Labor Organization Annual Financial Reports, Forms LM-2, LM-3, LM-4., 3735-3742 [E7-1275]
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Federal Register / Vol. 72, No. 17 / Friday, January 26, 2007 / Rules and Regulations
DEPARTMENT OF LABOR
Office of Labor-Management
Standards
29 CFR Part 403
RIN 12157–AB34
Labor Organization Annual Financial
Reports, Forms LM–2, LM–3, LM–4.
Office of Labor-Management
Standards, Employment Standards
Administration, Department of Labor.
ACTION: Policy statement; interpretation.
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AGENCY:
SUMMARY: On December 22, 2002, the
Department of Labor (Department)
proposed revisions to Forms LM–2, LM–
3, and LM–4, which are used by labor
organizations to file annual financial
reports required under Title II of the
Labor-Management Reporting and
Disclosure Act of 1959 (LMRDA or Act),
29 U.S.C. 401 et seq., with the
Employment Standards
Administration’s Office of LaborManagement Standards (OLMS). A
portion of the proposed rule stated the
Department’s intent to revise its
interpretation of an aspect of the
definition of ‘‘labor organization * * *
deemed to be engaged in an industry
affecting commerce’’ under the LMRDA.
After receiving and considering
comments, the Department published its
final rule on October 9, 2003.
The interpretation in the final rule
stated that intermediate bodies that are
subordinate to a national or
international labor organization that
includes a labor organization will be
covered by the LMRDA, even if the
intermediate body’s constituents are
solely public sector local labor unions
not covered by the Act. This
interpretation of the LMRDA was
challenged in federal district court by
labor unions affected by the
interpretation, and the court granted
summary judgment in favor of the labor
unions. Alabama Education Ass’n v.
Chao, 2005 WL 736535 (D.D.C. Mar 31,
2005). On appeal, the U.S. Court of
Appeals for the District of Columbia
Circuit reversed the grant of summary
judgment. Alabama Education Ass’n v.
Chao, 455 F.3d 386 (D.C. Cir. 2006). The
court of appeals held that the
Department’s interpretation was
reviewable under deference principles
established under Chevron U.S.A., Inc.
v. Natural Resources Defense Council,
Inc., 467 U.S. 837 (1984), and that the
statutory definition of ‘‘labor
organization * * * deemed to be
engaged in an industry affecting
commerce’’ is ambiguous and subject to
more than one permissible
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interpretation, including the
Department’s interpretation. 455 F.3d at
393, 396. The court also concluded,
however, that the Department had failed
to provide a ‘‘reasoned analysis
supporting its change of position’’ and
remanded the rule to the Department to
provide such analysis. Id. at 396–397.
The Department issues this Policy
Statement in response to the court’s
remand order.
DATES: Effective Date: January 26, 2007.
FOR FURTHER INFORMATION CONTACT: Kay
H. Oshel, Director, Office of Policy,
Reports, and Disclosure, Office of LaborManagement Standards (OLMS), U.S.
Department of Labor, 200 Constitution
Avenue NW., Room N–5605,
Washington, DC 20210, olmspublic@dol.gov, (202) 693–1233 (this is
not a toll-free number). Individuals with
hearing impairments may call 1–800–
877–8339 (TTY/TDD).
SUPPLEMENTARY INFORMATION:
Statutory and Regulatory Background
Congress enacted the LMRDA after an
extensive investigation of ‘‘the labor and
management fields * * * [found] that
there ha[d] been a number of instances
of breach of trust, corruption, disregard
of the rights of individual employees,
and other failures to observe high
standards of responsibility and ethical
conduct.’’ 29 U.S.C. 401(b). Congress
intended the Act to ‘‘eliminate or
prevent improper practices’’ in labor
organizations, to protect the rights and
interests of employees, and to prevent
union corruption. 29 U.S.C. 401(b), (c).
As part of the statutory scheme designed
to accomplish these goals, Congress
required labor organizations to file
annual financial reports with the
Secretary of Labor. 29 U.S.C. 431(b).
Congress sought full and public
disclosure of a labor organization’s
financial condition and operations in
order to curb embezzlement and other
improper financial activities by union
officers and employees. See S. Rep. No.
86–187 (1959), reprinted in I NLRB,
Legislative History of the LaborManagement Reporting and Disclosure
Act of 1959, at 398–99. Under the Act,
labor organizations must file reports
containing information such as assets,
liabilities, receipts, salaries, loans to
officers, employees, members or
businesses and other disbursements ‘‘in
such detail as may be necessary
accurately to disclose [their] financial
condition and operations for [the]
preceding fiscal year.’’ 29 U.S.C. 431(b).
‘‘Labor organizations’’ subject to the
financial reporting requirements of the
LMRDA are defined in the Act. Section
3(i) of the LMRDA , 29 U.S.C. 402(i),
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defines a ‘‘labor organization’’ as (1) any
organization ‘‘engaged in an industry
affecting commerce * * * in which
employees participate and which exists
for the purpose, in whole or in part, of
dealing with employers concerning
grievances, labor disputes, wages, rates
of pay, hours, or other terms or
conditions of employment,’’ or (2) ‘‘any
conference, general committee, joint or
system board, or joint council so
engaged which is subordinate to a
national or international labor
organization other than a State or local
central body.’’ The first clause of
Section 3(i) applies to entities that exist,
at least in part, to deal with employers
concerning terms and conditions of
employment. The second clause of the
definition applies to conferences,
general committees, joint or system
boards or joint councils—entities that
are known as ‘‘intermediate’’ labor
organizations. See 29 CFR 451.4(f).
Section 3(j) of the LMRDA, 29 U.S.C.
402(j), sets forth the circumstances
under which labor organizations will be
‘‘deemed to be engaged in an industry
affecting commerce’’ under the Act. In
particular, Section 3(j)(5) of the Act
provides that an intermediate labor
organization is deemed ‘‘engaged in an
industry affecting commerce’’ if it is ‘‘a
conference, general committee, joint or
system board, or joint council,
subordinate to a national or
international labor organization, which
includes a labor organization engaged in
an industry affecting commerce within
the meaning of any of the preceding
paragraphs of this subsection, other than
a State or local central body.’’ 29 U.S.C.
402(j)(5).
Although ‘‘employer’’ is defined
broadly in the Act, the United States,
States and local governments are
expressly excluded from this definition.
29 U.S.C. 402(e). Thus, an organization
is not covered under the first clause of
Section 3(i), which requires that the
organization deal with a statutory
‘‘employer,’’ if it deals only with
federal, state or local governments.
However, an ‘‘organization’’ covered by
the second clause of the definition (a
‘‘conference, general committee, [etc.]
subordinate to a national or
international’’) need not deal with
employers at all. 29 U.S.C. 402(i).
Instead, such an intermediate labor
body is covered by the Act so long as
it is subordinate to a national or
international labor organization and is
‘‘engaged in an industry affecting
commerce.’’ Id.
The LMRDA authorizes the
Department to promulgate rules and
regulations to enforce the Act’s financial
reporting requirements. Under the Act,
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Congress broadly delegated authority to
the Secretary ‘‘to issue, amend, and
rescind rules and regulations
prescribing the form and publication of
reports required to be filed under this
subchapter and such other reasonable
rules and regulations * * * as [s]he may
find necessary to prevent the
circumvention or evasion of such
reporting requirements.’’ 29 U.S.C. 438;
American Fed’n of Labor and Congress
Of Indus. Orgs. v. Chao, 409 F.3d 377,
386 (D.C. Cir. 2005) (‘‘[t]here is no
serious dispute’’ that Congress
‘‘delegated authority to the Secretary to
promulgate rules to enforce Section 208
[29 U.S.C. 438]’’). The Secretary also has
express authority to enforce the Act’s
reporting requirements by initiating a
civil action. 29 U.S.C. 440. The
Department’s interpretation of Section
3(j)(5), which ‘‘clarifies the meaning of
‘labor organization * * * engaged in an
industry affecting commerce[,] * * *
comes within its express authority in
§ 208 to promulgate rules’’ under the
LMRDA. Alabama Education, 455 F.3d
at 393.
The Department’s LMRDA Rulemaking
The Department issued a Notice of
Proposed Rulemaking on December 27,
2002, that proposed revisions to the
forms labor organizations use to file
annual financial reports required by the
LMRDA. Labor Organization Annual
Financial Reports, 67 FR 79,280 (Dec.
21, 2002) (NPRM). As part of this
rulemaking, the Department stated its
intent to modify its interpretation of
Section 3(j)(5). As noted, the Section
provides that an intermediate labor
organization is deemed ‘‘engaged in an
industry affecting commerce’’ if it is:
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A conference, general committee, joint or
system board, or joint council, subordinate to
a national or international labor organization,
which includes a labor organization engaged
in an industry affecting commerce within the
meaning of any of the preceding paragraphs
of this subsection, other than a State or local
central body.
Before the December 2002 NPRM, the
Department interpreted the clause,
‘‘which includes a labor organization
engaged in an industry affecting
commerce within the meaning of any of
the preceding paragraphs of this
subsection, ‘‘ in Section 3(j)(5) as
modifying ‘‘conference’’ and other listed
intermediate bodies. Under that
interpretation, Section 3(j)(5) applied
only to intermediate bodies that were
subordinate to a national or
international labor organization and
were themselves composed, in whole or
in part, of private sector local labor
organizations.
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In contrast, in the NPRM’s proposed
interpretation, the ‘‘which includes’’
clause, modifies ‘‘national or
international labor organization.’’ Under
this interpretation, intermediate labor
bodies need not themselves include
private sector members to be covered
under the LMRDA; rather, they need
only be subordinate to a national or
international labor organization that
includes a union that represents private
sector workers.
The Department’s prior interpretation
of Section 3(j)(5) came into question
following the decision in Chao v.
Bremerton Metal Trades Council, 294
F.3d 1114 (9th Cir. 2002). In Bremerton,
the Ninth Circuit held that the
Bremerton Metal Trades Council
(‘‘BMTC’’), a joint council, met the
LMRDA definition of ‘‘labor
organization’’ because it was
subordinate to the Metal Trades
Department, an international labor
organization engaged in an industry
affecting commerce. Bremerton, 294
F.3d at 1118. In so holding, the court
relied on the fact that the BMTC was
subordinate to a parent organization that
met the LMRDA definition of ‘‘labor
organization.’’ Id. The court reasoned
that ‘‘[w]e must decide not whether the
Bremerton Council bargains directly
with any private employers but, instead,
whether the Metal Trades Department,
the organization to which the Bremerton
Council is subordinate, is engaged in an
industry affecting commerce.’’ Id. at
1117. Thus, in contrast to the
Secretary’s interpretation at the time,
Bremerton adopted an analysis under
Section 3(j)(5) that looked not to the
composition of the intermediate body
itself, but rather to whether the national
or international to which it is
subordinate is engaged in an industry
affecting commerce.
The Bremerton case brought to the
Department’s attention an alternate view
of the meaning of the ‘‘which includes’’
clause in Section 3(j)(5). In the 2002
NPRM, the Department proposed to
revise its instructions on financial
reports for labor organizations to
include this interpretation of Section
3(j)(5), reflecting Bremerton’s analysis.
See NPRM, 67 FR 79,284 (proposing to
adopt a rule that ‘‘an intermediate labor
organization that has no dealings itself
with private employers and no members
who are employed in the private sector
may nevertheless be a labor organization
engaged in commerce * * * if [it] is
‘subordinate to a national or
international labor organization which
includes a labor organization engaged in
commerce.’’’)
Following a 90-day comment period,
the Department on October 9, 2003,
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issued its final rule dealing with labor
organization reporting requirements, in
which it adopted the revised
interpretation of Section 3(j)(5). Labor
Organization Annual Financial Reports,
68 FR 58374 (Oct. 9, 2003) (Final Rule).
In the preamble to the Final Rule, the
Department addressed comments from
three labor organizations—the National
Education Association (NEA), the
American Federation of Teachers (AFT)
and the AFL–CIO—each of which
opposed the Department’s interpretation
of Section 3(j)(5). The Department
concluded that the comments opposing
the Department’s interpretation failed to
provide a persuasive argument
supporting the Department’s return to
its pre-2002 view of the ‘‘which
includes’’ clause of Section 3(j)(5).
After being notified by OLMS of the
Department’s revised interpretation of
Section 3(j)(5), and the corresponding
need to file reports, 38 intermediate
labor organizations representing public
sector employees, primarily public
school teachers, challenged the new
interpretation in federal district court.
The court granted summary judgment in
favor of the plaintiff labor organizations.
Alabama Education Ass’n v. Chao, 2005
WL 736535 (D.D.C. Mar. 31, 2005). The
Department appealed that decision, and
the U.S. Court of Appeals for the D.C.
Circuit, reversed the lower court’s
ruling. Alabama Education Ass’n v.
Chao, 455 F.3d 386 (2006). The court of
appeals held that the Department has
statutory authority ‘‘to clarif[y] the
meaning of ‘labor organization * * *
engaged in an industry affecting
commerce’ ’’ and thus the Secretary’s
interpretation of Section 3(j)(5) is
‘‘reviewable under Chevron’’ principles
of deference. 455 F.3d at 393. The court
further ruled that Section 3(j)(5)’s
‘‘which includes’’ clause contains a
‘‘patent ambiguity’’ and that the
Secretary’s interpretation was a
permissible interpretation of the
provision’s terms. 455 F.3d at 395, 396;
see also id. at n. * (LMRDA legislative
history confirms ‘‘inherent ambiguity of
the statute’’).
The court, however, further
concluded that the Department had
failed to provide a ‘‘reasoned analysis’’
for its change of position ‘‘sufficient to
command [the court’s] deference under
Chevron.’’ 455 F.3d at 396. The court
noted that the Department failed to link
specifically the general policy concerns
underlying the financial reporting
revisions in the final rule, (i.e., changes
in union size, financing and structure,
and resulting financial irregularities, 67
FR 79,280), with an assessment of the
Department’s new and prior
interpretations of Section 3(j)(5). 455
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F.3d at 396–397. The court also noted
that the Department had unduly relied
on the Bremerton decision, without
acknowledging that because the
intermediate body in that case
contained private sector members, the
decision’s holding did not contribute to
the required reasoned analysis. Id. at
397. Accordingly, the court remanded
the rule to the Department to provide a
reasoned explanation for its change in
interpretation.
That analysis is set forth below.
Explanation for the Department’s
Revised Interpretation of Section 3(j)(5)
The Department’s revised
interpretation of the statute broadens
the coverage of intermediate labor
organizations subject to the reporting
requirements of the LMRDA.
The result of this interpretation is that
intermediate bodies that are subordinate
to a national or international labor
organization that includes a covered
labor organization will be covered by
the LMRDA, even if the intermediate
body is composed of solely public sector
local labor unions not covered by the
Act. The rulemaking record as a whole
suggested several reasons in support of
the Department’s adoption of this
policy, and those reasons will be further
explained and analyzed here.
The Department’s 2002 NPRM
supported its regulatory revisions to
labor organizations’ financial reporting
requirements with the following
analysis:
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Labor organizations also have changed
tremendously since the enactment of the
LMRDA in 1959. There are now far fewer
small, independent unions and more large
unions affiliated with a national or
international body * * *. In fact, many large
unions today resemble modern corporations
in their structure, scope and complexity.
Moreover, just as in the corporate sector,
there have been a number of financial
failures and irregularities involving pension
funds and other member accounts
maintained by labor organizations. These
failures and irregularities result in direct
financial harm to union members. If the
members of labor organizations had more
complete, understandable information about
their unions’ financial transactions,
investments and solvency, they would be in
a much better position than they are today to
protect their personal financial interests and
exercise their democratic rights of selfgovernance.
NPRM, 67 FR at 79,280–81.
In addition, regarding the
Department’s view of Section 3(j)(5), the
NPRM stated:
The instructions to form LM–2 adopt the
recent holding of the U.S. Court of Appeals
for the Ninth Circuit in Chao v. Bremerton
Metal Trades Council, AFL–CIO, 294 F.3d
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1114 (2002), interpreting Section 3(j) of the
LMRDA, because that interpretation gives
full meaning to the plain language of the
statute. In that case, the Court ruled that an
intermediate labor organization that has no
dealings itself with private employers and no
members who are employed in the private
sector may nevertheless be a labor
organization engaged in commerce within the
meaning of Section 3(j) of the LMRDA if the
intermediate body is ‘‘subordinate to a
national or international labor organization
which includes a labor organization engaged
in commerce.’’ Accordingly, the Instructions
will clarify that any ‘‘conference, general
committee, joint or system board, or joint
council’’ that is subordinate to a national or
international labor organization will be
required to file an annual financial form if
the national or international labor
organization is a labor organization engaged
in an industry affecting commerce within the
meaning of Section 3(j) of the LMRDA.
NPRM, 67 FR 79,280, 79,284.
The Department’s 2003 Final Rule
provided the following support for its
policy revision:
The stated intent of Congress was to
exempt ‘‘wholly public sector’’ labor
organizations from the coverage of the Act.
The Bremerton court found that an
intermediate labor organization is not
‘‘wholly public sector’’ and exempt from the
Act where it is subordinate to a parent
organization that meets the definition of a
labor organization engaged in an industry
affecting commerce. The Department’s
regulation at 29 CFR 451.3(a)(4) is not
contrary to the Bremerton decision when the
regulation is read as giving effect to the
court’s interpretation of the term ‘‘wholly
public sector labor organization.’’ The
Department concludes that none of the
commenters provides a persuasive argument
for disagreeing with the Bremerton court’s
reading of the statute and therefore will
maintain the expanded language in the
instructions for the Form LM–2.
Final Rule, 68 FR 58,374, 58,384.
These excerpts from the rule-making
record establish a foundation for the
Department’s explanation of its policy
choice, and point to three
interdependent rationales for the
adoption of the revised interpretation.
First, the Department has selected a
policy alternative that is consistent with
the terms of the statute and promotes
Congress’s purposes in enacting the
LMRDA. The Department’s
interpretation of Section 3(j)(5)
advances the twin Congressional goals
that labor organizations’ financial
conditions and operations should be
subject to public disclosure to benefit
employees that participate in those
organizations, and that the definition of
‘‘labor organizations’’ covered by the
LMRDA should be interpreted broadly
to advance union democracy, financial
transparency, and integrity. Second, the
expanded coverage permitted by the
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new interpretation promotes disclosure
of financial disbursements and receipts
to and from structurally related labor
organizations, thus enhancing
employees’ ability to understand the
overall operation of labor organizations
in general, as well as identify any
potential financial irregularities in
particular. The structure and financial
aspects of labor organizations have
become increasingly complex in the
nearly fifty years since the passage of
the LMRDA. Unlike several decades ago,
when small, independent unions
predominated, there are now large,
multi-level, multi-faceted labor
organizations, most of which are
affiliated with large and complex
national or international labor
organizations. In addition, many labor
organizations have restructured and
reorganized their affiliate relationships,
rendering a single labor organization
report insufficient to provide
transparency to increasingly complex
structures and relationships.
Third, and most importantly, the
revised interpretation gives full meaning
to clause two of Section 3(i), 29 U.S.C.
402(i), which has at its core a focus on
covering those intermediate bodies
precisely because they are subordinate
to a covered national or international
labor organization even though they
may consist only of unions not covered
under the first clause of 3(i). The
interpretation advances public
disclosure of financial transactions by
intermediate bodies that receive money
from covered national and international
labor organizations, the source of which
is, in part, fees and assessments
originating from employees in the
private sector. Thus, the so-called
‘‘wholly public sector’’ intermediate
body loses that attribute to a great extent
(despite its composition) when it is
subordinate to, and accepting
contributions from, covered national
and international labor organizations
whose funds are derived, in part, from
employees in the private sector.
As the court of appeals noted, these
bases for the revised interpretation were
not fully explained in the prior
rulemaking, and we now elaborate upon
them in greater detail.1
1 In the preamble to the 2003 final rule, the
Department reviewed and responded to all
comments regarding the Department’s
interpretation in the final rule. As explained in the
preamble, the Department received only five
comments on its interpretation, including one from
a supportive union member and one from a labor
organization that employed a mistaken premise that
the interpretation would require state or local
central bodies to file financial disclosure forms. 68
FR 58,383–58,384. Taken together, the remaining
three comments from three labor organizations
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1. Consistency With the Terms and
Purpose of the LMRDA
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As noted above, in enacting the
LMRDA, Congress intended to
‘‘eliminate or prevent improper
practices’’ in labor organizations,
protect the rights and interests of
employees, and prevent union
corruption. 29 U.S.C. 401(b), (c). To
curb embezzlement and other improper
financial activities of labor
organizations, Congress required labor
organizations to file detailed annual
financial reports with the Secretary of
Labor. 29 U.S.C. 431(b). The reporting
provisions of the LMRDA were devised
to implement the basic premise of the
LMRDA—that the Act was intended to
safeguard democratic procedures within
labor organizations and protect the basic
democratic rights of union members. By
mandating that labor organizations
disclose their financial operations to
employees they represent, Congress
intended to promote union selfgovernment, which would be advanced
because union members would be
provided sufficient information to
permit them to take effective action in
regulating internal union affairs.
The LMRDA is a remedial statute,
necessary to impose high standards and
ethical conduct in the administration of
internal union affairs. Wirtz v. Local
153, Glass Bottle Blowers Assn., 389
U.S. 463, 469–470 (1968). In addition,
Congress intended the definition of
labor organization to be construed
broadly to achieve the Act’s purposes.
Donovan v. National Transient Div.,
Int’l Bhd. of Boilermakers, 736 F.2d 618,
621 (10th Cir. 1984), cert. denied, 469
U.S. 1107 (1985). In order to fully
effectuate and serve the remedial
purposes of the Act noted above, the
Department seeks to interpret the
definitional sections of the LMRDA
broadly ‘‘to include all labor
organizations of any kind other than
challenged the interpretation on three grounds: (1)
The Department did not have the statutory
authority to undertake the revised interpretation; (2)
the Department’s construction of the statutory terms
was erroneous, and resulted in the coverage of
intermediate labor organizations that are purely
public-sector labor organizations and exempt from
the definitional provisions of the Act; and (3) the
intermediate bodies to which the Act would apply
are not ‘‘subordinate’’ to a national or international
labor organization within the meaning of the Act.
After full consideration the Department determined
that none of the comments resulted in a
determination that the interpretation was either
legally flawed, an erroneous construction of the
statute, or misguided public policy. 68 FR 58,383–
58,384. The Department has once again fully
reviewed and reconsidered these comments prior to
publication of this Policy Statement, and the
conclusion expressed in the 2003 preamble remains
unaltered.
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those clearly shown to be outside the
scope of the Act.’’ 29 CFR 451.2 (2006).
The Department’s pre-2002
interpretation of Section 3(j)(5) did not
fully serve Congressional intent that the
statute’s definition be read broadly, nor
did it serve the remedial purposes of the
LMRDA. Employees concerned about
payments to and from intermediate
labor organizations subordinate to a
covered national or international labor
organization did not have access to the
quality and quantity of information
available to members of unions that
have historically filed the Department’s
annual disclosure forms. Absent such
disclosures, union members know less
about the governance of their unions
and are thereby frustrated by their
inability to monitor the spending of
their dues monies because they are not
fully aware of the financial
commitments and obligations of their
union. They are disadvantaged in their
ability to make informed decisions
when electing their union officers
because they do not have detailed
information about the funding decisions
made by incumbent officeholders. In
contrast, members of unions that file the
financial disclosure forms have a tool
that can help them detect fraud and
embezzlement. Officers and employees
of such unions are deterred from
committing such misconduct because
they understand that their unions’
financial transactions are recorded,
reported, and made publicly available
on the Internet. Employees concerned
about the expenditures of intermediate
unions that did not report as the result
of the Department’s prior policy have
been denied the benefits that flow from
the increased transparency that
compliance with the LMRDA brings,
including more effective member
participation in union decision-making,
more informed voters, and the
deterrence and detection of fraud. If all
intermediate bodies subordinate to
LMRDA-covered labor organizations are
not themselves covered by the LMRDA,
union transparency is diminished and
misdeeds will be more difficult to
discover.
2. Structural and Financial Complexity
of Labor Organizations
The Department’s NPRM noted that
‘‘many large unions today resemble
modern corporations in their structure,
scope and complexity.’’ NPRM, 67 FR at
79,280. Indeed, ‘‘commercial
organizations and unions still share
many structural features of complex
organizations. In most industrial
nations, unions as labor organizations
have developed from small, voluntary
associations, to larger, more formal
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bureaucracies. With the formation and
expansion of large scale industrial
unions, the structure of labor
organizations has shifted from that of
informal communities of workers to
more centralized, hierarchical, and
rational bureaucracies.’’ Julian Barling,
Clive Fullagar & E. Kevin Kelloway, The
Union and Its Members 13 (Oxford
University Press 1992).
In a unionized workplace, employees
may be members of a local labor
organization, which represents
employees with respect to terms and
conditions of employment at that
particular workplace. That local union
is typically chartered by a national
union, which in turn may be affiliated
with a national federation of unions. In
addition, there are city and state
federations of labor organizations,
international federations of labor, joint
and district councils, and departments
within a national federation of unions,
among others. There are many different,
but related, labor organizations that a
union member must examine in order to
analyze his or her local representative’s
expenditure of funds.
The interrelatedness, and resulting
structural complexity, of labor
organizations has a number of causes.
The need for collaboration among and
between labor organizations with shared
interests, the necessity of labor
organization cohesion during times of
economic strife, the need for large-scale
reform regarding certain issues, such as
nation-wide wages and hours reform,
the rise in multi-city or national
corporations, and the growth of a global
economy, have all contributed to the
increase in labor organization affiliation
within local, central and national labor
organizations. See Sidney Lens, Unions
and What They Do 39–46 (G.P.
Putnam’s Sons 1968). These factors
contributing to labor organization
interrelatedness and complexity have
only increased in the final decades of
the twentieth century.
This growth of interconnected labor
organizations has been accompanied by
a complicated pattern of relationships,
including affiliations, disaffiliations,
trusteeships, federal court supervision,
and the like. For instance, in 2005,
seven of the largest national and
international unions left the AFL–CIO,
for many years the only national
federation of unions, and created a
brand new national labor federation.
Several of the nation’s largest labor
organizations have departed the AFL–
CIO in the past, only to rejoin, and then
depart again. Several national or
international labor organizations prefer
to remain independent from any
national federation. State federations of
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26JAR1
Federal Register / Vol. 72, No. 17 / Friday, January 26, 2007 / Rules and Regulations
labor organizations have themselves
affiliated or disaffiliated with national
organizations depending on the
common or divergent interests of those
labor organizations. Labor organizations
have been placed in trusteeship,
requiring management of their internal
affairs by higher-level labor
organizations, and several labor
organizations have been managed for
years under court supervision. The
AFL–CIO itself has departments that are
groupings of international unions based
on trade or industry that affiliate
specifically with those departments. A
local union member may have direct
contact only with his or her local, but
in all likelihood he or she is
represented, through elected or
appointed delegates, within a maze of
other union structures.
The complexity of labor organization
structures and relationships may be
daunting to employees represented at
the workplace level by a local labor
organization. Yet the structural
complexity pales in comparison to the
financial complexity created by these
relationships. Dues and fees are
collected from members at the local
level, and that money is sent on to other
related organizations in the form of percapita assessments to support an
increasingly complicated, sophisticated,
and coordinated set of expenditures by
related labor organizations, including
education, organizing, political action at
all levels of government, strike funds,
public relations, research, legal
representation, and so on. The ability of
that local union member to follow the
trail of transactions among and between
labor organizations affiliated with the
local union is challenging at best.
Confronted by the structural and
financial complexity of interrelated
labor organizations, a local union
member is further hindered by the fact
that labor organizations are required to
report only their individual financial
conditions—joint affiliate reporting is
not required by the LMRDA. As a result,
a local union member interested in
ascertaining the end-point of his or her
dues collected by the local but cast into
the stream of affiliate expenditures must
obtain the financial reports of the local
and each affiliated labor organization—
the national or international, the state
level organization, the national
federation, and any other labor
organizations affiliated directly or
indirectly with the local union. Of
course, this opportunity to study and
analyze one’s own local union
expenditures is lost if, within the chain
of affiliations, one of the affiliates has
not filed an annual financial report.
Given the increased complexity of
union structures and finances, the
ability of local union members to benefit
from the transparency afforded by the
LMRDA should not be diminished by a
labor organization’s relationship to an
intermediate body that does not
presently file annual financial reports.
Such a circumstance is akin to a parent
corporation disguising its assets and
expenditures by lodging them with an
undisclosed subsidiary. To avoid this
scenario in the context of labor
organizations, the LMRDA should be
interpreted, to the extent permitted by
the statute’s terms, so that local union
members have the ability to lift the
cloak of structural and financial
complexity, and fully understand the
activities and expenditures of their local
unions, their local’s national affiliates,
and the national organization’s
subordinate labor organizations.
3. Intermediate Bodies’ Expenditure of
Funds Derived in Part From Compulsory
Fees and Taxes on Employees in the
Private Sector
The two principles discussed above—
the promotion of Congress’s goal of
transparency in labor organization
expenditures and the complex structural
and financial relationships between
unions—lead directly to the final
consideration supporting the
Department’s revised interpretation of
Section 3(j)(5). The LMRDA’s purpose
and intent, its legislative history, and
the complexity and interrelatedness of
modern labor organizations, all support
the disclosure of assets and
expenditures of intermediate labor
bodies whose funds are derived, at least
in part, from private sector employees.
In some cases, private sector employees
are represented by a local union that
financially supports a national or
international labor organization with
which it is affiliated, and that national
or international labor organization in
3739
turn financially supports a subordinate
state-level labor body that may itself be
wholly composed of locals representing
employees only in the public sector and
therefore, has not, in the past, filed
annual financial disclosure statements.
Consider, for example, a local labor
organization composed entirely of
nurses and other health care
professionals employed by hospitals
and other facilities in the private sector,
which is affiliated with a national union
primarily representing teachers in the
public sector. The private-sector nurses’
local union dues support the national
teachers union, which in turn disburses
funds to its state-level subordinates. The
state-level subordinate may itself be
wholly composed of public-sector locals
and, as a result, not previously required
to file a financial disclosure statement.
Consequently, the private-sector nurses
can track expenditures of their local
union dues only until the expenditures
reach the state-level labor organization.
There, under the Department’s prior
interpretation, further financial
information would not be available,
because the intermediate labor
organization would not be considered to
be engaged in an industry affecting
commerce under the Act and would not
be required to file reports.
The same scenario holds true in the
case of faculty and staff employed by
universities in the private sector, and
represented by a local union affiliated
with another national union primarily
representing teachers in the public
sector. The private-sector faculty
members’ local union dues support the
national teachers union, which in turn
disburses funds to its state-level
subordinates. Again, the intermediate
body may be wholly composed of
public-sector locals, but it is receiving
indirectly the dues and fees of
employees in the private sector.
These scenarios are borne out by the
two tables below. Table 1 reflects locals
affiliated with two national teachers
unions that have many dues-paying
members employed in the privatesector, like the nurses and university
professors examples noted above. The
per capita fees paid to the national
teachers union by members of those
private-sector locals are shown below.
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TABLE 1.—FISCAL YEAR 2005 PER CAPITA TAX DISBURSEMENTS FROM LOCALS COMPOSED AT LEAST IN PART OF
PRIVATE-SECTOR EMPLOYEES TO AFFILIATED NATIONAL TEACHERS UNION 2
Locals Affiliated With American Federation of Teachers 3
Indiana Educators Federation, Local 4524 .........................................................................................................................................
Temple University, Local 4531 ............................................................................................................................................................
USF Faculty Association, Local 4269 .................................................................................................................................................
Washington Teachers Union, Local 6 .................................................................................................................................................
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Sfmt 4700
E:\FR\FM\26JAR1.SGM
26JAR1
$254,735
173,540
91,381
794,148
3740
Federal Register / Vol. 72, No. 17 / Friday, January 26, 2007 / Rules and Regulations
TABLE 1.—FISCAL YEAR 2005 PER CAPITA TAX DISBURSEMENTS FROM LOCALS COMPOSED AT LEAST IN PART OF
PRIVATE-SECTOR EMPLOYEES TO AFFILIATED NATIONAL TEACHERS UNION 2—Continued
Professional Guild of Ohio, Local 1960 ...............................................................................................................................................
UCATS, Local Union 3882 ..................................................................................................................................................................
Danbury Hospital Professional Nurses Association, Local Union 5047 .............................................................................................
New Haven Federation of Teachers, Local Union 933 .......................................................................................................................
Oregon Federation of Nurses-Kaiser, Local Union 5017 ....................................................................................................................
NY State Public Employees Federation, Local Union 4053 ...............................................................................................................
Alaska Public Employees Association, Local Union 5200 ..................................................................................................................
Professional Staff Congress/CUNY, Local Union 2334 ......................................................................................................................
L & M Healthcare Workers Union, Local Union 5123 .........................................................................................................................
171,237
395,783
174,270
537,260
412,957
7,658,493
423,730
4,771,000
169,217
Locals Affiliated With National Education Association 4
OEA American Education Assn Okinawa ...........................................................................................................................................
Endicott College Faculty Association ..................................................................................................................................................
Adrian College Association of Professors ...........................................................................................................................................
University of Detroit Professors Union ................................................................................................................................................
Roger Williams University Faculty .......................................................................................................................................................
Baker College Education Association .................................................................................................................................................
Milton Hershey Education Association ................................................................................................................................................
National Education Assn Ind Local Union University of Detroit Support Staff ...................................................................................
Rhode Island School of Design Faculty ..............................................................................................................................................
RISD Part Time Faculty Association, Local 895 .................................................................................................................................
264,263
8,631
50,959
147,821
105,623
25,261
70,025
14,840
58,215
39,997
2 Labor organizations that file Form LM–2, LM–3, or LM–4 reports with the Department are, by definition, ‘‘labor organizations’’ covered by the
LMRDA. Local labor organizations that file reports are composed, at least in part, of members employed in the private sector. See 29 CFR
451.3(a)(4) (‘‘mixed and non-government locals [are] ‘labor organizations’ and subject to the Act’’).
3 These figures are taken from the Form LM–2 filed by each listed local labor organization for its fiscal year 2005. Form LM–2s are filed by
those labor organizations with total annual receipts of $250,000 or more in their fiscal years. See Instructions for Electronic Form LM–2 Labor
Organizations Annual Report (3/23/04) at p. 1, at https://www.dol.gov/esa/regs/compliance/olms/erds/LM2Instr2-2-04koREVISED.pdf. (Revisions in
2003 to the Form LM–2 and its instructions, which set $250,000 as the mandatory floor for filing the Form LM–2 amended the old floor of
$200,000 set in 29 CFR 403.4. See 68 FR 58383, 58473.) Article VIII, Section 1(a) of AFT’s constitution requires each local to pay an established per capita tax to the national office, and further sets the per capita rate at which the national office will pay the office of each state federation. See AFT 2002 Constitution at p. 21.
4 Except in one case in which the labor organization filed a Form LM–2, these figures are taken from the Form LM–3 filed by each listed local
labor organization for its fiscal year 2005. Section 2–9 of the NEA’s bylaws indicates that, as established in contracts entered into between the
affiliates and the NEA, local affiliates transmit dues to both the state affiliate and the NEA. As a result, these figures may represent disbursements to both state affiliates and the NEA. See Bylaws of the National Education Association of the United States 2004–2005 at. p. 7.
*
*
*
*
*
Table 2 below confirms that these
national teachers unions, which, as
shown above, received per capita fees
from locals composed, at least in part,
of private sector employees, disbursed
funds to their affiliated intermediate
bodies.
TABLE 2.—FISCAL YEAR 2005 DISBURSEMENTS AS ‘‘CONTRIBUTIONS, GIFTS AND GRANTS’’ BY NATIONAL TEACHERS
UNIONS TO INTERMEDIATE STATE-LEVEL LABOR ORGANIZATIONS 5
Contributions, Gifts and Grants by American Federation of Teachers to State Affiliates 6
Louisiana Federation of Teachers* .....................................................................................................................................................
$15,000
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Contributions, Gifts and Grants by National Education Association to State Affiliates 7
Alabama Education Association* .........................................................................................................................................................
NEA Alaska* ........................................................................................................................................................................................
Arizona Education Association* ...........................................................................................................................................................
Arkansas Education Association* ........................................................................................................................................................
Colorado Education Association* ........................................................................................................................................................
Connecticut Education Association* ....................................................................................................................................................
Delaware State Education Association* ..............................................................................................................................................
Georgia Association of Educators* ......................................................................................................................................................
Hawaii State Teachers Association* ...................................................................................................................................................
Idaho Education Association* ..............................................................................................................................................................
Indiana State Teachers Association* ..................................................................................................................................................
Iowa State Education Association* ......................................................................................................................................................
Kansas NEA* .......................................................................................................................................................................................
Kentucky Education Association* ........................................................................................................................................................
Louisiana Association of Educators* ...................................................................................................................................................
Maryland State Teachers Association* ...............................................................................................................................................
Massachusetts Teachers Association* ................................................................................................................................................
Education Minnesota ...........................................................................................................................................................................
Mississippi Association of Educators* .................................................................................................................................................
Missouri NEA* ......................................................................................................................................................................................
Nebraska State Education Association ...............................................................................................................................................
NEA New Hampshire* .........................................................................................................................................................................
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16:43 Jan 25, 2007
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Frm 00036
Fmt 4700
Sfmt 4700
E:\FR\FM\26JAR1.SGM
26JAR1
$1,561,525
390,595
879,775
434,715
142,435
844,595
239,015
972,770
414,740
317,305
1,181,930
892,770
595,465
1,009,842
479,094
1,434,090
1,638,351
1,410,256
242,370
800,440
590,465
405,595
Federal Register / Vol. 72, No. 17 / Friday, January 26, 2007 / Rules and Regulations
3741
TABLE 2.—FISCAL YEAR 2005 DISBURSEMENTS AS ‘‘CONTRIBUTIONS, GIFTS AND GRANTS’’ BY NATIONAL TEACHERS
UNIONS TO INTERMEDIATE STATE-LEVEL LABOR ORGANIZATIONS 5—Continued
NEA New Mexico .................................................................................................................................................................................
NEA New York .....................................................................................................................................................................................
New Jersey Education Association .....................................................................................................................................................
Nevada State Education Association* .................................................................................................................................................
North Carolina Association of Educators* ...........................................................................................................................................
North Dakota Education Association* .................................................................................................................................................
Oklahoma Education Association* ......................................................................................................................................................
Oregon Education Association* ...........................................................................................................................................................
South Carolina Education Association* ...............................................................................................................................................
South Dakota Education Association* .................................................................................................................................................
Texas State Teachers Association ......................................................................................................................................................
Tennessee Education Association* .....................................................................................................................................................
Utah Education Association .................................................................................................................................................................
Vermont NEA .......................................................................................................................................................................................
Virginia Education Association* ...........................................................................................................................................................
Washington Education Association* ....................................................................................................................................................
West Virginia Education Association* .................................................................................................................................................
Wisconsin Education Association Council* .........................................................................................................................................
Wyoming Education Association* ........................................................................................................................................................
332,305
1,535,089
2,286,522
777,045
1,283,365
213,370
772,045
1,012,705
434,740
239,015
1,408,136
1,105,568
112,435
438,660
1,509,090
1,922,975
416,740
2,470,440
190,725
mstockstill on PROD1PC62 with RULES
5 LM–2 instructions require labor organizations to itemize contributions, gifts and grants on Schedule 17 of the Form. The itemizations include
‘‘direct and indirect disbursements to all entities and individuals during the reporting period associated with contributions, gifts, and grants, other
than those listed on Schedules 15, 16, and 20[, and i]nclude, for example, charitable contributions, contributions to scholarship funds, etc.’’ See
Instructions for Electronic Form LM–2 Labor Organizations Annual Report (3/23/04) at p.32, at https://www.dol.gov/esa/regs/
compliance/olms/erds/LM2Instr2-2-04koREVISED.pdf.
6 These figures are taken from the Form LM–2 filed by AFT for its fiscal year beginning July 1, 2004 and ending June 30, 2005.
7 These figures are taken from the Form LM–2 filed by the NEA for its fiscal year beginning September 1, 2004 and ending August 31, 2005.
* State affiliates marked with an asterisk are parties in Alabama Education Ass’n v. Chao, 455 F.3d 386 (D.C. Cir. 2006), and have not filed financial disclosure reports with the Department. These state affiliates have stated in that litigation that they are intermediate bodies wholly composed of public sector affiliates. State affiliates that are not marked by an asterisk are not parties in Alabama Education Ass’n v. Chao, and have
not filed current financial disclosure reports with the Department. The Department presumes that their non-filing status is due to their wholly public sector composition and not due to any other exception or exemption under the LMRDA.
Taken together, Tables 1 and 2
demonstrate that two national teachers
unions receive dues and fees from
employees employed in the privatesector, and that money is, in turn,
disbursed to intermediate bodies that
have previously not been required to file
financial disclosure reports.
*
*
*
*
*
The expenditure of dues and fees of
private-sector employees by
intermediate-level state affiliates of
national labor organizations without full
public disclosure of those expenditures
runs afoul of the purpose and intent of
the LMRDA. As noted earlier, labor
organizations that solely ‘‘deal with’’
public-sector employers are not covered
by the first clause of Section 3(i), which
applies only to labor organizations that
deal with statutory, i.e., private sector
employers. The second clause has no
such limitation, and does not require
that intermediate bodies deal with any
employers, private or public. Given the
scenario outlined above—that
intermediate bodies may receive
financial support based on dues
received in part from private sector
employees, the second clause of section
3(i) makes perfect sense. Coverage of
intermediate bodies under the second
clause does not turn on the entity’s
dealings with employers, but is based
instead on the subordinate relationship
with a covered national or international.
VerDate Aug<31>2005
15:24 Jan 25, 2007
Jkt 211001
The Department’s rule corrects the
problem of the non-transparency of
funds provided by covered national or
international labor organizations to
subordinate intermediate bodies, and
gives full meaning to the second clause
of Section 3(i).
It would undermine, rather than
promote, the purposes of the LMRDA if
a labor organization could disburse dues
paid by private-sector employees to a
subordinate labor body, and such
subordinate labor body could spend that
money in secrecy. Such a loophole does
not exist on the face of the statute or
anywhere in its legislative history, and
was not deliberately created by Congress
in 1959. Moreover, the Department’s key
statutory responsibility to promote
union transparency and democracy
under the LMRDA requires that this
loophole created by prior interpretation
be closed. As in the cases illustrated
above, a private-sector employee
represented by a private-sector local
union covered by the LMRDA should
not be prevented from tracing to its endpoint the expenditure of his or her own
dues and fees, even if a labor
organization ultimately receiving those
private-sector dues is composed solely
of public-sector unions. Thus, the
ambiguity in Section 3(j)(5), see
Alabama Education, 455 F.3d at 395,
should be resolved in favor of coverage
of an intermediate labor organization
PO 00000
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Fmt 4700
Sfmt 4700
that is subordinate to a national or
international labor organization that
includes a private sector local, even if
the intermediate itself is composed
solely of public sector members. Under
this interpretation, the private-sector
employees in that local will have an
improved ability to ascertain the nature
of labor organizations expenditures
derived from their dues.
For several decades following the
enactment of the LMRDA, the
Department’s administration of the
statute did not reach intermediate labor
organizations subordinate to a covered
national or international labor
organization but composed solely of
local public-sector labor organizations.
During that period of LMRDA
administration, the Department’s
interpretation permitted LMRDAcovered national and international
organizations to make financial
disbursements to their intermediate
affiliates without any requirement that
the intermediate affiliates disclose the
manner in which that money, some
derived from private-sector employees,
was spent. Private-sector local union
members have been unable to ascertain
whether their representatives spend
their money wisely, foolishly, or even
illegally. The LMRDA’s primary goal of
labor organization democracy achieved
through labor organization transparency
has been thwarted during this period.
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26JAR1
3742
Federal Register / Vol. 72, No. 17 / Friday, January 26, 2007 / Rules and Regulations
The Department’s revised interpretation
is intended to shed light on the financial
transactions of intermediate labor
organizations that are subordinate to,
and spend money conveyed to them by,
covered labor organizations, thereby
fully effectuating the purposes of the
Act.
For the reasons set forth above, the
Department of Labor is issuing this
Policy Statement; Interpretation under
the authority at 29 U.S.C. 431 and 438.
Signed at Washington, DC, this 23rd day of
January, 2007.
Victoria A. Lipnic,
Assistant Secretary for Employment
Standards.
Don Todd,
Deputy Assistant Secretary for LaborManagement Programs.
[FR Doc. E7–1275 Filed 1–25–07; 8:45 am]
BILLING CODE 4510–CP–P
DEPARTMENT OF HOMELAND
SECURITY
Coast Guard
33 CFR Part 165
[CGD13–07–003]
RIN 1625–AA00
Safety Zone Regulations, New Tacoma
Narrows Bridge Construction Project,
Construction Barge ‘‘MARMACK 12’’
Coast Guard, DHS.
Temporary final rule.
AGENCY:
mstockstill on PROD1PC62 with RULES
ACTION:
SUMMARY: The Coast Guard is
establishing a temporary safety zone
around the Barge ‘‘MARMACK 12’’,
Official Number 1024657, while it is
being used for the New Tacoma Narrows
Bridge Construction Project. The zone
will extend 500 feet in all directions
from the barge, and will be in effect at
all times during the duration of this
rule. This zone is only in effect while
the barge is on the navigable waters of
the United States, in the Tacoma
Narrows. The Coast Guard is taking this
action to safeguard the public from
possible collision with the barge and the
deck sections it is carrying, and from
hazards associated with navigating in
the vicinity of the barge during
construction operations. Entry into this
zone is prohibited unless authorized by
the Captain of the Port, Puget Sound or
his designated representatives.
DATES: This rule is effective from 12:01
a.m. January 16, 2007 to 11:59 p.m.
January 31, 2007.
ADDRESSES: Documents indicated in this
preamble as being available in the
VerDate Aug<31>2005
15:24 Jan 25, 2007
Jkt 211001
docket are part of docket CGD13–07–
003 and are available for inspection or
copying at the Waterways Management
Division, Coast Guard Sector Seattle,
1519 Alaskan Way South, Seattle, WA
98134, between 8 a.m. and 3 p.m.,
Monday through Friday, except Federal
holidays.
FOR FURTHER INFORMATION CONTACT:
Lieutenant Junior Grade Jes Hagen,
Waterways Management Division, Coast
Guard Sector Seattle, at (206) 217–6958.
SUPPLEMENTARY INFORMATION:
Background and Purpose
Pursuant to 5 U.S.C. 553, a notice of
proposed rulemaking (NPRM) has not
been published for this regulation and
good cause exists for making it effective
without publication of an NPRM in the
Federal Register. Publishing a NPRM
would be contrary to public interest
since immediate action is necessary to
ensure the safety of vessels and persons
that transit in the vicinity of the Tacoma
Narrows Bridge. If normal notice and
comment procedures were followed,
this rule would not become effective
until after construction activities were
already taking place.
Under 5 U.S.C. 553(d)(3), the Coast
Guard finds that good cause exists for
making this rule effective less than 30
days after publication in the Federal
Register. Making the rule effective after
30 days of publication in the Federal
Register would be contrary to public
interest since immediate action is
necessary to ensure the safety of vessels
and persons that transit in the vicinity
of the Tacoma Narrows Bridge. If
normal notice and comment procedures
were followed, this rule would not
become effective until after construction
activities were already taking place.
Discussion of Rule
The Coast Guard is adopting a
temporary safety zone regulation on the
waters of Tacoma Narrows, Washington,
for the New Tacoma Narrows Bridge
construction project. The Coast Guard
has determined it is necessary to restrict
access to the waters within 500 feet of
the construction barge ‘‘MARMACK’’, in
order to safeguard people and property
from hazards associated with navigating
in the vicinity of moving construction
equipment. These safety hazards
include, but are not limited to, hazards
to navigation, collisions with the barge
or its cargo, and disturbance of the load
on the barge, which could fall or shift,
injuring anyone in the vicinity. The
Coast Guard, through this action,
intends to promote the safety of
personnel, vessels, and facilities in the
area. Entry into this zone will be
PO 00000
Frm 00038
Fmt 4700
Sfmt 4700
prohibited unless authorized by the
Captain of the Port or his representative.
This safety zone will be enforced by
Coast Guard personnel. The Captain of
the Port may be assisted by other
federal, state, or local agencies.
Regulatory Evaluation
This temporary rule is not a
‘‘significant regulatory action’’ under
section 3(f) of Executive Order 12866
and does not require an assessment of
potential costs and benefits under
section 6(a)(3) of that Order. The Office
of Management and Budget has not
reviewed it under that Order. It is not
significant under the regulatory policies
and procedures of the Department of
Homeland Security (DHS).
We expect the economic impact of
this temporary rule to be so minimal
that a full Regulatory Evaluation under
paragraph 10(e) of the regulatory
policies and procedures of DHS is
unnecessary. This expectation is based
on the fact that the regulated area
established by this regulation would
encompass a small area that should not
impact commercial or recreational
traffic. For the above reasons, the Coast
Guard does not anticipate any
significant economic impact.
Small Entities
Under the Regulatory Flexibility Act
(5 U.S.C. 601–612), we have considered
whether this rule would have a
significant economic impact on a
substantial number of small entities.
The term ‘‘small entities’’ comprises
small businesses, not-for-profit
organizations that are independently
owned and operated and are not
dominant in their fields, and
governmental jurisdictions with
populations of less than 50,000.
This rule will affect the following
entities, some of which may be small
entities: the owners or operators of
vessels intending to transit this portion
of the Tacoma Narrows during the time
this regulation is in effect. The zone will
not have a significant economic impact
on a substantial number of small entities
due to its small area, and the limited
duration of the impacts to navigation
caused by the zone. Because the impacts
of this rule are expected to be so
minimal, the Coast Guard certifies
under 605(b) of the Regulatory
Flexibility Act (5 U.S.C. 601–612) that
this temporary rule will not have a
significant economic impact on a
substantial number of small entities.
Assistance for Small Entities
Under section 213(a) of the Small
Business Regulatory Enforcement
Fairness Act of 1996 (Pub. L. 104–121),
E:\FR\FM\26JAR1.SGM
26JAR1
]]>Agencies
[Federal Register Volume 72, Number 17 (Friday, January 26, 2007)]
[Rules and Regulations]
[Pages 3735-3742]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E7-1275]
[[Page 3735]]
-----------------------------------------------------------------------
DEPARTMENT OF LABOR
Office of Labor-Management Standards
29 CFR Part 403
RIN 12157-AB34
Labor Organization Annual Financial Reports, Forms LM-2, LM-3,
LM-4.
AGENCY: Office of Labor-Management Standards, Employment Standards
Administration, Department of Labor.
ACTION: Policy statement; interpretation.
-----------------------------------------------------------------------
SUMMARY: On December 22, 2002, the Department of Labor (Department)
proposed revisions to Forms LM-2, LM-3, and LM-4, which are used by
labor organizations to file annual financial reports required under
Title II of the Labor-Management Reporting and Disclosure Act of 1959
(LMRDA or Act), 29 U.S.C. 401 et seq., with the Employment Standards
Administration's Office of Labor-Management Standards (OLMS). A portion
of the proposed rule stated the Department's intent to revise its
interpretation of an aspect of the definition of ``labor organization *
* * deemed to be engaged in an industry affecting commerce'' under the
LMRDA. After receiving and considering comments, the Department
published its final rule on October 9, 2003.
The interpretation in the final rule stated that intermediate
bodies that are subordinate to a national or international labor
organization that includes a labor organization will be covered by the
LMRDA, even if the intermediate body's constituents are solely public
sector local labor unions not covered by the Act. This interpretation
of the LMRDA was challenged in federal district court by labor unions
affected by the interpretation, and the court granted summary judgment
in favor of the labor unions. Alabama Education Ass'n v. Chao, 2005 WL
736535 (D.D.C. Mar 31, 2005). On appeal, the U.S. Court of Appeals for
the District of Columbia Circuit reversed the grant of summary
judgment. Alabama Education Ass'n v. Chao, 455 F.3d 386 (D.C. Cir.
2006). The court of appeals held that the Department's interpretation
was reviewable under deference principles established under Chevron
U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837
(1984), and that the statutory definition of ``labor organization * * *
deemed to be engaged in an industry affecting commerce'' is ambiguous
and subject to more than one permissible interpretation, including the
Department's interpretation. 455 F.3d at 393, 396. The court also
concluded, however, that the Department had failed to provide a
``reasoned analysis supporting its change of position'' and remanded
the rule to the Department to provide such analysis. Id. at 396-397.
The Department issues this Policy Statement in response to the court's
remand order.
DATES: Effective Date: January 26, 2007.
FOR FURTHER INFORMATION CONTACT: Kay H. Oshel, Director, Office of
Policy, Reports, and Disclosure, Office of Labor-Management Standards
(OLMS), U.S. Department of Labor, 200 Constitution Avenue NW., Room N-
5605, Washington, DC 20210, olms-public@dol.gov, (202) 693-1233 (this
is not a toll-free number). Individuals with hearing impairments may
call 1-800-877-8339 (TTY/TDD).
SUPPLEMENTARY INFORMATION:
Statutory and Regulatory Background
Congress enacted the LMRDA after an extensive investigation of
``the labor and management fields * * * [found] that there ha[d] been a
number of instances of breach of trust, corruption, disregard of the
rights of individual employees, and other failures to observe high
standards of responsibility and ethical conduct.'' 29 U.S.C. 401(b).
Congress intended the Act to ``eliminate or prevent improper
practices'' in labor organizations, to protect the rights and interests
of employees, and to prevent union corruption. 29 U.S.C. 401(b), (c).
As part of the statutory scheme designed to accomplish these goals,
Congress required labor organizations to file annual financial reports
with the Secretary of Labor. 29 U.S.C. 431(b). Congress sought full and
public disclosure of a labor organization's financial condition and
operations in order to curb embezzlement and other improper financial
activities by union officers and employees. See S. Rep. No. 86-187
(1959), reprinted in I NLRB, Legislative History of the Labor-
Management Reporting and Disclosure Act of 1959, at 398-99. Under the
Act, labor organizations must file reports containing information such
as assets, liabilities, receipts, salaries, loans to officers,
employees, members or businesses and other disbursements ``in such
detail as may be necessary accurately to disclose [their] financial
condition and operations for [the] preceding fiscal year.'' 29 U.S.C.
431(b).
``Labor organizations'' subject to the financial reporting
requirements of the LMRDA are defined in the Act. Section 3(i) of the
LMRDA , 29 U.S.C. 402(i), defines a ``labor organization'' as (1) any
organization ``engaged in an industry affecting commerce * * * in which
employees participate and which exists for the purpose, in whole or in
part, of dealing with employers concerning grievances, labor disputes,
wages, rates of pay, hours, or other terms or conditions of
employment,'' or (2) ``any conference, general committee, joint or
system board, or joint council so engaged which is subordinate to a
national or international labor organization other than a State or
local central body.'' The first clause of Section 3(i) applies to
entities that exist, at least in part, to deal with employers
concerning terms and conditions of employment. The second clause of the
definition applies to conferences, general committees, joint or system
boards or joint councils--entities that are known as ``intermediate''
labor organizations. See 29 CFR 451.4(f).
Section 3(j) of the LMRDA, 29 U.S.C. 402(j), sets forth the
circumstances under which labor organizations will be ``deemed to be
engaged in an industry affecting commerce'' under the Act. In
particular, Section 3(j)(5) of the Act provides that an intermediate
labor organization is deemed ``engaged in an industry affecting
commerce'' if it is ``a conference, general committee, joint or system
board, or joint council, subordinate to a national or international
labor organization, which includes a labor organization engaged in an
industry affecting commerce within the meaning of any of the preceding
paragraphs of this subsection, other than a State or local central
body.'' 29 U.S.C. 402(j)(5).
Although ``employer'' is defined broadly in the Act, the United
States, States and local governments are expressly excluded from this
definition. 29 U.S.C. 402(e). Thus, an organization is not covered
under the first clause of Section 3(i), which requires that the
organization deal with a statutory ``employer,'' if it deals only with
federal, state or local governments. However, an ``organization''
covered by the second clause of the definition (a ``conference, general
committee, [etc.] subordinate to a national or international'') need
not deal with employers at all. 29 U.S.C. 402(i). Instead, such an
intermediate labor body is covered by the Act so long as it is
subordinate to a national or international labor organization and is
``engaged in an industry affecting commerce.'' Id.
The LMRDA authorizes the Department to promulgate rules and
regulations to enforce the Act's financial reporting requirements.
Under the Act,
[[Page 3736]]
Congress broadly delegated authority to the Secretary ``to issue,
amend, and rescind rules and regulations prescribing the form and
publication of reports required to be filed under this subchapter and
such other reasonable rules and regulations * * * as [s]he may find
necessary to prevent the circumvention or evasion of such reporting
requirements.'' 29 U.S.C. 438; American Fed'n of Labor and Congress Of
Indus. Orgs. v. Chao, 409 F.3d 377, 386 (D.C. Cir. 2005) (``[t]here is
no serious dispute'' that Congress ``delegated authority to the
Secretary to promulgate rules to enforce Section 208 [29 U.S.C.
438]''). The Secretary also has express authority to enforce the Act's
reporting requirements by initiating a civil action. 29 U.S.C. 440. The
Department's interpretation of Section 3(j)(5), which ``clarifies the
meaning of `labor organization * * * engaged in an industry affecting
commerce[,] * * * comes within its express authority in Sec. 208 to
promulgate rules'' under the LMRDA. Alabama Education, 455 F.3d at 393.
The Department's LMRDA Rulemaking
The Department issued a Notice of Proposed Rulemaking on December
27, 2002, that proposed revisions to the forms labor organizations use
to file annual financial reports required by the LMRDA. Labor
Organization Annual Financial Reports, 67 FR 79,280 (Dec. 21, 2002)
(NPRM). As part of this rulemaking, the Department stated its intent to
modify its interpretation of Section 3(j)(5). As noted, the Section
provides that an intermediate labor organization is deemed ``engaged in
an industry affecting commerce'' if it is:
A conference, general committee, joint or system board, or joint
council, subordinate to a national or international labor
organization, which includes a labor organization engaged in an
industry affecting commerce within the meaning of any of the
preceding paragraphs of this subsection, other than a State or local
central body.
Before the December 2002 NPRM, the Department interpreted the
clause, ``which includes a labor organization engaged in an industry
affecting commerce within the meaning of any of the preceding
paragraphs of this subsection, `` in Section 3(j)(5) as modifying
``conference'' and other listed intermediate bodies. Under that
interpretation, Section 3(j)(5) applied only to intermediate bodies
that were subordinate to a national or international labor organization
and were themselves composed, in whole or in part, of private sector
local labor organizations.
In contrast, in the NPRM's proposed interpretation, the ``which
includes'' clause, modifies ``national or international labor
organization.'' Under this interpretation, intermediate labor bodies
need not themselves include private sector members to be covered under
the LMRDA; rather, they need only be subordinate to a national or
international labor organization that includes a union that represents
private sector workers.
The Department's prior interpretation of Section 3(j)(5) came into
question following the decision in Chao v. Bremerton Metal Trades
Council, 294 F.3d 1114 (9th Cir. 2002). In Bremerton, the Ninth Circuit
held that the Bremerton Metal Trades Council (``BMTC''), a joint
council, met the LMRDA definition of ``labor organization'' because it
was subordinate to the Metal Trades Department, an international labor
organization engaged in an industry affecting commerce. Bremerton, 294
F.3d at 1118. In so holding, the court relied on the fact that the BMTC
was subordinate to a parent organization that met the LMRDA definition
of ``labor organization.'' Id. The court reasoned that ``[w]e must
decide not whether the Bremerton Council bargains directly with any
private employers but, instead, whether the Metal Trades Department,
the organization to which the Bremerton Council is subordinate, is
engaged in an industry affecting commerce.'' Id. at 1117. Thus, in
contrast to the Secretary's interpretation at the time, Bremerton
adopted an analysis under Section 3(j)(5) that looked not to the
composition of the intermediate body itself, but rather to whether the
national or international to which it is subordinate is engaged in an
industry affecting commerce.
The Bremerton case brought to the Department's attention an
alternate view of the meaning of the ``which includes'' clause in
Section 3(j)(5). In the 2002 NPRM, the Department proposed to revise
its instructions on financial reports for labor organizations to
include this interpretation of Section 3(j)(5), reflecting Bremerton's
analysis. See NPRM, 67 FR 79,284 (proposing to adopt a rule that ``an
intermediate labor organization that has no dealings itself with
private employers and no members who are employed in the private sector
may nevertheless be a labor organization engaged in commerce * * * if
[it] is `subordinate to a national or international labor organization
which includes a labor organization engaged in commerce.''')
Following a 90-day comment period, the Department on October 9,
2003, issued its final rule dealing with labor organization reporting
requirements, in which it adopted the revised interpretation of Section
3(j)(5). Labor Organization Annual Financial Reports, 68 FR 58374 (Oct.
9, 2003) (Final Rule). In the preamble to the Final Rule, the
Department addressed comments from three labor organizations--the
National Education Association (NEA), the American Federation of
Teachers (AFT) and the AFL-CIO--each of which opposed the Department's
interpretation of Section 3(j)(5). The Department concluded that the
comments opposing the Department's interpretation failed to provide a
persuasive argument supporting the Department's return to its pre-2002
view of the ``which includes'' clause of Section 3(j)(5).
After being notified by OLMS of the Department's revised
interpretation of Section 3(j)(5), and the corresponding need to file
reports, 38 intermediate labor organizations representing public sector
employees, primarily public school teachers, challenged the new
interpretation in federal district court. The court granted summary
judgment in favor of the plaintiff labor organizations. Alabama
Education Ass'n v. Chao, 2005 WL 736535 (D.D.C. Mar. 31, 2005). The
Department appealed that decision, and the U.S. Court of Appeals for
the D.C. Circuit, reversed the lower court's ruling. Alabama Education
Ass'n v. Chao, 455 F.3d 386 (2006). The court of appeals held that the
Department has statutory authority ``to clarif[y] the meaning of `labor
organization * * * engaged in an industry affecting commerce' '' and
thus the Secretary's interpretation of Section 3(j)(5) is ``reviewable
under Chevron'' principles of deference. 455 F.3d at 393. The court
further ruled that Section 3(j)(5)'s ``which includes'' clause contains
a ``patent ambiguity'' and that the Secretary's interpretation was a
permissible interpretation of the provision's terms. 455 F.3d at 395,
396; see also id. at n. * (LMRDA legislative history confirms
``inherent ambiguity of the statute'').
The court, however, further concluded that the Department had
failed to provide a ``reasoned analysis'' for its change of position
``sufficient to command [the court's] deference under Chevron.'' 455
F.3d at 396. The court noted that the Department failed to link
specifically the general policy concerns underlying the financial
reporting revisions in the final rule, (i.e., changes in union size,
financing and structure, and resulting financial irregularities, 67 FR
79,280), with an assessment of the Department's new and prior
interpretations of Section 3(j)(5). 455
[[Page 3737]]
F.3d at 396-397. The court also noted that the Department had unduly
relied on the Bremerton decision, without acknowledging that because
the intermediate body in that case contained private sector members,
the decision's holding did not contribute to the required reasoned
analysis. Id. at 397. Accordingly, the court remanded the rule to the
Department to provide a reasoned explanation for its change in
interpretation.
That analysis is set forth below.
Explanation for the Department's Revised Interpretation of Section
3(j)(5)
The Department's revised interpretation of the statute broadens the
coverage of intermediate labor organizations subject to the reporting
requirements of the LMRDA.
The result of this interpretation is that intermediate bodies that
are subordinate to a national or international labor organization that
includes a covered labor organization will be covered by the LMRDA,
even if the intermediate body is composed of solely public sector local
labor unions not covered by the Act. The rulemaking record as a whole
suggested several reasons in support of the Department's adoption of
this policy, and those reasons will be further explained and analyzed
here.
The Department's 2002 NPRM supported its regulatory revisions to
labor organizations' financial reporting requirements with the
following analysis:
Labor organizations also have changed tremendously since the
enactment of the LMRDA in 1959. There are now far fewer small,
independent unions and more large unions affiliated with a national
or international body * * *. In fact, many large unions today
resemble modern corporations in their structure, scope and
complexity. Moreover, just as in the corporate sector, there have
been a number of financial failures and irregularities involving
pension funds and other member accounts maintained by labor
organizations. These failures and irregularities result in direct
financial harm to union members. If the members of labor
organizations had more complete, understandable information about
their unions' financial transactions, investments and solvency, they
would be in a much better position than they are today to protect
their personal financial interests and exercise their democratic
rights of self-governance.
NPRM, 67 FR at 79,280-81.
In addition, regarding the Department's view of Section 3(j)(5),
the NPRM stated:
The instructions to form LM-2 adopt the recent holding of the
U.S. Court of Appeals for the Ninth Circuit in Chao v. Bremerton
Metal Trades Council, AFL-CIO, 294 F.3d 1114 (2002), interpreting
Section 3(j) of the LMRDA, because that interpretation gives full
meaning to the plain language of the statute. In that case, the
Court ruled that an intermediate labor organization that has no
dealings itself with private employers and no members who are
employed in the private sector may nevertheless be a labor
organization engaged in commerce within the meaning of Section 3(j)
of the LMRDA if the intermediate body is ``subordinate to a national
or international labor organization which includes a labor
organization engaged in commerce.'' Accordingly, the Instructions
will clarify that any ``conference, general committee, joint or
system board, or joint council'' that is subordinate to a national
or international labor organization will be required to file an
annual financial form if the national or international labor
organization is a labor organization engaged in an industry
affecting commerce within the meaning of Section 3(j) of the LMRDA.
NPRM, 67 FR 79,280, 79,284.
The Department's 2003 Final Rule provided the following support for
its policy revision:
The stated intent of Congress was to exempt ``wholly public
sector'' labor organizations from the coverage of the Act. The
Bremerton court found that an intermediate labor organization is not
``wholly public sector'' and exempt from the Act where it is
subordinate to a parent organization that meets the definition of a
labor organization engaged in an industry affecting commerce. The
Department's regulation at 29 CFR 451.3(a)(4) is not contrary to the
Bremerton decision when the regulation is read as giving effect to
the court's interpretation of the term ``wholly public sector labor
organization.'' The Department concludes that none of the commenters
provides a persuasive argument for disagreeing with the Bremerton
court's reading of the statute and therefore will maintain the
expanded language in the instructions for the Form LM-2.
Final Rule, 68 FR 58,374, 58,384.
These excerpts from the rule-making record establish a foundation
for the Department's explanation of its policy choice, and point to
three interdependent rationales for the adoption of the revised
interpretation. First, the Department has selected a policy alternative
that is consistent with the terms of the statute and promotes
Congress's purposes in enacting the LMRDA. The Department's
interpretation of Section 3(j)(5) advances the twin Congressional goals
that labor organizations' financial conditions and operations should be
subject to public disclosure to benefit employees that participate in
those organizations, and that the definition of ``labor organizations''
covered by the LMRDA should be interpreted broadly to advance union
democracy, financial transparency, and integrity. Second, the expanded
coverage permitted by the new interpretation promotes disclosure of
financial disbursements and receipts to and from structurally related
labor organizations, thus enhancing employees' ability to understand
the overall operation of labor organizations in general, as well as
identify any potential financial irregularities in particular. The
structure and financial aspects of labor organizations have become
increasingly complex in the nearly fifty years since the passage of the
LMRDA. Unlike several decades ago, when small, independent unions
predominated, there are now large, multi-level, multi-faceted labor
organizations, most of which are affiliated with large and complex
national or international labor organizations. In addition, many labor
organizations have restructured and reorganized their affiliate
relationships, rendering a single labor organization report
insufficient to provide transparency to increasingly complex structures
and relationships.
Third, and most importantly, the revised interpretation gives full
meaning to clause two of Section 3(i), 29 U.S.C. 402(i), which has at
its core a focus on covering those intermediate bodies precisely
because they are subordinate to a covered national or international
labor organization even though they may consist only of unions not
covered under the first clause of 3(i). The interpretation advances
public disclosure of financial transactions by intermediate bodies that
receive money from covered national and international labor
organizations, the source of which is, in part, fees and assessments
originating from employees in the private sector. Thus, the so-called
``wholly public sector'' intermediate body loses that attribute to a
great extent (despite its composition) when it is subordinate to, and
accepting contributions from, covered national and international labor
organizations whose funds are derived, in part, from employees in the
private sector.
As the court of appeals noted, these bases for the revised
interpretation were not fully explained in the prior rulemaking, and we
now elaborate upon them in greater detail.\1\
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\1\ In the preamble to the 2003 final rule, the Department
reviewed and responded to all comments regarding the Department's
interpretation in the final rule. As explained in the preamble, the
Department received only five comments on its interpretation,
including one from a supportive union member and one from a labor
organization that employed a mistaken premise that the
interpretation would require state or local central bodies to file
financial disclosure forms. 68 FR 58,383-58,384. Taken together, the
remaining three comments from three labor organizations challenged
the interpretation on three grounds: (1) The Department did not have
the statutory authority to undertake the revised interpretation; (2)
the Department's construction of the statutory terms was erroneous,
and resulted in the coverage of intermediate labor organizations
that are purely public-sector labor organizations and exempt from
the definitional provisions of the Act; and (3) the intermediate
bodies to which the Act would apply are not ``subordinate'' to a
national or international labor organization within the meaning of
the Act. After full consideration the Department determined that
none of the comments resulted in a determination that the
interpretation was either legally flawed, an erroneous construction
of the statute, or misguided public policy. 68 FR 58,383-58,384. The
Department has once again fully reviewed and reconsidered these
comments prior to publication of this Policy Statement, and the
conclusion expressed in the 2003 preamble remains unaltered.
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[[Page 3738]]
1. Consistency With the Terms and Purpose of the LMRDA
As noted above, in enacting the LMRDA, Congress intended to
``eliminate or prevent improper practices'' in labor organizations,
protect the rights and interests of employees, and prevent union
corruption. 29 U.S.C. 401(b), (c). To curb embezzlement and other
improper financial activities of labor organizations, Congress required
labor organizations to file detailed annual financial reports with the
Secretary of Labor. 29 U.S.C. 431(b). The reporting provisions of the
LMRDA were devised to implement the basic premise of the LMRDA--that
the Act was intended to safeguard democratic procedures within labor
organizations and protect the basic democratic rights of union members.
By mandating that labor organizations disclose their financial
operations to employees they represent, Congress intended to promote
union self-government, which would be advanced because union members
would be provided sufficient information to permit them to take
effective action in regulating internal union affairs.
The LMRDA is a remedial statute, necessary to impose high standards
and ethical conduct in the administration of internal union affairs.
Wirtz v. Local 153, Glass Bottle Blowers Assn., 389 U.S. 463, 469-470
(1968). In addition, Congress intended the definition of labor
organization to be construed broadly to achieve the Act's purposes.
Donovan v. National Transient Div., Int'l Bhd. of Boilermakers, 736
F.2d 618, 621 (10th Cir. 1984), cert. denied, 469 U.S. 1107 (1985). In
order to fully effectuate and serve the remedial purposes of the Act
noted above, the Department seeks to interpret the definitional
sections of the LMRDA broadly ``to include all labor organizations of
any kind other than those clearly shown to be outside the scope of the
Act.'' 29 CFR 451.2 (2006).
The Department's pre-2002 interpretation of Section 3(j)(5) did not
fully serve Congressional intent that the statute's definition be read
broadly, nor did it serve the remedial purposes of the LMRDA. Employees
concerned about payments to and from intermediate labor organizations
subordinate to a covered national or international labor organization
did not have access to the quality and quantity of information
available to members of unions that have historically filed the
Department's annual disclosure forms. Absent such disclosures, union
members know less about the governance of their unions and are thereby
frustrated by their inability to monitor the spending of their dues
monies because they are not fully aware of the financial commitments
and obligations of their union. They are disadvantaged in their ability
to make informed decisions when electing their union officers because
they do not have detailed information about the funding decisions made
by incumbent officeholders. In contrast, members of unions that file
the financial disclosure forms have a tool that can help them detect
fraud and embezzlement. Officers and employees of such unions are
deterred from committing such misconduct because they understand that
their unions' financial transactions are recorded, reported, and made
publicly available on the Internet. Employees concerned about the
expenditures of intermediate unions that did not report as the result
of the Department's prior policy have been denied the benefits that
flow from the increased transparency that compliance with the LMRDA
brings, including more effective member participation in union
decision-making, more informed voters, and the deterrence and detection
of fraud. If all intermediate bodies subordinate to LMRDA-covered labor
organizations are not themselves covered by the LMRDA, union
transparency is diminished and misdeeds will be more difficult to
discover.
2. Structural and Financial Complexity of Labor Organizations
The Department's NPRM noted that ``many large unions today resemble
modern corporations in their structure, scope and complexity.'' NPRM,
67 FR at 79,280. Indeed, ``commercial organizations and unions still
share many structural features of complex organizations. In most
industrial nations, unions as labor organizations have developed from
small, voluntary associations, to larger, more formal bureaucracies.
With the formation and expansion of large scale industrial unions, the
structure of labor organizations has shifted from that of informal
communities of workers to more centralized, hierarchical, and rational
bureaucracies.'' Julian Barling, Clive Fullagar & E. Kevin Kelloway,
The Union and Its Members 13 (Oxford University Press 1992).
In a unionized workplace, employees may be members of a local labor
organization, which represents employees with respect to terms and
conditions of employment at that particular workplace. That local union
is typically chartered by a national union, which in turn may be
affiliated with a national federation of unions. In addition, there are
city and state federations of labor organizations, international
federations of labor, joint and district councils, and departments
within a national federation of unions, among others. There are many
different, but related, labor organizations that a union member must
examine in order to analyze his or her local representative's
expenditure of funds.
The interrelatedness, and resulting structural complexity, of labor
organizations has a number of causes. The need for collaboration among
and between labor organizations with shared interests, the necessity of
labor organization cohesion during times of economic strife, the need
for large-scale reform regarding certain issues, such as nation-wide
wages and hours reform, the rise in multi-city or national
corporations, and the growth of a global economy, have all contributed
to the increase in labor organization affiliation within local, central
and national labor organizations. See Sidney Lens, Unions and What They
Do 39-46 (G.P. Putnam's Sons 1968). These factors contributing to labor
organization interrelatedness and complexity have only increased in the
final decades of the twentieth century.
This growth of interconnected labor organizations has been
accompanied by a complicated pattern of relationships, including
affiliations, disaffiliations, trusteeships, federal court supervision,
and the like. For instance, in 2005, seven of the largest national and
international unions left the AFL-CIO, for many years the only national
federation of unions, and created a brand new national labor
federation. Several of the nation's largest labor organizations have
departed the AFL-CIO in the past, only to rejoin, and then depart
again. Several national or international labor organizations prefer to
remain independent from any national federation. State federations of
[[Page 3739]]
labor organizations have themselves affiliated or disaffiliated with
national organizations depending on the common or divergent interests
of those labor organizations. Labor organizations have been placed in
trusteeship, requiring management of their internal affairs by higher-
level labor organizations, and several labor organizations have been
managed for years under court supervision. The AFL-CIO itself has
departments that are groupings of international unions based on trade
or industry that affiliate specifically with those departments. A local
union member may have direct contact only with his or her local, but in
all likelihood he or she is represented, through elected or appointed
delegates, within a maze of other union structures.
The complexity of labor organization structures and relationships
may be daunting to employees represented at the workplace level by a
local labor organization. Yet the structural complexity pales in
comparison to the financial complexity created by these relationships.
Dues and fees are collected from members at the local level, and that
money is sent on to other related organizations in the form of per-
capita assessments to support an increasingly complicated,
sophisticated, and coordinated set of expenditures by related labor
organizations, including education, organizing, political action at all
levels of government, strike funds, public relations, research, legal
representation, and so on. The ability of that local union member to
follow the trail of transactions among and between labor organizations
affiliated with the local union is challenging at best.
Confronted by the structural and financial complexity of
interrelated labor organizations, a local union member is further
hindered by the fact that labor organizations are required to report
only their individual financial conditions--joint affiliate reporting
is not required by the LMRDA. As a result, a local union member
interested in ascertaining the end-point of his or her dues collected
by the local but cast into the stream of affiliate expenditures must
obtain the financial reports of the local and each affiliated labor
organization--the national or international, the state level
organization, the national federation, and any other labor
organizations affiliated directly or indirectly with the local union.
Of course, this opportunity to study and analyze one's own local union
expenditures is lost if, within the chain of affiliations, one of the
affiliates has not filed an annual financial report.
Given the increased complexity of union structures and finances,
the ability of local union members to benefit from the transparency
afforded by the LMRDA should not be diminished by a labor
organization's relationship to an intermediate body that does not
presently file annual financial reports. Such a circumstance is akin to
a parent corporation disguising its assets and expenditures by lodging
them with an undisclosed subsidiary. To avoid this scenario in the
context of labor organizations, the LMRDA should be interpreted, to the
extent permitted by the statute's terms, so that local union members
have the ability to lift the cloak of structural and financial
complexity, and fully understand the activities and expenditures of
their local unions, their local's national affiliates, and the national
organization's subordinate labor organizations.
3. Intermediate Bodies' Expenditure of Funds Derived in Part From
Compulsory Fees and Taxes on Employees in the Private Sector
The two principles discussed above--the promotion of Congress's
goal of transparency in labor organization expenditures and the complex
structural and financial relationships between unions--lead directly to
the final consideration supporting the Department's revised
interpretation of Section 3(j)(5). The LMRDA's purpose and intent, its
legislative history, and the complexity and interrelatedness of modern
labor organizations, all support the disclosure of assets and
expenditures of intermediate labor bodies whose funds are derived, at
least in part, from private sector employees. In some cases, private
sector employees are represented by a local union that financially
supports a national or international labor organization with which it
is affiliated, and that national or international labor organization in
turn financially supports a subordinate state-level labor body that may
itself be wholly composed of locals representing employees only in the
public sector and therefore, has not, in the past, filed annual
financial disclosure statements.
Consider, for example, a local labor organization composed entirely
of nurses and other health care professionals employed by hospitals and
other facilities in the private sector, which is affiliated with a
national union primarily representing teachers in the public sector.
The private-sector nurses' local union dues support the national
teachers union, which in turn disburses funds to its state-level
subordinates. The state-level subordinate may itself be wholly composed
of public-sector locals and, as a result, not previously required to
file a financial disclosure statement. Consequently, the private-sector
nurses can track expenditures of their local union dues only until the
expenditures reach the state-level labor organization. There, under the
Department's prior interpretation, further financial information would
not be available, because the intermediate labor organization would not
be considered to be engaged in an industry affecting commerce under the
Act and would not be required to file reports.
The same scenario holds true in the case of faculty and staff
employed by universities in the private sector, and represented by a
local union affiliated with another national union primarily
representing teachers in the public sector. The private-sector faculty
members' local union dues support the national teachers union, which in
turn disburses funds to its state-level subordinates. Again, the
intermediate body may be wholly composed of public-sector locals, but
it is receiving indirectly the dues and fees of employees in the
private sector.
These scenarios are borne out by the two tables below. Table 1
reflects locals affiliated with two national teachers unions that have
many dues-paying members employed in the private-sector, like the
nurses and university professors examples noted above. The per capita
fees paid to the national teachers union by members of those private-
sector locals are shown below.
Table 1.--Fiscal Year 2005 Per Capita Tax Disbursements From Locals
Composed at Least in Part of Private-Sector Employees to Affiliated
National Teachers Union \2\
------------------------------------------------------------------------
------------------------------------------------------------------------
Locals Affiliated With American Federation of Teachers \3\
------------------------------------------------------------------------
Indiana Educators Federation, Local 4524................ $254,735
Temple University, Local 4531........................... 173,540
USF Faculty Association, Local 4269..................... 91,381
Washington Teachers Union, Local 6...................... 794,148
[[Page 3740]]
Professional Guild of Ohio, Local 1960.................. 171,237
UCATS, Local Union 3882................................. 395,783
Danbury Hospital Professional Nurses Association, Local 174,270
Union 5047.............................................
New Haven Federation of Teachers, Local Union 933....... 537,260
Oregon Federation of Nurses-Kaiser, Local Union 5017.... 412,957
NY State Public Employees Federation, Local Union 4053.. 7,658,493
Alaska Public Employees Association, Local Union 5200... 423,730
Professional Staff Congress/CUNY, Local Union 2334...... 4,771,000
L & M Healthcare Workers Union, Local Union 5123........ 169,217
------------------------------------------------------------------------
Locals Affiliated With National Education Association \4\
------------------------------------------------------------------------
OEA American Education Assn Okinawa..................... 264,263
Endicott College Faculty Association.................... 8,631
Adrian College Association of Professors................ 50,959
University of Detroit Professors Union.................. 147,821
Roger Williams University Faculty....................... 105,623
Baker College Education Association..................... 25,261
Milton Hershey Education Association.................... 70,025
National Education Assn Ind Local Union University of 14,840
Detroit Support Staff..................................
Rhode Island School of Design Faculty................... 58,215
RISD Part Time Faculty Association, Local 895........... 39,997
------------------------------------------------------------------------
\2\ Labor organizations that file Form LM-2, LM-3, or LM-4 reports with
the Department are, by definition, ``labor organizations'' covered by
the LMRDA. Local labor organizations that file reports are composed,
at least in part, of members employed in the private sector. See 29
CFR 451.3(a)(4) (``mixed and non-government locals [are] `labor
organizations' and subject to the Act'').
\3\ These figures are taken from the Form LM-2 filed by each listed
local labor organization for its fiscal year 2005. Form LM-2s are
filed by those labor organizations with total annual receipts of
$250,000 or more in their fiscal years. See Instructions for
Electronic Form LM-2 Labor Organizations Annual Report (3/23/04) at p.
1, at https://www.dol.gov/esa/regs/compliance/olms/erds/
LM2Instr2-2-04koREVISED.pdf. (Revisions in 2003 to the Form LM-
2 and its instructions, which set $250,000 as the mandatory floor for
filing the Form LM-2 amended the old floor of $200,000 set in 29 CFR
403.4. See 68 FR 58383, 58473.) Article VIII, Section 1(a) of AFT's
constitution requires each local to pay an established per capita tax
to the national office, and further sets the per capita rate at which
the national office will pay the office of each state federation. See
AFT 2002 Constitution at p. 21.
\4\ Except in one case in which the labor organization filed a Form LM-
2, these figures are taken from the Form LM-3 filed by each listed
local labor organization for its fiscal year 2005. Section 2-9 of the
NEA's bylaws indicates that, as established in contracts entered into
between the affiliates and the NEA, local affiliates transmit dues to
both the state affiliate and the NEA. As a result, these figures may
represent disbursements to both state affiliates and the NEA. See
Bylaws of the National Education Association of the United States 2004-
2005 at. p. 7.
* * * * *
Table 2 below confirms that these national teachers unions, which,
as shown above, received per capita fees from locals composed, at least
in part, of private sector employees, disbursed funds to their
affiliated intermediate bodies.
Table 2.--Fiscal Year 2005 Disbursements as ``Contributions, Gifts and
Grants'' by National Teachers Unions to Intermediate State-Level Labor
Organizations \5\
------------------------------------------------------------------------
------------------------------------------------------------------------
Contributions, Gifts and Grants by American Federation of Teachers to
State Affiliates \6\
------------------------------------------------------------------------
Louisiana Federation of Teachers*....................... $15,000
------------------------------------------------------------------------
Contributions, Gifts and Grants by National Education Association to
State Affiliates \7\
------------------------------------------------------------------------
Alabama Education Association*.......................... $1,561,525
NEA Alaska*............................................. 390,595
Arizona Education Association*.......................... 879,775
Arkansas Education Association*......................... 434,715
Colorado Education Association*......................... 142,435
Connecticut Education Association*...................... 844,595
Delaware State Education Association*................... 239,015
Georgia Association of Educators*....................... 972,770
Hawaii State Teachers Association*...................... 414,740
Idaho Education Association*............................ 317,305
Indiana State Teachers Association*..................... 1,181,930
Iowa State Education Association*....................... 892,770
Kansas NEA*............................................. 595,465
Kentucky Education Association*......................... 1,009,842
Louisiana Association of Educators*..................... 479,094
Maryland State Teachers Association*.................... 1,434,090
Massachusetts Teachers Association*..................... 1,638,351
Education Minnesota..................................... 1,410,256
Mississippi Association of Educators*................... 242,370
Missouri NEA*........................................... 800,440
Nebraska State Education Association.................... 590,465
NEA New Hampshire*...................................... 405,595
[[Page 3741]]
NEA New Mexico.......................................... 332,305
NEA New York............................................ 1,535,089
New Jersey Education Association........................ 2,286,522
Nevada State Education Association*..................... 777,045
North Carolina Association of Educators*................ 1,283,365
North Dakota Education Association*..................... 213,370
Oklahoma Education Association*......................... 772,045
Oregon Education Association*........................... 1,012,705
South Carolina Education Association*................... 434,740
South Dakota Education Association*..................... 239,015
Texas State Teachers Association........................ 1,408,136
Tennessee Education Association*........................ 1,105,568
Utah Education Association.............................. 112,435
Vermont NEA............................................. 438,660
Virginia Education Association*......................... 1,509,090
Washington Education Association*....................... 1,922,975
West Virginia Education Association*.................... 416,740
Wisconsin Education Association Council*................ 2,470,440
Wyoming Education Association*.......................... 190,725
------------------------------------------------------------------------
\5\ LM-2 instructions require labor organizations to itemize
contributions, gifts and grants on Schedule 17 of the Form. The
itemizations include ``direct and indirect disbursements to all
entities and individuals during the reporting period associated with
contributions, gifts, and grants, other than those listed on Schedules
15, 16, and 20[, and i]nclude, for example, charitable contributions,
contributions to scholarship funds, etc.'' See Instructions for
Electronic Form LM-2 Labor Organizations Annual Report (3/23/04) at
p.32, at https://www.dol.gov/esa/regs/compliance/olms/erds/LM2Instr2-
2-04koREVISED.pdf.
\6\ These figures are taken from the Form LM-2 filed by AFT for its
fiscal year beginning July 1, 2004 and ending June 30, 2005.
\7\ These figures are taken from the Form LM-2 filed by the NEA for its
fiscal year beginning September 1, 2004 and ending August 31, 2005.
* State affiliates marked with an asterisk are parties in Alabama
Education Ass'n v. Chao, 455 F.3d 386 (D.C. Cir. 2006), and have not
filed financial disclosure reports with the Department. These state
affiliates have stated in that litigation that they are intermediate
bodies wholly composed of public sector affiliates. State affiliates
that are not marked by an asterisk are not parties in Alabama
Education Ass'n v. Chao, and have not filed current financial
disclosure reports with the Department. The Department presumes that
their non-filing status is due to their wholly public sector
composition and not due to any other exception or exemption under the
LMRDA.
Taken together, Tables 1 and 2 demonstrate that two national
teachers unions receive dues and fees from employees employed in the
private-sector, and that money is, in turn, disbursed to intermediate
bodies that have previously not been required to file financial
disclosure reports.
* * * * *
The expenditure of dues and fees of private-sector employees by
intermediate-level state affiliates of national labor organizations
without full public disclosure of those expenditures runs afoul of the
purpose and intent of the LMRDA. As noted earlier, labor organizations
that solely ``deal with'' public-sector employers are not covered by
the first clause of Section 3(i), which applies only to labor
organizations that deal with statutory, i.e., private sector employers.
The second clause has no such limitation, and does not require that
intermediate bodies deal with any employers, private or public. Given
the scenario outlined above--that intermediate bodies may receive
financial support based on dues received in part from private sector
employees, the second clause of section 3(i) makes perfect sense.
Coverage of intermediate bodies under the second clause does not turn
on the entity's dealings with employers, but is based instead on the
subordinate relationship with a covered national or international. The
Department's rule corrects the problem of the non-transparency of funds
provided by covered national or international labor organizations to
subordinate intermediate bodies, and gives full meaning to the second
clause of Section 3(i).
It would undermine, rather than promote, the purposes of the LMRDA
if a labor organization could disburse dues paid by private-sector
employees to a subordinate labor body, and such subordinate labor body
could spend that money in secrecy. Such a loophole does not exist on
the face of the statute or anywhere in its legislative history, and was
not deliberately created by Congress in 1959. Moreover, the
Department's key statutory responsibility to promote union transparency
and democracy under the LMRDA requires that this loophole created by
prior interpretation be closed. As in the cases illustrated above, a
private-sector employee represented by a private-sector local union
covered by the LMRDA should not be prevented from tracing to its end-
point the expenditure of his or her own dues and fees, even if a labor
organization ultimately receiving those private-sector dues is composed
solely of public-sector unions. Thus, the ambiguity in Section 3(j)(5),
see Alabama Education, 455 F.3d at 395, should be resolved in favor of
coverage of an intermediate labor organization that is subordinate to a
national or international labor organization that includes a private
sector local, even if the intermediate itself is composed solely of
public sector members. Under this interpretation, the private-sector
employees in that local will have an improved ability to ascertain the
nature of labor organizations expenditures derived from their dues.
For several decades following the enactment of the LMRDA, the
Department's administration of the statute did not reach intermediate
labor organizations subordinate to a covered national or international
labor organization but composed solely of local public-sector labor
organizations. During that period of LMRDA administration, the
Department's interpretation permitted LMRDA-covered national and
international organizations to make financial disbursements to their
intermediate affiliates without any requirement that the intermediate
affiliates disclose the manner in which that money, some derived from
private-sector employees, was spent. Private-sector local union members
have been unable to ascertain whether their representatives spend their
money wisely, foolishly, or even illegally. The LMRDA's primary goal of
labor organization democracy achieved through labor organization
transparency has been thwarted during this period.
[[Page 3742]]
The Department's revised interpretation is intended to shed light on
the financial transactions of intermediate labor organizations that are
subordinate to, and spend money conveyed to them by, covered labor
organizations, thereby fully effectuating the purposes of the Act.
For the reasons set forth above, the Department of Labor is issuing
this Policy Statement; Interpretation under the authority at 29 U.S.C.
431 and 438.
Signed at Washington, DC, this 23rd day of January, 2007.
Victoria A. Lipnic,
Assistant Secretary for Employment Standards.
Don Todd,
Deputy Assistant Secretary for Labor-Management Programs.
[FR Doc. E7-1275 Filed 1-25-07; 8:45 am]
BILLING CODE 4510-CP-P
