State Policy Network
Proposed rule from the Department of Labor would modernize and increase union transparency

Millions of public employees join unions to improve their workplace conditions and receive better benefits and wages. These employees expect their union to fight for them and advance policies that improve their lives and serve their interests. When union leaders aren’t serving the workers they represent, workers deserve to know. However, current laws governing unions make it difficult for members to truly see what’s happening with their union dues, thereby making it harder to root out corruption within leadership.

On October 13, 2020, the Department of Labor (DOL) published a notice of proposed rulemaking (NPRM) that, if enacted, would require unions to provide more details on the financial information they already report publicly, predominantly through the LM-2 forms. If adopted, government union members will have a better understanding of how their union spends their hard-earned dues.

LM-2 forms 101

Never heard of an LM-2 form? You’re not alone. In fact, even some union members have never heard of them! An LM-2 form is an annual financial report that unions send to the DOL, which has oversight over these organizations. While these are the primary financial reporting method for unions, the forms haven’t seen a substantive update since 2004, when a rule went into effect that required increased transparency and disclosure from labor unions. Agency officials implemented this bipartisan rule to help union members hold their leaders accountable.

The rule required unions with revenue of $250,000 or more to file a LM-2 report (smaller unions file other LM forms). The report calls for the itemization of any expense of $5,000 or above, broken down into several categories such as representation, administration, or politics. The form also details officer and employee compensation, loans, assets, and membership information.

This was a big step for union transparency, but the form needs to be updated. Unions have grown significantly over the last 15 years, and their finances have become even more complex. What’s more, in the current LM-2 form, unions will clump expenditures together, so it’s not easy for union members or the public to understand where exactly the money is going.

The DOL’s proposed rule gives government union members a better picture of their union’s finances

The NPRM would include more itemized reporting, so unions can no longer lump expenditures together. For example, under the current LM-2 form, politics and lobbying are grouped together in one category. Union members aren’t able to see how much their union spends on electoral politics versus how much they spend on lobbying for certain issues. In such a highly politicized time, union members and the public have an interest and a right to know when unions spend money on political activities.

Another example is the “representation” line. The NPRM would break down the representation line and require unions to explain how much money they are spending on their current members for representation, collective bargaining, and contract negotiations, versus how much are they spending on organizing new members.

The NPRM would also identify conflicts of interest. For instance, if a union officer or employee is receiving money from another union, unions would be required to disclose that under the proposed rule. This will give union members a full picture of union officers and where their allegiances may lie.

The NPRM creates a new LM-2 Long Form (LM-2 LF) and updates the current LM-2 form. The new LM-2 LF will apply to unions with annual receipts of $8,000,000 or more. The LM-2 would apply to unions with annual receipts between $250,000 to $7,999,999. To reflect inflation, the DOL proposes raising the threshold for the LM-2 from $250,000 in receipts to $300,000.

Financial transparency will empower union members to hold their leaders accountable

While there are unions that uphold their commitment to serving their members, there have been widespread cases of financial abuse and corruption. In September, federal authorities launched an investigation into the longtime president of the nation’s largest firefighters union. The president is accused of collecting more than $1 million in payments from a union pension fund while still working at the union.

Frank Ricci is a senior strategist at the Yankee Institute for Public Policy. He also spent years as a union president for the New Haven Fire Fighters in Connecticut. “I can attest that internal transparency has never been a priority for unions,” noted Ricci. “Not unlike government, the longer a union is in existence, there is a propensity to create a larger bureaucracy. Soon the union is not about representing its members. It’s about preserving that bureaucracy and promoting the self-interest of the elected few.”

If the NPRM is implemented, union members will be in a better position to hold their leaders accountable if those leaders are not upholding their duty to act in the best interest of their members. Teachers, firefighters, policemen, and other public employees work hard for their community and expect their union to work hard for them. They deserve to know when their union isn’t serving their interests.

An opportunity for state think tanks to comment on this proposed rule

The DOL is seeking feedback on this proposed rule. SPN’s Federal Working Group, a coalition focused on advancing workplace freedom in the states, is encouraging state think tanks and their communities of workers to comment. Think tanks and their networks can play a crucial role in ensuring the DOL takes these important steps to increase union transparency. The comment period is open until December 14, 2020. If your organization has any questions about submitting comments, please contact Chantal Lovell at lovell@spn.org.

Categories: Policy Solutions
Organization: State Policy Network