Across the country, most public employees do not have the same rights as private-sector employees to review their union’s finances. And when they do, the information can be so sparse that members still struggle to see how their unions are spending their money, and evaluate the financial health of their organization.
Government union members deserve access to high-quality information about their unions, just as private-sector union members have. This page outlines solutions for making greater transparency possible.
On October 13, the Federal Register 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. Enactment of this rule would increase the amount of information union members have about their own organizations, particularly how much is being spent on politics and union leadership expenditures. By providing more information to union members and the public, this rule would help prevent corruption within unions, and ensure union officers better serve the workers they represent.
Currently, unions with private-sector membership are required by the 1959 Labor Management Relations Disclosure Act (LMRDA) to report their financial and membership data to the Department of Labor. Congress originally enacted the LMRDA because of “a number of instances of breach of trust, corruption, disregard of the rights of individual employees, and other failures to observe high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.”
The last major update to union reporting requirements was over 15 years ago under George W. Bush’s Secretary of Labor Elaine L. Chao. Before these updates, unions were able to lump millions of dollars in a single line item and union members had no meaningful way of knowing what the union was doing with their money. It also hampered efforts of watchdog groups and the media to investigate union corruption and hold these organizations accountable.
The 2004 reforms were a significant advancement in union transparency. Specifically, they required unions with revenue of $250,000 or more to file a LM-2 report (smaller unions file other LM forms). The LM-2 now requires the itemization of any receipt or expenditure of $5,000 or above, broken down into several categories such as representation, administration, or politics. The forms also detail, officer and employee compensation, loan information, assets, and membership information. The headquarters of all major national public employee unions annually file this report. This includes the National Education Association, American Federation of Teachers, American Federation of State, County and Municipal Employees, and others.
Since those updates, union members and the public have been able to access information about how unions spend and receive dues money. An update was attempted in 2008 but was stopped by the Obama Administration. However, while the Chao DOL changes were great advancements in union transparency, the subsequent decade and a half have produced lessons to show where they need to be updated. The Department surveyed several of its investigators to identify what information was missing and what would be useful to curb corruption.
Given the increased complexity in union finances and growth in membership over the last 15 years, it is time to update the form.
Intermediate bodies are mid-level organizations in the union hierarchy. They are generally state or regional unions made up of smaller local unions but still under a national union.
Given the interconnectivity of local unions with larger parent unions, local government unions can give their members clearer, more accessible financial information by reporting finances in the same way private-sector unions must.
The Department of Labor’s Office of Labor-Management Standards (OLMS) can make this solution possible by reinstating a 2003 rule that fixed this reporting disparity. This intermediate bodies rule requires financial information to be reported by intermediate unions representing public employees who are under a national or international union subject to the LMRDA.
The Fall 2018 Unified Agenda included the rule with a notice of proposed rulemaking due in December 2018. DOL has collected and is currently considering public comments on the rule.
The Labor Management Reporting and Disclosure Act of 1959 (LMRDA) established the requirement for unions to submit annual financial reports to the Department of Labor (DOL). Yet, unions have significantly changed since 1959. They are organized differently and now resemble large corporations with interrelated finances, accounts, and pension funds. Gone are the days of small independent government unions. They are now interconnected with national and international unions, which have the power to charter, affiliate, disaffiliate, or even put these intermediate bodies under trusteeship.
Under current regulations, only private-sector unions and government unions representing both public- and private-sector employees are required to disclose financial transactions, such as expenses, assets, and officer salaries, in forms know as LM-2, LM-3, and LM-4. In 2003, The Department of Labor, under President George W. Bush, took a step to fix this disparity by a creating rule that required intermediate bodies of government unions to file financial reports if their parent union was subject to the LMRDA. The Obama administration later issued a rule reverting to the antiquated interpretation of the act, allowing these intermediate bodies to get around reporting requirements.
Reinstating the 2003 rule would resolve this reporting loophole. The intermediate bodies rule has already been promulgated and litigated, and a 2007 policy statement gave further analysis demonstrating the need and legislative authority for the rule.
Due to widespread corruption, racketeering, and other misconduct in labor unions, Congress passed the LMRDA. This required unions to submit annual financial reports to DOL.
The Ninth Circuit in Chao v. Bremerton Metal Trades Council, 294 F.3d 1114 (9th Cir. 2002) held that the union was subject to the LMRDA because it was subordinate to a larger organization that met the LMRDA requirements.
DOL proposed 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 [and have to file LMRDA financial reports] . . . if [it] is ‘subordinate to a national or international labor organization which includes a labor organization engaged in commerce.’”
DOL published the final rule that updated the definition of “labor organization” to include “intermediate bodies that are subordinate to a national or international labor organization” and subjected these organizations to the LMRDA, “even if the intermediate body’s constituents are solely public sector local labor unions not covered by the Act.”
After several union challenges the US Court of Appeals for the District of Columbia Circuit in Alabama Education Association v. Chao, 455 F.3d 386 found that there is more than one reasonable interpretation of whom is covered by LMRDA requirements but that DOL failed to provide “reasoned analysis supporting its change of position.”
DOL issued a policy statement in response to the court, justifying the need for the modern interpretation
The court upheld DOL’s expansion of the LMRDA to intermediate labor organizations, allowing public employees under these government unions to obtain financial reports if their parent unions are subject to the LMRDA.
Under the Obama administration, DOL issued a new rule that reversed the previous rule and denied public employees in these unions the right to know about local union finances.
DOL included the intermediate bodies rule in the Unified Agenda.
DOL receives comments on Intermediate Bodies Rule to increase transparency of unions representing public-sector workers. DOL also moves to modernize union financial reporting by updating the LM forms.