State Policy Network

Government Union Transparency

Give Government Union Members the Right to Examine Union Finances

The Issue

Across the county, most public employees do not have the same rights as private-sector employees to review their union’s finances. This means they have no way to access information on the financial health of their union and how their dues money is spent. Public-sector employees should have the access to this important information—just like private-sector union members have.

Background

Union Reporting Requirements Are Inadequate for Public Employees

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).

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.

DOL, under President George W. Bush, took a step to fix this disparity by a rule that required intermediate bodies of government unions to file financial reports if their parent union was subject to the LMRDA. 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. However, the Obama administration issued a rule going back to the antiquated interpretation of the act and allowed these intermediate bodies to get  around reporting requirements.

Unions have significantly changed how they are organized and run since the initial reporting requirements were established in 1959. They 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.

This interconnectivity of local unions with larger “parent” unions that are required to provide financial reports, and Congress’ clear intent to bring transparency to union members and stop corruption show the need for local government unions to report in the same way private-sector unions report.

Solution: The "Intermediate Bodies" Rule

The Department of Labor’s Office of Labor-Management Standards (OLMS) can give similar rights to some public-sector union members that their private-sector brothers and sisters
enjoy. OLMS can do this by returning to its 2003 interpretation that financial information should be reported by intermediate unions representing public employees who are under a national or international union subject to the LMRDA.

The intermediate bodies rule has already been promulgated and litigated. Reinstating the correct interpretation can be as simple as going back to the 2003 rule backed up by a 2007 policy statement that gave further analysis showing the need and legislative authority for the rule.

The Fall 2018 Unified Agenda included the rule with a notice of proposed rulemaking due in December 2018.

The Department of Labor should protect the right of public employees to see their union finances.

History of Reporting Requirements

1959

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.

2002

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.

2002

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.’”

2003

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.”

2006

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.”

2007

DOL issued a policy statement in response to the court, justifying the need for the modern interpretation

2008

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.

2010

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.

2018

DOL included the intermediate bodies rule in the Unified Agenda.

SPN Contact

Jennifer Butler

Senior Policy Advisor