Labor Organization Officer and Employee Reports

DEPARTMENT OF LABOR

Office of Labor-Management Standards

29 CFR Part 404

RIN 1215-AB74

RIN 1245-AA01

Labor Organization Officer and Employee Reports

AGENCY:

Office of Labor-Management Standards, Department of Labor.

ACTION:

Final rule.

SUMMARY:

The Office of Labor-Management Standards of the Department of Labor (Department) is revising the Form LM-30 Labor Organization Officer and Employee Report and its instructions upon review of the comments received in response to its August 10, 2010 Notice of Proposed Rulemaking (NRPM). The Form LM-30 implements section 202 of the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA or Act), the purpose of which is to require officers and employees of labor organizations (unions) to publicly disclose possible conflicts between their personal financial interests and their duty to the labor union and its members. The rule revises the Form LM-30 and its instructions, based on an examination of the policy and legal justifications for, and utility of, changes enacted in the Form LM-30 Final Rule (2007 rule), published on July 2, 2007. The principal revisions are: Union leave and no docking payments are not required to be reported on the Form LM-30; union stewards and others representing the union in similar positions are not covered by the Form LM-30 reporting requirements; the requirement to report certain bona fide loans is limited, as is reporting of payments from certain trusts, unions, and employers in competition with employers whose employees are represented by an official's union; and the scope of reporting required of officers and employees of international, national, and intermediate body unions is revised. This rule also establishes a new form and instructions, as well as regulatory text concerning certain reporting obligations. This rule largely implements the Department's proposal in the NPRM, with modifications of several minor aspects of the layout of the form and instructions.

DATES:

This rule is effective on November 25, 2011, and it is applicable to Form LM-30 filers with fiscal years beginning on or after January 1, 2012. For filers with fiscal years beginning prior to January 1, 2012, the Department will accept either the Revised Form LM-30 published with this rule, the pre-2007 Form LM-30, or the 2007 Form LM-30.

FOR FURTHER INFORMATION CONTACT:

Andrew R. Davis, Chief of the Division of Interpretations and Standards, Office of Labor-Management Standards, U.S. Department of Labor, 200 Constitution Avenue, NW., Room N-5609, Washington, DC 20210,

olms-public@dol.gov,

(202) 693-0123 (this is not a toll-free number), (800) 877-8339 (TTY/TDD).

SUPPLEMENTARY INFORMATION:

The Regulatory Information Number (RIN) identified for this rulemaking changed with publication of the Spring 2010 Regulatory Agenda due to an organizational restructuring. The old RIN (1215-AB74) was assigned to the Employment Standards Administration, which no longer exists; a new RIN (1245-AA01) has been assigned to the Office of Labor-Management Standards.

I. Background

A. Introduction

This final rule, which revises the Form LM-30 and its instructions, is part of the Department's ongoing effort to effectively administer the reporting requirements of the LMRDA. The Form LM-30 Labor Organization Officer and Employee Report is designed to provide for the disclosure of payments to, and interests held by, union officers and employees, when such payments and interests pose an actual or potential conflict of interest. In developing the proposed rule and considering and responding to the comments submitted on the proposal, the Department has kept in mind that a fair and transparent reporting system for union officers and employees must consider the interests of unions, their members, and the public, and must balance the benefits served by disclosure with the burden placed on reporting individuals and labor organizations.

The Form LM-30 implements section 202 of the LMRDA, 29 U.S.C. 432. Under section 202,

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union officers and employees (collectively, union officials) are required to file reports if they, or their spouses or minor children, engage in certain transactions or have financial holdings that may constitute a conflict of interest with their union responsibilities. The Act requires public disclosure of certain financial interests held, transactions engaged in, and income received. Subject to certain exclusions, these interests, transactions, and incomes include:

1. Payments or benefits with monetary value from, or interests in, an employer whose employees the filer's union represents or is actively seeking to represent;

2. Transactions involving any stock, bond, security, or loan to or from, or other interest in, an employer whose employees the filer's union represents or is actively seeking to represent;

3. Income or any other benefit with monetary value from, or other interest in, a business a substantial part of which consists of buying from, selling or leasing to, or otherwise dealing with an employer whose employees the filer's union represents or is actively seeking to represent;

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Unless otherwise stated all references to statutory provisions,

e.g.,

“section 202,” are to provisions in the LMRDA. 29 U.S.C. 401-531.

4. Income or any other benefit with monetary value from, or other interest in, a business any part of which consists of buying from, or selling or leasing directly or indirectly to, or otherwise dealing with the filer's union or a trust in which the filer's union is interested;

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These trusts are defined by section 3(l) of the Act as:

a trust or other fund or organization (1) Which was created or established by a labor organization, or one or more of the trustees or one or more members of the governing body of which is selected or appointed by a labor organization, and (2) a primary purpose of which is to provide benefits for the members of such labor organization or their beneficiaries.

Unless otherwise specified, references to “trust” in this preamble are to these statutorily defined trusts, which are sometimes referred to as “section 3(l) trusts.”

5. Business transactions or arrangements with an employer whose employees the filer's union represents or is actively seeking to represent; and

6. Payment of money or any other thing of value from any employer not covered under the above categories, or payment of money or other thing of value from a person who acts as a labor relations consultant to an employer.

The Form LM-30 had remained essentially unchanged from 1963 until 2007. In 2005, the Department published a Notice of Proposed Rulemaking that proposed far-reaching changes to the form. 70 FR 51165 (Aug. 29, 2005). After a notice and comment period, the Department issued the 2007 final rule. 72 FR 36105 (July 2, 2007). The 2007 rule brought significant changes to the LM-30 and its instructions and represented, in some instances, a sharp departure from the Department's previous interpretations of section 202. The rule completely revised the layout and overall structure of the Form LM-30, lengthening the form from two to nine pages with the creation of

five schedules, continuation pages, and various sections consisting of instructions and examples. (The 2007 form and instructions are available at

http://www.dol.gov/olms.

)

Upon review of the 2007 rule, and input from the regulated community, the Department issued its proposed revisions to that rule on August 10, 2010, stating its view that many of the objectives sought to be met by the 2007 rule—including simplification of the reporting requirements and adherence to the reporting scheme intended by Congress—had not been accomplished. See 75 FR 48416. The Department, at 75 FR 48417, explained that the 2007 rule left unresolved fundamental questions about the reporting obligations of union officials and raised policy and legal issues warranting reexamination by the Department. These fundamental questions regarding the Form LM-30 reporting requirements included—the coverage of stewards and other union representatives serving in similar positions; the reporting of certain loans and union leave and no docking payments; the reporting of payments from certain trusts and unions; the reporting of payments from businesses that compete with an employer whose employees are represented by an official's union or whose employees the union is actively seeking to represent; and reporting by higher level union officials about relationships with businesses and employers that pose conflicts concerning subordinate affiliates of their union. In addition, the Department identified questions concerning the layout of the 2007 Form LM-30 and instructions and whether they provided useful and adequate assistance to filers.

Prompted by these uncertainties about the 2007 rule, the Department, on March 19, 2009, issued a non-enforcement policy regarding the 2007 Form LM-30 reporting requirements, allowing filers to use either the pre-2007 or 2007 Form LM-30 report.

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Further, the Department held a stakeholder meeting on July 21, 2009 to solicit comments regarding the 2007 rule and potential revisions to the Form LM-30. In the NPRM, the Department invited comment on the proposed changes with respect to their benefits, the ease or difficulty with which union officers and employees would be able to comply with these changes, and whether the changes would better implement the LMRDA. The Department invited general and specific comments on any aspect of this proposal; it also invited comment on specific points, as noted throughout the text of the notice.

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The Department modifies this non-enforcement policy with the publication of today's rule. For filers with reportable payments or interests in fiscal years beginning prior to January 1, 2012, the Department will accept either the Revised Form LM-30 published with this rule, the 2007 Form LM-30, or the pre-2007 Form LM-30. For filers with reportable payments or interests in fiscal years beginning on or after January 1, 2012, the Department will accept only the Revised Form LM-30.

B. History of the LMRDA's Reporting Requirements

In enacting the LMRDA in 1959, a bipartisan Congress expressed the conclusion that in the labor and management fields “there have 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 which require further and supplementary legislation that will afford necessary protection of the rights and interests of employees and the public generally as they relate to the activities of labor organizations, employers, labor relations consultants, and their officers and representatives.” Section 2(b), 29 U.S.C. 401(b).

The LMRDA was the direct outgrowth of a Congressional investigation conducted by the Select Committee on Improper Activities in the Labor or Management Field, commonly known as the McClellan Committee. The LMRDA addressed various ills through a set of integrated provisions aimed at labor-management relations governance and management. These provisions include financial reporting and disclosure requirements for labor organizations, their officers and employees, employers, labor relations consultants, and surety companies. See 29 U.S.C. 431-36, 441.

To highlight the potential conflicts of interest to which union officers and employees could be susceptible, the Senate Committee Report explained:

[This section] requires a union officer or employee to disclose any securities or other interest which he has in a business whose employees his labor union represents or “seeks to represent” in collective bargaining. When a prominent union official has an interest in the business with which the union is bargaining, he sits on both sides of the table. He is under temptation to negotiate a soft contract or to refrain from enforcing working rules so as to increase the company's profits. This is unfair to both union members and competing businesses.

Senate Report No. 187 (1959) (Senate Report) at 15, reprinted in NLRB Legislative History of the Labor-Management Reporting and Disclosure Act of 1959 (2 volumes) (Leg. History), 1 Leg. History, at 411.

The Senate Report presented “three reasons for relying upon the milder sanction of reporting and disclosure [relative to establishing criminal penalties] to eliminate improper conflicts of interest,” which can be summarized as follows:

Disclosure discourages questionable practices. “The searchlight of publicity is a strong deterrent.” Disclosure rules should be tried before more severe methods are employed.

Disclosure aids union governance. Reporting and publication will enable unions “to better regulate their own affairs. The members may vote out of office any individual whose personal financial interests conflict with his duties to the members,” and reporting and disclosure would facilitate legal action by members against “officers who violate their duty of loyalty to the members.”

Disclosure creates a record. The reports will furnish a “sound factual basis for further action in the event that other legislation is required.”

Senate Report, at 16, reprinted in 1 Leg. History, at 412.

The Report further stated:

The committee bill attacks the problem [of conflicts of interest] by requiring union officers and employees to file reports with the Secretary of Labor disclosing to union members and the general public any investments or transactions in which their personal financial interests may conflict with their duties to the members. The bill requires only the disclosure of conflicts of interest as defined therein. The other investments of union officials and their other sources of income are left private because they are not matters of public concern. No union officer or employee is obliged to file a report unless he holds a questionable interest in or has engaged in a questionable transaction. The bill is drawn broadly enough, however, to require disclosure of any personal gain which an officer or employee may be securing at the expense of the union members.

Senate Report, at 14-15, reprinted in 1 Leg. History, at 410-11.

Both the Senate and House Reports recognized that a reportable interest was not necessarily an illegal practice. As the House Report stated:

In some instances matters to be reported are not illegal and may not be improper but may serve to disclose conflicts of interest. Even in such instances disclosure will enable the persons whose rights are affected, the public, and the Government, to determine whether the arrangements or activities are justifiable, ethical, and legal.

House Report No. 741 (House Report), at 4, reprinted in 1 Leg. History, at 762. See Senate Report, at 38, reprinted in 1 Leg. History, at 434 (“By requiring reports * * *, the committee is not to be construed as necessarily condemning the matters to be reported if they are not specifically declared to be improper or

made illegal under other provisions of the bill or other laws”).

Conflict-of-interest standards, including disclosure obligations of individuals and entities occupying positions of trust, are firmly established in U.S. law. As stated in the House Report, repeating almost verbatim the same point in the Senate Report:

For centuries the law of fiduciaries has forbidden any person in a position of trust subject to such law to hold interests or enter into transactions in which self-interest may conflict with complete loyalty to those whom he serves. * * * The same principle * * * should be equally applicable to union officers and employees [quoting the AFL-CIO's ethical practices code]: “[A] basic ethical principle in the conduct of union affairs is that no responsible trade union official should have a personal financial interest which conflicts with the full performance of his fiduciary duties as a worker's representative.”

House Report, at 10-11, reprinted at 1 Leg. History, at 768-69. Senate Report, at 14, reprinted in 1 Leg. History, at 410. See generally Restatement (Second) of Trusts (1959) §§ 170, 173; Restatement (Second) of Agency (1958) §§ 381, 387-98.

The reporting provisions of the Act represent, in part, an effort to codify various requirements contained in an extensive code of ethics voluntarily adopted by the AFL-CIO in 1957 and applied to its affiliated unions and officials. See Senate Report, at 12-16, reprinted in 1 Leg. History, at 408-12; House Report, at 9-12, reprinted in 1 Leg. History, at 767-70. See also Archibald Cox, Internal Affairs of Labor Unions Under the Labor Reform Act of 1959, 58 Mich. L. Rev. 819, 824-29 (1960). The following excerpts from this code demonstrate the similarities between a union official's fiduciary duty and the disclosure requirements of section 202.

[A] basic ethical principle in the conduct of union affairs is that no responsible trade union official should have a personal financial interest which conflicts with the full performance of his fiduciary duties as a workers' representative.

[U]nion officers and agents should not be prohibited from investing their personal funds in their own way in the American free enterprise system so long as they are scrupulously careful to avoid any actual or potential conflict of interest.

In a sense, a trade union official holds a position comparable to that of a public servant. Like a public servant, he has a high fiduciary duty not only to serve the members of his union honestly and faithfully, but also to avoid personal economic interest which may conflict or appear to conflict with the full performance of his responsibility to those whom he serves.

There is nothing in the essential ethical principles of the trade union movement which should prevent a trade union official, at any level, from investing personal funds in the publicly traded securities of corporate enterprises unrelated to the industry or area in which the official has a particular trade union responsibility.

[These principles] apply not only where the investments are made by union officials, but also where third persons are used as blinds or covers to conceal the financial interests of union officials.

Ethical Practices Code IV: Investments and Business Interests of Union, 105 Cong. Rec.*16379 (daily ed. Sept. 3, 1959), reprinted in 2 Leg. History, at 1407-08. See also Ethical Practices Code II: Health and Welfare Funds,

Id.,

2 Leg. History, at 1406-07.

The Act was crafted with particular regard for the unique function and status of labor unions. Then Senator John F. Kennedy, who was the chief sponsor of the Senate bill, S. 505, which served as the foundation for the LMRDA, stated that the legislation was “designed to permit responsible unionism to operate without being undermined by either racketeering tactics or bureaucratic controls. It is designed to strike a balance between the dangers of to [sic] much and too little legislation in this field.” 105 Cong. Rec. S816 (daily ed. Jan. 20, 1959), reprinted in 1 Leg. History, at 969.

As noted by Senator Kennedy, a balance of these interests was central to the enactment of the LMRDA. Congress sought to address legitimate concerns about illegal and undemocratic behaviors without permitting that concern to be used as an excuse for undermining organized labor. Further, Congress sought to address the importance of balancing necessary disclosure and regulation with undue intrusion on union operations and the protection of union officers' privacy interests. As stated in the Senate Report, “[t]he committee recognized the desirability of minimum interference by Government in the internal affairs of any private organization * * * in establishing and enforcing statutory standards great care should be taken not to undermine union self-government or weaken unions in their role as collective-bargaining agents.” Senate Report, at p. 7, reprinted in 2 Leg. History, at 403.

Professor Archibald Cox played a pivotal role in drafting the legislation that ultimately became the LMRDA. His testimony before the Senate subcommittee that was considering this legislation presaged the language in the Senate Report, describing the reporting obligation as a limited one. He testified: “The bill is narrowly drawn to meet a specific evil. It requires only the disclosure of conflicts of interest. The other investments of union officials and their other sources of income are left private because they are not matters of public concern.” Hearings on S. 505 before the Subcommittee on Labor of the Senate Committee on Labor and Public Welfare (1959) (Senate Hearings), at 123; see Senate Report, at 15, reprinted in 1 Leg. History, at 411. Professor Cox additionally noted that because the reporting requirements were based, in part, upon the Ethical Practices Code formulated by the AFL-CIO, union officials who adhered to this code would have “virtually nothing to disclose in his report to the public.” Senate Hearings, at 123.

C. Statutory Language

Section 202 provides in its entirety:

SEC. 202. (a) Every officer of a labor organization and every employee of a labor organization (other than an employee performing exclusively clerical or custodial services) shall file with the Secretary a signed report listing and describing for his preceding fiscal year—

(1) Any stock, bond, security, or other interest, legal or equitable, which he or his spouse or minor child directly or indirectly held in, and any income or any other benefit with monetary value (including reimbursed expenses) which he or his spouse or minor child derived directly or indirectly from, an employer whose employees such labor organization represents or is actively seeking to represent, except payments and other benefits received as a bona fide employee of such employer;

(2) Any transaction in which he or his spouse or minor child engaged, directly or indirectly, involving any stock, bond, security, or loan to or from, or other legal or equitable interest in the business of an employer whose employees such labor organization represents or is actively seeking to represent;

(3) Any stock, bond, security, or other interest, legal or equitable, which he or his spouse or minor child directly or indirectly held in, and any income or any other benefit with monetary value (including reimbursed expenses) which he or his spouse or minor child directly or indirectly derived from, any business a substantial part of which consists of buying from, selling or leasing to, or otherwise dealing with, the business of an employer whose employees such labor organization represents or is actively seeking to represent;

(4) Any stock, bond, security, or other interest, legal or equitable, which he or his spouse or minor child directly or indirectly held in, and any income or any other benefit with monetary value (including reimbursed expenses) which he or his spouse or minor child directly or indirectly derived from, a business any part of which consists of buying from, or selling or leasing directly or indirectly to, or otherwise dealing with such labor organization;

(5) Any direct or indirect business transaction or arrangement between him or his spouse or minor child and any employer whose employees his organization represents or is actively seeking to represent, except work performed and payments and benefits received as a bona fide employee of such employer and except purchases and sales of goods or services in the regular course of business at prices generally available to any employee of such employer; and

(6) Any payment of money or other thing of value (including reimbursed expenses) which he or his spouse or minor child received directly or indirectly from any employer or any person who acts as a labor relations consultant to an employer, except payments of the kinds referred to in section 302(c) of the Labor Management Relations Act, 1947, as amended.

(b) The provisions of paragraphs (1), (2), (3), (4), and (5) of subsection (a) shall not be construed to require any such officer or employee to report his bona fide investments in securities traded on a securities exchange registered as a national securities exchange under the Securities Exchange Act of 1934, in shares in an investment company registered under the Investment Company Act or in securities of a public utility holding company registered under the Public Utility Holding Company Act of 1935, or to report any income derived therefrom.

(c) Nothing contained in this section shall be construed to require any officer or employee of a labor organization to file a report under subsection (a) unless he or his spouse or minor child holds or has held an interest, has received income or any other benefit with monetary value or a loan, or has engaged in a transaction described therein. 29 U.S.C. 432.

D. Rationale for Rulemaking on Form LM-30

The Department is modifying the Form LM-30 for the following reasons, which the Department identified in the NPRM as the bases for its proposed changes:

(1) The 2007 Form LM-30 rule created uncertainty for the regulated community, presented unresolved questions regarding the rule's reporting requirements, engendered strong objections to key aspects of the rule, such as the reporting of certain loans, including mortgages and student loans; the reporting of union leave and no docking payments; and the extension of the Form LM-30 reporting requirement to individuals serving as union stewards or in similar positions representing the union.

(2) The revisions adopted in this rule better balance the disclosure of information and the burden imposed on union officials.

(3) The revisions in this rule better clarify the form and instructions and organize the information in a useful format.

As explained in the NPRM, the Department fully recognizes the importance of union officer and employee reporting and the disclosure of pertinent financial information to union members and the public. This rule effectuates these purposes and reflects a proper balancing of transparency with the need to maintain union autonomy and to avoid overburdening unions and their officials with unnecessary reporting requirements. Because the 2007 rule did not adequately consider this balance, it did not succeed in properly implementing the LMRDA. The Department has carefully considered the comments received from the regulated community and the public about the 2007 rule and the changes proposed by the Department. Generally, the Department has included in the final rule the changes proposed. Unless otherwise stated herein, the Department has made these changes for the reasons stated in the NPRM. Rather than restate in full the reasons set out at length in the NPRM, the Department has attempted to limit repetition to those instances where a more detailed discussion is needed to provide context to comments received on the proposed rule and the Department's response to those comments.

E. Review of General Comments Received in Response to NPRM

The Department received 62 unique comments to the NPRM, from 286 commenters.

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Of the 62 unique comments received, 39 expressed opposition to the Department's proposal to revise Form LM-30, 22 supported the proposal, and an additional comment, from a labor organization, expressed neither support nor opposition to the proposal, but requested an industry-specific exemption to the LM-30 reporting requirement.

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One of the unique comments was a form letter submitted by 225 individuals. Additionally, one commenter submitted two versions of the same comment.

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The labor organization suggested that the Form LM -30 reporting obligation should not apply to union officials who receive free admission to performances for union-related purposes, or for purposes of voting for industry awards. The union offered clarifying language that would exempt these examples of free admission from Form LM-30 reporting. The issue will be addressed in section III.E. of the preamble.

Comments that expressed, in whole or in part, general support or opposition to the NPRM will be discussed in this section of the rule. Comments on specific changes and revisions to Form LM-30 will be addressed in subsequent sections, which are organized by topic.

Review of General Comments in Support of NPRM

Comments submitted by 17 national/international unions, two federations of labor organizations, one local union, one law firm (on behalf of various clients, including unions, insurance companies, and service providers to unions and benefit plans), and one public policy organization generally expressed strong support for the Department's proposed revisions to Form LM-30.

Multiple union commenters, a public policy organization, and a law firm generally supported the Department's NPRM, but expressed concerns about certain aspects of the proposal or suggested certain modifications. These issues and proposed modifications will be discussed later in this rule, in the relevant sections to which each topic applies.

Review of General Comments in Opposition to NPRM

The comments submitted in opposition to the NPRM include the above-referenced form letter, 36 additional comments submitted by individuals, and two comments submitted by public policy organizations. A third public policy organization opposed some aspects of the proposal.

Most of the opposing comments, apart from those submitted by the public policy organizations, were general in nature and did not directly, if at all, address the Form LM-30 or the Department's proposed revisions. The above-referenced form letter stated that the proposed Form LM-30 regulations should be rejected because they would undermine efforts regarding recent changes made to unions' reporting and disclosure requirements, which were designed to increase transparency. The letter also stated that union members have relied on the LMRDA to “discourage and expose” corruption.

Two individuals that identified themselves as union members asserted that conflict-of-interest reporting requirements should not be lessened, and voiced their support of transparency. While some private citizens limited their comments to expressing general dissatisfaction with the current political administration, other commenters expressed general anti-union sentiment, and did not refer to the proposed revisions to Form LM-

30 or any aspect of LMRDA reporting requirements. Additional commenters made general statements that unions should be held accountable for potential conflicts of interest, and generally should not be exempt from reporting requirements. Apparently misunderstanding the Department's proposal, multiple commenters erroneously characterized the NPRM as an effort to eliminate conflict-of-interest reporting altogether.

In response to these comments, the Department notes that its proposal and this final rule have been drafted with the purpose of best effectuating the disclosure requirements of the LMRDA. The goal has been to revise the 2007 rule in a way that achieves that purpose. Contrary to the suggestions by several commenters, the Department's proposals are not designed to achieve arbitrary goals or political objectives. Indeed, many commenters appear to have overlooked that most aspects of the 2007 rule were left unchanged by the Department's proposal and this final rule. As a matter of policy and statutory interpretation, the Department believes that the approach adopted in this rule reflects an improvement over those aspects of the 2007 rule that have been revised.

One public policy organization disputed the Department's statement that the 2007 rule raised “significant policy and law questions.” Rather, in the commenter's view, the objections to the 2007 rule are “political” in nature, deriving from the “regulated community.” The commenter stated that the NPRM should be immediately withdrawn “due to the Department's inconsistent application of the term “employer” to different parts of the LMRDA” (discussed below in section III, part D, of this preamble). The commenter explained its view that the 2007 changes were necessary additions to ensure needed transparency, and urged the Department to enforce the 2007 rule. The Department disagrees with these general comments. In the Department's view, it is evident from a cursory review of the 2007 rule, the compliance issues it presented, the history surrounding the Form LM-30 and its enforcement, and the comments received at the July 21, 2009 stakeholder meeting, that the 2007 rule presented fundamental policy and legal questions deserving of the Department's scrutiny. As a result of its review of the 2007 rule, the Department has developed an approach that more effectively targets actual or potential conflict-of-interest payments and balances the need for transparency with the legitimate interests of union officials and transparent labor-management relations.

Another public policy organization voiced strong opposition to the NPRM, and stated that the NPRM “provides no evidence that is consistent with LMRDA language” to justify its proposed revisions to Form LM-30. The commenter stated that “[s]ince 1959, the Department has essentially ignored Form LM-30 reporting and disclosures.” The commenter argued that the NPRM proposes to “hide [union-employer] collusions,” and “essentially abandons individual workers in its analysis.” For the reasons mentioned above in response to a similar comment, the Department disagrees with the assertions. The interest of workers, union members, and the public in labor-management transparency is a significant goal of the statute, and has been a primary consideration in this rulemaking. The importance of balancing the benefits of disclosure against the burdens that recordkeeping and reporting imposed on the legitimate activities of unions and their officials likewise undergirds the proposal and the final rule. The Department fully explains in the sections that follow in this preamble the rationale for the changes made by this final rule and how they comport with the LMRDA's disclosure provisions.

One public policy organization challenged the Secretary's authority to make the proposed revisions under section 208 of the LMRDA, and suggested that the proposed rule, therefore, is inval

Id.

Section 208 of the LMRDA, 29 U.S.C. 438, authorizes the Secretary of Labor to issue, amend, and rescind rules and regulations to implement the LMRDA's reporting provisions. The commenter reads section 208 as a “one-way ratcheting mechanism” that only permits the Secretary to add additional reporting requirements, not revise existing requirements. In its view, the changes proposed by the Department could be effectuated only if Congress amends the Act.

The Department disagrees with the commenter's distinctive view of section 208. Section 208 grants the Secretary authority “to issue, amend, and rescind rules and regulations prescribing the form and publication of reports required to be filed under Title II of the Act.” The verbs “amend” and “rescind” do not constrain this authority; they allow the Secretary to make changes, but do not compel any particular modification. Further, the words themselves do not connote that amendments and rescissions must add to (rather than subtract from) the reporting requirements. The verb “rescind,” for example, suggests removal or abrogation in general, and is equally applicable to both reporting requirements and reporting exemptions.

The Department fully understands that its “rules and regulations prescribing the form and publication of reports required to be filed” must conform to the statute. As explained throughout this preamble, the proposed changes, as adopted in this final rule, are entirely consistent with the language and purpose of the LMRDA. By revising the Form LM-30 to feature a simplified format and more concise, clear instructions, the final rule will facilitate filers' compliance with Form LM-30 reporting requirements and increase the form's utility to the public.

The same commenter suggests that the Department has disregarded the intent of Congress and conferred upon itself the authority to create administrative exemptions in derogation of the statutory requirements. The Department disagrees, noting, as discussed throughout this preamble, that the changes are based upon the Department's reasoned interpretation of the Act. The Department additionally notes that while the term “administrative exemption” has long been used to describe certain exceptions from a general reporting obligation (as the term was also used in the 2007 rule), they have always been based on a reasonable interpretation of the statute. The commenter overlooks that the Department retains discretion under the statute in crafting rules, and that how this discretion is exercised is appropriately based on policy considerations.

The commenter added that the Secretary may limit disclosure by utilizing de minimis thresholds, but argued that union officials must still adhere to record retention requirements in LMRDA section 206. While the intent of the comment is not clear, such recordkeeping requirements apply to records needed to verify required reports and the detail required to be included on the reports. They do not apply to information not required to be reported.

Finally, the commenter suggested that a statement used in the 2010 NPRM demonstrates the Department's intention to undermine congressional intent. The NPRM, at 75 FR 48416, states that the LMRDA reporting provisions “are designed to empower labor organizations, their members, and the public.” The commenter reads the statement as proof that “DOL embraces a view that part of the LMRDA's purpose is to `empower labor unions'

when, in fact, its purpose is to shield union members and the public from corrupt union officials.” In response, the Department in no way intended to intimate that the LMRDA was designed to “empower labor organizations,” as distinct from their membership. As the commenter also recognizes, the LMRDA's disclosure provisions provide information that empowers union members and the public by promoting union self-governance and financial integrity. At the same time, and as recognized in the NPRM, the Department cannot disregard the burden that reporting places on unions and union officials. As stated in the 1959 Senate Committee Report and repeated in the NPRM: “The committee recognized the desirability of minimum interference by Government in the internal affairs of any private organization * * * in establishing and enforcing statutory standards great care should be taken not to undermine union self-government or weaken unions in their role as collective-bargaining agents.” Senate Report No. 187, at p. 7, reprinted in 2 Leg. History, at 403, quoted at 75 FR 48418. Thus, in regard to its impact upon unions, the intent of the LMRDA is not to intrude on the legitimate role of unions in labor-management relations, but, rather, to advance the interests of employees by furthering union and workplace democracy and reducing or eliminating labor-management financial corruption.

Comments on Reporting Burden Created by 2007 Rule

Most union commenters asserted that the 2007 changes to the Form LM-30 reporting requirements are not justified in light of the burden they impose, and voiced support for the rescission of some of these requirements, which one commenter described as “extremely burdensome to filers, and confusing and misleading to the public.” Another international union commented that the 2007 revisions to Form LM-30 “impose[d] a severe burden on union filers with no corresponding benefit to union members or the public and raised fundamental legal and policy questions with which OLMS is still struggling.”

A federation of labor organizations stated that in challenging the 2007 rule it had argued that the 2007 “changes in the universe of potential Form LM-30 filers and in the scope of interests and receipts subject to reporting exceeded the Department's statutory authority.” The commenter concurs with the NPRM that the 2007 changes to the Form LM-30, had they gone into effect, would have been unduly burdensome and could have deterred people from running for union office. One commenter concurred with the comments submitted by the federation, and stated that “the prior regulatory scheme * * * was unduly burdensome and far beyond the original intent of the law.” Another commenter stated that the 2007 LM-30 reporting requirements “create a trap for even the most scrupulous and detail-oriented union official,” adding that [“b]y setting [a]standard that in some respects is impossible to meet, the current rules discourage involvement in union activities.”

Echoing the burden theme, one international union commenter stated that the Form LM-30 reporting requirements outlined in the 2007 rule require “unnecessary reporting of many financial transactions and arrangements that pose no threat of a conflict of interest,” and create a “crushing burden on [its] officers and employees.” It added that these new requirements “discourage[ ] involvement in union activities to the detriment of both the union and its employer partners.” Yet another commenter supported the Department's proposal, as it targeted the “unnecessary over-complication, confusion, and burden caused by its 2007 rule.”

One union commenter challenged the 2007 rule as claiming to enhance “transparency,” but rather imposed “expensive and time-consuming” requirements, to the detriment of the members. Noting the increased volume of information required to be reported on the 2007 Form LM-30, another international union questioned whether such additional information would effectively reveal actual or potential conflicts of interest.

Comment on 2007 Rule's Impact on Compliance Assistance Efforts

One local union commenter cited the intensive, multi-faceted training and compliance assistance efforts undertaken by the commenter's union when the 2007 rule was adopted, and supports the proposed changes, as they would reduce the “complication associated with compliance.” The commenter stated that its union “would much rather devote these human resources to matters that have more widespread and direct benefits for our members,” such as negotiating contracts, processing grievances, and organizing unrepresented workers to protect the wages and fringe benefits of its membership.

Comments on Striking a Fair Balance Between the Conflict-of-Interest Disclosure Requirement and Union Officials' Legitimate Privacy Interests

Numerous commenters supported the Department's proposal in its effort to balance the legitimate needs and interests of unions and their officials with the need for conflict-of-interest reporting that advances labor-management relations, union democracy, and union financial integrity. For example, one commenter stated, “The goal of the proposed Rule, to restore a fair balance between the interests of unions, their members and the public, is appropriate and necessary.” Following this theme, another commenter stated that the Department's proposal better balances union officials' privacy interests with the need for members to have information concerning conflicts of interest that could undermine the union's ability to represent the employees. Another commenter, a federation of labor organizations, stated that it supported the Department's proposal “because, in the main, the proposal accomplishes the Department's statutory purpose of striking the proper `balance' between `the interests of labor organizations, their members, and the public, including the benefits served by disclosure, the burden placed on reporting entities, and preserving the independence of unions and their officials from unnecessary government regulation.” 75 FR at 48416. An international union commenter offered support for the proposed changes, stating that they are well grounded, consistent with congressional purpose in drafting the Act, and successful in striking an appropriate balance between the goals of greater conflict-of-interest transparency while not establishing unnecessary burden for union officials.

II. Authority

A. Legal Authority

The legal authority for this rule is set forth in sections 202 and 208 of the LMRDA, 29 U.S.C. 432, 438. Section 208 of the LMRDA provides that the Secretary of Labor shall have authority to issue, amend, and rescind rules and regulations prescribing the form and publication of reports required to be filed under Title II of the Act and such other reasonable rules and regulations as she may find necessary to prevent the circumvention or evasion of the reporting requirements. 29 U.S.C. 438.

B. Departmental Authorization

Secretary's Order 08-2009, issued November 6, 2009, contains the

delegation of authority and assignment of responsibility for the Secretary's functions under the LMRDA to the Director of the Office of Labor-Management Standards and permits re-delegation of such authority. See 74 FR 58835 (Nov. 13, 2009).

III. Revisions to the 2007 Form LM-30 Reporting Requirements

This rule implements five changes to the Form LM-30 reporting requirements, as proposed in the NPRM: (1) The elimination of reporting of union leave and no docking payments, and, more broadly, a revised interpretation of the bona fide employee exception; (2) the removal from coverage of individuals serving as union stewards or in similar positions representing the union, such as a member of a safety committee or a bargaining committee; (3) the elimination of reporting for certain bona fide loans and other financial transactions on Parts A and B of the form; (4) the limitation on reporting of payments from employers competitive to the represented employer, certain trusts, and unions; and (5) a revision of the reporting required of national, international, and intermediate union officers and employees.

First, this rule returns to the historical practice whereby union officers and employees were not required to report compensation they received under union leave and no docking policies established under collective bargaining agreements or pursuant to a custom and practice under such collective bargaining agreements. These payments are made by a represented employer to its employees who are serving on behalf of the union on labor-management relations matters. Under a union leave policy, the employer continues the pay and benefits of an individual who often works full time on such matters. Under a no docking policy, the employer permits individuals to devote portions of their work day or work week to labor-management relations business, such as processing grievances, with no loss of pay. The requirement in the 2007 rule that union officials must report union leave and no docking payments has been strongly criticized as unduly burdensome. The Department agrees that this reporting requirement imposes undue burden and may impede individuals from running for union office and otherwise serving in important union roles. The 2007 rule was based on the premise that such payments are for work performed on the union's behalf, rather than the employer's, and are thus not payments made under the “bona fide employee” exception of section 202 of the LMRDA. Upon reconsideration, the Department has determined that the term “bona fide employee,” as used in that section, is most naturally read to distinguish between, on the one hand, payments that are made to a union official by virtue of his or her employment by the company making the payment, and, on the other hand, payments that are made to union officials without regard to such employment. This interpretation better accords with the purposes of the statute than the interpretation embodied in the 2007 rule that focuses on whether the union or the employer making the payment exercises primary control over an individual's discrete, temporal activities as a union official.

Second, this rule returns to the historical practice of excluding union stewards and similar union representatives from Form LM-30 reporting. The Department believes that this practice comports with the language of section 202 and better effectuates labor-management relations than the interpretation embodied in the 2007 rule.

Third, this rule establishes administrative exemptions for Parts A and B of the form, whereby union officials generally need only report loans from bona fide credit institutions if such loans are on terms more favorable than those available to the public. The 2007 rule required more extensive reporting and made confusing and complex distinctions among various relationships and credit institutions. This rule also incorporates the clarification, as set forth in 2007 Form LM-30 Frequently Asked Question (FAQ) 70, that union officials as a general rule are not required to report on savings accounts, certificates of deposit (CD), credit cards, etc. where such instruments contain the same terms offered to other customers without regard to an individual's status as a union official.

6

6

See the 2007 Form LM-30 FAQs at

http://www.dol.gov/olms/regs/compliance/RevisedLM30_FAQ.htm.

Fourth, this rule limits the reporting obligation with respect to interests in and payments from employers that compete with employers represented by the official's union or that the union actively seeks to represent. Disclosure of such payments is important, but only where an official is involved with the organizing, collective bargaining, or contract administration activities related to a particular represented employer, or possesses significant authority or influence over such activities. Establishing such limitation on disclosure ensures that meaningful information will be provided to union members without imposing undue burden on officials who do not occupy positions of influence over the union's organizing, collective bargaining, or contract administration activities related to the represented employer. Similarly, this rule modifies the scope of reporting insofar as payments from certain trusts and unions are concerned. The Department returns to its historical practice of not requiring officials to report on payments they receive from trusts or, as a general rule, from unions. Officials of a staff union are, however, still required to report on Part A any payments they receive from the union-employer whose employees the staff union represents.

Finally, this rule revises and clarifies the scope of “top-down” reporting for officials of international, national, and intermediate unions. This rule effectuates the Department's proposal in the NPRM that officers and certain employees of these higher level unions must look at payments they receive from employers and businesses with relationships with lower levels of their unions (

e.g.,

a local or other subordinate body), as well as with their own level of the union, when applying the Form LM-30 reporting requirements. However, based on a review of the comments, the Department has determined to adopt a modification of its proposed expansion of the scope of top-down reporting for union employees of national, international, and intermediate body labor organizations. All higher-level union employees that have significant authority or influence with respect to affiliates will also need to report these matters in relation to subordinate affiliates. Higher-level union employees without such significant authority or influence over affiliates or officials of affiliates will not be subject to these top-down reporting obligations.

The 2007 rule also established confusing exceptions to the “top-down” reporting obligations. Payments from businesses that dealt with represented employers were exempt, while the instructions did not specify the reportability of payments from businesses that dealt with lower level unions. Further, these officials were not required to report any payments or other financial benefits received by their spouses and minor children from employers and businesses involved with a lower level union. This rule effectuates the Department's proposal to remove these exceptions.

In developing this rule, the Department has reviewed the reporting

examples utilized in the 2007 rule and the substantial guidance issued after the rule's publication as answers to FAQs in order to identify the extent to which, if at all, reporting will be changed under this rule. This rule supersedes any inconsistent interpretation or other guidance. The Department identifies in the margin those instances where the rule does not change the reporting obligations under the examples and FAQs.

7

As discussed later in the text, examples will generally not be included in the revised instructions.

7

Most of the examples in the 2007 instructions continue to accurately reflect reporting requirements as articulated in this rule. Thus, the following continue to accurately reflect reporting requirements: Examples 2-15, at pp. 3-4 of the instructions; examples 1-2, 4-5, at p. 6 of the instructions; examples 1 and 2, at p. 7 of the instructions; and examples 1, 3-15, and 17, at pp. 8-9 of the instructions. Note that the NPRM had incorrectly stated that example 3, at p. 6 of the instructions would continue to accurately reflect reporting under this rule. Several of the FAQs are based on requirements that the Department changes with this rule.The following FAQs, however, continue to accurately reflect reporting requirements: 2-10, 12-26, 28, 30-37, 39, 44, 47, 49-50, 54, 56-59, 72-76, and 79-88. It should be noted however, that some of the comments and FAQs, such as FAQs 49 and 73, while remaining accurate, were intended to illustrate issues that are less likely to arise under the revised rule. Others, such as FAQs 1 and 77, while largely accurate, contain some statements that are based on or refer to interpretations that are superseded by this rule.

A. The Bona Fide Employee Reporting Exception Under Section 202

This rule effectuates the Department's proposal to return to its historical position that union officials should not report union leave and no docking payments. 75 FR 48421. As discussed above, these payments are made by a represented employer to its employees who are serving on behalf of the union on labor-management relations matters in accordance with the parties' collective bargaining agreement. First, the historical interpretation under which such compensation was not reported—to which this rule returns—comports more readily with the language in section 202, than the interpretation underlying the Department's 2007 interpretation. Second, such reporting imposes a substantial burden on union officials on matters unlikely to pose conflicts of interest and removing this burden ensures that there will be no undue interference with the internal workings of labor unions and labor-management relations. Third, there is no persuasive reason, as a matter of policy, why union officials must report such payments, while employers making such payments are under no similar obligation. See 75 FR 48421-48423.

Sections 202(a)(1) and (5) of the LMRDA require a labor organization officer or employee to report payments that the official, his or her spouse, or minor children receive from an employer whose employees the labor organization represents or is actively seeking to represent, “

except payments and other benefits received as a bona fide employee of such employer.”

29 U.S.C. 432(a)(1) & (5) (emphasis added).

Until the 2007 rule, the Department's policy had been to exclude from reporting payments and other benefits received for activities undertaken on behalf of the union, as well as for any other “activities other than productive work,” but paid for by the employer. Thus, the instructions for the 1963 Form LM-30 stated that the following payments and benefits were exempt from Form LM-30 reporting:

[p]ayments and benefits received as a bona fide employee of the employer for past or present services, including wages, payments or benefits received under a bona fide health, welfare, pension, vacation, training or other benefit plan; and payments for periods in which such employee engaged in activities other than productive work, if the payments for such period of time are: (a) Required by law or a bona fide collective bargaining agreement, or (b) made pursuant to a custom or practice under such a collective bargaining agreement, or (c) made pursuant to a policy, custom, or practice with respect to employment in the establishment which the employer has adopted without regard to any holding by such employee of a position with a labor organization.

Pre-2007 Form LM-30 Instructions, Part A (Items 6 and 7) at (iv). See 28 FR 14384 (Dec. 27, 1963).

The 2007 rule narrowed the exemption in the Form LM-30 instructions, as quoted above, by limiting it to situations where such payments were made pursuant to a bona fide collective bargaining agreement and totaled 250 or fewer hours during the filer's fiscal year.

1. Review of Comments Received

The Department received 17 substantive comments on the issue of the union leave and no docking payments. Of these 17 comments, 14 supported the removal of reporting for such payments: 12 unions, one law firm, and one public policy organization. Additionally, three comments opposed the change, including two public policy groups, and 225 individuals who sent in form letters.

a. Comments in Support of NPRM

The Department received 13 comments that provided general support for removing union leave and no docking payments from the Form LM-30 reporting requirements, with about one-half providing specific comments in support of the changes. One international union commenter concurred with the view that the “legitimacy” of such payments is established when they are included in a collective bargaining agreement or employment practice, and that they do not pose conflict-of-interest problems like “no show work, featherbedding, or similar practices.” The commenter further stated that requiring reporting for such payments for union officials, and not employers, imposes an “unnecessary burden” on the officials and deters employees from serving as representatives. A national union concurred with the Department's view, as expressed in the NPRM, that such payments do not pose a conflict of interest, and also noted that employers are not required to report such payments on the Form LM-10.

Another international union maintained that such reporting would be burdensome, unrelated to the purpose and intent of the statute, and “disruptive of many well-established labor-management relationships.” The commenter also stated that such arrangements are known to the employees, who benefit along with the employer from this practice, and it presented evidence of the burdensome nature of reporting such payments. It explained that union officials would be required to keep track of all hours worked under union leave or no docking arrangements and calculate benefits as well as wages earned, adding that such information would not easily be obtained from the employer, who may not desire to release it. Such reporting, the commenter contended, may discourage employee participation in the union, and would not disclose conflicts of interest in that no docking arrangements are already known to employees in a bargaining unit either by being required by a collective bargaining agreement or being made pursuant to a custom under a collective bargaining agreement. Further, the commenter stated that members know that when stewards or other union representatives “administer the contract, process grievances, or represent members in disciplinary actions,” they are receiving payment from the employer.

A national union discussed the burden and disincentive that reporting union leave and no docking payments would have on employees' willingness to serve the union. Another national union emphasized that such payments, received pursuant to a collective bargaining agreement, are made with full knowledge of the employees and

thus reporting is not needed to provide transparency. The union explained that the burden that such reporting would impose would discourage members from representing their fellow employees in “grievances, serving on safety and health committees, and participating in collective bargaining.” An international union stressed that such payments do not pose conflicts of interests, as they “primarily serve” the employers by promoting “prompt and fair resolution of grievances and other workplace issues so that work continues and morale remains high.”

Further, a national union stated that in determining whether or not a payment is received “as a bona fide employee,” a distinction must be made between payments made “by virtue” of a union official's employment with the employer and payments made without regard to such relationship. In this union's experience, employees volunteer to serve, on their own personal time, on joint labor-management, safety and health, and other committees, with the collective bargaining agreement only ensuring that they do not lose any compensation or benefits.

Finally, a law firm supported the Department's proposed return to its historical position that union leave and no docking payments are not reportable. It urged the Department to clarify that employers are not required to report such payments under section 203 of the Act. The firm asserted that such payments should be considered to be made as “compensation for, or by reason of, [an employee's] service as an employee for such employer.”

8

It stated that without such clarification an employer may feel obligated to report such payments, even though union officials are not required to report their receipt of such payments. As the Department discusses in later sections of the preamble, this rulemaking solely addresses reporting under section 202 of the Act and that interpreting section 203 requirements would be beyond its scope.

8

The Department of Justice, not this Department, is responsible for interpreting and enforcing section 302 of the Taft-Hartley Act. The language quoted is from section 302(c) of the statue.

b. Comments in Opposition to NPRM

The three comments opposing this aspect of the Department's proposal offered arguments in support of the 2007 rule's premise that union leave and no docking payments presented a conflict of interest for union officials and must be reported to ensure appropriate transparency. Two of the commenters argued that the Department's proposal was based on an impermissible reading of the statute.

A public policy organization offered some specific observations regarding the effect of allowing union leave and no docking to go unreported. It claimed that the Department lacked authority under the Act to excuse union officials from reporting such payments, suggesting that the proposed rule was based simply on the new Administration's dissatisfaction with the reporting requirement rather than a considered view of the statute's requirements. The comment argued that payments for work done for the union cannot be received as a “bona fide employee.”

Additionally, the public policy organization claimed that by eliminating reporting, “de facto no-show jobs” and “featherbedding” would be concealed and substantial payments to union officials would go unreported. Such payments, in its view, constitute an improper “subsidy” for union activity. Another commenter, a public policy organization, argued that the Department's proposal would conceal instances of “no-show jobs,” and other fraudulent arrangements. This public policy organization also asserted that, in proposing to remove union leave and no docking payments from Form LM-30 reporting, the Department was ignoring the structure of the statute and establishing an “administrative exemption.”

The individuals who commented by form letter also addressed this issue and stated that no docking reporting should not be removed because most stewards receive no extra compensation for their duties, which could make them susceptible to “other forms of rewards.”

The two public policy organizations stated that the burden associated with the 2007 rule is significantly overstated. One organization stated that the Department's proposal overlooked how the 2007 rule mitigated burden by establishing a 250-hour reporting threshold. One of the organizations argued, albeit without further support, that most union officials would not have to report their union leave or no docking payments, because these payments would not meet the 250-hour threshold.

The organization also argued that the Department's burden estimates in the 2010 NPRM demonstrated the absence of any significant burden associated with reporting union leave and no docking payment, noting that the Department estimated that the proposed changes would only reduce recordkeeping time by five minutes (15 minutes in the proposed rule as opposed to 20 minutes in the 2007 rule) and the overall reporting by 30 minutes (90 minutes in the proposed rule as opposed to 120 minutes in the 2007 rule).

A public policy organization also objected to the Department's assessment of the burden associated with the 2007 rule, as discussed in the NPRM. It stated, on one hand, that any burden is not the result of the 2007 rule but has existed since the enactment of the statute (even if the Department, in the commenter's opinion, did not always enforce the Form LM-30 requirements), and, on the other hand, that the 2007 rule created no additional burden because only “atypical financial arrangements that benefit some union officials” were reportable under the rule.

Taking issue with the view that union leave and no docking payments pose no conflict of interest where required by a collective bargaining agreement or made pursuant to a custom under a collective bargaining agreement, another public policy organization argued that these payments create “the definite possibility of becoming a conflict of interest.” In this regard, it cited a dissenting opinion in

Caterpillar

v.

UAW,

107 F.3d 1052, 1060 (3d

.

Cir. 1997)(Alito, J. dissenting), where the dissenting judge stated such payments create a conflict, because “union negotiators * * * may agree to reduced benefits for employees in exchange for financial support for the union.”

One public policy organization acknowledged that the courts have determined that union leave and no docking are not unlawful under LMRA Section 302, but it nevertheless contends that the courts have “misconstrued” such provision, and that such payments, as well as the granting of “super-seniority” to union officials, do create a conflict of interest for the union officials, as the officials could exchange benefits for the bargaining unit as a whole for benefits for themselves. The comment asserted that “any special benefit” creates a conflict of interest, and it cites

United States

v.

Phillips,

19 F.3d 1565, 1566-69 (11th Cir. 1994), to illustrate this point. It also contended that disclosure furthers the public's and government's ability “to determine the validity of the financial transaction.” Additionally, the commenter rejected the idea that union leave and no docking provided value to the employer, insisting, for example, that the payments did not increase the speed of handling grievances, and that, in any event, such considerations have no relevance to the statute.

The public policy organization also contended that any conflict of interest should be disclosed so members can “exercise their democratic rights” when choosing representatives, and that the Department will hamper members' ability to exercise such rights by establishing a Form LM-30 that will provide “less information on the financial activities of their representatives.” Another public policy organization similarly argued that the Department is proposing to reduce the “amount of information” made available to members, the government, and the public regarding payments to union officials.

Additionally, the public policy organization argued that the effect of the union leave and no docking payments is to shift costs of union officer, employee, and steward training to the employer and to defray costs involved in the union's political activities. Thus, the commenter contended that reporting is needed for the public to be made aware of these effects. Furthermore, the commenter insisted that the effect of the NPRM's “new definition of `bona fide employee'” will require the filing of other LMRDA reports, including “persuader reports” under section 203 of the Act.

Finally, both public policy organization commenters disagreed with the Department's position that, as a matter of policy, there was no persuasive reason why union officials should report union leave and no docking payments while employers are not required to do so pursuant to the Form LM-10, Employer Report, and section 203 of the statute.

2. Response to Comments

In response to the comments received, and for the reasons stated in the NPRM and discussed herein, this rule effectuates the Department's proposal to rescind the requirement in the 2007 rule that union officials report compensation and benefits they receive under employer union leave and no docking policies. In the NPRM, as noted above, the Department advanced three reasons for its proposal: (1) The historical interpretation under which such compensation was not reported comports more readily with the language in section 202 than the interpretation in the 2007 rule; (2) the 2007 rule imposes a substantial burden on union officials to report on matters unlikely to pose conflicts of interest and this burden could unduly interfere with the internal workings of labor unions and labor-management relations; and (3) the absence of any persuasive policy reason why union officials must report receiving such payments while employers making such payments are under no similar obligation.

With regard to the language of section 202, the Department believes it is best read to require reporting of payments only when a union official is not a bona fide employee of the employer making the payment. This reading departs from the 2007 rule's approach, which sought to equate payments to “bona fide employees” with payments made to union officials for “productive work” on the employer's behalf. In the 2010 NPRM, the Department made the additional points, discussed below, in rejecting the position taken in the 2007 rule. An individual's status as an employee is based on the various factors articulated in the common law. See

Nationwide Mutual Ins.

v.

Darden,

503 U.S. 318 (1992). “Bona fide” is synonymous with “good faith” or “genuine,”

i.e.,

without fraud or deceit.

9

Thus, section 202(a)(1) is most naturally read to except from reporting union leave and no docking payments to a current or former employee of the company making the payment unless made under the guise of employment, such as where payment is for a no-show job with the company, in an amount that unreasonably exceeds the value or amount of the work performed, or the payment is made on terms inconsistent with the parties' negotiated agreement or the workplace custom and practice under the agreement. In contrast, where a payment made to an individual working on behalf of the union by his current or past employer is sanctioned by a collective bargaining agreement or by custom or practice of the workplace pursuant to the collective bargaining agreement, the legitimacy or “bona fides” of the payment, received as a result of a genuine employment relationship, is established.

9

See Black's Law Dictionary

(8th ed. 2004), which defines the term as: “1. Made in good faith; without fraud or deceit. 2. sincere; genuine”;

The Random House Dictionary of the English Language, Unabridged

(2d ed. 1987), which defines the term as: “1. made, presented, etc. in good faith; without deception or fraud * * *. 2. genuine.—syn. 1. honest, sincere, lawful, legal. 2. genuine.—ant. spurious, deceitful, false.”

See also Black's

“bona fide operation,” defined as “[a] real, ongoing business”; and “bona fides,” defined as “1. Good faith. 2.

Roman law.

The standard of conduct expected of a reasonable person, esp. in making contracts ands similar actions; acting without fraudulent intent or malice.” See 75 FR 48422.

In response to the comments received, the Department notes that payments received as bona fide employees may include wages and other benefits received as compensation for service as an employee of the employer,

and

other compensation, such as jury duty leave, military leave, and maternity and paternity leave. It is not relevant whether or not the payments made to employees are for work or other activities engaged in under the control or direction of the employer, as employers routinely provide payments to employees as bona fide employees in such circumstances, which the 2007 rule also recognized. See the definition of “bona fide employee,” in the 2007 Form LM-30 Instructions, which exempts, in part, payments or benefits received for “leave for jury duty.” Further, the Department does not recognize any difference between union leave and no docking payments from other types of leave payments that are not for “productive work,” assuming that they are all bona fide, or good faith, payments.

The Department disagrees with the commenters' conclusions that unless union leave and no docking payments to union representatives are reported there will be no disclosure of de facto “no-show jobs,” “featherbedding,” or similar abuses of the employment relationship.

10

Contrary to this commenter's view, such payments are reportable on the pre-2007 Form LM-30, the 2007 Form LM-30,

and

the revised Form LM-30, as they are payments that are not received as a

bona fide, i.e.,

good faith, employee. See IM entry 248.200; see also the NPRM at 75 FR 48422.

11

Nothing in the Department's proposal suggested otherwise. Regardless of the label the commenter might attach,

e.g.,

de facto “no-show job,” what is relevant is whether or not the payment was received as a bona fide employee. Further, as mentioned, the legitimacy of the payment is established when it is made pursuant to the terms of a collective bargaining agreement. Thus, the determination of whether or not such payments are made pursuant to a collective bargaining agreement, or a custom or practice made pursuant to a

collective bargaining agreement, is not only relevant but statutorily necessary. “Bona fide” means “genuine” or in “good faith,” the application of which, in a unionized workplace, must be made in part by analyzing the collective bargaining agreement.

12

10

The Department disagrees with the assertion that a union official remaining on an employer's rolls under a grant of “super-seniority” would have had an obligation, simply upon that status, under the Act to report all payments received from an employer. Like any union official, an official with this status would have been required to report union leave or no docking payments under the 2007 rule. However, payments made to an official for his regular production work have never been reportable under the Act. Payments received for production work are not reportable because they are received as a bona fide employee of the employer making the payment. An employee's super-seniority status does not change this analysis. See 72 FR 36127-28.

11

The Department states that, as a general matter, union leave and no docking payments are received by union officials as bona fide employees, but it will evaluate the factual circumstance concerning any type of payment to a union official, on a case-by-case basis, if there is any question whether or not the bona fide nature of the arrangement has been established.

12

See

Caterpillar, Inc.

v.

UAW,

107 F.3d 1052 (3d Cir. 1997) (employer's payments of salary and benefits to union grievance chairpersons did not violate section 302 of the LMRA). The majority stated that the collective bargaining agreement “does not immunize otherwise unlawful subjects but, by defining the basis for the payments, speaks directly to the question posed by the statute as to whether the payments are “compensation for, or by reason of * * * service as an employee.”

Id.

at 1057.

Further, the Department disagrees with a commenter's suggestion that no docking and union leave payments are a type of “featherbedding” or “no show jobs” and as such are unlawful or at least subject to disapproval on public policy grounds.

13

Indeed, as just discussed, “no-show jobs,” “featherbedding,” and similar improper payments are distinct from those payments that an employee of the employer receives as a

bona fide

employee of such employer. Moreover, it is longstanding Departmental policy that the bona fide employee exemption can only be applied to union officials if they are current or former employees of the employer. See IM entry 243.200 (based on an opinion rendered on August 17, 1962). As stated, the bona fide nature of the payments is established by virtue of the collective bargaining agreement or by custom and practice under the collective bargaining agreement, or by policy, custom, or practice without regard to an employee's position within a labor organization. The Department emphasizes that it did not propose to exempt

any

payment from an employer to a union official pursuant to a collective bargaining agreement, nor did it propose to exempt any payment from an employer to a union official simply because the official is also a current or former employee of such employer. Rather, the Department proposed and here adopts the position that payments and other benefits from an employer to a union official are exempt if such payments and other benefits are “received

as

a bona fide employee of such employer” (emphasis added). See section 202(a)(1).

13

The commenter may have its own distinctive notion of how these terms may be used, but its suggestion that union officials receiving compensation or union leave benefits for the work they perform on labor-management matters is somehow improper or tainted is misplaced. Simply put, the terms “featherbedding” and “no show jobs” cannot be fairly applied to the work undertaken by union officials in representing the union and its members in administering the contract between the union and the employer. The term “featherbedding,” is usually associated with practices to keep workers on a company's payroll, even though the jobs are no longer needed because of changes in production methods. See Robert's Dictionary of Industrial Relations. As there defined, the term refers to “make work for [a union's] members through the limitation of production, the amount of work to be performed, or other make-work arrangements.”

Id.,

251. See also 29 U.S.C. 158(b)(6) (making it an unfair labor practice for a union “to cause or attempt to cause an employer to pay or deliver or agree to pay or deliver any money or other thing of value, in the nature of an exaction, for services which are not performed or not to be performed”). “No-show jobs” is a term more commonly associated with extortion or shakedown by criminal elements, rather than as a means of preserving a worker's livelihood in the face of technological change or a payment with the object of promoting constructive labor-management relations. Unlike “no-show jobs” where an individual receives pay for no work, union officials are performing the work for which they are being compensated, work deemed to be in the mutual interest of the union and the employer. Clearly, “featherbedding” and “no-show jobs,” as these terms are commonly understood, cannot fairly be applied to union leave and no docking arrangements in which union officials engaged in activities that advance the collective interests of a company's workers represented by the union. While featherbedding and no-show jobs are reportable on the revised Form LM-30, union leave and no docking payments are not.

Additionally, as stated in the NPRM and noted in the 2007 rule, union leave and no docking payments were common at the time the LMRDA was enacted. 72 FR at 36126. As set out in the NPRM, these payments were not an issue of concern in the hearings before the McClellan Committee or in any of the legislative materials relating to the LMRDA, unlike payments such as for no-show work or featherbedding. 75 FR at 48422. As noted in the 2007 rule, the legislative history does not shed light on whether Congress had a specific intention to require or not the reporting of such payments by union officials. See 72 FR at 36126. While, as noted in the 2007 rule, legislative silence is not generally a conclusive guide to interpreting statutory text, it is notable, as explained in the 2010 NPRM, at 75 FR 48422, that Congress did not identify union leave or no docking payments as requiring disclosure to union members and the public as a matter of course. See 72 FR at 36126. Equally significant, such payments were not in any way proscribed by the AFL-CIO codes of ethics that strongly influenced the reporting provisions of the LMRDA. See 72 FR at 36112-13. See Senate Hearings, at 123 (statement by Professor Cox that union officials who followed the AFL-CIO Ethical Practices would have “virtually nothing to disclose in his report to the public”).

With regard to the second reason advanced in the NPRM for removing union leave and no docking from the Form LM-30 reporting requirements, the Department continues to believe, as explained below, that such reporting imposes a substantial burden for union officials on matters unlikely to pose conflicts of interest, and thus unduly interferes with the internal workings of labor unions and labor-management relations. In response to those commenters who argued that the Department is downplaying the importance of section 202 reporting, the Department has acknowledged repeatedly in the various LM-30 rulemakings that section 202 is intended to capture payments that, although not necessarily illegal, are “atypical financial arrangements” that should nevertheless be disclosed to union members and the public if they present a potential conflict of interest. Such disclosure aids union democratic self-governance and assists government agencies and the public to identify potential corruption. The Department has also acknowledged that a “special benefit” received by a union official from a represented employer should be disclosed if it would likely constitute an actual or potential conflict of interest. At the same time, however, the Department is mindful that section 202 does not require general reporting of union officials' financial information.

In the Department's view, union leave and no docking payments, like other payments received by a bona fide employee, reflect ordinary arrangements, mutually agreed upon by the employer, the union, and the employees, that do not present such a danger of a conflict of interest or corruption. As articulated in the NPRM, the Department does not view union leave and no docking payments as presenting the type of danger that Congress intended to highlight through reporting. Such payments, where established by virtue of the collective bargaining agreement, or by custom and practice under the collective bargaining agreement, or by policy, custom, or practice without regard to an individual's position within a labor organization, do not present the sort of conflicts of interest presented by other payments to union officers and employees. Rather, they serve the mutual goals of employers and unions. They help ensure that individuals with first-hand knowledge of an employer's workplace will be able to take a position with the union, a benefit not only to the union and employer but also the represented employees. Such payments are voluntary; without the assent of both management and labor, the payments

cannot be made. They are not kept secret from employees.

14

14

These payments are usually made under the terms of a collective bargaining agreement and tied to the same rate of pay that the union official would have received under the agreement for time worked at his or her trade. Indeed, the court in

Caterpillar Inc.

v.

UAW,

stated “each rank-and-file employee has the opportunity to vote” on the collective bargaining agreement, which is ratified by the union membership, and which provides the membership a means to hold officials receiving the payments accountable. The court asserted that such payments thus differ from “bribery, extortion, and other corrupt practices conducted in secret.” See

Caterpillar

107 F.3d at 1057. Moreover, under section 104 of the LMRDA, each bargaining unit member may receive and inspect a copy of the collective bargaining agreement.

Moreover, the Department is persuaded that an employer's agreement to pay its employees to work for or serve the union does not, in and of itself, have an influence on the duties or loyalties of the union official, since union leave and no docking payments are on the same terms as the payments the bona fide employee would otherwise receive if he or she continued work performed for and under the control of the employer. Indeed, the members themselves are paid by the same employer. Furthermore, when the union official or representative no longer serves in such a labor-management capacity he or she could return to regular full-time production work for the employer receiving the same payments and benefits received while working as a union official or representative.

15

15

The Department also notes that a union official or representative who receives union leave or no docking payments from an employer, as a bona fide employee of the employer, does not, thereby, owe any allegiance to such employer in conflict with any duty to the union and its members, as the union appoints or elects its own representatives.

The Department disagrees with the view of a public policy organization that any “special benefit” received by a union official must be reported, or that any “special benefit” nurtures an environment in which self interest takes priority over the interests of a bargaining unit. Relying on

United States

v.

Phillips,

19 F.3d 1565 (11th Cir. 1994), the commenter suggested that union leave, no docking payments, and “special benefits” create not only a hypothetical conflict of interest, but reflect “in fact, how labor unions operate.” As an initial matter, the Department strongly disagrees with the notion that financial self-interest on the part of union officials animates how unions represent the interests of their members. Additionally, the commenter's reliance on

Phillips

is misplaced.

The

Phillips

decision does not concern union leave and no docking arrangements. In that case, an employer and union officials were convicted, in part, for violating the LMRA by ignoring a collective bargaining agreement and granting

retroactive

leaves of absences, and thus pension benefits, to the officials. The Department believes the court reached the right result in that case. Further, the opinion in that case cannot be read to suggest that the improper conduct there involved was at all symptomatic of how union officers conduct their activities on behalf of their members, nor does it affect the reporting of union leave and no docking arrangements. Moreover, the result in that case lends support to the Department's proposal. In

Phillips,

the payments received were by union officials who were no longer employees of the employer at the time the benefits were arranged, and the retroactive leave was not provided for in the collective bargaining agreement. Because the benefits there at issue were not received pursuant to union leave or no docking arrangements or otherwise received by union officials as

bona fide

employees of the employer, the benefits would have to be reported under both the Department's proposal and the 2007 rule. Moreover, the commenter's reliance on

Phillips

is further undercut by that court's recognition, citing

BASF Wyandotte Corporation

v.

Local 227,

791 F.2d 1046, 1049 (3d Cir. 1986), that no docking payments are not unlawful under the LMRA. See

Phillips,

19 F.3d at 1575.

The Department finds instructive the discussion concerning union leave and no docking payments in

Caterpillar, Inc.

v.

UAW,

107 F.3d 1052,1056 (3d Cir. 1997), where the court recognized that such payments, while not compensation “for hours worked in the past, certainly were `by reason of' that service.” The court also noted that the union leave and no docking are arrangements in which “every employee implicitly gave up a small amount in current wages and benefits in exchange for a promise that, if he or she should someday be elected grievance chairperson,” the employer would continue to pay his or her salary.

Id.

Thus, such payments only benefit those union officials who are members of the bargaining unit, and all members of the bargaining unit have the potential of receiving such payments if they become union officials. Further, all represented employees benefit from the work of their fellow employees who represent them.

In response to the commenter who asserted that union leave and no docking payments constitute an improper “subsidy” to the union, the Department disagrees. These payments are provided by mutual agreement of the union and the employer to facilitate labor-management relations. The payments are made to current or former employees who have been selected by the union to perform this service to the bargaining unit, a practice that provides benefits to both labor and management. These payments are similar to other benefits provided to employees represented by the union such as payment for jury duty, military service, and other situations as discussed above.

In response to the commenter who questioned the impact of union leave and no docking reporting on labor-management relations, the Department is particularly concerned about the potential consequence of requiring reporting of payments received under union leave or no docking policies (

i.e.,

union members will be discouraged from running for union office and others from serving as stewards). The Department believes that its historical position to except union leave and no docking payments from reporting is consistent with the purposes of the LMRDA and with the Congressional plan that the government avoid unnecessary intrusion into internal union affairs. Cf.

Wirtz

v.

Local 153, Glass Bottle Blowers Assn.,

389 U.S. 463, 470-71 (1968). Employers have historically agreed to compensate stewards, safety and health committee representatives, and others for such work because they see it as adding value to their organizations. As explained in the 2010 NPRM, a number of states require the establishment of joint labor-management safety and health committees. 75 FR 48424. Having employees serve on employee assistance programs and wellness committees is also seen as a cost-effective business decision by many employers.

Id.

The Department concurs with those commenters who stated that union leave and no docking arrangements increase the speed of grievance adjustments, and otherwise benefit labor-management relations. The Department does not view the section 202 reporting provisions as requiring the reporting of such mutually beneficial arrangements between employers and employees.

Regarding the Department's characterization of the reporting burden as “substantial,” the union commenters generally agreed with this assessment. However, some public policy groups disagreed, with one focusing upon the 250-hour threshold.

16

As discussed

below, such burden is substantial, even with the 250-hour exemption.

16

The Department also disagrees with the comments regarding the significance of the 250-hour threshold, as it is not clear why the number

of hours worked pursuant to a union leave or no docking arrangement affects a potential conflict of interest. See

Caterpillar, Inc.

v.

UAW at 1056.,

in which the majority questions why Congress would sanction multiple employees receiving less than eight hours per day of no-docking payments but would criminalize eight hours of union leave payments per day for a single employee.

As noted above, one commenter criticized the Department's description of the burden associated with the 2007 rule, noting that the proposed rule reflected only a five-minute recordkeeping savings. This commenter overlooked that the significant number of union officials who would be excluded from filing under the proposed and final rules will be saved the 120-minute burden imposed by the 2007 rule and, for those who do file, the reporting burden has been reduced by 25 minutes. Further, the burden estimate for the 2007 rule only tracks the number of and burden upon

respondents

(

i.e.,

filers) to the 2007 rule. As such, the 2007 rule did not include the number of and burden on union officials, stewards, and other union representatives who, although not reaching the 250-hour union leave threshold, would need to keep track of such hours to determine whether or not filing would be required for their union leave or no docking payments. See 75 FR 48424, n. 9. Moreover, the burden on respondents and non-respondents is heightened because such payments are not likely to generate a conflict of interest and may discourage individuals from serving as representatives for their fellow workers.

Additionally, as articulated by some of the commenters, it may prove difficult for union officials and representatives to obtain information concerning benefit compensation from their employers in order to comply with the union leave and no docking reporting required under the 2007 rule. These practical problems faced by union officials, stewards, and other representatives in maintaining records necessary to meet the reporting burden placed on them were not fully considered in the 2007 rule. Unless the employer has a payroll reporting system that allows the union stewards to clock in and out every time they have to perform union work, the stewards would have to keep their own records. A member's work on behalf of the union is not always performed during a series of discrete intervals where it is easy to determine when union work begins and ends. Sometimes, such representatives will briefly engage in union work when a co-worker comes and speaks to the on-duty steward. Sometimes the conversation occurs when the representative is on the way to the break room or at lunch. Sometimes union work occurs during a work-related conversation with a supervisor or manager and a grievance question comes up. Thus, the amount of time required to perform steward and similar functions may vary significantly from day to day and week to week and is therefore not easy to predict. For example, in the building and construction trades, with its very mobile workforce and short-term employment on construction projects, stewards will change from job to job, not just from week to week.

As the Department explained in the NPRM, there is no persuasive policy reason why union officials must report such union leave and no docking payments, and thus bear the burden of such reporting, while employers making such payments are under no similar obligation or burden. As stated in the NPRM, the Department has reexamined the policy underlying the current requirement and has concluded that the inconsistent application is unreasonable regarding the imposition of these reporting requirements on union officials but not employers. 75 FR 48423. The Department disagrees with the commenters' statement that, in making this determination, the Department was ignoring the structure and language of the statute. To the contrary, the Department's view is entirely consistent with the statute. The specific reference in section 203 excepting from reporting “payments of the kind referred to in section 302(c) of the [LMRA]” does not require that section 202 be read to mandate such reporting where such payments are received by an employee.

17

Indeed, there would appear to be no reason why such payments, regularly made by some employers in the ordinary course of conducting labor relations, would require union officials, as the recipients of such payments, to report their receipt but not require employers making the payments to report them. The commenters have provided no persuasive argument to counter this observation. Additionally, the instructions, as drafted, mitigate any concern that such payments are concealed from union members. Under the rule, union leave and no docking payments must be reported unless they are made pursuant to a collective bargaining agreement, or by custom and practice under a collective bargaining agreement, or by policy, custom, or practice without regard to an individual's position within the union.

17

See LMRDA Interpretative Manual, at section 241.600. This section states that the reporting exceptions in section 203 do not affect the reporting by union officers and employees in section 202, “

where

the applicable provision of section 202 does not provide a pertinent exception.” (emphasis added). Section 202, however, contains a pertinent exception: the bona fide employee exception.

Finally, the Department notes that a commenter suggested that the proposed change would create other potential consequences affecting election law, labor-management matters unrelated to the LMRDA, persuader activity reports under section 203 of the Act, and other matters involving public policy. The commenter did not fully explain its concerns, but it appears that some of these issues involve statutes over which the Department has no authority and that none of these concerns are material to the changes proposed by this rulemaking. While the discussion of other LMRDA provisions is obviously necessary to address some issues, this rule only addresses the scope of reporting required by union officers and employees pursuant to LMRDA section 202. As discussed below, other commenters have asked the Department to use this rulemaking to resolve issues that may arise under the Act's other reporting provisions. While these comments are helpful to the Department in identifying concerns among the various regulated communities and informing the Department about how it might best direct its compliance resources, the Department cannot resolve those concerns in this rule.

B. Coverage of Stewards and Similar Union Representatives Under Section 202

The Department is effectuating its proposal to return to its longstanding policy that union stewards and similar volunteer union representatives are not as a general rule covered by the Form LM-30 reporting requirements. A union steward is responsible for informing employees of their rights under the collective bargaining agreement and applicable law, investigating grievances filed by union members, representing union members in presenting those grievances to management, and otherwise enforcing the collective bargaining agreement. See generally Herman Erickson,

The Steward's Role in the Union

29-54 (1971).

As proposed in the NPRM, 75 FR 48423-25, and as articulated below, the Department rescinds the definition of “labor organization employee” in the 2007 Form LM-30 that extends Form LM-30 coverage to such union representatives and inserts the following language in the revised Form LM-30

Instructions in Section II, Who Must File.

18

18

The definition of “labor organization employee” in the NPRM included the word “exclusively” prior to “as a union steward * * *”

For purposes of the Form LM-30, an individual who serves the union as a union steward or as a similar union representative, such as a member of a safety committee or a bargaining committee, is not considered to be an employee of the union

by virtue of service in such capacity.

In the final rule, the Department added the last phrase, in italics, for clarity. As explained in the NPRM, individuals serving as stewards or in other volunteer positions would be subject to the same reporting obligations as other officers and employees, if they are officers pursuant to their union's constitution or bylaws—an atypical situation—or otherwise qualify as a union employee. The italicized words better convey this point than the language proposed in the NPRM, which had used the adverb “exclusively” to qualify the statement.

In extending the union officer and employee reporting obligation to union stewards in the 2007 rule, the Department determined that a union steward receiving no docking or union leave payments would be considered to be a labor organization employee within the meaning of the Form LM-30. As stated in the preamble to that rule: “An individual who is paid by an employer to perform union work is an employee of the union if he or she is under the control of the union, while so engaged.” 72 FR at 36109. Stewards were deemed to be “labor organization employees” by virtue of their receiving union leave or no docking payments from an employer.

As stated in the 2010 NPRM and upon further review, the Department believes that the 2007 rulemaking did not satisfactorily address or adequately support the expansion of the Form LM-30 reporting requirements to include stewards. Rather, the rule focused on the “bona fide employee” exception of section 202, which, as mentioned, was revised to require the reporting of no docking and union leave payments. (See the discussion above concerning this change to the “bona fide employee exception.”) The rule also provided, almost in passing, that stewards as well as union officers and employees needed to report such payments, based upon whether or not the official qualified as a bona fide employee of the payer-employer

during the time for which payment was made.

72 FR 36124. (emphasis added).

Upon review and reconsideration, the Department took the position in the 2010 NPRM that the Form LM-30 reporting requirements should not be expanded to include stewards. As there noted, requiring “stewards” to file Form LM-30 reports as “employees,” solely on the basis of having received union leave, “no docking,” or “lost time” payments, raises policy, interpretative, and practical concerns.

First, from a policy perspective, imposing obligations on union stewards and other volunteers (

e.g.,

those who serve on health and safety, productivity improvement, and bargaining committees) intrudes in internal union affairs. Union stewards and other representatives perform valuable tasks and extending reporting requirements to them would significantly hamper union efforts to recruit and retain stewards and other representatives.

Second, an examination of the text of the relevant provisions of Title II of the LMRDA suggests that Congress did not intend that stewards be considered to be union employees. While section 202 requires reporting from “every officer of a labor organization and every employee of a labor organization (other than an employee performing exclusively clerical or custodial services),” it does not require reporting from stewards. In contrast, however, Congress expressly required employer payments to stewards to be reportable, pursuant to section 203, subject to certain exceptions. The Department explained in the 2010 NPRM that the absence of similar language in section 202 is a strong indication of Congressional intent to exclude agents, stewards, and similar representatives from the prescribed reporting requirements. Additional support for this position can be gleaned from the LMRDA's legislative history, as explained in the NPRM. Congress, revealingly, did not include the term “stewards” in describing the regulated class established by section 202, despite inserting the term in other LMRDA sections, thus indicating that those members who serve as “shop stewards” are of a different category than “labor organization employees.” When Congress wanted financial payments made to stewards to be reported, it knew how to do so.

1. Review of Comments Received

The Department received 16 comments that specifically addressed this particular issue. Of these 16 comments, 13 supported the return to the historical interpretation that such individuals are not considered union employees for reporting purposes under section 202, 12 unions, and one law firm. Three comments opposed the change, including a public policy group, a legal defense foundation, as well as 225 individuals who sent in a form letter.

a. Comments in Support of NPRM

There were 13 comments in support of the proposal to rescind required reporting by union stewards. A federation of labor unions stated that the 2007 rule significantly increased the universe of potential filers, noting especially the addition of stewards and other “on-the-job union representatives,” as employees of the union. In the commenter's view, this imposed Form LM-30 requirements on “tens of thousands of union members who voluntarily” perform representation functions for fellow workers during the regular workday.

An international union supported the Department's view that steward reporting is not required based on legislative intent. The commenter stressed the NPRM's analysis of the structure of the LMRDA, which recognized that “stewards” are not included in section 202, as well as the legislative history and intent, such as a prior draft of section 202 that specified their inclusion. The commenter characterized the removal of stewards reporting to be “reasonable” and consistent with the intent of the Act, and agreed that the inclusion of stewards would hinder members' willingness to volunteer to serve their fellow workers and would be a loss to labor-management relations.

A national union stated that subjecting stewards to the reporting requirements would discourage employees from volunteering to serve in that capacity. Another national union also maintained that the 2007 rule greatly expanded the Form LM-30 reporting requirements, and stated that stewards are members who volunteer to “play a key role” in ensuring smooth workplace operations. Thus, they should be “encouraged” to serve the union and not “punished with onerous reporting.”

An international union emphasized that requiring stewards to file the Form LM-30 would discourage members from serving in this important position. Further, according to the commenter, stewards benefit management as well as the employees and the union, and removing them from potential reporting obligations furthers labor-management relations. The commenter expressed its view that the Department should not discourage this involvement. Another international union stressed that this change in steward coverage “will end considerable confusion” over the

reporting requirements, which, combined with the burden associated with the form, has, in the commenter's experience, “deterred aspirants” for steward and similar volunteer positions crucial for unions and the workplace.

A national union described stewards and similar positions as “voluntary, unpaid positions” that are filled by members who are not officers or employees of the union. Stewards generally handle grievances during breaks or before or after their regular working hours, while they also often receive union leave or no docking payments for union work during the employer's time. Regardless, the commenter contended that imposing coverage on such individuals would “seriously undermine cooperative labor-management relations and productivity.” Not only would individuals be discouraged from volunteering to serve, but those that do may be deterred from doing so during work hours, delaying grievance adjustments.

Some union commenters acknowledged that individuals who are union stewards may be required to report “in the unusual circumstances” when the steward is a constitutional officer position, is a paid position in the union, or is an employee of the union under circumstances distinct from his or her status as steward.

Further, a law firm also agreed with the Department's view as stated in the NPRM that, if Congress had intended that stewards would be subject to the reporting requirements of section 202, it would have indicated that intention in fashioning the terms of section 202 as it did under section 203. In contrast to section 202, employers are required by the express terms of section 203 to report payments made to stewards.

b. Comments in Opposition to NPRM

In response to the NPRM, OLMS received a form letter signed by 225 individuals in opposition to the Department's proposal. The letter stated that stewards are an “essential part of union representation,” elected by coworkers, to “responsible positions,” and have the status of a “union official.” The letter also noted that because most stewards receive no compensation for performing their duties, they may be more sensitive to other forms of reward, suggesting to these individuals the need for conflict-of-interest reporting by stewards.

A few public policy groups also opposed the Department's proposal to rescind the general reporting requirement for stewards. One public policy organization agreed with the Department insofar as union leave and no-docking payments are concerned, but it argued that the NPRM went too far in exempting stewards and similar representatives from all reporting. This commenter stated that these union representatives should report all income received directly or indirectly from employers that is not related to their representation role, such as payments received for mowing the lawn of a management representative or painting the representative's house.

Finally, a public policy group claimed, without elaborating, that most stewards perform functions of union officers and therefore are “officers” within the meaning of the LMRDA required to report pursuant to LMRDA section 202.

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Moreover, the commenter contended that the Department has no authority to exempt from coverage of the Act as many as 80,000 individuals who, in its view, are covered by the reporting provisions of section 202; this commenter also concurred with the view that stewards are union employees.

19

The commenter further argued that if the Department classifies stewards as “essentially employees of an employer,” then agency fee payers would have no union fees to pay. The commenter offers no further explanation for its conclusion, which is not self-evident. However, as the Department has noted in a previous rule, the Department does not regulate payments by agency fee payers or reports prepared by unions showing how they compute costs that are allocated to agency fee payers. See 68 FR 58395.

2. Response to Comments

The Department concurs with the comments affirming the central and important role that stewards and similar union representatives play in the labor-management context. As stated by many of the commenters, stewards and similar union representatives differ from union officers and employees in that they are union members who volunteer portions of their time to union representation without additional compensation. Additionally, unlike officers, stewards are often appointed; in many construction unions, they are appointed (or removed) by the Business Manager of the local union. Stewards, safety and health, and bargaining committee members are typically created and empowered by the collective bargaining agreement, not by the union's constitution and by-laws. Additionally, the Department concurs with the numerous commenters who confirmed the Department's position in the NPRM that imposing obligations on union stewards and other volunteers may also significantly intrude in internal union affairs and labor-management relations.

The Department also concurs with the unions that stated that the 2007 rule increased burden on stewards, in part, through the confusion surrounding their coverage, thus also significantly intruding in internal union affairs and labor-management relations. Although the 2007 rule denied such a chilling effect would be created, the Department has reconsidered this position. The Department has concluded that the impact on those who would have to file, coupled with the confusion and uncertainty created by extending all of the Form LM-30 reporting obligations to stewards and similar union representatives—even for those that actually had no payments or interests to report—invariably would dissuade some individuals from continuing in, or later volunteering for, those positions. Moreover, independent of the reporting required by the 2007 rule, union stewards and other representatives perform valuable tasks and extending onerous reporting requirements to them would “chill” future offers to serve. Imposing reporting burdens on such individuals clearly will temper the willingness of individuals to volunteer to serve in such positions—a loss to the union, the employer, and these individuals' fellow employees, as well as to the effective conduct of labor-management relations.

Section 202 does not refer to stewards as union officers or employees. Because other sections of the LMRDA expressly apply to stewards, the Department views their omission from section 202 as an intention to exclude them from its application. As noted in the NPRM, 75 FR 48424, employers must report payments to stewards pursuant to section 203; and stewards are explicitly covered by the fiduciary responsibilities provision of section 501 and the bonding provisions of section 502. The Department acknowledges the central role that stewards play and responsibilities that they exhibit within labor organizations, as demonstrated by the provisions of the LMRDA that apply to them. However, as stated, the statutory structure indicates that Congress deliberately did not apply the section 202 requirements to stewards, presumably because it did not want to unduly interfere with legitimate labor-management relations.

Furthermore, the statute provides for disclosure of payments to stewards without imposing reporting obligations on the stewards themselves. Section 203 of the statute requires employers to disclose any payment, subject to certain exemptions, to any “officer, agent, shop steward, or other representative of a labor organization.” Thus, the concerns

of the commenter that was troubled by the prospect that payments to stewards other than those for no docking or union leave would be undisclosed are unwarranted.

The Department disagrees with the comment that most union stewards necessarily must be considered union officers and, as such, required to file reports pursuant to section 202. The Act defines union officers as “any constitutional officer * * * and any member of [the union's executive board or similar governing body.” LMRDA, section 3(n). As noted earlier, a steward generally is responsible for informing employees of their rights under a collective bargaining agreement, investigating and presenting grievances, and otherwise enforcing the collective bargaining agreement. These are not executive responsibilities normally associated with union officer positions, as described in union constitutions and bylaws; rather, they draw their essence from the collective bargaining agreement. In unusual situations, the position of steward is a constitutional office in the union (or is authorized to perform the functions of an officer). In other instances, an individual, although serving as a steward, is an employee of the union under circumstances distinct from his or her status as steward. In those circumstances, such individuals, both historically and under this rule, are subject to the reporting requirements of the Form LM-30, as union officers or union employees. The Department notes that several union commenters concurred with this position as well.

Finally, the Department disagrees with the suggestion that the Secretary's proposal is inconsistent with the Act and that the Department, in effect, lacks discretion to disregard what the commenter views as the clear command that stewards are employees of the union when they act on the union's behalf. Until the 2007 rule, stewards had not been required to file reports under section 202, and the 2007 rule was based on an interpretation of the ambiguous statutory term “labor organization employee.” 72 FR 36144. The rule did not claim that coverage of stewards was required by the terms of the statute, and indeed it did not place coverage of stewards in the category of revoked “administrative exceptions.” 72 FR 36156.

The structure of section 202, itself, demonstrates that Congress did not intend that stewards be considered to be union employees by virtue of service in such capacity. Again, the position of `steward' is not enumerated in section 202 as it is in other provisions of the statute. No commenter challenged this view of the statutory language, and several comments supported it. Rather, under section 202, only union employees and officers are required to submit reports. In sum, for the reasons stated in the NPRM and earlier in this preamble, stewards and other volunteers, as a general rule, are neither officers nor employees of a union. The commenters offer no persuasive argument that the Department has departed from the Act's reporting mandates.

C. Reporting of Loans and Other Transactions With Credit Institutions

This rule effectuates the Department's proposal to amend the Form LM-30 to exempt from reporting marketplace transactions with bona fide credit institutions, including loans, interest, dividends, and payments and credit extended through credit card transactions, provided that they are arm's length transactions in accordance with usual business practice. In so doing, the Department establishes the appropriate balance between privacy and disclosure intended under the LMRDA—to disclose only a union official's actual or potential conflicts of interests, while keeping private bona fide investments “because they are not matters of public concern.” Senate Report, at 15, reprinted in 1 Leg. History, at 411. See 75 FR 48425.

The 2007 rule established the general requirement that union officials report the details of any loan received from any business that deals with the official's union, the union's trust, or represented employer (in substantial part). 72 FR at 36133-38. This aspect of the rule engendered strong protests from union officials and some segments of the financial services industry as intrusive and unduly complex. Thus, shortly after the rule's publication, the Department issued guidance to reduce the complexity in the rule and the confusion about its requirements. The Department issued this guidance through a series of Form LM-30 Frequently Asked Questions (FAQs), posted on the Department's Web site,

20

which identified several kinds of payments from credit institutions that did not require reporting so long as they were arm's length transactions in accordance with usual business practice. These payments included interest and dividends involving savings and checking accounts and certificates of deposit and credit card arrangements.

20

http://www.dol.gov/olms/regs/compliance/RevisedLM30_FAQ.htm.

FAQs 70-73 deal with issues surrounding payments from credit institutions. FAQ 70 stated, in part, that union officials do not need to report “credit card transactions (including unpaid balances) and interest and dividends paid on savings accounts, checking accounts or certificates of deposit if the payments and transactions are based upon the credit institution's own criteria and are made on terms unrelated to the official's status in the labor organization.” FAQs 71 and 72 outlined the obligations of union officials regarding home loans, which clarified that such loans must be reported if received from a trust in which the official's union is interested, a business that deals with the official's union or a trust in which the union has an interest, or a business a substantial part of which deals with an employer the official's union represents or is actively seeking to represent. Finally, FAQ 73 affirmed that the de minimis exemption applies to transactions, interests, and dividends from a financial institution, even if it had dealings with the official's union.

In the 2010 NPRM, the Department explained that the 2007 rule reflected a policy choice in favor of the disclosure of information, even without a showing of a likely conflict of interest, and even with the risks concerning burden upon and intrusion into the private affairs of union officials. 75 FR 48425. In the 2010 NPRM, the Department further explained that it may not have given sufficient weight in fashioning the 2007 rule to Congress's concern that the LMRDA should not unnecessarily regulate unions and their officials, and that the burden of reporting such routine transactions would outweigh the value of any additional information disclosed.

Id.

The Department explained that loans and other transactions made on market terms are usual, regular transactions, unrelated to the officials' status in the union, and are therefore unlikely to pose a conflict of interest with the officials' duties to the union. 75 FR 48426. In contrast to these loans and transactions, a loan, gift, or other benefit obtained from a transaction other than at arm's length provides the union official with a net monetary gain, and consequently a potential motive to deal with a business in a way contrary to the interests of the union. Thus, the Department concluded that the better policy is to require the reporting of loans and other bona fide financial transactions from a credit institution only where the transaction is on other than market terms.

Id.

Furthermore, as discussed in the NPRM, the proposed bona fide financial transaction reporting exemption under sections 202(a)(3) and (4) would prevent the submission of superfluous reports that would overwhelm the public with unnecessary information, thus impeding the discovery of true conflict-of-interest payments. 75 FR 48425. The proposal also would prevent unnecessary burdens on union officers and employees and avoid interference with the privacy of such officials.

Id.

Additionally, the Department there explained, at 75 FR 48426, that in the 2007 rule the Department excepted from reporting under section 202(a)(6) such bona fide financial transactions with a credit institution because of the burden associated with reporting what “are among the most common financial transactions undertaken by individuals.” 72 FR 36118. The NPRM stated the Department's belief that this reasoning also must apply to the reporting of marketplace loan transactions under sections 202(a)(3) and (4). 75 FR 48426.

The NPRM explained that the proposed revision was limited to bona fide loans from legitimate credit institutions. 75 FR 48426. The Department has not changed other longstanding interpretations of section 202 that require union officers and employees to report other payments from vendors, service providers, credit institutions, and other businesses that deal in substantial part with the represented employer or in any part with either the official's union or any trust in which the official's union is interested or loans received from employers or businesses that are not credit institutions.

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Id.

As explained below, the Department has determined to adopt, without change, the position set forth in the NPRM regarding bona fide financial transactions with credit institutions on Part B of the revised Form LM-30:

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As stated in the 2010 NPRM:

The proposed modification does not relax the obligation to report on loans or other financial transactions (including credit card arrangements and interest-bearing accounts) where a union official receives terms more favorable than the market allows, where for example a union official receives a loan because of the official's status despite a credit history that would normally prevent an individual from receiving credit, or payments on the loan are extended or forgiven because of preferential treatment as a union official.

75 FR 48426, n. 11.

Bona fide loans.

Do not report bona fide loans, including mortgages, received from national or state banks, credit unions, savings or loan associations, insurance companies, or other bona fide credit institutions, if the loans are based upon the credit institution's own criteria and made on terms unrelated to the official's status in the labor organization. Additionally, do not report other marketplace transactions with such bona fide credit institutions, such as credit card transactions (including unpaid balances) and interest and dividends paid on savings accounts, checking accounts or certificates of deposit if the payments and transactions are based upon the credit institution's own criteria and are made on terms unrelated to the official's status in the labor organization.

1. Review of Comments Submitted Concerning the Proposed Changes to the Reporting of Loans Under LMRDA Sections 202(a)(3) and (4)

The Department received 14 comments about the proposed exemption regarding the reporting of loans. Of these 14 comments, two were from public policy organizations, 11 were from national/international unions, and one comment was from a federation of international labor unions.

a. Comments in Support of the Proposed Exemption Regarding Reporting of Loans

Comments submitted by all eleven national/international unions and the federation of international labor unions supported the Department's proposal to exempt the reporting of bona fide market rate loans from credit institutions. There comments expressed many common themes, including union officials' right to privacy in personal, routine financial matters unrelated to their union role, the undue burden associated with reporting bona fide arm's length transactions, and the absence of any link between these transactions and conflict-of-interest concerns.

Three commenters agreed that the Department's proposal achieves a correct balance between the privacy of union officers and employees and the Act's goal of disclosing actual or potential conflicts of interest. Another commenter stated that the requirements established by the 2007 rule (apparently as distinct from the interpretation in the FAQs) “intru[des] into [union officials'] private affairs, and would produce information which is irrelevant to their union duties and the purposes of the LMRDA.” As expressed by another commenter, the 2007 rule's “broad requirement does not comport with the Act's intent to require only the disclosure of transactions in which there is actual or potential conflict of interest with an official's duties to his/her union and delves into personal matters that are of absolutely no public concern.”

Another commenter noted a parallel between the Department's proposal and the approach used in other “ethics regimes,” such as the financial disclosure rules established by each body of Congress. It explained that Congress does not require its members to report on loans that are made on terms generally available to the public, and that it made sense to treat similarly loans made to union officials on such terms.

b. Comments Opposing the Proposed Section 202(a)(3) and (4) Exemption Regarding Reporting of Loans From Bona Fide Credit Institutions

The two public policy organizations disagreed with the Department's proposal, arguing that such loans should be disclosed by union officials on the Form LM-30. One of these organizations stated that “the fear that seemingly private mortgage information will somehow become public due to the reporting requirements of the Form LM-30 is misplaced,” in that mortgages are public documents that can be obtained from a state recorder's office or, in some cases, accessed online. The same commenter addressed the Department's statement in its proposal, 75 FR 48425, that its revised interpretation “would prevent the submission of superfluous reports that would overwhelm the public with unnecessary information,” expressing its view that this concern is misplaced due to the technological developments of the 21st century. It characterized the Department's view as meaning that “more information actually means less useful information.” The commenter added that OLMS computer systems could easily handle all Form LM-30 reports, and allow cross-checking other forms, and stated that the public can view Form LM-30 data on

http://www.unionreports.gov

to “find whatever information they seek.”

Another public policy organization commented that the Department's proposed administrative exemption for bona fide loans with terms no more favorable than those available to the public “misses the point of disclosure and the need for it.” The commenter added that, while the loan terms may not be more favorable than those available to the public, there is no “guarantee that the loan was given to a qualified individual union official (

e.g.,

the union official may have a very low credit score or income insufficient to make the payments).” The commenter also stated that “union officers have been known to have their loans completely forgiven or paid off by another source,” and added, “* * * if there is no disclosure of the loan, then no one will know that a loan should perhaps not have been given or even that a possibly questionable loan exists.” Additionally, this commenter referenced a media report concerning a public official's “special loan” arrangements with a particular mortgage company, asserting that just as voters benefit from such disclosure, union

members would benefit from the disclosure of such loans.

c. Other Comments

Although the Department did not propose to eliminate the requirement that a union official must report loans from a represented employer that is a credit institution, such as a bank whose employees are represented by the official's union, some commenters submitted comments requesting the elimination of this requirement. Such a request is beyond the scope of this rule, but the Department, for completeness, discusses these comments below.

A federation of international labor unions urged the Department to create a reporting exemption, under section 202(a)(5) of the LMRDA, for bona fide loans and other bona fide financial transactions between a union official and a credit institution employer whose employees the official's union represents or is actively seeking to represent. An international union concurred with this request. These unions argued that by not applying the same arm's length exemption, as proposed generally in the 2010 NPRM,

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to transactions involving credit institutions whose employees are represented by an official's union, the Department would be ignoring the regular course of business exemption in section 202(a)(5), which they assert relieves any reporting on any “regular course of business” transactions.

23

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Union officials must report, pursuant to section 202(a)(5), “any direct or indirect business transaction or arrangement between him or his spouse or minor child and any employer whose employees his organization represents or is actively seeking to represent, except work performed and payments and benefits received as a bona fide employee of such employer and except purchases and sales of goods or services in the regular course of business at prices generally available to any employee of such employer.”

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The commenter notes correctly that the Department did not address its section 202(a)(5) argument in the 2010 NPRM. The Department there noted that any loans from an employer represented by the official's union (or whose employees it actively seeks to represent) must be reported pursuant to section 202(a)(2) of the LMRDA—including bona fide loans from a credit institution employer. See 75 FR 48426., n. 11.

The commenter asserted that the section 202(a)(5) marketplace transactions exemption should be applied to bona fide financial transactions with credit institutions. The commenter argued that the Department should give effect to what it sees as the same statutory interests involving routine transactions that would otherwise be reportable under other provisions of section 202. The commenter relied, in part, on its general reading of the Act's legislative history, which it reads to express an intention by Congress to not discourage any arm's length business transactions, which are not “questionable in nature,” illegal, or pose actual or potential conflicts of interests. This, according to the commenter, would also impose a significant burden on union officials whose unions represent or seek to represent employees of credit institutions. The commenter also stated that bona fide loans and other bona fide financial transactions between a credit institution employer and a union official are not reportable by the credit institution employer under section 203, citing the LMRA section 302(c)(3) exemption, 29 U.S.C. 186(c)(3). The commenter argues that, since credit institution employers are not required to report such loans and transactions on the Form LM-10 (Employer Report), then union officials should not be required to report such loans and transactions on Form LM-30.

1. Response to Comments

Upon consideration of the comments received on this issue, the Department has determined to revise the reporting obligation for union officials by adopting an exemption to the reporting of bona fide loans and other financial transactions made on market terms with credit institutions. In the Department's view, loans made on market terms are of little or no interest to union members, yet they disclose to members and the general public matters about which union officials, no less than other individuals, have a legitimate expectation of privacy.

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But for the Department's guidance and the position adopted in today's rule, a union official would have to report each mortgage or other bank loan received from any credit institution that deals with his union, a section 3(l) trust, or, in substantial part, with the represented employer. In the Department's view, the burden associated with such requirement would far outweigh the value of any information disclosed. In the 2007 rule, the Department excepted from reporting under section 202(a)(6) arm's length loans, interest, and dividends earned during the regular course of business with a credit institution, because of the burden associated with reporting what “are among the most common financial transactions undertaken by individuals.” 72 FR 36118. The Department believes that this reasoning also must apply to the reporting of marketplace loan transactions under sections 202(a)(3) and (4).

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As discussed in the text, the proposed modification does not relax the obligation to report on loans or other financial transactions (including credit card arrangements and interest-bearing accounts) where a union official receives terms more favorable than the market allows, where for example a union official receives a loan because of the official's status despite a credit history that would normally prevent an individual from receiving credit, or payments on the loan are extended or forgiven because of preferential treatment as a union official. Moreover, loans received from employers or businesses that are not financial institutions will have to be reported as will any loans on other than market terms from employers or businesses that have a relationship with the official's union.

The Department notes that union commenters agreed with the approach proposed in the 2010 NPRM, as well as the supporting rationale the Department offered. These commenters agreed that any benefit associated with disclosing arm's length transactions was heavily outweighed by the burden, loss of privacy, and limited utility that such disclosure would entail.

Only two policy organizations submitted comments in opposition to the proposal. One asserted that the Department had overstated the impact that the rule would have on an official's privacy. In this regard, it asserted that some of the same personal financial data that would be reported under the terms of the 2007 rule, such as mortgage information, may already be accessible to the public. However, the Department notes in response to this comment that such information is not made public in a reporting regime intended to disclose actual or potential conflicts of interest, as would be the case with the Form LM-30. That some mortgage information may be available publicly by people with easy access to that data does not excuse the intrusion that results from making public what most people still consider to be private financial information. Requiring a union official to collect and, in effect, publish all such information in the Form LM-30 certainly magnifies the intrusion. Further, that certain financial information can already be accessed by the public does not justify requiring that such information be reported on Form LM-30. Moreover, as discussed, the reporting of routine bona fide loans and similar transactions does not advance the disclosure purposes served by section 202 and therefore the burden associated with such reporting is not warranted.

One commenter stated that the Department was mistaken in its view that requiring bona fide loan-type information to be reported on the Form LM-30 could impede the utility of the form to union members and the public. The commenter pointed out that the Department's Form LM-30 Web site employs technology allowing data to be effectively managed and searched. The Department does not disagree with this

characterization of the efficiency of the OLMS Web site, but this observation is not relevant to the issue presented in the NPRM, as the Form LM-30 does not require general financial disclosure. Rather, its purpose is to highlight actual or potential conflicts of interest involving union officials. Thus, collecting large amounts of information with little or no utility can obscure other information concerning possible or actual conflicts of interest, as each report submitted must be searched separately in order to find information relevant to actual or potential conflicts of interest. Intermixing meaningful reports with thousands of innocuous reports impedes easy review of the reports that disclose actual or potential conflicts. Eliminating superfluous information removes an unnecessary burden on union officials and promotes the objective of section 202 to disclose actual and potential conflicts of interests.

The commenters expressed understandable concern that any loans or other transactions with terms preferential to union officials be reported. The Department's proposal, however, ensures that any such loans will be disclosed. Only loans and other transactions that reflect market rates are excepted from reporting. These transactions do not carry with them any indicia of a conflict, actual or apparent, between the union official and his or her duty to the union. As discussed in the 2010 NPRM and expressly stated in the Form LM-30 instructions, transactions not “based upon the credit institution's own criteria,” according to “usual business practice,” or “made on terms related to the official's status in the labor organization” must be reported on the revised Form LM-30. For example, if a loan is given to a union official with a low credit score, if a loan is extended or forgiven, if the loan does not reflect market terms, including usual fees, or if it otherwise evinces preferential treatment based upon the officials' union status, it must be reported. Any relaxation of the loan's terms, repayment requirements, or forgiveness must also be reported if based on preferential treatment because of the official's union status. Furthermore, loans received from employers or businesses that are not credit institutions must be reported. The same considerations apply to other transactions with credit institutions, including credit cards and interest-bearing accounts.

Finally, as noted, two commenters requested the Department to exempt from reporting loans and related transactions from credit institutions that are represented employers. Because the Department did not propose to eliminate this requirement, no extensive discussion is required. As noted in the NPRM, the Department acknowledged that it was not changing this aspect of the 2007 rule. Further, the Department notes that, historically, the Department has held that any loan to an official from an employer whose employees are represented by the official's union are reportable pursuant to 202(a)(2), without any statutory or other exceptions (other than the de minimis threshold). See IM sections 244.100 and 244.120; see also the pre-2007 Form LM-30 Instructions, Part A, exemption (iii).

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The 2007 rule upheld this principle, and the Department stated in the preamble to the 2010 NPRM that a union official would need to report any loans from an employer represented by the official's union (or whose employees it actively seeks to represent).” See 75 FR at 48426 n. 11. Additionally, the Department notes that the appearance of a conflict of interest and any temptation to curry favor by offering what appears to be an arm's length loan or related transaction on favored terms is much greater where the official's union represents (or seeks to represent) the institution's employees than where a loan is made by an institution that has a more attenuated relationship with the official's union.

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The exemption (iii) of Part A of the pre-2007 Form LM-30 Instructions exempts transactions “involving purchases and sales of goods and services in the regular course of business at prices generally available to any employee of the employer. This does not apply to transactions involving stocks, bonds, securities, or loans, for example.”

D. Scope of Reporting Requirements Under Section 202(a)(6)

In the NPRM, the Department proposed to narrow the scope of reporting required under section 202(a)(6) with respect to (1) Payments from business competitors to the employer whose employees the union official's union represents or actively seeks to represent; (2) payments received from trusts; and (3) payments from unions. In this final rule, the Department has adopted its proposals on these points.

As explained in the NPRM, sections 202(a)(1)-(5) of the LMRDA establish conflict-of-interest reporting requirements concerning payments received by union officers and employees from two sets of entities: (1) Employers that a union represents or is actively seeking to represent; and (2) businesses, such as vendors and service providers, that buy or sell to the represented and potentially represented employers, the union official's union, or trusts in which the official's union is interested. In each case, the reporting obligation is triggered by the particular relationship between an official's union and the entity from which the official receives a payment or in which the official holds an interest.

By contrast, section 202(a)(6) does not specify any relationship between an entity and an official's union, nor does it express when payments must be reported. Rather, it more broadly requires union officials to report any payment of money or other thing of value from “any employer or any person who acts as a labor relations consultant to an employer” (except payments of the kinds referred to in section 302(c) of the Labor Management Relations Act of 1947, as amended (LMRA)). As noted in the NPRM and discussed in the 2007 rule, the Department has long interpreted section 202(a)(6) as a “catch-all” that captures conflict-of-interest payments from employers not otherwise reportable in the previous five subsections of 202. Thus, LMRDA Interpretative Manual section 248.005 states, in part: “[Section] 202(a)(6) is designed for those situations which pose conflict-of-interest problems which are not covered in the previous five sections of 202.” 72 FR at 36129. Further, the 2007 rule made clear that section 202(a)(6) can be read to encompass disclosure of any employer payment that could present a financial conflict of interest for the union official.

Id.

The Department did not propose to change this requirement.

After a review of the comments received, the Department retains the general requirement, as earlier proposed, that officials report payments from employers and labor relations consultants from whom a payment would create an actual or potential conflict between the filer's personal financial interests and the interests of the filer's labor organization (or the filer's duties to the labor organization). As proposed, the Department included a non-exhaustive list in the instructions for the revised Form LM-30 of examples of such actual or potential conflicts of interest. These examples included payments from business competitors of the employer whose employees the union official's union represents or whose employees the union is actively seeking to represent. Further, to ensure that only actual or potential conflict-of-interest payments are reported, the Department has qualified this requirement so that a union official, as a general rule, must report such financial interests only if the official is

involved with the union's organizing, collective bargaining, or contract administration activities or possesses significant authority or influence over such activities. As explained in the NPRM, an official will be required to report such payments where he or she possesses such authority or influence by virtue of his or her position, even if such authority has not been exercised. This rule also effectuates the proposal to retain the requirement that union officials must report payments received from an employer that is a not-for-profit organization that receives or is actively and directly soliciting (other than by mass mail, telephone bank, or mass media) money, donations, or contributions, from the official's labor organization.

The Department is revising, as proposed, the reporting requirements insofar as payments from certain trusts and labor unions pursuant to section 202(a)(6) are concerned. In contrast to the 2007 rule, which required payments from trusts to be reported, the Department proposed to return to its historical position that such payments are not reportable because they do not pose an apparent or actual conflict of interest between the official's personal financial interests and his duty to the union and its members. As explained in the 2010 NPRM and based upon the considered analysis in the Department's 1967 opinion on this issue, the Department believed that these payments pose “no conflict with which Congress was concerned.” 75 FR 48428. Further, the Department believes, as stated in the NPRM, that the better reading of section 202(a)(6) of the LMRDA is that labor unions and trusts are not within the universe of “employers” from which union officials should report payments, as both entities are treated separately from other “employers” under the Act. In drafting the LMRDA reporting and disclosure requirements, Congress delineated separate requirements for these discrete statutory actors (unions and trusts), and reporting of labor organization disbursements is set forth in section 201 of the statute, not section 202. Moreover, the Department maintains that this reading of the statute better implements the labor union and labor-management reporting requirements of the LMRDA.

Finally, the Department also retains, as proposed, the requirement that union officials must report five types of payments received from an employer, regardless of the relationship the employer has with the filer's union. These reportable payments to a union official (or the official's spouse or minor child) from any employer or labor relations consultant to an employer are payments for the following purposes: (1) Not to organize employees; (2) to influence employees in any way with respect to their rights to organize; (3) to take any action with respect to the status of employees or others as members of a labor organization; (4) to take any action with respect to bargaining or dealing with employers whose employees the filer's union represents or whose employees the union is actively seeking to represent; and (5) to influence the outcome of an internal union election. 72 FR at 36128, 36173. These payments, per se, create an actual or potential conflict between the filer's financial interests and his or her duties to the labor organization.

The Department received 15 comments on the scope of section 202(a)(6), with 12 supporting all of the changes,

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one supporting the changes in part and opposing in part, and two comments opposing all of the proposed modifications to this aspect of the NPRM. The comments on specific aspects of the rule are addressed below.

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As a preliminary matter, however, the Department believes it important to address the view expressed by two commenters that none of the proposed changes to reporting under section 202(a)(6) are justified.

26

Seven of these commenters supported the proposed changes to the 2007 rule but also opposed other portions and thus suggested additional modifications to the form.

27

Two commenters suggested that the Department should further revise the section 202(a)(6) requirements to limit reportable interests solely to those payments made by employers that would impact the labor-management relationship between a union and a represented employer. Thus, for example, they would exempt from reporting payments to a union official from a charity to which the official's union contributes. Because the Department did not propose such change, the comments are outside the scope of the rule. The Department briefly notes, however, that the suggestion is at odds with the general “catch-all” purpose of section 202(a)(6), would leave undisclosed conflicts of interest, and is not compelled by the language of section 202(a)(6) or the Act's structure.

In essence, these commenters read section 202(a)(6) as a mandate to require a union official to report on his or her financial interests with virtually all employers. The Department disagrees. It remains of the view that its interpretation is sound as a matter of law and policy. Granted, the terms of section 202(a)(6) are expansive, requiring a union official to report “any payment of money or other thing of value * * * which he or his spouse or minor child received directly or indirectly from any employer.” In contrast to the breadth of section 202(a)(6), however, each of the other paragraphs of section 202(a) addresses payments by particular employers or businesses that have dealings with the official's labor organization (202(a)(4)) or an employer whose employees are represented by the official's union or the union actively seeks to represent, (202(a)(1), (2), (3), (5)). The actual or potential conflict of interest for payments from and interests in such entities is evident.

The literal language of section 202(a)(6), if applied as the commenters advocate, would render superfluous the limiting language in the other subsections, as it would potentially require reporting from any entity that is an employer, regardless of whether or not the entity had any connection with the union and its represented employers. Given the absurdity of such construction, the Department, mindful of the statute's language and legislative history, has interpreted section 202(a)(6) as a “catch-all” provision, intended by Congress to capture various payments that would pose apparent conflicts of interest, even though outside the literal terms of subsections (a)(1)-(5). The Department has never interpreted this section in the way these two commenters apparently would prefer—as a mandate to require a union official to report on his or her financial interests from virtually all employers. The 2007 rule outlines this longstanding approach by the Department, 72 FR at 36128-30, and the Department has continued the same basic approach in this rulemaking, see 75 FR48426-29, 48434-35. As recognized in the 2007 rule and the 2010 NPRM, the Secretary must interpret the statute to clarify the intended reach of section 202(a)(6). 72 FR 36139-41; 75 FR 48429-30. Here, in contrast to the 2007 rule, the Secretary, in exercising her discretion to interpret that section, has concluded that it does not require union officials to report on certain payments received from employers that compete with represented employers, section 3(l) trusts, and labor organizations.

1. Obligation To Report Payments From Business Competitors of the Employer Whose Employees the Union Official's Union Represents or Whose Employees the Union Is Actively Seeking to Represent

As explained in the 2010 NPRM and reiterated here, the Department has historically viewed subsection 202(a)(6) differently than the other subsections of section 202(a). The relationships addressed in 202(a)(6), such as that between a union official and a competitor employer to a represented employer, are further removed from the

activities of the union than those involving the represented employer and the other business relationships addressed in the first five subsections of section 202. In particular, the competitor employer does not have a current and ongoing relationship with the union; indeed, neither is actively seeking such a relationship (if it did, sections 202(a)(1), (2), and (5) would likely apply). Further, any payment made by a competitor or other employer to not organize or otherwise affect the union official's responsibilities with the union is per se reportable under Part C of the instructions. Moreover, the Department believes that in the outside chance that there could be a conflict concerning a union official and a competitor employer, the Department's “significant authority or influence” test, as shown in italics and discussed below, would ensure its reporting.

The instructions to the Form LM-30, as revised in this rule, provide:

Complete Part C if you, your spouse, or your minor child received, directly or indirectly, any payment of money or other thing of value (including reimbursed expenses) from any employer (other than a Represented Employer under Part A or Business covered under Part B above) from whom a payment would create an actual or potential conflict between these

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financial interests and the interest of your labor organization or your duties to your labor organization. Such employers include, but are not limited to, an employer in competition with an employer whose employees your labor organization represents or whose employees your union is actively seeking to represent,

if you are involved with the organizing, collective bargaining, or contract administration activities or possess significant authority or influence over such activities. You are deemed to have such authority and influence if you possess authority by virtue of your position, even if you did not become involved in these activities.

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The NPRM stated, “between

your

financial interests * * *” The Department modified this phrase to read “between

these

financial interests,” so filers are aware that they must look at the payments and interests of their spouse and minor children as well as their own.

An example illustrates the difference between the 2007 Form LM-30 and the narrower reporting requirement implemented here. First, assume that an individual employed by a union to handle computer problems also works for a technology company that is a competitor of a company whose employees are represented by the union. Under the 2007 rule, the individual would have to file a Form LM-30 to report gifts, gratuities, or other non-exempt payments he or she receives from the technology company.

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Under this rule, the individual would not have to report these payments. In contrast, assume that an individual employed by a union as an organizer also works for a technology company that is a competitor of a company whose employees are represented by the union. Under both this rule and the 2007 rule, the individual would have to file a Form LM-30 to report gifts, gratuities, or other non-exempt payments he or she receives from the technology company.

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It should be noted that such employee would not be required to report his regular wages from the employer. LMRDA, section 202(a)(6), which exempts payments of the kinds referred to in LMRA section 302(c)(1), excepts these payments from reporting. A public policy organization, which offered general opposition to the proposed changes to the reporting of payments from competitor employers, noted that the NPRM indicated that the wages paid by the technology company would be reportable under the 2007 rule, and that this mistake cast doubt on the entire NPRM. The text has been clarified to make plain that regular wage payments are not to be reported.

Multiple commenters offered support for the proposal. One national/international union supports the change as it reduces burden on officials and focuses reporting on actual or potential conflict-of-interest scenarios. With respect to burden, the commenter stressed the “layers” of subsidiaries and affiliates that must be researched to identify the represented employer's competitors in order to determine if reporting is required. Moreover, the commenter contended that this information may not be publicly available.

30

30

The concerns of the commenters pertaining to the level of “research” that must be conducted in order to determine what payments are reportable are unsubstantiated and exaggerated. As discussed in greater detail in the top-down reporting section of this preamble, III.E., the scope of the official's inquiry is limited to considering non-exempt, atypical payments received from an employer and only

then

must the official look at the relationship that the employer has with the official's union. Nevertheless, by limiting this aspect of reporting to officials that possess actual authority or influence over subordinate affiliates, the rule should ameliorate concerns among some filers.

One international union supported the change, but also suggested that it should be narrowed further to require reporting of a “gift” only when an official has “actual knowledge” of an employer being a competitor to a represented employer. It explained that such a change would reduce a filer's burden because it would be unnecessary to “research potentially complex chains of business ownerships through webs of subsidiaries and affiliates.” The Department does not concur with this suggestion, as determinin

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