DOL Proposes Changes to Financial Reporting Requirements for the Largest and Most Prominent Unions

05 October 2020 Labor & Employment Law Perspectives Blog
Authors: Anne B. Sekel

In the wake of a high-profile corruption scandal involving the United Auto Workers International Union (UAW), the Department of Labor (DOL) announced on September 30 a Notice of Proposed Rulemaking (NPRM) designed to “increase and enhance financial transparency for unions regulated by the Labor-Management Reporting and Disclosure Act of 1959.” 

The UAW scandal saw more than a dozen former union officers and several former automotive executives plead guilty to various charges arising from a pattern of bribery and the diversion of union funds for personal use by union officials and others.  In its introduction to the proposed regulatory changes, the DOL observes that much of the illegal conduct at issue in the UAW scandal was facilitated by or concealed through false and inadequate financial reporting by union officials.  The DOL concludes that there may be a link between insufficient reporting and disclosure requirements, on the one hand, and criminal conduct on the other.  The DOL’s proposed changes, if they become law, will provide members of labor organizations with additional and more detailed information about the financial activities of unions and will enable members to examine whether the union’s priorities align with its constitution, as well as the member’s own priorities and those of fellow members. 

Among other changes, the DOL’s proposal provides for a long-form version of the annual financial report referred to as the Form LM-2, which unions with $250,000 in annual receipts currently must file.  The long form, which will be referred to as the LM-2 LF, would apply only to unions with annual receipts of $8 million or more.  This way, the new regulation targets the largest and most prominent labor unions.  The new disclosure form would require labor organizations to identify any officers or employees who were paid $10,000 or more by the reporting organization and who also received $10,000 or more as an officer or employee of another labor organization in gross salaries, allowances, and other direct and indirect disbursements during the reporting period. 

The DOL believes that this change will help identify conflicts of interest and will facilitate tracking funds that may be transferred from one union to another.  Another proposed disclosure focuses on the existence and amount of strike funds.  A strike fund is used to cover the basic financial needs of striking union members and has been particularly susceptible to abuses, such as embezzlement.  Requiring the amount of the fund to be disclosed to union members will allow them to assess the health of the union and monitor the amount of money available in the fund.         

The public will have 60 days from the date the proposal is published in the Federal Register to comment on the DOL’s proposed changes.  The DOL already has acknowledged that, while some of the increased reporting requirements undoubtedly will enhance financial transparency, there are countervailing issues that need to be considered for which comment will be critical.  For example, the proposed strike fund disclosures may give employers visibility into information they can use to their advantage in negotiations with the unions.    

Given the nature of the proposed changes and the impact they will have on union members and employers alike, reactions and comments to the DOL’s proposed changes are likely to be closely monitored by both groups.

This blog is made available by Foley & Lardner LLP (“Foley” or “the Firm”) for informational purposes only. It is not meant to convey the Firm’s legal position on behalf of any client, nor is it intended to convey specific legal advice. Any opinions expressed in this article do not necessarily reflect the views of Foley & Lardner LLP, its partners, or its clients. Accordingly, do not act upon this information without seeking counsel from a licensed attorney. This blog is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Communicating with Foley through this website by email, blog post, or otherwise, does not create an attorney-client relationship for any legal matter. Therefore, any communication or material you transmit to Foley through this blog, whether by email, blog post or any other manner, will not be treated as confidential or proprietary. The information on this blog is published “AS IS” and is not guaranteed to be complete, accurate, and or up-to-date. Foley makes no representations or warranties of any kind, express or implied, as to the operation or content of the site. Foley expressly disclaims all other guarantees, warranties, conditions and representations of any kind, either express or implied, whether arising under any statute, law, commercial use or otherwise, including implied warranties of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Foley or any of its partners, officers, employees, agents or affiliates be liable, directly or indirectly, under any theory of law (contract, tort, negligence or otherwise), to you or anyone else, for any claims, losses or damages, direct, indirect special, incidental, punitive or consequential, resulting from or occasioned by the creation, use of or reliance on this site (including information and other content) or any third party websites or the information, resources or material accessed through any such websites. In some jurisdictions, the contents of this blog may be considered Attorney Advertising. If applicable, please note that prior results do not guarantee a similar outcome. Photographs are for dramatization purposes only and may include models. Likenesses do not necessarily imply current client, partnership or employee status.

Related Services

Insights