Canadian Legislation Would Require Union Transparency

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Canadian flagLabor leaders don't like it when they have to open their books to public inspection. Those in Canada apparently aren't much different from the ones in this country. Canadian lawmakers currently are considering private legislation, Public Financial Disclosure for Labour Organizations, to include unions as among the organizations required to furnish financial data. Sponsors say the measure, alternately known as C-377, is needed to combat corruption and foster transparency. Union leaders insist that compliance would be unjustifiably costly and time-consuming. If this sounds familiar, it should. Close to a decade ago, the Bush administration via the regulatory process proposed similar changes. It prevailed, but only after a lengthy court challenge by the AFL-CIO. What happens in Canada looms especially significant because hundreds of thousands of its union members belong to AFL-CIO affiliates.

Union Corruption Update during the last decade often recounted at length how the U.S. Department of Labor (DOL) under Bush-era Labor Secretary Elaine Chao required greater detail in annual union financial reports and mandated free online accessibility to dues-paying members and the general public. Specifically, the department in 2003 (and with the help of NLPC) issued a rule that called upon officials of large unions - those with total annual receipts of at least $250,000 - to provide more details in their annual financial report, Form LM-2. The DOL also created Form T-1, which would apply to union trusts such as retirement plans and training funds. The move was prompted by widespread recognition that union corruption still was commonplace, and often rampant, and that existing rules developed under the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA) were insufficient to discourage it.

A highly displeased AFL-CIO went to federal court to block the rules from taking effect. The case reached an appeals court, which in May 2005 handed the Labor Department a partial victory. The expanded Form LM-2, the court ruled, didn't violate the constitutional rights of union members or place undue compliance costs on their organizations. But the court also ruled that Form T-1 had not met this bar. The department eventually revised the T-1 to the court's satisfaction. In 2007 the DOL issued a final rule mandating a more detailed Form LM-30, which union officials and business agents must file to demonstrate no conflicts of interest. And in the waning days of the Bush administration, the department further strengthened the LM-2 form and restricted the circumstances by which smaller unions could file the simpler LM-3. Predictably, the Obama administration, led by Labor Secretary Hilda Solis, has rolled back former Secretary Chao's LM-30, LM-3 and second-round LM-2 regulations, and shelved the never-implemented T-1 form entirely.

These developments hadn't gone unheeded in Canada, where labor corruption and menace have occurred with regularity. Last fall, for example, Quebec Labour Minister Lise Theriault reported that an anonymous caller to her office had threatened to "break both her legs" in the wake of her institution of minor curbs on union powers. In another incident, a female construction worker in Quebec reported being beaten at a union job site. And in 2002, Harvey Holst, secretary-treasurer of the Canadian Union of Public Employees (CUPE) Local 68 in Kitchener, Ontario, pleaded guilty to stealing $271,800 in union funds. Calls for public accountability by union critics, within and outside the unions, have been growing.

There may be a lot more corruption to be uncovered. Unfortunately, the obstacles to discover it are formidable. And union leaders prefer it that way. A decade ago a Canadian internal reform union group, Members for Democracy (www.m-f-d.org), explained:

We assume that if corruption happened, we'd be reading about it in the newspapers and hearing about it on the news. We don't, so we assume that it doesn't exist...(People) think that unions are democratic entities that would put the run on anyone who perpetrated a fraud or crime against the members. That's where the RCMP and Revenue Canada got it all wrong when they interpreted what happened to the General Workers Union in BC after they busted the president for embezzlement and gun charges. All they saw was the president getting re-elected just days before he went to jail. They washed their hands of union stuff thereafter. They saw it as the members validating the actions of the president. They went away with a "why should we bother?" attitude. They didn't understand that unions aren't democratic organizations in the same sense as governments are.

But aren't union leaders supposed to serve their members? Actually, noted the group, they don't have to:

Contrary to what is widely believed, there are few laws that govern unions and the relationship between unions and their members. While most of us believe that the various labour relations acts provide some measure of protection for union members, that's just not the case. Labour relations in Canada grants union members virtually nothing in the way of rights or protection. The main thrust of labour relations legislation is to regulate relations between employers and unions. So while, unions and employers have certain rights and obligations to each other, unions have little in the way of obligations toward their members.

If a union member does complain, he's not likely to get a hearing, much less a victory. According to Dimitrios Papadopolous, a Canadian worker who sued his union (the Communications, Energy and Paperworkers Union of Canada), and lost at the Canadian Supreme Court: "(S)tatistics show that 99% of all DFR (Duty of Fair Representation) Complaints for union misrepresentation that disadvantaged unionized workers filed for a union redress, were dismissed right from the get go. In any given province, the provincial Board received on average 1,000 DFR complaints. 990 are dismissed." Moreover, under current Canadian law, unionized workers have very limited recourse in the event of a board decision against them. Formally, they can appeal. But in practice, it's an exercise in futility. "Unless the worker is able to provide evidence that the Board violated Natural Justice, an impossibly vague concept to prove, it's pretty much a lost case," noted Papadopolous. "Statistics show 99.9% of Judicial Reviews (requested by) unionized workers are dismissed in Courts of Appeal." Should the worker appeal to the Canadian Supreme Court, the prospects are even worse: "100% of all such applications are dismissed with no explanations."

So how did union leaders in Canada come to wield so much power over members? A major reason is that the country is a good deal more unionized than ours. In the U.S. only about 12 percent of all workers belong to a union; the figure is slightly less than 7 percent in the private sector. In Canada, however, a little over 30 percent of the total work force belongs to a union. And studies show that the higher the level of union density within a given industry or geographic area, the greater the capacity for unions to control the supply of labor. But related to this is another, equally compelling factor. Unions use the windfall of dues collections to influence elected representatives. Members of Parliament typically avoid crossing swords with the unions over any major issue, including enacting legal safeguards to protect dissenting members and the general public. This is why the reform bill at hand, C-377, is private legislation; if passed, it won't necessarily become law. 

That brings us to C-377 itself. The measure, which to some extent is patterned after our own LMRDA-based regulations, would amend Canada's Income Tax Act so as to apply to labor unions. Russ Hiebert, a Conservative representing South Surrey-White Rock-Cloverdale (Greater Vancouver, British Columbia) and the bill's prime mover, explains the need for the measure: "There is a genuine public purpose served by requiring financial transparency in all institutions that receive a substantial public benefit. We do it in government, in crown corporations and in charities. Now I'm proposing we extend it to another set of institutions that enjoy public benefits - unions." Like here, the law would create a standardized system of electronic filing and posting in order to facilitate free public viewing of union finances. Recent survey data show that 83 percent of all Canadians favor such disclosure. Support among union members is even higher at 86 percent.

One strains to imagine how a proposed law heavily supported by union members constitutes an attack on unions. Notwithstanding, Canadian union officials are giving it a go. Ken Georgetti, president of the Canadian Labour Congress (CLC) - Canada's equivalent of our AFL-CIO - last September denounced one of the bill's sources of support, the Fraser Institute, a Vancouver-based free-market think tank: "The Fraser Institute attacks trade unions for an alleged lack of transparency in how we disclose financial information. How would they know? We will gladly compare our transparency with theirs any day of the week. Our (owners) members know how and where to get their union's financial information." Similarly, Kevin Rebeck, president of the Manitoba Federation of Labour, sent a rather testy letter to Canadian Prime Minister Stephen Harper, who has expressed support for C-377. Rebeck stated: "As you are aware, Bill C-377 is a reflection of your contempt for the free trade union movement and not a response to an existing, verifiable issue with how unions in Canada conduct themselves." He continued:

Those who drafted the Bill and its defenders argue that workers get hundreds of millions of dollars in tax benefits through union and professional dues deductions. They argue that any organization that enjoys a tax exemption should be fully transparent so that taxpayers may assess the propriety of their actions and determine whether the tax exemption is being used for the intended purposes. But C-377's provisions only apply to unions. What about the "any organization that enjoys a tax exemption should be fully transparent" test? Why isn't every individual, corporation and organization that benefits from tax credits, tax deductions, tax loopholes and tax reductions listed? Clearly, those aren't the people you want to attack and union members are!

Rebeck closed his letter by calling C-377 "an unwarranted intrusion into the internal affairs of unions in order to provide information to employers and anti-union groups while forcing unions to take on significantly increased costs."

There are several counter-arguments to such bluster. First, union membership in Canada, even more than in the U.S., is compulsory; employment with a particular employer isn't. Speaking on the subject of C-377, Terrance Oakey, president of Merit Canada, an Ottawa-based trade association of open shop building contractors, stated: "(T)here's a key distinction between any voluntary member organization and a labour organization. It's not a condition to run a business in Canada to be a member of Merit Canada." Second, union leaders use tax-deductible member dues to engage in political battles that members might not support. A recent poll by the Toronto-based Nanos Research, in fact, revealed that two-thirds of current union workers in Canada are opposed to unions routing dues payments to political parties or causes of their leaders' choice without member consent. Third, public-sector unions in Canada have a virtual monopoly on government service provision. It would seem that such protected status ought to be accompanied by some mechanism for public accountability. Fourth and finally, the worlds of corporations and unions overlap, often to the detriment of rank and file. AFL-CIO-affiliated pension funds, for example, lost a combined $3.3 billion in the collapses of Enron and Worldcom a decade ago. If corporate irresponsibility is a real issue, then union irresponsibility in such cases should be every bit as much so.

It's hard to think of any reason, this side of union self-interest, to oppose C-377. Under the present system, union members may view their respective organization's financial statements, but first must file a request to do so. Not only is this time-consuming, it also eliminates anonymity and thus increases the risk of retaliation, including firing. In three provinces - Alberta, Prince Edward Island and Saskatchewan - a union doesn't even have to make a statement available. If and when an inquiring member does get information, he's not likely to find much of value. "(T)here are no regulations specifying the amount of detail in union financial statements," wrote Fraser Institute economists Niels Veldhuis and Amela Karabegovic, the pair who had aroused Georgetti's ire, in a guest article last September for Canada's Financial Post. "Most importantly, there is no requirement that financial statements indicate a breakdown of money spent on activities directly related to representing workers and money spent on activities unrelated to representation, such as political activities."

The C-377 measure would correct these deficiencies. And it's moving along the legislative path. On March 14 of this year, the Federal House of Commons in Ottawa approved a Second Reading of the bill by a 154-127 margin. The measurer is now before the Finance Committee for evaluation. Our historic ties with Canada aside, Americans should pay close attention to the outcome. According to John Mortimer, president of Canadian LabourWatch Association, a Vancouver-based Right to Work nonprofit group, roughly a half-million Canadian workers belong to unions affiliated with the AFL-CIO. And the AFL-CIO stands foursquare with Canadian union officials. At the CLC convention in Vancouver in May 2011, AFL-CIO President Richard Trumka called CLC President Ken Georgetti "the best kind of union man, a true friend and a fighter." One hardly would expect him, of course, to say otherwise. But dues-paying union members in Canada, like here, should have a right to know if Georgetti and other labor leaders are playing by the rules.

Related:

Obama Rolls Back Union Disclosure; Gives Green Light to Corruption

Obama Set to Block Labor Department Transparency Rules

Department Publishes Final Rule for LM-2, LM-3

New LM-2 Regulations Set to Improve Union Transparency

Revised LM-2 Form Provides Public Window to Union Spending