Labor Department Publishes Final Rule for LM-2, LM-3 Reporting Forms

Even before assuming power, the Obama administration had given signs of wanting to undo certain Department of Labor regulations written during the Bush years. But that didn’t stop the old regime under Labor Secretary Elaine Chao from getting in a few last blows for union transparency. On January 16, the department’s Office of Labor-Management Standards announced that it would publish a final rule in the January 21 Federal Register updating Form LM-2 for larger unions and restricting the circumstances under which smaller unions could file the simpler Form LM-3. The regulation, developed pursuant to the Labor-Management Reporting and Disclosure Act of 1959 (i.e., the Landrum-Griffin Act), subsequently appeared on the latter date, the day after President Obama’s inauguration.

 

The Office of Labor-Management Standards, or OLMS, is the agency within the Labor Department charged with monitoring compliance with the Landrum-Griffin Act. OLMS’ criminal enforcement section in particular reviews annual financial reporting forms submitted by unions to check for irregularities potentially connected to embezzlement, fraud and other financial crimes. Larger unions – that is, those with annual receipts of at least $250,000 – must file the LM-2 form, which the DOL made more detailed under Secretary Chao, despite protests and a lawsuit by the AFL-CIO. The DOL believed union officials and employees over the years too easily could hide or falsify financial reporting data. After winning in U.S. appeals court in 2005, the department subsequently put its more detailed form into effect. Even so, some of its officials believed the newer version needed some fine-tuning. The new Form LM-2 requires additional disclosure of: compensation received by union officers and their employees; parties buying or selling union assets; and different categories of receipts. 

 

The other element of the new rule concerns the circumstances for filing the relatively simple LM-3 form. Smaller unions as a matter of course long have filed the LM-3. However, the Labor Department concluded that certain among these unions had abused their privilege. The new rule stipulates that unions habitually delinquent or deficient in filing may have their privilege revoked and thus would have to file an LM-2.

OLMS officials are optimistic that the rule changes will result in more open and honest unions. “Since fiscal year 2001, OLMS investigations have yielded a total of 1,004 indictments with 929 convictions and court-ordered restitution of more than $93 million,” said Deputy Assistant Secretary for Labor-Management Standards Don Todd. “We are confident that the changes we are making will both discourage embezzlement of union members’ money and make such embezzlements harder to hide.” One hopes his successor shows the same level of commitment. (PR Newswire, 1/16/09).