Private-sector unions are required to file reports annually with the U.S. Department of Labor and the Internal Revenue Service.  The Labor Department form is mandated by the Landrum-Griffin Act, and is referred to as the LM-2.  The IRS filing is on Form 990, required from all non-profit organizations.

LM-2 forms require complete information concerning assets and liabilities at the beginning and end of the fiscal year; all receipts and the sources of all receipts; compensation of all union officer and employees who received more than $10,000; loans made to officers, employees, or members, of more than $250; loans to any business enterprise; and other disbursements made by the organization.[39]

Section (c) of the LM-2 requires that this information be made available to all of the labor organization's members and permits all members to examine any books, records, and accounts necessary to verify the information found in the annual report.  The course of legal action available to members who are denied this information is also laid out in this section.  Union members may sue in state or federal court to force their union to turn over "any books, records, and accounts necessary to verify" the report if there is just cause to believe the report is inaccurate.  But given the financial burden of a lawsuit and the ill will generated by suing the union, this course of action is impractical for rank-and-file union members.

Finally, the Act states that this information will be provided in "such categories as the Secretary [of Labor] may prescribe."[40]  This is the crucial point in the effort to create more meaningful labor organization financial disclosure, considering that the value of the information on these forms, for union members and union oversight groups, largely depends on these "categories."  Financial information required of unions provides little insight into the various functional areas where union money is spent, such as collective bargaining, politics, lobbying, or grievances. 

Reading the LM-2 or Form 990 of the typical labor union can be exasperating; the disclosure laws leave plenty of nooks and crannies for hiding questionable activities.  For example, the MEA's 1999 LM-2 gives the names and salaries of hundreds of employees.  Among them are approximately 100 individuals who appear to have used "release time" to work on union business.  Yet, there is no indication of what these persons worked on; it is entirely possible that these individuals did political work on union time.  There is an entry for political expenditures in the amount of $36,550, but no indication of what these expenditures were for, or which candidates received them.  Likewise with an entry in the amount of $321,246 of "legislative and political" spending.

Adding to the confusion is the lack of a consistent standard for reporting.  LM-2 forms do not follow generally accepted accounting principles and need not be audited by a third party before submission to the Labor Department.  Consequently, similar expenditures can be treated very differently by different unions.[41]

Unions consciously take advantage of this confusion.  One NEA publication entitled "How To Set Up and Operate a Local Association Political Action Program" advises local union officials to "combine PAC fundraising and the Association's membership drive—so  you avoid separate drives by asking people to join the Association and give to the PAC at the same time. . . . At the bargaining table, fight for the payroll deduction system of making PAC contributions and for the designation of Election Day as a paid holiday.  Show members how human and civil rights programs and laws were accomplished through effective political campaigning and lobbying.  Include political action program articles in Association publications. . . . Include a political education line item in the local Association's budget so that dues monies are available for conducting political activities with members and their families."[42]

Consequently, many activities that are political aren't listed as such.  Passing out fliers advocating a particular position on an issue without mentioning a specific bill up for a vote could legally be categorized as an "education" expense, for example.  "Leadership Development," upon which the MEA spent $284,645 in 1999, could easily include political training and "Committees and Task Forces" ($548,219) may or may not include groups working on party politics.  As the laws covering union disclosure stand, it's impossible to know what the numbers include, especially when it comes to politics.

However inadequate the information obtainable through LM-2 forms may be, it also is extremely difficult for an outsider to obtain.

The Labor Management Reporting and Disclosure Act (LMRDA) was passed in 1958 when the computer age was in its infancy.  To this day, files are still only available in hard copy; there has been no upgrade to computer files.

As former U.S. Department of Labor Solicitor Marshall J. Breger told the U.S. House Committee on Education and the Workforce on July 9, 1997:

. LM-2 forms are filed with the Department of Labor's Office of Labor Management Standards (OLMS).  OLMS keeps some 34,000 such disclosure statements on file here in Washington.  They are not retrievable by computer and are available only on the OLMS's receipt of a five-digit file number corresponding to the file.  The public may find such file numbers in a reference book, last published in 1990.  Many of the file numbers are not updated, which makes finding some files practically impossible.  In addition, their [sic] are significant restrictions on the number of files that can be examined or photocopied per day.[43]

IRS Form 990s share the same flaws.  For example, the MEA's 1999 filing states that the union spent no money whatsoever on political activity that year.  Yet the MEA's own attachments list $42,070 for "legislative activities" and $11,778 for the "Third World political forum."  This is not necessarily a violation of tax law: The IRS is looking for specific types of taxable political expenditures.[44]  But it is likely to be confusing for laymen.  On Form 990s, as on the LM-2, many political expenditures can be mixed in with or concealed by non-political categories.  Any union member attempting to learn the extent and thrust of union politics, whether as part of a Beck suit or simply to satisfy ordinary curiosity will find little useful information in either filing.

Oddly enough, while dues-paying union members are left to puzzle over IRS forms and LM-2 filings, non-members can receive an accounting for union spending (although unions make it as difficult as possible).   In the public sector these disclosures are referred to as Hudson notices after Chicago Teachers Union v. Hudson, in which the U.S. Supreme Court laid down the ground rules for public sector workers who object to union political activity.[45]  Private sector workers who quit the union and object to union spending are legally entitled to receive a similar accounting, referred to as a Beck notice (although, again, with great difficulty).  Both Hudson and Beck notices are supposed to break union spending down between costs of representation on the one hand and spending peripheral to worker representation on the other.

The process is unwieldy; resigning from the union and objecting to the agency fee are technically two different things.  A worker who resigns from a union is typically charged an agency fee equal to the dues paid by full members of the union.  In order to fully exercise Beck rights the worker must also "object" to the agency fee.  This entitles the worker to receive an accounting of union expenditures and have the agency fee reduced.  It is possible to do both simultaneously, but the distinction does create confusion and frustration for workers.

Workers who object to the agency fee amount find that unions will resist efforts to obtain a refund. Since the decision in Machinists v. Street, which recognized workers' right to withhold support for union politics, unions have attempted to limit the period of time during the year during which workers could resign.[46] They have also denied non-members any right to an account of how their fees are being spent, [47] required nonmembers to file objections to dues every year,[48] and forced nonmembers to go through arbitration before taking the matter to court.[49]  All of these ploys have been rejected by the federal courts, but workers were forced to go all the way to the Supreme Court in many of these cases before the matters were settled.

Perhaps the nadir of union stonewalling came in the case of Bromley v. Michigan Education Association - NEA.[50]  In Bromley, a group of college and public school employees represented by the MEA objected to the amount the union calculated for their agency fee and went through an arbitration procedure.  The arbitrator did not look at the MEA's records directly, but affirmed the union's calculations, basing his decision on financial summaries provided by the union.  The workers went to federal court and requested further documentation of the fee amount, but the district court denied the request, then allowed the union to go ahead with a motion for summary judgment, concluding that plaintiffs had "everything they need to enable them to respond to the defendant's motion for summary judgment."  The court went on to grant the union's motion, dismissing the case.

On appeal, the federal Circuit Court reversed emphatically: "Given the importance of the constitutional interests at stake in the case at bar, the district court should not have decided the summary judgment motion without allowing meaningful discovery first.  In declining to allow any discovery beyond the arbitration record . . . the district court clearly abused its discretion."  The case was sent back for trial, with plaintiffs gaining access to the union's financial records.  Eventually the matter was settled, with the union refunding $150,000 and changing its procedures for tracking staff time.[51]

The record from courts across the country shows that union officers have little regard for the First Amendment rights of workers, and will use any gambit to deny or delay a full reckoning of the money they owe under the rules laid down by Beck.  Sometimes the courts themselves are confused by union claims that accounting for their own spending presents a heavy burden.

Nonetheless, the Hudson and Beck notices available to objecting workers are the only documents in which union officials are made to go on record and state how much money unions actually need to represent workers. The unfortunate fact of the matter is that getting a full record of union spending often involves a lengthy court battle, the supreme irony of which is that even under the Beck decision, union members must resign before they can even begin the process.



[39] 29 U.S.C. 431(b)

[40] 29 U.S.C. 431 (c)

[41] Testimony of David Fortney before the Senate Committee on Rules Administration, S Hrg 106-522, appendix 33, p. 595

[42] Complaint before the Internal Revenue Service, Re: National Education Association, FEIN 53-0115260 , Landmark Legal Foundation, http://www.landmarklegal.org

[43] At the time this report was written file numbers had been updated, but LM-2 reports could not be viewed online, and a system for ordering LM-2 reports over the Internet was inoperative.

[44] The Landmark Legal Foundation's suit against the NEA raises precisely this question.

[45] 475 U.S. 292 (1986)

[46] Unions have attempted to prohibit resignations prior to a strike, Pattern Makers v. NLRB, 473 U.S. 95 (1985); and have also attempted to impose a brief annual "window" in which dues protests must be filed Machinists v. NLRB and Strang, 133 F.3rd 1012 (7th Cir 1998)

[47] Teachers v. Hudson, 475 U.S. 292 (1986)

[48]Shea v. Machinists, 154 F.3d 508 (5th Cir. 1998)

[49] Air Line Pilots v. Miller, U.S. Supreme Court 97-428 (1998)

[50] 82 F3d. 686 (6th Cir. 1996)

[51] Mammoth Michigan Union Forced to Return $150,000 Dollars in Union Dues to 450 Teachers, National Right to Work Legal Defense Fund, news release, May 15, 2000, http://www.nrtw.org