Department of Labor Proposes New Union Financial Reporting Rules

Mackinac Center Proposes Stronger State Disclosure Laws

MIDLAND-The U.S. Department of Labor published its proposal for new union financial disclosure forms and rules today. The new rules, applying to unions with annual receipts of over $200,000, reflect growing concern over the use of union resources for political activity and other purposes outside of collective bargaining.

"These new financial reporting rules are a positive step in holding unions accountable to their members," said Paul Kersey, Labor Research Associate at the Mackinac Center for Public Policy. "If workers are going to have any effective oversight over their unions, they simply must know how union officials use their resources."

The union financial reports, referred to as form LM-2, are required under the Labor Management Reporting and Disclosure Act, (LMRDA) passed in 1959. The new forms call for a breakdown of union spending by categories, such as contract negotiation and administration, organization of new bargaining units, political activities, lobbying, and strike benefits. The proposal also includes disclosure provisions for trust funds controlled by unions.

AFL-CIO President John Sweeney was critical of the changes, calling the new requirements "onerous" and "clearly punitive," alleging that they "are clearly designed to be so burdensome that they will weaken unions as a force for worker’s rights and economic fairness." The administration, however, argues that the new reporting rules are necessary because union operations have become more sophisticated. According to the Labor Department, many unions "resemble modern corporations in their structure, scope and complexity," operating benefit plans, maintaining close relationships with investment firms, and running revenue-producing subsidiaries.

According to a Mackinac Center for Public Policy report on union financial disclosure, Michigan labor unions collect over $250 million in dues annually. Large labor union PACs contribute over 95 percent of their funds to Democrats, even though union members split their vote much more closely. For instance, Mitchell Research reports that 40 percent of UAW members voted for Republican Dick Posthumus in the recent gubernatorial election.

According to the Mackinac Center’s Kersey, the drive for greater financial accountability faces significant obstacles: "There are two problem areas, first, certain types of political activity can easily be characterized as something entirely different. Given the extent of union political activity, and the wide range of political and social views held by rank-and-file union members, this is an area that needs thorough accounting."

"The other problem is the absence of an audit requirement," said Kersey. "Without that, union officials will be tempted to falsify information. Those concerns aside, however, this is a good start. We also repeat our proposal for a state union disclosure law that would cover government employee unions in Michigan. Even if new federal rules are approved, they won’t apply to unions that represent state government employees. The Michigan Education Association (MEA) union alone took in $46 million in membership dues last year, and teachers deserve to know how that money was used."

The proposed regulations will be open to public comment for 60 days before they are revised and implemented. The Mackinac Center report "The Michigan Union Accountability Act: A Step Toward Accountability and Democracy in Labor Organizations" is available at http://www.mackinac.org/3944.