Improving Union Annual Reporting

Since the passage of the 1959 Labor Management Reporting and Disclosure Act (LMRDA), most labor unions have been required to file annual financial reports to the U.S. Department of Labor’s Office of Labor-Management Standards. Since the George W. Bush administration made the forms more comprehensive, they have proved essential to tracking unions’ nonrepresentational—read, political and advocacy—spending and even caught important corruption.

The House Education and Workforce Committee has requested information on potential reforms to the LMRDA, including to the LM-2 forms that the largest labor unions file. As a frequent user of LM-2 forms, I have some thoughts.

Where Did the Money Come From?

Union political and advocacy funds derive from two “collections” taken from union members. (Nonmembers compelled to pay agency fees in forced unionism states can technically refrain from paying into both funds through “Beck rights,” but this distinction is not particularly important here.) The first collection is the assessment of union dues, which are mandatory fees the union imposes on union members for the union’s general operations. The second collection is the political fund contribution, which is optional for members and funds political efforts that unions cannot fund with dues (so-called “general treasury”) money, most notably direct contributions to federal political candidates.

The LM-2 requires unions to report their political and lobbying activities on Schedule 16 (and sometimes the “Contributions, Gifts, and Grants” on Schedule 17, about which more later). But for a report that is supposed to inform members about how their dues are being spent, the reporting has a serious flaw: The spending line items do not differentiate which “collection” paid for the spending, and it’s obvious that some unions report both on the form (which may be obligatory depending on how their internal accounting is administered).

Especially following the 2010 Supreme Court decision in Citizens United v. FEC, which “collection” is funding what spending is important information for union members, and they deserve ready, single-site access. (Citizens United overturned a Taft-Hartley Act–derived ban on using union dues revenues for independent expenditures on behalf of candidates.) They should not need to cross-reference Federal Election Commission (FEC) reports and Labor Department reports to infer which pot of money paid for which spending. Instead, the Labor Department or Congress should revise the LM-2 form to require labor unions to specify the funding source, perhaps by adding a new schedule for expenditures to or by the “Separate Segregated Fund” (the technical name for the “second collection” pot of money) or by requiring specification of the source of funds for Schedule 16 and 17 expenditures related to politics and advocacy.

Political “Contributions, Gifts, and Grants”

Schedule 17 of the LM-2 is dedicated to unions’ “contributions, gifts, and grants.” The Labor Department’s instructions for the form make clear that Schedule 17 is supposed to be a catch-all form for expenditures that do not fit in any other category, such as political activities and lobbying, but it all too often includes expenditures that under any plausible definition are political or lobbying activities.

Frequently, contributions to ballot measure committees, which are definitionally “lobbying activities” (for complicated reasons the government considers campaigning for ballot measures to be “lobbying the electorate” rather than electioneering), end up on Schedule 17. That should not be allowed. Congress should give the Office of Labor-Management Standards the resources to ensure compliance with reporting requirements to make sure that reports are accurate and easily comprehensible to union members and the public. If the Labor Department or Congress were more aggressive, either could further require unions to report grants to any organizations that engage in substantial lobbying as political and lobbying expenditures.

Reporting could be further improved with these resources. The Department of Labor’s database of annual union reports is comprehensive, but difficult to search because it uses character matching rather than Google-style Boolean search operators. This means that typographical errors, names cut off by character limits, and abbreviations can cause a search of the database not to return valid results. The Labor Department or Congress could stipulate that 501(c) and 527 organizations that are declared as recipients of labor union funds on the LM-2 must also have their IRS tax identification numbers (EINs) listed. There is no privacy concern involved because these entities’ EINs are already public record.

Other Potential Improvements

Congress has the power to revise the LMRDA to fix major loopholes in union financial reporting. When Dwight Eisenhower signed the LMRDA in 1959, government worker unions were not really a thing. Wisconsin, the first state to formalize collective bargaining in the government sector at the state level, only enacted its bargaining law that year. As a result, LMRDA did not cover unions exclusively representing state and municipal workers.

Today, almost half of American union members are federal, state, or municipal workers. If Congress really wants to bring accountability to American unions, it must eliminate the blind spot that legislators accidentally created in LMRDA and apply the reporting requirements to all labor organizations.

Other reforms could expand LMRDA reporting to pots of union money that are currently exempt. The first Trump administration (like the George W. Bush administration before it) attempted to impose reporting requirements on union-controlled trusts (such as strike funds, training funds, and the like), but the reporting never went into force thanks to Big Labor–backed litigation and the 2020 election. With the power to legislate, Congress could simply codify the trust-reporting rule and possibly expand it to other funds presently off-limits to regulatory scrutiny.

The LMRDA is an important law that codifies the principle that unions must experience public and member scrutiny as a price for their extensive, government-secured powers over the American workplace. Improving scrutiny would benefit union members, workers considering unionizing, and the public at large.

Source: https://capitalresearch.org/article/improving-union-annual-reporting/