Home Budget & Tax News U.S. Department of Labor Proposes New Financial Transparency Rules

U.S. Department of Labor Proposes New Financial Transparency Rules

The U.S. Department of Labor is preparing a series of reforms in response to the United Auto Workers’ (UAW) corruption scandal.

With federal charges first filed in June 2017, the investigation revealed extensive instances of embezzlement and bribery which resulted in charges against 15 people, including former UAW presidents Dennis Williams and Gary Jones.

Top officials at the UAW have been accused of improper use of union dues for personal luxuries such as lakefront resort renovation and high-end golf vacations. An additional federal investigation against current UAW President Rory Gamble is pending.

In response to this breach of trust of union members’ dues and to prevent future corruption, the Labor Department recently proposed a change to the annual financial disclosure reports known as LM-2 forms, to make public more financial information. This information will be of particular interest to union members and watchdog groups.

The forms were introduced to inform union members of how their dues are being spent under the Labor-Management Reporting and Disclosure Act of 1959 (LMRDA), also known as the Landrum-Griffin Act, for unions with annual receipts of more than $250,000.

In its news release on the rule, Acting Director of the Office of Labor-Management Standards Andrew Auerbach said, “The Office of Labor Management Standards protects America’s workers by promoting union financial transparency, and combatting union fraud and embezzlement. This proposed rulemaking would increase financial transparency and better enable workers to make decisions regarding their union.”

The current reporting process lacks specificity about the financing of such activities as political campaign efforts, lobbying, collective bargaining, and member recruitment, which the new rule would require. The rule change would also mandate the reporting of details about travel disbursements and investments and would reveal conflicts of interest by requiring disclosure of outside compensation from other labor organizations.

The changes would place many of the specific activities related to the UAW embezzlement schemes under much greater scrutiny. The rule will also establish a new “long form” for larger labor unions such as UAW, those with annual receipts of $8 million or more. The department will accept public comments on the proposed rule for 60 days after its publication in the Federal Register on October 13.

F. Vincent Vernuccio, a senior policy advisor at the State Policy Network and former special assistant to the assistant secretary for administration and management in the Department of Labor under George W. Bush, says the proposed rulemaking would provide much more information for union members to see how their dues are being spent.

“What the Department of Labor has put forward is an excellent update to union transparency forms,” Vernuccio said. “It will bring more detail and itemization to several categories so union members can see exactly how their dues are being spent. It will help expose self-dealing and ensure arms-length transactions of union assets.”

The proposed changes to LM-2 reporting are just the latest in a series of union reforms proposed by the Department of Labor. In April of this year, the department finalized a rule establishing a new T-1 form for labor union trusts such as strike funds. This rule would provide more information about each labor union’s dealings in the trust’s governance and finances, in response to past scandals in which union trusts hid embezzlement proceeds through vague financial reporting.

“The Department of Labor under Secretary Scalia has been flooding the zone with union transparency modernization,” Vernuccio said. “They’re striving to have more unions file financial reports, and also striving to have union trusts disclosed. This would have been important in the recent UAW scandals.”

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