Federal Register / Vol. 74, No. 196 / Tuesday, October 13, 2009 / Rules and Regulations 52401 

resides with the Secretary of Homeland 

Security. 

Pursuant to section 641 of the Tariff 

Act, part 111 of title 19 of the Code of 

Federal Regulations sets forth the 

conduct and licensing requirements for 

customs brokers. Section 111.11 sets 

forth the basic requirements for 

obtaining a broker’s license, including 

the requirement that the applicant must 

obtain a passing grade on the written 

examination within a 3-year period 

before submitting the application for a 

broker’s license. 19 CFR 111.11. 

Section 111.13(f) provides that an 

examinee can appeal a failing grade on 

the written examination by first filing a 

written appeal with Trade Policy and 

Programs, Office of International Trade, 

U.S. Customs and Border Protection 

(CBP), within 60 calendar days after the 

date of the written notice of the 

examination results. 19 CFR 111.13(f). 

After reviewing the submission, CBP 

provides the examinee with a written 

notice setting forth the decision on the 

appeal. If CBP’s decision on the appeal 

reaffirms the result of the examination, 

the examinee may subsequently request 

review of CBP’s decision on the appeal 

by writing to the Secretary of Homeland 

Security, or her designee, within 60 

calendar days after the date of the notice 

from CBP. 

Explanation of Amendment 

As noted above, the Secretary of the 

Treasury delegated to the Secretary of 

Homeland Security the authority to 

prescribe rules and regulations relating 

to customs brokers. The Secretary of 

Homeland Security, in turn, delegated 

some of this authority to the 

Commissioner of CBP including the 

authority to regulate brokers. See 

Delegation Number 7010.3, dated 

May 11, 2006. 

On October 19, 2007, CBP published 

a final rule in the Federal Register, at 

72 FR 59166, setting forth technical 

corrections to the CBP regulations to 

reflect changes in CBP’s organizational 

structure. Among the many technical 

changes in that document, consistent 

with the Homeland Security Act and 

Treasury Delegation 100–16, CBP 

amended 19 CFR 111.13(f) to remove 

the Secretary of the Treasury as the 

official with the authority to issue the 

final administrative appeal on a failing 

grade on the broker’s exam and gave the 

Secretary of Homeland Security or her 

designee that authority. 

Since the publication of the final rule 

regarding this particular technical 

amendment, CBP has determined that 

the Assistant Commissioner in CBP’s 

Office of International Trade is the most 

appropriate official to issue the final 

administrative appeal on a failing grade 

on the written customs broker’s exam. 

This designation is consistent with DHS 

Delegation Number 7010.3, which 

delegates the authority to regulate 

customs brokers to the Commissioner of 

CBP. In addition, CBP notes that the 

Office of International Trade is staffed 

with examination subject matter experts 

and is uniquely positioned to 

independently and expeditiously review 

examination appeals. Accordingly, 

§ 111.13(f) is being amended in this 

document by removing ‘‘Secretary of 

Homeland Security, or his designee’’ 

and adding, in its place, ‘‘Assistant 

Commissioner, Office of International 

Trade, U.S. Customs and Border 

Protection.’’ 

Administrative Procedure Act 

Since this rule pertains to matters 

relating to rules of agency organization, 

procedure, or practice, this rule is not a 

substantive rule and is exempt from the 

notice and comment rulemaking 

requirements under the Administrative 

Procedure Act. See 5 U.S.C. 553(b)(A). 

In addition, the delayed effective date 

requirement of 5 U.S.C. 553(d) does not 

apply to this rule for these same 

reasons. 

Regulatory Flexibility Act 

Because this rule is not subject to the 

notice and public comment procedure 

requirements of 5 U.S.C. 553, it is not 

subject to the provisions of the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.). 

Executive Order 12866 

These amendments do not meet the 

criteria for a ‘‘significant regulatory 

action’’ as specified in Executive Order 

12866. Therefore, the Office of 

Management and Budget (OMB) has not 

reviewed this rule. 

Signing Authority 

This document is being issued by CBP 

in accordance with § 0.1(b)(1) of the 

CBP regulations (19 CFR 0.1(b)(1)). 

List of Subjects in 19 CFR Part 111 

Administrative practice and 

procedure, Brokers, Customs duties and 

inspection, Imports, Licensing, 

Reporting and recordkeeping 

requirements. 

Amendments to the CBP Regulations 

■ For the reasons set forth above, part 

111 of title 19 of the Code of Federal 

Regulations (19 CFR part 111) is 

amended as follows: 

PART 111—CUSTOMS BROKERS 

■ 1. The general authority citation for 

Part 111 continues to read as follows: 

Authority: 19 U.S.C. 66, 1202 (General 

Note 3(i), Harmonized Tariff Schedule of the 

United States), 1624, 1641. 

■ 2. In § 111.13, paragraph (f) is revised 

to read as follows: 

§ 111.13 Written examination for individual 

license. 

* * * * * 

(f) Appeal of failing grade on 

examination. If an examinee fails to 

attain a passing grade on the 

examination taken under this section, 

the examinee may challenge that result 

by filing a written appeal with Trade 

Policy and Programs, Office of 

International Trade, U.S. Customs and 

Border Protection, Washington, DC 

20005 within 60 calendar days after the 

date of the written notice provided for 

in paragraph (e) of this section. CBP will 

provide to the examinee written notice 

of the decision on the appeal. If the CBP 

decision on the appeal affirms the result 

of the examination, the examinee may 

request review of the decision on the 

appeal by writing to the Assistant 

Commissioner, Office of International 

Trade, U.S. Customs and Border 

Protection, within 60 calendar days after 

the date of the notice on that decision. 

Dated: September 21, 2009. 

Janet Napolitano, 

Secretary. 

[FR Doc. E9–24489 Filed 10–9–09; 8:45 am] 

BILLING CODE 9111–14–P 

DEPARTMENT OF LABOR 

Office of Labor-Management 

Standards 

29 CFR Parts 403 and 408 

RIN 1215–AB62 

Labor Organization Annual Financial 

Reports 

AGENCY: Office of Labor-Management 

Standards, Employment Standards 

Administration, Department of Labor. 

ACTION: Final Rule; Rescission of 

January 21, 2009 rule. 

SUMMARY: This final rule withdraws a 

rule published in the Federal Register 

on January 21, 2009, which revised the 

Form LM–2, an annual financial report 

required by the Labor-Management 

Reporting and Disclosure Act of 1959, as 

amended (LMRDA), and established 

standards and procedures by which the 

Department can revoke, when 


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52402 Federal Register / Vol. 74, No. 196 / Tuesday, October 13, 2009 / Rules and Regulations 

warranted, the authorization for smaller 

labor organizations to file the Form LM– 

3, a less detailed annual financial report 

also required pursuant to the LMRDA. 

Upon consideration of the comments 

received following an April 21, 2009 

notice of proposed rulemaking (NPRM), 

the Department withdraws the January 

21 rule. The rule is withdrawn because 

the revisions it made to the Form LM– 

2 were issued without an adequate 

review of the Department’s experience 

under the relatively recent revisions to 

Form LM–2 in 2003, and because the 

comments received indicate that the 

Department may have underestimated 

the increased burden that the rule 

would place on reporting labor 

organizations. Additionally, upon 

consideration of the comments received, 

the Department withdraws the 

provisions of the rule pertaining to the 

revocation of a small union’s 

authorization to file a Form LM–3 report 

due to delinquency or deficiency in 

filing such report, because the 

revocation standards and procedures are 

not based upon realistic assessments of 

such a union’s ability to file the more 

complex Form LM–2 and thus are 

unlikely to achieve the intended goals of 

greater transparency and disclosure. 

Moreover, the revocation provisions did 

not adequately balance the need for 

transparency with the burden placed 

upon smaller labor organizations. 

DATES: Effective October 13, 2009, the 

Final Rule published January 21, 2009 

amending 29 CFR parts 403 and 408 (74 

FR 3678), for which the effective date 

was delayed on February 20, 2009 (74 

FR 7814) and April 21, 2009 (74 FR 

18132), is withdrawn. 

FOR FURTHER INFORMATION CONTACT: 

Denise M. Boucher, Director, Office of 

Policy, Reports and Disclosure, Office of 

Labor-Management Standards, 

Employment Standards Administration, 

U.S. Department of Labor, 200 

Constitution Avenue, NW., Room N– 

5609, Washington, DC 20210, (202) 693– 

1185 (this is not a toll-free number), 

(800) 877–8339 (TTY/TDD). 

SUPPLEMENTARY INFORMATION: 

I. Statutory Authority 

This rescission of the January 21, 

2009 rule (January 21 rule) is issued 

pursuant to section 208 of the LMRDA, 

29 U.S.C. 438. Section 208 authorizes 

the Secretary of Labor to issue, amend, 

and rescind rules and regulations to 

implement the LMRDA’s reporting 

provisions. Section 208 also provides 

that the Secretary shall ‘‘establish 

simplified reports for labor 

organizations or employers for whom 

[s]he finds that by virtue of their size a 

detailed report would be unduly 

burdensome,’’ and to revoke this 

authorization to file simplified reports 

for any labor organization or employer 

if the Secretary determines, after such 

investigation as she deems proper and 

due notice and opportunity for a 

hearing, that the purposes of section 208 

would be served by revocation. 

Secretary’s Order 01–2008, issued May 

30, 2008, and published in the Federal 

Register on June 6, 2008 (73 FR 32424), 

contains the delegation of authority and 

assignment of responsibility for the 

Secretary’s functions under the LMRDA 

to the Assistant Secretary for 

Employment Standards and permits redelegation of such authority. 

II. Background 

A. Introduction 

The rescission of the January 21 rule 

is part of the Department’s continuing 

effort to fairly effectuate the reporting 

requirements of the LMRDA. The 

LMRDA’s various reporting provisions 

are designed to empower labor 

organizations and their members by 

providing the means and information to 

ensure a proper accounting of labor 

organization funds. The Department 

believes that a fair and transparent 

government regulatory regime must 

consider and balance the interests of 

labor organizations, their members, and 

the public. Any change to a union’s 

recordkeeping, accounting, and 

reporting practices must be based on a 

demonstrated and significant need for 

additional information, consideration of 

the burden associated with such 

reporting and any increased costs 

associated with reporting additional 

information. 

On January 21, 2009, OLMS 

published in the Federal Register (74 

FR 3678) a rule revising the Form LM– 

2 (used by the largest labor 

organizations to file their annual 

financial reports). The rule would 

require labor unions to report additional 

information on Schedules 3 (Sale of 

Investments and Fixed Assets), 4 

(Purchase of Investments and Fixed 

Assets), 11 (All Officers and 

Disbursements to Officers), and 12 

(Disbursement to Employees). The rule 

also would add itemization schedules 

corresponding to categories of receipts, 

and establish a procedure and standards 

by which the Secretary of Labor may 

revoke a particular labor organization’s 

authorization to file the simplified 

annual report, Form LM–3, where 

appropriate, after investigation, due 

notice, and opportunity for a hearing. 

The rule was scheduled to take effect on 

February 20, 2009, and apply to labor 

unions whose fiscal years began on or 

after July 1, 2009. 

Consistent with the memorandum of 

January 20, 2009, from the Assistant to 

the President and Chief of Staff, entitled 

‘‘Regulatory Review’’ and the 

memorandum of January 21, 2009, from 

the Director of the Office of 

Management and Budget (OMB), 

entitled ‘‘Implementation of 

Memorandum Concerning Regulatory 

Review,’’ on February 3, 2009, the 

Department’s Office of LaborManagement Standards (OLMS) 

published a request for comments (74 

FR 5899) on a proposed 60-day 

extension of the effective date of the 

January 21 rule and invited comment on 

legal and policy questions relating to the 

rule, including the merits of rescinding 

or retaining the rule. 

On February 20, 2009 (74 FR 7814), 

OLMS extended the effective date of the 

January 21 rule until April 21, 2009, to 

allow additional time for the 

Department to review questions of law 

and policy concerning the rule, for the 

public to comment on the merits of it, 

and, meanwhile, to permit unions to 

delay costly development and 

implementation of any necessary new 

accounting and recordkeeping systems 

and procedures pending this further 

consideration. On March 19, 2009 (74 

FR 11700), OLMS published a proposed 

rule to further extend the effective date 

until October 19, 2009 and to extend the 

applicability date until January 1, 2010. 

The Department published, on April 21, 

2009 (74 FR 18132), a final rule delaying 

the effective date until October 19, 2009, 

and the applicability date until January 

1, 2010. 

Upon consideration of the comments 

received on questions of law and policy 

raised by the January 21 rule, the 

Department proposed the rule’s 

withdrawal on April 21, 2009 (74 FR 

18172), because we were concerned that 

it may not have been informed by an 

adequate review of the Department’s 

experience under the relatively recent 

revisions to Form LM–2 in 2003, and 

because the comments indicated that 

the Department may have 

underestimated the increased burden 

that would be placed on reporting labor 

organizations by the January 21 rule. 

Finally, the Department concluded, 

based on the comments received, that 

the provisions related to the revocation 

of a small union’s authorization to file 

a simpler form because it has been 

delinquent or deficient in filing that 

form are not based upon realistic 

assessments of such a union’s ability to 

file the more complex form and are 

unlikely to achieve the intended goals of 

greater transparency and disclosure. 


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Federal Register / Vol. 74, No. 196 / Tuesday, October 13, 2009 / Rules and Regulations 52403 

The Department initially published 

the NPRM with a 30-day comment 

period to expire on May 21, 2009. 

However, in response to comments 

requesting extension of the comment 

period, the Department extended the 

comment period to June 22, 2009. 74 FR 

23811. 

This final rule addresses the 

comments received on the NPRM, and 

withdraws the January 21 rule. This rule 

takes effect upon publication, thereby 

relieving labor organizations from 

complying with the requirements of the 

January 21 rule and incurring the 

attendant burden of that rule. By 

withdrawing the January 21 rule, 

today’s rule operates to continue the 

Form LM–2 reporting requirements that 

have been in place since 2003. Delaying 

the effective date of today’s rule would 

not alter reporting obligations (given 

that no report would be due under the 

January 21 rule until the close of a fiscal 

year beginning on or after January 1, 

2010), but could confuse labor 

organizations about their reporting 

obligations, add unnecessary planning 

and recordkeeping burden on these 

organizations, and potentially delay the 

submission of Form LM–2 reports. 

B. The LMRDA’s Reporting 

Requirements 

In enacting the LMRDA in 1959, a 

bipartisan Congress sought to protect 

the rights and interests of employees, 

labor organizations and the public 

generally as they relate to the activities 

of labor organizations, employers, labor 

relations consultants, and their officers, 

employees, and representatives. The 

LMRDA was the direct outgrowth of a 

Congressional investigation conducted 

by the Select Committee on Improper 

Activities in the Labor or Management 

Field, commonly known as the 

McClellan Committee. The LMRDA 

addressed various ills through a set of 

integrated provisions aimed at labormanagement relations governance and 

management. These provisions include 

financial reporting and disclosure 

requirements for labor organizations, 

their officers and employees, employers, 

labor relations consultants, and surety 

companies. See 29 U.S.C. 431–36, 441. 

The Department has developed 

several forms for implementing the 

LMRDA’s union financial reporting 

requirements. The annual reports 

required by section 201(b) of the Act, 29 

U.S.C. 431(b) (Form LM–2, Form LM–3, 

and Form LM–4), contain information 

about a labor organization’s assets, 

liabilities, receipts, disbursements, 

loans to officers and employees and 

business enterprises, payments to each 

officer, and payments to each employee 

of the labor organization paid more than 

$10,000 during the fiscal year. The 

reporting detail required of labor 

organizations, as the Secretary has 

established by rule, varies depending on 

the amount of the labor organization’s 

annual receipts. 29 CFR 403.4. 

Forms LM–3 and LM–4 were 

developed by the Secretary to meet the 

LMRDA’s charge that she develop 

‘‘simplified reports for labor 

organizations and employers for whom 

[s]he finds by virtue of their size a 

detailed report would be unduly 

burdensome,’’ 29 U.S.C. 438. A labor 

organization not in trusteeship that has 

total annual receipts of less than 

$250,000 for its fiscal year may elect to 

file Form LM–3 instead of Form LM–2. 

See 29 CFR 403.4(a)(1). The Form LM– 

3 is a five-page document requiring 

labor organizations to provide 

particularized information by certain 

categories, but in less detail than Form 

LM–2. A labor organization not in 

trusteeship that has total annual receipts 

less than $10,000 for its fiscal year may 

elect to file Form LM–4 instead of Form 

LM–2 or Form LM–3. 29 CFR 

403.4(a)(2). The Form LM–4 is a twopage document that requires a labor 

organization to report only the total 

aggregate amounts of its assets, 

liabilities, receipts, disbursements, and 

payments to officers and employees. 

In 2003, the Department enacted 

extensive changes to the Form LM–2, 

the largest regulatory change to that 

form in the history of the LMRDA (2003 

rule, 68 FR 58374 (Oct. 9, 2003)). As a 

result of the changes, labor 

organizations with annual receipts of 

$250,000 or more are required to file a 

Form LM–2 report electronically and to 

itemize receipts and disbursements of 

$5,000 or more, as well as receipts not 

reported elsewhere from, or 

disbursements to, a single entity that 

total $5,000 or more in the reporting 

year. Such disbursements are required 

to be reported in specific categories 

such as ‘‘Representational Activities’’ 

and ‘‘Union Administration.’’ The 

changes eliminated a category entitled 

‘‘Other Disbursements’’ and, overall, 

sought much more detailed reporting. 

Labor organizations were permitted to 

report sensitive information for some 

categories that might harm legitimate 

union or privacy interests with other 

non-itemized receipts and 

disbursements, provided the labor 

organization indicated that it had done 

so and offered union members access to 

review the underlying data upon request 

pursuant to the statute (29 U.S.C. 431(c); 

29 CFR 403.8(b)). 

The 2003 rule also included 

schedules for reporting information 

regarding delinquent accounts payable 

and receivable, and it required labor 

organizations to report investments with 

a book value of over $5,000 that exceed 

5% or more of the union’s investments. 

Another new schedule required labor 

organizations to report the number of 

members by membership category, and 

allowed each labor organization to 

define the categories used for reporting. 

Finally, the 2003 rule required reporting 

labor organizations to estimate the 

proportion of each officer’s and 

employee’s time spent and the 

corresponding percentage of gross salary 

in each of the functional categories on 

the Form LM–2 and to report that 

percentage of gross salary in the relevant 

schedule. 

III. Rescission of the 2009 Changes to 

the Form LM–2 Reporting 

Requirements 

For the reasons discussed below, the 

Department withdraws the January 21 

rule. Its withdrawal, however, does not 

affect a labor union’s continuing 

obligation to file detailed annual 

financial disclosure reports, as 

prescribed by the 2003 rule for Form 

LM–2 filers, thereby ensuring disclosure 

of financial information to union 

members, the Department, and the 

public as required under the LMRDA. 

The Form LM–3 was not changed by the 

January 21 rule and the existing form, 

therefore, continues in effect. 

A. Background 

The January 21 rule modified Form 

LM–2 by requiring labor organizations 

to disclose additional information about 

their financial activities. On the revised 

form, labor organizations would provide 

additional information in Schedule 3 

(‘‘Sale of Investments and Fixed 

Assets’’) and Schedule 4 (‘‘Purchase of 

Investments and Fixed Assets’’), which 

the rule justified by stating that the 

changes would allow verification that 

these transactions were performed at 

arm’s length and without conflicts of 

interest. 74 FR at 3684–87. Schedules 11 

and 12 were also revised to require 

reporting of the value of benefits paid to 

and on behalf of officers and employees. 

74 FR at 3687–91. Labor organizations 

would report on Schedules 11 and 12 

travel reimbursements indirectly paid 

on behalf of labor organization officers 

and employees. 74 FR at 3687–88. The 

preamble to the rule stated that these 

changes would provide a more accurate 

picture of total compensation received 

by labor organization officers and 

employees. 74 FR at 3689. The Form 

LM–2 changes also included additional 

schedules corresponding to the 

following categories of receipts: Dues 


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52404 Federal Register / Vol. 74, No. 196 / Tuesday, October 13, 2009 / Rules and Regulations 

1The guidance identified the following factors to 

be considered in identifying rules that should be 

reviewed: (1) Whether the rulemaking process was 

procedurally adequate; (2) whether the rule 

reflected proper consideration of all the facts; (3) 

whether the rule reflected due consideration of the 

agency’s statutory or legal obligations; (4) whether 

the rule is based on a reasonable judgment about 

legally relevant policy considerations; (5) whether 

the rulemaking process was open and transparent; 

(6) whether objections to the rule were properly 

considered, including whether interested parties 

had fair opportunities to present contrary facts and 

arguments; (7) whether interested parties had the 

benefit of access to the facts, data, or other analyses 

on which the agency relied; and (8) whether the 

final rule found adequate support in the rulemaking 

record. 

2The Department disagrees that a review of the 

2003 changes is a necessary precursor to this final 

rule, as the rescission of the January 21 rule 

preserves the status quo for LM–2 filers and users 

of Form LM–2 information. This rule does not 

impose any additional reporting on labor unions, 

nor does it relieve labor unions from any reporting 

currently in effect. Similarly, the Department 

disagrees with the suggestion that the January 21 

rule should remain in place until a meaningful 

review of experience under the 2003 rule has been 

completed. The Department believes that a better 

course of action would be to conduct a meaningful 

review of the 2003 revisions as a first step in 

proposing any changes to the Form LM–2. In this 

manner, the Department would be able to articulate 

the need for any proposed changes, and the public 

would be able to comment on the Department’s 

review of the 2003 revisions at the same time as 

they comment on the proposed changes. Continuing 

to extend the effective and applicability dates of the 

rule would continue the uncertainty for all 

stakeholders. Labor organization members and the 

public would likely not know what information 

labor organizations were required to report and 

when that information would be available through 

DOL disclosure, and Form LM–2 reporting labor 

organizations would experience confusion with 

respect to their reporting requirements and any 

needed modifications to their recordkeeping and 

accounting systems. 

3The Department rejects the suggestion that the 

withdrawal of the January 21 rule will somehow 

affect any future judgment by the Department about 

any particular reporting requirement that now 

exists or may be proposed in the future. In this 

regard, the Department notes that some of the 

commenters on the proposed rescission of the 

January 21 rule have addressed particular aspects 

of that rule, identified particular benefits or 

problems with the rule, or suggested additional 

reporting requirements. The Department has not 

reached a determination on the merits of these 

contentions in deciding to withdraw the rule. These 

comments, along with the other information 

submitted in connection with the proposed 

rescission of the January 21 rule, will help inform 

any future rulemaking. 

and Agency Fees; Per Capita Tax; Fees, 

Fines, Assessments, Work Permits; Sales 

of Supplies; Interest; Dividends; Rents; 

On Behalf of Affiliates for Transmittal to 

Them; and From Members for 

Disbursement on Their Behalf. 74 FR at 

3691–93. These new schedules would 

require the reporting of additional 

information, by receipt category, of 

aggregated receipts of $5,000 or more. 

Id. 

B. Discussion of Comments and Reasons 

for Withdrawing the January 21 Rule 

In its NPRM proposing rescission of 

the changes to the Form LM–2, the 

Department justified its proposed 

rescission on two grounds. First, the 

additional reporting requirements were 

imposed without an adequate review of 

the Department’s experience under the 

relatively recent revisions to Form LM– 

2 in 2003, with the result that the 

Department may have underestimated 

the increased burden that would be 

placed on reporting labor organizations 

and overestimated the additional 

benefits to union members and the 

public of the increased data disclosures. 

74 FR 18173, 18175. Second, this failure 

to consider the utility of increased 

reporting and its attendant burdens may 

have resulted in a reporting regime that 

lacks the balance between the need for 

transparency in union financial 

reporting and the need to protect unions 

from excessive burdens attendant with 

such reporting, a result contrary to the 

purpose of the LMRDA. Id. After 

considering carefully the comments 

received on the proposal to withdraw 

the January 21 rule, the Department, for 

the reasons just mentioned and those 

discussed below, has concluded to 

withdraw the rule. 

The Department received comments 

from 27 individuals or entities on the 

proposed withdrawal of the January 21 

rule. Four unions and a federation of 

unions supported the withdrawal of the 

rule. The remaining 22 commenters 

opposed rescission, arguing that the rule 

should be allowed to take effect. Of this 

total, 18 were submitted by individuals, 

including nine form letters. An 

employer trade association, a business 

federation, two public policy groups, 

and a Congressman submitted 

comments. For discussion, the 

comments and the Department’s 

responses to them have been grouped as 

follows: the Department’s process for 

withdrawing the January 21 rule, the 

necessity to balance transparency with 

burden in setting reporting 

requirements, and the adequacy of the 

Department’s review of the 2003 Form 

LM–2 changes as a predicate to the 

January 21 rule. 

1. The Department’s Process for 

Withdrawing the January 21 Rule 

A few of the commenters asserted that 

the Department was mistaken in 

delaying the effective date of the 

January 21 rule and proposing its 

rescission. They asserted that the rule 

did not raise questions of law or policy 

of the nature contemplated by the 

instructions provided Executive Branch 

agencies. See memorandum of January 

20, 2009, from the Assistant to the 

President and Chief of Staff, entitled 

‘‘Regulatory Review’’ and the 

memorandum of January 21, 2009, from 

the Director of OMB, entitled 

‘‘Implementation of Memorandum 

Concerning Regulatory Review.’’ The 

Department disagrees. Agencies were 

directed to consider extending the 

effective date of regulations for the 

purpose of reviewing questions of law 

and policy raised by the regulations in 

question. Thus, on February 3, 2009, the 

Department published a request for 

comments (74 FR 5899) on a proposed 

60-day extension of the effective date of 

the January 21 rule, inviting comment 

on legal and policy questions relating to 

the rule, including the merits of 

rescinding or retaining the rule.1 To the 

extent these commenters may be 

suggesting that it should have been self 

evident that the January 21 rule did not 

pose any questions of policy or law 

warranting review, the Department 

disagrees. As noted in the Department’s 

proposal to withdraw the January 21 

rule, the rule presented issues 

warranting the delay of its effective date 

and ultimately its withdrawal. These 

issues, which are discussed at length 

below, rebut any contention that the 

rule’s further review by the Department 

was unwarranted. 

These same commenters assert that 

the Administrative Procedure Act, 5 

U.S.C. 551, (APA) effectively prevents 

the Department from lawfully 

withdrawing the January 21 rule. The 

commenters apparently believe that the 

Department may not withdraw the rule 

without first conducting a 

comprehensive study, including a new 

burden analysis in place of the analysis 

perceived as inadequate.2 A commenter 

suggested that the withdrawal of the 

rule operates as prejudgment of the 

requirements established by the 2009 

rule.3 One commenter asserted that the 

rulemaking record underlying the 

January 21 rule fails to support the 

conclusion that the Department, in 

promulgating that rule, was remiss in 

considering the benefits and burdens 

associated with that rule. As stated 

below, the Department holds the view, 

based on its consideration of the January 

21 rule and the rulemaking record, that 

the January 21 rule was promulgated 

without undertaking a comprehensive 

review of experience under the 2003 

rule. Given this material deficiency, the 

only logical option is to withdraw the 

January 21 rule. Any future proposals to 

change the reporting requirement would 

be shaped by such review of experience 

under the 2003 rule. The Department’s 

approach comports fully with the APA. 


CPrice-Sewell on DSKGBLS3C1PROD with RULES
Federal Register / Vol. 74, No. 196 / Tuesday, October 13, 2009 / Rules and Regulations 52405 

4The report also identified as a third principle 

the need to avoid imposing sanctions on the union 

or its members where officer conduct is at issue. 

This principle, like the two quoted, evidences a 

purpose of balance and restraint in regulating union 

affairs. 

2. The Necessity for a Balancing of 

Transparency With Burden 

The Department noted that a failure to 

consider adequately the utility of 

increased reporting and its attendant 

burdens on unions may result in 

reporting requirements at odds with the 

reporting regime intended by the 

Congressional authors of the LMRDA. 

The Department is obliged to ‘‘strike a 

balance between the dangers of too 

much and too little legislation in this 

field.’’ 105 Cong. Rec. 816 (daily ed. Jan. 

20, 1959) (quoting Senator John F. 

Kennedy), reprinted in 2 NLRB Leg. 

Hist. of the LMRDA, at 969. The 

Department pointed out that Congress 

expressed a preference that ‘‘the major 

recommendations of the [McClellan] 

select committee [be implemented] 

within a general philosophy of 

legislative restraint.’’ S. Rep. No. 187 

(1959), reprinted in 1 NLRB Leg. Hist. of 

the LMRDA, at 403). The Department 

further noted that the January 21 rule 

failed to take into account an imperative 

underlying the LMRDA, i.e., that 

restraint and great care must be taken in 

regulating union internal affairs so as 

not to undermine union self governance 

by union members. 74 FR at 18175. 

Finally, the Department noted that 

Congress expressed a preference to 

avoid impeding legitimate unionism, 

citing to remarks by Senator Frank 

Church (105 Cong. Rec. 6024 (daily ed. 

Apr. 25, 1959), reprinted in 2 NLRB Leg. 

Hist. of the LMRDA, at 1233), and by 

Senator John F. Kennedy, who observed 

that Congress intended ‘‘to permit 

responsible unionism to operate without 

being undermined by either racketeering 

tactics or bureaucratic controls.’’ 105 

Cong. Rec. 816 (daily ed. Jan. 20, 1959), 

reprinted in 2 NLRB Leg. Hist. of the 

LMRDA, at 969. 

Multiple commenters agreed that the 

Department has an obligation to balance 

the need for transparency with the need 

to protect unions from excessive 

burdens when implementing the 

LMRDA’s reporting and disclosure 

requirements. A federation of unions 

stated that the new provisions in the 

January 21 rule did not have any 

demonstrated utility that would justify 

their imposition, nor did the rule 

provide the information necessary to 

balance the competing interests. 

An international union stated that 

Congress gave the Secretary the 

discretion to prescribe the categories 

and details of the annual financial 

disclosure reports, in order to ensure 

that it properly maintains the balance 

Congress sought between transparency 

and not overburdening unions. The 

union asserted that Congress intended a 

balance, citing the right of members to 

examine the union’s books pursuant to 

section 201(c) of the Act. Further, it 

specifically expressed concern over the 

potential release of ‘‘trade secrets’’ to 

employers and management 

consultants, such as those related to job 

targeting, market recovery, and union 

organizing programs. The union also 

asserted that detailed reporting 

requirements are unnecessary because 

union members are sophisticated 

enough to seek information about union 

financial matters from their unions, as 

well as seek publicly available 

information, such as that provided by 

IRS. The union thus concluded that the 

January 21 rule failed to achieve the 

balance required by the LMRDA. 

Only two commenters who opposed 

the proposal to rescind the January 21 

rule specifically addressed the intent of 

Congress in this regard. One commenter, 

a trade association, rejected the 

Department’s conclusions on the need 

for balancing interests. Another 

commenter, a business federation 

acknowledged that the ‘‘Department is 

certainly obliged to consider the intent 

of Congress’’ but expressed its view that 

the January 21 rule ‘‘carefully 

considered the intent of Congress to 

‘strike a balance between too much and 

too little legislation in the field.’ ’’ 

Therefore, although the business 

federation disagreed with the 

Department regarding whether or not it 

conducted an adequate review of the 

2003 changes and whether it carefully 

considered congressional intent in 

drafting the regulations, it did not 

disagree with the Department’s 

conclusion that reporting requirements 

should reflect Congressional desire to 

‘‘strike a balance.’’ The trade association 

offered its view that Congress did not 

evidence an intent to strike a balance 

between too much and too little 

legislation in this field, but rather 

desired to establish union financial 

transparency, an object it believed to 

have been achieved by the January 21 

rule. The Department disagrees. As 

stated in the key Senate Report on the 

legislation that ultimately became the 

LMRDA: 

In acting on this bill, the committee 

followed [these] principles: 

1. The committee recognized the 

desirability of minimum interference by 

Government in the internal affairs of any 

private organization. Trade unions have 

made a commendable effort to correct 

internal abuses; hence the committee 

believes that only essential standards should 

be imposed by legislation. Moreover, in 

establishing and enforcing statutory 

standards great care should be taken not to 

undermine union self-government or weaken 

unions in their role as collective-bargaining 

agents. 

2. Given the maintenance of minimum 

democratic safeguards and detailed essential 

information about the union, the individual 

members are fully competent to regulate 

union affairs. The committee strongly 

opposes any attempt to prescribe detailed 

procedures and standards for the conduct of 

union business. Such paternalistic regulation 

would weaken rather than strengthen the 

labor movement; it would cross over into the 

area of trade union licensing and destroy 

union independence. 

S. Rep. No. 187, reprinted in 2 NLRB 

Leg. Hist. of the LMRDA, at 403.4

These principles (which are not 

referenced in the trade association’s 

comments) show an effort to strike a 

balance between regulation of union 

affairs and interference with such 

affairs, i.e., on the exercise of 

‘‘legislative restraint.’’ Further, there is 

nothing in the House Report, H. Rep. 

No. 741, reprinted in 1 NLRB Leg. Hist. 

of the LMRDA, at 759–33, or other 

legislative materials suggesting an 

alternative regulatory approach. 

Moreover, as a matter of policy, the 

Department believes that it should 

achieve the goal of transparency in 

union financial reporting without 

imposing unnecessary requirements. 

The Department acknowledges the 

commenter’s important observation that 

the Senate Report recognizes that ‘‘[t]he 

members who are the real owners of the 

money and property of the organization 

are entitled to a full accounting of all 

transactions involving their property’’ 

and ‘‘[t]his bill insures that full 

information’’ concerning the unions’ 

financial operations are ‘‘available to the 

members of such organizations.’’ S. Rep. 

No. 187, at 8, reprinted in 1 NLRB Leg. 

Hist. of the LMRDA, at 404 (emphasis 

added). At the same time, this statement 

in no way suggests that the Department 

was to achieve transparency in a way 

that would overburden unions with 

‘‘bureaucratic controls.’’ Congress 

provided the members an additional 

right through section 201(c) of the Act, 

which permits them to see the 

underlying documents of the submitted 

annual financial reports if they provide 

‘‘just cause.’’ 29 U.S.C. 431(c). The 

language of that section, which of 

necessity confers on members a right to 

receive information unavailable to 

others, logically imposes bounds on the 

information available to individuals and 

entities lacking that status. 


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In this regard, the Department agrees 

with the statement of an international 

union, which argued that Congress 

never intended that the annual reports 

designed by the Secretary should 

disclose to members, much less the 

general public, every ‘‘bit of probative 

financial information.’’ Rather, section 

201(c) of the Act exists to enable the 

members, and not the general public, to 

have access to their unions’ books if 

they can show ‘‘just cause.’’ The union 

cited decisions that illustrate that the 

‘‘just cause’’ requirement is nominal, 

and that it does ‘‘not pose any barrier to 

a union member’s honest inquiry into 

the supporting records [of the union].’’ 

Fruit & Vegetable Packers’ Local 760 v. 

Morley, 378 F.2d 738, 743 (9th Cir. 

1967). The union also asserted that 

Congress did not want management 

agents or consultants to unfairly take 

advantage of the financial disclosure 

requirements, relying on the remarks of 

Senator Javits on the justification for 

requiring union members to show good 

cause to examine the data underlying a 

union’s financial reports. See 105 Cong. 

Rec. 5853–54 (daily ed. Apr. 23, 1959), 

reprinted at 2 NLRB Leg. Hist. of the 

LMRDA, at 1127–28. The union stated 

that preventing public disclosure of 

certain areas of union finances does not 

deprive union members of this 

information, but it would prevent 

employers from exploiting this 

information in order to prevent workers 

from organizing or for the employers to 

otherwise engage in ‘‘union avoidance.’’ 

At the same time, the Department 

acknowledges, as pointed out by a trade 

association, that litigation, with the 

attendant costs of time and money, is 

sometimes necessary to obtain such 

information and that a union’s refusal to 

provide the information may not always 

be reasonable. Nonetheless, Congress 

established this procedure to protect the 

interests of both the union and its 

members and financial reporting cannot 

be justified on the basis that the 

protections embodied in section 201(c) 

may be trumped on the claim that the 

Department possesses unbounded 

authority under section 201 to require 

complete and unlimited disclosure of 

union financial information. 

3. Failure To Conduct a Meaningful 

Review of the 2003 Form LM–2 Changes 

Several commenters expressed 

support for withdrawing the January 21 

rule, agreeing with the Department’s 

observations in the NPRM that the rule 

was promulgated too soon after the 2003 

changes to the Form LM–2 reporting 

regime and without an adequate review 

of the benefits and costs of the changes. 

In support of the proposed rescission, a 

federation of unions stated that the 

Department had failed to properly 

consider the benefits and costs 

associated with such changes. It 

referenced earlier comments it had 

submitted, in which it stated the 

principle that a regulatory agency’s first 

obligation in establishing and improving 

financial accounting and reporting is ‘‘to 

determine that a proposed standard will 

fill a significant need and that costs 

imposed to meet that standard, as 

compared with other alternatives, are 

justified in relation to the overall 

benefits of the resulting information.’’ 

FASB, Statement of Financial 

Accounting Standards No. 117; 

Financial Statements of Not-for-Profit 

Organizations (June 1993) Section 38. In 

the federation’s view, the January 21 

rule failed this test. It asserted that the 

Department had ignored the experience 

under the 2003 rule in imposing 

additional reporting requirements; 

instead, it merely relied on the 

explanation it had offered in support of 

the 2003 rule. The federation explained 

that the 2003 rule imposed 

unprecedented itemization 

requirements on unions, necessarily 

requiring the Department at that time to 

make a speculative assessment of costs 

and benefits. However, it argued that 

this approach was an unacceptable 

substitute four years later when actual 

data and experience under the 2003 rule 

was available. Because itemization costs 

impose the principal recordkeeping and 

reporting burden on unions, it was 

imperative, in the federation’s opinion, 

to obtain information on such costs 

before imposing additional itemization 

requirements. With respect to the 

anticipated public benefit of the 

reporting imposed by the 2003 rule, the 

federation asserted that the 

Department’s own annual reports failed 

to show a significant increase in the 

number of enforcement actions—an 

expected outcome if the 2003 rule was 

fulfilling the objective of disclosing 

financial improprieties. Thus, it 

concluded that there was no basis for 

the Department’s assessment that 

additional reporting would achieve the 

benefits predicted. 

One international union recognized 

that the Department has collected 

‘‘vastly increased amounts of 

information’’ from unions since the 

2003 changes, but it has not conducted 

any empirical study of the costs or 

effects of those revisions. Further, the 

2003 changes contained significant 

‘‘start-up’’ costs, such as revising 

computer programs and accounting 

practices and training staff, which the 

union alleged cost millions of dollars for 

some unions, as well as more long-term 

costs regarding ongoing compliance. 

The union provided as an example the 

hundreds of additional pages that it 

filed in 2007 as opposed to 2004, the 

last year before the 2003 changes 

became effective. The 2007 report, in its 

view, was filled with ‘‘financial 

minutia’’ costly to track and without 

any purpose or benefit. Ultimately, it 

views the 2003 changes as ‘‘punitive 

and unnecessary.’’ The federation of 

unions and an international union 

explicitly supported the Department’s 

assertion that a review of the 

information received since 2003, as well 

as an examination of the data regarding 

burden since 2003, would provide a 

foundation on which the Department 

could determine whether or not 

additional changes are needed. One 

national union offered several 

suggestions for calculating the burden 

on unions following the 2003 rule and 

the January 21 rule. For example, it 

asserted that the Department should 

have considered the increased costs 

incurred by unions in using outside 

accountants as opposed to internal ones 

in complying with Form LM–2 

reporting, a practice that this national 

union and other large ones like it 

employ. 

Other commenters related concerns 

with regard to the burdens and benefits 

of the 2003 rule, and opined that such 

a review would reveal undue burden, 

and thus militate against any additional 

reporting requirements such as those 

imposed by the January 21 rule. These 

union commenters argued that the 

Department should rescind the January 

21 rule until it can accurately assess 

both the benefits and burdens of the 

2003 rule. One international union 

referred to the 2003 revisions as 

‘‘punitive and excessive’’ and urged the 

Department to examine their impact 

with a goal of significantly reducing the 

recordkeeping burden to a ‘‘more 

rational level, consistent with the 

LMRDA.’’ A national union stressed the 

‘‘onerous’’ burden that the 2003 rule 

created for it and its affiliates, in terms 

of economics and operations, and 

argued that any additional burdens 

imposed by the rule are not justified by 

any meaningful benefits, the existence 

of which it doubted. 

The remainder of the commenters 

opposed rescission of the January 21 

rule. Most emphasized the general 

importance of union financial reporting 

and disclosure requirements, some 

asserting that withdrawal of the rule ran 

counter to the President’s focus upon 

transparency. Six commenters opposed 

the rescission of the rule on substantive 

grounds. One individual, a retired union 


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5Armand J. Thieblot, Job Targeting and Market 

Recovery Practices of Construction Unions: Their 

Apparent and Hidden Costs (2008) (John M. Olin 

Institute for Employment Practice and Policy, 

George Mason University). Rescinding the January 

21 rule leaves in place the 2003 instructions 

concerning the reporting of expenses involved in 

job targeting. The Department takes no position on 

the observations and conclusions made by this 

author. It deserves mention, however, that this 

private study, which focuses primarily on only a 

small aspect of union financial reporting, involved 

considerable research and review of reporting data 

under the 2003 rule, including the review of a 

considerable number of Form LM–2s. (The study is 

not part of the January 21 rulemaking record, 

presumably because it was published after the close 

of the comment period for that rule). The author 

describes his research and explains his 

methodology and the reasoning in arriving at his 

conclusions. The study highlights the absence of 

anything comparable in the January 21 rule or its 

rulemaking record. 

associate member, argued in support of 

the January 21 rule. While commenting 

on the value of the reports submitted 

under the 2003 rule, he also expressed 

the view that the additional reporting by 

union officials would be beneficial to 

union members. Three commenters 

offered several recent examples of union 

corruption as support for the January 21 

rule. An employer trade association 

referenced several comments from 

individuals, including union members, 

who offered support for the January 21 

rule. The trade association emphasized 

its interest in disclosure of union job 

targeting expenditures. The trade 

association submitted a study as support 

for its view that unions significantly 

underreport the amount they spend on 

job targeting, a problem recognized and 

partially addressed by the January 21 

rule.5 In its view, the study also 

demonstrated that the 2003 rule 

required additional reporting 

requirements if union members were to 

be given a true picture of their unions’ 

financial health and its use of members’ 

funds, especially in reconciling 

membership and dues numbers. 

Another individual commenter 

opposing rescission of the January 21 

rule stressed the Department’s 

enforcement record (e.g., the number of 

indictments and convictions recorded) 

over the past eight years as a reason not 

to reduce the financial disclosure 

requirements and ‘‘weaken the 

government’s ability to fight’’ union 

corruption. A Congressman cited similar 

enforcement statistics and highlighted 

other aspects of the Department’s 

enforcement efforts. He also outlined 

arguments for the additional reporting 

obligations—to better understand officer 

and employee compensation by 

identifying benefits payable to 

particular individuals, to allow union 

members to see the travel and related 

expenses incurred by the union in 

connection with an individual’s travel 

and lodging, the itemization of receipts 

received by unions in excess of $5,000, 

and the names and other information 

about the purchase and sale of union 

assets. He also relied on a 1999 

legislative report (as did another 

commenter) as support for the 

requirement to disclose all payments 

made to particular union officials. 

Subcomm. on Oversight and Inv. of the 

Comm. on Education and the 

Workforce, Report on the Financial 

Operating and Political Affairs of the 

International Brotherhood of Teamsters 

(1999). The Congressman also 

summarized the steps taken by the 

Department in revising its burden 

estimates, concluding that the estimate 

reflected the most accurate data 

available to create a fair and accurate 

representation of the compliance costs 

associated with the January 21 rule. 

The Department disagrees that 

rescinding the rule will weaken the 

agency’s ability to fight fraud and 

embezzlement. The Department has not 

carefully reviewed the potential 

deterrent effect, if any, associated with 

the 2003 revisions to the Form LM–2, 

and there is no support in the 

rulemaking record for drawing a 

reasonable inference about the probable 

impact of the additional reporting 

requirements prescribed by the January 

21 rule. Indeed, the prior eight-year 

period of 1993–2000 actually yielded 

slightly higher results than the eightyear period of 2001–2008, with 1,193 

indictments and 1,159 convictions. The 

year 2000 totals, 204 indictments and 

191 convictions, are higher than any of 

the yearly totals from 2001–2008. 

Moreover, these results all derive from 

a period prior to the 2003 changes to the 

Form LM–2. In making this point, 

however, the Department does not 

suggest that previous versions of the 

Form LM–2 were more effective tools in 

fighting union corruption, or that there 

is a link between any specific Form LM– 

2 data and the overall rate of fraud and 

embezzlement. These figures are offered 

solely to show that there is an 

insufficient record to justify increases or 

reductions in reporting form data 

collection by reference to changes in 

enforcement statistics. 

In particular, there has been no 

review as to whether the 2003 changes 

resulted in increased indictments or 

convictions; improved compliance; 

offered members information needed for 

self-governance, accountability or fiscal 

management; or otherwise aided the 

Department or the public in exposing 

union fraud or corruption. The 

Department concurs with commenters 

who have suggested that before moving 

forward with the additional reporting 

requirements imposed by the 2009 final 

rule, it should have engaged in a 

meaningful review to assess the 

benefits, effectiveness, and usefulness of 

the 2003 changes. The lack of such a 

review justifies today’s rescission of the 

January 21 rule. 

The Department fully recognizes and 

supports the importance of union 

reporting and disclosure to the union 

members and to the public, but it also 

believes that the LMRDA requires a 

balancing of transparency with the need 

to maintain union autonomy without 

overburdening unions with reporting 

requirements. The Form LM–2, as 

established by the January 21 rule, did 

not adequately consider this balance. In 

this regard, the Department does not 

believe that this necessary balancing is 

possible without a review of the 2003 

changes to the Form LM–2, which the 

rulemaking process that culminated in 

the January 21 rule did not undertake. 

The commenters did not provide any 

contrary reasoning. 

In proposing rescission of the January 

21 rule, the Department stated that it 

was a mistake to propose further 

changes to the Form LM–2 reporting 

requirements so soon after the 2003 rule 

without proper consideration of the 

effects of these changes. Without 

undertaking such review, the 

Department could not adequately weigh 

the merits of the increased disclosure 

against the associated burdens on the 

union filers. 74 FR 18175. As there 

stated, the Department recognized that 

the January 21 rule did not adequately 

consider the effects of the 2003 changes, 

particularly regarding the assumed 

benefits of the changes. The January 21 

rule did not adequately show that the 

2003 changes either succeeded or failed 

in achieving their intended purpose. 

Further, the Department explained that 

additional review of the post-2003 

reporting history would be beneficial 

before deciding that additional 

regulatory changes would facilitate 

these purposes. Additionally, the 

Department recognized that financial 

transparency is necessary to protect 

against union fraud and corruption, 

enhance accountability among union 

officials, and that it is necessary for 

members to effectively engage in union 

self-governance. However, it also noted 

that a review of the usefulness of the 

information that has been reported since 

the Form LM–2 was revised in 2003, as 

well as the burden placed on unions by 

that revision, would provide a better 

basis for determining whether 

additional changes are necessary than 

the unverified assumptions underlying 

the January 21 rule. This review would 


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6Although the rulemaking record contains 

support for the various examples used to illustrate 

a concern about a particular aspect of Form LM–2 

reporting, the record does not allow an inference to 

be drawn about the frequency at which the 

circumstances described occur. 

permit the Department to properly 

balance the need for transparency with 

the need to protect unions from 

excessive burdens imposed by reporting 

and disclosure requirements. 

In contrast to the Department’s 

assessment that no meaningful review of 

prior Form LM–2 changes had been 

undertaken in connection with the 

January 21 rule, one commenter 

expressed the view that the rule reflects 

a ‘‘well reasoned culmination to eight 

years of solid work’’, while another 

characterized it as a product of the 

‘‘expertise’’ of Department officials and 

others in identifying and reviewing 

areas of the Form LM–2 that could be 

improved. A business federation stated 

that the rule is supported by comments 

that verified the assumptions 

underlying the 2003 burden estimates 

and that the Department had made 

significant changes to improve the 

methodology for estimating burden and 

improve the accuracy of its burden 

estimates. 

After carefully considering the 

competing points of view among the 

commenters, the Department continues 

to hold the opinion that the Department 

failed to conduct an adequate analysis 

of the effects of the 2003 Form LM–2 

revisions before it developed the 

additional reporting requirements 

adopted in the January 21 rule. 

Although the Department justified the 

January 21 rule, in part, on experience 

under the 2003 rule, see 74 FR 3681–82, 

that experience was neither documented 

not comprehensively analyzed. The 

informal, anecdotal information on 

which the Department relied was 

simply inadequate for the task. It was no 

substitute for a more comprehensive 

review such as, for example, a survey of 

all Department investigators or a 

documented review of the thousands of 

filings received by Department under 

the 2003 rule. See 74 FR at 3681 

(referring to ‘‘opportunity to review 

thousands of forms and to tap the 

experience gained by its staff in 

investigating Form LM–2 issues and 

from their dialogue with union officials 

and union members while providing 

Form LM–2 compliance assistance to 

them’’); 74 FR 3684 (citing to ‘‘OLMS 

experience over years of auditing and 

investigating union financial 

activities’’). While such experience is 

valid, it is a poor substitute for a 

comprehensive review of experience 

under the 2003 rule.6 It is the 

Department’s opinion that, as a matter 

of policy, the regulated community and 

the public should have the benefit of the 

Department’s best analysis of its 

regulatory experience before it proposes 

to place additional burdens on unions. 

Despite ‘‘the benefit of three cycles of 

reviewing forms,’’ the Department did 

not undertake a comprehensive review 

of the 2003 changes, and it did not 

provide any assessment in the January 

21 rule of benefits obtained from such 

changes. 74 FR 3681. Instead, it merely 

provided arguments as to why further 

reporting changes were needed, rather 

than addressing the impact of the 

previous changes in terms of benefits 

and burdens. See 74 FR 3681–84. 

The Department attempted to partially 

account for the absence of appropriate 

review by characterizing the January 21 

rule as ‘‘incremental’’ reform to the 

Form LM–2. 74 FR at 3681. Indeed, the 

2008 NPRM proposing the January 21 

rule stated that the 2003 changes to the 

Form LM–2 ‘‘helped to fulfill the 

LMRDA’s reporting mandate.’’ 73 FR 

27348. However, the NPRM provided no 

indication that this conclusion was 

based on a comprehensive review of 

experience under the 2003 rule. Only 

when the Department has engaged in 

such review can it determine if 

‘‘incremental’’ changes to the 2003 Form 

LM–2 reporting regime, such as those 

implemented in the January 21 rule, are 

justified in light of the need to balance 

competing interests. While increased 

disclosure provides beneficial 

information to members, it is by no 

means clear that such benefits outweigh 

the institutional cost to unions and the 

members themselves by disclosing 

information, in some instances 

comparable to trade secrets, to the 

general public. Thus, a review of 

experience under the 2003 rule should 

include an assessment of the burden 

that such increased reporting imposes 

on unions, not merely in terms of cost 

but also in terms of its impact on the 

unions’ ability to represent its members. 

Yet the January 21 rule fails altogether 

to account for this cost to unions and 

their members. The Department, 

therefore, disagrees with the business 

federation’s assertion that the 

Department evidenced ‘‘a meaningful 

and adequate review’’ in its January 21 

rulemaking. A general reference in the 

preamble to the January 21 rule—to ‘‘the 

benefit of three cycles of reviewing 

forms * * * to assess the utility of the 

form and to identify areas in which 

improvement was needed’’—falls short 

of a meaningful review of the benefits of 

the form to the reader or the burden to 

the filer. Such analysis simply cannot be 

completed within the four corners of the 

filed reports. 

The same commenter asserted that the 

Department in revising its initial burden 

estimates for the January 21 rule had 

taken into account ‘‘actual costs and 

data that were identified by labor 

organizations in their comments and 

other data sources.’’ On the contrary, the 

Department expressly rejected the 

concept of using actual post-2003 costs. 

See 74 FR 3703. In the burden analysis 

to the January 21 rule, the Department 

conceded that ‘‘after considering the 

comments regarding actual costs 

associated with the LM–2 revision in 

2003, the Department has decided to 

retain the approach adopted in the 

NPRM and use the costs estimates 

developed in 2003 as a baseline for the 

costs associated with this [2009] 

revision.’’ 74 FR 3703 (emphasis added). 

A Congressman, commenting on this 

issue, acknowledged that ‘‘the 2009 

burden estimates were based on 2003 

estimates which were applied to actual 

data taken from 2007 Form LM–2s.’’ 

The business federation asserted that 

the Department provided for comment 

its 2006 publication of its paperwork 

burden package in the Federal Register, 

and that no comments were received 

from any union or anyone else 

indicating that there were any problems 

or issues with the Department’s 2003 

burden hour estimates or the 

methodology used to calculate those 

estimates (OMB ICR Reference No. 

200609–1215–016). In the Department’s 

view, the absence of comments does not 

excuse the failure to undertake a proper 

review of reporting burdens. The 

Department believes that there is a need 

for a meaningful review of the 

consequences of the 2003 changes, a 

review that has not yet been performed, 

and such a review is necessary to 

determine the actual benefits and 

burdens of the 2003 changes. 

In the course of this rulemaking, the 

Department received comments from 

labor organizations regarding burden 

issues that merit review. Even though 

such comments would be helpful in 

gauging the 2003 rule’s impact on union 

members, information from a much 

larger sample of union members would 

be needed to provide a reasonable 

benchmark for considering changes in 

the reporting regimen. Review of such 

experience, among other lines of 

inquiry, might include the effects of the 

2003 changes in such areas as the 

detection, prosecution, and deterrence 

of fraud and corruption; compliance 

assistance; the aiding of members in 

exercising their rights to view additional 

materials under section 201(c); the 

support of members in utilizing their 


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rights under the trusteeship, election, 

and other provisions of the LMRDA in 

furthering union accountability, fiscal 

management, and self-governance; the 

provision to the public of tools that 

advance labor-management 

transparency and union democracy; or 

in ascertaining the actual, as opposed to 

estimated, costs to unions in reshaping 

and maintaining their recordkeeping 

and accounting systems to comply with 

the 2003 changes. Therefore, the 

Department does not know the extent to 

which the need of union members and 

the public for transparency has been 

met by the 2003 rule, or whether the 

rule appropriately balances that need for 

transparency without overburdening 

unions. 

The failure to conduct appropriate 

review as a predicate for the new 

reporting requirements in the January 21 

rule is compounded by the weaknesses 

in the 2003 data that was used to 

estimate the compliance burden. A 

national union asserted, based on its 

experience, that the 2003 burden 

estimates were ‘‘grossly 

underestimated.’’ This union estimates 

that the 2003 rule resulted in a 40–45% 

increase in its initial compliance costs, 

which were substantially larger than the 

Department’s estimates in 2003, and the 

union offered similar data for its annual 

cost to comply with the 2003 changes, 

which it alleges are also multiple times 

higher than the Department’s estimates. 

The commenter expressed fear that 

these errors led to equally erroneous 

calculations in the January 21 rule. As 

an example, the union states that the 

itemization for interest and dividends 

will result in substantially greater costs 

than estimated, because its accounting 

system does not maintain information 

on payment sources, payment amounts, 

payment dates, or payment purposes. 

The Department agrees with the 

comments that the Department, in 

fashioning the January 21 rule, 

effectively overlooked the problem of 

relying on the necessarily speculative 

estimates for costs associated with the 

itemization of substantial 

disbursements, as required by the 2003 

rule. In crafting that rule, the 

Department had no real cost experience 

to draw on in making the estimates. 

Indeed, as the Department’s own 

explanation makes plain, see 74 FR at 

3704–05, the Department had to 

substantially revise its own estimates of 

the burden associated with the 2003 

rule, based on comments it received 

from labor organizations. 

The Department agrees with a 

national union’s comments regarding 

the necessity to review the post-2003 

data in terms of the perceived benefits 

of the 2003 changes in such areas as 

protecting unions against fraud and 

corruption, assisting the Department in 

enforcing compliance, and providing 

meaningful information to union 

members so they can engage in selfgovernance. The union asserted that no 

evidence exists as to whether those 

objectives have been met by the 2003 

changes. It shared its own experience 

under the 2003 rule: no instances of 

fraud or embezzlement have been 

uncovered; the new schedules have had 

no impact on the governance of the 

union; and no questions or issues 

related to the information reported on 

the new schedules have been raised by 

any member of the union, as evidenced 

by a review of correspondence from the 

members to the union’s president, as 

well as member meetings attended by 

the president. As noted above, these 

issues need to be considered in 

reviewing the costs and benefits 

associated with the 2003 rule and that 

such review is a necessary predicate to 

any proposal to revise the 2003 

reporting requirements. 

For the reasons articulated above, the 

Department disagrees with a business 

federation’s defense of the process and 

conclusions leading up to the January 

21 rule, suggesting that the review was 

adequate and that at best the proposed 

rescission was merely a ‘‘policy 

disagreement’’ with the past 

Administration. Regardless of whether 

the Department agrees or disagrees with 

the January 21 rule, the rescission is 

based primarily on the Department’s 

failure to undertake meaningful review 

of experience under the 2003 rule, 

including the benefits and burdens 

associated with the rule, leaving the 

Department unable to assess whether 

the reporting requirements achieve the 

balance intended by Congress. 

A public policy group requested the 

Department to engage in a burden 

analysis, viewing the absence of a new 

burden analysis for the January 21 rule 

as fatal to the proposed rescission of 

that rule. Such analysis is not required 

for this action, as the Department is not 

proposing any changes to the existing 

Form LM–2 but, rather, is rescinding the 

changes made on January 21, 2009. 

Additionally, the Department 

disagrees with the contention of a 

commenter that it was an improper use 

of government resources to engage in 

further rulemaking on the Form LM–2. 

The Department believes that resources 

spent on rescinding a poorly-justified 

rule are well-spent. Moreover, the 

burden on the public and the 

Department from permitting the January 

21 rule to go into effect far outweigh the 

costs of rescinding them. 

The Department’s current view is that 

before implementing additional 

financial reporting requirements, a more 

comprehensive review of the experience 

under the 2003 rule should have been 

completed, along with engagement in a 

meaningful dialogue with labor unions 

and public policy groups interested in 

union financial reporting. The parties 

with a particular interest in financial 

reporting should be able to fully 

understand the Department’s support 

for its proposals and, as appropriate, to 

comment on its sufficiency as 

rulemaking begins. In promoting 

transparency and accountability— 

purposes served by the disclosure and 

reporting provisions of the LMRDA—the 

Department must share with the public 

all the information it relies on in 

support of a proposed rule change. 

IV. Rescission of the Procedure To 

Revoke the Form LM–3 Filing 

Authorization 

A. Background 

The January 21 rule established 

standards and procedures for revoking 

the simplified report filing authorization 

provided by 29 CFR 403.4(a)(1) for those 

labor organizations that are delinquent 

in their Form LM–3 filing obligation, 

fail to cure a materially deficient Form 

LM–3 report after notification by OLMS, 

or where other situations exist where 

revoking the Form LM–3 filing 

authorization furthers the purposes of 

LMRDA section 208. 

Under the revocation procedure, 

where there appear to be grounds for 

revoking a labor organization’s 

authorization to file the Form LM–3, the 

Department could conduct an 

investigation to confirm the facts 

relating to the delinquency or other 

possible basis for revocation. If the 

Department after investigation finds 

grounds for revocation, the Department 

could send the labor organization a 

notice of the proposed Form LM–3 

revocation stating the reason for the 

proposed revocation and explaining that 

revocation, if ordered, would require the 

labor organization to file the more 

detailed Form LM–2. The letter would 

provide notice that the labor 

organization has the right to a hearing 

if it chooses to challenge the proposed 

revocation, and that the hearing would 

be limited to written submissions due 

within 30 days of the date of the notice. 

In its written submission, the labor 

organization would be required to 

present relevant facts and arguments 

that address whether (1) the report was 

delinquent or deficient or other grounds 

for the proposed revocation exist; (2) the 

deficiency, if any, was material; (3) the 


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circumstances concerning the 

delinquency or other grounds for the 

proposed revocation were caused by 

factors reasonably outside the control of 

the labor organization; and (4) any 

factors exist that mitigate against 

revocation. 

After review of the labor 

organization’s submission, the Secretary 

would issue a written determination, 

stating the reasons for the 

determination, and, as appropriate 

based on neutral criteria, inform the 

labor organization that it is required to 

file the Form LM–2 for such reporting 

periods as she finds appropriate. 

B. Reasons for Rescission of the 

Revocation Standards and Procedure 

In proposing to rescind the Form LM– 

3 standards and procedure for 

revocation, the Department justified its 

proposal on two grounds. First, the 

Department stated that the January 21 

rule did not adequately assess the 

burden placed on smaller labor 

organizations by the standards and 

revocation procedure. The Department 

also stated its belief that, in light of that 

burden, there was no realistic likelihood 

that the standards and procedure would 

accomplish the intended results of 

increased transparency and more 

disclosure. The Department explained 

that there is no realistic likelihood that 

most small unions would have the 

information or means to file the more 

detailed Form LM–2. 74 FR 18176–77. 

Second, the Department explained, as 

discussed above, that the LMRDA 

requires a balancing of transparency and 

union autonomy, a balance that the 

January 21 rule failed to achieve. Id. 

After having considered the 

comments received on this issue, the 

Department remains of the view that the 

standards and procedure for revocation 

should be withdrawn. As discussed 

below, the January 21 rule predicted 

that less than 100 labor unions per year 

would suffer revocation. Nevertheless, 

many times this number of unions 

would be drawn into the process, 

requiring the expenditure of time and 

effort without any demonstrated 

showing that Form LM–3 filers subject 

to revocation will be able to properly 

file a Form LM–2. Furthermore, as 

discussed below, the Act requires a 

balancing of transparency and union 

autonomy, and the January 21 rule did 

not take this mandate into account in 

formulating the standards for revocation 

(i.e., delinquency or deficiency in filing, 

which it argued indicated a greater need 

for transparency, as those unions were 

more likely to experience financial 

corruption). There is nothing in the 

preamble to establish what percentage 

of filers delay their filings or file 

incomplete reports for ‘‘benign,’’ as 

distinct from more culpable reasons, 

and nothing to suggest that a significant 

number of filers delay their filings or 

submit incomplete reports because they 

have reason to conceal financial 

information. For these reasons, the 

Department is not persuaded that the 

approach crafted in the January 21 rule 

ensures the required balance or is likely 

to improve compliance. Instead, this 

approach seems less likely to achieve 

compliance than establishing 

cooperative arrangements between the 

Department and national/international 

unions to assist smaller unions with 

fulfilling their reporting obligations 

The January 21 rule establishing the 

standards and procedure for revocation 

stated that unions that are deficient or 

delinquent in their Form LM–3 filings 

are more likely to experience financial 

corruption and, therefore, are in greater 

need of increased financial transparency 

through Form LM–2 reporting. 74 FR at 

3697. However, as stated in the April 21 

NPRM, the Department reevaluated the 

efficacy of the standards and procedure 

in achieving this end. 74 FR at 18176– 

77. In coming to this view, the 

Department determined that the January 

21 rule did not adequately assess the 

burden on smaller unions in filing a 

Form LM–2 report and, therefore, 

misjudged the effectiveness of the 

revocation as a means to increase 

transparency. As stated in the proposal 

to rescind the January 21 rule, the 

revocation provisions of the rule are 

counter-intuitive and the rule fails to 

demonstrate that Form LM–3 filers 

required to file the more detailed and 

complicated Form LM–2 reports are 

likely to submit timely, complete, and 

accurate Form LM–2 reports. 74 FR at 

18176. Moreover, the Department stated 

that there was insufficient support in 

the rule for the conclusion that 

revocation will reduce delinquency and 

deficiencies in reporting. Id. 

As explained in the NPRM, the 

January 21 rule projected that 96 filers 

would be required to file the Form LM– 

2 and calculated the associated burden 

on that projection. This burden is 

necessarily understated due to the fact 

that some associated burden applies to 

all Form LM–3 filers, not merely those 

whose right to file a Form LM–3 is 

revoked. In order to file a Form LM–2, 

steps must be taken at the start of the 

fiscal year. Accounting systems and 

procedures must be in place that will 

track and maintain the data required by 

the Form LM–2. Therefore, as explained 

in the NPRM, the Department 

concluded that there is no realistic 

likelihood that most small unions 

would have the information or the 

means to file the more detailed Form 

LM–2, and that the revocation standards 

and procedure established by the rule 

will be unlikely to result in more 

disclosure. Id. 

As stated in the NPRM, the 

Department agreed with comments that 

had previously been submitted that 

advocated a compliance assistance 

approach, particularly one drawing 

upon the cooperative efforts of national 

and international unions, rather than a 

revocation procedure. As stated in the 

NPRM, a revocation procedure is not 

likely to improve delinquency and 

deficiencies in Form LM–3 reporting, 

and it could actually contribute to 

continuing non-compliance since filers 

may have greater difficulty successfully 

meeting the Form LM–2 reporting 

requirements. The Department 

explained that a compliance assistance 

approach is more likely to increase 

proper reporting than a revocation 

approach that is counter-intuitive and 

likely to damage compliance assistance 

efforts. Id. 

In response to the NPRM, four union 

commenters expressed specific support 

for the Department’s proposal to rescind 

the revocation standards and procedure. 

A federation of unions stated that with 

outreach and compliance assistance, it 

would be a rare event that a small union 

would not comply with its Form LM–3 

filing obligation, noting that in such 

instances it would be appropriate to use 

the enforcement mechanism provided 

by the LMRDA. The federation also 

referenced its earlier comments where it 

stated ‘‘[t]here is no reason to believe 

that a small labor organization that was 

not set up to fil[e] a timely or complete 

Form LM–2 report would be able to 

meet the enormous burden of 

retroactively adjusting its accounting 

system in a manner sufficient to file 

Form LM–2 reports.’’ 

A national union offered specific 

evidence in support of the notion that 

smaller unions would not be able to file 

the Form LM–2, and it noted that the 

retroactive nature of the revocation 

procedure particularly impacted Form 

LM–3 filers. This union also felt that the 

‘‘enormous financial strain’’ that 

revocation would cause could lead to 

further compliance problems, and it 

therefore stressed compliance assistance 

in its place. An international union 

expressed similar concerns, noting that 

Form LM–2 preparation requires 

electronic accounting and the 

professional assistance that will not be 

available to small unions. Another 

union concurred with the view 

expressed in the NPRM that the 

Department did not adequately consider 


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the burden on smaller unions to file the 

Form LM–2 in place of the Form LM– 

3, and went further to propose that the 

Department consider raising the 

threshold for Form LM–2 filers from the 

current $250,000 in annual receipts due 

to the burden on smaller unions. 

Finally, an international union agreed 

that the revocation is unlikely to 

achieve its intended goals, and instead 

promoted the idea of devoting the 

Department’s resources to education of 

the regulated community. 

The Department received three 

comments that specifically opposed the 

proposal to rescind the Form LM–3 

revocation standards and procedure. 

Only one commenter, a business 

federation, addressed the Department’s 

concerns, as outlined in the NPRM, that 

the January 21 rule failed to adequately 

assess the burden the procedure would 

impose on the smaller labor 

organizations and the likelihood that, in 

light of that burden, the rule would 

accomplish the intended results of 

increased transparency and more 

disclosure. This commenter argued that 

the rulemaking record illustrated that 

smaller unions could file the Form LM– 

2, and cited Form LM–3 filers who 

ordinarily have less than $250,000 in 

annual receipts, but due to the sale of 

an asset or other reason, finish a fiscal 

year with greater than $250,000 in 

receipts and, therefore, must file a Form 

LM–2 report. The business federation 

also cited unions in trusteeship, for 

which a Form LM–2 must be filed on 

their behalf, regardless of the annual 

receipts of the union in trusteeship. 

Additionally, this commenter 

challenged the NPRM’s reference to the 

‘‘counter-intuitive’’ nature of the 

revocation procedure, explaining its 

view that the approach outlined in the 

January 21 rule was a sensible one that 

augmented other enforcement tools such 

as criminal enforcement and voluntary 

compliance. 

The Department disagrees with those 

commenters questioning the NPRM’s 

conclusions pertaining to the burden on 

smaller unions. The Department 

continues to believe that revocation is 

unlikely to result in the increased 

transparency and greater disclosure 

intended by the January 21 rule in view 

of the Form LM–2 burden it places on 

Form LM–3 filers. Initially, the 

Department notes that its argument is 

not that all Form LM–3 filers are unable 

to file a Form LM–2, but that those that 

do not properly or timely file a Form 

LM–3 are not likely to properly or 

timely file a Form LM–2, particularly 

given the retroactive nature of the 

revocation procedure, as several 

commenters noted. The Department 

finds the revocation procedure’s steps of 

notification and voluntary cooperation 

only reinforce this notion, as unions 

that have difficulty properly filing a 

Form LM–3 are unlikely to properly 

submit a written statement contesting 

the revocation of the Form LM–3 filing 

authorization and unions that do not 

properly file a Form LM–3 after these 

efforts would seem less likely to 

properly file a Form LM–2. 

Moreover, assuming that the 

revocation procedure is a tool available 

to the Department to address delinquent 

and deficient reporting, the problem 

remains that the revocation procedure is 

a poorly designed, burdensome method 

of resolving this problem. In fact, the 

stated goal of the revocation standards 

and procedure was to increase 

transparency in unions with reporting 

deficiencies and delinquencies, which 

the January 21 rule concluded were in 

need of greater disclosure. However, the 

Department, on its review of the rule, 

does not believe that increased 

transparency is likely through the 

revocation provisions, because it is 

unreasonable to expect delinquent and 

deficient Form LM–3 filers to properly 

and timely file the more complicated 

Form LM–2. No commenter adequately 

refuted this assertion. 

In response to comments referencing 

those Form LM–3 filers that, under the 

2003 rule and certain conditions, must 

file a Form LM–2 report, the Department 

stresses the statutory distinction 

between the requirement for the 

Secretary to establish simplified reports 

for certain smaller unions and the 

discretionary authority to revoke such 

authorization for simplified reports 

under certain conditions. The fact that 

some Form LM–3 filers during 

occasional fiscal years are required to 

alter their reporting procedures and file 

a Form LM–2 does not negate the fact 

that the burden placed on Form LM–3 

filers by revocation makes the goal of 

increased transparency unlikely to be 

met. Indeed, as commenters have 

attested, their experience demonstrates 

that even smaller Form LM–2 filers, 

those only marginally exceeding the 

$250,000 filing threshold, have a great 

deal of difficulty meeting their 

requirements, thus justifying the 

mandate for simplified forms for smaller 

unions. Further, the Department 

recognizes that nonexistent records 

cannot be created retroactively. In this 

regard, the Department notes that 

section 206 of the Act, 29 U.S.C. 436, 

requires ‘‘[e]very person required to file 

any report under this title’’ to ‘‘maintain 

records on the matters required to be 

reported which will provide in 

sufficient detail the necessary basic 

information and data from which the 

documents filed with the Secretary may 

be verified * * *.’’ (emphasis added). 

Therefore, each person required to file 

a report under LMRDA Title II must 

keep sufficient records for the matters 

required to be reported in the particular 

report that such person must file. Thus, 

a Form LM–3 filer would not ordinarily 

be required to maintain records 

sufficient to complete a Form LM–2 

report, and only acquires such an 

obligation upon reaching $250,000 in 

annual receipts for a given fiscal year. 

Moreover, the union that places the 

subordinate union in trusteeship is 

obliged to file the Form LM–2, not the 

union placed in trusteeship. The trustee 

union, which generally will be larger 

than the union in trusteeship, likely will 

possess the experience, resources and 

information necessary to file a Form 

LM–2. 

In its NPRM proposing the rescission 

of the January 21 rule, the Department 

also defended its proposal to withdraw 

the revocation standards and procedure 

by arguing that the LMRDA requires a 

balancing of transparency and union 

autonomy, a balance that the January 21 

rule failed to achieve. All three of the 

commenters opposing rescission of the 

standards and procedure, asserted, in 

essence, that the Secretary possesses 

‘‘clear and unambiguous’’ authority 

under section 208 to establish the 

revocation procedure. Two of these 

commenters contend that section 208 is 

self-operative, asserting that the 

Secretary retains the authority to revoke 

the simpler filing authorization even if 

the rule is rescinded. According to their 

view, the regulations merely ‘‘flesh[] 

out’’ the necessary procedures to 

implement the existing authority. As 

explained by one of commenters, the 

language of section 206 of the LMRDA 

(requiring covered unions to maintain 

records underlying required reports) 

prevents the Department from finding 

that ‘‘there is no realistic likelihood that 

most small unions would have the 

information’’ necessary to complete the 

Form LM–2. 

The Department is not persuaded that 

section 208 is self-operating. As the 

commenters themselves point out, 

section 208 contemplates that the 

Department follow required procedures, 

the details of which are not prescribed. 

Thus, it is necessary for the Department 

to establish procedures as a condition 

for rescinding a filer’s authorization to 

file a Form LM–3. In proposing 

rescission, the Department noted both 

that section 208 specifically mandates 

that the Secretary must issue simplified 

reports for labor organizations for which 

she finds that ‘‘by virtue of their size a 


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detailed report would be unduly 

burdensome,’’ and that she is permitted 

to revoke such filing authorization if 

‘‘the purposes of this section would be 

served thereby.’’ Therefore, consistent 

with the language of section 208 and the 

required balance between disclosure 

and unnecessary burden, the 

‘‘purposes’’ of section 208 must include 

ensuring that a more detailed report for 

a smaller union would not be ‘‘unduly 

burdensome’’ by virtue of its size. 

The third commenter opposing 

rescission also addressed the Secretary’s 

authority under section 208. This 

commenter stressed the ‘‘unambiguous 

authority’’ granted to the Secretary and 

argued that section 208 thus does not 

require the Department to ‘‘balance’’ the 

need for financial transparency with 

burden. Further, the commenter 

emphasized that revocation was just one 

‘‘tool’’ that the Secretary has to ensure 

compliance with the statute, and that 

the ‘‘purpose’’ of the section is 

preventing the ‘‘circumvention or 

evasion’’ of the Act’s reporting 

requirements, not ensuring that the 

requirements are not unduly 

burdensome. The Department rejects 

these arguments, as it notes that section 

208 grants the Secretary authority to 

rescind only if she determines that the 

‘‘purposes’’ of the section would be 

served. The Department maintains that 

section 208 explicitly intends, among 

other purposes, that smaller labor 

organizations should not be subject to 

‘‘unduly burdensome’’ reporting 

requirements. 

Section 208 requires the Department 

to properly balance the size of the union 

and its burden to file the Form LM–2 

with the need of greater transparency for 

that union. An international union 

asserted that revoking the Form LM–3 

filing authorization for smaller unions 

merely because of delinquency or 

deficiency in their Form LM–3 reporting 

is ‘‘overkill,’’ constituting ‘‘collective 

punishment.’’ As such, it asserted that 

the Department had failed to properly 

balance these concerns, noting that the 

rule failed even as a ‘‘prophylactic’’ 

means to detect a ‘‘lack of sophistication 

and awareness’’ or ‘‘the rare instances’’ 

of financial corruption. The union 

stated that the root causes of delinquent 

and deficient reporting are ‘‘honest 

mistakes’’ and other ‘‘benign reasons’’ 

such as ‘‘over-worked, under-trained, 

part-time, officials often lacking both 

technical expertise in union 

administration and any institutional 

knowledge base from which to draw,’’ 

and not ‘‘the rare instances’’ of financial 

corruption. An international union 

predicted that if small unions were 

required to file the Form LM–2 local 

officials likely would quit their 

positions. 

The Department concurs with these 

assertions, as it does not believe that the 

purpose of balancing the need for 

transparency without overburdening 

smaller unions is met by standards for 

revocation (delinquency or deficiency in 

reporting) that are so sweeping in 

nature, i.e., revoking the Form LM–3 

filing authorization for potentially any 

delinquent or deficient smaller unions, 

even though most are not plagued by 

financial corruption. The standards 

established by the January 21 rule 

potentially increase the filing burden for 

all Form LM–3 filers, a result that is not 

justified by the ‘‘relatively benign’’ (see 

the January 21 rule at 74 FR 3696) 

causes of most delinquent or deficient 

reporting. Therefore, they do not 

properly balance the size of the unions 

and reporting burden with the need for 

greater transparency for such smaller 

unions. Indeed, for those unions that are 

delinquent or deficient in their filing as 

a result of ‘‘relatively benign’’ reasons, 

there is no justification for more 

stringent reporting requirements. 

Additionally, instead of risking the 

loss of union officials who may quit 

rather than assume the burden 

associated with the revocation 

procedure, an international union urged 

the Department to address the root 

causes of delinquent reporting by 

educating smaller unions. The union 

noted that where education and 

voluntary compliance efforts are 

unsuccessful, criminal investigations 

and prosecutions are effective tools to 

address financial corruption in smaller 

unions. The Department agrees with 

these comments. As stated in the 

proposal to rescind the January 21 rule, 

the Department, as a matter of policy, 

does ‘‘not intend to encourage or 

discourage the participation of union 

members from running and serving in 

union office, nor does it otherwise 

desire to unnecessarily interfere in the 

internal affairs of unions.’’ 74 FR at 

18176–77. The Department further 

stated that it intends to implement the 

LMRDA with as little interference as 

possible, with an overarching goal of 

empowering members to govern their 

unions democratically. It also addressed 

other possibly detrimental 

consequences of the revocation 

procedure, such as the diversion of 

union officials from grievance handling 

and other core business, and stated its 

view that revocation cannot be justified 

by merely lessening or downplaying the 

acknowledged increased burden 

imposed by the Form LM–2 reporting 

requirements. Id. Compliance assistance 

is a vital aspect of this approach, as are 

audit and enforcement options, and 

both are better approaches than a 

revocation procedure that is viewed as 

punitive to Form LM–3 filers. The 

unions commented that criminal 

investigations and prosecutions are 

better used in addressing financial 

corruption in smaller unions. The 

Department agrees that the selective use 

of criminal investigation and 

enforcement is preferable to the 

approach in the January 21 rule because 

it is doubtful that the Department will 

discover embezzlements and other 

corruption through revocation (which 

theoretically would result in the filing 

of a Form LM–2), since the procedure is 

unlikely to result in increased reporting. 

Finally, the Department disagrees 

with the commenter that suggested that, 

even if the revocation procedure is now 

deemed to be overly burdensome, the 

Department should not rescind the rule 

without first establishing a replacement 

procedure. In its view, section 208 

requires the Department to have a 

published revocation procedure 

available in case it is needed. The 

commenter stated that if the Department 

is dissatisfied with the procedure in the 

rule, it should have proposed a 

procedure based on a ‘‘realistic 

assessment’’ of the ability of smaller 

unions to complete a Form LM–2, with 

the goal of preventing the 

circumvention or evasion of section 208. 

The Department believes that, for the 

reasons stated above, the revocation 

procedure and standards established by 

the regulations are flawed and, 

therefore, rescinds them. The 

Department retains the authority under 

section 208 to propose a new revocation 

procedure and standards, based upon a 

necessary balancing of transparency 

with union autonomy as required by the 

section and the Act, if it decides that 

such an action is necessary and 

appropriate. 

V. Regulatory Procedures 

Executive Order 12866 

This rule is considered to be a 

significant regulatory action within the 

meaning of Executive Order 12866, and 

was submitted to OMB for review before 

publication, because the proposed rule 

may raise novel legal or policy issues 

arising out of legal mandates, the 

President’s priorities, or the principles 

set forth in Executive Order 12866. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act of 

1980, 5 U.S.C. 601 et seq., requires 

agencies to prepare regulatory flexibility 

analyses, and to develop alternatives 

wherever possible, in drafting 


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regulations that will have a significant 

impact on a substantial number of small 

entities. The Department does not 

believe that this rule will have a 

significant economic impact on a 

substantial number of small entities, as 

the rule relieves the additional burden 

imposed upon labor organizations 

through the rescission of the regulations 

published on January 21, 2009. 

Therefore, a regulatory flexibility 

analysis under the Regulatory 

Flexibility Act is not required. The 

Secretary has certified this conclusion 

to the Chief Counsel for Advocacy of the 

Small Business Administration. 

Unfunded Mandates Reform 

This rule will not include any Federal 

mandate that may result in increased 

expenditures by State, local, and tribal 

governments, in the aggregate, of $100 

million or more, or in increased 

expenditures by the private sector of 

$100 million or more. 

Paperwork Reduction Act 

This rule contains no new 

information collection requirements for 

purposes of the Paperwork Reduction 

Act of 1995 (PRA) (44 U.S.C. 3501 et 

seq.). If the January 21 rule had gone 

into effect, it would have increased the 

burden of reporting under OMB No. 

1215–0188. Under the January 21 rule, 

the total burden hours per Form LM–2 

respondent would have increased by 

approximately 60.06 hours, and the total 

burden hours would have increased by 

274,539. The average cost per Form LM– 

2 respondent would have been 

increased by $1,939 and the total cost 

would have increased by $8,863,038. 

Since this rule rescinds the January 21 

rule, the increases in reporting burden 

under OMB No. 1215–0188 will not 

occur. The Department will seek OMB 

approval of any revisions of the existing 

information collection requirements, in 

accordance with the PRA. 

Small Business Regulatory Enforcement 

Fairness Act of 1996 

This rule is not a major rule as 

defined by section 804 of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996, 5 U.S.C. 804. This 

rule will not result in an annual effect 

on the economy of $100,000,000 or 

more; a major increase in costs or prices; 

or significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or on the 

ability of the United States-based 

companies to compete with foreignbased companies in domestic and 

export markets. 

List of Subjects in 29 CFR Part 403 

Labor unions, Reporting and 

recordkeeping requirements. 

■ For the reasons set forth in the 

preamble, the Final Rule published 

January 21, 2009 amending 29 CFR parts 

403 and 408 (74 FR 3678), for which the 

effective date was delayed on February 

20, 2009 (74 FR 7814) and April 21, 

2009 (74 FR 18132) is withdrawn. 

Signed in Washington, DC, this 7th day of 

October 2009. 

Shelby Hallmark, 

Acting Assistant Secretary for Employment 

Standards. 

John Lund, 

Deputy Assistant Secretary for LaborManagement Programs. 

[FR Doc. E9–24571 Filed 10–9–09; 8:45 am] 

BILLING CODE 4510–CP–P 

DEPARTMENT OF HOMELAND 

SECURITY 

Coast Guard 

33 CFR Parts 155 and 157; 46 CFR Part 

162 

[Docket No. USCG–2004–18939] 

RIN 1625–AA90 

Pollution Prevention Equipment 

AGENCY: Coast Guard, DHS. 

ACTION: Final rule. 

SUMMARY: The Coast Guard is finalizing 

its January 16, 2009, interim rule 

establishing oil pollution prevention 

equipment requirements with one minor 

amendment to the rule’s effective date 

for vessels with equipment installed on 

or after January 1, 2005. The rule 

harmonizes Coast Guard regulations 

with new International Maritime 

Organization (IMO) guidelines and 

specifications issued under the 

International Convention for the 

Prevention of Pollution from Ships 

(MARPOL) Annex I. It implements these 

MARPOL Annex I regulations and, 

ultimately, is intended to reduce the 

amount of oil discharged from vessels 

and eliminate the use of ozonedepleting solvents in equipment tests. 

All vessels replacing or installing oilywater separators and bilge alarms must 

install equipment that meets these 

revised standards. Newly constructed 

vessels carrying oil in bulk must install 

monitoring systems that meet the 

revised standards. 

DATES: This final rule is effective 

November 12, 2009, except that 

paragraphs 33 CFR 155.350(a)(3), 

155.360(a)(2), and 155.370(a)(4) are 

effective October 13, 2009. The 

incorporation by reference of certain 

publications listed in the rule is 

approved by the Director of the Federal 

Register on November 12, 2009. 

ADDRESSES: Comments and material 

received from the public, as well as 

documents mentioned in this preamble 

as being available in the docket, are part 

of docket USCG–2004–18939 and are 

available for inspection or copying at 

the Docket Management Facility (M–30), 

U.S. Department of Transportation, 

West Building Ground Floor, Room 

W12–140, 1200 New Jersey Avenue SE., 

Washington, DC 20590, between 9 a.m. 

and 5 p.m., Monday through Friday, 

except Federal holidays. You may also 

find this docket on the Internet by going 

to http://www.regulations.gov, inserting 

USCG–2004–18939 in the ‘‘Keyword’’ 

box, and then clicking ‘‘Search.’’ 

FOR FURTHER INFORMATION CONTACT: If 

you have questions on this rule, call or 

email Mr. Wayne Lundy, Systems 

Engineering Division (CG–5213), Office 

of Design and Engineering Standards, 

U.S. Coast Guard, telephone 202–372– 

1379, e-mail Wayne.M.Lundy@uscg.mil. 

If you have questions on viewing the 

docket, call Renee V. Wright, Program 

Manager, Docket Operations, telephone 

202–366–9826. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Abbreviations 

II. Regulatory History 

III. Background and Purpose 

IV. Discussion of Comments and Changes 

V. Incorporation by Reference 

VI. Regulatory Analyses 

A. Regulatory Planning and Review 

B. Small Entities 

C. Assistance for Small Entities 

D. Collection of Information 

E. Federalism 

F. Unfunded Mandates Reform Act 

G. Taking of Private Property 

H. Civil Justice Reform 

I. Protection of Children 

J. Indian Tribal Governments 

K. Energy Effects 

L. Technical Standards 

M. Environment 

I. Abbreviations 

CFR Code of Federal Regulations 

DHS Department of Homeland Security 

FR Federal Register 

IMO International Maritime Organization 

IOPP International Oil Pollution Prevention 

ISO International Organization for 

Standardization 

MARPOL International Convention for the 

Prevention of Pollution from Ships 

MEPC Marine Environment Protection 

Committee 

NEPA National Environmental Policy Act 

NPRM Notice of Proposed Rulemaking 

NTTAA National Technology Transfer and 

Advancement Act 


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