[Federal Register Volume 72, Number 126 (Monday, July 2, 2007)]
[Rules and Regulations]
[Pages 36106-36190]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 07-3155]



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Part II





Department of Labor





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Office of Labor-Management Standards



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29 CFR Part 404



 Labor Organization Officer and Employee Report, Form LM-30; Final Rule

Federal Register / Vol. 72, No. 126 / Monday, July 2, 2007 / Rules 
and Regulations

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DEPARTMENT OF LABOR

Office of Labor-Management Standards

29 CFR Part 404

RIN 1215-AB49


Labor Organization Officer and Employee Report, Form LM-30

AGENCY: Office of Labor-Management Standards, Employment Standards 
Administration, Department of Labor.

ACTION: Final rule.

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SUMMARY: The Employment Standards Administration's (``ESA'') Office of 
Labor-Management Standards (``OLMS'') of the Department of Labor 
(``Department'') publishes this Final Rule to revise the Form LM-30, 
Labor Organization Officer and Employee Report, its instructions, and 
related provisions in the Department's regulations. The Form LM-30 
implements section 202 of the Labor-Management Reporting and Disclosure 
Act of 1959 (``LMRDA'' or ``Act''), 29 U.S.C. 432, whose purpose is to 
require officers and employees of labor organizations to report 
specified financial transactions and holdings to effect public 
disclosure of any possible conflicts between their personal financial 
interests and their duty to the labor union and its members. This rule 
clarifies the Form LM-30 and its instructions by explaining key terms 
and providing examples of the financial matters that must be reported, 
eliminates or modifies administrative exceptions in the old Form LM-30 
that impeded the full disclosure of financial matters that constitute 
conflicts, or potential conflicts, of interest, and improves the 
usability of the reports by union members and the public.

DATES: Effective Date: This rule will be effective August 16, 2007.

FOR FURTHER INFORMATION CONTACT: Kay H. Oshel, Director, Office of 
Policy, Reports, and Disclosure, Office of Labor-Management Standards, 
U.S. Department of Labor, 200 Constitution Avenue, NW., Room N-5609, 
Washington, DC 20210, <a href="/cdn-cgi/l/email-protection#3c5350514f114c495e50555f7c585350125b534a"><span class="__cf_email__" data-cfemail="8ae5e6e7f9a7faffe8e6e3e9caeee5e6a4ede5fc">[email protected]</span></a>, (202) 693-1233 (this is not 
a toll-free number). Individuals with hearing impairments may call 1-
800-877-8339 (TTY/TDD).

SUPPLEMENTARY INFORMATION: An outline of this information and a note 
regarding the references to statutory provisions in this document 
follow:

Table of Contents

I. Background
    A. Statutory Authority
    B. Departmental Authorization
    C. Background to and Overview of Rule
    1. The Reasons for Today's Revisions of the Form LM-30
    2. Legislative History
II. Discussion of Comments Received on Proposed Rule and 
Department's Response
    A. Why the Changes to the Form Are Needed Now
    B. Why the Department Is Not Presently Requiring Unions To 
Notify Their Officers and Employees (``Officials'') About Their 
Annual Reporting Obligations
    C. Why the De Minimis Exemption From Reporting Insubstantial 
Gifts and Other Financial Benefits Has Been Simplified and Subjected 
to a $250 Limit, With an Exclusion for Gifts Valued at $20 or Less 
and Certain Widely-Attended Gatherings
    D. Why Reporting Exceptions Permitted Under the Old Rule Have 
Been Eliminated or Modified To Provide More Information to Union 
Members
    1. Regular Course of Business Exception
    2. Bona Fide Employee Exception for Transactions With an 
Employer Whose Employees the Official's Union Represents or Is 
Actively Seeking To Represent
    3. Exception for Bona Fide Loans or Interest From a Banking 
Institution
    4. Exceptions Relating to Stocks
    5. Revision of Special Report Language
    E. Why Union Officials, as a General Rule, Must Report Payments 
Received as Members of a Company's Board of Directors
    F. Why Officers of International, National, and Intermediate 
Labor Unions, in Addition to Their Obligation to Report Payments and 
Other Financial Benefits Received From Businesses and Employers That 
Have a Direct Relationship With the Component of the Union to Which 
They are Elected or Appointed, Must Also Report Payments and Other 
Financial Benefits Received From Businesses and Employers Whose 
Relationship is With a Subordinate Body of Their Union
    G. Why Union Officials Must Report Payments Under Union--Leave 
and No-Docking Practices Subject to an Exception for Payments of 250 
Hours or Less Per Year Made in Accordance with a Collective 
Bargaining Agreement
    H. What Payments and Other Financial Benefits, Received From an 
Employer or Business Whose Employees are not Represented by the 
Union and Which Does Not Conduct Business With the Official's Union, 
Must be Reported
    I. When is a Union ``Actively Seeking To Represent'' Employees, 
Thereby Triggering a Union Official's Obligation To Report Payments 
and Other Financial Benefits Received From the Employer That is the 
Subject of the Organizing Drive
    J. How Union Officials Will Determine Whether an Entity From 
Which They Receive a Payment or Other Financial Benefit Does a ``A 
Substantial Part'' of its Business With an Employer Whose Employees 
are Represented by the Official's Union or the Union it is Actively 
Seeking to Represent
    K. Why Payments and Other Financial Benefits Received From 
Section 3(l) Trusts and Service Providers to Such Trusts Must Be 
Reported
    1. Alleged Procedural Shortcoming
    2. Routine Exceptions
    3. Relationship With Other Statutes
    4. Trusts as Employers and Businesses
    L. When Payments and Other Financial Benefits Received From a 
Union Other Than an Official's Own Union Must be Reported
    M. How the Proposed Definitions Have Been Clarified To Ease a 
Filer's Completion of the Form LM-30
    1. Definitions Adopted by Today's Rule
    2. Other Issues Related to Definitions
    N. Details Relating To Proposed and Revised Form and 
Instructions
    1. Comparison of the ``Old'' and Proposed Forms
    2. Comments on Proposed Form
    3. Completion of the Revised Form
III. Regulatory Procedures
    A. Executive Order 12866
    B. Small Business Regulatory Enforcement Fairness Act
    C. Unfunded Mandates Reform
    D. Executive Order 13132 (Federalism)
    E. Regulatory Flexibility Act
    F. Paperwork Reduction Act
    G. Executive Order 13045 (Protection of Children From 
Environmental Health Risks and Safety Risks)
    H. Executive Order 13175 (Consultation and Coordination With 
Indian Tribal Governments)
    I. Executive Order 12630 (Governmental Actions and Interference 
With Constitutionally Protected Property Rights)
    J. Executive Order 12988 (Civil Justice Reform)
    K. Environmental Impact Assessment
    L. Executive Order 13211 (Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use)
IV. Text of Final Rule

Appendix

    Note: Throughout this document, the Department refers to various 
statutory provisions as ``section ----.'' All such references, 
unless otherwise noted, are to Title 29 of the U.S. Code. Further, 
unless otherwise noted, all the sections are part of the Labor-
Management Reporting and Disclosure Act of 1959, which is set forth 
in Chapter 11 of Title 29, 29 U.S.C. 401-531. Following is a list of 
the most frequently cited LMRDA provisions in this document with 
corresponding citations to the U.S. Code: section 3(l), 29 U.S.C. 
402(l); 201, 29 U.S.C. 431; section 202, 29 U.S.C. 432; and section 
203, 29 U.S.C. 433. The only other provision of the U.S. Code 
frequently referred to in the document by the section number in the 
public law in which it was enacted is ``section 302(c),'' a 
reference to a provision of the Labor Management Relations Act, as 
amended, 29 U.S.C. 141-188. A reference to

[[Page 36107]]

section 302(c), 29 U.S.C. 186(c), appears in the text of section 
202(a)(6) of the LMRDA, 29 U.S.C. 432(a)(6).

I. Background

A. Statutory Authority

    Section 208 of the LMRDA states in part:

    The [Department] shall have authority to issue, amend and 
rescind rules and regulations prescribing the form and publication 
of reports required to be filed under this title and such other 
reasonable rules and regulations (including rules prescribing 
reports concerning trusts in which a labor organization is 
interested) as he may find necessary to prevent the circumvention or 
evasion of such reporting requirements.

    29 U.S.C. 438. Today's rule prescribes the disclosure form required 
to be filed by a union officer or employee if such an official, his or 
her spouse, or minor child hold an interest in or receive payments from 
certain entities. The reporting requirements are contained in section 
202, which provides in its entirety:

    Sec.  202. (a) Every officer of a labor organization and every 
employee of a labor organization (other than an employee performing 
exclusively clerical or custodial services) shall file with the 
Secretary a signed report listing and describing for his preceding 
fiscal year--
    (1) Any stock, bond, security, or other interest, legal or 
equitable, which he or his spouse or minor child directly or 
indirectly held in, and any income or any other benefit with 
monetary value (including reimbursed expenses) which he or his 
spouse or minor child derived directly or indirectly from, an 
employer whose employees such labor organization represents or is 
actively seeking to represent, except payments and other benefits 
received as a bona fide employee of such employer;
    (2) Any transaction in which he or his spouse or minor child 
engaged, directly or indirectly, involving any stock, bond, 
security, or loan to or from, or other legal or equitable interest 
in the business of an employer whose employees such labor 
organization represents or is actively seeking to represent;
    (3) Any stock, bond, security, or other interest, legal or 
equitable, which he or his spouse or minor child directly or 
indirectly held in, and any income or any other benefit with 
monetary value (including reimbursed expenses) which he or his 
spouse or minor child directly or indirectly derived from, any 
business a substantial part of which consists of buying from, 
selling or leasing to, or otherwise dealing with, the business of an 
employer whose employees such labor organization represents or is 
actively seeking to represent;
    (4) Any stock, bond, security, or other interest, legal or 
equitable, which he or his spouse or minor child directly or 
indirectly held in, and any income or any other benefit with 
monetary value (including reimbursed expenses) which he or his 
spouse or minor child directly or indirectly derived from, a 
business any part of which consists of buying from, or selling or 
leasing directly or indirectly to, or otherwise dealing with such 
labor organization;
    (5) Any direct or indirect business transaction or arrangement 
between him or his spouse or minor child and any employer whose 
employees his organization represents or is actively seeking to 
represent, except work performed and payments and benefits received 
as a bona fide employee of such employer and except purchases and 
sales of goods or services in the regular course of business at 
prices generally available to any employee of such employer; and
    (6) Any payment of money or other thing of value (including 
reimbursed expenses) which he or his spouse or minor child received 
directly or indirectly from any employer or any person who acts as a 
labor relations consultant to an employer, except payments of the 
kinds referred to in section 302(c) of the Labor Management 
Relations Act, 1947, as amended.
    (b) The provisions of paragraphs (1), (2), (3), (4), and (5) of 
subsection (a) shall not be construed to require any such officer or 
employee to report his bona fide investments in securities traded on 
a securities exchange registered as a national securities exchange 
under the Securities Exchange Act of 1934, in shares in an 
investment company registered under the Investment Company Act or in 
securities of a public utility holding company registered under the 
Public Utility Holding Company Act of 1935, or to report any income 
derived therefrom.
    (c) Nothing contained in this section shall be construed to 
require any officer or employee of a labor organization to file a 
report under subsection (a) unless he or his spouse or minor child 
holds or has held an interest, has received income or any other 
benefit with monetary value or a loan, or has engaged in a 
transaction described therein.

B. Departmental Authorization

    Section 208 of the Act, 29 U.S.C. 438, provides that the Secretary 
of Labor shall have the authority to issue, amend, and rescind rules 
and regulations prescribing the form and publication of reports 
required to be filed under Title II of the Act and such other 
reasonable rules and regulations as she may find necessary to prevent 
the circumvention or evasion of the reporting requirements. Secretary's 
Order 4-2007, issued May 2, 2007, and published in the Federal Register 
on May 8, 2007 (72 FR 26159), contains the delegation of authority and 
assignment of responsibility of the Secretary's functions under the 
LMRDA to the Assistant Secretary for Employment Standards and permits 
the redelegation of such authority.

C. Background to and Overview of Rule

    In today's rule, the Department revises the Form LM-30, Labor 
Organization Officer and Employee Report based on its review of public 
comments received in response to its Notice of Proposed Rulemaking 
(``NPRM''), 70 FR 51166 (Aug. 29, 2005). The Form LM-30 is used by 
officers and employees of labor organizations subject to the LMRDA. 
Section 202 of the Act requires public disclosure of certain financial 
interests held, income received, and transactions engaged in by labor 
organization officers and employees (generally referred to herein as 
``union officials'' or ``officials'') and their spouses and minor 
children. Subject to exclusions, these interests, incomes, and 
transactions include:
    1. Payments or benefits from, or interests in, an employer whose 
employees the filer's union represents or is actively seeking to 
represent;
    2. Transactions involving interests in, or loans to or from, an 
employer whose employees the filer's union represents or is actively 
seeking to represent;
    3. Interests in, income from, or transactions with a business a 
substantial part of which consists of dealing with an employer whose 
employees the filer's union represents or is actively seeking to 
represent;
    4. Interests in, income from, or transactions with a business that 
deals with the filer's union or a trust in which the filer's union is 
interested;
    5. Transactions or arrangements with an employer whose employees 
the filer's union represents or is actively seeking to represent; and
    6. Payments from an employer or labor relations consultant to an 
employer.

As sometimes used herein, the short-hand phrase ``payments or other 
financial interests'' or its equivalent is used to refer to the various 
payments, transactions, arrangements and other monetary and financial 
interests that must be reported. Payments, as a general rule, include 
gifts, gratuities, restaurant meals, and entertainment.
    The Form LM-30 must be filed annually by a union officer or 
employee (other than those solely engaged in performing clerical or 
custodial duties) if the official, the official's spouse, or minor 
child (or children) receives a payment or other financial interest from 
a business or employer in connection with certain activities, 
identified in section 202. Section 202's disclosure obligations for 
union officials (as embodied in the Form LM-30) are an integral part of 
the Act's reporting structure. The Act requires annual reports by 
unions as ``institutions'' under section 201 (Forms LM-2, LM-3, and LM-
4), by employers, who must

[[Page 36108]]

report payments to unions and their representatives under section 203 
(Form LM-10), and by unions for trusts in which they have an interest 
(``section 3(l) trusts,'' a reference to section 3(l) of the Act 
defining such trusts) under sections 201 and 208 (Form T-1).
    In the NPRM the Department invited comment with respect to the 
benefits of the proposed changes, the ease or difficulty with which 
union officials would be able to comply with these changes, and whether 
the changes would be meaningful, useful, and in accord with the LMRDA 
disclosure purposes. The initial 60-day comment period provided for in 
the NPRM was subsequently extended to January 26, 2006. 70 FR 61400 
(Oct. 24, 2005). The Department received over 1,000 comments. Of these 
comments about 50 were unique; the rest were form letters. Almost 300 
of the comments were from unions or union members, most of whom were 
critical of all or parts of the proposal; about 700 were from 
individuals who generally supported the proposal, about 25 were from 
business or trade organizations, who expressed diverse views on the 
proposal; about 10 were from law firms, on their own behalf or their 
clients, who mostly opposed the proposal; two were from benefit fund 
administrators, who opposed the proposal; and one was from an academic 
who reported on his limited study of the reactions of union officials 
to the proposed form and instructions from which he concluded these 
documents needed substantial improvement. Over 280 of the union 
commenters were members of one local. In their form letters, they urged 
rejection of the rule ``in its entirety.'' They characterized the 
proposed requirements as ``frivolous.'' They asserted that the existing 
form was adequate to ensure ``due diligence'' by union officials, 
adding that the proposed union-leave and no-docking requirements would 
turn shop stewards into accountants because of the duty to ``calculate 
their time.'' Of the individuals supporting the proposal, the 
Department received about 660 form letters. These individuals asserted 
that such reforms were long overdue, noting that under the current form 
it is difficult to determine when a report is required and that the 
proposed form's inclusion of clear definitions and examples would 
improve reporting.
    The historically low filing rates during the years preceding the 
initiation of this rulemaking process demonstrated substantial non-
compliance with the Act. The Department recognized that its own 
compliance assistance efforts in this area needed improvement and thus 
it has retargeted its resources to educate the affected community about 
the Form LM-30 reporting obligation and to increase its enforcement 
efforts. At the same time as the Department was working on the proposed 
rule, it announced an initiative to improve Form LM-30 compliance. As 
part of this effort, the Department substantially augmented its 
published guidance to Form LM-30 filers, primarily by posting 
information on OLMS Web pages and by further disseminating this 
information by notifying subscribers to its free, automated list serve. 
On April 25, 2005, the Department announced a special enforcement 
policy under which new Form LM-30 filers, absent extraordinary 
circumstances, would not have to submit reports for prior years, even 
if such reports should have been filed. Specifically, the Department 
advised the regulated community that it would not require a new filer 
to submit reports covering the same financial interest for any prior 
years absent extraordinary circumstances. To take advantage of this 
grace period, the new filer had to submit his or her initial report 
voluntarily during a ``grace period,'' which ended August 15, 2005. 
With the substantial voluntary assistance of the AFL-CIO and other 
labor organizations to educate union officials about their reporting 
obligations, the Department experienced a large upsurge in the number 
of Form LM-30 filings over historical levels. To help union officials 
better understand their filing obligations, the Department proposed to 
change the instructions to the old form by defining and explaining key 
concepts and terms used by the statute and the form, and providing 
examples of situations where reporting is required. The Department also 
proposed to redesign the reporting format to better assist filers and 
improve the utility of the collected information to union members, the 
Department, and the general public. Following its review of the 
comments and taking into account the Department's recent Form LM-30 
filing experience--as requested by some commenters, the Department 
remains convinced that this approach is sound and therefore today's 
rule preserves the overall approach outlined in the NPRM. At the same 
time, the comments were helpful in reconsidering some aspects of the 
rule and improving the content of the instructions and the form. The 
Department has revised the layout of the form. Instead of the 
subsection-by-subsection approach in the proposed form and instructions 
that parallels the structure of section 202 and its subsections (i.e., 
sections 202(a)(1) through 202(a)(6)), the rule organizes the form and 
instructions by the source of the reportable payment to a union 
official. Thus, the form lists the types of employer relationships that 
trigger a reporting requirement and the types of business relationships 
that trigger a reporting requirement. The instructions identify the 
types of payments and other financial interests that must be reported 
by a union official if received from an employer, differentiating 
between payments received from an employer whose employees the filer's 
union represents or is actively seeking to represent and those received 
from certain other employers. The instructions also identify the types 
of payments that must be reported if received from businesses that 
maintain business dealings with the official's union, a trust in which 
the official's union is interested, or certain employers. In the NPRM, 
the Department requested comment on whether labor organizations should 
be required to notify their officers and employees of their Form LM-30 
reporting obligations. After review of the comments and the number of 
recent filers, the Department has decided to not require unions at this 
time to provide such notification to their officials.
    In the NPRM, the Department proposed to revise its longstanding de 
minimis exception by adopting a quantitative standard of $25 as the 
amount that would trigger a reporting obligation. Numerous comments 
attacked the $25 threshold as unreasonably low, while other commenters 
argued that there should be no de minimis level at all. The Department 
adopts $250 as the amount above which a report is required and $20 as 
the amount above which payments or benefits must be counted when 
calculating whether the union official's $250 reporting threshold has 
been met. The rule also includes a limited exclusion for widely 
attended gatherings, allowing union officials to attend two such 
gatherings without incurring a reporting obligation provided the 
employer or business paying for the gathering spent $125 or less per 
attendee per gathering.
    One provision of the Act, section 202(a)(6), may be read to impose 
a requirement on union officials to report payments from all employers. 
The Department's proposal to construe this obligation in this manner 
was opposed by most of the comments that discussed this point. In light 
of these comments, today's rule clarifies the scope of the reporting 
obligation under section 202(a)(6), identifying particular situations 
that pose a conflict of interest

[[Page 36109]]

that otherwise would not be captured by the other five subsections of 
section 202(a).
    The Department also proposed to remove certain administrative 
exceptions that were available to filers under the old rule: Purchases 
and sales in the regular course of business at prices generally 
available to any employee of the employer; work performed and payments 
and benefits received as a bona fide employee of the employer; certain 
loans; and specified interests relating to stock ownership. The rule 
generally adopts the proposals as set forth in the NPRM to narrow the 
scope of these exceptions and thus makes reportable interests and 
payments that present previously unreported potential conflicts of 
interest.
    The Department requested comment on whether to retain the 
distinction between securities traded on a registered national stock 
exchange and securities traded elsewhere, such as the NASDAQ stock 
market, notwithstanding the language in the Act limiting the exception 
to registered securities exchanges. See section 202(b) (ties exception 
to such exchanges registered under the Securities Exchange Act of 1934 
and other enumerated statutes). After reviewing the comments, the 
Department retains its interpretation that it should not extend this 
limited exception to exchanges that have not been registered. The 
Department, however, notes that on July 15, 2006, the Securities and 
Exchange Commission (``SEC'') approved NASDAQ's application for 
registration as a national securities exchange, effective July 31, 
2006.
    Payments received by union officials from employers for work done 
on the union's behalf are reportable because such payments are not 
received as a bona fide employee of the employer making the payment. 
The Department explained in its proposal that union officials must 
report any payments for other than ``productive work'' for the 
employer, including union-leave and no-docking payments. Similarly, the 
proposed definition of ``labor organization employee'' clarified that 
an individual who is paid by an employer to perform union work is an 
employee of the union if he or she is under the control of the union, 
while so engaged. Today's rule adopts the proposed definition of ``bona 
fide employee'' and ``labor organization employee,'' making union-leave 
and no-docking payments reportable. However, today's rule stipulates 
that if such payments are made pursuant to a collective bargaining 
agreement and the payments are made for 250 or fewer hours during the 
year then there is no reporting obligation.
    The meaning given ``labor organization'' defines the scope of a 
union official's obligation to report interests in or payments by 
certain employers and businesses. Essentially the question presented by 
the Department's proposal is whether this obligation applies to only an 
official's immediate organization, e.g., a local union or international 
union in which he or she holds office, or whether it extends to 
situations involving organizations affiliated with the immediate 
organization. For instance, is an international officer required to 
report payments received from a business that sells products or 
services to intermediate and local affiliates or from employers whose 
employees are represented by a subordinate union? Under today's rule, 
an international union officer must report such payments. The same 
obligation exists under the old rule. Today's rule further clarifies 
that the same reporting obligation applies to payments received by an 
intermediate union officer. The Department, however, does not impose a 
reporting obligation on local or intermediate union officials who 
receive payments from an entity that does business with a higher 
affiliated organization. The rule also excepts employees of 
international, national, and intermediate unions from this reporting 
requirement. Further, the reporting obligation on officers of national 
and intermediate unions does not extend to payments received as 
employment compensation by their spouse or minor child that otherwise 
would be reportable because of the payer's relationship with a 
subordinate union.
    Although the Department's old rule applies to payments received 
from a section 3(l) trust and the Department proposed no departure from 
this rule, numerous comments were received arguing that the Form LM-30 
reporting obligation has never been applied to payments by trusts to 
union officials. These commenters are mistaken. The Department always 
has maintained the position that payments from trusts and vendors to 
such trusts enjoy no special excepted status under the Act's reporting 
provisions. Some commenters argued that such reporting would only be 
duplicative of reporting already required by ERISA and could discourage 
union trustees from attending conferences designed to educate trustees 
about their duties as trustees. The Department believes that the 
concerns about burden and overlap with ERISA disclosure requirements 
are overstated. In light of the comments, however, today's rule 
clarifies that a payment by a trust is treated no differently than 
other payments by an employer or a business to union officials.
    Section 202(a)(3) imposes a limited reporting obligation on a union 
official who has an interest in or receives payments from a business 
that buys, sells, leases, or otherwise deals with the business of an 
employer if the latter's employees are represented by the official's 
union or it is actively seeking to represent these employees. The 
obligation attaches only if the vendor's dealings with the employer 
comprise a ``substantial part'' of the vendor's business. The 
Department proposed to define ``substantial'' as more than 5% of the 
vendor's business. Most of the comments criticized the threshold as too 
low. Today's rule sets the threshold at 10%.
    In addition to some of the terms discussed above, the Department 
has clarified some of the proposed definitions. By clarifying these 
terms and the concepts that underlie the Act's reporting provisions, 
the rule ensures transparency in the personal financial affairs of 
union officials that may pose conflicts between the official's duty to 
their union and its members and the official's personal interests.
    A number of comments were received from employer and industry 
associations. Most of these comments focused on the obligation of 
employers to file a Form LM-10 on certain payments made by employers or 
labor relations consultants to unions or union officials. Today's rule 
is specific to Form LM-30 filers. It does not amend the Department's 
current regulations or guidance specific to the Form LM-10. The 
Department, however, has carefully considered all the comments 
submitted by these groups and addresses them herein insofar as they 
address particular aspects of the Form LM-30 proposal. Form LM-10 
Frequently Asked Questions (FAQs) on the OLMS Web site at http://www.olms.dol.gov informs the public that the Department will not 
enforce certain Form LM-10 reporting requirements until both the Form 
LM-30 rulemaking is completed and further written guidance is issued on 
the Form LM-10. This written guidance will be issued in revisions to 
the FAQs that will be announced through the OLMS list serve which can 
be subscribed to at http://www.dol.gov/esa/aboutesa/org/olms/olms-mailinglist.htm.
1. The Reasons for Today's Revisions of the Form LM-30
    The Form LM-30 has remained essentially unchanged since 1963.

[[Page 36110]]

During this time, there have been many significant changes in the ways 
in which unions operate and conduct their financial affairs. 
Individuals too have more and varied financial interests than was the 
case forty years ago. As explained in the NPRM, many unions manage 
benefit plans for their members, maintain close business relationships 
with financial service providers such as insurance companies and 
investment firms, operate revenue-producing subsidiaries, and 
participate in foundations and charitable activities. The complexity of 
these financial practices, including business relationships with 
outside firms and vendors, increases the likelihood that union 
officials may have interests in, or receive income from, these 
businesses. As more labor organizations conduct their financial 
activities through sophisticated trusts, increased numbers of 
businesses have commercial relationships with such trusts, creating 
financial opportunities for union officers and employees who may 
operate, receive income from, or hold an interest in such businesses. 
In addition, employers also have fostered multi-faceted business 
interests, creating further opportunities for financial relationships 
between employers and union officers and employees. In this context, 
disclosure is critical to promoting good union governance, fostering 
ethical behavior, and deterring and detecting self-dealing.
    As noted in the NPRM, on many occasions the Department has 
discovered during an audit or investigation that a union officer or 
employee received a reportable payment or other financial benefit but 
had failed to file the Form LM-30 as required. The Department 
identified several such situations in the NPRM, including the 
following:
    <bullet> A local president owned 50% of a business that resurfaced 
the union's parking lot. Over two years, the business received $9,000 
from the union.
    <bullet> A union designated certain attorneys to represent injured 
members. Some of these attorneys, who were employers, furnished cash or 
items of value such as trips and golf clubs to union officials.
    <bullet> A union hired the accounting firm of an employee's spouse. 
The firm received over $29,000 from the union over two years.
    <bullet> An officer of a union, whose members worked at a theater, 
formed a business with two partners. He put his share of the business 
in his wife's name although he actually managed the business, which 
employed members of his local to work for the theater. He and his wife 
received almost $75,000 in profits, expense reimbursements, and salary 
from the business.
    <bullet> A union president owned the building in which the union 
rented office space.
    <bullet> A union employee's spouse owned an advertising company 
that printed materials for the union and its funds. In one year, the 
company received over $245,000 as payment for her company's services.
    <bullet> Four local officers formed a company that provided payroll 
services to the local as well as to theatrical companies that employed 
members of the local. Two other officers of the local received over 
$20,000 as employees of the company.
    <bullet> The spouse of a union officer owned a company that 
provided cleaning and maintenance services to the union and a trust in 
which the union was interested. In one year, the company received over 
$94,000 from the union and the trust.
    <bullet> A union officer's spouse owned a janitorial business that 
provided daily janitorial services to the union at $800 per month.
    <bullet> A union officer was part-owner, along with his wife and 
daughter, of a copier supply company. He was an officer of several 
unions, including one that employed his daughter as a benefit 
representative and union trustee. All of the unions purchased office 
equipment and services from the family's company.
    <bullet> During a campaign for a State government office, a 
business agent received contributions from employers who were covered 
by the union's collective bargaining agreement.
    <bullet> A union employee owned a heating and air conditioning 
business that performed HVAC work for the union.
    In these instances, compliance with the Form LM-30 requirements 
would have provided union members with valuable information concerning 
financial practices of their unions' officials. This information would 
have assisted union members in evaluating the efficacy of the work 
performed by union employees and the leadership provided by union 
officers. Furthermore, the information would have alerted them to 
potential conflicts of interests and guided them as to which actions or 
decisions of their officers and employees might require greater 
scrutiny in order to determine whether the conflicts had affected the 
union official's service to the union. Armed with this information, 
union members could express their concerns at membership meetings, see 
section 101(a), 29 U.S.C. 411(a), evaluate the use of union monies as 
reported on the union's annual financial report, see section 201(b), 29 
U.S.C. 431(b), cast more informed votes at internal union elections, 
see sections 401-403, 29 U.S.C. 481-483, employ union procedures for 
removal of officers guilty of serious misconduct, see section 401(h), 
29 U.S.C. 481(h), and exercise their right to obtain judicial relief 
for violations of the official's fiduciary responsibilities. See 
section 501(b), 29 U.S.C. 501(b).
    In other instances, as described in the NPRM, compliance with Form 
LM-30 requirements would have revealed criminal conduct. For example, 
the president of a national union had the sole authority to appoint or 
remove attorneys from a list of ``Designated Legal Counsel.'' These 
attorneys represented injured union members who sought compensation 
from the railroad for on-the-job injuries. Rather than selecting 
attorneys on the basis of their skills, the president awarded the 
designation to attorneys who gave the union president cash or other 
things of value. In another instance, contractors were hired to make 
repairs and improvements to the offices of a local union. The 
contractors also performed work on the officers' homes. All the 
expenses of the work, including about $1.2 million for work on the 
officers' homes, was charged to and paid by the union. A third example 
involved a contractor, an investment firm that managed pension and 
investment accounts for unions. This company collapsed in September 
2000, costing its clients about $355 million. The company's former 
chairman was indicted on counts of fraud, money laundering, witness 
tampering, and making illegal payments to union benefit plan trustees. 
As part of its scheme to buy the influence of pension fund trustees, 
who were union officers, the investment firm hired relatives of pension 
trustees as well as provided plan trustees with gifts including rifles, 
season tickets to sporting events, and fishing and hunting trips to 
various locations in the western U.S., Canada, Africa, Argentina and 
Mexico.
    As the above incidents demonstrate, a statement made in 1986 
continues to ring true: ``The plunder of union resources remains an 
attractive [target for certain individuals and organizations]. * * * 
The most successful devices are the payment of excessive salaries and 
benefits to * * * union officials and the plunder of workers'' health 
and pension funds.'' President's Commission on Organized Crime, Report 
to the President and Attorney General, The Edge: Organized Crime, 
Business, and Labor Unions

[[Page 36111]]

(1986), at 12. Added transparency about a union official's conflicts of 
interest will help ensure that all union officials keep paramount the 
interests of their union and its members. Most union officials will 
never be tempted to subordinate their union's interests to their own 
financial interests; the rule will help them avoid the perception that 
their financial interests, left unreported through inadvertence or 
misunderstanding, may engender unfair suspicion. Others, though 
tempted, will be deterred from taking such action. See Archibald Cox, 
Internal Affairs of Labor Unions Under the Labor Reform Act of 1959, 58 
Mich.L.Rev. 819, 827 (1960) (``Internal Affairs of Labor Unions'') 
(``The official whose fingers itch for a ``fast buck'' but who is not a 
criminal will be deterred by the fear of prosecution if he files no 
report and by fear of reprisal from the members if he does'').
    The Form LM-30 has been redesigned to facilitate full and accurate 
completion by the filer and review by members of the filer's union and 
the public. The instructions now contain useful definitions of key 
terms and concepts required to complete the form and numerous practical 
examples to assist filers in completing the form. Union officials will 
also better understand the disclosure obligations relating to actual or 
potential conflicts of interest and will be mindful of their duty to 
hold their union's interests above their own personal financial 
interests. Financial transparency, as noted above, also may deter fraud 
and self-dealing and facilitates discovery of such misconduct when it 
occurs. Transparency promotes the unions' own interests as democratic 
institutions. By these improvements, union members will obtain a more 
accurate picture of the personal financial interests of their union's 
officers and employees, as those interests may bear upon their actions 
on behalf of the union and its members. With this information, union 
members will be better able to understand any financial incentives or 
disincentives faced by their union's officers and employees and to make 
more informed choices about the leadership of their union and its 
management of its affairs. Through these actions, the Department 
advances the LMRDA's declared purpose ``that labor organizations, 
employers, and their officials adhere to the highest standards of 
responsibility and ethical conduct in administering the affairs of 
their organizations.'' Section 2(a). As such, today's rule will better 
achieve the purposes of the LMRDA than the old reporting regimen.
2. Legislative History
    To better understand the purposes served by disclosure, a brief 
review of the history of the LMRDA's reporting and disclosure 
requirements for union officials is appropriate. As explained in the 
NPRM, at 70 FR 51166, the LMRDA was passed in 1959 by a bipartisan 
Congress that found: In labor and management fields:

    [T]here have been a number of instances of breach of trust, 
corruption, disregard of the rights of individual employees, and 
other failures to observe high standards of responsibility and 
ethical conduct which require further and supplementary legislation 
that will afford necessary protection of the rights and interests of 
employees and the public generally as they relate to the activities 
of labor organizations, employers, labor relations consultants, and 
their officers and representatives.

Section 2(a).
    The legislation 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, chaired by Senator John McClellan of Arkansas. In 1957, the 
committee began a highly publicized investigation of union racketeering 
and corruption; its findings of financial abuse, mismanagement of union 
funds, and unethical conduct provided much of the impetus for enactment 
of the LMRDA's remedial provisions. See generally Benjamin Aaron, The 
Labor-Management Reporting and Disclosure Act of 1959, 73 Harv. L. Rev. 
851, 851-55 (1960). During the investigation, the committee uncovered a 
host of improper financial arrangements between officials of several 
international and local unions and employers (and labor consultants 
aligned with the employers) whose employees were represented by the 
unions in question or might be organized by them. Similar arrangements 
also were found to exist between union officials and the companies that 
handled matters relating to the administration of union benefit funds. 
See generally, Interim Report of the Select Committee on Improper 
Activities in the Labor or Management Field, S. Report No. 85-1417 
(1957) (``Interim Report''). For examples of some of the improper 
arrangements directly or indirectly involving officials of these 
unions, see Interim Report, pp. 42-86, 122-30, 150-57, 222-55, 376-420, 
441-50. See also Robert F. Kennedy, The Enemy Within (1960) (discussing 
the committee's investigation).
    The statute was designed to remedy these various ills through a set 
of integrated provisions aimed at union governance and management. 
These included a ``bill of rights'' for union members, which provides 
for equal voting rights, freedom of speech and assembly, and other 
basic safeguards for union democracy, see sections 101-105 of the 
LMRDA, 29 U.S.C. 411-415, financial reporting and disclosure 
requirements for unions, union officers and employees, employers, labor 
relations consultants, and surety companies, see sections 201-206 and 
211 of the LMRDA, 29 U.S.C. 431-436, 441; detailed procedural, 
substantive, and reporting requirements relating to union trusteeships, 
see sections 301-306 of the LMRDA, 29 U.S.C. 461-466; detailed 
procedural requirements for the conduct of elections of union officers, 
see sections 401-403 of the LMRDA, 29 U.S.C. 481-483, safeguards for 
unions, including bonding requirements, the establishment of fiduciary 
responsibilities for union officials and other representatives; and 
criminal penalties for embezzlement from a union, for loans over $2,000 
by a union to officers or employees, for a union's employment of 
certain convicted felons or permitting them to hold union office, and 
for payments to employees for prohibited purposes by an employer or 
labor relations consultant, see sections 501-504 of the LMRDA, 29 
U.S.C. 501-504; and prohibitions against retaliation for exercising 
protected rights, see sections 601-611 of the LMRDA, 29 U.S.C. 521-531.
    The reporting requirement for union officials operates in tandem 
with the Act's establishment of a fiduciary duty for union officials 
and representatives. Section 501, 29 U.S.C. 501. Congress addressed 
conflicts of interest in both sections 202 and 501(a) of the Act. The 
latter section provides in part:

    The officers, agents, shop stewards, and other representatives 
of a labor organization occupy positions of trust in relation to 
such organization and its members as a group. It is, therefore, the 
duty of each such person, taking into account the special problems 
and functions of a labor organization, to hold its money and 
property solely for the benefit of the organization and its members 
and to manage, invest, and expend the same in accordance with its 
constitution and bylaws and any resolutions of the governing bodies 
adopted thereunder, to refrain from dealing with such organization 
as an adverse party or in behalf of an adverse party in any matter 
connected with his duties and from holding or acquiring any 
pecuniary or personal interest which conflicts with the interests of 
such organization * * *.

    Both provisions address the potential and actual conflict between a 
union representative's personal interests and his or her duty to the 
union and its

[[Page 36112]]

members. See Theodore Clark, Jr., The Fiduciary Duties of Union 
Officials under Section 501 of the LMRDA, 52 Minn. L. Rev. 437, 458-60 
(1962).
    The McClellan Committee hearings disclosed a history of self-
dealing by certain union officials, often at the expense of their 
union's membership. Then Senator John F. Kennedy was the chief sponsor 
of the Senate bill, S. 505, which served as the foundation for the 
LMRDA. In introducing the bill for the Senate's consideration, Senator 
Kennedy addressed concerns about the involvement of union officials in 
matters that blurred their personal interests and their union's 
interests, which concerns would be remedied by the legislation. Senator 
Kennedy used the experience of the Teamsters union, as revealed by the 
investigation of the McClellan Committee, to underscore the purposes to 
be achieved by the Act:

    First. It will no longer be possible for the dues of Teamster 
members to be * * * used by [the union's] officers to build their 
own personal financial empires without the knowledge of the members 
themselves--or without investigation by the press and public 
authorities.
    Second. [A union official] would be required to disclose all his 
business dealings with insurance agents handling the union's welfare 
funds, his private arrangements with employers, his hidden 
partnerships in business ventures foisted upon his members, and all 
other possible conflicts of interest.
* * * * *
    Sixth. [Union officials] will find future collusion with 
employers vastly restricted--with no more loans from employer 
groups, no more attacks on rival unions through middlemen * * *, and 
no more secrecy shrouding the use of union funds to bail out a 
collaborating employer.

105 Cong. Rec. S817 (daily ed. Jan. 20, 1959), reprinted in 2 NLRB 
Legislative History of the Labor-Management Reporting and Disclosure 
Act of 1959 (``Leg. History''), at 969.
    The improper dealings by the Teamsters officials, to which Senator 
Kennedy refers, are detailed in the Interim Report, at e.g., 48, 59-60, 
64-86, 222-54, 443-50. These dealings, like those identified by 
officials of other unions in the Interim Report, included actions 
undertaken by national officers, or others acting at their behest, 
involving matters affecting not only the national union's operation but 
also matters of importance to local and intermediate bodies of their 
union. See e.g., Interim Report, at 4-7, 46-49, 51, 55, 59-60, 63, 69, 
74, 81, 87, 122-25, 128, 130, 179, 186-87, 224, 228, 230-40, 244, 250, 
252, 264-66, 268, 281, 284-85, 295, 297, 300, 444-48. See also The 
Enemy Within, at 97, 99, 104-05, 106, 221-24.
    As explained in the Senate Committee Report, S. Rep. No. 187 (1959) 
(``Senate Report''), at 15, reprinted in 1 Leg. History, at 411: ``The 
hearings before the McClellan committee brought to light a number of 
instances in which union officials gained personal profit from a 
business which dealt with the very same employer with whom they engaged 
in collective bargaining on behalf of the union.'' Id. The committee 
endorsed the concern expressed in the AFL-CIO's Ethical Practices Code 
that the union official ``may be given special favors or contracts by 
the employer in return for less than a discharge of his obligations as 
a trade-union leader.'' Id.
    In explaining the purpose of the disclosure rules for union 
officers and employees, the Senate Report presented ``three reasons for 
relying upon the milder sanction of reporting and disclosure [relative 
to establishing criminal penalties] to eliminate improper conflicts of 
interest,'' which we summarize as follows:
    <bullet> Disclosure discourages questionable practices. ``The 
searchlight of publicity is a strong deterrent.'' Disclosure rules 
should be tried before more severe methods are employed.
    <bullet> Disclosure aids union governance. Reporting and 
publication will enable unions ``to better regulate their own affairs. 
The members may vote out of office any individual whose personal 
financial interests conflict with his duties to members,'' and 
reporting and disclosure would facilitate legal action by members 
against ``officers who violate their duty of loyalty to the members.''
    <bullet> Disclosure creates a record. The reports will furnish a 
``sound factual basis for further action in the event that other 
legislation is required.''

Senate Report, at 16, reprinted in 1 Leg. History, at 412.
    The Report further stated: ``No union officer or employee is 
obliged to file a report unless he holds a questionable interest or has 
engaged in a questionable transaction. The bill is drawn broadly 
enough, however, to require disclosure of any personal gain which an 
officer or employee may be securing at the expense of the union 
members.'' Senate Report, at 14-15, reprinted in 1 Leg. History, at 
410-11. The House Committee Report, H.R. Rep. No. 741 (1959) (``House 
Report''), at 11, reprinted in 1 Leg. History, at 769, conveyed the 
same message. Both the Senate and House Reports recognize that a 
reportable interest is not necessarily an illegal practice. As the 
House Report stated:

    In some instances matters to be reported are not illegal and may 
not be improper but may serve to disclose conflicts of interest. 
Even in such instances, disclosure will enable the persons whose 
rights are affected, the public, and the Government, to determine 
whether the arrangements or activities are justifiable, ethical, and 
legal.

House Report, at 4, reprinted in 1 Leg. History, at 762. See Senate 
Report, at 38, reprinted in 1 Leg. History, at 434 (``By requiring 
reports * * *, the committee is not to be construed as necessarily 
condemning the matters to be reported if they are not specifically 
declared to be improper or made illegal under other provisions of the 
bill or other laws''). ``Reports are required as to matters which 
should be public knowledge so that their propriety can be explored in 
the light of known facts and conditions.'' Id. As stated by Senator 
Barry Goldwater after the LMRDA had been passed:

    Briefly, what must be reported are holdings of interest in or 
the receipt of economic benefits from employers who deal or might 
deal with such union official's union, or holdings in or benefits 
from enterprises which do business with such union official's union.

105 Cong. Rec. A8512 (daily ed. Oct. 2, 1959), reprinted in 2 Leg. 
History, at 1846.
    Conflict of interest standards, including disclosure obligations of 
individuals and entities occupying positions of trust, are well 
grounded in U.S. law. As stated in the House Report, repeating almost 
verbatim the same point in the Senate Report:

    For centuries the law of fiduciaries has forbidden any person in 
a position of trust subject to such law to hold interests or enter 
into transactions in which self-interest may conflict with complete 
loyalty to those whom he serves. * * * The same principle * * * 
should be equally applicable to union officers and employees 
[quoting the AFL-CIO's Ethical Practices Code]: ``[A] basic ethical 
principle in the conduct of union affairs is that no responsible 
trade union official should have a personal financial interest which 
conflicts with the full performance of his fiduciary duties as a 
worker's representative.''

Senate Report, at 11, reprinted in 1 Leg. History, at 769. See 
generally Restatement (Second) of Trusts (1959) Sec. Sec.  170, 173; 
Restatement (Second) of Agency (1958) Sec. Sec.  381, 387-98.
    Section 202 is an effort, in part, to make effective the disclosure 
requirements associated with the fiduciary standards applied to union 
officials in Title V of the LMRDA, a duty that includes an obligation 
to report potential conflicts of interest. Both Titles II and V of the 
Act represent an effort to codify various requirements

[[Page 36113]]

contained in an extensive code of ethics voluntarily adopted by the 
AFL-CIO in 1957 and applied to its affiliated unions and officials. See 
Senate Report, at 12-16, reprinted in 1 Leg. History, at 408-12; House 
Report, at 9-12, reprinted in 1 Leg. History, at 767-70. See also 
Internal Affairs of Labor Unions, 58 Mich. L. Rev. at 824-29. The 
following excerpts from this code demonstrate the similarities between 
a union official's fiduciary duty and the disclosure requirements of 
section 202.

    [A] basic ethical principle in the conduct of trade union 
affairs is that no responsible trade union official should have a 
personal financial interest which conflicts with the full 
performance of his fiduciary duties as a workers' representative.
    [U]nion officers and agents should not be prohibited from 
investing their personal funds in their own way in the American free 
enterprise system so long as they are scrupulously careful to avoid 
any actual or potential conflict of interest.
    In a sense, a trade union official holds a position comparable 
to that of a public servant. Like a public servant, he has a high 
fiduciary duty not only to serve the members of his union honestly 
and faithfully, but also to avoid personal economic interest which 
may conflict or appear to conflict with the full performance of his 
responsibility to those whom he serves.
    There is nothing in the essential ethical principles of the 
trade union movement which should prevent a trade union official, at 
any level, from investing personal funds in the publicly traded 
securities of corporate enterprises unrelated to the industry or 
area in which the official has a particular trade union 
responsibility.
    [These principles] apply not only where the investments are made 
by union officials, but also where third persons are used as blinds 
or covers to conceal the financial interests of union officials.

Ethical Practices Code IV: Investments and Business Interests of Union, 
105 Cong. Rec.*16379 (daily ed. Sept. 3, 1959), reprinted in 2 Leg. 
History, at 1408. See also Ethical Practices Code II: Health and 
Welfare Funds, id., 2 Leg. History, at 1406-07.
    The Department intends by today's rule to better achieve the 
purposes of the LMRDA, as reflected by its legislative history.

II. Discussion of Comments Received on Proposed Rule and Department's 
Response

A. Why the Changes To the Form Are Needed Now

    Several commenters recommended that the Department should evaluate 
its recent compliance experience with Form LM-30 reports submitted by 
union officials using the old form before considering any changes to 
the form. One commenter stated that there is no problem with the old 
form. Another asserted that the affected community has spent a ``huge 
amount of time getting up to speed on the present form,'' arguing that 
the proposed form is more confusing than the current form because it 
requires filers to identify for each reportable interest the particular 
statutory provision to which it relates.
    A labor educator, noting the upsurge in Form LM-30 filings about 
the time of the comment period on the proposed rule, suggested that the 
Department should postpone any changes until it completed a thorough 
analysis of these submissions. Although this commenter acknowledged 
that the old form presents some challenges to a filer's easy 
understanding of the reporting requirements, he asserted that the 
proposed form poses greater opportunity for mistake and confusion. Two 
commenters argued: ``[R]adically changing the form at the same time as 
the Department provides comprehensive guidance on what is considered 
reportable [on the old form] will only impede the efforts to encourage 
accurate and full reporting.''
    The old Form LM-30 posed substantial challenges to filers. As 
discussed in the NPRM and as demonstrated by comments on the proposal, 
filers have been unsure about the kinds of payments that trigger the 
need to file a Form LM-30. See 70 FR 51172-73, 51175. Keeping the 
status quo would leave in place exceptions that permit union officials 
to avoid disclosing payments that would otherwise be reportable under 
the statute, denying union members information about their officials' 
interests in and payments by employers and businesses that raise 
conflict of interest questions. Deferring the final rule for an 
exhaustive analysis of all the Form LM-30 filings during the April 
through mid-August 2006 ``grace period,'' numbering about 13,000 would 
cause undue delay with little additional gain. The Department's 
preliminary and ongoing review of these filings demonstrates that the 
old form is unclear and that today's rule will rectify many of the 
problems observed in those filings.
    One commenter recommended that the Department, well in advance of 
the filing deadline, ``should grant a reasonable extension for filing 
and/or make any aspects of the final rule that are more restrictive 
than the current rule prospective only. DOL should only apply any 
changes prospectively, and it should provide a reasonable opportunity 
for necessary recordkeeping and related efforts to facilitate accurate 
reports and compliance.'' Another commenter argued that no new 
requirements should be imposed on service providers until rulemaking on 
the Form LM-10 is completed. Another commenter argued that no changes 
in reporting should occur any sooner than a filer's fiscal year that 
begins after the final rule takes effect.
    DOL is applying these changes prospectively only. This final rule 
will apply to fiscal years beginning on or after ------, 2007. 
Therefore, no report subject to today's rule will be due until at least 
------, 2008. There is ample time from publication of this final rule 
until ------, 2008 for all filers to obtain any information they need 
to comply with the filing requirements.

B. Why the Department Is Not Presently Requiring Unions to Notify Their 
Officers and Employees (``Officials'') About Their Annual Reporting 
Obligations

    In the NPRM, the Department requested comments on whether the 
Department should require unions to provide notice of the filing 
requirements to their officers and employees. The NPRM discussed 
possible notification options. Under one option, unions would be 
required to notify their officers and employees of their Form LM-30 
obligations within 30 days of their installation into office or hire, 
respectively. Unions would be required to provide initial notification 
within 60 days of the enactment of the regulation, and annually 
thereafter to all officers and employees. Under the proposal, a union 
could meet this requirement by providing a copy of the Form LM-30 and 
its instructions. E-mail notification might be considered. As an 
alternative, a general notice, provided in a union publication 
addressed to each officer and employee, might be adequate for this 
purpose.
    A number of comments were received on the notification question. 
Commenters were divided on the question. Some commenters strongly 
supported mandatory notification, pointing to low numbers of past 
filers as evidence that notification is essential. No union commenter 
supported the proposal. Commenters were divided as to whether the 
Department has authority to require notification under sections 105 or 
208 of the LMRDA. One commenter asserted that the Department lacks 
authority to issue a notification requirement under section 105, 
arguing that this provision does not allow imposition of a detailed 
code of union conduct. Another commenter used section 105 to illustrate 
its position that Congress knew how to establish a notification 
requirement, arguing that its

[[Page 36114]]

failure to so provide in section 202 evinces the intention to excuse 
unions from any obligation to provide such notice. Another commenter 
argued to the contrary, stating that mandatory notification is 
consistent with section 105 which states, ``[e]very labor organization 
shall inform its members concerning the provisions of this Act.'' While 
acknowledging that section 208 arguably permits a notification 
requirement, a commenter argued that the Department must first 
demonstrate that such a rule is necessary to prevent the circumvention 
or evasion of the reporting obligation. It argued that 
``circumvention'' and ``evasion'' connote a willful disregard of the 
filing obligation, actions that require as a premise that the filer 
already is aware of the filing obligation.
    A commenter argued that the Department should impose a broader 
notification requirement on unions. Unions should be required, in its 
view, to provide notice to both officials and their members about both 
the filing obligations of union officials and the union's own reporting 
obligations to file a Form LM-2, 3 or 4. Another commenter viewed 
notification as a ``first-step in the right direction.'' It stated a 
preference for a system whereby the Department would provide annual 
reminders about Form LM-30; each union would be required to file with 
the Department the names and addresses of all its officers and 
employees. On the other hand, several commenters argued that reliance 
on voluntary efforts would better achieve the goal of informing 
officials about their filing obligation. One of these commenters stated 
that voluntary education works better than mandatory notification given 
that unions have a variety of governance structures and that they 
operate, in effect, in different industries calling for different 
approaches. Another commenter suggested that DOL ``work informally'' to 
obtain compliance. This commenter explained that under the old 
regulation, unions take various steps to inform their officials about 
Form LM-30 requirements, such as by holding meetings or providing 
written notices. The commenter argued that the choice of a method to 
inform union members should be left to the union. Several commenters 
argued that notification was unnecessary in light of new Department 
guidance, pointing to the rise in filings to support its claim.
    The Department believes it possesses the authority to impose a 
notification requirement. However, the Department has concluded, based 
on its review of the comments and the recent experience with Form LM-30 
filers, that a mandatory notification requirement is unnecessary on the 
present record to effectuate the disclosure purpose served by section 
202 of the Act. After unions and their counsel became aware of the 
Department's increased emphasis in securing compliance with section 
202, many contacted their officers and employees to inform or at least 
remind them of their obligation to file a Form LM-30 if they engaged in 
any of the activities identified by the form and its instructions. 
While in previous years less than 100 forms were typically filed each 
year, during the 2005 grace period contemporaneous with this 
rulemaking, 13,326 reports were filed. During FY 2006, 4,348 Form LM-30 
reports were filed. Given the historic increases in Form LM-30s during 
the grace period with stepped up Departmental compliance assistance and 
voluntary efforts by major unions to educate affiliates and officials, 
there is currently not a sufficient record to conclude that a mandatory 
requirement is needed.
    The Department applauds the voluntary efforts by the AFL-CIO and 
other unions to apprise union officials about their Form LM-30 
reporting obligations. However, insufficient time has passed to 
conclude that union officials, without receiving regular notice by 
their union of these obligations, will remain aware of these 
obligations. If future compliance figures indicate that new union 
officials are uninformed about their Form LM-30 filing obligations or 
that others appear to have forgotten their obligations, the Department 
may then reassess the need for imposing a notification requirement.

C. Why the De Minimis Exemption From Reporting Insubstantial Gifts and 
Other Financial Benefits Has Been Simplified and Subjected to a $250 
Limit, With an Exclusion for Gifts Valued at $20 or Less and Certain 
Widely-Attended Gatherings

    Section 202(a) of the LMRDA calls for disclosure of ``any'' stock, 
bond or other interest, ``any'' income, ``any'' loan, and ``any'' 
payment or other thing of value received by a union official, his or 
her spouse, or minor child[ren] from employers and businesses as 
defined in sections 202(a)(1) through 202(a)(6). While this inclusive 
language may be read to require a report on any such payments 
regardless of amount, the Department always has excepted from reporting 
payments of insubstantial or de minimis value. Thus, the old 
instructions to the Form LM-30 inform filers: ``You do not have to 
report any sporadic or occasional gifts, gratuities, or loans of 
insubstantial value, given under circumstances or terms unrelated to 
the recipient's status in a labor organization.'' This exemption 
applies by its terms to all reports due under section 202. The LMRDA 
Interpretative Manual (``LMRDA Manual''), as revised in March 2005, 
states that anything with a value of $25 or less will be considered de 
minimis and therefore not reportable if it is given on an ``infrequent 
or sporadic'' basis under circumstances unrelated to the recipient's 
status in a labor organization. LMRDA Manual, Sec.  241.700.
    The Department sought comments on the de minimis exception 
generally and specifically on whether the $25 threshold is appropriate, 
whether the burden is reasonable, and whether reporting of all 
transactions should be required without regard to their value. 70 FR 
51175. In November 2005, following a review of Form LM-30 reports filed 
during the Department's grace period, which revealed the reporting of 
numerous payments that union members and the public would regard as 
trivial, and based on comments from union representatives that the 
threshold was too low, the Department issued guidance advising that 
``gifts, gratuities or loans with a value of $250 or less'' would be 
considered insubstantial for the purposes of Form LM-30 reporting.
    In the NPRM, the Department noted the inclusive language used by 
Congress in defining the scope of the reporting obligation and the 
absence of any general substantiality test for the LMRDA's reporting 
provisions. See section 202(a)(3); 29 U.S.C. 432(a) (limiting reports 
specific to certain ``substantial'' dealings). The Department also 
noted that exceptions based on insubstantiality are commonly read into 
statutes that do not expressly contain them and that the financial 
disclosure reports for certain Federal government employees contain a 
de minimis exemption.
    The Department in today's rule retains a de minimis exemption. 
Under this exemption, payments or gifts totaling $250 or less from any 
one source during the reporting year need not be reported. In addition, 
the Department decides that payments or gifts valued at $20 or less 
need not be included in determining whether the $250 threshold has been 
met. The Department has concluded that a dollar-specific test for de 
minimis payments is preferable to one that requires filers to make a 
fact-specific determination of what is ``insubstantial'' or ``unrelated 
to the filer's status in a labor organization'' or ``sporadic and 
occasional.'' The Department also has crafted a limited reporting 
exclusion for a union official's

[[Page 36115]]

attendance at ``widely attended gatherings.'' If during the year, an 
officer or employee attends one or two widely-attended gatherings for 
which an employer has spent $125 or less per attendee per gathering, 
the officer or employee has no Form LM-30 obligation with regard to 
tracking or disclosing these events. A gathering will be considered 
``widely attended'' if it is expected that a large number of persons 
will attend and that attendees will include both union officials and a 
substantial number of individuals with no relationship to a union or 
its section 3(l) trust.
    The Department received numerous comments on the de minimis 
question, mostly in favor of retaining the exemption and the adoption 
of a quantitative threshold substantially higher than the $25 figure 
discussed in the NPRM. Particular comments are discussed below.
    A few commenters argued that no de minimis level should be adopted 
at all. One commenter stated that full disclosure was appropriate 
because it allowed a union's members to decide whether a gift to a 
union official presented a negligible conflict of interest or not. The 
Department acknowledges that there would be some benefit in eliminating 
the exception; this change would allow individual union members to 
determine whether a particular payment poses a conflict of interest and 
more importantly could lead to further inquiry about a union official's 
actions. As stated in the NPRM, there is no statutory requirement for a 
de minimis level. See Environmental Defense Fund, Inc. v. EPA, 82 F.3d 
451, 466 (D.C. Cir. 1996). Nonetheless, abandoning a de minimis 
threshold altogether would be a sharp departure from the Department's 
historical practice. Moreover, as further discussed below, the 
Department believes that elimination of the de minimis exception would 
only marginally increase meaningful transparency. Furthermore, the 
absence of a specific de minimis exception in section 202 is not 
determinative; exceptions based on insubstantiality are commonly read 
into statutes that do not expressly contain them, and this practice 
demonstrates their practical value. See Wisconsin Dept. of Revenue v. 
William Wrigley, Jr., Co., 505 U.S. 214, 231 (1992). For these reasons, 
the Department retains the de minimis exception.
    Many commenters noted the difficulty of applying the vague de 
minimis standard in the old instructions and the historical absence of 
helpful guidance in applying the exception. Several requested the 
Department to provide at least an illustrative dollar figure and to 
explain the meaning it attributes to the terms ``unrelated to the 
filer's status in a labor organization'' and ``sporadic and 
occasional.'' Some specifically requested the Department to provide 
additional examples so that filers could better understand the de 
minimis exception. Others argued for a test that was solely tied to the 
dollar value of any gift or payment.
    As acknowledged in the NPRM, the qualitative aspects of the rule 
have proved difficult to apply. Based on its consideration of the 
comments and further review of this question, the Department has 
concluded that the purposes of section 202 can best be achieved by 
modifying the test so that the value of the payment or gift is the sole 
consideration affecting its disclosure. Additional conditions for 
claiming the exception would often present filers with the burden and 
expense of undertaking a fact-specific inquiry even though the amount 
of the gift or payment, as recognized by the dollar threshold, is 
insubstantial.
    Some commenters favored replacing or at least supplementing the de 
minimis rule with the creation of broad exceptions to the various 
reporting requirements. These commenters requested exceptions for what 
they viewed as routine activities necessary for conducting business. 
Thus, exceptions, among others, were proposed for the following: any 
expenses related to an employee benefit plan including educational 
benefits, receptions and meals, routine business functions and 
luncheons, all marketing expenses, marketing and entertainment expenses 
provided equally to union and management trustees, and any promotional 
or branded good containing a company name or logo. Most of these 
comments were from employers or industry associations that anticipate 
that union officials will rely on the vendors to keep track of any 
gifts or payments so that they can readily determine whether they have 
incurred a reporting obligation. Another commenter suggested that no 
report should be required for any gratuity that would be considered a 
``business expense'' by the IRS. One commenter characterized the rule 
as ``incredibly burdensome'' and an ``unprecedented imposition'' on 
service providers to trusts. Another commenter suggested, in effect, 
that the Department should adopt the rules and exceptions provided 
under the disclosure rules for Federal employees in place of the 
Department's proposed de minimis rule.
    Several comments expressed concern about the need to report 
educational materials and seminars provided union trustees by vendors 
offering or providing services to welfare and pension plans. These 
commenters argued that even a high de minimis level would have a 
chilling effect because union trustees would refuse the materials or 
decline to attend a seminar in order to avoid the recordkeeping and 
reporting burden or the perception by union members that the trustee's 
attendance would be inappropriate. One commenter suggested that no 
report should be required for educational resources provided to union 
officials, so long as the sponsoring organization retained a statement 
of the educational purpose of the resource, a list of its total 
expenses relating to the otherwise reportable event, and if a seminar, 
the list of attendees.
    The Department declines to create any suggested broad category of 
exceptions. Creating the broad exceptions suggested would frustrate the 
purpose of the statute to make transparent possible conflicts and would 
deny union members the ability to evaluate any concerns they might have 
about the possibility that a union official might put his or her own 
interests above those of the union and its members. Educational 
seminars and resources may benefit trustees to pension or welfare plans 
and the workers whom the plan is meant to benefit. The same event, 
however, may well include gifts, meals, travel, lodging and 
entertainment provided by service providers, or potential service 
providers, to these plans. By requiring reporting, the Department need 
not attempt the highly difficult task of crafting a rule that will 
identify the questionable payments. Rather, union members and the 
public can evaluate the situation on a case-by-case basis, and make 
their own decisions on the choices made by their officials. 
Furthermore, these commenters fail to recognize that the Secretary's 
authority to fashion a de minimis exception is a limited one. The LMRDA 
does not confer on the Secretary the authority to except from reporting 
matters which Congress has evinced no intention to withhold from 
disclosure and the de minimis principle, as evidenced by its name, only 
applies to matters of relative insignificance. Although the disclosure 
rules for Federal employees provide an alternative system for reporting 
financial interests that may pose a conflict with an individual's 
duties, that system was designed to meet the special needs and 
interests of Federal employment and the various laws that govern such 
employment. The

[[Page 36116]]

Department has borrowed some ideas from the disclosure rules for 
Federal employees but to adopt the Federal disclosure rules wholesale 
would be impracticable.
    Most of the commenters advocated a dollar threshold substantially 
higher than the $25 figure mentioned in the NPRM; many urged a figure 
higher than $250. These commenters and others requested the Department 
to exclude from the aggregate amount ``hospitality gifts'' of nominal 
value, variously defined by particular commenters. Several commenters 
urged the Department to adopt a two-tier approach similar to Federal 
conflict of interest disclosure requirements for Office of Government 
Ethics (OGE) Form 450 and Form SF 278. In general, these commenters 
recommended that gifts totaling $250 or less from any one source need 
not be reported and that ``insubstantial'' gifts (ranging from $75 to 
$250) should not be included in determining whether the $250 threshold 
has been met. Otherwise, many commenters argued, the recordkeeping 
burden would be unreasonable because union officials would have to 
track every cup of coffee and every lunch to determine whether and when 
the $250 level was met. The general rule for employees covered by the 
Federal disclosure rules is that they are prohibited from accepting any 
gift because of their government position. Examples of prohibited gifts 
are those that come from persons or firms that have contracts, grants, 
or other business with the employee's agency, or are seeking such 
contracts, grants or other business. These employees are also 
prohibited from accepting gifts from entities that are either regulated 
by the employee's agency or may be affected by the performance of the 
employee's duties. An exception to this general rule applies to 
unsolicited non-cash gifts of $20 or less up to a maximum of $50 per 
year from a single source. 5 CFR 2635.204(a).
    The Department believes that, by setting the threshold at $250 and 
providing that payments or gifts valued at $20 or less need not be 
included in determining whether the $250 threshold has been met, it has 
achieved the appropriate balance between ensuring transparency of 
potential conflicts and minimizing the reporting burden. This two-tier 
approach has precedent in the Federal employee disclosure regime. By 
excluding expenses of $20 or less from the $250 computation, the 
Department substantially reduces the burden associated with aggregating 
gifts or payments from a particular employer or business. There will be 
no need to keep records of coffee and pastry service, modest lunches, 
or similar ``hospitality gifts.''
    Some commenters expressed the concern that requiring large numbers 
of reports on relatively small amounts of payments ``buries'' from view 
reports of greater value. The Department believes this fear is 
unfounded, especially in light of the $250 aggregate threshold 
established by today's rule. Even at a much lower figure, the number of 
reports of interest to a particular union member would constitute only 
a small fraction of the total number of reports filed and these reports 
could easily be culled electronically from the other reports.
    The Department does not find persuasive the comments urging that 
payments higher than $20 should be excluded from the $250 reporting 
threshold. While there may be merit to some arguments urging a somewhat 
higher or lower amount, a $20 initial threshold minimizes reporting 
burden and ensures disclosure of financial relationships that may pose 
a conflict of interest. The Department, however, rejects the suggestion 
that items valued substantially more than $20 should go unreported. 
While in the Department's view, a single gift of $75 or even $100 is 
unlikely to be a matter of substantial concern to some members, even a 
few gifts of this magnitude would be of concern to most members. And 
almost every member would be concerned if a union official received 
several gifts of such value. By setting the amount at $100, for 
example, a union official could receive a respectable set of golf 
clubs, gloves, shoes, and other golfing attire through a series of $100 
gifts without filing a Form LM-30. Most union members and members of 
the public, the Department believes, would view the gift of a complete 
set of clubs or other serial or packaged gifts as posing a potential 
conflict of interest between the union duties of the recipient and 
matters affecting the donor of the gifts.
    The purpose of the de minimis exception is to minimize reporting 
burden. A filer may not use the exception to hide the receipt of a 
series of payments or gifts that are purposely set at $20 or less to 
avoid reaching the $250 reporting threshold. For example, a filer would 
have to report his or her receipt of individual tickets worth $20 or 
less to all of a professional baseball team's home games that are 
provided before each game rather than given as a complete package at 
the start of the season. The Department is sensitive to the concern 
that by setting the de minimis level at $250 today's rule could lead to 
the unintended consequence that some union officials will choose not to 
attend some widely-attended gatherings of value to them and their 
union's members. However, the Department also believes that reporting 
attendance at legitimate educational gatherings will also benefit the 
filer by showing their union members that the filer is taking steps to 
learn and advance the skills needed for their position. As stated 
above, the Department's authority to fashion a de minimis exception is 
constrained by the language of section 202. In the Department's view, 
however, the Department is within the bounds of its discretion to craft 
a limited reporting exception for such gatherings. Thus, the Department 
concludes that no union official need report their attendance at one or 
two such gatherings annually provided the expense incurred by the 
employer or business holding the gathering is $125 or less per expected 
attendee. The Department believes this change meets the concern of some 
commenters that union officials and trustees would be discouraged from 
attending educational seminars related to their union or trustee duties 
if they were required to report such activities. The Department 
considered, but rejected as impractical and perhaps beyond the 
Department's authority, a broader qualitative exception for meetings. 
None of the comments provided a ready basis for distinguishing between 
the purposes of various meetings that would reduce the reporting burden 
without impeding the disclosure of information relevant to assessing 
the potential conflict of interest from the value of attendance at 
several meetings or a single meeting of significant economic value to a 
union official present at the meeting.

D. Why Reporting Exceptions Permitted Under the Old Rule Have Been 
Eliminated or Modified To Provide More Information to Union Members

    In the NPRM, the Department proposed the elimination of regulatory 
exceptions from the reporting requirements of section 202. One of these 
exceptions relates to the reporting by union officials of payments 
received under ``union-leave'' and ``no-docking'' policies; this 
exception is discussed separately. Although each exception is based on 
statutory language excepting the reporting of specific interests in or 
payments from an employer, the old Form LM-30 and its instructions 
apply these specific exceptions more generally to other matters that 
otherwise would have to be reported. As discussed in the NPRM, by 
administratively enlarging exceptions to reporting, the Department 
deprived union members of information

[[Page 36117]]

to which they were entitled under particular provisions of section 202. 
70 FR 51175-78. The Department also proposed to eliminate a provision 
in its regulations, 29 CFR 404.4, which now states that the Department 
may require a union official to file a special report in situations 
where the administrative exceptions departed from the language of the 
statute. 70 FR 51178.
    Under today's rule, as discussed below, the Department generally 
has adopted the proposals set forth in the NPRM to narrow the scope of 
these exceptions in order to better adhere to the statutory design. The 
Department also has eliminated the ``special reports'' language as 
unnecessary given the Department's express statutory mandate to conduct 
investigations under the Act.
1. Regular Course of Business Exception
    Section 202(a)(5) of the LMRDA requires union officials to report 
any ``business transaction or arrangement'' with an employer whose 
employees the union represents or is actively seeking to represent. 
This section excepts from reporting two categories of transactions and 
arrangements: (1) Payments and benefits received as a bona fide 
employee of an employer whose employees the official's union represents 
or is actively seeking to represent; and (2) ``purchases and sales of 
goods or services in the regular course of business at prices generally 
available to any employee of such employer.'' (Emphasis added). 
Sections 202(a)(1) and 202(a)(2) require union officers and employees 
to report payments from and other financial interests with such an 
employer. These sections do not contain this ``employee discount in the 
regular course of business'' exception, but the prior instructions 
applied it to financial matters covered by these subsections.
    The Department adopts its proposal to limit the exception to 
financial matters reportable under section 202(a)(5). Thus, this 
exception will no longer apply to matters reportable under sections 
202(a)(1) or 202(a)(2). It will not be applicable to (1) Holdings in an 
employer whose employees the union represents or is actively seeking to 
represent, (2) transactions in such holdings, (3) loans to or from such 
employer, and (4) income or any other benefit with monetary value 
(including reimbursed expenses) received from such an employer.
    The Department received a few comments specific to this issue. One 
commenter supported the proposal to remove the exception, while two 
others objected to the proposal. One commenter based its support of the 
Department's proposal in the statutory language, noting that the 
``regular course of business/employee discount'' exception is found 
only in section 202(a)(5) and not in sections 202(a)(1) and 202(a)(2). 
Therefore, this commenter contended, ``the current instructions create 
an exception for transactions under the latter two subsections that 
Congress did not envision.'' Numerous commenters objected generally to 
reporting related to the routine conduct of business, especially in 
connection with business conducted between section 3(l) trusts and 
service providers, including financial institutions. For example, one 
commenter asserted that the Department should not focus on ``routine 
business transactions conducted at arms length,'' but rather on those 
transactions that may be evidence of a potential conflict of interest.
    One commenter offered a general argument against reporting of what 
it considers to be routine business transactions, including payments or 
loans to union officials. The commenter argued, in effect, that the 
proviso in section 202(a)(6), excepting reporting on ``payments of the 
kinds referred to in section 302(c) of the Labor Management Relations 
Act,'' should be applied broadly to all the subsections of section 
202(a). Thus, this commenter argues implicitly that section 302(c) of 
the Labor Management Relations Act excepts from the section's criminal 
prohibition the payment of money or other thing of value ``with respect 
to the sale or purchase of an article or commodity at the prevailing 
market price in the regular course of business.'' 29 U.S.C. 186(c)(3). 
This commenter apparently believes that Congress also intended to 
exclude such payments from any reporting by union officials, 
notwithstanding the absence of such exception from subsections (a)(1)-
(5) of section 202.
    The Department disagrees that Congress intended the section 302(c) 
proviso in section 202(a)(6) to supplant the specific reporting 
obligations prescribed by the other five subsections of section 202(a), 
several which have unique exceptions narrowly applicable to the types 
of payments for which reports must be filed. The Department concludes 
that this construction is contrary to the plain language of the Act, 
and would render superfluous specific exclusions Congress crafted for 
particular types of payments. It would make no sense for Congress to 
craft a disclosure-specific statute with explicit reporting obligations 
and explicit exceptions and, at the same time, undo those specific 
provisions by a vague reference to another statute.
    Union members have an interest in knowing of such holdings, 
transactions in holdings, loans, and income so they can evaluate 
whether each is significant enough, or of such a nature, to constitute 
a conflict of interest. The statutory exemption for payments and other 
benefits received as a bona fide employee of the employer is sufficient 
to exempt all the ordinary payments received as part of an employment 
relationship; the exemption in the current form, the Department finds, 
may provide a means to exclude other items that present conflicts of 
interest for union officials. For example, a union officer who receives 
income from the employer of union members for contract work could, at 
least arguably, avoid disclosing the payment by relying on this 
exemption. A union employee who purchases certain types of ownership 
interests could avoid disclosing the holding by relying on this 
exemption. A union official with an employer as a client has a conflict 
between personal interests and union loyalties, as does an official 
with an ownership interest in the employer. The change is consistent 
with the plain language of the statute, which applies this exception 
only to financial matters reportable under section 202(a)(5), not to 
section 202(a)(1) or 202(a)(2). The elimination of this exemption will 
result in more detailed and transparent reporting of financial 
information that union members may find helpful in determining whether 
their union's officers and employees are subject to financial pressures 
inconsistent with their responsibilities to the union and its members.
2. Bona Fide Employee Exception for Transactions With an Employer Whose 
Employees the Official's Union Represents or Is Actively Seeking To 
Represent
    Sections 202(a)(1) and 202(a)(5) include language that specifically 
excepts ``payments and other benefits received as a bona fide employee 
of such employer'' from reporting. Under the old Form LM-30 and the 
instructions, however, this exception also was applied to matters for 
which reports were required under section 202(a)(2). Section 202(a)(2) 
requires union officials to report: (1) Transactions in holdings in an 
employer whose employees the union represents or is actively seeking to 
represent, and (2) loans to or from such an employer. Section 202(a)(2) 
does not include the ``bona fide employee'' exception.

[[Page 36118]]

    The Department proposed to limit this exception only to reports due 
under sections 202(a)(1) and 202(a)(5), thereby eliminating the old 
exception for reports (on payments other than loans) due under section 
202(a)(2). See 70 FR 51176-78, 51188. The Department received only one 
comment on this issue. It supported the proposal. Today's rule adopts 
the proposal, which is consistent with the plain language of the 
statute. A union official's decision to purchase or divest holdings in 
the employer could be of significant importance to union members and 
its reporting would prevent a possible conflict from escaping the 
scrutiny of members. As noted in the proposal, sales and purchases of 
an ownership interest in the employer are unlikely to constitute 
payments received as a bona fide employee; by eliminating this 
exception, a union official must now, for example, report payments made 
to officials as stock options where the employer buys back such 
options.
3. Exception for Bona Fide Loans or Interest From a Banking Institution
    Section 202(a)(6) requires union officials to report ``any payment 
of money or other thing of value (including reimbursed expenses)'' 
received from ``any employer'' or any labor relations consultant to an 
employer. Under the old Form LM-30 and its instructions, the following 
are excepted from reporting: ``[B]ona fide loans, interest or dividends 
from national or state banks, credit unions, savings or loan 
associations, insurance companies, or other bona fide credit 
institutions.'' See Part C (ii) of the instructions to the old form. 
The Department proposed to eliminate the exemption.
    Upon review of the comments, the Department retains the general 
exception but limits its scope because the Department has determined 
that the exception is too broad. Under the final rule, this exception 
will not apply to ``national or state banks, credit unions, savings or 
loan associations, insurance companies, or other bona fide credit 
institutions that constitute a `trust in which your labor organization 
is interested'.''
    The Department received two comments in support of the proposal to 
eliminate this exception in toto. One commenter argued that the 
exception in the Form LM-30 instructions had no statutory basis, and 
that its existence tended to shield transactions that should be 
reported. The Department received four comments opposed to this 
proposal. These commenters stated that the elimination of this 
exception would burden union officers and employees, employers, and the 
Department; interfere with the privacy of the employees as well as the 
financial institutions by revealing confidential information; and fail 
to advance the goal of disclosing potential conflicts of interest. One 
commenter argued that the Department's proposal to eliminate the 
exception was an ``unwarranted intrusion on privacy,'' while providing 
only minimal benefit to union members. This commenter questioned why 
the public should be made aware of a ``bona fide mortgage'' from a 
financial institution unrelated to the union and given on terms 
generally offered to the public. Most mortgages along with other 
encumbrances on property must be recorded with a government office, 
typically at the county level, to be effective. These filings are 
publicly available and as such the insinuation that the Department is 
now making public information that was secret is unfounded. Further, 
the vast majority of these loans will be made on neutral criteria not 
related to the filer's status with a labor organization and as such 
will not be reportable. The rare instance where the filer's status with 
the labor organization is a criterion for issuance of the loan is 
exactly the type of situation where a possible conflict of interest 
exists. As such, reporting on transactions of this type is warranted.
    Another commenter recommended that the Department only require 
reporting of loans made to employees in whole or in part due to their 
union status. The commenter expressed concern over the volume and 
diversity of new transactions that would come under the scope of the 
new Form LM-30, such as payroll advances, and the burdensome 
recordkeeping requirements that would accompany the elimination of this 
exception. One commenter argued that the ``overwhelming majority'' of 
the estimated 206,000 union officers and employees would now have to 
report under the new Form LM-30.
    The Department has concluded that the exception as drawn in the 
instructions to the old Form LM-30 is too broad. While there is a 
strong argument that elimination of the exception would best serve the 
disclosure purposes of the Act, the total burden associated with 
requiring reports on payments received from all financial institutions 
would be considerable. Loans, interest, and dividends earned during the 
regular course of business with a bona fide financial institution are 
among the most common financial transactions undertaken by individuals. 
For example, without this exception, a union official would have to 
report each mortgage or other bank loan received from any financial 
institution in competition with a financial institution that deals with 
the official's union. A union official would first have to identify all 
the financial transactions with the official, his or her spouse or 
minor children and then look at the corresponding institutions to see 
whether they do business with the official's union, or compete with 
those that deal with the official's union. In the Department's view, 
the burden would outweigh the value of the additional information 
disclosed.
    The current exception has kept improper transactions from being 
disclosed. As noted in the NPRM, the Department only belatedly became 
aware of a situation where a credit union controlled by a local union 
made 61% of its loans to four of its loan officers, three of whom were 
officers of the local. 70 FR 51177. If the officials had been required 
to report these loans, the members would have learned that their credit 
union was making loans for reasons related to union status, not on a 
borrower's ability to repay the debt, which posed a risk to the credit 
union by failing to spread the lending risk more broadly. In short, the 
members would have been able to determine whether the officials had 
placed their own personal interests above the union's interest in the 
credit union that it ostensibly controlled. By eliminating the 
exception for institutions that are trusts, valuable information 
regarding potential conflicts of interest will be publicly disclosed.
    While the Department recognizes that an official's interest in 
preserving the confidentiality of such information may be considerable; 
nonetheless, this interest is outweighed by the need for union members 
and the public to know of transactions between union officials and 
related organizations. Thus, here the balance tips in favor of 
disclosure in the limited situations proposed by today's rule.
    This exception applies, and has always applied, only to reports due 
under section 202(a)(6). Where the financial institution is an employer 
whose employees the filer's union represents or is actively seeking to 
represent, the exception would not apply. Nor would it apply where the 
financial institution is a business that buys, sells, leases or 
otherwise deals with the union, a trust in which the union is 
interested, or in substantial part with the employer of the union 
members.
    One commenter ``strongly'' disagreed with the proposal, arguing 
that it would impose a reporting obligation on union

[[Page 36119]]

officials, even though financial institutions are expressly relieved 
from reporting such loans by section 203(a)(1) of the Act. Section 
203(a)(1) specifically exempts ``payments or loans made by any national 
or State bank, credit union, insurance company, savings and loan 
association or other credit institution.'' The commenter pointed out 
the potential ``reporting inequities'' of the Department's proposal and 
argued that the inconsistent reporting obligation would make 
comparative analysis of Forms LM-10 and LM-30 impossible. The 
Department acknowledges that by modifying the exception, union 
officials will be required to report on matters about which the 
financial institutions themselves have no LMRDA reporting 
responsibility. However, the commenter overlooked the limited scope of 
the divergence. Section 203(a)(1)'s exception for ``credit 
institutions'' does not extend to any payments or loans made by such 
institutions to persuade or otherwise interfere with employee 
collective bargaining or representation rights. See 29 U.S.C. 203(a)(2) 
and (3). Furthermore, strong policy reasons exist for requiring union 
officials to report their arrangements with financial institutions in 
the limited circumstances required by today's rule.
4. Exceptions Relating to Stocks
    The Department invited comments about whether to remove or retain 
the administratively created exception related to the reporting of 
holdings, transactions or receipts of income from securities that do 
not meet the registration requirements of the Act, are of insubstantial 
value, and occur under terms unrelated to an employee's status in a 
labor organization. The old rule states: ``For purposes of this 
exclusion, holdings or transactions involving $1,000 or less and 
receipt of income of $100 or less in any one security shall be 
considered insubstantial.'' 70 FR 51176.
    On a related issue, the Department sought comments on whether to 
retain the distinction between, on the one hand, securities traded on a 
registered national stock exchange and, on the other hand, securities 
that while traded on a high volume exchange, are not traded on a 
registered national exchange (as was the case with NASDAQ until 
recently). 70 FR 51177. Section 202(b) provides that a union official 
is not required ``to report his bona fide investments in securities 
traded on a securities exchange registered as a national securities 
exchange under the Securities Exchange Act of 1934, in shares in an 
investment company registered under the Investment Company Act of 1940, 
or in securities of a public utility holding company registered under 
the Public Utility Holding Company Act of 1935, or to report any income 
derived therefrom.'' The NPRM listed all of the stock exchanges 
currently registered under the Securities and Exchange Act of 1934: 
``The American Stock Exchange, Chicago Board Options Stock Exchange, 
International Securities Exchange, National Stock Exchange (formerly 
the Cincinnati Stock Exchange), New York Stock Exchange, Pacific 
Exchange, and Philadelphia Stock Exchange.'' The proposal noted that 
NASDAQ was not registered as a national securities exchange.
    Two commenters favored the complete elimination of the 
insubstantiality exception for securities not meeting the registration 
requirements. One of these commenters argued that the insubstantiality 
exception flies in the face of clear statutory intent to require the 
reporting of all stock transactions apart from bona fide investments in 
securities traded on a national securities exchange. The other 
commenter argued that union members, not this Department, should 
determine what is and is not insubstantial. One commenter also 
supported the exception for small holdings of unregistered securities 
as long as the holdings are too small to give rise to a controlling 
interest. Focusing on the comprehensibility of the exceptions to ``end-
user'' union officials and members, another commenter stated that the 
``$1,000/100'' and ``publicly-traded securities'' exceptions are 
specific and easily understood. By contrast, all of the union 
commenters, along with a labor educator, favored the exception and 
supported its broadening.
    The Department believes that the $1,000/$100 exception is 
warranted, and therefore it is retained in today's rule. Where the 
value of securities and any interest thereon is less than these 
threshold amounts, there is little risk of potential conflict between 
an official's personal interests and his or her duties to the union. 
Moreover, any such risk is outweighed by the burden associated with 
such reporting. Thus, for these and the reasons already expressed more 
generally herein on the application of the de minimis principle to the 
reporting obligation, today's rule retains this limited reporting 
exception.
    One commenter objected to maintaining the exception for stock 
traded on other than a registered, national stock exchange on the 
ground that the statute does not provide for such an exception. Another 
commenter argued that there should be no exceptions for transactions 
involving the stock of the employer, regardless of whether the stock is 
traded on a registered securities exchange. This commenter expressed 
concern about the potential for insider trading by union officials who 
have knowledge about the position of the company that the rank and file 
members do not have. In support of his position, the commenter provides 
an example in which members of a union executive board sell stock 
options in a national exchange or private exchange shortly before 
authorizing a strike against the company that issued the stock.
    Other commenters argued that the existing exception for securities 
traded on a registered, national stock exchange should be continued and 
extended to cover stock transactions for shares traded on NASDAQ. All 
of the union commenters, along with a labor educator, favored the 
exception and supported broadening it. A commenter supported 
maintaining the exception for stock that is held in a company unrelated 
to the filer's labor organization because, in its view, there is no 
potential for a conflict of interest. In support of their position, 
they argued that the LMRDA's legislative history demonstrates that 
Congress did not want to burden officials with reporting holdings of 
publicly traded or regulated stocks ``because of the unlikelihood that 
such holdings will amount to a substantial or controlling interest * * 
* in the company in question. The argument follows that because NASDAQ 
securities are publicly regulated and publicly traded, they fall within 
the purview of what Congress sought to exempt from reporting under 
section 202(b). One commenter illustrated its position with the 
different reporting requirements that would apply if a union official 
owned both Gateway and Dell stock: the Dell stock (traded on NASDAQ) 
would be reported, whereas the Gateway stock (traded on the NYSE) would 
not be reported. According to this commenter, there is no conflict of 
interest in either instance, and accordingly neither transaction should 
be reported. Another commenter noted that when the LMRDA was enacted in 
1959, the shares of large corporations were exclusively traded on 
registered exchanges. It explains that now, however, the shares of many 
of those same large corporations are traded on the NASDAQ and that 
shares traded on NASDAQ are subject to Federal registration 
requirements.
    The Department retains the rule set forth in the instructions to 
the old rule, continuing the obligation of union officials to report 
transactions with any

[[Page 36120]]

exchange unless and until they meet the requirements embodied in 
section 202(b). As a pure matter of policy, the argument for adding 
securities traded on a highly regulated, albeit ``unregistered,'' 
market to the general exception for stock traded on a registered, 
national stock exchange may have merit. However, such argument founders 
on the plain language used by Congress to craft the exception for 
securities traded on a registered exchange as provided in the statute. 
By conditioning a reporting exception on registration, Congress 
obviously considered whether unregistered stocks should be similarly 
exempted and decided against it. Similarly, the statutory language 
prevents the Department from adopting a rule, as suggested by one 
commenter, to require officials to report their holdings in such 
securities that he or she has purchased in a company whose employees 
the official's union represents or is actively seeking to represent.
    Although the commenters have demonstrated that the exception 
crafted by Congress, differentiating between certain kinds of stock 
depending upon how they are traded, may lead to some perceived 
anomalies, they do not show that this reporting obligation will impose 
any undue burden on filers. Furthermore, on July 15, 2006, the SEC 
approved NASDAQ's application for registration as a national securities 
exchange, effective July 31, 2006. In announcing its decision, the SEC 
stated that the ``vast majority'' of the companies listed on NASDAQ 
have previously registered their securities under the Exchange Act. 
Press Release, SEC (July 31, 2006), available at http://www.sec.gov/news/press/2006/2006-127.htm (last visited on Nov. 21, 2006). Thus, 
under today's rule, the exception provided by section 202(b) applies to 
registered stocks traded on NASDAQ; and the instructions have been 
revised to reflect this change. As some of the commenters suggested, 
the distinction between highly regulated stocks that are traded on a 
national, but unregistered exchange, and those traded on a registered 
national exchange is not immediately apparent to many filers, 
particularly insofar as NASDAQ-traded securities were concerned. The 
Department believes that its proposed definition of ``publicly-traded 
securities'' (albeit something of a misnomer in that registration of a 
national exchange, not ``public trading,'' is the distinguishing 
characteristic for reporting purposes) accurately set forth the 
statutory reporting obligation. At the same time, however, the change 
in the registration status of NASDAQ has largely eliminated the need 
for a lengthy discussion of this point in the instructions. For this 
reason, the final instructions more closely follow the abbreviated 
discussion of this point in the current instructions, without the need 
for a separate definition of ``publicly-traded securities'' or an 
equivalent term.
5. Revision of Special Report Language
    As noted, the old Form LM-30 administratively excepts union 
officials from reporting various matters that otherwise would have to 
be reported under the particular subsections of section 202(a). A 
special report was intended to be used to obtain such information about 
such unreported matters upon demand of the Department. See 29 CFR 
404.4. The Department proposed to delete the special report provision.
    At the time the Form LM-30 was created, the Department apparently 
believed that more complete reporting, consistent with the reporting 
requirements of section 202, could be realized through an ad hoc 
special report that could be selectively required by the Department. 
See 29 CFR 404.4. As discussed in the NPRM, these reports would allow 
the Department to require the disclosure of the information that was 
exempted from disclosure by operation of the administrative exceptions. 
No procedures were established, however, to identify the circumstances 
for which a special report would be required; and apparently the 
Department has never requested a union official to provide a special 
report. As noted in the NPRM, the elimination of the special report 
provision does not diminish the Department's authority to assess each 
Form LM-30 report for sufficiency, require amended reports, and to 
commence investigations where it is necessary to determine whether any 
person has or is about to violate any provision of the Act. 29 U.S.C. 
440, 521.

E. Why Union Officials, as a General Rule, Must Report Payments 
Received as Members of a Company's Board of Directors

    If a union official serves as a director for an employer and 
receives compensation or reimbursement for attendance at meetings, the 
official must report such payments. Such payments may not have been 
reported on the old Form LM-30 because of an official's reliance on an 
earlier opinion by the Department on this issue. In the NPRM, the 
proposed instructions provided the following example of a transaction 
to be reported under section 202(a)(4):

    You are a national union president and a trustee of a jointly 
administered health care trust that insures union members through an 
insurance company. Premiums for coverage are paid by the trust to 
the insurance company. You are a member of the board of directors of 
the health insurance company, which pays you an annual fee and 
reimburses expenses for your attendance at board meetings. * * * As 
the insurance company is doing business with a trust in which your 
union is interested, you must report your annual fee and reimbursed 
expenses under this subsection. The dealings between the health 
insurance company and the trust must also be reported.

70 FR 51215.
    The Department only received one comment on this point. The 
commenter opposed the proposal, arguing that the Department should 
confirm its 1986 opinion that directors' fees paid to union officers 
serving on a corporate board need not be reported ``so long as the 
corporation pays the union officer/director at the same rate it pays 
the other directors, for the same services.'' The opposition was based 
on the commenter's broader premise that Congress intended to generally 
except any payments to union officials that are made in the regular 
course of business. The Department disagrees.
    In the commenter's view, the old Form LM-30, in effect, applies 
language in section 202(a)(5)--excepting from reporting certain 
transactions involving the ``purchases and sales of goods or services 
in the regular course of business at prices generally available to any 
employee of [the] employer'' who sold the goods or service--to modify 
generally the reporting obligations under section 202. The commenter 
argued that the instructions to the old Form LM-30 also apply, in 
effect, language in section 202(a)(6)--excepting from reporting certain 
payments ``of the kinds referred to in section 302(c) of the Labor 
Management Relations Act''--to modify generally the reporting 
obligations of section 202. The commenter, in essence, asserts that the 
instructions to the old form, like the 1986 opinion on directors' fees, 
which draws on similar language in section 302(c), properly effectuate 
the intent of Congress and therefore should be preserved. The commenter 
further asserts that there is no justification for additional 
recordkeeping and reporting if the union representatives are being 
treated the same as their fellow directors on a corporate board.
    The Department disagrees with this commenter's opposition to this 
reporting requirement. The commenter's reference to the 1986 opinion on 
directors' fees refers to a letter by a senior Department official 
responding to

[[Page 36121]]

a request for an opinion concerning directors' fees paid to union 
officers serving on a corporate board. The official concluded that ``so 
long as the corporation pays the union officer/director at the same 
rate that it pays the other directors, for the same services,'' the 
payments are not reportable. The opinion letter reversed a 1983 
determination by another senior Department official that the fees must 
be reported. After again carefully reviewing this question and the 
example discussed above in the NPRM, the Department concludes that the 
NPRM correctly illustrated a payment that is required under section 
202(a)(4) (a business dealing directly or indirectly with an official's 
union) and section 404.2 of the Department's regulations on reporting 
by union officials (a business dealing with a section 3(l) trust that 
involves the official's union).
    If a union official serves on an employer's board of directors and 
receives a fee, the employer has made a payment to a union official. 
Such payments are typically not of the kind referred to in section 
302(c) because the exception concerning compensation to employees is 
not applicable unless the director is employed by the company on whose 
board he or she sits, an atypical status for a corporate director. 
Further, directors' fees are not an article or commodity, and it is 
questionable whether such payments for these types of personal services 
can be said to have a prevailing market price. Significantly, these 
payments raise potential questions of a conflict of interest, due to 
the employer's role in selecting the directors and setting the amount 
of the fee. A union member has an interest in knowing whether decisions 
made by his or her union officials may have been affected by the 
official's competing personal financial interest. The commenter's 
contention that no report should be filed where union-affiliated 
directors receive the same compensation as non-union directors is not 
persuasive. The LMRDA's reach extends only to regulating the conduct of 
union officials, not to setting general standards of corporate 
governance.
    Thus, under today's rule, no separate reporting exception is made 
for directors' fees. A union official must report his or her receipt of 
directors' fees when made by an employer whose employees the payment 
recipient's union represents or is actively seeking to represent. 
Sections 202(a)(1), (2) and (5). Such fees will also be reportable when 
made by a business, a substantial part of which consists of buying, 
selling, or otherwise dealing with an employer whose employees the 
payment recipient's union represents or is actively seeking to 
represent, or any part of which consists of buying, selling, or 
otherwise dealing with the recipient's union, or a trust in which the 
recipient's union is interested. Section 202(a)(4). Finally, as 
discussed in greater detail, the official must report his or her 
receipt of directors' fees from an employer defined by this rule under 
202(a)(6) including an employer in competition with an employer whose 
employees the payment recipient's union represents or is actively 
seeking to represent.

F. Why Officers of International, National, and Intermediate Labor 
Unions, in Addition to Their Obligation to Report Payments and Other 
Financial Benefits Received From Businesses and Employers That Have a 
Direct Relationship With the Component of the Union to Which They are 
Elected or Appointed, Must Also Report Payments and Other Financial 
Benefits Received From Businesses and Employers Whose Relationship Is 
With a Subordinate Body of Their Union

    In the NPRM, the Department proposed to clarify the obligation of a 
union official to report his or her interests in and payments (and 
those of the official's spouse and minor children) from employers and 
businesses that have a relationship with the official's union, albeit 
at a different hierarchical level than the level at which the official 
serves as an officer or employee. Under sections 202(a)(1) through 
(a)(5), union officers and employees must report payments from, 
holdings in, or transactions with: (1) An employer whose employees the 
filer's labor organization represents or is actively seeking to 
represent; (2) a business a substantial part of which consists of 
dealing with an employer whose employees the filer's labor organization 
represents or is actively seeking to represent; or (3) a business that 
deals with the filer's labor organization or a trust in which the 
filer's labor organization is interested. The scope of the reporting 
obligation thus depends on what organization constitutes the filer's 
``labor organization.'' As explained in the NPRM, many labor 
organizations consist of a three-tier hierarchy, such as a local labor 
organization, an intermediate body, and a national or international 
labor organization. 70 FR 51182. The NPRM explained that the 
Department's proposal clarifies the reach of the disclosure obligation 
to include conflicts that arise between a union official and his or her 
responsibility to both the immediate unit of the union that he or she 
serves and any of its parent or subordinate bodies. The NPRM noted that 
the LMRDA Manual provides that an officer at the highest tier of a 
three-tier labor organization must report payments from businesses that 
deal with employers whose employees are represented by a subordinate 
union local. ``An international union officer must report his income 
from [a] business [that has dealings with an employer whose employees a 
local union represents] even though he is not an officer of the local 
which represents the employees of the business, and even though his 
duties as an international officer do not include representation 
activities.'' LMRDA Manual, Sec.  241.100. The proposed rulemaking 
noted that members of an LMRDA-covered labor organization would have an 
interest in knowing if a subordinate labor organization purchases goods 
or services from a business entity owned by a higher level labor 
organization officer because local union personnel may choose to deal 
with this business entity out of fear of alienating the higher level 
officer. 70 FR 51183.
    The old instructions are silent about the obligation of an officer 
or employee to report interests or income from businesses that have a 
relationship with parent or subordinate labor organizations of the 
filer's immediate union body, i.e., the particular component of the 
official's union in which he or she holds office or is employed. See 29 
U.S.C. 432(a)(4). In the same way, the instructions are silent as to 
whether labor unions affiliated with that of the union officer or 
employee are encompassed by the phrase ``an employer whose employees 
such labor organization represents or is actively seeking to 
represent.'' See 29 U.S.C. 202(a)(1), (2), (5) (emphasis added). The 
Department proposed to establish a rule requiring a union official to 
report payments he or she received from a business or employer that had 
a relationship with any component of the overall union hierarchy to 
which the official belongs or whose employees any components of that 
union represent or are actively seeking to represent. To accomplish 
this result, the Department proposed to define ``labor organization,'' 
for purposes of Form LM-30 reporting as ``the local, intermediate, or 
national or international labor organization that employed the filer, 
or in which the filer held office, during the reporting period, and any 
parent or subordinate labor organization of the filer's labor 
organization.'' 70 FR 51174.
    Commenters were divided on the proposal, with most opposed to what

[[Page 36122]]

they viewed as an expanded reporting obligation. Representative of the 
comments favoring the proposal is the following: Union members deserve 
to know whether union officers or employees ``receive benefits from 
businesses whose employees are represented by, or are actively seeking 
to be represented by, a parent or subordinate union, to form an opinion 
about whether a conflict of interests exists.'' Representative of the 
opposing viewpoint is the following: Union officers do not have the 
resources to ``trace the repercussions of each potentially reportable 
interest * * * up or down the organizational hierarchy and throughout 
the national marketplace.'' As discussed below, the Department has 
decided to modify the reporting obligation by excluding local officials 
from reporting financial interests in businesses and employers that are 
involved with higher level components of their union's hierarchy and 
clarifying and reducing the reporting obligation of officials of 
national, international, and intermediate level unions. Thus, the 
Department has narrowed the reporting obligation from that proposed in 
the NPRM by adopting the existing ``top-down'' approach. See LMRDA 
Manual, Sec.  241.100.
    The Department adopts a revised definition of ``labor 
organization,'' which reads in the instructions as follows:

    Labor organization means the local, intermediate, or national or 
international labor organization that employed the filer, or in 
which the filer held office, during the reporting period, and, in 
the case of a national or international union officer or an 
intermediate union officer, any subordinate labor organization of 
the officer's labor organization. Item 6 of the Form LM-30 
identifies the relationships between employers and ``your labor 
organization'' or ``your union'' that trigger a reporting 
requirement. Item 7 of the Form LM-30 identifies the direct and 
indirect relationships between a business (such as a goods vendor or 
a service provider) and ``your labor organization'' that trigger a 
reporting requirement. The terms ``your labor organization'' and 
``your union'' mean:
    a. For officers and employees of a local labor organization.
    Your local labor organization.
    b. For officers of an international or national labor 
organization.
    Your national or international labor organization and all of its 
affiliated intermediate bodies and all of its affiliated local labor 
organizations.
    But note: A national or international union officer does not 
have to report, payments from, or interests in businesses that deal 
with employers represented by, or actively being organized by, any 
lower level of the officer's labor organization. Such officers are 
also not required to report payments and other financial benefits 
received by their spouses or minor children as bona fide employees 
of a business or employer involved with a lower level of the 
officer's labor organization.
    c. For employees of a national or international labor 
organization.
    Your national or international labor organization.
    d. For officers of intermediate bodies.
    Your intermediate body and all of its affiliated local labor 
organizations.
    But note: An officer of an intermediate body does not have to 
report payments from or interests in businesses that deal with 
employers represented by, or actively being organized by, any lower 
level of the officer's labor organization. Such officers are also 
not required to report payments and other financial benefits 
received by their spouses or minor children as bona fide employees 
of a business or employer involved with a lower level of the 
officer's labor organization.
    e. For employees of an intermediate body.
    Your intermediate body.

    The first sentence of the definition is also adopted as part of the 
definitions section of the Department's regulations (to be codified as 
29 CFR 404.1(f)). A summary of the principal comments on this issue and 
the Department's response to the comments follows.
    Some commenters expressed a belief that the proposed definition is 
not supported by the statutory definition of ``labor organization'' at 
section 3(i). Instead, they argued that the term ``labor organization'' 
refers to the immediate labor organization of the filer, exclusive of 
any parent and subordinate entities. A commenter claimed support for 
its argument in the legislative history of the LMRDA, specifically the 
Senate Report, which discusses the conflict of interest that develops 
when a union officer is involved in collective bargaining with a 
business in which he or she has a financial interest. Id., at 15, 
reprinted in 1 Leg. History, at 411. Some commenters argued that 
interests and payments that would be reported under the Department's 
proposal do not present conflicts of interest; one commenter explained 
that transactions involving parent and subordinate organizations are 
not reportable because the union officer is not bargaining on behalf of 
those organizations.
    The Department is not persuaded that the language of the statute 
compels, or even that it can be best read to support, the conclusion 
that Congress intended to confine a union official's reporting 
obligation solely to the entity of a national or international union to 
which a particular union official is elected, appointed, or hired. As 
defined by the Act:

    ``Labor organization'' means a labor organization engaged in an 
industry affecting commerce and includes any organization of any 
kind, any agency, or employee representation committee, group, 
association, or plan so engaged in which employees participate and 
which exists for the purpose, in whole or in part, of dealing with 
employers concerning grievances, labor disputes, wages, rates of 
pay, hours, or other terms and conditions of employment, and any 
conference, general committee, joint or system board, or joint 
council so engaged which is subordinate to a national or 
international labor organization, other than a state or local 
central body.

    Section 3(i); 29 U.S.C. 402(i). This definition, broad in scope, 
does not answer the question posed by the Department's proposal. 
Section 3(i) serves mostly a functional purpose, to distinguish labor 
organizations from other groups or associations to which employees may 
belong by focusing on the organization's purpose and activities to 
collectively represent the employees in their dealings with employers 
about matters affecting various aspects of its members' employment. 
Section 3(j) of the Act, 29 U.S.C. 402(j), albeit focused on the nexus 
between an organization and its effect on interstate commerce, is more 
helpful in discerning whether Congress proceeded upon a general premise 
that it was creating rights and obligations that would be specific to 
only a particular component of a larger organization, i.e., legislating 
on a separate, component-by-component basis. If Congress had that 
intent, the Act should provide precise boundaries between entities that 
otherwise are often combined in everyday usage. The statute, however, 
does not contain such precision. Congress instead took an approach, 
consistent with the common understanding of the term ``labor 
organization'' and its flexible usage in which the existence and 
overlapping responsibilities of entities that constitute or comprise a 
labor organization are inferred unless otherwise indicated. Thus, 
Congress understood that a union engages in representation through 
various means, including certification, or through the employer's 
``recognition or acting as the representative of employees.'' Id. This 
section also recognizes that the term ``labor organization'' includes a 
``local or subordinate body'' to such an organization and a higher body 
of which it is part. See sections 3(j)(1) through 3(j)(5).
    As section 3(j) recognizes, the term ``labor organization'' 
requires a flexible meaning, depending upon the particular context in 
which it is used. For example, while section 101 of the Act establishes 
a bill of rights conferring on ``every member'' of a labor organization 
``equal rights and privileges within such organization,'' it obviously 
does not

[[Page 36123]]

create for every member of a national ``labor organization,'' the same 
rights as members of a particular component of the organization in 
voting for that component's officers, but it does confer such rights 
insofar as they are exercised within the ``larger organization.'' In 
contrast, section 104 takes a different approach; in imposing on a 
``labor organization'' the duty to provide copies of collective 
bargaining agreements, it distinguishes between the particular duty 
``in the case of a local labor organization'' and the duty ``in the 
case of a labor organization other than a local labor organization.'' 
This approach obviously contrasts with the approach taken by Congress 
in crafting the reporting obligation to file labor organization annual 
financial reports in section 201 of the Act. Although the filing 
obligation is cast in terms of ``each labor organization,'' the context 
makes clear that the obligation applies to the financial affairs of a 
particular component of a labor organization. With respect to section 
202, the context does not make clear whether the obligation is limited 
to a particular component of the union or not. Each of the particular 
requirements may be applied to an official's ``immediate labor 
organization'' or the ``larger labor organization'' to which the 
official belongs. As discussed below, the Department believes that this 
ambiguity, based on its review of the statute's legislative history and 
public policy considerations, should be resolved in favor of 
disclosure. At the same time, as discussed below, the Department has 
taken into account the burden which such a reporting obligation may 
entail and has crafted a rule that achieves a balance between 
disclosure and undue burden.
    Although some commenters apparently would argue that the language 
in section 202 evinces an intention to restrict the reporting 
obligation to the official's immediate union, this contention begs the 
question of what was intended by the referent, ``such labor 
organization,'' as used in that section. As explained above, the 
structure of the LMRDA does not compel nor even strongly suggest that 
intention. The Department believes that the disclosure purposes of the 
Act are best met by giving the term ``labor organization'' its broader 
reach in applying the reporting obligation. As discussed above, section 
3(j) recognizes that representation of employees is exercised in 
different ways, not merely through a union component that holds 
``certified'' status. Moreover, as the statute's legislative history 
and the Department's own experience bear out, national and 
international unions often exercise authority that affects subordinate 
bodies (and their members) in their relationship with employers even 
though a subordinate union holds the certification or recognition with 
the employer and may have retained formal authority over such matters. 
Given the broad reach of the term labor organization section 202's use 
of the term ``such'' in combination with ``labor organization'' does 
not qualify or restrict the reporting obligation.
    The argument, in effect, that Congress intended to restrict a union 
official's reporting obligation to the particular component of the 
union he or she serves as an officer or employee also is belied by the 
legislative history of the LMRDA. As discussed in greater detail 
herein, the genesis of the LMRDA's reporting provisions was the 
conflicts of interest between the personal financial interests of 
national and international union officials and their duty to promote 
the interest of all the members of their union. The hearings of the 
McClellan Committee revealed numerous instances whereby such officials 
took actions to advance the interests of employers with whom they had 
obtained financial benefits or the officials' own personal financial 
interests, overriding local officials and the interests of these 
locals. See Interim Report, at 4-5, 69-70, 73-74, 85-86, 122-28, 130-
31, 228, 230, 240-41, 250, 252, 262, 265-66, 298, 441-45; The Enemy 
Within, at 26, 94, 97-98, 104-06, 219-20. At the same time, the hearing 
did not show a reciprocal pattern whereby local officials were able to 
interject themselves into matters handled at higher levels of their 
union to advance the interests of an employer with whom the local 
official had a financial relationship.
    Apart from the question of legal authority, several commenters 
expressed concern about the wisdom of the Department's proposal, 
suggesting that the information sought by the Department did not pose a 
conflict of interest and that, even if it did, the burden of reporting 
outweighed any benefit from obtaining the information. For example, a 
commenter asserted that filers will be confused by the requirements and 
many individuals will unintentionally fail to report transactions 
because ``they lack knowledge of any connection between the employer 
involved and the newly expanded `labor organization' of which the 
individual is considered to be an officer or employee.''
    The Department believes that union members have an interest in 
knowing if an international, national, or intermediate union officer 
receives payments and benefits from, or holds an ownership interest in, 
a business that deals with subordinate labor organizations or trusts in 
which these labor organizations are interested. The national or 
international officer could use his or her position to influence 
subordinate labor organizations to utilize the services of that 
business. Moreover, his or her financial interests in those businesses 
create the same potential for putting the official's personal financial 
interests above his or her duties to the union and its members. The 
proposed instructions include several examples of situations that would 
create a tension between a union official's duty to the ``larger 
union'' which the official serves and his or her own personal finances. 
See 70 FR 51189-91. Union members are entitled to this information in 
order to determine if their interests are best served where a union 
official has such financial ties. Without such disclosure, it is 
unlikely that a union member would be able to determine whether such 
payments reflected a ``cut'' of the union's funds that were advanced 
for a particular purchase or to disguise a payment for services 
rendered by the official in favor of an employer whose employees are 
represented by or may be the target of organizing by a subordinate 
union of the official's union. Such reporting also prevents 
circumvention or evasion of the Act's other reporting obligations. 
Requiring union officials to report such payments not only allows 
members to ``follow the money'' that otherwise would be identified in 
the union's Form LM-2, but also increases the likelihood that the 
employer making the payment also will comply with its own obligations 
under section 203 of the Act.
    The concern about the conflicts between the personal financial 
interests of national and international officials and the interests of 
the union's members at all levels of the union underlies the 
Department's interpretation in the LMRDA Manual, at Sec.  241.100, 
quoted above. After carefully considering the comments received on this 
point and reevaluating the legislative history, the Department has 
decided to impose the reporting obligation only on union officers who 
have dealings with businesses and employers that deal with components 
of the union subordinate to the level of the union which the official 
serves as an officer. In reaching this decision, the Department 
recognized that a much greater probability exists that an official with 
a position higher in the union hierarchy would be able to

[[Page 36124]]

wield influence on matters affecting a subordinate entity than the 
reverse situation, and that officials in higher positions are more 
readily able to obtain the information needed to meet this obligation 
than someone lower placed in the union hierarchy. For similar reasons, 
the Department has determined to limit the reporting obligation to the 
national or international union's officers; under today's rule, 
employees of the national or international union are not required to 
report payments or other financial interests that solely relate to 
subordinate entities of the international. Although section 202 would 
allow such reporting, the Department believes that potential conflicts 
are much more likely to arise where a payment or other financial 
interest is received by a union officer rather than by an employee. 
Furthermore, given the typically much larger number of employees than 
officers in national and international unions, the overall reporting 
burden of the rule is minimized by excepting employees from this 
particular reporting obligation. To further reduce the overall 
reporting burden, the Department has decided to except from reporting 
payments or other financial interests received, as a bona fide 
employee, by an officer's spouse or minor child in connection with 
dealings relating to subordinate components of the officer's union--
payments that if made to the officer would be reportable. In this way, 
the rule also represents a reduction in burden from the prior rule, 
which required officers of international unions to report all payments 
to their spouses and minor children from vendors to subordinate locals.
    As noted, the cited interpretation in the Department's LMRDA Manual 
only refers to officers of an international union (and by extension to 
national unions); however, the same concerns that require such officers 
to report possible conflicts involving subordinate components of the 
union counsel for requiring intermediate union officers to report 
possible conflicts involving locals or members that the intermediate 
union oversees. The same potential for conflicts and manipulation 
exists as to the relationship between intermediate union officers and 
businesses and employers dealing with local labor organizations. For 
example, local union personnel may choose to deal with a business 
entity owned or controlled in whole or in part by an intermediate or 
national or international union officer out of fear of alienating the 
higher level officer. 70 FR 51183.
    Some commenters expressed concern that the Department's proposal 
would impose a substantial burden on union officials, requiring them to 
identify the ``spider web like'' connections between the various 
components of their union and the businesses and employers who are 
represented by any of the components or who any of the components is 
actively seeking to represent. As a general rule, local officials need 
only report payments from and other financial interests in businesses 
that sell products or services to the local or the local's section 3(l) 
trusts and employers whose employees are represented by the local or it 
is actively seeking to represent. The only other payments or interests 
that they must report are those from ``other employers'' that involve 
identified conflicts of interest. Thus, for reporting purposes, the 
local official need only identify those entities which he or she holds 
an interest in or receives a payment from and the relationship between 
these entities and the official's local.
    The burden is potentially greater for an officer of an 
international, national, or intermediate labor organization, but so 
too, as evidenced by the McClellan Committee hearings discussed above, 
is the potential for a conflict between the officer's personal finances 
and his or her duty both to the component of the union in which he or 
she serves and its subordinate bodies. In the Department's view, when 
officers have an ownership interest in a business, they should either 
have personal knowledge of whether the business deals with subordinate 
labor organizations or the ability to obtain this information from the 
business. While the information may be more difficult to obtain where 
the officer is an employee of the entity in question, rather than an 
owner, any burden is outweighed by the benefit to union members of 
obtaining reports of their official's conflicts of interests.

G. Why Union Officials Must Report Payments Under Union-Leave and No-
Docking Practices Subject to an Exception for Payments of 250 Hours or 
Less Per Year Made in Accordance With a Collective Bargaining Agreement

    The Department proposed to require union officials to report 
payments received from employers for activities engaged in by the 
officials on the union's behalf. The most common payments by employers 
to individuals for conducting union business are made pursuant to 
``union-leave'' or ``no-docking'' policies established in collective 
bargaining agreements or by customary practice. Under a union-leave 
policy, the employer continues the pay and benefits of an individual 
who works full time for a union. Under a no-docking policy, the 
employer permits individuals to devote portions of their day or work 
week to union business, such as processing grievances, with no loss of 
pay. The Department proposed that an officer or employee would have to 
report any payments for other than ``productive work,'' including 
union-leave and no-docking payments. The Department explained in its 
proposed definition of bona fide employee that these payments are not 
received as a bona fide employee of the employer; rather, they are 
received as a representative or employee of the union.
    Under the instructions to the old Form LM-30, such payments are not 
reportable if they are: ``(a) Required by law or a bona fide collective 
bargaining agreement, or (b) made pursuant to a custom or practice 
under such a collective bargaining agreement, or (c) made pursuant to a 
policy, custom, or practice with respect to employment in the 
establishment which the employer has adopted without regard to any 
holding by such employee of a position with a labor organization.'' See 
instructions, Part A, exception (iv); see also LMRDA Manual Sec.  
248.005. This section of the Manual, as noted in the NPRM, discusses 
the situation where a union officer ``is excused from his regular work 
to handle grievances and [is] paid his regular wages while handling 
grievances.'' The Manual states: ``Such a situation will not normally 
require reports from the union officer * * * on the theory that the 
employee officer is being paid for work performed of value to the 
employer who is interested in seeing to it that grievances are 
immediately adjusted.'' LMRDA Manual, Sec.  248.005. See 70 FR 51181.
    In the NPRM, the Department explained that the exception for 
payments made to a bona fide employee is required by statute, but that 
the statute is silent on the scope of the exception and specifically 
its applicability to ``union-leave,'' ``no-docking,'' and similar 
payments. The Department explained that under its proposal ``to be 
exempt from reporting, payments and other benefits received as a bona 
fide employee of the employer must be attributable to work performed 
for, and subject to the control of, the employer.''
    The Department also stated that the LMRDA Manual improperly focused 
on whether the employer feels the money is well-spent; the correct 
issue is whether or not the official is a bona fide employee of the 
payer-employer during the time for which payment was made. In making 
its proposal, the Department

[[Page 36125]]

endorsed the statement: ``Union-leave,'' and ``no-docking'' payments 
may pose a conflict of interest since there are ``union negotiators who 
may agree to reduced benefits for the employees in exchange for 
financial support for the union.'' Caterpillar v. UAW, 107 F.3d 1052, 
1060 (3d Cir. 1997) (Mansmann, J., dissenting). The Department noted 
its view that such payments should be disclosed to union members to 
enable them to evaluate the effect such payments might have on an 
official's performance of his or her duties to the union.
    The Department adopts a revised definition of ``bona fide 
employee,'' as set forth in the next paragraph. Under today's rule, 
payments to a union officer or employee under a union-leave or no-
docking arrangements set forth in a collective bargaining agreement are 
exempt from reporting unless payment is for greater than 250 hours of 
union work during the filer's fiscal year. Payments for union work 
totaling greater than 250 hours over the course of the filer's fiscal 
year are reportable as are any payments that are not made pursuant to 
arrangements set forth in a collective bargaining agreement.
    The revised definition of ``bona fide employee'' reads:

    Bona fide employee is an individual who performs work for, and 
subject to the control of, the employer.

    Note: A payment received as a bona fide employee includes wages 
and employment benefits received for work performed for, and subject 
to the control of, the employer making the payment, as well as 
compensation for work previously performed, such as earned or 
accrued wages, payments or benefits received under a bona fide 
health, welfare, pension, vacation, training or other benefit plan, 
leave for jury duty, and all payments required by law.

    Compensation received under a ``union-leave,'' or ``no-docking'' 
policy is not received as a bona fide employee of the employer 
making the payment. Under a union-leave policy, the employer 
continues the pay and benefits of an individual who works full time 
for a union. Under a no-docking policy, the employer permits 
individuals to devote portions of their day or workweek to union 
business, such as processing grievances, with no loss of pay. Such 
payments are received as an employee of the union and thus, such 
payment must be reported by the union officer or employee unless 
they (1) totaled 250 or fewer hours during the filer's fiscal year 
and (2) were paid pursuant to a bona fide collective bargaining 
agreement. If a filer must report payments for union-leave or no-
docking arrangements, the filer must enter the actual amount of 
compensation received for each hour of union work. If union-leave/
no-docking payments are received from multiple employers, each such 
payment is to be considered separately to determine if the 250 hour 
threshold has been met. For purposes of Form LM-30, stewards 
receiving union-leave/no-docking payments from an employer or lost 
time payments from a labor organization are considered employees of 
the labor organization.

    The filer will report, separately, for each such employer the total 
payments received from the employer during the filer's fiscal year for 
the work performed on the union's behalf. The filer must also calculate 
the hourly monetary value of any fringe benefits received, and include 
this figure in the total.
    The Department sought comments about any problems (or their 
absence) that have arisen by not requiring the reporting of payments 
received for union-leave, no-docking, and similar situations where a 
union official was paid for unproductive time, and whether or not there 
should be quantitative and/or qualitative distinctions to the 
disclosure obligation. Numerous comments, mostly opposed to the 
Department's proposal, were received on this question.
    A few commenters favored the Department's proposed definition of 
bona fide employee and the reporting of payments received by a filer in 
union-leave or no-docking situations. One commenter maintained that any 
payments made by an employer as part of no-docking or union-leave 
arrangements could result in union officials agreeing to trade off 
contract provisions that might benefit the entire bargaining unit in 
exchange for privileges that would benefit only union officials. 
Another commenter stated that union members may be unaware of such 
payments. His statement was based on his knowledge that one of his 
union's officers received payment from the employer for union-related 
work and that such payment was not provided for in the collective 
bargaining agreement. He stated that other members of his union did not 
know that the official received these payments from the employer.
    A large majority of the comments argued in favor of retaining the 
no-docking and union-leave exception. One commenter argued that the 
Department was abandoning a ``long-standing position without adequate 
justification.'' This commenter cited a lack of statutory authority or 
legislative history of Congressional intent to require union officials 
to report such payments, adding that any benefit from such disclosure 
was outweighed by the increased burden on filers. One commenter cited 
the Senate subcommittee hearings on the LMRDA to support its position 
that bargained no-docking and union-leave provisions were ``not 
forbidden by the AFL-CIO Code of ethical practices.'' Hearings on Union 
Financial and Administrative Practices and Procedures before the 
Subcommittee on Labor and Public Welfare (1958) (``1958 Senate 
Hearings''), at 349. Many of these commenters stressed the ``long-
standing nature'' of such practices by employers, and they particularly 
emphasized how ``commonplace'' it is to find these provisions in 
collective bargaining agreements. One commenter asserted that at the 
time the LMRDA was enacted, just over half of all collective bargaining 
agreements involving manufacturers contained no-docking provisions. 
Several comments focused upon the Labor Management Relations Act and 
its interaction with the LMRDA, and argued that national labor policy 
is to encourage collective bargaining and a ``productive and harmonious 
workplace.'' They noted that no-docking and union-leave provisions have 
been found lawful by the courts when they are part of a collective 
bargaining agreement. Some commenters maintained that sections 
202(a)(1) and 202(a)(5) are parallel to section 302 of the Labor 
Management Relations Act because each is concerned with the same kind 
of employer payments to union officials. They further argued that 
because section 302 has been interpreted by the courts to provide that 
``payments pursuant to union-leave or no-docking arrangements are 
payments `by reason of' an officer or employee's service as an employee 
of an employer,'' sections 202(a)(1) and 202(a)(5) should be similarly 
interpreted to allow for the time union officers spend on union-related 
work to be considered the work of bona fide employees. See Caterpillar, 
Inc., 107 F.3d at 1052.
    Another commenter suggested that work performed under no-docking 
and union-leave scenarios is indirectly, if not directly, performed for 
the employer, and further stated that such pay by an employer is 
analogous to other employee benefits such as sick leave, military 
leave, jury leave, and similar fringe benefits. Many commentators 
argued that union-leave, no-docking, and similar payments are usually 
made under the terms of a collective bargaining agreement and that such 
payments are usually tied to the same rate of pay that the union 
representative would receive under the agreement for time worked at his 
or her trade. One commentator argued, in effect, that there was no 
conflict because the union would pay for the representative's time if 
it was not provided for under the parties'

[[Page 36126]]

negotiated agreement. Many argued that there is nothing private or 
secretive about such payments because the terms of the payments are 
disclosed by reading the negotiated agreement and that union members 
know that their representatives are paid for the time involved in 
contract administration. Many commenters explained that union stewards 
and other union representatives perform valuable tasks for the union 
and the employer; they expressed the concern that by imposing a 
reporting obligation on such payments future attempts to establish or 
continue these roles would ``be chilled'' which, in turn, could lead to 
``a breakdown in labor-management relations.'' A few commenters were 
concerned that if the Department's proposal was adopted employees would 
be less likely to volunteer for such positions and that union officials 
would be less likely to engage in workplace activities that are 
mutually beneficial to employers and unions.
    Some comments suggested that requiring reporting of payments 
included in collective bargaining agreements would burden employers. In 
this regard, a commenter stated that if the Department's proposal is 
adopted in the final rule, unions will ``inevitably want to negotiate a 
practice pursuant to which employers track and code any no-docking time 
on pay records of union officers and employees.'' Another commented 
that the filing of ``numerous pointless reports'' would defeat the 
purpose of uncovering conflicts of interest.
    Two commenters offered possible alternative arrangements to the 
existing exception. One recommended that if the Department established 
a reporting obligation it should not require reports for activities 
that are less than two hours in length. This commenter explained that 
thirty minutes or less is usually required to resolve a question under 
a parties' agreement and that meetings only rarely extend beyond two 
hours. By modifying the proposal in this way, it argued, the reporting 
burden would be minimal. The second commenter recommended that no 
reports be required of any payments unless they totaled $10,000 per 
year, an amount, it suggested, approximates about one-quarter of a 
union steward's annual pay.
    The LMRDA does not specifically address either the legality of 
payments made under union-leave or no-docking arrangements or the 
obligation, if any, for union officials to report such payments under 
section 202 of the Act. None of the commenters have identified any 
legislative history that would shed any light on this specific 
question, and the Department's own research has uncovered none. As 
noted in the comments, the practice whereby a union official employed 
by an employer would receive his or her regular compensation while 
engaged in contract administration on behalf of the union was 
commonplace at the time the LMRDA was enacted. Contrary to the view of 
some that the absence of any discussion in the legislative history 
about this common practice evinces an intention to foreclose the 
reporting of such payments, the Department believes that this silence 
suggests that Congress simply did not consider such practices to be 
prohibited under the LMRDA or the Labor Management Relations Act and it 
did not express a view one way or another on the question of 
reportability. Moreover, the logic of the ``intention by silence'' 
argument would require the exclusion of a myriad of payments and other 
financial benefits received by union officials, such as 
``featherbedding'' or ``no show'' payments, that were not explicitly 
identified by the language of section 202 or its legislative history, 
notwithstanding their inclusion under any reasonable reading of the 
section's language.
    The Department has reviewed the case law that has developed from 
employer challenges to the legality of employer payments to union 
officials for work performed on the union's behalf. Most courts that 
have considered the question have found that such payments are not 
subject to criminal sanctions. For example, one court has stated that: 
``we see nothing in the language or logic of section 302(c)(1) [of the 
Labor Management Relations Act] to suggest that Congress did not intend 
to allow an employer to grant a bona fide employee who is a union 
official paid time off in order that he may attend to union duties.'' 
BASF Wyandotte Corp. v. Local 237, International Chemical Workers 
Union, Local 227, 791 F.2d 1046, 1050 (2d Cir. 1986). See also NLRB v. 
BASF Wyandotte Corp., 798 F.2d 849 (5th Cir. 1986) quoting H.R.Rep. No. 
245, 80th Cong., 1st Sess. 28-29 (1947), ``At the time of enactment of 
Sec.  302, Congress was well aware that ``[e]mployers generally * * * 
allow representatives of the union, without losing pay, to confer not 
only with the employer but as well with employees, and to transact 
other union business in the plant.'' See Caterpillar, Inc. v. United 
Auto Workers, 107 F.3d 1052, 1056 (3d Cir. 1997) (``By paying 
production workers for the part-time hours when they leave their 
regular duties, the company is paying for services not actually 
rendered for it, since those employees are already receiving their 
regular hourly wages and benefits for their production line work. Yet, 
no-docking arrangements have been consistently upheld by the courts as 
not in violation of Sec.  302''). See also Herrera v. United Auto 
Workers, 73 F.3d 1056 (10th Cir. 1996) (adopting the reasoning of 
Herrera v. United Auto Workers, 858 F. Supp. 1529, 1546 (D. Kan. 
1994)); NLRB v. BASF Wyandotte Corp., 798 at 855-57. At the same time, 
however, the courts have signaled that they may be less inclined to 
treat payments for union-leave as beyond criminal sanction. See Toth v. 
USX Corp., 883 F.2d 1297, 1305; NLRB v. BASF Wyandotte Corp., 798 F.2d 
at 856 n. 4; BASF Wyandotte Corp. v. Local 227, 791 F.2d at 1050. None 
of the cases, however, address the different, but immediate, question 
of whether such payments, without regard to their lawfulness, should be 
excepted from reporting under section 202 of the Act.
    The Department believes it significant that Congress in enacting 
the LMRDA uses the term ``bona fide employee'' only in section 202. 
Elsewhere it simply uses the term ``employee'' to designate a duty or 
obligation. See, e.g., section 203(a), 203(e), section 502(a), section 
503, section 609. Thus, the Department concludes that Congress intended 
to limit the exception to individuals who, in fact, are receiving 
payment for activities performed on the payer-employer's behalf. The 
Department's reading also is consistent with the meaning generally 
given ``employee'' under the common law, where ``control'' over an 
individual's work is the essential component of this status. See, e.g., 
Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 322-24 (1992).
    The position adopted by the Department better comports with the 
language of the statute, and its inferred intended application, as 
discussed above, than an alternative reading that would interpret the 
term ``bona fide employee'' to include payments made by an employer for 
work performed on behalf of the union. Members have an interest in 
knowing the amount paid to union officers or employees by the employer 
for time spent on union business. This information would be significant 
for members in assessing the effectiveness of union officers and 
employees and in evaluating candidates for union office. For example, 
during collective bargaining negotiations, an official who enjoys 
union-leave or no-docking payments may agree, or feel pressure to 
agree, to reduced benefits for employees in exchange for increases in 
his or her employer payments as a

[[Page 36127]]

union representative. Similarly, where the continuation of the no-
docking or union-leave practice in the agreement becomes a possible 
issue in negotiations, the official might be motivated, for personal 
reasons and contrary to the union's best interest, to maintain what the 
official views as a meaningful and beneficial diversion from work at 
his or her trade. It also is conceivable that a union official may feel 
pressure to forego the zealous pursuit of a grievance on behalf of a 
union member for fear of alienating the employer and jeopardizing the 
continued availability of these payments. In such instances, the union 
official's personal financial interests pose a clear conflict with the 
official's duty to the union and its members.
    The Department received a number of comments indicating that union 
members already know that some of their union officials are paid by 
their employer for union-related activities. At the same time, other 
comments indicated that such information is not as common or as 
complete as suggested. Other comments received by the Department 
indicate that some payments occur without members' knowledge and that 
members have incomplete information about the amount of such payments. 
The Department agrees that many union members are aware that some of 
their officials receive employer payments for union-related activities, 
especially where such payments are expressly provided for in a 
collective bargaining agreement, but it seems doubtful that such 
members are aware of the magnitude of such payments and other members 
are likely unaware that this practice exists. As noted by one 
commenter, it is unlikely that members will be aware of such payments 
where the collective bargaining agreement is silent about the practice 
Reporting such payments will allow union members to assess whether this 
arrangement could tempt a union official to put his personal interests 
in maintaining the arrangement above his or her duty to the union. A 
union official may well prefer to spend his or her time engaged in 
contract administration duties than, for example, performing manual 
work on a construction site or the shop floor, or processing insurance 
claims.
    The Department recognizes that a reporting requirement may impose 
some burden on union officials and employers that have ``union-leave'' 
and ``no-docking'' practices. The Department acknowledges that payments 
by employers to union representatives often will benefit both union 
members and employers. Thus, the Department has considered carefully 
the comments suggesting that its reporting proposal would interfere 
with the effectiveness of such arrangements.
    The Department concludes that its proposal will not have a 
significant effect on labor-management relations practices. No 
commenter claimed that any single employer, never mind employers 
generally, authorizes payments to union officials without accounting at 
least informally for the time expended by such individuals in 
conducting union business. Employers no doubt have a wide range of 
practices in tracking such payments, with varying levels of scrutiny, 
but the rule adopted requires no special procedures or expense, and 
nothing any more burdensome than keeping a log of the amount of time 
expended and compensation received while on union business paid by the 
employer. Moreover, by excepting any reporting where payments approved 
under a collective bargaining agreement do not exceed payment for over 
250 hours, union officials can work for over 30 days with nothing to 
report. Additionally, the Department finds unpersuasive the comments 
that a reporting requirement will significantly impede the ability of 
unions to obtain members willing to perform the jobs of stewards or 
other union positions in which they receive compensation from their 
employer for union-related activities. As noted, the Department is not 
imposing any specific method of recordkeeping or accounting on union 
officials to comply with the disclosure obligation. Moreover, this 
practice will supplement the existing obligation of a union to report 
``lost time payments'' it makes to officials and other members, either 
identified by a particular member (if he or she is paid more than 
$10,000 per annum by the union) or otherwise in aggregated form. See 
section 201(b)(3).
    The Department took into consideration the various concerns about 
the effect of its proposal in arriving at the reporting threshold of 
250 hours per year. Although union officers and employees will need to 
keep records to determine whether the 250-hour threshold is exceeded, 
there is no reporting burden for those who do not exceed this 
threshold. Further, the recordkeeping time needed to determine whether 
the threshold is exceeded consists of nothing more than keeping track 
of the time one spends performing union work, and the amount paid, with 
no need, for example, to consult with third parties or obtain records 
maintained by others. The threshold of 250 hours per year will help 
separate those who perform a significant amount of union work from 
those who do not. For example, a union officer who spends only four 
hours per week, or less than an hour per day, on union business would 
not have to report no-docking payments, because his union activities 
would correspond to 200 hours per year (subtracting two weeks for 
vacation), fewer than the 250-hour threshold. On the other hand, a 
steward, who is also a union officer or employee, who works 2 hours per 
day on union business must report the payments he or she receives. In a 
five-day work week this would convert to 10 hours of union work per 
week and 500 hours per year (subtracting two weeks for vacation). Here, 
the value of the officer's union-related work exceeds the 250-hour 
threshold and is reportable. The Department believes this approach to 
be better than one that would trigger a report if a particular meeting 
lasted longer than a prescribed amount of time or if an official's pay 
for union-related activities exceeded a particular dollar value, such 
as the $10,000 suggested by one commenter. (Based on the commenter's 
estimate of a typical steward's annual pay, the 250-hour rule requires 
less reporting than a flat $10,000 threshold.) The former would depend 
upon establishing an average for the amount of time taken to resolve a 
particular contract administration issue, a difficult task even if the 
data necessary to establish such a benchmark existed and an impossible 
task on the current rulemaking record. The latter would impose a burden 
on higher paid union officials without distinguishing between the 
amount of time they perform work for which they were hired and work for 
the union.
    A commenter requested the Department to require union officials to 
report any ``super-seniority'' protection they receive by virtue of 
their union office. Some collective bargaining agreements provide 
layoff and similar benefits to union officials allowing them to 
continue on the employer's payroll, ahead of other more senior 
employees, in order to provide continued representation of union 
members. The Department believes that this request, in part, is beyond 
the scope of the Department's proposal, which, by its terms, is only 
concerned with employer payments for work performed on a union's 
behalf. Super-seniority, as commonly understood, allows a union 
official to remain on the employer's payroll for ``production 
purposes,'' not merely to receive payment for work undertaken on the 
union's behalf. A union official who receives pay from his

[[Page 36128]]

nominal employer for union activities is subject to the general 
requirements set forth above without regard to the official's super-
seniority status.

H. What Payments and Other Financial Benefits, Received From an 
Employer or Business Whose Employees Are Not Represented by the Union 
and Which Does not Conduct Business With the Official's Union, Must Be 
Reported

    In the NPRM, the Department described section 202(a)(6) as a 
``catch-all'' for interests held in or payments to a union official (or 
his or her spouse or minor child) by an employer that would not 
otherwise be reportable under subsections 202(a)(1) through 202(a)(5). 
70 FR 51192. Under the proposal, any such interest in or payment by any 
employer would have to be reported, except for those ``payments of the 
kind referred to in section 302(c) of the Labor Management Relations 
Act,'' the exception expressly provided in section 202(a)(6).
    The NPRM thus proposed as a general rule that any payments by any 
employer to any union official would have to be reported except for 
payments expressly excepted under section 302(c) of the Labor 
Management Relations Act. A union official would have to report the 
payment without regard to whether a collective bargaining or other 
direct relationship existed between the official's union and the 
employer in question. In addition, the proposal identified some 
particular payments that would have to be reported: payments not to 
organize employees, to influence employees in any way with respect to 
their rights to organize, to take any action with respect to the status 
of employees or others as members of a labor organization, and to take 
any action with respect to bargaining or dealing with employers whose 
employees your organization represents or is actively seeking to 
represent. See 70 FR 51192.
    In the NPRM, the Department invited comments on this proposal as a 
general matter and more particularly whether section 202(a)(6) limits 
the reporting obligation to only payments that present an actual 
conflict of interest, whether such an interpretation is a permissible 
reading of the statute, and, if so, how the instructions could be 
written to implement this interpretation, without granting 
impermissible discretion to the filer to determine which financial 
matters are reportable. The Department also requested comments 
regarding the reporting of ordinary payments of wages and salaries of 
the spouse and/or minor children of the officer/employee because 
section 202(a)(6) could be read to require a union official to report 
all employment compensation paid by any employer to his or her spouse 
or minor child.
    After its review of the comments, the Department adopts a rule that 
is narrower than the proposal. Under today's rule, where a payment or 
financial interest is not reportable under subsections (a)(1) through 
(a)(5) of section 202, it is reportable as follows. A report must be 
filed for any payment of money or other thing of value (including 
reimbursed expenses) from (1) An employer that is in competition with 
an employer whose employees the filer's labor organization represents 
or is actively seeking to represent; (2) an employer that is a trust in 
which the filer's labor organization is interested as defined in 
section 3(l) of the LMRDA; (3) an employer that is a non-profit 
organization that receives or is actively and directly soliciting 
(other than by mass mail, telephone bank, or mass media) money, 
donations, or contributions from the filer's labor organization; (4) an 
employer that is a labor union that (a) Has employees represented by 
the filer's union, (b) has employees in the same occupation as those 
represented by the filer's union; (c) claims jurisdiction over work 
that is also claimed by the filer's union; (d) is a party to or will be 
affected by any proceeding in which the filer has voting authority or 
other ability to influence the outcome of the proceeding; or (e) has 
made a payment to the filer for the purpose of influencing the outcome 
of an internal union election; or (5) an employer whose interests are 
in actual or potential conflict with the interests of the filer's union 
or the filer's duties to his or her union. This rule recognizes that it 
is impossible to specifically identify all potential conflict-of-
interest payments.
    Today's rule also adopts the rule set forth in the NPRM and the 
instructions to the old Form LM-30, at Part C, requiring a report for 
any payment from any employer or a labor relations consultant to any 
union official for the following purposes:
    <bullet> Not to organize employees;
    <bullet> To influence employees in any way with respect to their 
rights to organize;
    <bullet> To take any action with respect to the status of employees 
or others as members of a labor organization;
    <bullet> To take any action with respect to bargaining or dealing 
with employers whose employees your organization represents or is 
actively seeking to represent.
    Today's rule adds to this list the following: ``To influence the 
outcome of an internal union election.''
    The discussion below addresses the principal comments submitted on 
this issue and the Department's response to those comments.
    No comments were received on the Department's proposal to require 
reporting in the circumstances identified in the bulleted points above. 
As noted, these situations are included in the instructions to the old 
form and are retained. The additional point requiring disclosure where 
a union official receives a payment ``to influence the outcome of an 
internal union election'' has been added to clarify a point already 
encompassed by ``take any action with respect to the status of 
employees * * * as members of a labor organization.''
    Two commenters supported an expansive reading of section 202(a)(6) 
to require a union official to report any and all interests in or 
payments from any employer. They argued that only by strictly limiting 
exceptions could the Department achieve the Act's goal of full 
disclosure. A third commenter asserted that only an expansive reading 
of section 202(a)(6) would provide union members and the public with 
the information necessary for them to determine whether an interest in 
or payment by an employer could pose a conflict of interest. This 
commenter stated that Congress did not intend section 202(a)(6) to be 
given such a limited reading and that even if such a gloss was added to 
the statutory language filers would likely be unable to ``honestly, 
fairly, and accurately'' determine whether a conflict exists.
    Several commenters expressed a contrary point of view. They 
asserted that unless section 202(a)(6) was narrowly applied, the 
Department would be creating a ``general reporting'' mandate, something 
that Congress intended to avoid in crafting section 202 of the Act. As 
stated in one comment (citing to Senate Report, at 15, reprinted in 1 
Leg. History, at 411): ``The bill requires only the disclosure of 
conflicts as defined therein. The other investments of union officials 
and their sources of income are left private because they are not 
matters of public concern.'' The same commenter saw evidence of a 
narrow construction from a statement in the House Report that section 
202(a)(6) was intended to reach both ``the union official who may 
receive a payment from an employer not to organize the employees,'' and 
payments that may conflict with the official's ``fiduciary duties as a 
worker's representative.'' Other commenters relied on statements by 
Senator Goldwater as support for a narrow reading of section 202(a)(6). 
See 105

[[Page 36129]]

Cong. Rec. A5812 (daily ed. Oct. 2, 1959), reprinted in 2 Leg. History, 
at 1846) (the reporting requirements were directed at those 
transactions ``which would constitute a conflict of interest,'' such as 
``holdings or interest in or the receipt of economic benefits from 
employers who deal or might deal with such union official's union'').
    One commenter cited to testimony by Professor Archibald Cox before 
the Senate subcommittee that was considering this legislation: ``The 
bill is narrowly drawn to meet a specific evil. It requires only the 
disclosure of conflicts of interest. The other investments of union 
officials and their other sources of income are left private because 
they are not matters of public concern.'' See Senate Report, at 15, 
reprinted in 1 Leg. History, at 411. Cox was a Harvard law professor 
who played a pivotal role in drafting the legislation that ultimately 
became the LMRDA. Professor Cox also noted that the Kennedy bill that 
presaged the LMRDA was based, in part, upon the Ethical Practices Code 
formulated by the AFL-CIO. Professor Cox stated that an officer who 
followed this Code would have ``virtually nothing to disclose to the 
public.'' Hearings on S. 505 before the Subcommittee on Labor of the 
Senate Committee on Labor and Public Welfare (1959) (``1959 Senate 
Hearings''), at 123.
    A few commenters conceded that the statute does not refer to 
``conflicts of interest,'' but noted that forty years of Department 
enforcement have limited this section to conflict of interest 
situations. In this connection, they cited LMRDA Manual Sec.  248.005 
that states, in part: ``[Section] 202(a)(6) is designed for those 
situations which pose conflict of interest problems which are not 
covered in the previous five sections of 202.'' Other commenters argued 
that the inclusion of ``labor relations consultant'' and the reference 
to section 302(c) of the Labor Management Relations Act evince an 
intention to tie the reporting obligation to matters that directly 
involve labor-management activities. Two comments expressed opposition 
to the reporting of ordinary payments of wages and salaries to the 
spouse and/or minor children of the officer/employee.
    The Department is persuaded that section 202(a)(6) is best read to 
require reporting by union officials only where such interests in or 
payments by employers have the evident potential to pose a conflict 
between the official's own financial interests and the official's duty 
to his or her union and which would not otherwise be captured by the 
other provisions of section 202(a). While the language of the statute 
can be read more broadly, the Department believes that a better reading 
is one which avoids redundant reporting of matters already included in 
the previous five subsections but ensures that all significant 
transactions and other payments to the official, his or her spouse, or 
minor children that may impact upon the responsibilities of a union 
official to the union he or she represents are reported. The Department 
believes that its construction of section 202(a)(6) hews to the 
accepted premise that Congress did not intend that union officials 
would have to disclose virtually all their financial affairs, while 
also ensuring that members receive information about situations other 
than those identified in sections 202(a)(1) through 202(a)(5) that may 
pose potential conflicts of interest for union officials. The 
Department's construction reasonably targets employers that could 
influence the conduct of union officers and employees and requires the 
disclosure of an official's financial information only in those 
situations.
    Four of the first five subsections of section 202(a) have as their 
focus transactions and interests, on the one hand, between a union 
official (or indirectly through his or her spouse or minor child) and, 
on the other, the official's own union or an employer whose employees 
the union represents or seeks to represent. The other subsection 
(section 202(a)(3)) has a similar focus, but requires reporting on 
interests and payments involving a business that conducts a substantial 
part of its business with an employer whose employees the union 
represents or seeks to represent.
    The Department believes that the focus of these provisions is 
instructive in discerning the scope of the reporting obligation 
encapsulated by section 202(a)(6). In each instance, the object of the 
reporting is the official's union status and an employer whose 
employees the union represents or seeks to represent. From this, the 
Department infers that section 202(a)(6) also has as its object the 
relationship between the official's union and a particular employer 
that could pose a conflict between the official's own personal 
interests and the obligation his or her union holds to employees it 
represents or is actively seeking to represent, or who provide a 
suitable target for representation. Thus, from this vantage section 
202(a)(6) can be seen to target payments by or interests held in an 
employer only when the employer has a direct interest in the 
relationship between the official's union and an employer whose 
employees the union represents or would seek to represent. And by its 
terms, section 202(a)(6) only captures payments by ``employers.'' Thus, 
the Department cannot require a union official to report payments under 
section 202(a)(6) from an individual or an entity that is not an 
``employer.''
    A relationship between, on the one hand, a union official and, on 
the other hand, a section 3(l) trust, labor organization, and not-for-
profit organization, including charities, along with ``competitors'' to 
employers whose employees the union represents or would seek to 
represent, may trigger a reporting obligation under today's rule. These 
entities usually are ``employers,'' but sometimes not. A union official 
is under no obligation to report these payments unless they are 
received from an employer. As noted, section 202(a)(6) excepts 
``payments of the kinds referred to in section 302(c) of the Labor 
Management Relations Act.'' These payments notably include payments 
received as compensation for services as a current or former employee 
of the employer making the payment and as a general rule payments made 
to or received from a trust fund set up for the sole and exclusive 
benefit of employees and their dependents. See sections 302(c)(1) and 
(5) (note that the latter contains several provisions that could affect 
reportability in some specific circumstances). As implied by the 
section 302(c) proviso to section 202(a)(6), Congress presumed that a 
payment that arises from a bona fide employment relationship between an 
employer and its employee typically will be above board with little 
potential to pose a conflict between the union official's personal 
interests and the official's duty to his or her union. For the same 
reasons, a union official is not required under today's rule to report 
payments received by the official's spouse or minor child as regular 
compensation from their employer or as a benefit under the arrangements 
permitted under section 302(c).
    Thus, under this interpretation of section 202(a)(6), a union 
official would have to report a payment received from an employer that 
competes with a company whose employees are represented by the 
official's union unless it was received by the official as regular 
compensation for his current or past employment. For example, if a 
union official receives a benefit such as a paid vacation or a gift of 
golf clubs from an employer that competes with an employer whose 
employees the official's union represents or is actively seeking to 
represent, the official must report the benefit. In this example, the 
union official would have to disclose the gift, even if the official is 
an employee of the donor, except in the unlikely event that

[[Page 36130]]

such benefit is part of the official's regular compensation as an 
employee of the donor. In this situation, the union official faces an 
obvious potential conflict between his personal finances and the duties 
he or she owes to the union and its members. Where, for example, the 
union's negotiations will set the going wage rate for particular work 
within the relevant market, an official may be more attuned to concerns 
about rising labor costs if he or she is receiving payments from a 
company whose operations are less efficient than those of the 
represented employer. Similarly, a union official may be less vigilant 
in challenging a represented employer's decision to withdraw employer-
paid dental coverage if he or she holds an interest in or receives 
payments from a vendor that would provide alternative coverage 
sponsored by the official's union.
    Similarly, a union official must report a payment he or she 
receives from a trust that is an employer unless it is a ``payment[ ] 
of the kind referred to in section 302(c) of the Labor Management 
Relations Act.'' As just discussed, a union official will not have to 
report compensation received as an employee of a trust or as a general 
rule payments received as a beneficiary of the trust. Any ``special 
payments'' or gifts, however, will have to be reported unless they are 
insubstantial as defined in today's rule.
    Under today's rule, a union official will have to report a payment 
or other financial interest he or she receives from a not-for-profit 
employer that receives or is actively and directly soliciting (other 
than by mass mail, telephone bank, or mass media) money, donations, or 
contributions from the official's union. The potential conflict arises 
because such a payment could influence the official's activities in 
approving or overseeing the union's contribution to the charity.
    The remaining situations for which a report will be required 
relating to an employer (other than one whose relationship is described 
by sections 202(a)(1) through 202(a)(5)) involve payments received by a 
union official from a union-employer (other than his or her own) where 
the official's personal financial situation poses a plain conflict with 
his or her duties to the union in which the official serves as an 
officer or employee. Payments must be reported where the payment 
received by the union official is made by a union-employer that
    <bullet> Has employees represented by the official's union, e.g., 
the official's union represents the support and professional staff at 
the headquarters of a national or international union, or it actively 
seeks to represent;
    <bullet> Has employees in the same occupation as those represented 
by the official's union;
    <bullet> Claims jurisdiction over work that is also claimed by the 
official's union;
    <bullet> Is a party to or will be affected by any proceeding in 
which the official has voting authority or other ability to influence 
the outcome of the proceeding;
    <bullet> Has made the payment to the filer for the purpose of 
influencing the outcome of an internal union election.
    In each of these situations, a payment could serve as an inducement 
to receive favorable treatment from a union whose interests are clearly 
adverse to the official's own union--either in their labor-management 
relationship, as actual or potential competitors for the same members 
or work for such members, or actual or potential protagonists on 
disputes or other inter-union matters. In the first situation, any 
payment could serve as an inducement to agree to lower negotiated wages 
for the members of the official's own union. In the second and third 
situations, the two unions are ``competitors'' for the same or 
potential members and the work they perform, thus placing them in an 
adversarial position. In the fourth situation, the payment could 
reflect an inducement for favorable treatment in the proceeding at the 
expense of the official's own union that may have an interest adverse 
to the party making the payment. In the last situation, the union 
official, either directly or indirectly, has received a personal 
benefit (gaining money to advance the official's own political agenda 
within his or her own organization) that could serve as an inducement 
to advance the interests of the party making the payment at the expense 
of the interests of the official's own union.
    The Department has attempted to clarify the form by describing 
these situations that present actual or potential conflicts of 
interest. Union officials who receive payments in these situations can 
know, without ambiguity, of the need to file Form LM-30. It is 
impossible, however, to delineate with precision all potential 
conflict-of-interest payments. For that reason, the Department has 
chosen to retain its rule that, under section 202(a)(6), all payments 
from employers whose interests are in actual or potential conflict with 
the interests of a filer's labor organization or a filer's duties to 
his or her labor organization must be reported.

I. When Is a Union ``Actively Seeking To Represent'' Employees, Thereby 
Triggering a Union Official's Obligation To Report Payments and Other 
Financial Benefits Received From the Employer That Is the Subject of 
the Organizing Drive

    The term ``actively seeking to represent'' appears several times in 
section 202; this term does not appear elsewhere in the LMRDA. The old 
instructions do not define this term. In the NPRM, the Department 
proposed to define ``actively seeking to represent'' to mean that a 
labor organization has taken steps during the filer's fiscal year to 
become the bargaining representative of the employees of an employer, 
including but not limited to:
    <bullet> Sending an organizer to an employer's facility;
    <bullet> Placing an individual in a position as an employee of an 
employer that is the subject of an organizing drive and paying that 
individual subsidies to assist in the union's organizing activities;
    <bullet> Circulating a petition for representation among employees;
    <bullet> Soliciting employees to sign membership cards;
    <bullet> Handing out leaflets;
    <bullet> Picketing; or
    <bullet> Demanding recognition or bargaining rights or obtaining or 
requesting an employer to enter into a neutrality agreement (whereby 
the employer agrees not to take a position for or against union 
representation of its employees); or otherwise committing labor or 
financial resources to seek representation of employees working for the 
employer.
    Comments were invited as to the merit and clarity of the listed 
activities and whether other examples would be helpful. 70 FR 51180. 
Comments were sought as to whether it is appropriate to trigger the 
reporting obligation on the decision to organize an employer's 
workforce distinct from taking the first concrete step to organize. 
After review and consideration of the comments, the Department has 
concluded that the definition should be modified to clarify that a 
report need only be filed where the active steps have occurred during 
the filer's fiscal year. As discussed below, this clarification partly 
addresses the concern of some commenters that such reporting may 
disclose prematurely a union's efforts to organize an employer. The 
Department has also modified the definition to clarify that leafleting 
and picketing by a union, though presumptive evidence of actively 
seeking to represent employees of an employer whose operations are

[[Page 36131]]

targeted by the union, will not trigger the reporting obligation with 
respect to the targeted employer if the union's activity is entirely 
without any organizational object. Otherwise, the definition of 
``actively seeking to represent'' is identical to that proposed.
    As noted in the NPRM, the proposed definition, in large part, is 
based on a statement from the legislative history. See Senate Report, 
at 15, reprinted in 1 Leg. History, at 411 (The phrase ``actively 
seeking to represent'' denotes ``more than that the union hopes some 
day to become the bargaining representative of a group of employees or 
claims jurisdiction to organize them. It requires specific 
organizational activities such as sending organizers into a community, 
handing out leaflets, picketing, or demanding recognition and 
bargaining rights''). House Report, at 11; reprinted in 1 Leg. History, 
at 769. As noted in the NPRM, the Department believes that the term 
``actively seeking to represent'' is intended to distinguish between 
situations where a union has taken concrete steps to organize and those 
where the union merely has an interest in organizing employees of the 
employer in question. For example, a union may wish to represent 
employees of a certain employer, and may even have finalized an 
organizing plan, but has not yet begun to implement the plan. The 
Department explained that in such circumstances the union is not yet 
actively seeking to represent employees of this employer.
    Commenters argued that the Department's proposal would improperly 
impede a union's organizing efforts. One commenter stated that Congress 
intended to limit this term to only those instances where the union had 
instituted some kind of organizational activity, either sending 
organizers into the plants or picketing or distributing leaflets within 
the plant. The Department disagrees with the suggestion that its 
proposal departs from the legislative history. The Department's 
proposal is consistent with the illustrations provided in the Houses 
and Senate reports on the LMRDA, as quoted in the NPRM. These reports 
explicitly recognize that this reporting obligation is not solely 
triggered by in-plant activity. Among the illustrated situations that 
would trigger a reporting obligation is where a union ``send[s] 
organizers out into the community.'' In context, it is plain that this 
term refers to a community in the sense of the geographic area within 
which an employer's facilities are located, not a limited application 
to employees comprising a community delimited by the employer's 
facilities.
    Some commenters expressed concern about the difficulty of applying 
the general requirement to report payments that arise after a union 
``otherwise commits labor or financial resources to seek representation 
of employees working for a particular employer.'' They also argue that 
this proviso may go beyond the asserted limitation intended by Congress 
in describing this aspect of the reporting obligation to ``specific 
organizational activities.'' The Department recognizes that this factor 
lacks the specificity of the other factors used to describe the reach 
of the term ``actively seeking to represent.'' Its wording, however, is 
deliberate in order to capture the general purpose of the test and 
reduce any prospect that a filer would read the list of factors as 
exhaustive. At the same time, this factor was designed to distinguish 
between general union strategizing or planning, which would not be 
reportable, and concrete activities that have been directed at a 
particular employer. In this connection, one commenter raised a concern 
that the test proposed by the Department failed to clearly indicate 
whether a decision by the union to undertake organizing activity in the 
future triggers the reporting obligation or whether the concrete, 
future action triggers the reporting requirement. The instructions have 
been clarified to make plain that the former does not trigger the 
reporting obligation.
    Another commenter asserts that the Department should establish ``a 
bright line rule'' where the Department would define ``actively seeking 
to represent'' as (1) Having a pending election petition before the 
NLRB during the reporting period at issue, or (2) demanding voluntary 
recognition from the employer during the reporting period involved. The 
Department disagrees that the bright line suggested above would be 
beneficial. The suggested rule is unnecessarily narrow and would fail 
to effectuate the clearly expressed intention to include other concrete 
steps that evidence ``actively seeking to represent,'' including 
leafleting and picketing, as identified in the House and Senate reports 
discussed in the NPRM.
    Commenters suggest that payments and activities relating to ``area 
standards'' picketing should not be considered as steps taken to 
actively represent an employer's workers. Instead, these commenters 
asserted leafleting and picketing often are used in area pay and 
benefit standards disputes, serving as just a preliminary step to 
determine whether or not to initiate an organizing campaign. Therefore, 
according to the commenter, such steps should not trigger a reporting 
obligation. The Department believes that there is a reasonable basis 
for treating leafleting and picketing by a union as evidence that a 
union is ``actively seeking to represent'' the employees of the 
targeted employer and for triggering a reporting obligation where there 
are other indicia of a union's effort to ``actively seeking to 
represent'' such employees. In this regard, the Department notes that 
there is no evidence that Congress intended a limited application of 
the reporting obligation to situations where the leafleting or 
picketing is solely undertaken for the object of organizing an 
employer's workforce. Moreover, although the commenter suggests 
otherwise, it is the Department's view that in many instances 
informational or standards picketing reflects a union's first concrete 
steps to organize an employer and, as such, is an action within the 
intended reach of ``actively seeking to represent.'' At the same time, 
the Department recognizes that there are instances where such picketing 
or leafleting is wholly unrelated to organizational or representational 
objectives. For example, if a union pickets a sporting goods retailer 
solely for the purpose of alerting the public that the retailer is 
selling goods that are made by children working in oppressive 
conditions in violation of accepted international labor standards, the 
picketing in these circumstances would not meet the ``actively seeking 
to represent'' standard. The revised Form LM-30 instructions in today's 
rule alert filers to this distinction.
    A commenter endorses the inclusion of ``requesting an employer to 
enter into a neutrality agreement'' in the proposed definition as a 
concrete example of ``actively seeking to represent'' an employer's 
employees. It asserted that neutrality agreements have become the 
preferred method of organizing employees. No comments were received 
suggesting that entry into a neutrality agreement does not reflect an 
active step to represent the employer's employees. Thus, the Department 
will continue to recognize the execution of such agreements as evidence 
that a union is actively seeking to represent the employees of the 
employer with whom the agreement was reached.
    Some commenters expressed the concern that exposing a union's use 
of ``salts'' in an organizing campaign would make the employer aware of 
the campaign and hinder organizing efforts and might target the 
official, his or her spouse, or minor child for dismissal by the 
employer if any of them are working as the ``salt.'' As reflected in 
the Department's proposal, the term ``salt''

[[Page 36132]]

refers to an individual who applies for a position with an employer 
that is the subject of an organizing drive intending to surreptitiously 
work on the ``inside'' in support of the union's organizing activities 
and as it directs.
    The Department recognizes that some organizing activities are 
initiated without notice to the public or an employer, but there would 
appear to be few situations, where the disclosure of a reported 
interest on the Form LM-30 would be the first open acknowledgment of 
the union's active efforts to represent employees. In response to the 
concern that the disclosure of a reportable interest would alert an 
employer to the presence of a ``salt'' in the employer's workforce, the 
Department notes that payments from the employer for whom the salt 
performs the manufacturing or other work for which he was hired are 
payments to a bona fide employee; as such, these payments would not be 
reportable. Likewise, any payments by the union to the salt as an 
employee of the union also would not be reportable on the Form LM-30. 
The Department recognizes that there may be some instances, however, 
where an official would have to file a Form LM-30 because of the 
employment of salts by a particular employer. For example, if a union 
official owns a cleaning service that does substantial business with a 
company in which the official's union has placed ``salts,'' the union 
official would have to file a report, disclosing payments from the 
company to the official's cleaning service. Although this report if it 
came to the attention of the target employer would disclose the union's 
objective to organize its employees, if and when the employer becomes 
aware of such information, the employer likely would already have 
learned of the union's campaign. There would ordinarily be a 
substantial delay between the salt activity and the report's filing. 
Form LM-30s are filed annually and are due 90 days after the end of the 
filer's fiscal year. Thus, the definition of actively seeking to 
represent is not expected to significantly compromise the use of salts 
in organizing.
    The Department acknowledges, however, that the timely submission of 
the Form LM-30, in some instances, may put at risk the secrecy of a 
union's organizing campaign and the relationship that gives rise to the 
reporting obligation. For this reason, the Department has carefully 
considered whether it would be appropriate to take steps to minimize 
the risks from such disclosure.
    In crafting the Form LM-2, the Department, sensitive to union 
concerns about the premature disclosure of their organizing tactics, 
established reporting categories and itemization rules designed to 
minimize similar risks, while at the same time adhering to the 
requirements of section 202 of the Act, 29 U.S.C. 431. See 68 FR 58395-
97. Although, for example, the Department chose to allow the 
disaggregated reporting of some organizing expenditures, it rejected 
the option to shield from disclosure all expenditures related to 
``salts.'' The Department recognized that section 201(b)(3) expressly 
provided that unions annually report the ``salary, allowances, and 
other direct or indirect disbursements (including reimbursed expenses) 
to each officer and also to each employee who * * * received more than 
$10,000 in the aggregate from such labor organization and any other 
labor organization affiliated with it or with which it is affiliated * 
* *.'' 29 U.S.C. 431(b)(3). Thus, as recognized in the preamble to the 
Form LM-2: ``[I]f a ``salt'' is paid $10,000 or more per year as an 
employee of the union, the union is obliged by statute to list him by 
name on the Form LM-2 and to report the amount of his compensation.'' 
The statutory language added support to the policy determination in the 
Form LM-2 context that ``salt'' information was necessary for union 
members to be properly informed about their union's finances. In 
contrast, the same policy reasons did not, in the Department's view, 
compel that a union itemize organizational expenses (other than these 
payments to union officials). The Department reasoned that even without 
such itemization, the particular information would be available to 
union members upon request pursuant to section 201(c), 29 U.S.C. 
431(c). See 68 FR 58397; see also 68 FR 58386-87. Thus, the Department 
decided to allow Form LM-2 filers the option to report such payments 
without itemization, recognizing that the information relating to these 
expenditures would be made available to union members under section 
202(c) of the LMRDA.
    With regard to the immediate Form LM-30 reporting issue, the 
Department is guided by the language of section 202(a)(1), (2) & (5) of 
the LMRDA, requiring union officials to disclose specified conflicts of 
interest, including ``any income or other benefit with monetary value * 
* * derived * * * from an employer whose employees such labor 
organization * * * is actively seeking to represent.'' 29 U.S.C. 
432(a)(1), (2) & (5). In the Department's view, this language evinces a 
particular concern by Congress about conflicts that arise while a union 
is actively seeking to represent employees. The same concern is the 
basis for the Department's determination, as a matter of policy, that 
such payments pose serious questions regarding conflicted loyalties 
(including the possibility of collusion in some instances). As such 
this information is particularly important to union members, the 
Department, and the public. The need for transparency, thus outweighs, 
in the Department's view, any risk to a union's covert organizing 
activities by requiring the disclosure of any interests, transactions, 
and payment that arise while the filer's union is actively seeking to 
represent the targeted employees. Further, the statute authorizing the 
Form LM-30, 29 U.S.C. 432, contains no provision that would mitigate 
the lack of transparency caused by crafting a filing exemption for 
payments that would disclose the use of salts in organizing. Unlike the 
statute authorizing the Form LM-2, 29 U.S.C. 431, there is no statutory 
provision for union members to obtain records from union officers and 
employees necessary to verify the Form LM-30.
    Two commenters argued that the proposed definition poses particular 
difficulties for a local official who may be unaware of organizing 
activities undertaken by his or her international union or an 
international official that is unaware of a local's efforts to organize 
a particular employer. Similarly, several officers from large 
construction unions felt that the reporting requirement was too broad 
since it would be difficult for officers and employees to know about 
all instances of picketing, billing and other initial organizing 
efforts that go on in a single reporting year. The Department 
recognizes that the expanded scope of reporting may pose some 
difficulties for particular union officials. In consideration of this 
concern, as reflected in the comments summarized above, the Department 
has narrowed the scope of the reporting obligation for local and 
intermediate officers from that proposed in the NPRM. They do not have 
to report on matters affecting higher levels within their union. 
Officers of a national or international union, however, remain 
responsible for reporting activities affected by picketing or 
leafleting by subordinate units of their organization. Further, union 
officers and employees voluntarily receive reportable payments from or 
hold reportable interests in employers. The union officer or employee 
is perfectly free to refrain from taking such payments or holding such 
interests. If there is a fear that an organizing campaign could 
possibly be

[[Page 36133]]

exposed by filing a Form LM-30 the union officer or employees does not 
have to take the payment or hold the reportable interest.
    One commenter recommended that the Department clarify that payments 
from employers not to organize an employer, i.e., attempts at ``labor 
peace,'' should be reported. Another suggested that neutrality 
agreements ``are especially ripe for sweetheart deals'' where union 
officers and union employees can benefit at the expense of bargaining 
unit employees as, without reporting requirements for these instances, 
``it is nearly impossible'' for workers to learn what gifts an employer 
has given a union or the union's officials during an organizing drive. 
Apart from the asserted vulnerability of neutrality agreements to 
manipulation by employers and union officials, these commenters express 
a concern oft repeated in the comments that union officials should be 
required to report all payments they receive from employers. As 
discussed herein, Congress did not intend to impose such a sweeping 
obligation. Moreover, the Department is confident that today's final 
rule requires the disclosure of any payments that would impede the 
collective bargaining or internal union rights of a union's members.

J. How Union Officials Will Determine Whether an Entity From Which They 
Receive a Payment or Other Financial Benefit Does a ``A Substantial 
Part'' of its Business With an Employer Whose Employees Are Represented 
by the Official's Union or the Union It Is Actively Seeking To 
Represent

    Section 202(a)(3) requires union officials to report any interests 
in and payments from, ``any business a substantial part of which 
consists of buying from, selling or leasing to, or otherwise dealing 
with, the business of an employer whose employees such labor 
organization represents or is actively seeking to represent'' (emphasis 
added). The old rule does not define ``substantial part.'' The 
Department proposed to define this term as 5% or more of the business's 
annual receipts. The Department requested comments on various aspects 
of this proposal, including whether a percentage threshold should be 
imposed, whether the percentage threshold should be higher or lower 
than 5%, whether a percentage of receipts is the appropriate 
consideration, and whether union officials with holdings in, or income 
from, a business would be able to determine the percentage of the 
business's income that comes from dealings with the employer. 70 FR 
51186.
    The Department did not receive many comments on this proposal. Most 
of the comments, as discussed below, either opposed the quantification 
of ``substantial'' or suggested that it be set at an amount higher than 
5%. After review of the comments, the Department has determined that 
10% or more of a business's annual receipts will be considered ``a 
substantial part'' of its business.
    Two commenters recommended that the Department not define 
``substantial part'' in quantitative terms. A labor educator stated 
that his study participants characterized the 5% threshold as too low; 
he also stated that the participants were concerned about the potential 
difficulty of obtaining information about the percentage of business a 
vendor conducts with a particular employer. Another commenter expressed 
the same concern, noting that information about a vendor's receipts is 
generally not publicly available and employers would be reluctant to 
provide such confidential information. The same commenter expressed the 
view that a 5% threshold likely would be too low for a union officer to 
be aware of a vendor-employer relationship that required reporting. Two 
commenters suggested that that the Department should define 
``substantial part'' as a ``sufficient magnitude of business that its 
loss would materially affect the financial well-being of the business 
enterprise in question.'' While this statement may be helpful as a 
capsule view of the purpose underlying this particular reporting 
obligation, the statement does not provide filers a ready gauge to 
determine when a report must be filed. Further, such an approach would 
make relevant facts that would be difficult for union officials to 
ascertain. For a precarious business with overwhelming debt to service, 
the loss of 2% of revenue could be devastating. A different business, 
in an environment in which demand outstrips its production capacity, 
the loss of clients constituting a much higher percentage of its 
business may not be as much of a concern. It is difficult to imagine 
how a union official could learn the facts necessary to determine 
whether the loss of a client would materially affect the business 
enterprise. Thus, in the Department's view, the questions posed by its 
proposal are (1) What volume of business, expressed as a percentage of 
the vendor's annual receipts, is necessary to achieve the proper 
balance between insubstantial dealings and those that pose a risk of a 
conflict of interest, and thus, trigger the reporting obligation; and 
(2) whether a filer will be able, without undue burden, to obtain 
information needed to make the threshold determination.
    In the NPRM, the Department explained that ``substantial part,'' as 
used in section 202(a)(3) and the instructions, refers to the magnitude 
of the business transacted between any business in which a union 
official holds an interest or receives payment from (referred to herein 
as ``the vendor'') and the employer whose employees the filer's labor 
organization represents or is actively seeking to represent, as a 
percentage of all business transacted by the business. 70 FR 51186. The 
purpose of the ``substantial part'' language is to relieve union 
officials from having to report income or transactions that do not have 
potential conflict-of-interest implications. In the NPRM, the 
Department expressed its view that an official who has an interest in, 
or receives income from, a vendor that receives 5% or more of its 
income from the employer of the union members may well face a conflict. 
The Department explained that a business with 5% of its receipts from a 
single client would have the opportunity and inclination to make 
demands or offer inducements to retain that business. In negotiations 
with the union, the employer could use its relationship with the 
business as a bargaining tool, either threatening to end the 
relationship or promising to provide additional business opportunities.
    The Department is not persuaded that there is any benefit in 
leaving the term ``substantial part'' undefined. The Department 
acknowledges that, in other contexts, statutes and regulations leave 
``substantial'' undefined or use qualitative factors to give content to 
the term, e.g., 18 U.S.C. 1093 (defining substantial as ``such 
numerical significance,'' the loss of which would destroy the ``group 
as a viable entity''). For reporting purposes, however, the utility of 
a less subjective approach is obvious. A definition that pegs 
``substantial'' to the volume of business conducted by a vendor with a 
particular entity as a percentage of all business provides a ready, 
easy to understand gauge to determine a union official's reporting 
obligation.
    One commenter asserted that the 5% threshold represents a 
significant departure from the Department's earlier interpretation of 
``substantial part.'' In support of this assertion, the commenter cited 
to a provision in the LMRDA Interpretative Manual (``LMRDA Manual''), 
which provides as follows:


[[Page 36134]]



245.200 Substantiality of Dealing

    Union Officers A and B of a local union are co-owners of a 
building corporation. The corporation, through intermediaries who 
are regular meat wholesalers, sold meat to employers who bargain 
with the local union. In 1962, some 80% of the corporation's 
business of approximately $100,000 was with such employers. Both A 
and B owe reports for the year 1962 * * *, since both the interest 
and the income are ``derived from any business a substantial part of 
which consists of buying from, selling or leasing to, or otherwise 
dealing with, the business of an employer whose employees such labor 
organization represents or is actively seeking to represent.''

    LMRDA Manual Sec.  245.200. (Emphasis in original). The commenter 
reads this provision to establish 80% as the threshold for reporting 
about a union official's interest in or payments from a vendor. He 
suggested that the Department should adopt the same quantitative 
threshold in the final rule. Noting his concerns about the difficulty a 
potential filer would face in obtaining information about the measure 
of a vendor's dealings with a target employer, he further proposed that 
no report need be filed unless the filer possesses actual knowledge 
that the vendor performs 80% or more its business for the target 
employer.
    The Department rejects the suggestion that the above-quoted section 
of the LMRDA Manual can be fairly read to establish a reporting 
threshold. The Manual indicates only that an officer who receives a 
payment from a business that receives 80% of its receipts from the 
employer of the union members must file a report. It does not state 
that receipts of less than 80% from the employer would be unreportable. 
The 80% figure in the example reflects a rather obvious situation where 
a substantial business relationship exists thus requiring a report. The 
illustration provides no assistance in determining the minimum volume 
of business that would trigger the reporting obligation. Similarly, the 
Department finds no merit to the suggestion that a reporting obligation 
attaches only where a union official possesses actual knowledge that 
the vendor's volume of business with a relevant employer was greater 
than the reporting threshold. The folly of this approach is obvious 
where the reporting threshold is set at 80%; it would allow a union 
official to avoid a conspicuous reporting obligation and provide an 
incentive for a union official to remain willfully ignorant of the 
business relationship between a vendor in which he or she holds an 
interest or from which he or she receives a payment and an employer 
whose employees the official's union represents or is actively seeking 
to represent.
    The Department does, however, accept the proposition that 
increasing the threshold decreases the burden on filers by reducing the 
number of reportable transactions. For that reason, the Department is 
persuaded that an upward adjustment is appropriate. As noted, the 
purposes served by section 202(a)(3) require a reporting threshold that 
balances the burden associated with reporting insubstantial matters and 
the benefit served by the disclosure of any potential conflicts between 
a union official's personal finances and the duties owed by him or her 
to the union and its members. To the extent there is some uncertainty 
as to where best to strike the balance, the Department believes that a 
lower threshold best ensures that disclosure will serve a prophylactic 
purpose. Based on the comments and a reassessment of the potential 
difficulties posed to filers in obtaining information from a vendor, 
the Department has decided to double the reporting threshold to 10%. 
The Department believes that setting the threshold level at 10% will 
achieve the balance required by the statute.
    The Department recognizes that some union officials with a 
reportable interest or payment may encounter difficulty in obtaining 
information about the amount of business a vendor conducts with the 
employer whose employees are represented by the official's union. The 
Department, however, believes that the burden is overstated, especially 
where the union official holds an ownership or operating interest in 
the vendor. In those instances, there should be little trouble in 
obtaining the needed information. In instances where the union official 
is an employee of the vendor or receives an occasional payment, some 
problems are more likely to arise. In such instances, the union 
official should request such information in writing from the vendor. If 
the vendor refuses to provide the information, the official should 
contact the Department for assistance in obtaining the information. In 
the meanwhile, the union official should make a good faith estimate, 
based on the information reasonably available, whether the 10% 
threshold has been met. If such estimate exceeds the 10% threshold, 
then the union official should file the report and explain that the 
vendor failed to provide requested information. If the estimate yields 
a figure less than 10%, no report is required, but the union official 
should retain the written request for information he or she presented 
to the vendor and any work sheet used to arrive at the less than 10% 
figure. If an investigation is conducted, there is no risk of 
prosecution absent unusual circumstances calling into doubt the 
legitimacy of the good faith estimate.

K. Why Payments and Other Financial Benefits Received From Section 3(l) 
Trusts and Service Providers to Such Trusts Must be Reported

    Numerous unions, law firms, and organizations representing 
financial service providers submitted comments urging the Department to 
modify or eliminate aspects of its proposed rule as it would affect a 
union official's obligation to report payments and other financial 
benefits received from section 3(l) trusts. In the NPRM, the Department 
stated that it had received compliance inquiries about whether payments 
from a union to a trust in which the union is interested constitute 
``dealing[s]'' between the trust and the union under section 202(a)(4).
    In the NPRM, the Department also invited comment on whether trusts 
set up by unions to provide benefits to their members, such as pension 
or welfare plans, constitute ``employers'' under section 202(a)(6) or 
``business[es]'' under section 202(a)(3) and section 202(a)(4) so that 
payments from such organizations to union officials would be 
reportable. 70 FR 51182. Several commenters expressed the view that the 
Department was improperly extending the reporting obligation to 
payments received from service providers to trusts. In a similar vein, 
several commenters suggested that the Department was improperly 
requiring reports by labor union officials serving as employees or 
representatives of trusts on matters for which reporting already is 
required by ERISA. As part of their concerns, several commenters 
objected to the proposal on procedural grounds. In essence, they 
asserted that service providers and other potential Form LM-10 filers 
will be bound by the Department's final Form LM-30 rule, denying them 
the full opportunity for notice and comment.
    A summary of the principal comments on these various points 
concerning a union official's obligation to report payments and other 
financial benefits received from section 3(l) trusts and the interplay 
between ERISA and the LMRDA and the Department's response to these 
comments follows. The Department first briefly addresses the contention 
that the Department's proposal is procedurally flawed because it 
prescribes rules that must be followed by employers under section 203 
of the Act without providing that community the full opportunity for 
notice and comment. The Department next

[[Page 36135]]

discusses the concern that requiring union officials to report their 
interests in or payments by trusts as employers or vendors providing 
services to those trusts represents a departure from the Department's 
asserted longstanding policy excepting reports about payments by trusts 
and their vendors and the contention that the Department's position is 
contrary to ERISA or, at the least, impedes that Act's proper 
administration. The Department, in the final paragraphs of this 
section, discusses the issue whether trusts and other not-for-profit 
entities constitute businesses, followed by the separate, yet related 
question, whether trusts and other not-for-profit entities constitute 
``employers.''
1. Alleged Procedural Shortcoming
    Today's rule is specific to Form LM-30 filers. It does not amend or 
modify in any way the Department's current rules specific to the Form 
LM-10. Any interpretation or guidance issued on the Form LM-10 remains 
in effect unless later changed by the Department. Any interpretation, 
guidance or amendment to Form LM-10 will conform to legal requirements 
appropriate to the nature of any such changes, including notice and 
comment rulemaking where required. Thus, the Department finds that any 
concerns that the Department's proposal is procedurally flawed are 
misplaced.
2. Routine Exceptions
    Many commenters urged the Department to not ``extend'' the 
reporting requirements to include payments to union officials by trusts 
or their service providers. Several asserted that the Department had 
never required union officials (or employers under Form LM-10) to 
report such payments. Numerous commenters objected generally to any 
reporting of gifts associated with the routine conduct of business, 
especially in connection with marketing by service providers to gain 
and maintain business with union-related trusts. Some objected 
generally, on the ground that Congress never intended that routine 
business expenses would be the subject of reporting. Some commenters 
offered a variation of this argument, asserting that Congress intended 
a general reporting exception for payments made in the regular course 
of business. A common theme in the comments is the claim that the 
affected community has understood that the LMRDA focuses solely on 
financial transactions involving unions and employers whose employees 
are represented by a union or a union has targeted for representation. 
In their view, the statute does not impose reporting obligations on 
financial institutions or service provider activities that have no 
connection to the union's labor-management relationship. A variant of 
the theme, unique to financial institutions, is that no reporting 
obligation exists for union officials who receive payments from 
financial institutions. Their position is based on the language of 
section 203, which excepts financial institutions from reporting 
``payments or loans'' made to union officials. This issue is discussed 
below.
    The suggestion that the Department is imposing a new reporting 
obligation on union officials for payments received by them from 
service providers to trusts is incorrect. A union official's obligation 
to report such payments has been plainly stated for over forty years in 
instructions to the Form LM-30. Indeed, the old Form LM-30 includes the 
explicit statement that ``every [union official] must file a detailed 
report describing certain financial transactions engaged in, and 
interests held by, the [official] or his/her spouse or minor child 
[including] * * * legal and equitable interests in, transactions with, 
and economic benefits from certain businesses * * * which deal[ ] with 
the union or a trust in which the [union] is interested.'' 
Instructions, Part III. The first Form LM-30 promulgated by the 
Department required filers to disclose ``An interest in or derived 
income or economic benefit with monetary value from a business * * * 
any part of which consists of buying from or selling or leasing 
directly or indirectly to, or otherwise dealing with your labor 
organization or with a trust in which your labor organization is 
interested.'' See BNA, Daily Labor Report, No. 192: A-6, E-1 (Oct. 2, 
1963). (Emphasis added). Similarly, the LMRDA Manual specifically 
identifies payments from insurance companies to union officials as 
matters reportable on Form LM-30. As there stated: ``A union officer, 
who is an employee of an insurance company from which the union welfare 
fund procures insurance, is required to report that money which he 
receives as an employee of the insurance company, inasmuch as he 
derives income from a business which sells to or otherwise deals with a 
labor organization of which he is an officer.'' LMRDA Manual Sec.  
246.600.
    The commenters cite no authority for their broad claim that the 
Department's position is a departure from a longstanding policy, nor do 
they provide a well-reasoned argument for how the statute would permit 
the Department the discretion to except from reporting payments from 
employers and businesses that have such extensive and ongoing 
activities with unions and section 3(l) trusts. Given the continuity in 
the Department's interpretation, a more accurate characterization might 
be the longstanding inattention to reporting such payments received 
from trusts and their service providers. Many unions and their section 
3(l) trusts manage benefit plans for their members, maintaining close 
business relationships with financial service providers such as 
insurance companies and investment firms. As discussed in greater 
detail herein, contemporary business and financial practices increase 
the prospect that union officials may receive payments from or hold 
financial interests in these businesses. Given these practices, the 
Department believes that disclosure is critical to promoting good union 
governance and fostering ethical behavior. Thus, the Department 
disagrees, on both legal and policy grounds, with the notion that 
payments from service providers or financial institutions should be 
excepted from reporting. Such payments carry with them a particular 
potential for conflict and as such warrant particular scrutiny by union 
members and the public.
    The asserted historical grounds for excepting payments by service 
providers and financial institutions from reporting are unpersuasive. 
The legislative history establishes that Congress intended that union 
officials report any gifts or payments from employers seeking to profit 
from their relationship with a union or its officials. Congress 
understood that the bill that became the LMRDA ``is drawn broadly 
enough * * * to require disclosure of any personal gain which an 
officer or employee may be securing at the expense of the union 
members.'' Senate. Report, at 15, reprinted in 1 Leg. History, at 411. 
As stated by Professor Cox, ``the basic theory [underlying the Act's 
conflict of interest provisions] is [that all] payments made by 
employers to labor organizations or union officials are prima facie 
questionable. Some may be justified. The bill does not forbid the 
payments. [The bill] simply requires that they be covered by public 
reports so that the employees affected and the public may know what has 
occurred.'' 1959 Senate Hearings, at 127. The legislative history 
illustrates how Congress believed the LMRDA would operate. The 
principal focus of the McClellan Committee was on the activities of the 
Teamsters Union and the conduct of three of its highest ranking 
officials: Dave Beck, Frank

[[Page 36136]]

Brewster, and Jimmy Hoffa. Each official engaged in unlawful activities 
that could not have been accomplished without the complicity of banks 
and insurance companies. Banks and insurance companies were used by 
these officials, often to the mutual benefit of the officials and the 
commercial entities, to carry out such activities and to otherwise 
provide unlawful gain to the officials. As explained by Senator 
Kennedy: ``Mr. Hoffa would be required to disclose all of his business 
dealings with insurance agents handling the union's welfare funds, his 
private arrangements with employers, his hidden partnerships in 
business ventures foisted upon his members, and all other possible 
conflicts of interest.'' 105 Cong. Rec. S817 (daily ed. Jan. 20, 1959), 
reprinted in 2 Leg. History, at 969.
    The AFL-CIO Ethical Practices Codes, which served as the foundation 
for the LMRDA conflict of interest reporting provisions, contained a 
specific code for union ``health and welfare funds.'' See 105 Cong. 
Rec.*16379 (daily ed. Sept. 3, 1959) reprinted in 2 Leg. History, at 
1406-07. It expressly stated: ``No union official who already receives 
full-time pay from his union shall receive fees or salaries of any kind 
from a fund established for the provision of a health, welfare, and 
retirement program. Where a salaried union official serves as employee 
representative or trustee * * * such service * * *should not [be 
considered] an extra function requiring further compensation from the 
welfare fund.'' 2 Leg. History, at 1406. Of particular import, it 
states: ``No union official, employee, or other person acting as agent 
or representative of a union, who exercises responsibilities or 
influence in the administration of welfare programs or in the placement 
of insurance contracts, should have any compromising personal ties, 
direct or indirect, with outside agencies such as insurance carriers, 
brokers, or consultants doing business with the welfare plan. Such ties 
cannot be reconciled with the duty of a union official to be guided 
solely by the best interests of the membership in any transaction with 
such agencies. Any agency official found to have such ties to his own 
[substantial] personal advantage or to have accepted fees, inducements, 
benefits, or favors of any kind from any such outside agency, should be 
removed [from office].'' Id. Where Congress, in effect, established a 
disclosure regime in section 202 for matters addressed by the AFL-CIO 
Ethical Practices Codes, it would make no sense to exclude reports on 
activities specifically identified as improper in those codes. Against 
this backdrop, the argument that the legislative history supports the 
contention that the Department's view of reporting is both novel and 
unintended by Congress fails.
    While most commenters appeared to recognize the obvious potential 
of circumvention and evasion of the Act's reporting requirements if 
union officials did not report any payments they received from trusts, 
some argued that the relationship between the official's union and the 
trust did not allow for that possibility. The commenters appear to 
argue that because the relationship between a section 3(l) trust and a 
participating union should be symbiotic, there is no conflict of 
interest presented by such payments and thus no circumvention or 
evasion is possible. This argument overlooks that the focus of section 
202 is conflict between a union official's personal financial interests 
and the duties he or she owes to the union and its members, one that 
exists without regard to the often congruent interests of a trust and 
its participating unions. Moreover, this argument overlooks that the 
money a participating union pays into a trust, either directly from the 
union or indirectly by an employer on the union's behalf, is money that 
otherwise would be maintained in the union's own account and, as such, 
any proceeds paid to a union official would be disclosed in reports 
filed by the union. Without requiring a union official to report 
payments he or she receives from a trust, an official would be able to 
circumvent and evade the disclosure that would have occurred if the 
funds had remained in the union's coffers. By requiring a union 
official to report payments from the trust, the Department is simply 
``following the money,'' ensuring that disclosure of such payments 
cannot be avoided. Further, since the union official's obligation to 
submit a Form LM-30 overlaps with the congruent responsibility of a 
union to disclose payments received by the official from a section 3(l) 
trust if certain conditions are met, the prospect that one party may 
report the payment increases the risk that a failure by the other party 
to report the payment will be detected. Thus, the reporting obligation 
helps check the evasion of reporting under the Act and, in some 
instances, may deter the primary conduct that would trigger the 
reporting obligation.
    As noted above, some financial institutions have argued that 
section 203(a)(1) excepts ``payments or loans made by any national or 
State bank, credit union, insurance company, savings and loan 
association or other credit institution * * *.'' These commenters 
assert that all payments received by union officials from banks, 
including lunches and dinners to meet with clients, and marketing and 
promotional expenses incurred to keep or to secure business, among 
other expenses, are excepted from reporting.
    The Department disagrees. Section 203(a)(1) cannot be read as a 
limitation on a union official's obligation to report interests in or 
payments from any particular segment of employers. In both sections 202 
and 203, Congress set forth specific, distinct rules including distinct 
exceptions to those rules, particular, on the one hand, to union 
officials and, on the other hand, to employers. Neither the statute nor 
its legislative history evinces an intention to create a completely 
uniform system of reports for all filers, union officials and employers 
alike, and neither infers that an exception unique to a particular 
provision was intended as a general exception to other reporting 
requirements. As discussed herein the Department acknowledges that its 
interpretation requires union officials to report a loan or payment 
made by a financial institution, but that the financial institution is 
not required to file a report. Although generally the Act establishes a 
reciprocal reporting obligation on union officials and employers--both 
the payer and the payee report on a covered payment--in this instance, 
the language of the two sections calls for a different result. Although 
today's rule does not interpret section 203(a), the Department notes 
that Congress may have held the belief that banks would be constrained 
to report these payments under laws regulating financial institutions 
and wished to avoid redundant reporting. The Department takes no 
position in today's rule on the separate question as to whether the 
breadth of the exception provided financial institutions from reporting 
obligations under section 203 is as expansive as suggested by some 
commenters.
    The LMRDA Manual specifically identifies payments from financial 
institutions to union officials as matters reportable on Form LM-30: 
``If a credit union grants loans to a labor union, a report would be 
required from an officer of that labor union who is also an employee of 
the credit union.'' LMRDA Manual Sec.  246.800. Further, a 1961 ``Guide 
for Employer Reporting'' issued by the Department provides the 
following examples of reportable payments (italics in original):


[[Page 36137]]


    A. Loans made to union representatives not employed by you, 
unless made in the regular course of business as a bank or other 
credit institution.
    B. Loans to employees, who are also union representatives, on 
terms more favorable than those available to other employees, unless 
made in the regular course of business as a bank or other credit 
institution.
    C. Loans to labor organizations, unless made in the regular 
course of business as a bank or other credit institution.

    Although today's rule does not affect any current reporting 
obligation of any Form LM-10 filers, the language quoted belies any 
suggestion that the Department is imposing a novel reporting obligation 
on Form LM-30 filers by requiring them to report the receipt of such 
payments.
    The LMRDA is a reporting statute directed at unions, union 
officials, and employers and businesses whose interests intersect with 
each other's interests; as such, it is obviously not intended to 
broadly regulate the affairs of financial institutions. The fact that 
financial institutions are regulated by government agencies other than 
this Department and that these institutions may be required to disclose 
information under those laws does not mean that the disclosure purposes 
of the LMRDA conflict with those laws or that those laws supersede the 
LMRDA's reporting provisions. The purpose of LMRDA reporting is to give 
union members information about financial transactions between union 
officials and employers. Reporting under securities and other laws 
serves other purposes; while some of these purposes may complement the 
LMRDA's disclosure provisions, none supplant the purpose of the LMRDA 
to provide relevant, readily available information to union members, 
the public, and the Department about potential conflicts between the 
financial circumstances of a union official, his or her spouse, or 
minor child and the official's duty to the union and its members.
    As noted, many commenters took the tack that even if the Department 
possessed the authority to require union officials to report payments 
received from trusts and vendors, it would be bad policy to do so. One 
commenter opined that the Form LM-30 reporting requirements will deter 
union trustees from attending educational or other conferences that may 
be required for the union trustee to properly discharge his or her 
duties under ERISA's standard of care and to be informed about the 
services available to the trusts from the financial services community. 
One commenter points out that ``anything that makes it more difficult 
or risky to obtain the knowledge and experience needed to be a 
fiduciary * * * is contrary to the interests of union members.'' 
Several commenters expressed concern that publishing information for 
only union officers gives union members the impression they can 
influence an employee benefits plan's operation as part of the 
governance of union affairs, which is contrary to ERISA's requirement 
that a fiduciary act independent of union affairs. Other commenters 
stated that it was unfair to single out union officials for disclosing 
payments from a trust since management officials associated with the 
trust receiving the same payments have no reporting obligation.
    In the Department's experience, union members are savvy enough to 
ascertain whether a union official's payments from or interests in a 
business pose conflicts of interest and to realize that trustees may 
need to obtain education and training to properly fulfill their roles 
as trustees. Thus, the Department believes that the concerns over 
reporting such matters are overstated and that reporting will not 
impede trustees in attending educational and training seminars. The 
Department believes that union members already understand or will 
understand with minimal explanation that an official's role as a 
trustee is distinct from his position with the union and requires that 
the official act in the best interests of the trust and its 
beneficiaries; as such, the official cannot put his personal political 
concerns or his union office or employment ahead of his fiduciary 
obligation to the trust. At the same time, the disclosure of such 
payments to the union official allows the union's members to determine 
whether the payments may tempt the official to put his or her own 
financial interests above the official's duties to the union, duties 
distinct from those owed by the official to the trust. The Department 
disagrees that it is unfairly singling out union-appointed trustees for 
reporting payments while allowing their management counterparts to 
refrain from doing so. Section 202 extends to reports by union 
officials, but not to all individuals who have a role in section 3(l) 
trusts. Thus, the Department is not able to consider such an extension 
to management trustees, whether or not it might have merit. The 
Department also believes that union members will understand this 
principle and not view the act of reporting by union officials as 
evidence of culpable conduct or the absence of reports by management 
trustees as proof of conduct beyond reproach. At the same time, 
however, by requiring union officials to report such payments, union 
members may determine for themselves whether some payments are 
excessive or unnecessary or arise in circumstances where the payments 
invite scrutiny to determine whether the official's personal benefits 
from the arrangement have impeded or may impede the official's duty to 
the union.
    One commenter argued that firms are concerned that if Form LM-30 
filers must report payments and gifts from vendors to a section 3(l) 
trust, these filers will demand that the firms assume the burden to 
keep records of such payments. The Department acknowledges that this 
may create a customer relations challenge to some vendors, but, just as 
the decision to make a payment, or accept a payment, is voluntary, so 
too is any decision by a vendor to keep ``gift records'' for a union 
official. The vendor may freely choose to demur from assuming such a 
burden, just as it may choose to change its practice of making gifts to 
union officials. The Form LM-30 reporting and recordkeeping obligations 
remain squarely on the union official who holds an interest or receives 
a payment for which reporting is required.
    One commenter suggests that the Department should change its 
proposal to include a general exception for reporting payments 
associated with an unsuccessful effort to obtain new or further 
business. Two commenters would exclude reporting where any payments 
were made to both union and management appointed trustees. One 
commenter, acknowledging that marketing benefits were provided by all 
service providers seeking new business, argues that the Department 
should provide guidance as to where to draw the line between routine 
matters and payments intended as bribes.
    The commenter who would except from reporting any unsuccessful 
efforts to garner business by courting a union official acknowledged 
that union members have a legitimate interest in knowing whether the 
businesses that are buying from or selling to their union are also 
engaged in private transactions with union officers or employees. But 
in his view, where no transaction actually takes place between the 
business and the union, a union member would have no interest in the 
payment. In the commenter's view, up until an actual transaction 
occurs, the business should not be considered to be ``dealing with'' 
the labor organization. The logic behind this position is not apparent. 
Other comments disagree. A commenter explained that such payments to a 
union official should be reportable to

[[Page 36138]]

the extent that the business was ``dealing with'' the union or employer 
by attempting to convince the union or employer to enter into 
commercial relations with a competitor. This view also has support in 
the legislative history. In an analysis of section 202(a), Senator 
Goldwater states, ``Briefly, what must be reported are holdings of 
interest in or the receipt of economic benefits from employers who deal 
or might deal with such union official's union.'' 62 Cong. Rec. 19,759 
(1959), reprinted in 1 DOL, Legislative History of the Labor-Management 
Reporting and Disclosure Act of 1959 (emphasis added). Furthermore, to 
the extent the commenter may be suggesting that many payments would be 
picked up if a business relationship is later consummated, the 
commenter fails to recognize that unless payments from potential 
vendors are reported in the fiscal year in which they occur, a union 
officer could avoid disclosure by simply accepting payments in one 
fiscal year and awarding the union business to the vendor in a later 
year.
    One commenter pointed out that the proposed rulemaking has no 
examples related to trust funds reimbursing union officers. Such 
examples have been added to the instructions.
3. Relationship With Other Statutes
    Although the Department notes that it did not receive a comment 
stating that any of its Form LM-30 proposals conflicts with an 
obligation under ERISA, many commenters oppose reporting on some or all 
of the trust-related activities because the same matters are subject to 
ERISA and other Federal reporting requirements relating to security and 
business taxes. A typical comment was that ERISA already regulates 
transactions that would be reported on Form LM-30. This commenter also 
argued that the IRS already oversees business expenses under the tax 
laws; it similarly argues that the IRS also oversees payments by tax 
exempt organizations that are made for improper private benefit. 26 
U.S.C. 501(c).
    Two commenters submit that the LMRDA was never intended to regulate 
multiemployer plans. They asserted that the Welfare and Pension Plans 
Disclosure Act (``WPPDA''), P.L. 85-836 (1958), which predated the 
LMRDA, was enacted for this purpose. They assert that the WPPDA 
implemented reporting and disclosure requirements for pension plans 
similar to the LMRDA's requirements for unions. When WPPDA proved 
inadequate to regulate trusts, Congress passed ERISA, which exceeded 
and expanded WPPDA's requirements.
    There is no merit to the implicit claim that ERISA was intended to 
supplant the LMRDA insofar as payments to union officials are 
concerned. Section 514 of ERISA states: ``Nothing in this subchapter 
shall be construed to alter, amend, modify, invalidate, impair, or 
supersede any law of the United States [with exceptions not here 
pertinent] or any rule or regulation issued under any such law.'' 29 
U.S.C. 1144(d). The WPPDA contained a similar provision, undermining 
any attempt to use that statute to constrain the Department's authority 
under the LMRDA. See Pub. L. 85-836, Sec.  10(b) (1958) (this act does 
not exempt any person from any duty under any present or future law 
affecting the administration of employee welfare or pension benefit 
plans). In the Department's view, the LMRDA and the ERISA serve 
complementary purposes, particularly insofar as their disclosure 
provisions overlap. There also is an evident similarity between the 
duty union officials owe to their union and the duty trust officials 
owe to their trust. Today's rule is not intended as an interpretation 
of ERISA and it should not be construed as such. It does not alter any 
statutory or regulatory obligations that now exist under that statute.
    The Department has determined that Form LM-30 reporting and 
recordkeeping requirements do not interfere with or unnecessarily 
duplicate ERISA financial disclosure requirements. Thus, the Department 
is requiring union officials to report certain payments they receive 
from trusts, notwithstanding any ERISA reporting requirements that may 
apply to trusts. On many occasions, the Department has discovered 
during an audit or investigation that a union officer or employee was 
engaged in a reportable situation with a trust but had not filed the 
required Form LM-30 until the Department became involved. For example, 
the spouse of a union officer owned a company that provided cleaning 
and maintenance services to the union and its trust. In one year, the 
company received over $94,000 from the union and the trust. Although 
this information might or might not be reported on a Form 5500, 
depending on the surrounding circumstances, this information can be 
disseminated more readily to union members on the Form LM-30 than 
through the Form 5500 alone. The Form LM-30, since its inception more 
than 45 years ago, has been the source for union members to learn of 
potential conflicts of interest between union officers and employees 
and vendors to their union's trusts.
    Contrary to an implicit premise underlying many of the comments 
that the ERISA and the LMRDA are co-extensive insofar as union-related 
trusts are concerned, ERISA applies to only a subset of the section 
3(l) trusts. Some section 3(l) trusts are not covered at all by ERISA. 
ERISA covers only pension and ``employee welfare benefit plans.'' 29 
U.S.C. 1002. While there is considerable overlap between section 3(l) 
trusts and ERISA ``employee welfare benefit plans,'' some funds in 
which unions participate fall outside ERISA coverage, including strike 
funds, recreation plans, hiring hall arrangements, and unfunded 
scholarship programs. 29 CFR 2510.3-1. Other section 3(l) trusts that 
are subject to ERISA are not required to file the Form 5500 or file 
only abbreviated schedules. See 29 CFR 2520.104-20 welfare (plans with 
fewer than 100 participants); 29 CFR 2520.104-26 (unfunded dues 
financed welfare plans); 29 CFR 2520.104-27 (unfunded dues financed 
pension plans). See also Reporting and Disclosure Guide for Employee 
Benefit Plans, U.S. Department of Labor (reprinted 2004), available at 
http://www.dol.gov/ebsa/pdf/rdguide.pdf.
    The Department received several comments that raise concerns with 
asserted duplicative reporting that would exist if union officials had 
to report payments received from trusts or vendors and that the burden 
to keep track of such payments likely would fall upon the trusts and 
vendors. Most of the commenters expressing concerns about these matters 
asserted that party-in-interest transactions (which they argue 
encompass all potential conflict of interest disclosures that may arise 
under the LMRDA), are already covered by ERISA reporting and auditing 
requirements. Some commenters submit that because ERISA identified 
those transactions which Congress determined were conflicts of 
interest, ERISA should be the standard against which all transactions 
involving jointly administered plans are judged.
    Among the suggestions on this point, the commenters requested the 
Department to except union officials from reporting a payment from a 
trust if the trust files a Form 5500. The commenters appear to argue 
that no payments associated with a union-related trust covered by ERISA 
need be reported by Form LM-30 or Form LM-10 filers if the trust files 
a Form 5500. Two commenters pointed out that, in a prior rulemaking, 
the Department recognized the merit of Form 5500 for

[[Page 36139]]

purposes of trust disclosure. These commenters apparently refer to the 
Form T-1 rule that was published in 2003 as part of the ``Form LM-2 
rulemaking.'' See 68 FR 58374, 58524-25(Oct. 9, 2003). This same 
exception is contained in the Form T-1 final rule published in the 
Federal Register, at 71 FR 57716 (Sept. 29, 2006). Several commenters 
recommended as an alternative that the Department expand Schedule C on 
Form 5500 to list by company all payments, loans, or gratuities from 
service providers to trustees and add a schedule that lists all 
trustees who served during the year and their expenses, similar to the 
Form LM-2.
    As noted by many commenters, the Department has previously 
recognized the merit of filing a timely and complete Form 5500 in lieu 
of a Form T-1. The Form 5500 as a ``surrogate Form T-1,'' however, only 
partially overlaps with the Form LM-30, and is therefore not a reliable 
substitute for the Form LM-30. The alternative suggested also presents 
problems. Expanding the Form 5500 would require all covered entities, 
not just those engaged in reportable transactions with labor union 
officers and employees to shoulder an LMRDA-driven higher reporting 
burden. The LMRDA addresses disclosure for labor organizations and 
labor organization officers and employees; it does not impose general 
disclosure requirements on the larger ERISA reporting universe. As such 
the Department's efforts here in clarifying the Form LM-30 better 
fulfill the full reporting mandate of the LMRDA without imposing 
additional burden on those entities and persons outside the scope of 
the LMRDA.
    Practical concerns also could impede the use of the Form 5500 to 
capture some of the information subject to today's rule. Form 5500s are 
not required to be filed until seven months after the close of a plan's 
fiscal year, and extensions are freely available, and there is a 
substantial lag time between the submission of a Form 5500 and its 
availability for public review. Thus, there now exists no way for a 
union member to timely access such information, unless it is obtained 
via Form LM-30. By collecting such information pertinent to a section 
3(l) trust, including payments by the trust to union officials, and 
making it available at a single site, however, union members are 
afforded the means to properly oversee their union's operations and 
monitor any potential conflicts between an official's personal monetary 
interests and the official's duty to the union. Moreover, even if these 
problems could be overcome, there would be no disclosure relating to 
those section 3(l) trusts that are not subject to ERISA.
    As noted, a few commenters suggested that the purposes served by 
the reporting requirements for payments made in the routine course of 
business are already met by the IRS rules on business expenses. The 
Department disagrees. The IRS rules on ``business expenses'' are not 
designed to disclose potential conflicts of interest; section 202 is 
precisely designed for this purpose. See IRS Publication 535. Many of 
the expenditures that qualify as ``business expenses'' for IRS purposes 
would potentially create a conflict of interest for union officers and 
employees. For instance, entertainment expenses incurred in seeking new 
business may be deductible in part under IRS rules. Further, the IRS 
considers certain below market loans and transfers of property as 
``business expenses.'' Such a loan or property transfer made to a union 
officer or employee is exactly the type of payment the LMRDA was 
designed to disclose. Moreover, the commenters offer no explanation how 
this approach would benefit union members who typically would never 
have access to such tax filings or the underlying expense 
documentation. Without such access, the prophylactic purposes served by 
disclosure cannot be achieved. As such, the Department rejects this 
approach.
4. Trusts as Employers and Businesses
    As noted above, the NPRM sought comment on whether a section 3(l) 
trust may constitute an ``employer'' under section 202(a)(6) or a 
``business'' under sections 202(a)(3) and 202(a)(4) so that payments 
from such organizations to union officials would be reportable. 70 FR 
51182. After considering the comments received on this point, the 
Department has concluded that a section 3(l) trust or other not-for-
profit organization with employees must be treated as an ``employer'' 
under the Act, but that they should not be treated as a ``business'' 
under the Act.
    As noted above, commenters were divided on the question whether a 
trust or other not-for-profit entity, including a labor organization, 
should be treated as an ``employer'' for reporting purposes. One 
commenter argued that trusts should not be regarded as ``employers'' 
because Congress only intended reporting to ``reach the union officials 
who may receive payment from an employer not to organize the 
employees,'' citing Senate Report, at 16. According to the commenter, 
trust funds in which the union is interested do not fall into this 
category. Another commenter argued: ``although some large trust funds 
happen to have employees--many do not--the statute was intended to 
cover employers whose potential relationship with a union raises the 
risk of a conflict of interest in some sense relevant to the union's 
function as a collective bargaining representative.'' One commenter 
argued that ``while [section 203] is precise in its applicability only 
to an employer whose employees are either represented by or a target of 
a union, Congress chose to use the additional terms `businesses' and 
`trust' rather than ``employer'' in [section 202] dealing with the 
reporting obligation of a union official. Nothing in the statute 
reflects a Congressional intent to subsume these broader terms within 
the subset of employers subject to [section 203].''
    Other commenters stated that a trust should not be considered an 
employer because any union officials involved with such funds do not 
negotiate with such funds or their representatives, but rather serve as 
trustees or shared employees in providing benefits or enforcing 
collective bargaining agreements. Another commenter agreed, noting that 
any improper payment from a trust to a union officer who is acting as a 
trustee would be considered a fiduciary breach of the trustee and not a 
breach of the officer's responsibilities to the union.
    Several commenters argued that treating a trust as an employer adds 
further administrative burdens on trust funds, which are already 
subject to numerous reporting and regulatory requirements. One 
commenter pointed out that some Taft-Hartley trusts are self-
administered, in which case the trust itself may be an employer, while 
other trusts employ third-party administrators to administer the trust, 
denying employer status to the trust. He implicitly suggests that given 
what he characterizes as an artificial distinction between third-party 
and self-administered trusts Congress could not have intended that 
payments by any trust would be covered. This commenter, like several 
others, further contended that trusts are not ``businesses'' for 
purposes of the Act.
    The LMRDA expressly defines ``employer'' in broad terms. Included 
in that definition, at section 3(e) of the Act, are employers that are 
``with respect to employees engaged in an industry affecting commerce, 
an employer within the meaning of any law of the United States relating 
to the employment of any employees or which may deal with any labor 
organization concerning grievances, labor disputes, wages, rates of 
pay, hours of employment, or

[[Page 36140]]

conditions of work * * *.'' 29 U.S.C. 402(e) (emphasis added). The 
statute contains no indication that Congress intended a narrower 
application of that term in any of the Act's provisions. Indeed, the 
breadth of the term is illustrated not only by the italicized language 
of section 3(e) but by the careful parsing of the remaining language in 
the provision to except governmental entities from the Act's 
application. See 29 U.S.C. 402(e) (the Act's sole exceptions for 
entities is for the ``United States or any corporation wholly owned by 
the Government of the United States or any State or political 
subdivision thereof.'') For these reasons, the Department is persuaded 
to give ``employer'' its full and natural construction, thus bringing 
within its reach any entity, including any section 3(l) trust and 
service providers to such trusts, that is an ``employer.''
    Commenters were divided on the question whether trusts and other 
not-for-profit entities constitute businesses within the meaning of the 
LMRDA. One commenter noted that leaving trusts outside the reporting 
requirements would minimize transparency and undermine the intent of 
the reforms. This commenter alleged that union officials have long 
utilized ``off the books'' accounting procedures for these programs. 
Most commenters, however, asserted that trusts do not constitute 
``businesses.'' One commenter argued that interpreting a trust in which 
a labor organization is interested as a ``business'' is incongruous 
with the Department's establishment of a reporting obligation by union 
officials who hold interests in or receive payments from ``businesses 
that deal with a trust in which the labor organization is interested.'' 
In this commenter's view, it would make no sense to consider the trust 
as a ``business'' at the same time as payments by either the labor 
organization or the trust to a union official must be reported by the 
official. In effect, the commenter argues that the union and the trust 
operate as one for reporting purposes and thus dealings by the trust 
with the union cannot be viewed as business dealings for reporting 
purposes.
    Other commenters argued that since trusts do not operate with a 
profit motive, they cannot be considered ``businesses.'' Several 
commenters echoed the sentiment that an entity can be a ``business'' 
only if it is a commercial enterprise carried on for profit; they infer 
support for this argument from their understanding of the term as 
guided by the language in sections 202(a)(3) and 202(a)(4), which 
equates ``business'' with the terms ``buying,'' ``selling,'' 
``leasing,'' and so forth. They argued that the phrase ``otherwise 
dealing with'' takes its meaning from these terms, citing to the Act's 
legislative history (Senate Report, at 90, reprinted in 1 Leg. History, 
at 486). If Congress had intended to cover entities that have non-
business dealings with a labor organization, they argue, it would have 
drafted sections 202(a)(3) and 202(a)(4) to include ``any entity,'' not 
simply ``a business.''
    The LMRDA does not define ``business,'' leaving the Department to 
apply the term's ordinary meaning unless the context in which it is 
used indicates that Congress intended a unique or special meaning. See 
Brower v. Evans, 257 F.3d 1058, 1065 (9th Cir. 2001). The American 
Heritage Dictionary (2000) defines ``business,'' in part, as 
``Commercial, industrial, or professional dealings'' and ``Volume or 
amount of commercial trade'' and ``commercial dealings.'' Under Black's 
Law Dictionary (8th ed. 2004), a ``business'' is generally defined as 
``a commercial enterprise carried on for profit.'' Black's illustrates 
the term's usage to distinguish between ``commercial enterprises'' and 
non-businesses, using academia as an example of the latter. Moreover, 
the IRS case law interpreting ``trade or business,'' has consistently 
held that a profit motive is a basic criterion of a ``business.'' 
Nickeson v. Commissioner, 962 F.2d 973 (10th Cir. 1992). Based on these 
interpretations, the Department believes it appropriate to treat trusts 
and other not-for-profit entities as distinct from entities treated as 
businesses for Form LM-30 purposes.

L. When Payments and Other Financial Benefits Received From a Union 
Other Than an Official's Own Union Must Be Reported

    In the NPRM, the Department asked for comment on the question 
whether ``labor organizations'' constitute ``businesses'' under 
sections 202(a)(3) and 202(a)(4), or constitute ``employers'' under 
section 202(a)(6). The Department received only a few comments on this 
question. Today's rule clarifies that a ``labor organization'' that has 
employees is an ``employer'' for purposes of Form LM-30. As just 
discussed, there is no indication that Congress intended to except any 
entities other than government agencies from the application of the 
Act's provisions if they occupy the status of ``employer'' under any 
law of the United States. The Department reaches this conclusion for 
essentially the same reasons as discussed above in connection with the 
status of trusts and other not-for-profit entities.
    One commenter asserts that Congress intended that businesses would 
consist only of entities that are likely organizing targets of a union. 
Another commenter states that the Department ``should continue its 
current practice of not requiring payments to a union official or 
employee from affiliated unions (including multi-trade councils such as 
building trades or metal trades councils) to be reported on the LM-
30.''
    Two commenters argued that ``labor organizations'' are not 
``businesses'' because the latter term refers only to ``commercial 
enterprises that engage in commercial transactions with unions or 
unionized employers.'' However, they add: ``To the extent a labor 
organization has employees who are represented by another union, 
payments from the labor organization to officials of the union 
representing its employees would be reportable under [sections] 
202(a)(1) & (5).'' Each of these sections provides that a union 
official should report payments from an employer whose employees the 
official's union represents or is actively seeking to represent. 
Another asserted that ``[t]he risk of a union official obtaining 
special favors from an affiliated labor organization or labor-
management committee in return for his or her not discharging his [or 
her] obligations as a union leader is simply not present.''
    The Department has decided that for reporting purposes a union may 
constitute an ``employer'' under section 202, if the union meets the 
statutory definition of the term. 29 U.S.C. 402(c). The Department's 
reasoning is basically the same as discussed above in connection with 
the ``employer'' question posed with regard to trusts and other not-
for-profit entities. Additionally, the Department rejects the 
proposition that ``labor organization'' and ``employer'' are mutually 
exclusive terms for all purposes of the Act. This proposition is 
inconsistent with the settled view that a ``labor organization'' that 
is also an ``employer'' will be held to the same obligation as other 
employers unless Congress otherwise provides. As noted, the Act 
provides that the term ``employer'' is to be given the same application 
for all its purposes. If a ``labor organization'' cannot be an 
``employer,'' then the various prohibitions relating to employer 
interference in union elections would be unavailable where employees of 
a union are themselves represented by an autonomous staff union. There 
is no evidence that Congress intended to deny LMRDA rights to these 
workers simply because their employer is a labor

[[Page 36141]]

organization. This Department's longstanding position to treat unions 
as employers vis-a-vis staff unions is congruent with the similar 
treatment accorded such relationships under the Labor Management 
Relations Act. See National Education Ass'n, 206 N.L.R.B. 893 (1973).
    However, in the rule today, the Department clarifies when a payment 
from a labor organization would be reportable under section 202(a)(6). 
No reports will be required where the payment is received from a union 
that is affiliated with the union which the officer or employee serves 
as an officer or employee; i.e., locals, intermediate bodies, and their 
parent national or international union. To use a fictitious example, an 
officer or employee of Local 1, National Union of Reporters (``NUR''), 
would not report a payment received from either the New England 
Council, NUR, Local 2, NUR, or the NUR, even if they were employers. 
Similarly, no payment from the local to an NUR national officer would 
be reported. Any such payment already will be reported on the payer 
union's Form LM-2, LM-3, or LM-4, albeit sometimes aggregated with 
other payments. Moreover, in instances where the union's payment(s) to 
a particular official exceed $5,000, alone or in the aggregate over a 
one-year period, the reporting union's payments will specifically 
identify the payee official on the Form LM-2. However, a union officer 
or employee unaffiliated with the union that makes the payment must 
report the payment if the payer-union is an employer. For example, an 
officer or employee of a regional council of multi-trade unions that 
receives a payment from NUR or one of its locals would have to report 
the payment if the NUR entity is an employer.
    The Department has created a reporting rule for unions: A union 
official will have to report payments from a labor union other than his 
or her own if that union (1) Has employees represented by the 
official's union; (2) has employees in the same occupation as those 
represented by the official's union; (3) claims jurisdiction over work 
that is also claimed by the official's union; (4) is a party to or will 
be affected by any proceeding in which the official has voting 
authority or other ability to influence the outcome of the proceeding; 
or (5) has made a payment to the filer for the purpose of influencing 
the outcome of an internal union election. This rule, coupled with the 
general provisions relating to section 202(a)(6), will capture for 
reporting any payments that could reasonably be perceived as presenting 
a conflict with the official's duty to their own union and its members. 
Readers are cautioned that the obligation to report or not report 
payments in the situations described above does not affect the legality 
of such payments under the election provisions of the LMRDA or other 
laws, such as the Labor Management Relations Act, which may regulate 
such matters.

M. How the Proposed Definitions Have Been Clarified To Ease a Filer's 
Completion of the Form LM-30

    As explained in the NPRM, the old regulations and instructions for 
the Form LM-30 failed to define or incompletely defined several terms 
whose meaning must be properly understood for a union official to 
correctly complete the Form LM-30. The Department therefore proposed 
several new or revised definitions. The terms defined included: 
Actively seeking to represent, arrangement, benefit with monetary 
value, bona fide employee, bona fide investment, dealing, directly or 
indirectly, filer/reporting person/you, income, labor organization, 
labor organization employee, labor organization officer, legal or 
equitable interest, minor child, payer, publicly-traded securities, 
substantial part, and trust in which a labor organization is 
interested. All of the proposed definitions with the exception of 
``publicly-traded securities'' have been adopted, some in revised form, 
in today's rule. As discussed earlier in the preamble, the Department 
has determined that it is unnecessary to include a definition for 
``publicly-traded securities'' or an equivalent term in the rule. 
Comments were received on only some of the definitions. To assist 
filers, however, all the definitions, as adopted by today's rule, are 
set out below in italics. Where comments have been received on a 
proposed definition, the comments are summarized and the Department's 
responses are discussed below. A number of the terms already have been 
discussed in this preamble.
1. Definitions Adopted by Today's Rule
    Actively seeking to represent means that a labor organization has 
taken steps during the filer's fiscal year to become the bargaining 
representative of the employees of an employer, including but not 
limited to:
    <bullet> Sending an organizer to an employer's facility;
    <bullet> Placing an individual in a position as an employee of an 
employer that is the subject of an organizing drive and paying that 
individual subsidies to assist in the union's organizing activities;
    <bullet> Circulating a petition for representation among employees;
    <bullet> Soliciting employees to sign membership cards;
    <bullet> Handing out leaflets;
    <bullet> Picketing; or
    <bullet> Demanding recognition or bargaining rights or obtaining or 
requesting an employer to enter into a neutrality agreement (whereby 
the employer agrees not to take a position for or against union 
representation of its employees), or otherwise committing labor or 
financial resources to seek representation of employees working for the 
employer.
    Where a filer's union has taken any of the foregoing steps, the 
filer is required to report a payment or interest received, or 
transaction conducted, during that reporting period.

    Note: Leafleting or picketing, such as purely ``informational'' 
or ``area standards'' picketing, that is wholly without the object 
of organizing the employees of a targeted employer will not alone 
trigger a reporting obligation. For example, if a union pickets a 
sporting goods retailer solely for the purpose of alerting the 
public that the retailer is selling goods that are made by children 
working in oppressive conditions in violation of accepted 
international standards, the picketing would not meet the ``actively 
seeking to represent'' standard.

    As discussed, the definition was modified by the addition of the 
note to inform filers that leafleting or picketing wholly without the 
object of organizing the employees of a targeted employer will not 
trigger a reporting obligation and make plain that a report need only 
be filed where a union official receives a payment during the year in 
which the official's union takes a concrete step to actively represent 
the employees of an employer that transacts business with the union or 
other businesses for which reports are required because of their 
relationship to such employer.
    Arrangement means any agreement or understanding, tacit or express, 
or any plan or undertaking, commercial or personal, by which the filer, 
spouse, or minor child will obtain a benefit, directly or indirectly, 
with an actual or potential monetary value.

    Note: The term ``arrangement'' is very broad and covers both 
personal and business transactions, including an unwritten 
understanding. For example, if during the reporting period an 
employer's representative offered a union officer a job with the 
employer, the officer must report the offer unless he or she 
rejected it. A standing job offer must be reported because it 
carries the potential of monetary value to the filer. Another 
example of a situation requiring a report is when an employer 
provided insider information about a stock or other investment 
opportunity, unless the filer rejected the advice and took no steps 
to act on it.


[[Page 36142]]


    No comments were received on the proposed definition. This 
definition is adopted as proposed. As discussed in the NPRM, the term 
encompasses both personal and business transactions, including an 
unwritten understanding. For example, if an employer's representative 
during the reporting period solicits a union officer to accept a job 
with the employer, the filer must report the solicitation, unless the 
filer rejects the offer. A standing job offer must be reported because 
it carries the potential of monetary value to the filer. Another 
example of a situation requiring a report would be one in which a 
covered employer provides insider information about a stock or other 
investment opportunity, unless the filer rejects the advice and takes 
no steps to act on it.
    Benefit with monetary value means anything of value, tangible or 
intangible. It includes any interest in personal or real property, 
gift, insurance, retirement, pension, license, copyright, forbearance, 
bequest or other form of inheritance, office, options, agreement for 
employment or property, or property of any kind. You do not need to 
report pension, health, or other benefit payments from a trust to you, 
your spouse, or minor child that are provided pursuant to a written 
specific agreement covering such payments.
    This definition has been revised by adding the new third sentence 
in the instructions to clarify that benefits received by a union 
official, his or her spouse, or minor child as a participant in a trust 
or benefit plan will generally not be reportable on Form LM-30. The 
same definition, with only a slight change in the wording of the third 
sentence, is adopted as section 404.1(a) of the Department's 
regulations (to be codified as 29 CFR 404.1(a)).
    A commenter voiced support for the Department's proposed definition 
of this term and the related definitions proposed for ``benefit with 
monetary value,'' ``income,'' and `` directly or indirectly,'' arguing 
that the Department has broadly construed these terms to capture 
anything of value received by the filer, his or her spouse, or minor 
child, including any payment or benefit held or received by a third 
party for their benefit. This commenter noted that the proposed 
definition is properly drawn from disclosure rules applicable to 
Federal employees. Another commenter criticized the proposal because it 
appears to include pension benefits that an officer receives from a 
jointly administered trust as a result of prior service for an employer 
participating in the trust. The commenter argues that the statute does 
not require disclosure of such payments and that an officer's receipt 
of such payments does not present a conflict of interest. The commenter 
recommends the Department either amend the definition or modify the 
instructions to clarify that such payments do not have to be reported 
under any of the sections. The Department agrees that benefits received 
as an employee of an employer, such as pension benefits, are generally 
not reportable. This point is clarified by the new third sentence added 
to the definition.
    Bona fide employee is an individual who performs work for, and 
subject to the control of, the employer.

    Note: A payment received as a bona fide employee includes wages 
and employment benefits received for work performed for, and subject 
to the control of, the employer making the payment, as well as 
compensation for work previously performed, such as earned or 
accrued wages, payments or benefits received under a bona fide 
health, welfare, pension, vacation, training or other benefit plan, 
leave for jury duty, and all payments required by law.
    Compensation received under a ``union-leave,'' or ``no-docking'' 
policy is not received as a bona fide employee of the employer 
making the payment. Under a union-leave policy, the employer 
continues the pay and benefits of an individual who works full time 
for a union. Under a no-docking policy, the employer permits 
individuals to devote portions of their day or workweek to union 
business, such as processing grievances, with no loss of pay. Such 
payments are received as an employee of the union and thus, such 
payment must be reported by the union officer or employee unless 
they (1) totaled 250 or fewer hours during the filer's fiscal year 
and (2) were paid pursuant to a bona fide collective bargaining 
agreement. If a filer must report payments for union-leave or no-
docking arrangements, the filer must enter the actual amount of 
compensation received for each hour of union work. If union-leave/
no-docking payments are received from multiple employers, each 
should be considered separately to determine if the 250-hour 
threshold has been met. For purposes of Form LM-30, stewards 
receiving union-leave/no-docking payments from an employer or lost 
time payments from a labor organization are considered employees of 
the labor organization.

    Any individual working at the control and direction of a labor 
organization will be an employee of the organization. A union steward 
or union official while acting on behalf of the union is not acting as 
a bona fide employee of the employer whose employees are represented by 
the steward's union. Of particular import, however, today's rule, as 
discussed herein, modifies the proposed instruction to except from 
reporting on the Form LM-30 compensation received from an employer for 
whom the official works for the time he or she is engaged in certain 
union activities provided it is made pursuant to a collective 
bargaining agreement and the compensation reflects payment for union 
activities of 250 hours or less during the reporting year.
    Bona fide investment means personal assets of an individual held to 
generate profit not acquired by improper means or as a gift from (1) an 
employer, (2) a business that deals with the filer's union or a trust 
in which the filer's union is interested, (3) a business a substantial 
part of which consists of dealing with an employer whose employees the 
filer's union represents or is actively seeking to represent, or (4) a 
labor relations consultant to an employer.
    No comments were received on this proposal. The primary purpose of 
this definition is to alert filers that stock or other securities 
received as a gift will not constitute a ``bona fide investment,'' 
under the provision that exempts from reporting bona fide investments 
in securities when the gift is received from specified employers, 
businesses, or labor relations consultants. The only changes from the 
NPRM are the numbering of the different sources of reportable payments 
and the elimination of the cross-reference to the term ``publicly-
traded securities.''
    Dealing means to engage in a transaction (bargain, sell, purchase, 
agree, contract) or to in any way traffic or trade, including 
solicitation for business.

    Note:  The term ``traffic or trade'' includes not only financial 
transactions that have occurred but also the act of soliciting such 
business. Thus, for example, potential vendors or service providers 
attempting to win business with a union will be considered to be 
``dealing'' with the union to the same extent as vendors who are 
already doing business with the union. Potential vendors must engage 
in the active and direct solicitation of business (other than by 
mass mail, telephone bank, or mass media). A business that passively 
advertises its services generally and would provide services 
consumed by, for example, a union would not meet this test. The 
potential vendor must be actively seeking the commercial 
relationship. Under certain circumstances, the payment itself will 
be evidence of the solicitation of business, such as a potential 
vendor who treats a union official to a golf outing and dinner to 
discuss the vendor's products.

    The definition of this term has been revised slightly from the 
proposal by adding the phrase ``including solicitation for business'' 
and adding the explanatory note to the instructions. The same 
definition, but without the note, is adopted as section 404.1(b) of

[[Page 36143]]

the Department's regulations (to be codified as 29 CFR 404.1(b))
    Most of the comments on the proposed term have been discussed 
already in connection with the meaning to be given the terms 
``employer'' and ``business.'' See discussion herein. The new phrase 
and note were added to make clear that payments to union officials must 
be reported even if they do not lead to a consummated business 
transaction. The Department notes, as discussed herein, that some 
commentators suggested that the term ``dealing'' should only encompass 
payments made to union officials in connection with marketing efforts 
that lead to a completed business transaction. For the reasons 
discussed herein the Department is not persuaded that there is anything 
in the language of section 202 or its legislative history to suggest 
that either ``routine marketing expenses'' or the subset of those that 
do not lead to a business agreement should be excepted from the 
reporting obligation.
    The Department believes that the definition it adopts for 
``dealing'' is consistent with the intended meaning given it by 
Congress. Neither its use in the statute nor the legislative history of 
the Act's ``dealing'' provisions suggest that the term should be given 
a unique meaning. As defined today, the term accords with the meaning 
given the term in the American Heritage Dictionary and Black's Law 
Dictionary. In the American Heritage Dictionary ``deal'' is defined, in 
part, as ``[t]o sell'' and ``[t]o do business; trade.'' In Black's, 
``deal'' is defined as ``an act of buying and selling'' such as ``the 
purchase and exchange of something for profit.''
    Directly or indirectly means by any course, avenue, or method. 
Directly encompasses holdings and transactions in which the filer, 
spouse, or minor child receives a payment or other benefit without the 
intervention or involvement of another party. Indirectly includes any 
payment or benefit which is intended for the filer, spouse, or minor 
child or on whose behalf a transaction or arrangement is undertaken, 
even though the interest is held by a third party, or was received 
through a third party, including instances in which the third party is 
acting on the behalf, or at the behest, of an employer or business and 
the interest would have to be reported if made directly to the filer, 
his or her spouse, or minor child . The following examples show the 
difference between ``direct'' and ``indirect'':

    You are employed by XYZ Widgets and also serve as the president 
of the local union representing XYZ Widgets employees. In a recent 
conversation with the XYZ Widgets human resources manager, you 
mention that you are placing your 15 year-old daughter in a private 
school. XYZ Widgets sends you a check for $1,000 with a note saying 
``Good luck with the new school!'' You have received a direct 
benefit.
    You are employed by XYZ Widgets and also serve as the president 
of the local union representing XYZ Widgets employees. In a recent 
conversation with the XYZ Widgets human resources manager, you 
mention that you are placing your daughter in a private school. You 
receive a letter from your daughter's new school stating that she 
has received a $1,000 scholarship through a donation by XYZ Widgets. 
You have received an indirect benefit.

    The definition of this term, as discussed above, has been revised 
from the proposal by including two examples. The examples have been 
added in response to a comment by a labor educator who suggested that 
the Department should include some examples to demonstrate the 
difference between ``direct'' and ``indirect.'' As noted in the NPRM, 
the purpose of the definition is to clarify that filers must disclose 
any benefits received by them (or their spouse or minor child) from a 
third party where the third party is acting on the behalf, or at the 
behest, of an employer or business where the benefit would have to be 
reported if made by the employer or business directly to the filer (or 
his or her spouse or minor child). Benefits received from an employee, 
agent, or representative of an employer or business, or other entity 
acting on behalf of the employer or business should be considered 
received from the employer or business. Payments to a third party to be 
held for the use or benefit of the filer are also reportable. The 
definition is deliberately drawn broadly, consistent with the 
legislative history, ``to require disclosure of any personal gain which 
an officer or employee may be securing at the expense of union 
members.'' As also noted in the NPRM, the legislative history draws 
from the AFL-CIO Ethical Practices Code: ``The ethical principles apply 
not only where the investments are made by union officials, but also 
where third parties are used as blinds or covers to conceal the 
financial interests of union officials.''
    Filer/Reporting Person/You mean any officer or employee of a labor 
organization who is required to file Form LM-30.

    Note: These terms are used synonymously and interchangeably 
throughout the instructions, and, when referring to reportable 
interests, income, or transactions, these terms include interests, 
income, or transactions involving the union officer's or employee's 
spouse or minor child.

    No comments were received on the proposed definition. This 
definition is adopted as proposed.
    Income means all income from whatever source derived, including, 
but not limited to, compensation for services, fees, commissions, 
wages, salaries, interest, rents, royalties, copyrights, licenses, 
dividends, annuities, honorarium, income and interest from insurance 
and endowment contracts, capital gains, discharge of indebtedness, 
share of partnership income, bequests or other forms of inheritance, 
and gifts, prizes or awards.
    The Department adopts the definition of ``income,'' as proposed, 
both in the instructions and as section 404.1(e) of the Department's 
regulations (to be codified at 29 CFR 404.1(e)).
    Labor organization, means the local, intermediate, or national or 
international labor organization that employed the filer, or in which 
the filer held office, during the reporting period, and, in the case of 
a national or international union officer or an intermediate union 
officer, any subordinate labor organization of the officer's labor 
organization. Item 6 of the Form LM-30 identifies the relationships 
between employers and ``your labor organization'' or ``your union'' 
that trigger a reporting requirement. Item 7 of the Form LM-30 
identifies the direct and indirect relationships between a business 
(such as a goods vendor or a service provider) and ``your labor 
organization'' that trigger a reporting requirement. The terms ``your 
labor organization'' and ``your union'' mean:

    a. For officers and employees of a local labor organization.
    Your local labor organization.
    b. For officers of an international or national labor 
organization
    Your national or international labor organization and all of its 
affiliated intermediate bodies and all of its affiliated local labor 
organizations.
    But note: A national or international union officer does not 
have to report payments from or interests in businesses that deal 
with employers represented by, or actively being organized by, any 
lower level of the officer's labor organization. Such officers are 
also not required to report payments and other financial benefits 
received by their spouses or minor children as bona fide employees 
of a business or employer involved with a lower level of the 
officer's labor organization.
    c. For employees of a national or international labor 
organization.
    Your national or international labor organization.
    d. For officers of intermediate bodies.
    Your intermediate body and all of its affiliated local labor 
organizations.
    But note: An officer of an intermediate body does not have to 
report payments from

[[Page 36144]]

or interests in businesses that deal with employers represented by, 
or actively being organized by, any lower level of the officer's 
labor organization. Such officers are also not required to report 
payments and other financial benefits received by their spouses or 
minor children as bona fide employees of a business or employer 
involved with a lower level of the officer's labor organization.
    e. For employees of an intermediate body.
    Your intermediate body.

    As discussed at length herein, the definition of ``labor 
organization'' for purposes of completing Form LM-30 has been modified 
from that proposed, narrowing its scope consistent with the 
Department's existing ``top down'' approach and limiting the obligation 
of officers of local and intermediate unions. The first sentence of the 
quoted material is adopted as section 404.1(f) of the Department's 
regulations (to be codified at 29 CFR 404.1(f)).
    Labor organization employee means any individual (other than an 
individual performing exclusively custodial or clerical services) 
employed by a labor organization within the meaning of any law of the 
United States relating to the employment of employees.

    Note: An individual who is paid by the employer to perform union 
work, either under a ``union-leave'' or ``no-docking'' policy, is an 
employee of the union for reporting purposes if the individual 
performs services for, and under the control of, the union. See 
definition of ``bona fide employee.''
    For purposes of Form LM-30, stewards receiving union-leave/no-
docking payments from an employer or lost time payments from a labor 
organization are considered employees of the labor organization.

    Numerous comments were received about the wisdom of requiring union 
officials to report payments they received under union-leave or no-
docking policies. As discussed above, in today's rule, the Department 
adopts a limited reporting obligation for such payments. Concerns 
regarding the reporting burden of labor organization employees under 
the ``union-leave'' and ``no-docking requirements'' are addressed 
separately in this final rule. In addition to comments on that aspect 
of the proposed definition, the Department also received comments 
inquiring about the application of the definition to union stewards.
    One commenter, a labor educator, stated that his study's 
participants found the definition for ``labor organization employee'' 
to be confusing. He explained that many participants viewed the 
proposed definition as a major shift from existing practice as a number 
of individuals, including stewards, bargaining committee members, and 
volunteer organizers, would now have reportable transactions when doing 
union work such as serving on a negotiating committee, serving as an 
arbitration witness, or organizing. The commenter identified as a 
specific problem the definition's failure to address how a filer should 
report the receipt of payments where he or she has multiple employers, 
each with a different practice or language with respect to lost wages 
and to the payment of benefits to part-time union officers, stewards, 
negotiating committee members, and so forth.
    In general, where a union steward receives union-leave/no-docking 
payments from an employer or lost time payments from the union, the 
steward will be regarded as an employee of the labor organization as 
the individual has received compensation for performance of services 
for the union. The Department recognizes that some stewards and other 
representatives have multiple employers, each with a different practice 
or language with respect to lost wages and payment of benefits of part-
time union officers, stewards, or negotiating committee members. Thus, 
each employer is considered separately for reporting purposes.
    Finally, unlike the proposed definition, today's rule does not 
outline the factors that distinguish between the status of individuals 
working for a union as independent contractors and those working as 
employees of the union. As explained in the NPRM, independent 
contractors of the union are not required to file a Form LM-30. In the 
Department's view, the inclusion of these factors in the definition of 
``labor organization employee'' added unnecessary length and possible 
confusion to the definition. If needed, the Department will provided 
guidance, separate from the instructions, to assist individuals unsure 
of their status as employees or independent contractors. The same 
definition, but without the note, modifies section 404.1(g) of the 
Department's regulations (to be codified at 29 CFR 404.1(g))
    Labor organization officer means any constitutional officer, any 
person authorized to perform the functions of president, vice 
president, secretary, treasurer, or other executive functions of a 
labor organization, and any member of its executive board or similar 
governing body. An officer is (1) a person identified as an officer by 
the constitution and bylaws of the labor organization; (2) any person 
authorized to perform the functions of president, vice president, 
secretary, or treasurer; (3) any person who in fact has executive or 
policy-making authority or responsibility; and (4) a member of a group 
identified as an executive board or a body which is vested with 
functions normally performed by an executive board.

    Note: Under this definition, an officer includes a trustee 
appointed by the national or international union to administer a 
local union in trusteeship. If you are a trustee elected or 
appointed by the local union to audit and/or hold the assets of the 
union, you may or may not be a union officer, depending on your 
union's constitution and other factors. If you serve in your union 
in any capacity and you are unsure if your position is an officer 
position, you are likely an officer of a labor organization if any 
one of the following applies:
    <bullet> Your union's constitution or bylaws refers to your 
position as an officer of the union;
    <bullet> Your union's constitution or bylaws states that your 
position has the authority to make executive decisions for the union 
or that you are authorized to perform the functions of president, 
vice-president, secretary, treasurer, or other constitutionally 
designated officer;
    <bullet> Your union's annual Form LM-2 or Form LM-3 lists your 
position as an officer of the union;
    <bullet> In your position, you serve on your union's executive 
board or similar governing body.

    This definition adopted in today's rule has been revised from that 
proposed by adding the above note in the instructions. The same 
definition, but without the note, is adopted as a modification of the 
existing definition at section 404.1(b) of the Department's regulations 
(to be codified as redesignated at 29 CFR 404.1(h)). As explained in 
the NPRM, the definition, as proposed, tracks the definition of 
``officer'' at section 3(n) of the LMRDA, 29 U.S.C. 402(n), and adds a 
new second sentence to the old regulation's definition, 29 CFR 
404.1(b). The LMRDA Manual applies the definition to trustees appointed 
to oversee a labor organization. See LMRDA Manual, 241.200.
    One commenter agreed with the Department's view that the group of 
union officials subject to section 202's reporting requirements only 
partially overlaps with the larger group of individuals subject to the 
Act's Title V fiduciary duties. See 29 U.S.C. 501(a) (``officers, 
agents, shop stewards, and other representatives''). The commenter 
noted that nevertheless the overlap was substantial. A labor educator 
stated that participants in his study group found the definition 
unclear, adding that the explanatory notes to the definition were 
unhelpful. He mentioned that some participants were unsure whether 
``trustee'' applied to the positions in some local unions which hold 
auditing

[[Page 36145]]

and other responsibilities over the local's assets or to an individual 
appointed by the national or international union to administer a 
local's affairs, or both. The commenter explained that local union 
trustees do not see themselves as union officers and are not de facto 
or de jure members of the executive board. The commenter also explained 
that participants were unsure whether stewards would be considered 
union officers. The Department has concluded that the proposed 
definition, along with the addition of the note, clarifies that the 
term ``trustee,'' as used in this definition, does not apply to those 
with auditing responsibility in the union. This definition also 
provides a test for determining whether any individual is a union 
officer.
    Legal or equitable interest means any property or benefit, tangible 
or intangible, that has an actual or potential monetary value for the 
filer, spouse, or minor child without regard to whether the filer, 
spouse, or minor child holds possession or title to the interest. See 
definition of income and benefit with monetary value. For example:
    <bullet> You are an officer of a union. You and your spouse jointly 
own an accounting business that provides tax services to a number of 
clients, including your union. You hold a legal interest in the company 
providing services to your union.
    <bullet> You are an officer of a union. You form a tax preparation 
business with two partners and put your share of the business in your 
wife's name. The business prepares tax returns and LM reports for your 
union. You hold an equitable interest in the business that deals with 
your union.
    This definition has been modified from that proposed by adding the 
examples set forth in the above bullets. This change was suggested by 
the labor educator whose study participants had difficulty 
understanding the meaning of the term.
    Minor child, means a son, daughter, stepson, or stepdaughter less 
than 21 years of age.
    This definition is adopted as proposed as part of the instructions 
and as section 404.1(i) of the Department's regulations (to be codified 
at 29 CFR 404.1(i)). As the Department noted in the NPRM, the old 
instructions, like the LMRDA, are silent about the age at which a child 
reaches his or her majority. As explained in the NPRM, state law 
definitions for the legal concept of childhood and age of majority 
differ from state to state but also may differ widely from legal 
context to legal context within the same state. In the Department's 
view, there is a need for a uniform, nationwide meaning of ``minor 
child'' under the LMRDA and without such a uniform definition the 
objective of the LMRDA will be frustrated. Both filers and union 
members who view filed reports require a known and easily applied 
single standard regarding when reports are required, and what a 
disclosure or its absence represents.
    The Department only received a few comments about the proposed 
definition of ``minor child.'' One commenter noted that the Department 
should exclude from its definition a ``child who has married and moved 
away from the parental home.'' Another suggested that 18 should be the 
cut off age unless the child is still claimed as a dependent for 
Federal income tax purposes. The Department agrees that the commenters 
offer valid alternatives to the Department's proposal. Nevertheless, 
the Department believes that the proposed definition solely tied to a 
child's age offers the advantage of simplicity and ease of application, 
particularly because a child's status may remain in a state of flux 
during his or her late teens and early twenties. In 1959 when the LMRDA 
was enacted, it was well established that at common law the age at 
which a person reached his or her majority in the states was twenty-one 
years. See, e.g., 5 Samuel Williston and Richard A. Lord, A Treatise on 
the Law of Contracts Sec.  9:3 n.15 (4th ed. 1993 & Supp. 1999). As 
explained in the NPRM, the Department believes that in 1959 when 
Congress used the term ``minor child'' in section 202(a), it intended a 
uniform Federal standard to apply and referred to the general common 
law meaning at that time, i.e., twenty-one years. The Department also 
believes that twenty-one is more suitable than an earlier age to 
distinguish between a child's relative dependence upon, and 
independence from, the finances of a parent. For these reasons, the 
Department adopts the definition of ``minor'' as proposed.
    Substantial part means 10% or more. Where a business's receipts 
from an employer whose employees the filer's labor organization 
represents or is actively seeking to represent constitute 10% or more 
of its annual receipts, a substantial part of the business consists of 
dealing with this employer.
    As discussed herein, this term has been changed by increasing the 
reporting threshold from 5% to 10% in order to ease the burden on a 
filer to determine the percentage of a vendor's business that consists 
of dealing with an employer whose employees the official's union 
represents or is actively seeking to represent.
    Trust in which a labor organization is interested means a trust or 
other fund or organization (1) which was created or established by a 
labor organization, or one or more of the trustees or one or more 
members of the governing body of which is selected or appointed by a 
labor organization, and (2) a primary purpose of which is to provide 
benefits for the members of such labor organization or their 
beneficiaries. The term ``section 3(l) trust'' is used in the 
instructions as a shorthand reference to such trusts.
    No comments were received on the Department's proposed definition 
of this term. This definition is provided by section 3(l) of the LMRDA. 
29 U.S.C. 402(l). The only change is the inclusion of the second 
sentence to make plain that the term ``section 3(l) trust `` is a 
shorthand reference to ``trust in which a labor organization is 
interested.'' The same definition is adopted as section 404.1(j) of the 
Department's regulations (to be codified at 29 CFR 404.1(j)).
2. Other Issues Related to Definitions
    A commenter suggested the inclusion of a definition for 
``transaction,'' another term used in the Form LM-30 instructions. The 
Department believes that the term has a plain meaning that applies 
across various contexts and therefore its inclusion in the instructions 
is unnecessary.
    The Department had proposed to use the term ``payer'' to describe 
the employer, business, or labor relations consultant that is the 
source of a reported payment on the Form LM-30. As explained in the 
NPRM, the Department recognized that the term was imperfect, because in 
common parlance a business in which a filer holds an interest would not 
ordinarily be considered a ``payer'' of the filer. Upon further 
consideration, the Department has determined that the use of the term, 
defined specifically for Form LM-30 reporting, is unnecessary and 
potentially confusing. For these reasons, the Department has withdrawn 
the proposed definition. For similar reasons, as discussed above, the 
Department has withdrawn the proposed definition of ``publicly-traded 
securities.''

N. Details Relating To Proposed and Revised Form and Instructions

    As explained in the NPRM, the broad purpose of Form LM-30 is to 
disclose payments and other financial interests of a union official 
that may pose a conflict between those personal interests and his or 
her duty to the

[[Page 36146]]

union and its members. 70 FR 51166. In the NPRM, the Department 
identified the difficulty in developing a self-explanatory form to 
accomplish this result. While the old Form LM-30 has a deceptively 
simple design, it fails to fully capture information that Congress 
wanted disclosed. Filers often failed to complete the form and, when 
they did file, they seldom provided the detail called for in the 
instructions.
1. Comparison of the ``Old'' and Proposed Forms
    Items 1-4 of the old Form LM-30 remained on the proposed form with 
only minor changes. Item 3 was modified to require an e-mail address of 
the filer. Item 4 of the proposed form combined Items 4 and 5 of the 
old form and it also required filers to report whether they held their 
position in the union at the end of the reporting period. Item 5 on the 
proposed form was the signature box, which was otherwise the same as 
the old form.
    The proposed Form LM-30 included a Payer Detail Page to provide an 
itemized list of all payments, by payer. The proposed form included 
three schedules, and it organized the reportable matters by tables 
instead of the narrative boxes on the old form. The old form also 
displays reportable information in a three section format: Part A, Part 
B, and Part C. The filer must report payments from employers in Part A, 
Items 6, 7a, and 7b; from businesses in Part B, Items 8-12; and from 
other employers and labor relations consultants in Part C, Items 13-14.
    The proposed form contained various continuation pages for 
information supplementing required entries on other pages or otherwise 
as overflow space. Some of these pages existed in a different format in 
the old form and some were new pages.
    The NPRM noted that the diversity of financial transactions made 
reportable by section 202 of the Act requires detailed instructions. 
The NPRM invited comments as to the layout of the instructions, their 
clarity, and suggestions about how to better explain the reporting 
obligations. The NPRM also noted that the first heading of the proposed 
instructions, ``Why File,'' was largely unchanged from the old form: it 
addressed the basic reporting obligations.
2. Comments on Proposed Form
    In an attempt to better inform potential filers about the purposes 
served by the Form LM-30, the proposed form included an expanded 
discussion of the LMRDA, placing the official's reporting obligation in 
the context of the other rights and obligations established by the Act. 
The proposed form also clarified that no form need be filed unless the 
filer, his or her spouse, or minor child held a covered interest, 
received a covered payment, or engaged in a covered transaction or 
arrangement during the reporting period.
    The NPRM also requested comments about the layout and clarity of 
the form, including: ``Would the form benefit from adding additional 
text and, if so, what additions are recommended? Does the form have an 
intuitive feel to it? Does the form request information in logical 
progression? How can the form be improved?'' The next paragraph 
discusses the general comments received on the proposed form and the 
Department's response. The following paragraphs summarize comments 
received on particular aspects of the proposed form and the 
Department's response to those comments. Comments and responses are 
grouped by the numbered items and schedules of the proposed form.
    General Comments: Several commenters applauded the inclusion of 
definitions and examples; some commenters, however, expressed concern 
about some of the definitions and argued that some of the examples were 
incorrect. As discussed, the Department has clarified some of the 
definitions, modified some of the examples, and added others where 
requested. These changes are discussed in other sections of this 
document.
    One commenter stated that the proposed form is more confusing to 
filers and the public than the old form, adding burden but no 
compensating benefit. The commenter recommended that the Department 
should ``leave well enough alone'' and that instead of revising the 
form it should provide guidance that would ``clarify[ ] and simplify[ ] 
the reporting requirement itself.'' The Department disagrees with this 
recommendation. As noted in the NPRM, flaws in the form itself and the 
instructions to the form provided impetus for the proposed rule. 
Further, as discussed throughout this document, many of the 
modifications to the form correspond to changes/clarifications in the 
reporting requirements themselves. Although under the revised form a 
filer no longer needs to record the statutory subsection under which a 
payment or other financial interest is received, the Department has 
nevertheless conformed the form to the reporting requirements of 
section 202 and the limited exceptions to such requirements. Finally, 
much of the asserted confusion will clear when filers familiarize 
themselves with the revised form and instructions and avail themselves 
of the compliance assistance readily available from this Department.
    A labor educator stated that several of his study participants 
found the language in the instructions to be too ``legalistic.'' He 
suggested that the Department should wait to see what problems arose in 
connection with the historic upsurge in Form LM-30 filings, 
particularly in light of his observation that the biggest problem may 
actually be ``false positives'' and not ``false negatives'' (i.e., 
individuals who have nothing to report are nonetheless filing reports). 
The commenter's point about the old form is valid. However, the revised 
form and instructions will resolve this problem.
    Item 2--Period Covered: One individual suggested that the 
instructions should make clear that the filer's fiscal year should be 
the fiscal year used by his union in filing its Form LM-2, and another 
expressed confusion about whether reports should be based on the 
official's fiscal year or his union's fiscal year. The Department 
cannot dictate to a filer his or her fiscal year. The language of the 
statute states: ``[the filer] shall file with the Secretary a signed 
report listing and describing for his preceding fiscal year * * *.'' 29 
U.S.C. 432(a). The instructions as proposed appear to leave some 
ambiguity as to what fiscal year should be utilized by the filer. As 
such, the Department has added language to Part IX of the revised 
instructions indicating that the fiscal year is that of the filer, 
which may differ from the fiscal year utilized by the filer's union for 
filing its annual financial report, Form LM-2, LM-3, or LM-4.
    Item 3(I)--Contact Information of Reporting Person: E-mail Address: 
One commenter expressed support for the added contact information 
required by Item 3. Other commenters voiced opposition to the addition 
of the filer's e-mail address. The concern over e-mail addresses was 
that they are private and that their disclosure may lead to harassing 
e-mail, spam, unwanted solicitation, and viruses. Further, the 
commenters argued that the reporting of a filer's office telephone 
number eliminates the need for the e-mail address.
    Although several commenters voiced concerns over the required 
inclusion of a filer's e-mail address, none explained how this would 
violate the Privacy Act. No violation of such Act is apparent; there 
does not appear to be any greater privacy interest in a personal e-mail 
address than in a personal mailing address or phone number and such

[[Page 36147]]

information has long been required by Form LM-30 filers without any 
challenge on privacy grounds. The old Form LM-30 requires the address 
of the filer and the telephone number where the filer conducts official 
business, although a private, unlisted telephone number is not required 
to be reported.
    At the same time, the Department is sensitive to a filer's concerns 
that by disclosing his or her e-mail address, the official may become 
the target of unsolicited e-mails or otherwise impeded in the use and 
enjoyment of his or her e-mail account. For this reason, the Department 
has decided that the filer has the option to disclose or not disclose 
his or her e-mail address.
    Summary: The Department received one comment supporting the 
addition of a summary schedule to Form LM-30. Other commenters opposed 
this schedule, asserting that the summary adds unnecessary burden, 
without adding any ``significant value,'' and creates confusion due to 
the lack of a readily apparent relationship between the payer and 
employer/union on the summary. One commenter noted that summarizing all 
payments in this manner leads to the conclusion that the total value is 
a ``payment'' when not all of the interests, such as share holdings, 
can be characterized as such.
    This summary enables viewers to quickly ascertain the payments and 
interests held in employers and businesses that may constitute a 
potential conflict of interest. This function is the essence of Form 
LM-30, and thus the summary is a significant improvement over the old 
form. The comments express concern over the confusion that would ensue 
from aggregating different types of interests and payments, and the 
Department has addressed this concern with the creation of the 
categories of ``income or other payments'' and ``assets'' on the 
summary section of the form.
    Part B--Schedule 1: Employer or Business Identifying Information: 
One commenter voiced general support for the new schedules and 
applauded the new contact information. Other commenters expressed 
opposition to the changes, in particular the business ID number and 
incorporation information. One commenter argued that the new payer 
identifying information was ``unduly burdensome,'' requiring filers to 
conduct extensive research to compile such information, and with little 
value to the members and other viewers. Another stated that only the 
payer telephone number was justified, along with the payer name and 
address and the transactional information. Further, a union commented 
that it will be extremely difficult for a filer to locate payer 
information such as the state of incorporation/registration and state 
business ID number.
    This schedule will no longer combine data from all ``payers'' 
regardless of its classification as an employer, labor relations 
consultant, or business. The latter terms appear in the Act, unlike 
``payer,'' and the Department has restructured Part II of the 
instructions to detail the reporting requirements with these 
distinctions in mind.
    The Department has also eliminated Items K and L (State of 
Incorporation/Registration and State Business ID number) of Schedule 1, 
as proposed. The commenters' assertions that the inclusion of the 
business ID number and incorporation information will add significant 
burden to the reporting requirements appear valid. A filer must report 
all transactions in an accurate and clear manner, as well as provide 
basic contact and reference information; the filer should not also be 
required to perform research on the employer or business for 
information beyond what is needed to meet the statutory requirements. 
Further, viewers of these forms may be able to acquire such information 
on their own initiative if it is of interest to them; they will have 
the employer's or business' name and contact information to assist them 
in obtaining any desired additional information.
    Part B--Schedule 2: A labor educator presented some specific 
suggestions for this Schedule. He suggested that the form spell out the 
coding ``O/E/S/C'' under Item B, Schedule 2, i.e., ``officer,'' 
``employee,'' ``spouse,'' and ``[minor] child.'' Two other commenters 
expressed a similar concern. The Department has modified the form to 
meet these concerns.
    This commenter also suggested that the Department could use the 
Itemization Sheets and Schedules 15-19 in the Form LM-2, with a 
standardized itemization sheet for all reportable transactions that 
roll-up into a single-summary sheet. The itemization sheets for 
Schedules 15-19 of the Form LM-2 are not appropriate or necessary for 
purposes of the Form LM-30. A filer using the electronic Form LM-30 
will be able to create as many copies of Schedules 2 and 4 and of the 
additional information schedule as needed to complete the form.
    Instructions--Categories A1-A6: The most critical comments 
concerned the subsection-by-subsection layout of the proposed form. One 
commenter described it in hyperbolic terms, as ``requiring an 
encyclopedic knowledge of the Act.'' Others simply suggested it was 
more difficult than necessary. The Department believed that the 
subsection-by-subsection approach had the value of showing the filer, 
by reference to the statutory language, exactly what he or she must 
report. While the Department continues to believe that this approach 
has value and may have been preferable for use by some filers, the 
Department is persuaded that this approach may lead to the perception 
that the Form LM-30 is unnecessarily difficult to complete.
    Two commenters asserted that the proposed form, unlike the old 
form, ``fail[s] to collect interests and transactions into coherent 
categories. The proposed format, dependent on a complicated coding 
system, adds unnecessary complexity for filers.'' Another commenter, a 
labor educator, generally opposed the use of the ``codes'' A1-A6, 
because in his view it is possible to have more than one code for a 
payment. He also stated that he had found that potential filers had 
difficulty synchronizing the sections of the form with the 
instructions. For example, he stated that filers had to continually 
``flip back and forth'' from the instructions to the form. He believes 
that this diminishes the effectiveness of the instructions.
    The Department has carefully considered the concerns expressed 
about the subsection-by-subsection approach of the proposed form. In 
place of this approach, the Department has decided instead to organize 
the form in a way that requests each filer to identify by employer and 
business the reportable interest, payment, loan, or transaction, and to 
identify whether it was held by or involved the filer, his or her 
spouse, or minor child. This approach, similar to the approach used in 
the old form, adopts the targeted approach used by Congress to identify 
the types of relationships from which a conflict between a filer's 
personal interests and his or her duty to the union arises. Moreover, 
the classification of each payer as an employer, labor consultant, or 
business provides necessary context for a member or other viewer to 
properly analyze the potential conflict. Except for this change, the 
revised definitions and examples, the addition of some new examples, 
and the enlarged exception for reporting insubstantial payments, there 
have been no significant changes to the proposed form or instructions.
    The Department has also reduced the necessity to ``flip back and 
forth'' from the instructions to the form by putting more instructions 
and examples on the form itself (following the example of SF-278 
required of Federal employees),

[[Page 36148]]

and by providing cross references, by page number of the instructions, 
for the definition of any terms needed to complete a particular section 
of the form. Also, to help alleviate this problem, the revised form 
utilizes Items 6 and 7 to add clarity for both the filer and the 
reviewer of the form by listing the conditions under which 
arrangements, transactions, income or other payments, interests, and 
loans must be reported. These items help the filer, in particular, by 
focusing him or her on the pertinent provision in the instructions.
    Instructions Part II--Who must file and what must be reported: One 
commenter suggested that the ``Do I have to file the LM-30'' section of 
the instructions should be revised to allow an individual to more 
easily identify himself or herself as a Form LM-30 filer. The 
Department has addressed this concern by removing the A1-A6 categories, 
restructuring Part II of the instructions around the reporting 
requirements, exceptions, and examples of payments from employers and 
businesses; by revising some of the definitions, and by adding page 
citations to the cross-references. Another commenter acknowledged that 
the proposed form assisted potential filers by highlighting that no 
union official needs to file unless there has been reportable activity. 
The revised form contains the same statement.
    A commenter noted that the definition of ``substantial'' should 
include the word ``employer'' and not ``labor organization'' at the end 
of the second sentence of the definition. The Department has corrected 
this error by indicating that the end of the second sentence of that 
definition should read ``employer'' and not ``labor organization,'' as 
``substantial part'' is found in the language of 202(a)(3) (a business 
that deals with the employer) and not in 202(a)(4) (a business that 
deals with a labor organization).
    Instructions--Examples and Definitions: A commenter opposed some of 
the examples, suggesting that they are unreal ``lawyer'' hypotheticals, 
better used to establish the bounds of the Department's authority than 
to provide practical assistance to filers. Another commenter stated 
that fewer, better examples should be developed. He provided 
information to support his view that the definitions were confusing. He 
also suggested that the form should be redesigned to eliminate the need 
for filers to refer to different places in the instructions in order to 
complete the form, and that the instructions should include a section 
that brings together all the transaction criteria in each of the six 
subsection categories. Another commenter characterized the revised 
instructions as an improvement over the old ones, describing the 
examples as ``particularly useful.''
    Many of the specific comments directed at examples have already 
been addressed in other sections of the preamble. The Department 
believes that these examples address typical reporting scenarios that 
will guide filers in their effort to comply with the reporting 
requirements. Nevertheless, the Department has carefully reviewed all 
the examples, and in several cases has added or modified language in an 
effort to clarify or simplify the guidance presented in them. Other 
examples, although reflecting a correct statement of a filer's 
obligations (with the exception of example 1, at 70 FR 51217, which 
omitted a key fact), have been eliminated as redundant.
    Commenters expressed concern about the absence of examples 
involving transactions between, on the one hand, union officials and on 
the other section 3(l) trusts or service providers to such trusts. The 
Department has added Example 3 under ``(2) Payments of Money or Other 
Thing of Value from Certain Other Employers or a Labor Relations 
Consultant to Such an Employer'' in Part II of the instructions, which 
relates to payments to a union official from a trust in which that 
official's union is interested. Further, Part II of the instructions, 
``Reportable Payments and Interests from Businesses,'' contains 
Examples 15 and 17, which each deals with payments to a union official 
from service providers to trusts.
    Instructions--General Stylistic Comments: An individual offered 
several specific recommendations in regard to the instructions. He 
proposed that the Department utilize a single column rather than the 
double columns in the proposed form; the ``Note on Definitions'' should 
be indented below each definition; and the examples should be placed 
within graphic text boxes. He also suggested that the Department should 
either include a discussion of the Act's legislative history in the 
instructions or separately publish such information to assist filers in 
understanding what is to be reported on the form.
    The Department has made several minor changes that add some clarity 
to the instructions. As to changing the two-column format, the 
Department disagrees. All the old Form LM instructions utilize two 
columns, and no other commenter expressed concern over this format. The 
Department believes that it is easier for readers to process 
information in a two-column format than by alternative presentation.
    The examples already stand out as they are numbered in bold type, 
so boxes around them are not needed. The Department has also 
consolidated many of the examples, based on its departure from the A1-
A6 format in the proposed form. The Department has indented the ``Note 
on the Definitions'' sections to aid the filer; created a new part of 
the instructions for definitions (Part III); numbered the definitions; 
and cited them with page number references in Part II of the 
instructions.
    The Department disagrees with the suggestion that the instructions 
should include a discussion of the Act's legislative history. The 
instructions are intended to be straightforward and directed solely at 
the completion of the form. A discussion of legislative history, the 
language of the statute, and legal and policy questions would add 
additional, unnecessary length to the instructions. A filer desiring 
additional background information of this nature can easily obtain it 
by reviewing this preamble, the preamble to the proposed rule as 
published in the Federal Register, or through the Department's own Web 
site and other governmental and publicly-accessible electronic 
information portals.
    The Department acknowledges that the revised form, like the 
proposed form, may ``feel less intuitive'' than the old form; however, 
it believes that the revised form will better meet the goals of the 
LMRDA than the old form. Moreover, to address the concerns of the 
commenters, the Department has made several changes to the form to 
facilitate its completion and use by union members and the general 
public.
3. Completion of the Revised Form
    The first seven items on the revised Form LM-30, as published in 
today's rule, provide basic information about the filer and his or her 
labor union; the number of employers and labor relations consultants 
and the number of businesses with which the filer engaged in reportable 
activity; and the total reported income and the total reported assets 
of the filer involving those employers, labor relations consultants, 
and/or businesses. Item 8 is for the signature, date, and telephone 
number of the filer. Items 1-8 have been designated as Part A of Form 
LM-30 for ease of reference.
    Both the proposed and revised forms provide a plain notice to 
filers that they should carefully review the instructions to the form 
before completing it. The revised form contains the notice on the

[[Page 36149]]

first page: ``You are not required to file this report unless you * * * 
have received a payment, engaged in any transactions or arrangements, 
or held an interest of the types described in * * * the instructions.'' 
The revised instructions include, on the second page, a discussion of 
the reporting exception for insubstantial payments and gifts to enable 
potential filers to more quickly determine whether they have a 
reporting obligation. To simplify the form's completion, the 
instructions identify particular terms that must be understood for 
completing particular items. Page references are provided for these 
terms, which are now defined near the end of the instructions. By 
relocating the terms, a filer is able to more quickly start completing 
the form and focus only on those terms that affect the filer's 
circumstances.
    The remainder of the form consists of Schedules 1 through 4 and is 
designated as Part B. The filer must complete a separate Part B in 
accordance with the instructions for each of the employers, labor 
relations consultants, or businesses with which the filer engaged in 
reportable activity.
    Item 1--File Number: No changes were proposed for this item, which 
is included in the old and revised forms.
    Item 2--Period Covered: No changes were proposed for this item, 
which is included in the old and revised forms.
    Item 3--Contact Information of Reporting Person: The addition of 
the filer's e-mail address was proposed. However, the Department has 
decided to allow filers the option to disclose or not disclose his or 
her e-mail address.
    Item 4--Labor Organization Identifying Information: Both the 
proposed form and today's form combine two items of the old form. Items 
4F, 4G, and 4H on the revised form ask for information about the 
filer's position in the union, whether it is an officer or employee 
position, and whether the filer held this position at the end of the 
reporting period. As noted in the NPRM, it is important as an 
enforcement matter to know whether the filer can still be reached at 
the union, and whether the filer may need to file Form LM-30 the 
following year.
    Item 5--Summary: The revised form adopted the concept of a summary 
schedule of reported payments and interests contained in the proposed 
form, but the proposed summary has been simplified in response to 
comments. The revised summary (now Item 5) shows total reported income 
or other payments and total reported assets. The summary no longer 
requires the filer to list each individual payer (employers, 
businesses, and labor relations consultants) and give a total value of 
all dealings with that payer as had been proposed. As discussed herein 
in greater detail, the aggregation of all types of dealings such as 
payments, share holdings, loans, and so forth was determined to be 
confusing. Instead, the filer now totals the amounts in Schedule 2, 
Item F, Column (1) (value of income or other payments) of all the Part 
Bs and enters the total in Item 5A. The filer likewise totals the 
amounts in Schedule 2, Item F, Column (2) (value of asset) of all the 
Part Bs and enters the total in Item 5B.
    Items 6 and 7--Employer Relationships and Business Relationships: 
To simplify reporting, Item 6 on the revised form identifies the 
relationships between, on the one hand, a filer's union and, on the 
other hand, an employer or a labor relations consultant to an employer 
that will trigger a reporting requirement. Its counterpart, Item 7, 
identifies the types of relationships, direct and indirect, between a 
business and the filer's union that will trigger a reporting 
requirement. These relationships are culled from the provisions of 
sections 202(a)(1) through 202(a)(5), supplemented by particular 
relationships that trigger a report under section 202(a)(6). Filers no 
longer have to extract these relationships from the statutory language. 
If the filer has received a payment from or held an interest in such an 
employer or business, the language on the form directs the filer to 
review Part II of the instructions to determine whether or not any of 
the exemptions apply to the filer's situation. Items 6(a) and 7(a) each 
contain a box for the filer to indicate whether or not he or she had 
any of the listed relationships. If the filer answers ``Yes'' to Item 
6(a) or 7(a), Items 6(b) and 7(b) ask for the number of employers (and 
consultants) or the number of businesses with which the filer had a 
listed relationship. Items 6 and 7 clarify for both the filer and the 
reviewer of the form the entities from which payments and interests 
must be reported.
    Item 8--Signature: The signature box has been renumbered as Item 8, 
but it has not otherwise changed from the old or proposed forms.
    Part B: The ``Payer Detail Page'' from the proposed form is now 
called Part B and has four schedules. Schedules 1 and 2 will be 
completed for both employers and businesses. Schedule 3 will be 
completed for employers only and Schedule 4 will be completed for 
businesses only, so only three schedules will be completed on each Part 
B, just as in the NPRM. Instructions and examples have been added to 
the schedules on the form to enable the filer to more easily complete 
the form. A separate Part B must be completed for each employer, 
business, or labor relations consultant from which the filer received a 
reportable payment or in which he or she had a reportable interest.
    Part B--Schedule 1: Employer or Business Identifying Information: 
All filers must complete this schedule. The schedule's title has been 
changed from the proposed form's ``Payer Identifying Information.'' The 
proposed form combined three items on the old form (Items 6, 8, and 13) 
that helped identify the source of a payment or the specific interest 
held by the filer, his or her spouse, or minor child. The proposed form 
also required the filer to provide contact information for each 
``payer,'' including the telephone number, Web site address, state of 
incorporation or registration, and state business identification 
number. As noted in the NPRM, the additional contact information would 
make it easier for a person reviewing the report to identify the payer. 
The filer also would have to indicate whether he or she was associated 
with the payer at the end of the reporting period, information that 
would be helpful to the Department in determining whether the filer may 
be required to file a report the following year, thereby allowing the 
Department to conduct effective compliance assistance. The revised form 
no longer requests the filer to provide for each payer the state of 
incorporation/registration or state business identification number. The 
Department has determined that filers may not have this information at 
hand and that asking them to obtain such information would impose an 
unnecessary burden. The Department has retained new items such as the 
entity's telephone number (Item I) and Web site address (Item J). The 
schedule also requires the information that would be found in the old 
form. The Department has also preserved the proposed form's requirement 
for the filers to indicate whether the union official (or spouse or 
minor child) had a continuing relationship with the employer, business, 
or labor relations consultant at the end of the reporting period.
    Part B--Schedule 2: Interests in, Payments From, Loans to or From, 
and Transactions or Arrangements with Employer or Business and Payments 
from a Labor Relations Consultant: All filers must complete this 
schedule. This schedule replaces and renames Schedule 2 on the ``Payer 
Detail Page'' of the proposed form. The term ``payer,'' as noted in the 
NPRM, was an awkward phrase; it is no longer needed in the

[[Page 36150]]

revised form. The proposed form required filers to identify reportable 
interests, payments, loans, transactions, and arrangements by the 
specific provisions of section 202 of the LMRDA.
    As in the proposed form, the revised Schedule 2 requires the 
reporting of the date of each reportable payment and interest and 
whether it was received or held by the filer, his or her spouse, or his 
or her minor child; this information was not always reported on the old 
form. Language on this schedule clarifies the information that must be 
reported, the format in which the information must be reported, and 
references the instructions for further review of filing criteria. The 
layout of the schedule itself remains largely unchanged from the 
proposal, which in turn is derived from Items 7, 12, and 14 of the old 
form. The most significant change in the revised form's Schedule 2 is 
the deletion of Item C of the proposed form, which required the filer 
to indicate the subsection of section 202 of the LMRDA (A1-A6) that 
required the disclosure of each reported payment or interest. As 
explained in greater detail elsewhere in this preamble, this 
requirement was deleted in response to comments. Item C ``Description 
of Interest, Payment, Loan, Transaction, or Arrangement'' on the 
revised form is identical to Item D on the proposed form. Item D, 
``Value'' on the revised form (Item E on the proposed form), has been 
divided to include separate columns for ``Value of Income or Other 
Payments'' and ``Value of Asset.'' The instructions for this item in 
Part IX clarify what must be reported in each column of Item D. The 
filer must add the data in the income column and in the asset column, 
and record these totals in Item F.
    Part B--Schedule 3: Employer's Relationship with Your Labor 
Organization: This schedule must be completed only by filers who are 
completing Part B for payments from, or interests in, an employer (or a 
labor relations consultant to an employer). It replaces Schedule 3 from 
the proposed form, ``Payer's Dealings with Union(s), Trust(s), or 
Employer(s)'' with respect to employers. This schedule, unlike the old 
or proposed forms, provides a checklist of relationships between the 
filer's union and employers and businesses that will trigger a 
reportable interest. The relationships are culled from the language of 
sections 202(a)(1) through (a)(5) and from the Department's 
interpretation of section 202(a)(6).
    In Item A the filer will check the appropriate box(s) describing 
the relationship between the employer and the filer's labor 
organization. This will clarify the exact nature of the relationship 
for both the filer and the reviewer of the form. Item B of the schedule 
asks for a detailed description of the dealings between the two 
entities. Item B(1) requests a dollar value of the transactions between 
the entities. If the employer's relationship with the filer's labor 
organization is based on the labor organization's representation of the 
employer's employees or actively seeking to represent the employees or 
if the relationship cannot otherwise be readily assigned a monetary 
value, the filer should enter ``N/A.'' The need for this schedule 
derives from the changes in the Department's interpretation and 
implementation of section 202(a)(6) as discussed elsewhere in this 
preamble.
    Together with Schedule 4 that compiles similar information for 
reportable interests that arise from business relationships with a 
filer's union, this schedule, like the proposed Schedule 2, combines 
and simplifies information that is now collected in multiple items of 
the old form. Both the proposed form and the revision in today's rule 
asks filers to provide for each reportable matter the source of the 
payment or the specific interest, its recipient or holder (filer, 
spouse, or minor child), a description of the reportable matter, and 
its value. The schedule, as revised, also includes examples of 
reportable items, which should assist filers in determining the manner 
and detail in which reportable items should be identified and 
described.
    Part B--Schedule 4: Business's Dealings with Union(s), Trust(s), or 
Employer(s): This schedule must be completed only by filers who are 
completing Part B for payments from, or interests in, a business that 
deals with the filer's labor organization, a trust in which the filer's 
labor organization is interested, or an employer whose employees the 
filer's labor organization represents or is actively seeking to 
represent. This schedule replaces the proposed Schedule 3, ``Payer's 
Dealings with Unions(s), Trusts(s), or Employer(s),'' with respect to 
businesses. The new Schedule 4 largely resembles its predecessor 
Schedule 3 in the proposed form, which combined and simplified 
information reported in Items 9, 10, and 11 of the old form. Item B now 
reads ``Union/Trust/Employer,'' rather than ``U/T/E.'' Filers are no 
longer required to compute and enter a total on the form for the value 
reported.
    As noted above, this schedule, combined with Schedule 3 that 
compiles similar information for reportable interests and payments from 
employers, asks filers to identify for each reportable matter the 
source of the payment or the specific interest, its recipient or holder 
(filer, spouse, or minor child), a description of the reportable 
matter, and its value. Although the proposed form asked the filer to 
designate for each reportable matter the subsection under which the 
report was triggered, the revised form does not ask for such 
information. The schedule, as revised, also includes examples of 
reportable items, which should assist filers in determining the manner 
and detail in which reportable items should be identified and 
described.
    Labor Organizations in Which the Reporting Person is an Officer or 
Employee--Continuation Page: This page is a continuation of, and is 
identical to, Item 4 on the revised Form LM-30. It is for use by a 
filer who is an officer or employee of more than one labor 
organization.
    Additional Information Schedule: This schedule is identical in both 
the proposed and revised forms. It allows filers to provide additional 
information or explanations about other items in the form. This is 
similar to additional information items found on other OLMS forms, but 
the old Form LM-30 does not contain such an item.
    Summary Schedule Continuation Page: The Department has eliminated 
this continuation page that was part of the proposed form, as the 
revisions to Item 5, the Summary, have removed the necessity for it.
    Schedule 2 Continuation Page: The Department has retained a 
continuation page for the new Schedule 2.
    Schedule 4 Continuation Page: The Department has added a 
continuation page for the new Schedule 4.
    Instructions Part I, Why File: This part of the instructions is 
largely unchanged from the old and proposed forms.
    Instructions Part II, Who Must File and What Must Be Reported and 
Part III, Definitions: Part II of the instructions has been amended in 
several significant ways from the proposed form. The Department has 
abandoned the layout of the instructions in the ``A1-A6'' format, and 
it has adopted an arrangement in which the instructions guide the filer 
according to the reporting requirements for payments from and interests 
in employers (and labor relations consultants) and businesses. Further, 
the Department has removed the definitions from Part II of the 
instructions, numbered them, and placed them in a new Part III. The 
reporting requirements in Part II cite the number and page of each of 
the definitions in Part III. Finally, the

[[Page 36151]]

Department has modified some of the definitions as earlier discussed in 
the preamble.
    Instructions Part IV, When to File: This part has been renumbered 
from the old form, but no substantive changes have been made.
    Instructions Part V, Where to File: This part has been renumbered 
from the old form, but no substantive changes have been made.
    Instructions Part VI, Public Disclosure: This part has been 
renumbered from the old form and updated information, including the 
Internet Public Disclosure Room, has been added.
    Instructions Part VII, Officer or Employee Responsibilities and 
Penalties: This part has been renumbered from the old form, but it is 
identical to the proposed form.
    Instructions Part VIII, Recordkeeping: This part has been 
renumbered from the old form and a reference has been added to 
retaining electronic documents. A similarly worded statement is adopted 
as section 404.7 of the Department's regulations (to be codified at 29 
CFR 404.7)). This represents a clarification of existing recordkeeping 
requirements, and is not intended as any change in the law governing 
the maintenance and retention of records.
    Instructions Part IX, Completing Form LM-30: The Department has 
modified this part of the instructions, the former Part VIII of the 
proposed instructions, to correspond to the changes made to the revised 
Form LM-30.

III. Regulatory Procedures

A. Executive Order 12866

    This final rule has been drafted and reviewed in accordance with 
Executive Order 12866. The Department has determined that this rule is 
not an ``economically significant'' regulatory action under section 
3(f)(1) of Executive Order 12866. Because compliance with the rule can 
be achieved at a reasonable cost to covered union officers and 
employees, the rule is not likely to meet the 3(f)(1) definition of 
having an annual effect on the economy of $100 million or more or 
adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or state, local or tribal governments or communities. 
As a result, the Department has concluded that a full economic impact 
and cost/benefit analysis is not required for the rule under Section 
6(a)(3) of the Order. However, the Department determined because of its 
importance to the public that this final rule is a significant 
regulatory action under the Executive Order and therefore, it was 
reviewed by the Office of Management and Budget.
    The burden imposed by the revision of the Form LM-30 is addressed 
in the Paperwork Reduction Act section, below.
    The Department believes that increased transparency for union 
officers and employees will provide substantial benefits to union 
members and the union itself, as well as to outside academic 
researchers, members of the public, and other stakeholders. 
Transparency promotes the unions' own interests as democratic 
institutions. By these improvements, union members will obtain a more 
accurate picture of the personal financial interests of their union's 
officers and employees, as those interests may bear upon their actions 
on behalf of the union and its members. With this information, union 
members will be better able to understand any financial incentives or 
disincentives faced by their union's officers and employees and to make 
more informed choices about the leadership of their union and its 
management of its affairs. Through these actions, the Department 
effectuates the reporting obligation established by section 202 of the 
LMRDA and advances the Act's declared purpose ``that labor 
organizations, employers, and their officials adhere to the highest 
standards of responsibility and ethical conduct in administering the 
affairs of their organizations.'' Section 2(a) of the LMRDA, 29 U.S.C. 
401.

B. Small Business Regulatory Enforcement Fairness Act

    For similar reasons as those discussed in section A, the Department 
has concluded that this final rule is not a ``major'' rule under the 
Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 
801 et seq.). It will not likely result in (1) An annual effect on the 
economy of $100 million or more; (2) a major increase in costs or 
prices for consumers, individual industries, Federal, State or local 
government agencies, or geographic regions; or (3) significant adverse 
effects on competition, employment, investment, productivity, 
innovation, or on the ability of United States-based enterprises to 
compete with foreign-based enterprises in domestic or export markets.

C. Unfunded Mandates Reform

    For purposes of the Unfunded Mandates Reform Act of 1995, this rule 
does not include a Federal mandate that might result in increased 
expenditures by State, local, and tribal governments, or increased 
expenditures by the private sector of more than $100 million (adjusted 
for inflation) in any one year.

D. Executive Order 13132 (Federalism)

    The Department has reviewed this rule in accordance with Executive 
Order 13132 regarding federalism and has determined that the rule does 
not have ``federalism implications.'' The economic effects of the rule 
are not substantial and the rule does not have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''

E. Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, requires 
agencies to prepare regulatory flexibility analyses, and to develop 
alternatives wherever possible, in drafting regulations that will have 
a significant impact on a substantial number of small entities, 
including ``small businesses,'' ``small organizations,'' and ``small 
governmental jurisdictions.'' Today's rule revises the reporting 
obligations of union officers and employees, who, as individuals, do 
not constitute small business entities. Accordingly, the final rule 
will not have a significant economic impact on a substantial number of 
small business entities. Therefore, under the Regulatory Flexibility 
Act, 5 U.S.C. 605(b), a regulatory flexibility analysis is not 
required.

F. Paperwork Reduction Act

    This statement is prepared in accordance with the Paperwork 
Reduction Act of 1995, 44 U.S.C. 3501 (``PRA''). See 5 CFR 1320.9. As 
discussed in the preamble to this final rule and the analysis that 
follows below, the rule implements an information collection that meets 
the requirements of the PRA in that: (1) The information collection has 
practical utility to labor organizations, their members, other members 
of the public, and the Department; (2) the rule does not require the 
collection of information that is duplicative of other reasonably 
accessible information to the extent practicable; (3) the provisions 
reduce to the extent practicable and appropriate the burden on union 
officials who must provide the information; (4) the form, instructions, 
and explanatory information in the eamble are written in plain language 
that will be understandable by reporting officials; (5) the disclosure 
requirements are implemented in ways consistent and

[[Page 36152]]

compatible, to the maximum extent practicable, with the existing 
reporting and recordkeeping practices of union officials who must 
comply with them; (6) the preamble and the instructions to the Form LM-
30 inform union officials of the reasons that the information will be 
collected, the way in which it will be used, the Department's estimate 
of the average burden of compliance, which is mandatory for officials 
with reportable interests, the fact that all information collected will 
be made public, and the fact that officials need not respond unless the 
form displays a currently valid OMB control number; (7) the Department 
has explained its plans for the efficient and effective management and 
use of the information to be collected, to enhance its utility to the 
Department and the public; (8) the Department has explained why the 
method of collecting information is ``appropriate to the purpose for 
which the information is to be collected''; and (9) the changes 
implemented by this rule make extensive, appropriate use of information 
technology ``to reduce burden and improve data quality, agency 
efficiency and responsiveness to the public.'' See 5 CFR 1320.9; 44 
U.S.C. 3506(c).
    As discussed throughout the preamble, today's rule provides various 
benefits to unions, union members, this Department, and the public. The 
information has obvious utility for these groups, among other reasons, 
by ensuring more complete compliance by labor union officials with the 
LMRDA's reporting obligations. The rule provides for the collection of 
information in a way that is compatible with electronic reporting and 
the dissemination of this information to the interested community of 
users. In so doing, it better achieves the public disclosure purposes 
served by the Act's reporting provisions than the existing rule.
    Although the effectiveness of today's rule depends, in large part, 
on a set of instructions for the Form LM-30 that is longer than the 
instructions for the old form, the additional length is largely the 
result of the inclusion of numerous definitions and examples, designed 
to assist filers in understanding their reporting obligations. The 
absence of this information in the instructions to the old form was a 
significant impediment to compliance by filers and the utility of 
reported data. The inclusion of this information in today's rule 
benefits filers and the public; any additional time required to read 
the instructions is a small burden in comparison to the knowledge 
provided filers and the predicted gains in the numbers and completeness 
of the forms submitted to the Department.
    The final rule more closely resembles the format of the old form 
than the form proposed by the Department. Unlike the proposed form, the 
form embodied in today's rule may be completed without need for the 
filer to identify the statutory provision that triggers a reportable 
interest. This change eliminates a concern by many commenters that the 
proposed form imposed unnecessary burdens on filers. Various other 
changes have been made to the form that was proposed and its 
accompanying instructions. The Department has achieved its goal of 
designing a rule that meets the disclosure purposes intended by 
Congress--the complete and meaningful reporting of information about 
actual or potential conflicts of interest between a union official's 
personal financial interests and the official's duty to his or her 
union and its members. Moreover, this goal has been achieved without 
imposing any unnecessary burden on union officials. While the 
Department believes that the form and instructions provide ready 
answers to typical questions that may rise in completing the form, the 
Department has a robust compliance assistance program in place to 
assist filers in timely and correctly fulfilling their reporting 
obligations.
    Most of the information collected by the form is unavailable in any 
other public document; to the extent there may be some overlap with 
reports required by fiduciaries under other laws, the duplication, 
albeit minimal, is unavoidable. The rule's recordkeeping requirements 
are identical to the old rule with the exception of the requirement 
that filers preserve any electronic information used to complete the 
form. This requirement is consistent with contemporary recordkeeping 
standards and elicited no unfavorable comment.
    The Department's NPRM in this rulemaking contained initial 
Regulatory Flexibility Act and PRA analyses, which were submitted to 
and reviewed by OMB. Based upon careful consideration of the comments 
and the changes made to the Department's proposal in this final rule, 
the Department has made significant adjustments to its burden 
estimates. The costs to the Department for administering the reporting 
requirements of the LMRDA also were adjusted.
    Pursuant to the PRA, the information collection requirements 
contained in this final rule have been submitted to OMB for approval. 
Within 30 days of the date of publication of this final rule, you may 
direct comments by fax (202-395-6974) to: Desk Officer for the 
Department of Labor/ESA, Office of Management and Budget.
    Summary: This final rule modifies the public financial disclosure 
reports that section 202 of the LMRDA requires to be filed by labor 
union officers and employees for any fiscal year in which they have 
certain holdings, receive certain payments or income, or engage in 
certain financial transactions or arrangements. The revised paperwork 
requirements are necessary to reduce the errors and deficiencies in the 
reports, raise the number of union officials that comply with the 
reporting requirements, and increase the transparency of the financial 
practices of such officials. More accurate reports and increased 
transparency will allow union members to view the information needed by 
them to monitor their union's affairs and to make informed choices 
about the leadership of their union and its direction. Such 
improvements promote the unions' own interests as democratic 
institutions and the interests of the public and the government. 
Financial disclosure deters fraud and self-dealing, and facilitates the 
discovery of such misconduct when it does occur. Increased compliance 
will be achieved by clarifying the form and instructions, offering 
numerous examples to guide filers, deleting or limiting exceptions that 
allowed some financial matters that posed conflicts of interest to go 
unreported, and organizing the information in a more useful format. For 
a more detailed discussion of the purposes served, and benefits 
achieved, by the changes to the Form LM-30, its instructions, and 
related Department regulations, see the discussion above at Section 
I.C.1.
    The revised Form LM-30 and instructions that will implement the new 
reporting requirements are published as an appendix to today's final 
rule. The electronic versions of the revised Form LM-30 and 
instructions are now available on the OLMS Web site at http://www.olms.dol.gov.
    Background: The Form LM-30 is used by officials of labor unions to 
comply with the Act's requirement that such a union official annually 
disclose specified payments or other financial benefits received by the 
official, his or her spouse, or minor children from employers and 
businesses where such payments or other financial benefits pose actual 
or potential conflicts between an official's personal financial 
interests and the interests of the official's union and its members. 
Subject to specified exceptions, the interests, incomes, transactions, 
and arrangements subject to reporting

[[Page 36153]]

comprise: (1) Payments or benefits from, or interests in, an employer 
whose employees the filer's union represents or is actively seeking to 
represent; (2) transactions involving interests in, or loans to or 
from, an employer whose employees the filer's union represents or is 
actively seeking to represent; (3) interests in, income from, or 
transactions with a business a substantial part of which consists of 
dealing with an employer whose employees the filer's union represents 
or is actively seeking to represent; (4) interests in, income from, or 
transactions with a business that deals with the filer's union or a 
trust in which the filer's union is interested; (5) transactions or 
arrangements with an employer whose employees the filer's union 
represents or is actively seeking to represent; and (6) payments from 
an employer or labor relations consultant. See section 202(a)(1)-(6).
    Overview of Changes to Form LM-30 and Summary of the Need for the 
Rule: The revised Form LM-30 and instructions define terms used in the 
form, provide examples to assist the filer in identifying reportable 
financial events, and remove or limit certain exceptions that allowed 
financial matters of interest to union members to go unreported under 
the current reporting scheme. A detailed discussion of the proposed and 
revised forms and instructions is set forth at Section II.N. herein.
    Estimated Universe of Filers: The Department initially estimated 
that it would receive 2,046 Form LM-30 reports per year as a result of 
the final rule. This figure was based on the then current estimated 
filing rate of 0.03% of all union officers and employees plus an 
expected increase in the Form LM-30 filing rate to 1% as a result of 
the proposal. See 70 FR 51199. For the final rule, a revised estimate, 
based on the public comment and the number of Form LM-30s filed with 
the Department during fiscal year 2006 has been used. During fiscal 
year 2006, the Department received 4,348 Form LM-30 reports, 882 of 
which did not contain information on any transaction or interest, i.e., 
blank reports, resulting in a total of 3,466 valid Form LM-30 reports 
filed during fiscal year 2006.\1\ As explained in the following 
paragraphs, the Department considered key aspects of the final rule and 
assessed the impact of the revised reporting provisions by estimating 
the relative frequency that such provisions would result in filings. In 
making these estimates, the Department relied upon information it has 
previously used in determining paperwork estimates: the number of 
unions filing annual financial reports (21,792) and the number of 
officials (204,634) serving these unions.\2\ See 70 FR 51171. Applying 
this methodology as discussed below, the Department estimates that 
under today's rule, it will receive 3,450 additional Form LM-30 
reports. Thus, the Department estimates that a total of 6,916 revised 
Form LM-30 reports will be filed annually.
---------------------------------------------------------------------------

    \1\ Through increased compliance assistance efforts explaining 
that a report need only be filed to report certain transactions and 
that filing blank forms is unnecessary, the Department intends to 
eliminate or minimize the filing of blank reports.
    \2\ Both figures have been obtained from the Department's 
Electronic Labor Organization Reporting System database (``eLORS''), 
which stores and automatically culls certain information, such as 
union officer and employee salaries, from annual reports submitted 
by labor organizations. The total number of labor organizations has 
been used in the Department's submission to OMB for continuing PRA 
approval of OLMS forms. This information is based on FY 2005 data. 
The number of union officials was based on a query of applicable 
data in the eLORS system. This same figure was used in the NPRM's 
PRA analysis. See 70 FR 51199.
---------------------------------------------------------------------------

    In the NPRM, the Department estimated that the clarification of the 
Form LM-30, the defined terms, the addition of examples that illustrate 
reportable and nonreportable transactions, and the removal of 
administrative filing exemptions would increase the number of 
individuals who file the Form LM-30. See 70 FR 51199. Using the best 
data available, the Department estimated that there are 204,634 union 
officers and employees. Further, based on the Department's receipt of 
approximately 61 reports annually (the annual average for fiscal years 
2001-2005), the Department estimated a current filing rate of 0.03% 
(61/204,634 x 100 = 0.03%). Due to the proposed reforms, as well as 
increased compliance assistance and enforcement initiatives, the 
Department estimated that the filing rate would increase to 
approximately 1%, or 2,046 reports filed annually. The NPRM estimate 
was based on the opinion of some stakeholders that relatively few union 
officers and employees would be engaged in covered transactions. Id. 
The Department acknowledged the considerable uncertainty in this 
estimate and requested comment on the number of reports that should be 
filed under the old requirements and that may be filed as a result of 
the new requirements. Id. The comments received on the proposed rule 
have proven only marginally helpful in predicting how today's rule will 
affect the future number of Forms LM-30 filed annually.
    Review of Public Comments on the Estimated Universe of Filers and 
Resulting Changes:
    One commenter questioned the Department's estimate of the proposed 
universe of filers, arguing that the Department does not have relevant 
historic data on which to base its estimates, but is rather basing its 
expectations on the limited study discussed in the NPRM. Both for the 
proposed rule and today's rule, the Department has forecast the number 
of expected filers as accurately as possible based on available data. 
The Department has revised its initial estimates of the number of 
expected filers by using data on the number of reports filed with OLMS 
during fiscal year 2006. During that time, the Department received 
4,348 Form LM-30 reports, 882 of which were blank. As demonstrated 
below, the Department has adjusted its estimated universe of filers 
based on this figure and input received from commenters.
    A number of commenters argued that the proposed universe of filers 
and the corresponding reporting and recordkeeping burdens, as discussed 
in the NPRM, were too low given that the proposed de minimis exception, 
i.e., the threshold below which a payment would not be reportable, was 
limited to payments of $25 or less. Commenters suggested that a de 
minimis level set at that amount would lead to a much higher incidence 
of filings than anticipated by the Department. One commenter pointed 
out that a $250 de minimis level, especially with a two-tiered 
approach, would result in a reduced compliance burden. In response to 
comments received on this point, the Department has replaced the 
proposed $25 de minimis test with a two-tiered approach. Under this 
approach, a filer must report aggregated payments or other financial 
benefits received from a single source that exceed $250. Payments of 
$20 or less are excluded from this computation. Further, union 
officials will not have to report hospitality benefits received while 
attending certain widely attended gatherings. As noted herein at 
Section II.C of the preamble, after the comment period for this rule 
closed, the Department issued guidance alerting filers, in effect, that 
they need report only payments that exceeded $250. This guidance was 
posted on the OLMS Web site on November 7, 2005 and disseminated 
through the OLMS e-mail listserv. Consequently, the Department has had 
a full year to gauge the impact of a $250 filing threshold. Not 
surprisingly, as a result of the implementation of the $250 de minimis

[[Page 36154]]

approach, there have been fewer filers reporting payments between $25 
and $250. Thus, contrary to the suggestion of some commenters, no 
upward adjustment to the recordkeeping and reporting burden need be 
made for reasons associated with the de minimis level, as proposed. 
Moreover, the $250 threshold and the exclusion of payments of $20 or 
less from this threshold will lead to fewer filings than expected by 
commenters.
    In the NPRM, the Department proposed that union officials must 
report all payments received from any employer or vendor with a 
relationship with any level of his or her union or with any trust in 
which any level of his or her union is interested. This would require, 
for example, that a local union president report payments received from 
a vendor that does business with the official's parent or intermediate 
union. The rule proposed to achieve this result by defining the term 
``labor organization'' broadly. Several commenters submitted that the 
ramifications of implementing the proposed definition of ``labor 
organization'' could lead to requiring filers to account for 
transactions vastly exceeding the estimated burden in the NPRM. One of 
these commenters presented a hypothetical scenario that would result in 
a union official having to account for possible transactions with over 
10,000 employers or businesses for not only himself or herself, but for 
a spouse and minor children as well.
    This comment appeared to be premised on the belief that all 
businesses and employers associated with any entity within a union's 
hierarchy will need to be tracked by the officer or employee. This is 
not the case. The union official does not need to research and maintain 
records with all involved businesses or employers, but only those with 
which he or she is in a reportable relationship or from which he or she 
has received a reportable payment. The maximum burden on an officer or 
employee, in this regard, is to check the identity of these employers 
and businesses. Further, some commenters submitted that compliance 
burdens would be substantially lessened by modifying the proposed 
definition of ``labor organization'' to eliminate the language ``and 
any parent or subordinate labor organization of the filer's labor 
organization.'' In response to comments received on this issue, the 
final rule has reduced the reporting obligations from that proposed. 
The rule requires that a local union official track and report payments 
from only businesses that deal with their local union, trusts of their 
local union, and employers represented by, or actively being organized 
by, their local union. This tracks the reporting obligations under the 
old rule, and does not increase the reporting burden based on a broader 
definition of ``labor organization.'' See discussion at Section II.F of 
the preamble.
    Officers of international unions and intermediate unions (but not 
employees) will also have to report any payments they receive from (1) 
An employer whose employees any subordinate labor union represents or 
is actively seeking to represent; (2) a business that buys from, sells 
to, or otherwise deals with any subordinate labor union; and (3) a 
business that buys from, sells to, or otherwise deals with a trust in 
which any subordinate labor union is interested, such as a pension or 
welfare plan or training fund. Employees of national, international, 
and intermediate labor unions do not have to track and report payments 
resulting from actions involving subordinate levels of the union.
    As for the reporting impact of this provision, the Department 
estimates a slight increase in the number of reports. The largest 
portion of this increase is most likely to come from officers of 
intermediate labor unions. For these officers, the rule is new. Since 
1962 international officers have been required to report on Form LM-30 
income from businesses dealing with subordinate unions of that 
international. Therefore, increased filing under this provision by 
officers of international unions will be attributable to increased 
compliance assistance and enforcement efforts, and not to the final 
rule.
    Many of the same commenters asserted that the NPRM did not address 
compliance costs and time for businesses to enact internal controls, 
which could entail substantial costs. Employers, including service 
providers, have been under the same reporting requirements since 1963 
and no changes are being made to these requirements. Employer reporting 
requirements are governed by section 203 of the LMRDA. This rulemaking 
adjusts union officer and employee reporting under section 202 of the 
LMRDA. Therefore, not only is there no need to raise PRA estimates for 
employer recordkeeping, such estimates are not within the scope of this 
rulemaking.
    One commenter submits that compliance burdens will be substantially 
lessened by determining that trusts are not ``businesses'' or 
``employers.'' As explained in the preamble, trusts with employees are 
considered to be employers. The Department's views on whether the LMRDA 
requires disclosure of payments from trusts to union officials have 
evolved over time. In correspondence issued in 1967, a high ranking 
Department official responded to an inquiry concerning whether 
reporting is required of officers of labor unions who receive payments 
from union and employer established pension and welfare plans. The 
letter concluded that no report was required. On June 27, 2005, OLMS 
placed on its Web site a document titled ``Trusts and Form LM-30 and 
Form LM-10.'' In this guidance, OLMS indicated that payments from 
trusts to union officers and employees are reportable on Form LM-30 if 
the trust is an employer or business. As part of this rulemaking, the 
Department sought comments on whether a trust is, or can constitute, an 
``employer'' or a ``business,'' making such payments reportable on the 
Form LM-30. These comments, and the determination that a trust or 
similar entity with employees is an employer for purposes of the Act, 
are addressed in depth in the preamble at section II.K.
    No commenters provided estimates for the number of trusts that 
constitute ``employers'' and make reportable payments. Although the 
comments provided some anecdotal information particular to some unions, 
no information was provided that would allow the Department to estimate 
the total number of trusts that would be employers and none that would 
allow an estimate of the numbers of union officials now receiving 
payments from such entities. For example, one international union 
stated that there are ``380 Local or Council * * * Pension, Annuity, 
Health and Welfare, and training trusts in the U.S.'' Another commenter 
identified four trusts it co-sponsored. Another international union 
indicated that ``although some large trust funds happen to have 
employees, many do not.'' Finally, yet another international union 
explained that it and its affiliated district councils and local unions 
participate in ``numerous benefit funds.'' There is no basis to believe 
that other unions have trusts in the same proportion as theses unions. 
Moreover, no information was received that would enable an estimate as 
to what fraction of these trusts have employees or the number of union 
officials to whom reportable payments are made.
    Payments received by an officer or employee of a labor union from 
the employer of the union's members for work performed by the union 
officer or union employee for the union will now be reportable unless 
they are made pursuant to a collective bargaining

[[Page 36155]]

agreement and total 250 hours or less per year. For the proposition 
that such provisions are common, a federation of labor organizations 
submitted a study, Major Collective Bargaining Agreements: Employer Pay 
and Leave for Union Business, U.S. Dept. of Labor, Bureau of Labor 
Statistics (October 1980) (``BLS Study''). Notwithstanding the 
significant period of time that has passed since the study's 
publication, it represents the most recent compilation of data on the 
union-leave/no-docking question. Furthermore, more recent papers on 
this issue focus on public sector unions, which, as previously noted, 
are generally not subject to the LMRDA, and thus such information is 
not readily transferable to the particular circumstances addressed by 
today's rule. The BLS Study (at pages indicated in parentheses) 
provides the following information:
    <bullet> Of 1,765 agreements reviewed, 803, or 45 percent, granted 
pay for grievance time (6)
    <bullet> Of 430 sample agreements examined in detail, 206 
established pay for at least some grievance work (6)
    <bullet> Of 206 sample clauses, 188 limited pay to either specific 
union representatives or to a fixed number of representatives (7)
    <bullet> A substantial number of the 206 sample pay clauses limited 
the amount of paid time available for grievance activity by type of 
activity or eligible personnel (7) or by the amount of time one could 
spend on union work (7-9)
    <bullet> Of the 1,765 agreements in the study, arbitration 
provisions appeared in 95 percent, but pay to union representatives for 
time spent appeared in only 3% (11)
    <bullet> Of 1,765 agreements, 139 established time off with pay for 
union negotiators (7.8%) (12)
    <bullet> Of 618 safety and health committee provisions reviewed, 
281 referred to paid time for the activity (45%) (13)
    <bullet> Of 1,765 agreements, 93 referred to training related to 
union business; half of these provide company pay (93/2 = 46.5) (46.5/
1,765 = 2.6%) (17)
    While it is clear from the BLS Study that the collective bargaining 
agreements under review contained a high number of union-leave/no-
docking provisions, neither the study nor the comments provide a basis 
for estimating how many of these agreements will result in the filing 
of a Form LM-30.
    The study demonstrates that 45% of these collective bargaining 
agreements grant union leave in at least one category (as outlined, 45% 
of provisions provided union leave for grievances and health and 
safety). However, a substantial but unspecified number of the clauses 
reviewed in 1980 by BLS limited the amount of paid time available (Id., 
at 7-9). The BLS Study, however, does not discuss provisions 
representative of such limitations or otherwise indicate typical limits 
on the amount of time allowed for these purposes. As there was no 
information in the study or from commenters pertaining to the average 
amount of time that an individual would be engaged in union-leave or 
no-docking activity, the Department has no benchmark to gauge the 
number of filers that will submit reports under today's rule, i.e., 
those who receive employer compensation for more than 250 hours of 
union activity under a collective bargaining agreement or who receive 
compensation, in any amount, for such activity, where it is not 
authorized by such agreement. It is the Department's belief that with 
this reporting threshold only a small fraction of union officials 
receiving such payments will have to file reports. Such officials 
likely will be serving in local or intermediate union positions; again, 
however, the Department lacks data to predict a percentage of such 
officials that receive such compensation or the smaller number that 
will receive compensation in excess of 250 hours.
    Similarly, as discussed in the preamble, union members who receive 
payments from an employer for work performed on behalf of the union 
will now be considered union employees for Form LM-30 reporting 
purposes. A federation of labor organizations submitted that 100,000 
union stewards out of 5.5 million members belonging to affiliated 
unions currently receive union-leave or no-docking payments. This 
comment appears to have overstated the number of affected stewards as 
it included unions representing state and local government employees 
that are not subject to the LMRDA. Another federation of labor 
organizations, while not directly commenting on the potential universe 
of filers, stated that this provision could result in ``tens of 
thousands'' of reports. Further, while both federations submit that 
there are many stewards who receive payments for union activity, the 
Department is unable to deduce from these comments how many stewards 
would already be subject to Form LM-30 reporting requirements because 
they currently meet the definition of union officer or employee. 
Therefore, the Department is unable to use information provided in 
these comments to derive an estimate of the number of individuals who 
will now be union employees because they receive union-leave or no-
docking payments, much less how many of these payments are made outside 
of a collective bargaining agreement or total more than 250 hours per 
year.
    As discussed in the preamble, certain exceptions are no longer 
applicable to all provisions of the revised Form LM-30; specifically, 
the ``bona fide employee'' exception for reports due under section 
202(a)(2) and the ``employee discount-regular course of business'' 
exception for reports due under sections 202(a)(1) and (2). Based on 
the low number of comments received on the removal of these exceptions, 
which are addressed above, and the absence of any comments estimating 
the number of reports this change would result in, the Department does 
not foresee a substantial increase resulting from the removal of these 
exceptions. As explained in the preamble, sales and purchases of 
ownership interest in the employer, in particular, are unlikely to 
constitute payments received as a bona fide employee and thus the 
exception in the current form for reports filed under section 202(a)(1) 
is all but superfluous in the context of ownership interests. See 
Section II. D.2. Bona fide employees typically do not routinely engage 
in transactions involving holdings or loans that could be characterized 
as a payment or benefit received as a bona fide employee of the 
employer, and, as a result, the filing burden will not be onerous. The 
lack of comments objecting to this change seems to support these 
points.
    Similarly, only three comments were received on the proposed 
removal of the ``employee discount-regular course of business'' 
exception, for reports due under sections 202(a)(1) and (2), one of 
which was supportive of the removal. As discussed earlier in the 
preamble, section 202(a)(5) of the LMRDA requires union officers and 
employees to report any ``business transaction or arrangement'' with an 
employer whose employees the union represents or is actively seeking to 
represent. This section exempts from reporting two categories of 
transactions and arrangements: (1) Payments and benefits received as a 
bona fide employee of an employer whose employees are represented by 
the official's union or the union actively seeks to represent; and (2) 
``purchases and sales of goods or services in the regular course of 
business at prices generally available to any employee of such 
employer.'' The current instructions apply this ``employee discount--
regular course of business'' exception to the requirement that union 
officers and employees report (1) Holdings, (2) transactions in 
holdings, (3) loans, and (4) income or

[[Page 36156]]

any other benefit with monetary value (including reimbursed expenses). 
In so doing, the instructions exempt from reporting certain matters 
that otherwise would be reported under section 202(a)(1) or 202(a)(2). 
These sections do not contain this ``regular course of business'' 
exception, but the prior instructions made it applicable. Again, given 
the lack of comments regarding these changes, the Department 
anticipates only a slight increase in the number of reports received as 
a result of this revision.
    In summary, as discussed previously, in the NPRM the Department 
estimated a then current filing rate of .03% based on the receipt of 61 
Form LM-30 reports (the average for fiscal years 2001 to 2004) per 
204,634 union officers and employees. Due to the proposed reforms as 
well as increased compliance assistance and enforcement initiatives, 
the Department estimated that the filing rate would increase to 
approximately 1%, or 2,046 reports filed annually. Subsequent to the 
NPRM, the Department engaged in increased compliance assistance and 
enforcement, and the number of valid reports received in fiscal year 
2006 reached 3,466. This results in an estimated current filing rate of 
1.69% (3,466 / 204,634 x 100 = 1.69%).
    Taking the concerns of commenters into account in regard to the 
implementation of substantive reporting requirements which were not 
previously applicable, specifically union-leave/no-docking, expanded 
obligations for intermediate officers, removal of the two 
administrative exceptions, reporting by union stewards paid by 
employers for union work, and considering trusts, labor organizations, 
and other groups as employers in certain circumstances, the Department 
estimates that the Form LM-30 filing rate will increase to as much as 
3.38%, or 6,916 reports filed annually, double the current filing rate. 
It is worth noting that the implementation of the $20 tiered de minimis 
threshold, under which no transaction, including aggregated 
transactions (subject only to the exception for a tacit or express 
agreement for the transfer of money, as discussed in section II.C of 
the preamble), militates against an even higher estimated number of 
overall filers.
    Review of Public Comments Regarding the Hour and Cost Burden 
Estimates for the Revised Form and Resulting Changes:
    In the NPRM, the Department proposed five minutes as the estimated 
amount of time for filers to report the employer's or business's name, 
address, name of contact at the employer or business, telephone number, 
Web site address, State of incorporation or registration, State 
business ID number, and whether the filer had an association with the 
business, employer, or labor relations consultant at the end of the 
reporting period. A number of commenters submitted that it would be 
especially burdensome, and possibly needless, to obtain the State of 
incorporation and State employer identification number. As such, these 
commenters suggested that the time allotted to gather the required 
information on an employer or business was insufficient. One commenter 
submitted that providing a telephone number and Web site address would 
not add any substantial reporting burden. Based on comments received on 
this issue, the Department has removed the requirement that filers 
report an employer's or business's State of incorporation and State 
employer identification number. With these items removed, there is no 
need to provide for corresponding additional recordkeeping and 
reporting time.
    One commenter submitted that 90 minutes for completion of the Form 
LM-30 is not an accurate estimate. Another submitted that allowing 45 
minutes for reading the instructions is insufficient time as the filer 
must refer back to earlier provisions in the instructions and the 
instructions have increased from 9 pages to 17. While this commenter 
argued that the proposed burden hour estimates were too low for the 
proposed requirements, no alternative burden hour estimates were 
submitted for any area of the rulemaking. The Department has changed 
the Form LM-30 from the NPRM proposal to add more instructions to the 
form itself. Because the form itself will be clearer, the amount of 
time a filer must spend studying the separate instructions will be 
reduced. Prior to this final rule, Form LM-30 was estimated to take 
filers roughly 30 minutes while the proposed revised form was estimated 
to require 90 minutes for completion, which is a 300% increase in the 
allotted time.
    One commenter submitted that expanding the form to provide for six 
categories instead of three would add compliance burdens that are not 
accounted for in the NPRM. The Department has not implemented this 
proposed change; the six categories have been eliminated from the form 
itself. Rather, the Form LM-30 will utilize one schedule, Schedule 2, 
to detail ``interests in, payments from, loans to or from, and 
transactions or arrangements with an employer or business and payments 
from a labor relations consultant.'' No new information is required as 
a result of the format change; instead of reporting information in one 
of three categories, filers will report the same information in one 
schedule, but with greater clarity as to the nature of the transaction. 
Therefore, there is no corresponding additional burden.
    It is also worth noting the implementation of the $20 tiered de 
minimis threshold, under which records need not be maintained for 
holdings or transactions, including aggregated transactions, of $20 and 
under. While this provision did not appear in the NPRM, commenters, as 
discussed above, nearly universally suggested that a tiered de minimis 
threshold would reduce the recordkeeping burden, or alternatively, 
prevent the need for increased recordkeeping estimates. The Department 
agrees with the latter opinion.
    The following table describes the information sought by the revised 
form and instructions and the amount of time estimated for completion 
of each item of information. The time estimates include the additional 
time burdens associated with the Department's curtailment of 
administrative exceptions, and the implementation of the revised 
definitions.\3\
---------------------------------------------------------------------------

    \3\ These figures assume that a filer will choose to use an 
electronic form, which provides greater efficiency than completion 
by hand. The Department estimates that a filer who chooses to file 
by hand will need about ten additional minutes to complete the form.

[[Page 36157]]



------------------------------------------------------------------------
            Burden description                          Time
------------------------------------------------------------------------
Maintaining and gathering records.........  20 minutes.
Reading the instructions to determine       15 minutes.\4\
 whether filer must complete the form.
Additional reading of the instructions to   40 minutes.\5\
 determine how to complete the form.
Reporting filer's file number in Item 1...  30 seconds.
Reporting filer's fiscal year in Item 2...  30 seconds.
Reporting filer's name, address, and        2 minutes.
 contact information in Item 3 (A-I).
Reporting name, file number, and address    2 minutes.
 of filer's union or unions as well as
 filer's current position in the union in
 Item 4 (A-H).
Adding the total value of all assets and    2 minutes.
 the value of all income or other payments
 in all Schedules 2 (as described below)
 and reporting the two totals in Item 5,
 Summary.
Indicating whether there was a reportable   2 minutes.
 involvement with an employer or labor
 relations consultant during the fiscal
 year, and if so, recording the number of
 employer(s) and consultant(s), in Item 6.
Indicating whether there was a reportable   2 minutes.
 involvement with a business during the
 fiscal year, and if so, recording the
 number of businesses in Item 7.
Reporting name and address of the employer  5 minutes.
 or business which the filer received a
 payment from or held an interest in,
 providing the contact name, telephone
 number, Web site address, and whether
 filer has an association with the
 business, employer, or labor relations
 consultant at the end of the reporting
 period in Schedule 1.
Reporting the nature and value of           5 minutes.
 interests in, payments from, loans to or
 from, and transactions with an employer
 or business and payments from a labor
 relations consultant (includes date,
 whether the party to the transaction is a
 union officer or employee or spouse or
 minor child thereof, and a description
 and value of the interest or payment) in
 Schedule 2.
Completing either Schedule 3 if an          8 minutes.
 employer or labor relations consultant is
 reported in Schedule 1, providing details
 of the employer's relationship with the
 filer's labor union; or Schedule 4 if a
 business is reported in Schedule 1,
 providing details regarding the entity
 the business dealt with (union, trust, or
 employer) and a description of those
 dealings.
Filer's signature, date and telephone       1 minute.
 number in Item 8.
Checking responses........................  5 minutes.
Total Burden Hour Estimate Per Filer......  120 minutes.
------------------------------------------------------------------------

    The recordkeeping estimate of 20 minutes reflects that the majority 
of financial books and records required to complete the report are 
those that filers would maintain in the normal course of conducting 
business, personal, and union affairs, and thus should only take five 
minutes to maintain and gather. The other 15 minutes have been 
estimated to be necessary to maintain and gather the books and records 
that would not ordinarily be maintained, including those concerning the 
dealings between a business and the filer's union, a trust in which the 
filer's union is interested, or an employer whose employees the union 
represents or is actively seeking to represent. The estimated times are 
for the average filer: the Department assumes that an individual who 
partially owns or receives income from a company will know that 
company's Web address. Where a filer does not have a web address 
immediately accessible, the Department estimates that a filer will need 
to obtain this information either by telephone or Internet search; 
however if a union officer receives a gift like sporting event tickets, 
the gift is likely an effort to obtain business, therefore, the giver 
will likely make his or her business known to the recipient through a 
business card, e-mail, etc.
---------------------------------------------------------------------------

    \4\ This estimate is for all filers, including first time filers 
and subsequent filers. While the Department considered reducing this 
estimate by about one-third for filers submitting reports in 
subsequent years following a first-time filing, the nature of Form 
LM-30 reporting militated against such a decision. Where the 
Department has previously made reductions for subsequent year 
filings, it generally applied to organizational reporting and not 
individual reporting. LMRDA organizational reporting, such as the 
Form LM-2 or Form LM-3, is a required annual event whereas an 
individual may not necessarily engage in Form LM-30 reportable 
transactions on an annual basis. Where an organization files 
required annual reports, a certain amount of ``institutional 
memory'' is present which may not be applicable to a filer who is 
only required to file a report when certain criteria are met.
    \5\ See preceding note 4.
---------------------------------------------------------------------------

    The resulting annualized reporting and recordkeeping burden for all 
Form LM-30 filings is 829,920 minutes (6,916 x 120) or 13,832 hours 
(829,920/60).
    While annual salary information for labor union officers and 
employees is available on annual financial reports filed with the 
Department (Forms LM-2, LM-3, and LM-4), hourly rates are not reported. 
Further, officers and employees receiving less than $10,000 do not 
appear on every form; therefore, only the roughest estimates could be 
made using these forms to determine the average hourly rate for covered 
officers and employees. Instead, the Department used the $22.34 mean 
hourly earnings of those engaged in white collar occupations as defined 
and published in the National Compensation Survey: Occupational Wages 
in the United States (July 2004, Bureau of Labor Statistics, U.S. 
Department of Labor, August 2005). Using this figure, the Department 
estimates that the annual reporting and recordkeeping cost burden for 
all filers will be $309,007 (10,374 x $22.34), or $44.68 per filer 
(309,007/6,916).
    In addition, the Department estimates that all union officers and 
employees will spend 15 minutes reading the revised form and 
instructions to determine whether they are required to file a report 
and 25 minutes reviewing any applicable receipts and determining that 
aggregated payments from an employer or business did not exceed the 
$250 de minimis threshold. By deducting the 6,916 estimated filers 
whose preliminary review of the form has already been counted from the 
estimated 204,634 union officers and employees, 197,718 officers and 
employees remain who will review the form and their records but 
determine that they are not required to file a report. The annual 
reporting and recordkeeping hour burden for these officers and 
employees will be 5,931,540 minutes (30 x 197,718) or 98,859 hours 
(5,931,540/60). Using the $22.34 hourly wage, the Department estimates 
that the annual reporting and recordkeeping cost burden for non-filing 
union officers and employees will be $2,208,510 (98,859 x $22.34), or 
$11.17 per non-filing union officer or employee ($2,208,510/197,718).
    The resulting total annual reporting and recordkeeping hour burden 
for both filers and those who review the form and determine that a 
report need not be filed will be 112,691 hours (13,832 (hours for 
filers) + 98,859 (hours for non-filers)). The total annual reporting 
and recordkeeping cost burden will be $2,517,517 (112.69 x $22.34).
    Federal Costs Associated with the Rule:
    The estimated annualized Federal cost of the Form LM-30 is 
$1,025,837. This represents estimated operational expenses such as 
equipment, overhead,

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and printing as well as salaries and benefits for the OLMS staff in the 
National Office and field offices who are involved with reporting and 
disclosure activities. These estimates include time devoted to: (a) 
Receipt and processing of reports; (b) disclosing reports to the 
public; (c) obtaining delinquent reports; (d) obtaining amended reports 
if reports are determined to be deficient; (e) auditing reports; and 
(f) providing compliance assistance training on recordkeeping and 
reporting requirements.

G. Executive Order 13045 (Protection of Children From Environmental 
Health Risks and Safety Risks)

    In accordance with Executive Order 13045, the Department has 
evaluated the environmental safety and health effects of the final rule 
on children. The Department has determined that the final rule will 
have no effect on children.

H. Executive Order 13175 (Consultation and Coordination With Indian 
Tribal Governments)

    The Department has reviewed this final rule in accordance with 
Executive Order 13175, and has determined that it does not have 
``tribal implications.'' The rule does not ``have substantial direct 
effects on one or more Indian tribes, on the relationship between the 
Federal government and Indian tribes, or on the distribution of power 
and responsibilities between the Federal government and Indian 
tribes.''

I. Executive Order 12630 (Governmental Actions and Interference With 
Constitutionally Protected Property Rights)

    This final rule is not subject to Executive Order 12630, 
Governmental Actions and Interference with Constitutionally Protected 
Property Rights, because it does not involve implementation of a policy 
with takings implications.

J. Executive Order 12988 (Civil Justice Reform)

    This regulation has been drafted and reviewed in accordance with 
Executive Order 12988, Civil Justice Reform, and will not unduly burden 
the Federal court system. The regulation has been written so as to 
minimize litigation and provide a clear legal standard for affected 
conduct, and has been reviewed carefully to eliminate drafting errors 
and ambiguities.

K. Environmental Impact Assessment

    The Department has reviewed the final rule in accordance with the 
requirements of the National Environmental Policy Act (``NEPA'') of 
1969 (42 U.S.C. 4321 et seq.), the regulations of the Council on 
Environmental Quality (40 U.S.C. part 1500), and the Department's NEPA 
procedures (29 CFR part 11). The final rule will not have a significant 
impact on the quality of the human environment, and, thus, the 
Department has not conducted an environmental assessment or an 
environmental impact statement.

L. Executive Order 13211 (Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use)

    This final rule is not subject to Executive Order 13211, because it 
will not have a significant adverse effect on the supply, distribution, 
or use of energy.

List of Subjects in 29 CFR Part 404

    Labor union officer and employees, Recordkeeping and reporting.

IV. Text of Final Rule

0
In consideration of the foregoing, the Office of Labor-Management 
Standards, Employment Standards Administration, Department of Labor 
hereby amends part 404 of title 29 of the Code of Federal Regulations 
as set forth below.

PART 404--LABOR ORGANIZATION OFFICER AND EMPLOYEE REPORTS

0
1. The authority citation for part 404 is revised to read as follows:

    Authority: Secs. 202, 207, 208, 73 Stat. 525, 529 (29 U.S.C. 
432, 437, 438); Secretary's Order No. 4-2001, 66 FR 29656 (May 31, 
2001).


Sec.  404.1  [Amended]

0
2. Section 404.1 is amended by:
0
a. Redesignating existing paragraph (b) as new paragraph (h) and adding 
the phrase ``An officer is:'' at the end thereof;
0
b. Adding new paragraphs (h)(1) through (h)(4) to read as set forth 
below;
0
c. Adding a new paragraph (b) to read as set forth below;
0
d. Redesignating existing paragraph (c) as new paragraph (g) and adding 
the phrase ``within the meaning of any law of the United States 
relating to the employment of employees'' to the end of newly 
designated paragraph (g);
0
e. Redesignating existing paragraph (d) as new paragraph (c);
0
f. Redesignating existing paragraph (a) as new paragraph (d);
0
g. Adding a new paragraph (a) to read as set forth below;
0
h. Adding new paragraphs (e), (f), (i) and (j) to read as set forth 
below.
    The additions and revision read as follows:


Sec.  404.1  Definitions.

    (a) Benefit with monetary value means anything of value, tangible 
or intangible, including any interest in personal or real property, 
gift, insurance, retirement, pension, license, copyright, forbearance, 
bequest or other form of inheritance, office, options, agreement for 
employment or property, or property of any kind. For reporting 
purposes, the following are excepted: pension, health, or other benefit 
payments from a trust that are provided pursuant to a written specific 
agreement covering such payments.
    (b) Dealing means to engage in a transaction (bargain, sell, 
purchase, agree, contract) or to in any way traffic or trade, including 
solicitation of business.
* * * * *
    (e) Income means all income from whatever source derived, 
including, but not limited to, compensation for services, fees, 
commissions, wages, salaries, interest, rents, royalties, copyrights, 
licenses, dividends, annuities, honorarium, income and interest from 
insurance and endowment contracts, capital gains, discharge of 
indebtedness, share of partnership income, bequests or other forms of 
inheritance, and gifts, prizes or awards.
    (f) Labor organization means the local, intermediate, or national 
or international labor organization that employed the filer of the Form 
LM-30, or in which the filer held office, during the reporting period, 
and, in the case of a national or international union officer or an 
intermediate union officer, any subordinate labor organization of the 
officer's labor organization.
* * * * *
    (h) * * *
    (1) A person identified as an officer by the constitution and 
bylaws of the labor organization;
    (2) Any person authorized to perform the functions of president, 
vice president, secretary, or treasurer;
    (3) Any person who in fact has executive or policy-making authority 
or responsibility; and
    (4) A member of a group identified as an executive board or a body 
which is vested with functions normally performed by an executive 
board.
    (i) Minor child means a son, daughter, stepson, or stepdaughter 
under 21 years of age.
    (j) Trust in which a labor organization is interested means a trust 
or other fund or organization:
    (1) Which was created or established by a labor organization, or 
one or more

[[Page 36159]]

of the trustees or one or more members of the governing body of which 
is selected or appointed by a labor organization, and
    (2) A primary purpose of which is to provide benefits for the 
members of such labor organization or their beneficiaries.


Sec.  404.4  [Removed and reserved]

0
3. Section 404.4 is removed and reserved.


Sec.  404.7  [Amended]

0
4. Section 404.7 is revised to read as follows:


Sec.  404.7  Maintenance and retention of records.

    Every person required to file any report under this part shall 
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 Office of Labor-Management 
Standards may be verified, explained or clarified, and checked for 
accuracy and completeness, and shall include vouchers, worksheets, 
receipts, financial and investment statements, contracts, 
correspondence, and applicable resolutions, in their original 
electronic and paper formats, and any electronic programs by which they 
are maintained, available for examination for a period of not less than 
five years after the filing of the documents based on the information 
which they contain.

    Signed at Washington, DC, this 22nd day of June, 2007.
Victoria A. Lipnic,
Assistant Secretary for Employment Standards.
    Signed at Washington, DC, this 22nd day of June, 2007.
Don Todd,
Deputy Assistant Secretary for Labor-Management Programs.

    Note: The following appendix will not appear in the Code of 
Federal Regulations:

Appendix--Form LM-30 and Instructions

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[FR Doc. 07-3155 Filed 6-29-07; 8:45 am]
BILLING CODE 4510-CP-C


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