27346 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 

DEPARTMENT OF LABOR 

Office of Labor-Management 

Standards 

29 CFR Part 403 

RIN 1215–AB62 

Labor Organization Annual Financial 

Reports 

AGENCY: Office of Labor-Management 

Standards, Employment Standards 

Administration, Department of Labor. 

ACTION: Notice of proposed rulemaking; 

request for comments. 

SUMMARY: The Department of Labor’s 

Employment Standards Administration 

(‘‘ESA’’) proposes to: make several 

revisions to the current Form LM–2 

(used by the largest labor organizations 

to file their annual financial reports) 

that will provide additional information 

on Schedules 3, 4, 11 and 12, clarify 

reporting under certain functional 

categories and add itemization 

schedules corresponding to categories of 

receipts; and establish a procedure and 

standards by which the Secretary of 

Labor may revoke a particular labor 

organization’s privilege to file a 

simplified annual report, Form LM–3, 

where appropriate, after investigation, 

due notice, and opportunity for a 

hearing. The proposed changes are 

made pursuant to section 208 of the 

Labor-Management Reporting and 

Disclosure Act (‘‘LMRDA’’). The 

proposed rule will apply prospectively. 

DATES: Comments must be received on 

or before June 26, 2008. 

ADDRESSES: You may submit comments, 

identified by RIN 1215-AB62, only by 

the following methods: 

Internet—Federal eRulemaking Portal. 

Electronic comments may be submitted 

through http://www.regulations.gov. To 

locate the proposed rule, use key words 

such as ‘‘Labor-Management Standards’’ 

or ‘‘Labor Organization Annual 

Financial Reports’’ to search documents 

accepting comments. Follow the 

instructions for submitting comments. 

Please be advised that comments 

received will be posted without change 

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

any personal information provided. 

Mail: Mailed comments should be 

sent to: Kay H. Oshel, Director of the 

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. 

Because of security precautions the 

Department continues to experience 

delays in U.S. mail delivery. You should 

take this into consideration when 

preparing to meet the deadline for 

submitting comments. 

The Office of Labor-Management 

Standards (‘‘OLMS’’) recommends that 

you confirm receipt of your mailed 

comments by contacting (202) 693–0123 

(this is not a toll-free number). 

Individuals with hearing impairments 

may call (800) 877–8339 (TTY/TDD). 

Only those comments submitted 

through http://www.regulations.gov, 

hand-delivered, or mailed will be 

accepted. 

Comments will be available for public 

inspection during normal business 

hours at the above address. 

FOR FURTHER INFORMATION CONTACT: Kay 

H. Oshel, Director of the Office of 

Policy, Reports and Disclosure, at: Kay 

H. Oshel, U.S. Department of Labor 

Employment Standards Administration, 

Office of Labor-Management Standards, 

200 Constitution Avenue, NW., Room 

N–5609, Washington, DC 20210, (202) 

693–1233 (this is not a toll-free 

number), (800) 877–8339 (TTY/TDD). 

SUPPLEMENTARY INFORMATION: 

I. Statutory Authority 

This proposed rule is issued pursuant 

to section 208 of the LMRDA, 29 U.S.C. 

438. Section 208 authorizes the 

Secretary of Labor to issue, amend, and 

rescind rules and regulations to 

implement the LMRDA’s reporting 

provisions. 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 for the Secretary’s 

functions under the LMRDA to the 

Assistant Secretary for Employment 

Standards and permits re-delegation of 

such authority. The proposal 

implements section 201 of the LMRDA, 

which requires covered labor 

organizations to file annual, public 

reports with the Department, identifying 

the labor organization’s assets and 

liabilities, receipts, salaries and other 

direct or indirect disbursements to each 

officer and all employees receiving 

$10,000 or more in aggregate from the 

labor organization, direct or indirect 

loans (in excess of $250 aggregate) to 

any officer, employee, or member, loans 

(of any amount) to any business 

enterprise, and other disbursements 

during the reporting period. 29 U.S.C. 

431(b). The statute requires that such 

information shall be filed ‘‘in such 

detail as may be necessary to disclose [a 

labor organization’s] financial 

conditions and operations.’’ Id. 

Section 208 authorizes the Secretary 

to establish ‘‘simplified reports for labor 

organizations or employers for whom 

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

detailed report would be unduly 

burdensome.’’ Section 208 also 

authorizes the Secretary to revoke this 

privilege for any labor organization or 

employer if the Secretary determines, 

after such investigation as she deems 

proper and due notice and opportunity 

for a hearing, that the purposes of 

section 208 would be served by 

revocation. 

II. Background 

A. Introduction 

This proposal is part of the 

Department’s continuing effort to better 

effectuate the reporting requirements of 

the LMRDA. The LMRDA’s various 

reporting provisions are designed to 

empower labor organization members 

by providing them the means and 

information to maintain democratic 

control over their labor organizations 

and ensure a proper accounting of labor 

organization funds. Labor organization 

members are better able to monitor their 

labor organization’s financial affairs and 

to make informed choices about the 

leadership of their labor organization 

and its direction when they receive the 

financial information required by the 

LMRDA. By reviewing the reports, a 

member may ascertain the labor 

organization’s priorities and whether 

they are in accord with the member’s 

own priorities and those of fellow 

members. At the same time, this 

transparency promotes both the labor 

organization’s own interests as 

democratic institutions and the interests 

of the public and the government. 

Furthermore, the LMRDA’s reporting 

and disclosure provisions, together with 

the fiduciary duty provision, 29 U.S.C. 

501, which directly regulates the 

primary conduct of labor organization 

officials, operate to safeguard a labor 

organization’s funds from depletion by 

improper or illegal means. Timely and 

complete reporting also helps deter 

labor organization officers or employees 

from making improper use of such 

funds or embezzling assets. 

In its continuing effort to achieve 

these goals, the Department proposes: 

first, to modify and improve the Form 

LM–2 by requiring additional 

information about the receipt and 

disbursement of labor organization 

funds; and second, to establish 

standards and procedures for revoking, 

where appropriate, the privilege 

afforded some labor organizations to file 

simplified annual reports, after 

investigation, due notice, and 

opportunity for a hearing. 


PWALKER on PROD1PC71 with PROPOSALS2
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27347 

1There are now more large labor organizations 

affiliated with a national or international body than 

ever before. At the close of FY 2005, 4,452 labor 

organizations, including 101 national and 

international labor organizations, reported $250,000 

or more in total annual receipts. Unless otherwise 

noted, all estimates are based on data from the 

OLMS electronic labor organization reporting 

system (‘‘e.LORS’’) for FY 2005. 

2The balance between wages/salaries paid to 

workers and their ‘‘other compensation’’ has 

changed significantly during this time. For 

example, in 1966, over 80% of total compensation 

consisted of wages and salaries, with less than 20% 

representing benefits. U.S. Department of Labor, 

Report on the American Workforce (2001) 76, 87. 

By 2007, wages dropped to 70.8% of total 

compensation and benefits grew to 29.2% of the 

compensation package. U.S. Department of Labor, 

Bureau of Labor Statistics Chart on Total Benefits, 

available on the Web site of the Bureau of Labor 

Statistics, http://www.bls.gov. 

3The format of Forms LM–2 and LM–3 remained 

essentially unchanged from the early 1960s, when 

the Department issued the first and second 

generation of rules under the Act, until October 

2003 when the revised Form LM–2 was issued. See, 

e.g., 25 FR 433 (Jan. 20, 1960); 28 FR 14383 (Dec. 

27, 1963). The Form LM–4 was adopted by a final 

rule in 1992 with an effective date of December 31, 

1993. See 57 FR 49356–49365 (Oct. 30, 1992). The 

effective date was subsequently postponed until 

Continued 

The proposed rule brings the 

reporting requirements for labor 

organizations in line with contemporary 

expectations for the disclosure of 

financial information. Today labor 

organizations are more like modern 

corporations in their structure, scope, 

and complexity than the labor 

organizations of 1959.1 Further, as 

benefits have become a larger 

component of compensation, 

information about such benefits has 

become more important to members.2

Moreover, labor organization members 

today are better educated, more 

empowered, and more familiar with 

financial data and transactions than ever 

before. As labor organization members, 

no less than as consumers, citizens, or 

creditors, they expect access to relevant 

and useful information in order to make 

fundamental investment, career, and 

retirement decisions, evaluate options, 

and exercise legally guaranteed rights. 

In August and September of 2007, 

Department officials met with 

representatives of the community that 

would be affected by the proposed 

changes, including officials of labor 

organizations and their legal counsel, to 

hear their views on the need for reform 

and the likely impact of changes that 

might be made. The Department 

developed its proposal with these 

discussions in mind and it requests 

comments from this community and 

other members of the public on any and 

all aspects of the proposal. 

B. The LMRDA’s Reporting and Other 

Requirements 

In enacting the LMRDA in 1959, a 

bipartisan Congress made the legislative 

finding that in the labor and 

management fields ‘‘there 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.’’

29 U.S.C. 401(a). The statute was 

designed to remedy these various ills 

through a set of integrated provisions 

aimed at labor organization governance 

and management. These include a ‘‘bill 

of rights’’ for labor organization 

members, which provides for equal 

voting rights, freedom of speech and 

assembly, and other basic safeguards for 

labor organization democracy, see 29 

U.S.C. 411–15; financial reporting and 

disclosure requirements for labor 

organizations, their officers and 

employees, employers, labor relations 

consultants, and surety companies, see 

29 U.S.C. 431–36, 441; detailed 

procedural, substantive, and reporting 

requirements relating to labor 

organization trusteeships, see 29 U.S.C. 

461–66; detailed procedural 

requirements for the conduct of 

elections of labor organization officers, 

see 29 U.S.C. 481–83; safeguards for 

labor organizations, including bonding 

requirements, the establishment of 

fiduciary responsibilities for labor 

organization officials and other 

representatives, criminal penalties for 

embezzlement from a labor 

organization, a prohibition on certain 

loans by a labor organization to officers 

or employees, prohibitions on 

employment and officeholding of 

certain convicted felons in a labor 

organization, and prohibitions on 

payments to employees, labor 

organizations, and labor organization 

officers and employees for prohibited 

purposes by an employer or labor 

relations consultant, see 29 U.S.C. 501–

05; and prohibitions against extortionate 

picketing, retaliation for exercising 

protected rights, and deprivation of 

LMRDA rights by violence, see 29 

U.S.C. 522, 529, 530. 

The LMRDA was the direct outgrowth 

of a congressional investigation 

conducted by the Select Committee on 

Improper Activities in the Labor or 

Management Field, commonly known as 

the McClellan Committee, chaired by 

Senator John McClellan of Arkansas. In 

1957, the committee began a highly 

publicized investigation of labor 

organization racketeering and 

corruption; and its findings of financial 

abuse, mismanagement of labor 

organization 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 labor 

organizations and employers (and labor 

consultants aligned with the employers) 

whose employees were represented by 

the labor organizations in question or 

might be organized by them. See 

generally Interim Report of the Select 

Committee on Improper Activities in the 

Labor or Management Field, S. Report 

No. 85–1417 (1957); see also William J. 

Isaacson, Employee Welfare and Benefit 

Plans: Regulation and Protection of 

Employee Rights, 59 Colum. L. Rev. 96 

(1959). 

Financial reporting and disclosure 

was conceived as a partial remedy for 

these improper practices. As noted in a 

key Senate Report on the legislation, 

disclosure would discourage 

questionable practices (‘‘The searchlight 

of publicity is a strong deterrent.’’); aid 

labor organization governance (Labor 

organizations will be able ‘‘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.’’); 

facilitate legal action by members 

against ‘‘officers who violate their duty 

of loyalty to the members’’; and create 

a record (The reports will furnish a 

‘‘sound factual basis for further action in 

the event that other legislation is 

required.’’). S. Rep. No. 187 (1959), at 

16, reprinted in 1 NLRB Legislative 

History of the Labor-Management 

Reporting and Disclosure Act of 1959, at 

412. 

The Department has developed 

several forms for implementing the 

LMRDA’s financial reporting 

requirements. The annual reports 

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

U.S.C. 431(b) (Form LM–2, Form LM–3, 

and Form LM–4), contain information 

about a labor organization’s assets, 

liabilities, receipts, disbursements, 

loans to officers and employees and 

business enterprises, payments to each 

officer, and payments to each employee 

of the labor organization paid more than 

$10,000 during the fiscal year.3 The 


PWALKER on PROD1PC71 with PROPOSALS2
27348 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 

December 31, 1994. See 58 FR 28304 (May 12, 

1993). The Form LM–4 was then revised slightly 

and adopted by a final rule with the same December 

31, 1994 effective date. See 58 FR 67594 (Dec. 21, 

1993). 4The Form LM–2 and its instructions are 

published at 68 FR 58449–523 (Oct. 9, 2003) and 

are available at http://www.olms.dol.gov. Copies of 

the Form LM–3 and Form LM–4 are also available 

at http://www.olms.dol.gov. 

5The 2003 rule set this amount at $250,000. 

However, the rule inadvertently failed to change the 

figure in 29 CFR 403.4(a)(1) from $200,000 to 

$250,000. As part of this proposal, the Department 

intends to revise section 403.4(a)(1) by correcting it 

to read ‘‘$250,000.’’ See proposed text of regulation. 

6The public disclosure room is located in Room 

N–1519 of the Francis Perkins Building, 200 

Constitution Ave., NW, Washington, DC 20210. 

reporting detail required of labor 

organizations, as the Secretary has 

established by rule, varies depending on 

the amount of the labor organization’s 

annual receipts. 29 CFR 403.4. 

Labor organizations with annual 

receipts of at least $250,000 and all 

labor organizations in trusteeship 

(without regard to the amount of their 

annual receipts) must file the Form LM–

2. 29 CFR 403.2–403.4. This form may 

be filed voluntarily by any other labor 

organization. The Form LM–2 requires 

receipts and disbursements to be 

reported by functional categories, such 

as representational activities; political 

activities and lobbying; contributions, 

gifts, and grants; union administration; 

and benefits. Further, the form requires 

filers to allocate the time their officers 

and employees spend according to 

functional categories, as well as the 

payments that each of these officers and 

employees receive, and it compels the 

itemization of certain transactions 

totaling $5,000 or more. This form must 

be electronically signed and filed with 

the Department.4

Forms LM–3 and LM–4 were 

developed by the Secretary to meet the 

LMRDA’s charge that she develop 

‘‘simplified reports for labor 

organizations and employers for whom 

[s]he finds by virtue of their size a 

detailed report would be unduly 

burdensome,’’ 29 U.S.C. 438. A labor 

organization not in trusteeship that has 

total annual receipts less than $250,000 

for its fiscal year may elect, ‘‘subject to 

revocation of the privilege,’’ to file Form 

LM–3 instead of Form LM–2. See 29 

CFR 403.4(a)(1).5 The Form LM–3 is a 

five-page document requiring labor 

organizations to provide particularized 

information by certain categories, but in 

less detail than Form LM–2. A labor 

organization not in trusteeship that has 

total annual receipts less than $10,000 

for its fiscal year may elect, ‘‘subject to 

revocation of the privilege,’’ to file Form 

LM–4 instead of Form LM–2 or Form 

LM–3. 29 CFR 403.4(a)(2). The Form 

LM–4 is a two-page document that 

requires a labor organization to report 

only the total aggregate amounts of its 

assets, liabilities, receipts, 

disbursements, and payments to officers 

and employees. 

The labor organization’s president 

and treasurer (or its corresponding 

officers) are personally responsible for 

filing the reports and for any statement 

in the reports known by them to be 

false. 29 CFR 403.6. These officers are 

also responsible for maintaining records 

in sufficient detail to verify, explain, or 

clarify the accuracy and completeness of 

the reports for not less than five years 

after the filing of the forms. 29 CFR 

403.7. A labor organization ‘‘shall make 

available to all its members the 

information required to be contained in 

such reports’’ and ‘‘shall * * * permit 

such member[s] for just cause to 

examine any books, records, and 

accounts necessary to verify such 

report[s].’’ 29 CFR 403.8(a). 

The reports are public information. 29 

U.S.C. 435(a). The Secretary is charged 

with providing for the inspection and 

examination of the financial reports, 29 

U.S.C. 435(b); for this purpose, OLMS 

maintains: (1) A public disclosure room 

at its national office in Washington, DC6

where copies of such reports filed with 

OLMS may be reviewed and; (2) an 

online public disclosure site, 

www.unionreports.gov, where copies of 

such reports filed since the year 2000 

are available for the public’s review. 

III. Proposal 

A. Proposal To Improve the Form 

LM–2 

1. Introduction 

The Department is proposing further 

enhancements to the Form LM–2 for the 

purpose of clarifying reporting and 

providing additional information to 

labor organization members and the 

public about the financial activities of 

labor organizations. The proposed 

enhancements provide additional 

information in Schedule 3 (Sale of 

Investments and Fixed Assets) and 

Schedule 4 (Purchase of Investments 

and Fixed Assets) that will allow 

verification that these transactions are 

performed at arm’s length and without 

conflicts of interest. Schedules 11 and 

12 will be revised to include the value 

of benefits paid to and on behalf of 

officers and employees. This will 

provide a more accurate picture of total 

compensation received by labor 

organization officers and employees. In 

addition, the proposed changes will 

require the reporting on Schedules 11 

and 12 of travel reimbursements 

indirectly paid on behalf of labor 

organization officers and employees. 

This proposed change will provide 

more accurate information on travel 

disbursements for labor organization 

officers and employees. The proposed 

enhancements also include additional 

schedules corresponding to the 

following categories of receipts: Dues 

and Agency Fees; Per Capita Tax; Fees, 

Fines, Assessments, Work Permits; Sales 

of Supplies; Interest; Dividends; Rents; 

On Behalf of Affiliates for Transmittal to 

Them; and From Members for 

Disbursement on Their Behalf. These 

schedules will provide additional 

information, by receipt category, of 

aggregated receipts of $5,000 or more. 

The $5,000 threshold for itemization is 

used throughout the Form LM–2. This 

proposed change is consistent with the 

information currently provided on 

disbursements. The Department also 

requests comment from the public 

regarding the appropriateness of the 

current functional disbursement 

categories in the Form LM–2. Comment 

is sought on whether changes should be 

made to these sections in order to 

improve their usability to members of 

labor organizations and the public. 

Form LM–2 is filed by approximately 

18.5 percent of the reporting labor 

organizations, i.e., those with $250,000 

or more in total annual receipts. Finally, 

the Department proposes to amend the 

Form LM–2 instructions to conform to 

the requirements for the proposed Form 

T–1. 

The revisions to the Form LM–2 made 

by the Department in 2003 have helped 

to fulfill the LMRDA’s reporting 

mandate. However, based upon the 

Department’s experience since 2003 and 

after reviewing data from reports filed 

on the revised form, the Department 

believes that further enhancements to 

Form LM–2 are necessary. The proposed 

enhancements, as more fully described 

below, will ensure that information is 

reported in such a way as to meet the 

objectives of the LMRDA by providing 

labor organization members with useful 

data that will enable them to be 

responsible and effective participants in 

the democratic governance of their labor 

organizations. The proposed changes are 

designed to provide members of labor 

organizations with additional and more 

detailed information about the financial 

activities of their labor organization that 

is not currently available through the 

Form LM–2 reporting. Moreover, 

experience with the software and 

technology developed for the 2003 

revisions show that it is possible to 

provide the level of detail necessary to 

give labor organization members a more 

accurate picture of their labor 


PWALKER on PROD1PC71 with PROPOSALS2
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27349 

7The Department published on March 4, 2008 a 

proposed rule that would establish a Form T–1 

relating to the financial operations of ‘‘trust[s] in 

which a labor organization is interested.’’ See 29 

U.S.C. 402(l), 438. The proposed Form T–1 rule, if 

adopted, will affect the instructions to the Form 

LM–2. See 73 FR 11754. 

organization’s financial condition and 

operations without imposing an 

unwarranted burden on reporting labor 

organizations. When a final rule is 

promulgated based on this notice of 

proposed rulemaking the Department 

will revise the Form LM–2 software 

currently in use by Form LM–2 filers to 

conform to any changes made in the 

final rule and will make it available to 

filers without charge. 

These proposed changes are 

consistent with the goals of the LMRDA 

and its legislative history as discussed 

above and in connection with the 

Department’s 2002 NPRM and 2003 

Final Rule. The reasons underlying the 

proposed revisions to the Form LM–2 

are discussed section by section below. 

2. The Proposed Revisions to the Form 

LM–2 and Instructions 

The following is a ‘‘section-bysection’’ discussion of the sections, 

items and schedules on the proposed 

revised Form LM–2 and instructions: 

Items 1–21. These sections on the 

form are unchanged.7

Statement A. This statement is 

unchanged. 

Statement B. Receipts and 

Disbursements: This statement currently 

contains two primary columns, one with 

the heading ‘‘Cash Receipts’’ and one 

with the heading ‘‘Cash 

Disbursements.’’ Under each heading 

are items listed that describe categories 

of receipts or disbursements that should 

be reported. There are no proposed 

changes to the items listed under ‘‘Cash 

Receipts.’’ As discussed below, 

however, the Department proposes 

additional schedules to correspond to 

items listed under ‘‘Cash Receipts’’ for 

which currently no schedules exist. As 

a result of these changes, the remaining 

cash disbursement items will be 

renumbered on Statement B. The 

proposed new form, including the new 

numbering system for the cash 

disbursement items can be found in the 

appendix to this proposed rule. 

Schedules 1–2. These schedules are 

unchanged. 

Schedule 3—Sale of Investments and 

Fixed Assets: The Department proposes 

to add two new columns to Schedule 3. 

The first new column entitled ‘‘Name 

and Address of Purchaser (A)’’ will 

disclose the purchasers of investments 

and fixed assets from the labor 

organization, if in the aggregate the sales 

amount to $5,000 or more per 

purchaser. A second column ‘‘Date (C)’’

will disclose the date of the sale. These 

additions will provide members with 

information necessary to verify that the 

sale was transacted at market price and 

at arm’s length, thereby helping prevent 

interested parties from unjustly 

enriching themselves by purchasing 

labor organization assets at belowmarket price. The Department believes 

that Schedules 3 and 4 of the current 

Form LM–2 (the latter discussed below) 

do not provide labor organization 

members with adequate information to 

enable them to determine whether a 

particular purchase or sale of an 

investment or asset was transacted at 

market price and at arm’s length. For 

instance, one labor organization in its 

latest Form LM–2 reported that it had 

sold a ‘‘John Deere Lawn Tractor, Trailer 

and Mower’’ for $678, even though this 

asset had a book value and cost of 

$18,000. Another labor organization 

reported that it had sold automobiles 

that had a book value of $57,997, a ‘‘real 

estate investment trust’’ that had a book 

value of $25,735, and furniture and 

equipment with a book value of $7,634. 

For each of these items, the union listed 

the sale price as $0. This same labor 

organization sold corporate stocks with 

a book value of $29,570,505 for 

$34,297,627. Another union sold a Ford 

Explorer for $9,252 that had a book 

value of $23,471. In all these situations, 

labor organization members would be 

unable to determine whether the labor 

organization received fair market value 

for the items that it sold, whether an 

insider benefited from these 

transactions, or whether the union’s 

officials are properly managing the labor 

organization’s finances. The book value 

of an asset is the value at which the 

investment or fixed asset was shown on 

the labor organization’s books. The 

value of certain assets such as stocks 

can vary greatly within the fiscal year. 

Because the date of sales is not listed on 

the current Form LM–2, a labor 

organization member is unable to 

determine whether the labor 

organization received good value on the 

sale transaction. The stock on the day of 

the sale may have been worth much 

more than its book value. In this 

scenario, a labor organization member 

would be unable to determine whether 

the stocks were sold by the labor 

organization at market value. The labor 

organization’s financial report filed on 

the current Form LM–2 would show this 

transaction as a profit for the labor 

organization, but the transaction could 

also have been detrimental to the labor 

organization if the asset was sold at a 

price below current market value. The 

proposed changes will help ensure 

disclosure of any potential conflicts of 

interest between the purchaser and the 

labor organization. The schedule will 

total all individually itemized 

transactions and will provide the sum of 

the sales by itemized individual 

purchasers and the sum of all nonitemized sales of investments and fixed 

assets, as well as the total of all sales. 

The Department estimates that this 

proposed change would impose a 

recurring burden on labor organizations 

of .51 hours per year. See the 

Department’s initial Paperwork 

Reduction Act (‘‘PRA’’) analysis below; 

see also Table 2 below. 

Schedule 4—Purchase of Investments 

and Fixed Assets: The Department 

proposes to add two new columns to 

Schedule 4. The first new column 

entitled ‘‘Name and Address of Seller’’

will disclose the identity of the seller of 

investments and fixed assets to the labor 

organization, if in the aggregate the sales 

amount to $5,000 or more per seller. A 

second new column will disclose the 

date of the purchase. These changes will 

provide information to allow members 

to verify that all such sales were 

transacted at market price and at arm’s 

length, thereby helping to prevent 

parties from unjustly enriching 

themselves by selling assets to a labor 

organization at above market price. The 

Department’s review of data filed on the 

current Form LM–2 has demonstrated 

that the current form does not provide 

labor organization members with a clear 

understanding of the entities that are 

receiving in some cases hundreds of 

millions of dollars of the labor 

organization members’ money. For 

instance, one labor organization listed 

on one line of its report disbursements 

of $789,369,139, another labor 

organization reported disbursements of 

$313,978,214, and another labor 

organization reported disbursements of 

$156,544,561. Labor organizations also 

report smaller amounts on this 

schedule. For instance, three labor 

organizations reported disbursements of 

$5,353, $5,350, and $6,952 on this 

schedule. None of the reports disclose 

the parties that sold these assets to these 

labor organizations. As such, the 

members of these labor organizations 

are not in a position to know whether 

these sums of money were well spent. 

The proposed changes help ensure the 

disclosure of any potential conflicts of 

interest between the seller and the labor 

organization. The schedule will total all 

individually itemized transactions and 

will provide the sum of the purchases 

from itemized individual sellers and the 


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27350 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 

sum of all other purchases of 

investments and fixed assets as well as 

the total of all purchases. As discussed 

below in the Department’s initial PRA 

analysis, the Department estimates that 

this proposed change would impose a 

recurring burden on labor organizations 

of .56 hours per year. See Table 2 below. 

Schedules 5–10. These schedules are 

unchanged. 

Schedule 11—All Officers and 

Disbursements to Officers: The 

Department proposes two substantive 

changes to the categories of 

disbursements reported on this 

schedule. First, an exception to the 

reporting of indirect disbursements will 

be eliminated and, therefore, both direct 

and indirect payments on behalf of the 

officer for travel expenses will be 

reported on Schedule 11. A ‘‘direct 

disbursement’’ to an officer is a payment 

made by the labor organization to the 

officer in the form of cash, property, 

goods, services, or other things of value. 

An ‘‘indirect disbursement’’ to an officer 

is a payment made by the labor 

organization to another party for cash, 

property, goods, services, or other things 

of value received by or on behalf of the 

officer. Such payments include those 

made through a credit arrangement 

under which charges are made to the 

account of the labor organization and 

are paid by the labor organization. For 

example, when a union, through its 

credit arrangements, is billed directly 

and pays the airline bills of an officer, 

the union will have to include this 

amount as part of the disbursements 

made to the particular officer. 

The instructions to the current Form 

LM–2 except from reporting on 

Schedule 11: 

Indirect disbursements for temporary 

lodging (room rent charges only) or 

transportation by public carrier necessary for 

conducting official business while the officer 

is in travel status away from his or her home 

and principal place of employment with the 

labor organization if payment is made by the 

labor organization directly to the provider or 

through a credit arrangement and these 

disbursements are reported in disbursement 

Schedules 15 through 19. 

The distinction between reporting of 

direct and indirect disbursements has 

existed for more than 40 years. The 

distinction, which was not in the first 

set of Form LM–2 instructions, was 

established because of the difficulties 

faced by unions in then reconstructing 

documentation for certain payments for 

their prior fiscal year. Because of this 

difficulty, organizations were allowed to 

report such disbursements as functional 

expenses of the organization rather than 

as disbursements to particular officials. 

This distinction remained in the 

instructions and was not revisited by 

DOL despite changes in data reporting 

and record retention methods over the 

intervening decades. This issue was not 

addressed in the 2002–2003 rulemaking. 

The Department proposes to eliminate 

this distinction. Disbursements for 

temporary lodging and transportation 

made directly to the labor organization 

officer by the labor organization are 

reported on Schedule 11; however, the 

exemption applies if the labor 

organization pays the vendor directly 

for the travel. This distinction does not 

serve the purpose of section 201(b)(3) of 

the LMRDA, 29 U.S.C. 431(b)(3), which 

calls for reporting of ‘‘other direct or 

indirect disbursements (including 

reimbursed expenses) to each officer 

and also to each employee. * * *’’

Under the current instructions, 

however, these indirect disbursements 

are not attributed to the labor 

organization officer. 

That payment for an official’s travel 

and lodging expenses is made by credit 

card and does not reduce the 

significance of the expense to a labor 

organization member; yet the current 

Form LM–2 treats the method of 

payment as significant. Travel and 

lodging expenses for a particular officer 

may raise questions among the 

membership for various reasons. The 

choice of transportation by public 

carrier (airplane, train or bus) and the 

level of accommodation (first-class or 

coach) may be significant to a member. 

Lodging choices may run from a motor 

inn to a five-star hotel; where options 

are available, the officer’s choice of 

accommodation may be significant to a 

member. However, the mode of payment 

now controls whether a labor 

organization member knows the full 

extent of disbursements made for a 

particular official of the labor 

organization. Although the specifics of 

the travel will not appear on the Form 

LM–2, members will have a better 

understanding of the total amount of 

disbursements made to or on behalf of 

a particular official. Through this more 

complete reporting, members of the 

labor organization will be better able to 

determine whether such disbursements 

warrant further scrutiny, including 

review of the underlying documentation 

maintained by the labor organization. 

As discussed below in the 

Department’s initial PRA analysis, the 

Department believes that the proposed 

elimination of this exception will result 

in a recurring burden of .19 hours per 

respondent. 

Second, a new column will be added 

to Schedule 11 to allow disclosure of 

benefits disbursements for the labor 

organization official. Columns ‘‘(A)’’

through ‘‘(E)’’ will remain unchanged. 

Column ‘‘(F)’’ will be redesignated 

‘‘Benefits.’’ This is the only new column 

on the schedule requiring disclosure of 

additional information. Column ‘‘(G)’’

will be redesignated ‘‘Disbursements for 

Official Business.’’ Column ‘‘(H)’’ will 

be redesignated ‘‘Other Disbursements 

not reported in (D) through (G).’’

Column ‘‘(I)’’ will be added for ‘‘Total.’’

The current Form LM–2 does not 

provide sufficient information on 

disbursements made to or on behalf of 

officers. Benefit disbursements include, 

for example, disbursements for life 

insurance, health insurance, and 

pensions. Labor organization members 

should be provided information on 

benefits disbursed to or on behalf of 

officers because benefits received by 

officers may be an important part of the 

compensation package provided by the 

labor organization. Reporting benefits 

disbursed in the aggregate on Schedule 

20 does not provide labor organization 

members and the public with a 

complete picture of compensation 

received by labor organization officers. 

For example, one local in its 2005 Form 

LM–2 listed $491,252 for ‘‘Officer’s 

Union Fringes’’ even though the labor 

organization had fewer than ten fulltime officers. Unfortunately, a member 

of a labor organization has no way of 

knowing, for example, if these benefits 

were evenly distributed among the 

officers, or if one officer received 

$400,000 and the other eight officers 

split the remaining $91,252. Under the 

proposal, rather than report fringe 

benefits in the aggregate on the current 

Schedule 20, the labor organization will 

report the benefits on Schedule 11 by 

individual labor organization officer. 

In another instance, a labor 

organization reported payments of 

$49,542 to ‘‘Various Companies’’ for 

‘‘Benefits Administration’’ and 

payments of $64,219 to ‘‘Various School 

Districts’’ for ‘‘Benefits paid on behalf of 

officers.’’ Another labor organization 

reported on its Form LM–2 total 

disbursements of $461,971, $460,203, 

and $244,780 to certain individual 

officers. This disclosure did not take 

into account that these same officers 

and employees also received $181,297, 

$184,397, and $161,240 respectively as 

contributions to their employee benefit 

plans. These benefits payments were 

disclosed to the IRS but do not appear 

itemized by officers and employees on 

the Form LM–2. While labor 

organization members aware of the IRS 

data may be able to obtain this 

information about the compensation 

packages received by labor organization 

officers and employees, the 

Department’s proposal will provide all 


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8For example, the Securities and Exchange 

Commission on December 29, 2006, amended its 

regulations governing disclosure to that agency of 

executive compensation (71 FR 78338), and the 

Internal Revenue Service Form 990 requires more 

detailed disclosure in the area of executive 

compensation than does the Department’s Form 

LM–2. 

members with ready access to this 

information in a single database. 

Under the current Form LM–2, such 

benefits payments are not required to be 

reported as having been made to or on 

behalf of a specific officer. Requiring 

that the aggregate amounts of benefits 

disbursements appear next to the name 

of each labor organization officer and 

employee, when applicable, will result 

in labor organizations better informing 

their members how their monies have 

been spent. The above examples 

demonstrate that the current Form LM–

2 fails to provide a full accounting of 

labor organizations’ disbursements to 

their officials. The current Form LM–2 

allows benefits payments made to or on 

behalf of officers to be lumped together 

with general benefits paid to members 

in Schedule 20. With such large 

disbursements listed in one category, it 

is impossible for labor organization 

members to ascertain what benefits are 

being paid to labor organization officers 

and employees. The Department 

believes that combining these 

disbursements into a single schedule 

does not adequately inform labor 

organization members and the public 

regarding benefits paid to labor 

organization officers, and thus in this 

area the full reporting mandate of the 

LMRDA is not fulfilled. 

As discussed below in the 

Department’s initial PRA analysis, the 

Department believes that the addition of 

the benefits column to Schedule 11 will 

add an estimated recurring burden of 

.49 hours for officers See Table 3 below. 

Currently, labor organizations track 

benefit disbursements to officers for the 

IRS Form 990. Therefore, the only 

additional burden labor organizations 

will incur for Schedule 11 is the time 

required to enter the sum each officer 

received in benefits next to each 

officer’s name on the Form LM–2. 

Furthermore, the proposed changes are 

consistent with the level of disclosure 

required in other contexts for executive 

and employee compensation.8

Moreover, the need for greater 

transparency in compensation packages 

applies equally well to employees and 

not simply officers. Accordingly, the 

reasons discussed above apply to 

Schedule 12 below as well. 

The Department recognizes that in the 

2003 Form LM–2 Final Rule a decision 

was made to aggregate the benefits on 

Schedule 20 (Benefits) citing privacy 

considerations. See 68 FR 58374, 58387, 

58399, 58426 (Oct. 9, 2003). The 

Department believes that its proposal to 

add a benefits column to Schedule 11 

(and 12) in the manner described above 

will preserve the privacy of the 

individuals. Recognizing privacy 

implications, the Department in this 

NPRM is not proposing to require labor 

organizations to itemize individual 

payments made to their officers and 

employees. Rather the Department 

proposes that labor organizations 

disclose the total sum paid directly or 

indirectly to each officer and employee. 

This level of disclosure balances the 

need to disclose total compensation 

packages against the need to protect the 

privacy of individuals receiving certain 

payments. 

The balance struck by this proposal 

will ensure that proper disclosure 

occurs, without disclosing private 

information to the general public, such 

as whether a particular officer or 

employee received an indirect payment 

for medical treatment. In fact, under the 

proposal a labor organization member 

reading the report will not be able to 

ascertain what types of benefits labor 

organization officers and employees 

receive, only the total value of these 

benefits. For instance, if a labor 

organization officer received a matching 

contribution to a 401(k) plan in the 

amount of $5,000, indirect payment of 

health insurance premiums in the 

amount of $6,700, and a health club 

membership in the amount of $1,200, 

the labor organization’s Form LM–2 

would disclose that this officer received 

a total of $12,900 in benefits. The 

individual payments will not be 

itemized, thus protecting the official’s 

privacy interests. The labor 

organization, however, is required to 

provide such information to the 

Department of Labor upon its request or 

to permit a member of the labor 

organization for just cause to examine 

records necessary to verify the report, 

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

Schedule 12—Disbursements to 

Employees: The proposed substantive 

changes to Schedule 12 are identical to 

the changes in Schedule 11 and the 

supporting reasons for the proposed 

changes are the same as described above 

for the changes to Schedule 11. One of 

the exceptions to the reporting of 

indirect disbursements will be 

eliminated and, therefore, both direct 

and indirect payments for travel 

expenses will be reported on Schedule 

12. The reporting labor organization will 

be required to report aggregate benefits 

disbursements made to or on behalf of 

each of the employees listed on 

Schedule 12. A new column will be 

added to Schedule 12 to allow 

disclosure of benefits expenditures. 

Columns ‘‘(A)’’ through ‘‘(E)’’ will 

remain unchanged. Column ‘‘(F)’’ will 

be redesignated ‘‘Benefits.’’ This is the 

only new column on the schedule 

requiring disclosure of additional 

information. Column ‘‘(G)’’ will be 

redesignated ‘‘Disbursements for 

Official Business.’’ Column ‘‘(H)’’ will 

be redesignated ‘‘Other Disbursements 

not reported in (D) through (G).’’

Column ‘‘(I)’’ will be added for ‘‘Total.’’

As discussed below, the Department 

believes that the proposed elimination 

of the exception will result in a 

recurring burden of .38 hours and the 

addition of the benefits column to 

Schedule 12 will add an estimated 

recurring burden of .88 hours. See 

discussion of Schedule 12 in the PRA 

analysis below (figures here derived 

from the recordkeeping burden 

associated with benefits and travel). 

Schedule 13—Membership Status: 

This schedule is unchanged. 

Detailed Summary Page: The current 

detailed summary page contains 

information from Schedule 14 through 

Schedule 19. The new detailed 

summary page will include information 

from Schedule 14 through Schedule 29. 

These summary pages will provide 

members with a snapshot of the labor 

organization’s activities. Members may 

then use this snapshot to determine 

whether further analysis of the 

individual itemized schedules is 

required. There is no additional burden 

associated with these summary 

schedules because the software will 

automatically enter the totals in the 

appropriate lines of the summary 

schedules as the labor organization fills 

out the individual itemization 

schedules. 

Schedules 14–22. Currently, Form 

LM–2 filers only report the total amount 

received from dues and agency fees, per 

capita taxes, fees, fines, assessments, 

and work permits, sales of supplies, 

interest, dividends, rents, receipts on 

behalf of affiliates for transmittal to 

them, and receipts from members for 

disbursement on their behalf on 

Statement B. In some instances, these 

line items exceed $20 million. For 

example, one labor organization stated 

that it received over $298 million in per 

capita taxes and another received over 

$28 million in rent. Little useful 

information can be discerned from these 

totals alone. 

The lack of itemization of most 

receipts on the current Form LM–2 

makes it easier for criminals to embezzle 

money coming to labor organization 

accounts. In one case, the president and 


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27352 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 

treasurer of a local labor organization 

converted over $184,129 in dues checks. 

However, the rank and file members, 

even if the individual checks had been 

in amounts of $5,000 or more, would 

have been unable to detect the 

conversion because the current Form 

LM–2 only requires the disclosure of the 

yearly total received in dues checks, not 

the reporting of individual checks 

received from employers. The proposed 

form will contain itemized information 

for each check that is $5,000 or more 

and disclose whether other checks 

aggregate to $5,000 or more. In those 

instances where the receipt checks, 

either alone or in combination aggregate 

to $5,000 or more, the labor organization 

will disclose this on the form. The 

change will address this problem, which 

extends to all the various reporting 

categories on the current form and not 

merely the receipt of dues payments, 

because now receipts-side 

embezzlements like the embezzlement 

of $184,129 mentioned above will be 

harder to hide. 

The Department proposes to add new 

schedules that coincide with the items 

of cash receipts listed on Statement B. 

These schedules represent new 

requirements that labor organizations 

itemize the individual categories of 

receipts aggregated to $5,000 from any 

one source. The labor organization will 

be required to complete a separate 

itemization schedule for each individual 

or entity from which the labor 

organization has received $5,000 or 

more. Each transaction from that 

individual or entity will include 

information about the individual, the 

purpose of the payment, the date of the 

payment, and the amount of the 

payment. The total amount received 

from the individual or entity, both 

itemized and non-itemized, will be 

included at the bottom of the itemized 

schedule. The totals from each itemized 

schedule will then be added together 

and that number will be entered in the 

appropriate item on Statement B. 

By providing itemization of receipts, 

labor organizations will better disclose 

to their members and the public a full 

accounting of all funds received and the 

identity of individuals and entities with 

whom the labor organization does 

business. The Department can use this 

information to determine the purpose of 

any receipt from one source in an 

amount of $5,000 or more, which will 

help identify possible diversion to 

unintended purposes. Members will be 

able to determine that money received 

by the labor organization is actually 

accounted for. For example, labor 

organization members can ensure that 

money they paid to the organization for 

disbursement on their behalf is 

accounted for on the Form LM–2. If 

there is no itemized receipt in new 

Schedule 22 for payments of $5,000 or 

more or the receipt is less than 

expected, then the member will know 

that the money was not properly 

reported and may pursue other avenues 

to determine what has happened to the 

money. The current Schedules 14 

through 20 will be re-numbered as 

described herein. Schedules 14 through 

22 will now provide itemized disclosure 

in the following areas of receipts: 

Schedule 14—Dues and Agency Fees, 

Schedule 15—Per Capita Tax, 

Schedule 16—Fees, Fines, Assessments, and 

Work Permits, 

Schedule 17—Sale of Supplies, 

Schedule 18—Interest, 

Schedule 19—Dividends, 

Schedule 20—Rents, 

Schedule 21—Receipts on Behalf of Affiliates 

for Transmittal to Them, 

Schedule 22—Receipts from Members for 

Disbursement on Their Behalf. 

Under the current form, receipts listed 

under the above listed categories on 

Statement B are not itemized on a 

separate schedule for aggregate amounts 

of $5,000 or more. The only itemized 

receipts are ‘‘Other Receipts.’’ ‘‘Other 

Receipts’’ of $5,000 or more are 

itemized on the current Schedule 14. 

Proposed Schedules 14 through 22 will 

include the same information that is 

currently required on Schedule 14 for 

‘‘Other Receipts.’’ As discussed below 

in the Department’s initial PRA 

analysis, the Department’s estimates 

that the proposed changes will increase 

the recurring recordkeeping burden, per 

schedule, an additional .21 hours per 

year. The Department estimates that the 

total additional reporting burden for all 

the revised schedules will be .47 hours 

per year. See Table 2 below. 

Additionally, the Department requests 

comments on whether to narrow, 

clarify, or remove the confidentiality 

exception from the Form LM–2 

instructions. Currently, the following 

information is subject to special 

reporting privileges under the 

confidentiality exception: (1) 

Information that would identify 

individuals paid by the union to work 

in a non-union facility in order to assist 

the union in organizing employees, 

provided that such individuals are not 

employees of the union who receive 

more than $10,000 in the aggregate from 

the union in the reporting year; (2) 

information that would expose the 

reporting union’s prospective organizing 

strategy; (3) information that would 

provide a tactical advantage to parties 

with whom the reporting union or an 

affiliated union is engaged or will be 

engaged in contract negotiations; (4) 

information pursuant to a settlement 

that is subject to a confidentiality 

agreement, or that the union is 

otherwise prohibited by law from 

disclosing; and (5) information in those 

situations where disclosure would 

endanger the health or safety of an 

individual. If the receipt or 

disbursement fits within one of the 

above broad categories, then the labor 

organization need not itemize the 

receipt or disbursement. Instead it may 

include the receipt or disbursement in 

the aggregated total on Line 3 of 

Summary Schedule 23 (Other Receipts) 

or on Line 5 of Summary Schedules 24 

(Representational Activities) or 28 

(Union Administration), as appropriate. 

The current broad confidentiality 

exception makes it impossible to 

ascertain from reviewing the form the 

actual purpose and payer/payee of many 

receipts and disbursements. For 

example, one labor organization did not 

identify the name of the payee, date of 

disbursement, nor the amount of the 

transaction for over 46% of its 

disbursements. This labor organization 

reported $5,931,513 in disbursements 

on Schedule 15, Line 5 (All Other 

Disbursements). In Item 69, the labor 

organization stated that it had excluded 

certain confidential information from 

Schedule 15, but included the 

information in the totals. This same 

labor organization’s total disbursements 

were $12,811,076. On a related matter, 

OLMS review of Form LM–2 filings has 

found that many major receipts and 

disbursements that do not qualify for 

the confidentiality exception, 68 FR 

58499–500, are being included on Line 

3 (total All Other Receipts) of Summary 

Schedule 14 (Other Receipts) or on Line 

5 (total All Other Disbursements) of 

Summary Schedules 15 

(Representational Activities) or 19 

(Union Administration). Labor 

organizations are usually describing the 

general type of information that was 

omitted from the schedule in Item 69 

(Additional Information), but the name 

of the payer/payee, date, and amount of 

the transaction(s) is not included. The 

Department believes that narrowing, 

clarifying, or removing the 

confidentiality exception will provide 

labor organization members with clearer 

information regarding these receipts and 

disbursements. A member now can only 

obtain specific information about these 

confidential transactions by requesting 

such information directly from the labor 

organization. 

The Department specifically invites 

comments on whether all transactions 

greater than $5,000 should be identified 

by amount and date in the relevant 


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Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27353 

9The proposed revocation procedures will not 

affect labor organizations with annual receipts less 

than $10,000. While section 208 allows the 

Secretary to revoke the privilege of such labor 

organizations to file the highly simplified Form 

LM–4, the Department is not proposing at this time 

to apply such procedure to Form LM–4 filers. 

10OLMS intends to continue its regular practice 

of contacting Form LM–3 filers at the end of their 

fiscal year about their filing obligation, and, in 

doing so, it will inform them of the potential 

revocation of their privilege to file the Form LM–

3 if they are delinquent in filing the form, file a 

Form LM–3 that is materially deficient, or for other 

appropriate cause. The instructions to the Form 

LM–3 already inform labor organization officers of 

their statutory obligation to file the completed 

forms with OLMS within 90 days after the end of 

their labor organization’s fiscal year. 

schedules, permitting, however, labor 

organizations, where acting in good 

faith and on reasonable grounds, to 

withhold information that otherwise 

would be reported, in order to prevent 

the divulging of information relating to 

the labor organization’s prospective 

organizing or negotiation strategy. 

Schedule 23—Other Receipts: This 

schedule, currently numbered Schedule 

14, will be renumbered Schedule 23. No 

other changes will be made to this 

schedule. 

Schedule 24—Representational 

Activities: This schedule, currently 

numbered Schedule 15, will be 

renumbered Schedule 24. No other 

changes will be made to this schedule. 

Schedule 25—Political Activities and 

Lobbying: This schedule, currently 

numbered Schedule 16, will be 

renumbered Schedule 25. No other 

changes will be made to this schedule. 

Schedule 26—Contributions, Gifts 

and Grants: This schedule, currently 

numbered Schedule 17, will be 

renumbered Schedule 26. No other 

changes will be made to this schedule. 

Schedule 27—General Overhead: This 

schedule, currently numbered Schedule 

18, will be renumbered Schedule 27. No 

other changes will be made to this 

schedule. 

Schedule 28—Union Administration: 

This schedule, currently numbered 

Schedule 19, will be renumbered 

Schedule 28. No other changes will be 

made to this schedule. 

Schedule 29—Benefits: This schedule, 

currently numbered Schedule 20, will 

be renumbered Schedule 29. As 

described above in the discussion 

regarding the proposed changes to 

Schedule 11 and Schedule 12, those 

benefits inuring to officers and 

employees of the labor organization will 

be listed next to the corresponding 

officer’s or employee’s name. Apart 

from this change, the same 

disbursements that were disclosed on 

Schedule 20 will be disclosed on the 

new Schedule 29. These include direct 

and indirect disbursements associated 

with direct and indirect benefits to 

members and members’ beneficiaries. 

The Department proposes that its rule 

take effect 30 days after publication and 

apply prospectively to labor 

organization’s fiscal years beginning on 

or after the effective date of a final rule 

promulgated after this notice of 

proposed rulemaking. 

Even though the Department is 

proposing at this time to change only 

the specific schedules identified above, 

it specifically requests comment on the 

appropriateness of the current 

functional categories and whether 

modifications to these categories are 

needed in order to provide labor 

organization members and the public 

with additional useful information. 

B. Proposed Procedure and Standards to 

Revoke the Simplified Reporting Option 

Where Appropriate in Particular 

Circumstances 

1. Introduction 

The Department proposes to establish 

standards and procedures for revoking 

the simplified report filing privilege 

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

labor organizations that are delinquent 

in their Form LM–3 filing obligation, 

fail to cure a materially deficient Form 

LM–3 report after notification by OLMS, 

or where other situations exist where 

revoking the Form LM–3 filing privilege 

furthers the purposes of LMRDA section 

208. The Department anticipates that 

the vast majority of situations where 

revocation occurs will be for 

delinquency or material deficiency. (See 

Regulatory Flexibility Analysis below; 

the Department there estimates that of 

the 96 cases per year in which the 

simplified reporting privilege will be 

revoked all but two will be for 

delinquency or deficiency.) In granting 

the Secretary the authority to establish 

simplified forms, section 208 also 

authorizes the Secretary to revoke a 

labor organization’s privilege to file 

such forms when the Secretary 

determines, after investigation, due 

notice, and an opportunity for a hearing, 

‘‘that the purposes of this section would 

be served [by revocation].’’ The 

Department’s primary method of 

enforcement to obtain a timely and 

complete report, a civil action seeking a 

court order that the labor organization 

file an adequate report, is a timeconsuming process that permits the 

evasion of the reporting requirements to 

continue for lengthy periods, denying 

members the timely disclosure of this 

financial information, without which 

they are unable to properly oversee the 

operations of their labor organization 

and, where they believe appropriate, to 

timely change its leadership, policies, or 

both. 

The proposed procedure will 

effectuate the Department’s authority to 

revoke a labor organization’s existing 

Form LM–3 filing privilege if it fails to 

timely file a Form LM–3 or files a Form 

LM–3 that is materially deficient. A 

delinquent filer has, by definition, failed 

to accurately disclose its financial 

condition and operations, as required by 

section 201(b). A materially deficient 

filing that remains uncorrected also 

violates section 201(b). The Department 

proposes that Form LM–2, rather than 

the less detailed Form LM–3, is the 

appropriate level of financial disclosure 

for labor organizations whose Form LM–

3 filings are delinquent or materially 

deficient. The Form LM–2 not only 

requires more detail in general than the 

Form LM–3, but the Form LM–2 

requires information that may be 

particularly pertinent to situations 

where possible financial 

mismanagement or embezzlement is 

suspected. 

In the absence of an established 

procedure, the Department’s ability to 

revoke a labor organization’s privilege to 

file a simplified report has been 

hindered—no matter how egregious a 

labor organization’s noncompliance 

with its reporting obligations, or 

obvious the indications of financial 

mismanagement, embezzlement, or 

corruption within that organization. The 

procedures set forth in this proposal 

will remedy this shortcoming in the 

Department’s reporting system.9

The Department’s goal in revoking the 

filing privilege is to promote greater 

financial transparency. The proposed 

rule fulfills that goal by requiring the 

affected labor organizations to file the 

standard reporting form, Form LM–2, 

which requires more detailed financial 

information than the Form LM–3. This 

additional financial information will 

assist members of labor organizations 

and OLMS investigators in reviewing 

the labor organization’s funds and assets 

during the reporting period and enable 

them to determine whether additional 

scrutiny of the labor organization’s 

finances is in order, for example, by 

requesting an explanation of the 

accounting, examining the underlying 

records of various transactions, or 

both.10

2. Reason for the Proposal 

The Department’s enforcement 

experience has shown that the failure of 

labor organizations to file the annual 

Form LM–3 on time and without 

material deficiencies is often an 

indicator of larger problems about the 


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27354 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 

way such organizations maintain their 

financial records, and may be an 

indicator of more serious financial 

mismanagement. For example, the labor 

organization may delay filing a Form 

LM–3 to avoid making timely public 

disclosures about financial 

improprieties of officers, such as the 

diversion of funds for personal use. 

Even if the Department eventually 

succeeds in encouraging a delinquent 

labor organization to file the required 

form, the lack of specificity in Form 

LM–3 may permit significant 

management problems to remain 

undetected. The greater detail required 

by the Form LM–2 makes it more 

difficult to hide such problems. 

The Department’s enforcement 

experience reveals various reasons for 

delinquent filings, such as a labor 

organization’s failure to maintain the 

records required by the LMRDA; 

inadequate office procedures; frequent 

turnover of labor organization officials 

and their often part-time status; 

uncertainty of first-time officers about 

their reporting responsibilities under 

the LMRDA and their inexperience with 

bookkeeping, recordkeeping, or both; an 

‘‘inherited bookkeeping mess;’’ an 

inattention generally to ‘‘paperwork;’’

overworked or under-trained officers; an 

officer’s unwillingness to question or 

report apparent irregularities due to the 

officer’s own inexperience or concern 

about the repercussions of reporting 

such matters; or a conscious effort to 

hide embezzlement or the 

misappropriation of funds by the 

officers, other members of the 

organization, or third parties associated 

with the labor organization. Many of 

these causes of delinquency, including 

pre-existing bookkeeping problems, 

inattention, overwork, insufficient 

training, and an unwillingness to 

confront or report financial 

irregularities, demonstrate that the labor 

organization members, the public, and 

the Department would benefit from a 

more detailed accounting of the 

organization’s financial conditions and 

operations. Moreover, OLMS review of 

data indicates that labor organizations 

that are repeatedly delinquent are more 

likely than other labor organizations to 

suffer embezzlement, or related crime. 

For instance, in one recent case an 

investigation of a labor organization that 

was delinquent in its reports for two 

years showed that the labor organization 

had been the victim of a serious 

embezzlement. Its former president 

plead guilty to embezzling $112,525 and 

received a prison sentence of 33 

months, and was ordered to pay back 

the $112,525 he had stolen. In another 

case a former financial secretary of a 

labor organization that had been 

delinquent in filing its reports for 

several years plead guilty to 

embezzlement and was ordered to pay 

restitution of $103,248 and also received 

a sentence including confinement for 

eight months, home detention for four 

months, and probation for three years. 

Many of the reasons that contribute to 

delinquent filings also result in the 

filing of reports that omit or misstate 

material information about the labor 

organization’s finances. The members of 

a labor organization that fails to correct 

a material reporting deficiency after 

being notified by the Department and 

being given an opportunity to address 

the error would also benefit from the 

increased transparency. 

3. Form LM–2 and Form LM–3 

Compared 

As discussed above, the reporting 

requirements apply to all labor 

organizations covered by the LMRDA. 

The Form LM–2 is the standard form for 

such purposes. It requires more detail 

than Forms LM–3 and LM–4, the 

simplified forms developed by the 

Secretary. The difference between the 

forms has been accentuated by the 

substantial revisions to the Form LM–2 

implemented by the Department in 

2003. As the Department explained in 

the preamble to the 2003 Form LM–2 

rule, the broad aggregated categories on 

the old Form LM–2 enabled officials of 

labor organizations to potentially hide 

embezzlements and financial 

mismanagement. 68 FR 58420. The 

more detailed reporting required of all 

financial transactions covered by Form 

LM–2 was designed, in part, to 

discourage and reduce corruption by 

making it more difficult to hide 

financial irregularities from members 

and the Department’s investigators and 

thereby strengthen the effective and 

efficient enforcement of the LMRDA. 68 

FR 58402. Requiring labor organizations 

to file a Form LM–2, after a 

determination that revocation of the 

privilege of filing a Form LM–3 is 

warranted, will make it more difficult to 

hide fraud. 

The Form LM–2 requires labor 

organizations to provide more specific 

information than the Form LM–3 in 

several areas relating to labor 

organization finances including, in part, 

the following: Investments, fixed assets, 

loans payable and owed, contributions, 

grants and gifts, overhead expenses, 

union administration, and receipts. 

With regard to labor organization 

receipts, Form LM–2 filers are explicitly 

required to report all receipts including: 

‘‘receipts from fundraising activities, 

such as raffles, bingo games, and 

dances; funds received from a parent 

body, other labor organizations, or the 

public for strike assistance; and receipts 

from another labor organization which 

merged into the labor organization.’’ See 

p. 29 of Instructions to Form LM–2, as 

reproduced at 68 FR 58501 

Form LM–2 requires filers to itemize 

receipts from and disbursements to any 

individual or business or other entity 

that exceed $5,000 in a fiscal year either 

in a single transaction or aggregated 

over the year. Aggregation prevents a 

labor organization from ‘‘hiding’’

significant receipts from or 

disbursements to the same individual or 

entity, a possibility that exists under the 

Form LM–3. The name, address, and 

other information must be provided for 

any such entity or individual. This 

information, which is not required by 

the Form LM–3, enables members of a 

labor organization to detect payments to 

individuals or entities that are out of the 

ordinary (given information that is 

known to the member but would not 

appear irregular to someone without 

such information). Thus, this 

information enables members to identify 

situations which may reflect a breach of 

the labor organization’s duties to its 

members or provide a reasonable basis 

for inquiry to determine whether 

officials of the labor organization are 

improperly diverting funds for their 

own benefit or the shared benefit of 

others. Additionally, a member who is 

aware that the labor organization has a 

financial relationship with one or more 

of these businesses will be in a better 

position to determine whether the 

business has made any required reports 

(Form LM–10). The itemization of 

payments at or above $5,000 also puts 

members in a better position to 

determine whether any of the recipients 

of the payments are businesses in which 

a labor organization official (or the 

official’s spouse or minor child) holds 

an interest, a circumstance that will 

require a report to be filed by the official 

(Form LM–30). 

The Form LM–2, unlike the Form 

LM–3, requires filers to provide a list of 

accounts receivable and payable 

(involving a particular individual or 

entity in an amount of $5,000 or greater, 

singly or aggregated) that are past due 

by more than 90 days. As explained in 

the 2003 Form LM–2 rulemaking, such 

itemized disclosure can provide a vital 

early warning signal of financial 

improprieties. In the case of an already 

overdue report, the delinquency 

demonstrates that such improprieties 

already may exist. 


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11OLMS will notify a filer whose Form LM–3 is 

materially deficient by letter, advising in what 

respects the filing is deficient and providing a date 

by which the filer must submit a corrected Form 

LM–3. Ordinarily, the filer will be allowed not less 

than 30 days from the date of the letter to submit 

a corrected Form LM–3. 

4. The Proposed Standards and 

Procedures for Revocation 

Section 208 authorizes the Secretary 

to revoke a labor organization’s privilege 

to file simplified reports when the 

Secretary determines after investigation, 

due notice, and an opportunity for a 

hearing, ‘‘that the purposes of this 

section would be served [by 

revocation].’’ The Department’s 

proposal effectuates this provision in a 

manner that safeguards the interests of 

labor organizations, which, by virtue of 

their size, ordinarily would be able to 

satisfy their annual reporting obligation 

by filing the Form LM–3. The procedure 

will ensure that revocation 

determinations are not made for 

arbitrary reasons. To implement this 

procedure and standards for revocation, 

the Department proposes to modify 

section 403.4 of its regulations, 29 CFR 

403.4, and to amend the instructions to 

the Form LM–3 in order to fully apprise 

filers of the procedure and standards. 

The Form LM–3 instructions will 

remain unchanged except for a new 

paragraph that discusses the revocation 

standards and procedures and quotes 

from the language proposed for section 

403.4. The Department proposes to add 

the following as a new paragraph at the 

end of section II of the Form LM–3 

instructions: 

Filers are advised that the privilege to file 

the Form LM–3 instead of the Form LM–2 

may be revoked if a labor organization fails 

to file the Form LM–3 on or before the date 

it is due; a labor organization files a Form 

LM–3 with a material deficiency and fails to 

timely remedy this deficiency after 

notification by the Department of Labor; or 

other circumstances exist that warrant 

revocation of the labor organization’s 

privilege to file the Form LM–3. Section 208 

of the LMRDA authorizes the Secretary to 

revoke this privilege if the Secretary 

determines, after such investigation as she 

deems proper and due notice and 

opportunity for a hearing, that the purposes 

of section 208 would be served by revocation. 

29 U.S.C. 438. Such revocation is governed 

by the standards just mentioned, which are 

set forth in section 403.4 of the Department’s 

regulations (29 CFR 403.4), and the 

procedure also set forth in that section. 

Where the privilege to file the Form LM–3 is 

revoked, a labor organization will be required 

to file the Form LM–2. Section 403.4 

provides in relevant part: 

(b) The Secretary may revoke a labor 

organization’s privilege to file the Form LM–

3 simplified annual report . . . and require 

the labor organization to file the Form LM–

2 as provided in § 403.3, if the following 

conditions are met: 

(1) The Secretary has undertaken an 

investigation revealing: 

(i) The labor organization failed to file the 

Form LM–3 on or before the date it was due; 

or 

(ii) The labor organization filed the Form 

LM–3 with a material deficiency; and failed 

to timely remedy this deficiency after 

notification by the Secretary that the report 

was deficient; or 

(iii) Other circumstances exist that warrant 

revocation of the labor organization’s 

privilege to file the Form LM–3. 

(2) The Secretary has provided notice to 

the labor organization of the proposed 

decision to revoke the filing privilege, the 

reason for such revocation, and an 

opportunity for the labor organization to 

submit in writing a position statement with 

relevant factual information and argument 

regarding: 

(i) The existence of the delinquency or the 

deficiency (including whether it is material) 

or other circumstances alleged in the notice; 

(ii) The reason for the delinquency or 

deficiency and whether it was caused by 

factors reasonably outside the control of the 

labor organization; and 

(iii) Any other factors that should be 

considered in mitigation of revoking the 

labor organization’s privilege to file the Form 

LM–3. 

(3) The Secretary, after review of all the 

information provided, shall issue a 

determination in writing to the labor 

organization, stating the reasons for the 

determination, and, as appropriate, informing 

the labor organization that it must file the 

Form LM–2 for such reporting periods as the 

Secretary finds appropriate. 

(c) A labor organization that receives a 

notice as set forth in 403.4(c)(2) must submit 

its written statement of position and any 

supporting facts and argument by mail, hand 

delivery or by alternative means specified in 

the notice to the Office of Labor-Management 

Standards at the address provided in the 

notice within 30 days after the date of the 

letter proposing revocation. If the 30th day 

falls on a Saturday, Sunday, or Federal 

holiday, the submission will be timely if 

received by OLMS on the first business day 

after the 30th day. Absent a timely 

submission to OLMS, the proposed 

revocation shall take effect automatically 

unless the Secretary in his or her discretion 

determines otherwise. 

(d) The Secretary shall make the 

determinations provided for in the foregoing 

paragraphs of this section. The determination 

shall be the Department’s final agency action 

on the revocation. 

(e) For purposes of this section, a 

deficiency is ‘‘material’’ if in the light of 

surrounding circumstances, the inclusion or 

correction of the item in the report is such 

that it is probable that the judgment of a 

reasonable person relying upon the report 

would have been changed or influenced. 

Where there appear to be grounds for 

revoking a labor organization’s privilege 

to file the Form LM–3, such as where 

the labor organization has failed to 

timely file the Form LM–3, files a Form 

LM–3 that lacks material information,11

or OLMS has received information that 

provides a reasonable basis to suspect 

financial irregularities, the Department 

will conduct an investigation to confirm 

the facts relating to the delinquency or 

other possible ground for revocation. 

The depth of the investigation will 

depend upon the particular 

circumstances. For example, where 

OLMS has no record of receiving a 

timely Form LM–3, the investigation 

may be limited to confirming that the 

labor organization did not timely submit 

the report. In other circumstances, an 

investigation may be needed to review 

the labor organization’s books, to review 

documents, and to interview subjects 

and obtain statements from individuals 

with knowledge about a labor 

organization’s finances and their 

reporting to determine whether or not 

the deficiencies on the Form LM–3 are 

material. 

If the Department finds grounds for 

revocation after the investigation, the 

Department will send the labor 

organization a notice of the proposed 

Form LM–3 revocation stating the 

reason for the proposed revocation and 

explaining that revocation, if ordered, 

will require the labor organization to file 

the more detailed annual financial 

report, Form LM–2. The letter will also 

provide notice that the labor 

organization has the right to a hearing 

if it chooses to challenge the proposed 

revocation; and that the hearing will be 

limited to written submissions due 

within 30 days of the date of the notice. 

The submissions and any supporting 

facts and argument must be received by 

the Office of Labor-Management 

Standards at the address provided in the 

notice within 30 days after the date of 

the letter proposing revocation. The 

letter will also advise that the labor 

organization’s failure to timely respond 

within 30 days will waive such labor 

organization’s opportunity to request a 

hearing and the proposed revocation 

shall take effect automatically unless the 

Secretary in his or her discretion 

determines otherwise. 

In its written submission, the labor 

organization must present relevant facts 

and arguments that address whether: (1) 

The report was delinquent or deficient 

or other grounds for the proposed 

revocation exist; (2) whether the 

deficiency, if any, was material; (3) 

whether the circumstances concerning 

the delinquency or other grounds for the 

proposed revocation were caused by 

factors reasonably outside the control of 

the labor organization; and (4) any 


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27356 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 

factors exist that mitigate against 

revocation. The proposed definition for 

‘‘material’’ is derived from Financial 

Accounting Standards Board, Statement 

of Financial Accounting Concepts No. 2 

(SFAC No. 2), at 132 (‘‘The omission or 

misstatement of an item in a financial 

report is material if, in light of 

surrounding circumstances, the 

magnitude of the item is such that it is 

probable that the judgment of a 

reasonable person relying upon the 

report would have been changed or 

influenced by the inclusion or 

correction of the item.’’) and TSC 

Industries Inc. v. Northway Inc., 426 

U.S. 438, 449 (1976) (‘‘A substantial 

likelihood that, under all the 

circumstances, the omitted fact would 

have assumed actual significance in the 

deliberations of the reasonable [person]. 

Put another way, there must be a 

substantial likelihood that the 

disclosure of the omitted fact would 

have been viewed by [a] reasonable 

[person] as having significantly altered 

the ‘total mix’ of information made 

available.’’). Factors reasonably outside 

the control of a labor organization could 

include, for example, natural disasters 

that destroyed the records necessary to 

complete a Form LM–3, or the death or 

serious illness of the labor 

organization’s president or treasurer 

while the form was being prepared for 

filing. Mitigating factors could also 

include, for example, that the form was 

timely completed but was mailed to an 

incorrect address or an attachment was 

inadvertently omitted from the filing. 

After review of the labor 

organization’s submission, the Secretary 

(or her designee who will not have 

participated in the investigation) will 

issue a written determination stating the 

reasons for the determination, and, as 

appropriate, informing the labor 

organization that it must file the Form 

LM–2 for such reporting periods as he 

or she finds appropriate. Where a labor 

organization has failed to timely 

respond to the notice of proposed 

revocation, the Secretary will notify the 

labor organization in writing that its 

privilege has been revoked (or in an 

exercise of his or her discretion that 

revocation is unnecessary). The 

determination by the Secretary shall be 

the Department’s final agency action on 

the revocation. 

The revocation of the Form LM–3 

filing privilege will ordinarily only 

apply to the fiscal year for which the 

labor organization was delinquent or 

failed to file a properly completed 

amended report after notification of a 

material deficiency and the fiscal year 

during which the revocation 

determination is issued. In other cases, 

the revocation will apply to the fiscal 

years that the Department finds 

appropriate, but no labor organization 

will be required to submit a Form LM–

2 for any past fiscal year for which the 

labor organization already has properly 

and timely filed a Form LM–3. If the 

revocation is for a longer period of time, 

the Department’s reasons will be 

included in its written determination. 

As discussed below in the PRA analysis, 

the Department believes that current 

LM–3 filers who have had their 

privilege revoked under the current 

proposed rule will incur an additional 

95.45 hour burden for each year in 

which they must file a Form LM–2. See 

Table 1. Labor organizations that are 

required to file a Form LM–2 because 

their Form LM–3 filing privilege has 

been revoked will not be required to 

submit the Form LM–2 electronically. 

The Department proposes that its rule 

take effect 30 days after publication and 

apply prospectively to labor 

organization’s fiscal years beginning on 

or after the effective date of a final rule 

promulgated after this notice of 

proposed rulemaking. 

IV. Regulatory Procedures 

Executive Order 12866 

This proposed rule has been drafted 

and reviewed in accordance with 

Executive Order 12866, section 1(b), 

Principles of Regulation. The 

Department has determined that this 

proposed rule is not an ‘‘economically 

significant’’ regulatory action under 

section 3(f)(1) of Executive Order 12866. 

Based on a preliminary analysis of the 

data the rule is not likely to: (1) Have 

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; (2) create 

a serious inconsistency or otherwise 

interfere with an action taken or 

planned by another agency; (3) 

materially alter the budgetary impact of 

entitlements, grants, user fees, or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise novel 

legal or policy issues. 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, because of its importance to 

the public the rule was treated as a 

significant regulatory action and was 

reviewed by the Office of Management 

and Budget. 

Unfunded Mandates Reform 

For purposes of the Unfunded 

Mandates Reform Act of 1995, this 

proposed 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 in any one year. 

Executive Order 13132 (Federalism) 

The Department has reviewed this 

proposed rule in accordance with 

Executive Order 13132 regarding 

federalism and has determined that the 

proposed rule does not have federalism 

implications. Because the economic 

effects under the rule will not be 

substantial for the reasons noted above 

and because the rule has no direct effect 

on states or their relationship to the 

federal government, 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.’’

Initial Regulatory Flexibility Analysis 

The Regulatory Flexibility Act of 

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

agencies to prepare regulatory flexibility 

analyses, and to develop alternatives 

wherever possible, in drafting 

regulations that will have a significant 

impact on a substantial number of small 

entities. To evaluate whether this 

proposed rule will have a significant 

economic impact on a substantial 

number of small entities, the 

Department has conducted an Initial 

Regulatory Flexibility Analysis 

(‘‘IRFA’’) as a component of this 

rulemaking. 

In the 2003 Form LM–2 rule, the 

Department’s regulatory flexibility 

analysis utilized the Small Business 

Administration’s (‘‘SBA’’) ‘‘small 

business’’ standard for ‘‘Labor Unions 

and Similar Labor Organizations.’’

Specifically, the Department used the $5 

million standard established in 2000 (as 

updated in 2005 to $6.5 million) for 

purposes of its regulatory flexibility 

analyses. See 65 FR 30836 (May 15, 

2000); 70 FR 72577 (Dec. 6, 2005). This 

same standard, which has also been 

used in rulemakings involving the Form 

T–1, has been used in developing the 

initial regulatory flexibility analysis for 

this proposed rule. 

The Department recognizes that the 

SBA has not established fixed, financial 

thresholds for ‘‘organizations,’’ as 

distinct from other entities. See A Guide 

for Federal Agencies: How to Comply 

with the Regulatory Flexibility Act, 


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Office of Advocacy, U.S. Small Business 

Administration at 12–13, available at 

www.sba.gov. The Department further 

recognizes that under SBA guidelines, 

the relationship of an entity to a larger 

entity with greater receipts is a factor to 

be considered in determining the 

necessity of conducting a regulatory 

flexibility analysis. Thus, the affiliation 

between a local labor organization and 

a national or international labor 

organization, a widespread practice 

among labor organizations subject to the 

LMRDA, may have an impact on the 

number of organizations that should be 

counted as ‘‘small organizations’’ under 

section 601(4) of the RFA, 5 U.S.C. 

601(4). Section 601(4) provides in part: 

‘‘the term ‘small organization’ means 

any not-for-profit enterprise which is 

independently owned and operated and 

is not dominant in its field.’’ Affiliation 

of labor organizations presents a unique 

circumstance in determining whether 

and, if so, how, receipts of particular 

labor organizations should be 

aggregated, if at all, in assessing whether 

a regulatory flexibility analysis is 

required and how it should be 

conducted. However, for purposes of 

analysis here and for ready comparison 

with the RFA analysis in its earlier 

Form LM–2 rulemaking, the Department 

has used the $6.5 million receipts test 

for ‘‘small businesses,’’ rather than the 

‘‘independently owned and operated 

and not dominant’’ test for ‘‘small 

organizations.’’ Application of the latter 

test likely would reduce the number of 

labor organizations that would be 

counted as small entities under the 

RFA. It is the Department’s view, 

however, that it would be inappropriate, 

given the past rulemaking concerning 

the Form T–1 and the Form LM–2, to 

depart from the $6.5 million receipts 

standard in preparing this initial 

regulatory flexibility analysis. 

Comments are invited to address this 

question of whether the use of the $6.5 

million figure, without aggregation 

among affiliated labor organizations, is 

appropriate and if not, to suggest 

alternative approaches for this purpose. 

Accordingly, the following analysis 

assesses the impact of these regulations 

on small entities as defined by the 

applicable SBA size standards. 

All numbers used in this analysis are 

based on 2005 data taken from the 

OLMS electronic labor organization 

reporting (‘‘e.LORS’’) database, which 

includes all records of labor 

organizations that have filed LMRDA 

reports with the Department. 

A. Statement of the Need for, and 

Objectives of, the Proposed Rule 

The following is a summary of the 

need for and objectives of the proposed 

rule. A more complete discussion is 

found in the preamble. 

The objective of this proposed rule is 

to increase the transparency of financial 

reporting by revising the current 

LMRDA disclosure Form LM–2 to 

enable workers to be responsible, 

informed, and effective participants in 

the governance of their labor 

organizations; discourage embezzlement 

and financial mismanagement; prevent 

the circumvention or evasion of the 

statutory reporting requirements; and 

strengthen the effective and efficient 

enforcement of the Act by the 

Department. Form LM–2 is filed by the 

largest reporting labor organizations, 

i.e., those with $250,000 or more in total 

annual receipts. 

The revisions to the Form LM–2 made 

by the Department in 2003 have helped 

to fulfill the mandate of full reporting 

set forth in the LMRDA. However, based 

upon the Department’s experience since 

2003 and after reviewing data from 

reports filed on the revised form, the 

Department believes that further 

enhancements to the Form LM–2 are 

necessary. The proposed enhancements 

will ensure that information is reported 

in such a way as to meet the objectives 

of the LMRDA by providing labor 

organization members with useful data 

that will enable them to be responsible 

and effective participants in the 

democratic governance of their labor 

organizations. The proposed changes are 

designed to provide members of labor 

organizations with additional and more 

detailed information about the financial 

activities of their labor organization that 

is not currently available through the 

Form LM–2 reporting. 

The proposed enhancements provide 

additional information in Schedule 3 

(Sale of Investments and Fixed Assets) 

and Schedule 4 (Purchase of 

Investments and Fixed Assets) that will 

allow verification that these transactions 

are performed at arm’s length and 

without conflicts of interest. Schedules 

11 and 12 will be revised to include the 

value of benefits paid to and on behalf 

of officers and employees. This will 

provide a more accurate picture of total 

compensation received by these labor 

organization officials. In addition, the 

proposed changes will require the 

reporting in Schedules 11 and 12 of 

travel reimbursements indirectly paid 

these officials. This proposed change 

will provide more accurate information 

on travel disbursements made to them 

by their labor organizations. The 

proposed enhancements also include 

additional schedules corresponding to 

categories of receipts, which will 

provide additional information, by 

receipt category, of aggregated receipts 

of $5,000 or more. This proposed 

change is consistent with the 

information currently provided on 

disbursements. 

The Department’s enforcement 

experience has shown that the failure of 

small labor organizations to file the 

annual Form LM–3 on time and the 

filing of reports with material 

deficiencies is often an indicator of 

larger problems about the way such 

organizations maintain their financial 

records, and may be an indicator of 

more serious financial mismanagement. 

The Department’s enforcement 

experience reveals various reasons for 

delinquent filings, such as a labor 

organization’s failure to maintain the 

records required by the LMRDA; 

inadequate office procedures; frequent 

turnover of labor organization officials 

and their often part-time status; 

uncertainty of first-time officers about 

their reporting responsibilities under 

the LMRDA and their inexperience with 

bookkeeping, recordkeeping, or both; an 

‘‘inherited bookkeeping mess;’’ an 

inattention generally to ‘‘paperwork;’’

overworked or under-trained officers; an 

officer’s unwillingness to question or 

report apparent irregularities due to the 

officer’s own inexperience or concern 

about the repercussions of reporting 

such matters; or a conscious effort to 

hide embezzlement or the 

misappropriation of funds by the 

officers, other members of the 

organization, or third parties associated 

with the labor organization. Many of 

these causes of delinquency, including 

pre-existing bookkeeping problems, 

inattention, overwork, insufficient 

training, and an unwillingness to 

confront or report financial 

irregularities, demonstrate that the labor 

organization members, the public, and 

the Department would benefit from a 

more detailed accounting of the 

organization’s financial conditions and 

operations. Moreover, OLMS experience 

indicates that labor organizations that 

are repeatedly delinquent are more 

likely than other labor organizations to 

suffer embezzlement, or related crime. 

Many of the reasons that contribute to 

delinquent filings also result in the 

filing of reports that omit or misstate 

material information about the labor 

organization’s finances. The members of 

a labor organization that fails to correct 

a material reporting deficiency after 

being notified by the Department and 

being given an opportunity to address 


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27358 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 

12 In the 2003 Form LM–2 rule, the Department 

estimated the burden for each of three categories of 

reporting labor organizations as measured by their 

range of annual receipts: Tier I ($250,000 to less 

than $500,000); Tier II ($500,000 to less than 

$50,000,000) and Tier III ($50,000,000 or more). 

the error would benefit from the 

increased transparency of the Form 

LM–2. 

As explained in the preamble, 

additional reporting by labor 

organizations is necessary to ensure, as 

intended by Congress, the full and 

comprehensive reporting of a labor 

organization’s financial condition and 

operations, including a full accounting 

to members from whose work the 

payments were earned. 67 FR 79282–83. 

The proposed rule will prevent 

circumvention and evasion of these 

reporting requirements by providing 

members of labor organizations with 

financial information concerning their 

labor organization. 

B. Legal Basis for Rule 

The legal authority for the notice of 

proposed rulemaking is provided by 

sections 201 and 208 of the LMRDA, 29 

U.S.C. 431, 438. Section 201 requires 

labor organizations to file annual 

financial reports and to disclose certain 

financial information, including all 

assets, receipts, liabilities, and 

disbursements of the labor organization. 

Section 208 provides that the Secretary 

of Labor shall have 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, including 

rules prescribing reports concerning 

trusts in which a labor organization is 

interested, and such other reasonable 

rules and regulations as she may find 

necessary to prevent the circumvention 

or evasion of the reporting 

requirements. Section 208 also 

authorizes the Secretary to establish 

‘‘simplified reports for labor 

organizations and employers for whom 

[s]he finds by virtue of their size a 

detailed report would be unduly 

burdensome.’’ Section 208 authorizes 

the Secretary to revoke this privilege for 

any labor organization or employer if 

the Secretary determines, after such 

investigation as she deems proper and 

due notice and opportunity for a 

hearing, that the purposes of section 208 

would be served by revocation. 

C. Number of Small Entities Covered 

Under the Rule 

The primary impact of this proposed 

rule will be on those labor organizations 

that have $250,000 or more in annual 

receipts. There are approximately 4,452 

labor organizations of this size that are 

required to file Form LM–2 reports 

under the LMRDA. See n. 1 above and 

Table 1 below. The Department 

estimates that 4,228 of these labor 

organizations, or 94.97%, are 

considered small under the current SBA 

standard (annual receipts less than $6.5 

million). These labor organizations have 

annual average receipts of $1.26 

million.12 See Table 1. The Department 

estimates that about 96 labor 

organizations with annual receipts of 

less than $250,000 will be affected by 

the proposed rule. These 96 labor 

organizations have annual average 

receipts of $68,939. See Table 1. 

Although these estimates may not be 

predictive of the exact number of small 

labor organizations that will be 

impacted by this proposed rule in the 

future, the Department believes these 

estimates to be sound and they are 

derived from the best available 

information. 

D. Relevant Federal Requirements 

Duplicating, Overlapping or Conflicting 

With the Rule 

There are no federal rules that 

duplicate or conflict with this proposed 

rule. There is some overlap, however, 

between the proposed rule and 

documents required by the Internal 

Revenue Service (‘‘IRS’’). Labor 

organizations are currently required to 

report some similar information to the 

IRS on Form 990 or Form 990–EZ if they 

are exempt from taxation under 26 

U.S.C. 501 (c)(5). A copy of the labor 

organization’s filed Form LM–2 may 

currently be submitted to the IRS in lieu 

of answering certain questions on Form 

990. However, under longstanding 

practice under the Form LM–2 and 

Form LM–3 rules, a Form 990 may not 

be submitted to OLMS for the Form 

LM–2. 

E. Differing Compliance or Reporting 

Requirements for Small Entities 

Under the proposal, the reporting, 

recordkeeping, and other compliance 

requirements apply equally to all labor 

organizations that are required to file a 

Form LM–2 under the LMRDA, 

including labor organizations which 

have had their Form LM–3 filing 

privilege revoked. The Department 

expects that only the largest labor 

organizations will have to make 

significant changes in the level of detail 

with which financial activity is reported 

in order to comply with the 

requirements of the proposed rule. 

Differences between the smaller labor 

organizations that are large enough to be 

required to file Form LM–2 and the 

largest labor organizations are more 

likely to result from differences in the 

financial practices of the labor 

organizations themselves. Only the 

largest filers, those that have annual 

receipts in the millions, are likely to 

have extensive financial transactions 

that will require substantial changes in 

their accounting practices in order to 

report these transactions on the revised 

Form LM–2. Labor organizations with 

receipts of between $250,000 and $2 

million, which account for over 3,441 of 

the estimated 4,452 Form LM–2 filers, 

are likely to have less difficulty using 

the revised Form LM–2 than the 

organizations with greater annual 

receipts. 

F. Clarification, Consolidation and 

Simplification of Compliance and 

Reporting Requirements for Small 

Entities 

OLMS will update the e.LORS system 

to coincide with any changes embodied 

in a final rule promulgated after this 

notice of proposed rulemaking. 

OLMS will provide compliance 

assistance for any questions or 

difficulties that may arise from using the 

reporting software. A help desk is 

staffed during normal business hours 

and can be reached by telephone toll 

free at 1–866–401–1109. 

The use of electronic forms makes it 

possible to download information from 

previously filed reports directly into the 

form; enables officer and employee 

information to be imported onto the 

form; makes it easier to enter 

information; and automatically performs 

calculations and checks for 

typographical and mathematical errors 

and other discrepancies, which reduces 

the likelihood of having to file an 

amended report. The error summaries 

provided by the software, combined 

with the speed and ease of electronic 

filing, will also make it easier for both 

the reporting labor organization and 

OLMS to identify errors in both current 

and previously filed reports and to file 

amended reports to correct them. 

As discussed in the preamble, labor 

organizations that are required to file a 

Form LM–2 because their Form LM–3 

filing privilege has been revoked are not 

required to comply with the electronic 

submission requirement. 

G. The Use of Performance Rather Than 

Design Standards 

The Department considered a number 

of alternatives to the proposed rule that 

could minimize the impact on small 

entities. One alternative would be not to 

change the existing Form LM–2. This 

alternative was rejected because OLMS 

experience demonstrates that the goals 

of the Act are not being met. As 

explained further in the preamble, 


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13The estimated burden on labor organizations is 

discussed in detail in the section concerning the 

Paperwork Reduction Act. The figures discussed 

above are derived from the figures explained in that 

section. 

14The estimates reported in this paragraph do not 

include labor organizations that voluntarily filed 

the Form LM–2 nor an estimate of the number of 

labor organizations (with annual receipts less than 

$250,000) that would have to file the Form LM–2 

under the proposed Form LM–3 revocation 

procedures. The number of such labor organizations 

(158) represents only a small fraction of the total 

number of reporting labor organizations and thus 

their inclusion would not have a material effect on 

the burden estimates. 

15The several magnitude difference in 

percentages is accountable to the much smaller 

number of labor organizations with $250,000 to 

$499,999 in annual receipts (1,317) compared to the 

number of labor organizations with $500,000 to $6.5 

million in annual receipts (2,881) and the three and 

one half-fold difference in average receipts between 

labor organizations with $250,000 to $499,999 in 

annual receipts ($360,387.94) and labor 

organizations with $500,000 to $6.5 million in 

annual receipts ($1,262,627.09). 

members of labor organizations cannot 

accurately determine from the current 

Form LM–2 what benefits officials of 

labor organizations are receiving. 

Members need this information to make 

informed decisions on the governance of 

their labor organizations. 

Another alternative would be to limit 

the new reporting requirements to 

national and international parent labor 

organizations. However, the Department 

has concluded that such a limitation 

would eliminate the availability of 

meaningful information from local and 

intermediate labor organizations, which 

may have far greater impact on and 

relevance to members of labor 

organizations, particularly since such 

lower levels of labor organizations 

generally set and collect dues and 

provide representational and other 

services for their members. Such a 

limitation would reduce the utility of 

the information to a significant number 

of members. Of the 4,452 labor 

organizations that are required to file 

Form LM–2, just 101 are national or 

international labor organizations. 

Requiring only national and 

international organizations to file more 

detailed reports would not provide any 

deterrent to fraud and embezzlement by 

local and intermediate body officials nor 

would it increase transparency in local 

and intermediate bodies. 

Another alternative would be to phase 

in the effective date for the Form LM–

2 changes and provide smaller Form 

LM–2 filers with additional lead time to 

modify their recordkeeping systems to 

comply with the new reporting 

requirements. The Department has 

concluded that a three-month period for 

all Form LM–2 filers to adapt to the new 

reporting requirements should provide 

sufficient time to make the necessary 

adjustments. OLMS also plans to 

provide compliance assistance to any 

labor organization that requests it. 

A review of the proposed revisions 

was undertaken to reduce paperwork 

burden for all Form LM–2 filers and an 

effort was made during the review to 

identify ways to reduce the impact on 

small entities. The Department believes 

it has minimized the economic impact 

of the form revision on small labor 

organizations to the extent possible 

while recognizing workers’ and the 

Department’s need for information to 

protect the rights of members of labor 

organizations under the LMRDA. 

H. Reporting, Recording and Other 

Compliance Requirements of the Rule 13

This proposed rule is not expected to 

have a significant economic impact on 

a substantial number of small entities. 

The LMRDA is primarily a reporting 

and disclosure statute. Accordingly, the 

primary economic impact will be the 

cost of obtaining and reporting required 

information. 

For the estimated 4,228 Form LM–2 

filers with between $250,000 and 

$6,500,000 in annual receipts, the 

estimated average annual reporting and 

recordkeeping burden for the current 

Form LM–2 is $14,811.32 or 1.17% of 

their average annual receipts. See Table 

1, which provides a more complete list 

of the burden estimates.14 The average 

additional first year cost (including first 

year non-recurring implementation 

costs) to these organizations is estimated 

at less than $4,164.44, or 0.33% of 

average annual receipts. Id. The average 

total first year cost of the revised Form 

LM–2 on these labor organizations is 

estimated at $18,975.77, or 1.50% of 

total annual receipts. Id. The 

Department believes that it is unlikely 

that the smallest subset of these labor 

organizations (those with between 

$250,000 and $499,999 in annual 

receipts) would incur many of the costs 

incurred by the typical Form LM–2 filer 

(those with receipts between $500,000 

and $6.5 million). The labor 

organizations with the least annual 

receipts are likely to have less 

complicated accounts covering fewer 

transactions than the typical, larger 

Form LM–2 filer. However, to assess the 

‘‘maximum’’ or ‘‘worst-case’’ impact on 

this subset of labor organizations, the 

Department considered the unlikely 

event that the labor organizations in this 

subset could incur the same compliance 

burden as the average for labor 

organizations with annual receipts of 

$500,000 to $49.9 million. Under this 

unlikely scenario, the total additional 

cost of the proposed rule on such labor 

organizations is estimated at $4,274.60 

in the first year, or 0.34% of the annual 

receipts of all organizations with 

receipts of $250,000 to $6.5 million, and 

$260.27 in the second year, or .02% of 

annual receipts. Id. For a small labor 

organization with $250,000 to $499,999 

in annual receipts, the estimated 

maximum additional cost of the 

proposed rule would be 2.82% of 

receipts in the first year and 2.23% in 

the second year.15 Id. 

The average annual reporting and 

recordkeeping burden for the current 

Form LM–3 is estimated at $1,404.00 or 

2.04% of average annual receipts for 

Form LM–3 filers. See Table 1. The 

Department assumes that Form LM–3 

filers will spend the same amount on 

labor as Tier 1 Form LM–2 filers or 

approximately $15.89 per hour. See 

Table 4. The additional cost of filing a 

Form LM–2 rather than a Form LM–3 is 

$1,955.92 or 2.84% of average annual 

receipts for Form LM–3 filers. The 

Department estimates that on average 96 

Form LM–3 filers annually will have 

their Form LM–3 filing privilege 

revoked and thus incur this additional 

burden. The Department arrived at this 

figure by examining the number of 

deficiency and delinquency cases 

processed by the Department. In the 

latest fiscal year, the Department 

processed 684 deficiency cases for Form 

LM–3 filers and 1,187 cases for 

delinquent Form LM–3 filers. The 

Department assumes that it will 

examine one half of the deficiency and 

delinquency cases for possible 

revocation (935.5 per year) and that 

10% of the cases examined will 

ultimately lead to revocation of the 

Form LM–3 filing privilege (93.55). 

Further the Department assumes that in 

another 2 cases per year it will find 

‘‘other circumstances exist that warrant 

revocation’’ for a total of 96 revocations 

per year (rounded up). 


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TABLE 1.—SUMMARY OF REGULATORY FLEXIBILITY ANALYSIS 16

For unions that meet the SBA small entities standard 

Total burden 

hours per 

respondent 

Total cost per 

respondent 

Weighted Average Cost of Current Form LM–2 ............................................................................................. 507.62 $14,811.32 

Percentage of Average Annual Receipts ................................................................................................. n.a. 1.17% 

Average Cost of Current Form LM–3 .............................................................................................................. 116.00 $ 1,404.00 

Percentage of Average Annual Receipts ................................................................................................. n.a. 2.04% 

Weighted Average First Year Cost of Revised Form LM–2 ........................................................................... 650.34 $18,975.77 

Percent of Average Annual Receipts ....................................................................................................... n.a. 1.50% 

Weighted Average Second Year Cost ............................................................................................................ 516.81 $15,079.59 

Percent of Average Annual Receipts ....................................................................................................... n.a. 1.19% 

Weighted Average Increase in Cost of Proposed Rule, First Year ................................................................ 142.72 $4,146.44 

Percent of Average Annual Receipts ....................................................................................................... n.a. 0.33% 

Weighted Average Increase in Cost of Proposed Rule, Second Year ........................................................... 9.19 $268.27 

Percent of Average Annual Receipts ....................................................................................................... n.a. 0.02% 

Maximum First Year Cost of Revised Form LM–2 for Unions with $250,000 to $499,999 in Annual Receipts ............................................................................................................................................................ 654.12 $10,393.92 

Percentage of Average Annual Receipts ................................................................................................. n.a. 2.82% 

Maximum Second Year Cost ........................................................................................................................... 516.54 $8,207.77 

Percentage of Average Annual Receipts ................................................................................................. n.a. 2.23% 

Maximum Increase in Cost of Proposed Rule, First Year .............................................................................. 146.50 $4,274.60 

Percent of Annual Receipts for $250,000 to $499,999 Union ................................................................. n.a. 0.36% 

Percent of Annual Receipts for $500,000 to $6,500,000 Union .............................................................. n.a. 0.18% 

Percent of Annual Receipts for $250K to $6.5M Union ........................................................................... n.a. 0.34% 

Maximum Increase in Cost of Proposed Rule, Second Year ......................................................................... 8.92 $260.27 

Percent of Annual Receipts for $250,000 to $499,999 Union ................................................................. n.a. 0.02% 

Percent of Annual Receipts for $500,000 to $6,500,000 Union .............................................................. n.a. 0.01% 

Percent of Annual Receipts for $250K to $6.5M Union ........................................................................... n.a. 0.02% 

Average Cost of Revised Form LM–2 ............................................................................................................. 211.45 $ 3,359.92 

Union with between $10K and $249,999 in Annual Receipts ................................................................. n.a. 4.87% 

Average Increase in Cost of Form LM–2 ........................................................................................................ 95.45 $ 1,955.92 

Unions with between $10K and $249,999 in Annual Receipts ................................................................ n.a. 2.84% 

Total 2005 Filers between $250K & $6.5M ...................................................................................................................... 4228 

Total 2005 Filers between $250K & $499,999 ................................................................................................................. 1317 

Total 2005 Filers between $500K & $6.5 ......................................................................................................................... 2911 

Total 2005 Filers between $500K & $49.9M .................................................................................................................... 3083 

Number of Form LM–2 Filers with Annual Receipts between $250K & $2M .................................................................. 3441 

Total 2005 Form LM–3 Filers ............................................................................................................................................ 9658 

Total 2005 Form LM–2 Filers ............................................................................................................................................ 4452 

Total 2005 Union Filers ..................................................................................................................................................... 24065 

Percentage of All Union Filers that File Form LM–2 ........................................................................................................ 18.50% 

Percentage of all Union Filers with Annual Receipts between $250K & $6.5M .............................................................. 18.0% 

Percentage of Union Filers with Annual Receipts between $250K & $499,999 .............................................................. 5.5% 

Percentage of Form LM–2 Filers with Annual Receipts between $250K & $6.5M .......................................................... 94.97% 

Percentage between $250K & $499,999 .......................................................................................................................... 31.15% 

Percentage between $500K & $6.5M ............................................................................................................................... 68.85% 

Percentage of Form LM–3 Filers that will File Form LM–2 .............................................................................................. .99% 

2005 Average Annual Receipts for Unions between $250K & $6.5M ............................................................................. $1,262,627.09 

2005 Average Annual Receipts for Unions between $250K & $499,999 ........................................................................ $368,597.23 

2005 Average Annual Receipts for Unions between $500K & $6.5M ............................................................................. $1,667,105.73 

2005 Average Annual Receipts for Unions between $10K and $249,999 ....................................................................... $68,939.34 

2005 Average Number of Employees Employed by Unions with Annual Receipts between $250K & $6.5M ................ 4 

2005 Average Number of Officers Employed by Unions with Annual Receipts between $250K & $6.5M ..................... 12 

16 Note: some of the figures used in this table and other figures mentioned in this document may not add due to rounding. 

I. Conclusion 

As noted above, the proposed rule 

will apply to 4,228 Form LM–2 filers 

and approximately 96 Form LM–3 filers 

that meet the SBA standard for small 

entities, about 18% of all labor 

organizations that must file an annual 

financial report under the LMRDA. 

Further, the Department estimates that 

just 1,317 labor organizations with 

annual receipts from $250,000 to 

$499,999, or 5.5% of all labor 

organizations covered by the LMRDA, 

would be affected by this rule. Even less 

(5.5% of the total) would incur the 

maximum additional costs of the 

proposed rule described above. Finally, 

the Department estimates that 

approximately 96 Form LM–3 filers, or 

1% of all Form LM–3 labor 

organizations covered by the LMRDA, 

would be affected by this rule. 

For the estimated 4,228 Form LM–2 

filers with between $250,000 and 

$6,500,000 in annual receipts, the 

estimated average annual reporting and 

recordkeeping burden for the current 

Form LM–2 is $14,811.32 or 1.17% of 

their average annual receipts. The 

average additional first year cost 

(including first year non-recurring 

implementation costs) to these 

organizations is estimated at less than 

$4,164.44, or 0.33% of average annual 

receipts. The average total first year cost 

of the revised Form LM–2 on these labor 

organizations is estimated at $18,975.77, 

or 1.50% of total annual receipts. The 

Department believes that it is unlikely 


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17The PRA analysis for the Form LM–2 is set 

forth at 68 FR 58436–42. 

that the smallest subset of these labor 

organizations (those with between 

$250,000 and $499,999 in annual 

receipts) would incur many of the costs 

incurred by the typical Form LM–2 filer 

(those with receipts between $500,000 

and $6.5 million). Under this ‘‘worst 

case’’ scenario for these organizations, 

the total additional cost of the final rule 

on such labor organizations is estimated 

at $4,274.60 in the first year, or 0.34% 

of the annual receipts of all 

organizations with receipts of $250,000 

to $6.5 million, and $260.27 in the 

second year, or .02% of annual receipts. 

The average annual reporting and 

recordkeeping burden for the current 

Form LM–3 is estimated at $1,404.00 or 

2.04% of average annual receipts for 

Form LM–3 filers. For the estimated 96 

Form LM–3 filers that would have their 

privilege to file Form LM–3 revoked (all 

of which meet the SBA standard for 

small entities), the additional cost of 

filing a Form LM–2 rather than a Form 

LM–3 is $1,955.92 or 2.84% of average 

annual receipts for Form LM–3 filers. 

To evaluate whether this proposed 

rule will have a significant economic 

impact on a substantial number of small 

entities, the Department has conducted 

this IRFA as a component of this 

rulemaking. Although the Department 

acknowledges that there will be a 

substantial number of small entities 

impacted by this proposed rule, it does 

not believe that these entities will incur 

a significant economic impact. The 

Department seeks comment on all 

aspects of this IRFA, particularly on the 

numbers of small entities that may be 

impacted by this rulemaking and the 

potential economic impacts to these 

small entities. 

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 

proposed rule, the analysis under the 

Regulatory Flexibility Act, and the 

analysis that follows, 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; (3) the 

provisions reduce to the extent 

practicable and appropriate the burden 

on unions that must provide the 

information, including small labor 

organizations; (4) the form, instructions, 

and explanatory information in the 

preamble are written in plain language 

that will be understandable by reporting 

labor organizations; (5) the disclosure 

requirements are implemented in ways 

consistent and compatible, to the 

maximum extent practicable, with the 

existing reporting and recordkeeping 

practices of labor organizations that 

must comply with them; (6) this 

preamble informs labor organizations 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, the fact that all information 

collected will be made public, and the 

fact that they 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 part of its continuing effort to 

reduce paperwork and respondent 

burden, the Department of Labor 

conducts a pre-clearance consultation 

program to provide the general public 

and Federal agencies with an 

opportunity to comment on proposed 

and continuing collections of 

information in accordance with the 

PRA. This helps to ensure that the 

public understands the Department’s 

collection instructions, respondents can 

provide the requested data in the 

desired format, the reporting burden 

(time and financial resources) is 

minimized, and the Department can 

properly assess the impact of collection 

requirements on respondents. 

In this proposed rulemaking, the 

Department has sought to improve the 

usefulness and accessibility of 

information to members of labor 

organizations subject to the LMRDA. 

The LMRDA reporting provisions were 

devised to protect the basic rights of 

labor organization members and to 

guarantee the democratic procedures 

and financial integrity of labor 

organizations. The 1959 Senate report 

on the version of the bill later enacted 

as the LMRDA stated clearly that ‘‘the 

members who are the real owners of the 

money and property of the organization 

are entitled to a full accounting of all 

transactions involving their property.’’

A full accounting was described as ‘‘full 

reporting and public disclosure of union 

internal processes and financial 

operations.’’

As labor organizations have become 

more multifaceted and have created 

hybrid structures for their various 

activities, the form used to report 

financial information with respect to 

these activities had until recently 

remained relatively unchanged and had 

become a barrier to the complete and 

transparent reporting of labor 

organizations’ financial information 

intended by the LMRDA. By providing 

members of labor organizations with 

more complete, understandable 

information about their labor 

organizations’ financial transactions, 

investments, and solvency, this 

proposal will put them in a much better 

position than they are today to protect 

their personal financial interests and to 

exercise their rights of self-governance. 

The information collection achieved by 

this rule is integral to this purpose. The 

paperwork requirements associated with 

the proposed rule are necessary to 

enable workers to be responsible, 

informed, and effective participants in 

the governance of their labor 

organizations; discourage embezzlement 

and financial mismanagement; prevent 

the circumvention or evasion of the 

statutory reporting requirements; and 

strengthen the effective and efficient 

enforcement of the LMRDA by the 

Department. 

This PRA analysis is based largely on 

the PRA analysis prepared by the 

Department in connection with its 2003 

final rule that substantially revised the 

Form LM–2.17 The PRA analysis was 

approved by the Office of Management 

and Budget. The PRA analysis utilizes 

the same basic methodology and data 

(the latter updated with more current 

information) as used in the 2003 rule. 

1. Form LM–2 Proposed Rulemaking 

This proposed rule modifies the 

annual reports required to be filed by 

the largest labor organizations, as 

required by section 201 of the LMRDA, 

29 U.S.C. 431, and prescribed by the 

Secretary of Labor. As discussed above 

and throughout the preamble, the 

revised paperwork requirements are 

necessary to effectuate the purposes of 

the LMRDA by providing members of 

labor organizations with information 

about their labor organizations that will 

enable them to be responsible, 

informed, and effective participants in 


PWALKER on PROD1PC71 with PROPOSALS2
27362 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 

the governance of those organizations; 

discourage embezzlement and financial 

mismanagement; prevent the 

circumvention or evasion of the 

statutory reporting requirements; and 

strengthen the effective and efficient 

enforcement of the LMRDA by the 

Department. The manner in which the 

collected information will serve these 

purposes is discussed throughout the 

preamble to this proposed rule. 

The proposed revisions to Form LM–

2 are designed to take advantage of 

technology that reduces the burden to 

report information, while at the same 

time making it easier to file and publish 

the contents of the reports. Members of 

labor organizations thus will be able to 

obtain a more accurate and complete 

picture of their labor organization’s 

financial condition and operations 

without imposing an unwarranted 

burden on reporting labor organizations. 

In the 2003 rule, the Department 

estimated the total first year compliance 

costs associated with the Form LM–2 at 

$116,000,000. 68 FR 58428. 

For the proposed Form LM–2, the 

total first year compliance costs are 

estimated to be $89.5 million ($70.4 

million (total cost to complete current 

Form LM–2) + $19.1 million (total cost 

to complete proposed changes to Form 

LM–2) = $89.5 million). This reflects an 

increased burden of $19.1 million 

($29.50 (weighted average cost per hour) 

× 650,407 (total burden hours to 

complete proposed changes to Form 

LM–2); this increase is chiefly the result 

of an adjustment in the number of 

expected filers, the addition of proposed 

schedules, and higher contemporary 

labor costs. Both the estimated burden 

hours and the compliance costs 

associated with the revised Form LM–2 

will decline in subsequent years. The 

Department estimates that the total 

burden averaged over the first three 

years to comply with the revised Form 

LM–2 to be 249,868 hours. The total 

compliance costs associated with the 

proposed changes to the Form LM–2, 

averaged over the first three years, are 

estimated to be $7.4 million per year. 

a. Background on Current Form LM–2 

Every labor organization whose total 

annual receipts are $250,000 or more 

and those organizations that are in 

trusteeship must currently file an 

annual financial report using the current 

Form LM–2, Labor Organization Annual 

Report, within 90 days after the end of 

the labor organization’s fiscal year, to 

disclose its financial condition and 

operations for the preceding fiscal year. 

The current Form LM–2 is also used by 

covered labor organizations with total 

annual receipts of $250,000 or more to 

file a terminal report upon losing their 

identity by merger, consolidation, or 

other reason. 

The current Form LM–2 consists of 21 

questions that identify the labor 

organization and provide basic 

information (in primarily a yes/no 

format); a statement of 11 financial 

items on different assets and liabilities; 

a statement of receipts and 

disbursements; and 20 supporting 

schedules. The information that is 

reported includes: whether the labor 

organization has any trusts; whether the 

labor organization has a political action 

committee; whether the labor 

organization discovered any loss or 

shortage of funds; the number of 

members; rates of dues and fees; the 

dollar amount for seven asset categories, 

such as accounts receivable, cash, and 

investments; the dollar amount for four 

liability categories, such as accounts 

payable and mortgages payable; the 

dollar amount for 13 categories of 

receipts such as dues and interest; and 

the dollar amount for 16 categories of 

disbursements such as payments to 

officers and repayment of loans 

obtained. Four of the supporting 

schedules include a detailed itemization 

of loans receivable and payable and the 

sale and purchase of investments and 

fixed assets. There are also 10 

supporting schedules for receipts and 

disbursements that provide members of 

labor organizations with more detailed 

information by general groupings or 

bookkeeping categories to identify their 

purpose. Labor organizations are 

required to track their receipts and 

disbursements in order to correctly 

group them into the categories on the 

current form. 

The Department also has developed 

an electronic reporting system for labor 

organizations, e.LORS, which uses 

information technology to perform some 

of the administrative functions for the 

current forms. The objectives of the 

e.LORS system include the electronic 

filing of current Forms LM–2, LM–3, 

and LM–4, as well as other LMRDA 

disclosure documents; disclosure of 

reports via a searchable Internet 

database; improving the accuracy, 

completeness and timeliness of reports; 

and creating efficiency gains in the 

reporting system. Effective use of the 

system reduces the burden on reporting 

organizations, provides increased 

information to members of labor 

organizations, and enhances LMRDA 

enforcement by OLMS. The OLMS 

Online Public Disclosure site is 

available for public use at http:// 

www.unionreports.gov. The site 

contains a copy of each labor 

organization’s annual financial report 

for reporting year 2000 and thereafter as 

well as an indexed computer database of 

the information in each report. 

Filing labor organizations have 

several advantages with the current 

electronic filing system. With e.LORS, 

information from previously filed 

reports and officer or employee 

information can be directly imported 

into Form LM–2. Not only is entry of the 

information eased, the software also 

makes mathematical calculations and 

checks for errors or discrepancies. 

b. Overview of Changes to Form LM–2 

The proposed Form LM–2 includes: 

the same number of questions (21) as 

the current form that identify the labor 

organization and provide basic 

information (in the same general yes/no 

format); the same (11) financial items on 

assets and liabilities in Statement A; an 

updated Statement B that asks for 

information in the same categories of 

receipts (13) as the current Form LM–2 

and ten additional supporting schedules 

(for a total of 23 instead of 13). 

Under the proposal, several of the 

current supporting schedules would 

change. The schedules for ‘‘Sale of 

Investments and Fixed Assets’’ and 

‘‘Purchase of Investments and Fixed 

Assets’’ would be modified by the 

inclusion of the name of the party 

transacting with the labor organization 

in the purchase or sale. The schedule for 

‘‘Benefits’’ would be modified and the 

disbursements for benefits to labor 

organization officers and employees 

would be reported in the schedules for 

disbursements to officers and 

employees. 

Under the proposal, the Form LM–2 

would be revised to require labor 

organizations to individually identify 

receipts within supporting schedules for 

all of the current categories of receipts. 

c. Methodology for the Burden 

Estimates 

In reaching its estimates, the 

Department considered both the 

onetime and recurring costs associated 

with the proposed rule. Separate 

estimates are included for the initial 

year of implementation as well as the 

second and third years. For filers, the 

Department included separate estimates, 

based on the relative size of labor 

organizations as measured by the 

amount of their annual receipts. The 

size of a labor organization, as measured 

by the amount of its annual receipts, 

will affect the burden on reporting labor 

organizations. For example, larger labor 

organizations have more receipts and 

disbursements to itemize and more 

employees who have to estimate their 

time allocation. 


PWALKER on PROD1PC71 with PROPOSALS2
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27363 

In 2005, there were approximately 

4,452 labor organizations that were 

required to file Form LM–2 reports 

under the LMRDA (approximately 18.5 

percent of all labor organizations 

covered by the LMRDA). Although these 

estimates may not be predictive of the 

exact number of labor organizations that 

will be impacted by this rule in the 

future, the Department believes these 

estimates to be sound and derived from 

the best available information. 

The Department’s estimates include 

costs incurred by the labor organization 

for both labor and equipment. The labor 

costs reflect the Department’s 

assumption that the labor organizations 

will rely upon the services of some or 

all of the following positions (either 

internal or external staff, including the 

labor organization’s president, secretarytreasurer, accountant, bookkeeper, 

computer programmer, lawyer, 

consultant) and the compensation costs 

for these positions, as measured by wage 

rates and employer costs published by 

the Bureau of Labor Statistics or derived 

from data reported in e.LORS. 

The Department also made 

assumptions relating to the amount of 

time that particular tasks or activities 

would take. The activities occur during 

the distinct ‘‘operational’’ phases of the 

rule: First, tasks associated with 

modifying bookkeeping and accounting 

practices, including the modification or 

purchase of software, to capture data 

needed to prepare the required reports; 

second, tasks associated with 

recordkeeping; and third, tasks 

associated with sending or exporting the 

data in an electronic format that can be 

processed by the Department’s import 

software. Since the analysis is designed 

to provide estimates for a 

‘‘representative’’ labor organization the 

Department’s estimates largely reflect 

weighted averages. Where an estimate 

depends upon the number of labor 

organizations subject to the LMRDA or 

included in one of the tier groups, the 

Department has relied upon data in the 

e.LORS system (for the years stated for 

each example in the text or tables). 

The following methodology and 

assumptions underlie the Department’s 

burden estimates: 

• The size of a labor organization, as 

measured by the amount of its annual 

receipts, will affect the burden on 

reporting labor organizations. Larger 

labor organizations have more receipts 

and disbursements to itemize and more 

employees who have to estimate their 

time allocation. Three tiers, based on 

annual receipts, have been constructed 

to differentiate the burdens among Form 

LM–2 filers. 

• A labor organization’s use of 

computer technology, or not, to 

maintain its financial accounts and 

prepare annual financial reports under 

the current rule, will affect the burden 

on reporting labor organizations. 

Although few Form LM–2 filers do not 

have computers, the larger the labor 

organization the greater likelihood that 

it will be using a specialized accounting 

program instead of commercial-off-theshelf accounting software. 

• Relative burden associated will 

correspond to the following predictable 

stages: Review of the rule, instructions, 

and forms; adjustments to accounting 

software and computer hardware; 

installation, testing, and review of the 

Department’s reporting software; 

changing accounting structures and 

developing, testing, reviewing, and 

documenting accounting software 

queries as well as designing query 

reports; training officers and employees 

involved in bookkeeping and 

accounting functions; training officers 

and employees to maintain information 

relating to transactions and estimating 

the amount of time they expend in 

prescribed categories; the actual 

recordkeeping of data under the revised 

procedures associated with itemizing 

receipts and disbursements and 

allocating them by functional categories; 

preparing a download methodology to 

either submit electronic reports using 

‘‘cut and paste’’ methods or the import/ 

export technology allowing for a more 

automated transfer of data to the 

Department; the development, testing, 

and review of any translator software 

that may be required between a labor 

organization’s accounting software and 

the Department’s reporting software; 

and completing a continuing hardship 

exemption request if necessary. 

• Burden can be categorized as 

recurring or non-recurring, with the 

latter primarily associated with the 

initial implementation stages. 

Recordkeeping burden, as distinct from 

reporting burden, will predominate 

during the first months of 

implementation. 

• Burden can be reasonably estimated 

to vary over time with the greatest 

burden in the initial year, decreasing in 

later years as users gain experience. 

Estimates for each of the first three years 

and a three-year average will provide 

useful information to assess the burden. 

A weighted average provides a 

‘‘snapshot’’ of the burden associated 

with the form for an individual 

reporting labor organization. 

• Burden can be usefully reported as 

an overall total for all filers in terms of 

hours and cost. This burden, for most 

purposes, can be differentiated for each 

individual form. The Federal burden 

cannot be reasonably estimated by form. 

• The estimated burden associated 

with the current Form LM–2 and Form 

LM–3 is the appropriate baseline for 

estimating the burden and cost 

associated with the proposed rule. 

d. Baseline Adjustments: Current Form 

LM–2 

Prior to the 2003 revision, the 

Department assumed that 5,038 local 

labor organizations would take 200 

hours and 141 national and 

international labor organizations would 

take 1,500 hours to collect and report 

their information on the current Form 

LM–2 for a weighted average of 

approximately 240.0 hours for each of 

the 5,179 respondents. In addition, the 

Department assumed at that time that 

Form LM–2 filers would take an average 

24.0 hours for accounting, 16.0 hours for 

programming, 8.0 hours for legal review, 

and 4.0 hours for consulting assistance 

to complete the current form for an 

average total burden of 292.0 hours per 

respondent. Further, the Department 

previously estimated that 160.0 hours of 

the total is for recordkeeping burden 

and 132.0 hours is for reporting burden. 

In 2003, the Department estimated that 

on average, labor organizations would 

spend 536.0 hours to comply with the 

recordkeeping and reporting 

requirements. 

In 2003 the Department estimated that 

the average annual cost of complying 

with the current Form LM–2 

recordkeeping and reporting 

requirements per respondent would be 

$24,271. The total annual cost for all 

respondents (based on the more recent 

estimate of 4,452 reporting labor 

organizations rather than the 5,038 

estimate used in 2003) is estimated to be 

$116.0 million for the current Form 

LM–2. 

e. Revised Form LM–2 

To estimate the burden hours and 

costs for the proposed revisions to Form 

LM–2, the Department, as it did in 

connection with the 2003 rule, divided 

the Form LM–2 filers into three groups 

or tiers, based on the amount of the 

labor organizations’ annual receipts. As 

discussed, the Department estimates 

that there are 4,452 such filers. In Tier 

I, the Department estimates there are 

1,317 labor organizations with annual 

receipts from $250,000 to $499,999.99. 

The Department assumes that labor 

organizations within this tier probably 

use some type of commercial off-theshelf accounting software program and 

will most likely use the ‘‘cut and paste’’

feature of the reporting software (see 

Table 3). In Tier II, the Department 


PWALKER on PROD1PC71 with PROPOSALS2
27364 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 

18The sum is divided for Tier II labor 

organizations because, as noted above, the 

Department estimated that one-half of these 

organizations already keep these records. 

estimates there are 3,083 labor 

organizations with annual receipts from 

$500,000 to $49.9 million. The 

Department assumes that labor 

organizations within this tier most 

likely use some type of commercial offthe-shelf accounting software program 

and will use all of the electronic filing 

features of the reporting software. Id. 

Finally, in Tier III, the Department 

estimates there are 52 labor 

organizations with annual receipts of 

$50.0 million or more. Id. The 

Department assumes that labor 

organizations within this tier most 

likely will use some type of specialized 

accounting software program and also 

will use all of the electronic filing 

features of the reporting software. 

For each of the three tiers, the 

Department estimated burden hours for 

the additional nonrecurring (first year) 

recordkeeping and reporting 

requirements, the additional recurring 

recordkeeping and reporting burden 

hours, and a three-year annual average 

for the additional nonrecurring and 

recurring burden hours associated with 

the proposed rule. 

The proposal will revise Form LM–2 

to improve financial disclosure and 

clarity within categories of receipts and 

disbursements. Under the proposal, 

receipts will have to be disclosed in the 

same manner that disbursements are 

currently disclosed and certain 

disbursements (e.g., benefit payments, 

travel reimbursements, and transactions 

involving investment and fixed assets) 

will have to be reported in greater 

detail. To accomplish this result, 

additional schedules will be required, 

which will add to the burden associated 

with each Form LM–2 filed. 

For this analysis the Department has 

used an approach that largely replicates 

the approach used in 2003, i.e., 

estimating the burden and costs by the 

size of labor organizations as measured 

by the amount of their annual receipts. 

However, the current approach differs 

somewhat from the 2003 approach. 

Since the basic information required on 

the new and revised schedules is 

already needed to complete the current 

Form LM–2, the Department assumes 

that most of the burden associated with 

the proposed changes will occur in the 

first year due to needed changes to the 

accounting software and staff training. 

Like it did in 2003, the Department has 

estimated burden hours and costs for 

the additional nonrecurring (first year) 

recordkeeping and reporting 

requirements, the additional recurring 

recordkeeping and reporting burden 

hours, and a three-year annual average 

for the additional nonrecurring and 

recurring burden hours. As in 2003, the 

Department assumes that Tier I and Tier 

II labor organizations use commercial 

off-the-self accounting packages and 

Tier III labor organizations use 

customized accounting software. 

For proposed revised Schedules 3 and 

4 (Sale of Investments and Fixed Assets 

and Purchase of Investments and Fixed 

Assets), the Department estimates that 

labor organizations shall spend, on 

average, an additional, nonrecurring 

10.38 hours per schedule to change their 

accounting structures; develop, test, 

review, and document accounting 

software queries; design query reports; 

and train accounting personnel. See 

Table 2 below. This estimated burden is 

derived from the 2003 Form LM–2 PRA 

estimate for the first year nonrecurring 

burden associated with Schedule 17 

(Contributions, Gifts, and Grants). The 

changes to that schedule under the 2003 

rule (the addition of date, name and 

address of payer or payee) are the same 

changes that are proposed for Schedules 

3 and 4 in this NPRM. In 2003, the 

Department determined that in order to 

provide this information it would take 

Tier I and II labor organizations 5.3 

hours to change their accounting 

systems and Tier III labor organizations 

13.3 hours. Again, as in 2003, the 

Department estimates that it will take 

Tier I, II and III labor organizations 1 

hour to design the report, 1 hour to 

develop a query, .75 hours to test the 

query, .5 hours for management review, 

.75 hours to document the query 

process, and .25 hours to train staff. The 

Department estimates that Tier II and III 

labor organizations will spend an 

additional hour preparing download 

methodology. The average burden was 

computed by taking the burden in each 

tier and weighting it by the number of 

unions in each tier. 

To record the date of the transaction 

and address of the payee on Schedule 4, 

the Department estimates, using a 

weighted average based on the number 

of labor organizations within each tier, 

that labor organizations will spend an 

additional (recurring) .03 hours of 

recordkeeping burden and .48 hours on 

reporting. To record the date of the 

transaction and address of the payer on 

Schedule 3, the Department estimates, 

using a weighted average based on the 

number of labor organizations within 

each tier, that labor organizations will 

spend an additional (recurring) .07 

hours of recordkeeping burden, and .49 

hours on reporting burden. Based on 

extensive public comment and analysis, 

the Department in 2003 made the 

following underlying assumptions in 

determining its final burden numbers. 

First, that it would take the average 

Form LM–2 filer approximately .05 

hours of additional recordkeeping time 

per receipt/disbursement to record the 

name and address of the payer/payee. 

Second, Tier I labor organizations 

would incur an additional 

recordkeeping burden from training (.25 

hours) and preparing the report (.33 

hours) to record the name and address 

of the payer/payee. Third, that 

approximately one-half of the Tier II 

labor organizations already kept these 

records, and all Tier III labor 

organizations kept these records. 

Therefore, all Tier I labor organizations 

would be subject to the additional 

recordkeeping burden, and one-half the 

Tier II labor organizations would be 

subject to the additional recordkeeping 

burden. The Department has adopted 

these underlying assumptions for its 

current analysis. 

The number of receipts and 

disbursements on Schedules 3 and 4 for 

2006 was compiled from the e.LORS 

database, which showed that Tier I labor 

organizations report, on average, less 

than 1 receipt in Schedule 3 and slightly 

more than 1 disbursement in Schedule 

4. Further, Tier II labor organizations 

report, on average, 1.5 receipts in 

Schedule 3 and less than 3.5 

disbursements in Schedule 4. Therefore, 

the additional recordkeeping burden for 

Tier I and Tier II filers is .06 hours and 

.13 hours respectively (average number 

of disbursements/receipts per tier on 

Schedules 3 and 4 times .05 hours; then 

divided by two for the Tier II 

estimate).18

Based on the same assumptions 

underlying the Department’s 2006 

estimates, the Department assumes that 

75% of Tier I filers will use the cut and 

paste method to enter their data on the 

Form LM–2 (.08 hour burden per 

schedule) and 25% will manually enter 

the data on the Form LM–2 (.016 hour 

burden per disbursement or receipt) and 

that all Tier II and III filers will import 

or attach their data to the Form LM–2 

for an additional reporting burden of .42 

hours per schedule. The average burden 

was computed by taking the burden in 

each tier and weighting it by the number 

of labor organizations in each tier. 

For proposed Schedules 11 (All 

Officers and Disbursements to Officers) 

and 12 (Disbursements to Employees), 

the Department estimates that labor 

organizations will spend, on average, 

10.38 hours to change their accounting 

structures; develop, test, review, and 

document accounting software queries; 

design query reports; and train 


PWALKER on PROD1PC71 with PROPOSALS2
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27365 

19The Department suspects that it will take 

significantly less time to make the changes listed 

above to column F (Disbursements for Official 

Business) on Schedules 11 and 12, which will now 

include indirect disbursements for temporary 

lodging or transportation while on official business 

for the labor organization. However, this 

information has never been reported by individuals 

and there is no data upon which to reliably estimate 

the number of disbursements. 

accounting personnel. As explained 

below, this estimated burden was 

reached by analyzing the 2003 burden 

estimates from the Form LM–2 final rule 

for Schedules 11 and 17 and applying 

that data to the Form LM–2 officer and 

employee entries on Form LM–2 reports 

filed with the Department in 2006. As 

in 2003, the Department assumes that 

the time required to add a column to 

one schedule is the same for any 

schedule. To download the relevant 

information from their records, 

programmers will only have to 

designate an appropriate location on 

their electronic filing system for 

collecting and reporting this 

information. Therefore, each labor 

organization would require, on average, 

approximately 5.2 hours to add the 

benefits column to Schedules 11 and 12 

(one-half the time required to add two 

columns to Schedules 3 and 4). The 

Department has applied the same 

nonrecurring burden to the 

Disbursements for Official Business 

revision as to the benefits revision, 5.2 

hours.19 The average burden was 

computed by taking the burden in each 

tier and weighting it by the number of 

labor organizations in each tier. 

As explained below, the Department 

estimates that, on average, labor 

organizations will take an additional 

(recurring) .19 hours of recordkeeping 

burden and .49 hours of reporting 

burden to enter the amount officers 

receive in benefits on Schedule 11 and 

track the indirect disbursements for 

temporary lodging or transportation. 

Again, these estimates are calculated 

using the recurring burden estimates 

from 2003 for Schedules 11 and 17. The 

average burden was computed by taking 

the burden in each tier and weighting it 

by the number of labor organizations in 

each tier. 

The proposed changes to Schedule 11 

involve individual columns, not entire 

schedules. Nevertheless, the Department 

has assumed that labor organizations 

will expend about the same amount of 

time keeping records and entering data 

required by the new proposed columns 

on Schedule 11 (using the same 

methodology, as discussed above, for 

Schedules 3 and 4). To report the 

additional information required by the 

proposed schedule, labor organizations 

will have to report the amount each of 

its officers receives in benefits from the 

labor organization. The labor 

organization must keep records of the 

benefits each officer receives, like an 

itemized schedule, then aggregate the 

payments and place the aggregate 

amount next to the officer’s name. 

Although the individual disbursements 

of $5,000 or more need not be entered 

on the Form LM–2, the labor 

organization must track all the 

disbursements for benefits so that a final 

lump sum total can be entered for each 

officer on Schedule 11. Currently, labor 

organizations are required to keep 

records of all benefits they provide to 

officers on the IRS Form 990. Therefore, 

there is no recurring recordkeeping 

burden associated with the new benefits 

column. However, there is a slight 

recurring reporting burden, on average, 

of .49 hours. The Department assumes 

that 75% of Tier I filers would use the 

cut and paste method to enter their data 

on the Form LM–2 (.08 hour burden per 

column entering data, .25 hours on 

training, .33 hours preparing the report), 

and 25% would manually enter the data 

on the Form LM–2 (.016 hour burden 

per officer, .25 hours on training, .33 

hours preparing the report). Tier II and 

III filers will import or attach their data 

to the Form LM–2 for an additional 

reporting burden of .42 hours. Further, 

there is no new recurring reporting 

burden for indirect disbursements for 

temporary lodging or transportation. 

This information is currently required to 

be reported in Schedules 15 through 20, 

as appropriate; thus, as only the location 

on the form is changed, there is no 

additional reporting burden. The only 

burden associated with this proposed 

change is estimated to be about the same 

amount of time required for a new 

itemized schedule (.19 hours). The 

average burden was computed by taking 

the burden in each tier and weighting it 

by the number of labor organizations in 

each tier. 

Compared to the proposed revised 

Schedule 11, the Department estimates 

that, on average, labor organizations will 

spend slightly more time on the 

proposed revised Schedule 12. Labor 

organizations, on average, will spend an 

additional (recurring) .75 hours of 

recordkeeping burden and .5 hours of 

reporting burden to track and enter the 

amount employees receive in benefits 

on Schedule 12 and track the indirect 

disbursements for temporary lodging or 

transportation. Unlike benefits to 

officers (which are reported on 

Schedule 11), labor organizations do not 

have to track benefits paid to employees 

for the IRS Form 990 unless those 

employees are ‘‘key employees.’’

Further, labor organizations have not 

had to track by individual employee the 

indirect disbursements to employees for 

lodging or travel under the current Form 

LM–2. 

There is no way to determine the 

amount or number of benefits or 

indirect disbursement for lodging or 

travel being paid to employees from the 

current Form LM–2. To estimate the 

additional burden associated with these 

tasks, the Department assumes that 

labor organizations will expend the 

same amount of time keeping records of 

benefits and indirect disbursements for 

lodging or travel for data entry on 

Schedule 12 as they do on Schedules 3 

and 4. The Department assumes that 

labor organizations already keep some 

records of benefits paid to employees 

and indirect disbursements for lodging 

and travel. However, it is unlikely that 

these benefits or disbursements appear 

next to the name of the person who 

received them. Therefore, like 

Schedules 3 and 4, the labor 

organizations will now have to track the 

name of the person to whom (or on 

whose behalf) the disbursement is 

made. Unlike Schedules 3 and 4, where 

the burden is based on the estimated 

number of disbursements, Schedule 12’s 

recordkeeping burden is based on the 

estimated number of employees. Tier I 

labor organizations will spend 

approximately 3 minutes (.05 hours) per 

employee keeping records of benefits 

paid to each employee and 3 minutes 

(.05 hours) per employee keeping 

records of indirect disbursements for 

lodging or travel made to employees. On 

average, Tier I labor organizations have 

9.67 employees listed on their Form 

LM–2. As on Schedule 3 and 4, the 

Department assumes that one half of the 

Tier II labor organizations will already 

keep data on benefits and indirect 

disbursements for lodging or travel 

made to employees, but the other one 

half will spend approximately 3 

minutes (.05 hours) per employee 

keeping records of benefits paid to each 

employee and 3 minutes (.05 hours) per 

employee keeping records of indirect 

disbursements for lodging or travel 

made to each employee. On average, 

Tier II labor organizations have 13.53 

employees listed on their Form LM–2. 

Finally, it is assumed that Tier III labor 

organizations already keep records of 

benefits and indirect disbursements for 

lodging or travel by employee. 

Therefore, labor organizations will 

spend an additional .75 hours keeping 

records of employee benefits and 

disbursements to employees for lodging 

or travel. Like Schedules 3 and 4, the 

Department assumes it will take Tier I 


PWALKER on PROD1PC71 with PROPOSALS2
27366 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 

20The Department estimates the total 

recordkeeping and reporting burden to average 

682.09 hours per response in the first-year and 

547.14 hours per response in the second- and thirdyears. The total first-year burden was computed by 

adding the current Form LM–2 total burden hours 

per respondent (536) to the revised Form LM–2 

first-year burden (146.09) from Table 5. The secondand third-year burden was computed by adding the 

current Form LM–2 total burden hours per 

respondent (536) to the revised Form LM–2 secondand third-year burden (11.14) from Table 5. 

labor organization .05 hours 

recordkeeping burden per employee to 

keep the new data. The Department, 

however, also assumes that one-half the 

Tier II labor organizations currently 

keep the records, and all the Tier III 

labor organizations keep the records. 

Additionally, the Department assumes 

that labor organizations will use the 

same method for reporting benefits as 

they use throughout the Form LM–2. 

Therefore, the Department estimates 

that labor organizations will spend an 

additional .50 hours per year reporting 

benefits on the Form LM–2. There is no 

additional reporting cost associated 

with the removal of the exemption for 

indirect disbursements to employees for 

lodging or travel. This information is 

now reported in Schedules 15 through 

20, as appropriate, so only the reporting 

location on the form is changed. The 

average burden was computed by taking 

the burden in each tier and weighting it 

by the number of labor organizations in 

each tier. 

For proposed Schedules 14 through 

22, the Department estimates that labor 

organizations will spend, on average, 

10.38 hours per schedule to change their 

accounting structures; develop, test, 

review, and document accounting 

software queries; design query reports; 

and train accounting personnel. This 

burden estimate is based largely on the 

2003 burden estimates for Schedule 14 

and the number of itemized receipts 

reported on Schedule 14 in 2006, 

approximately 6.4 per filer. It should be 

noted that the Department has used the 

number of itemized entries currently 

reported on Schedule 14 for estimating 

this burden because there is no way to 

determine the number of itemized 

receipts which will appear on the 

proposed Schedules 14 through 22 as 

they currently only report an aggregate 

number. However, since Schedule 14 is 

a ‘‘catch all’’ schedule (includes all 

other receipts which do not fit into the 

other specific receipt schedules), it is 

likely that the number of entries on 

proposed Schedules 14 through 22 will 

be significantly lower than the 

Department’s estimate. As in 2003, the 

Department estimates that it will take 

Tier I and Tier II labor organizations 5.3 

hours to change their accounting 

structures and 13.3 hours for Tier III 

labor organizations to change their 

accounting structures. Additionally, the 

Department estimates that each labor 

organization will spend approximately 

4.95 hours setting up the reporting 

system. The smallest Form LM–2 filers, 

Tier I, will spend approximately 4.25 

hours setting up their reporting 

schedules (1 hour to design report, 1 

hour to develop query, .75 hours to test 

query, .5 hours for management review, 

.75 hours for document query process, 

and .25 hours to train new staff). The 

Tier II and III labor organizations will 

spend an additional hour setting up 

their systems as their systems are more 

complicated and will require a greater 

number of entries. 

The Department also estimates that, 

on average, labor organizations will take 

an additional (recurring) .21 hours of 

recordkeeping burden and .47 hours of 

reporting burden to complete proposed 

Schedules 14 through 22. In 2003 the 

Department made the underlying 

assumption that labor organizations will 

spend 3 minutes (.05 hours) on 

recordkeeping per disbursement or 

receipt. Further, the Department 

assumed that all the largest labor 

organizations, Tier III, and 10% of the 

Tier II labor organizations will already 

keep this data. The Department has 

adopted the above underlying 

assumptions in its current analysis. In 

2006, Tier I filers had, on average, 1.3 

entries on other receipts and Tier II 

filers had, on average, 6.1 entries on 

other receipts. If it takes 3 minutes of 

recordkeeping per receipt or 

disbursement, then the average labor 

organization will spend .21 hours per 

schedule on recordkeeping each year. 

Further, as in 2003, the Department 

assumes that Tier I filers will spend .25 

hours on training, .33 hours preparing 

the report and 1 minute (.02 hours) to 

manually enter each disbursement or 

receipt on the report and Tier II and III 

filers will spend 25 minutes (.42 hours) 

per schedule to cut and paste or import 

their data onto the Form LM–2. 

Therefore, the Department estimates the 

reporting burden per schedule to be .47 

hours. The average burden was 

computed by taking the burden in each 

tier and weighting it by the number of 

labor organizations in each tier. 

Finally, the Department estimates that 

labor organizations will spend, on 

average, an additional, recurring 2.0 

hours reviewing the revised Form LM–

2 and instructions. In 2003, the 

Department estimated that, on average, 

labor organizations would spend 4.0 

hours reviewing the current Form LM–

2 and instructions. The Department has 

reduced the burden associated with 

reviewing the revised Form LM–2 and 

instructions because the proposed 

changes are significantly less extensive 

than the changes in 2003 and labor 

organizations are familiar with the kinds 

of changes being made to the proposed 

Form LM–2.20

Given the current widespread use of 

automated accounting packages and 

labor organizations’ experience with the 

electronic filing, the Department is not 

making the assumption (that was made 

in 2003) that over time the recurring 

burden would be reduced due to 

efficiency gains as the accounting staff 

became familiar with the software. 


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Rather, the Department assumes that the 

second- and third-year burden will be 

equal to the recurring first-year burden. 

To develop the cost estimates, the 

Department examined data from BLS 

and the e.LORS system. The Department 

examined salary data for the positions of 

president, secretary-treasurer, 

accountant, and bookkeeper-clerk. This 

review was conducted for labor 

organizations in all three tiers. Based on 

this review the Department has 

developed averages for these labor 

organization personnel in each tier. The 

annual salaries were divided by 2080 

hours to convert them to hourly rates. 

These figures are reported in Table 4 

immediately below. 

The weighted average salary rates 

were then multiplied by the estimated 

additional burden hours to arrive at the 

estimated additional cost burden 

displayed in Table 5 below. 

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The Department estimates the 

additional weighted average reporting 

and recordkeeping burden for the 

revised Form LM–2 to be 146.09 hours 

per respondent in the first year 

(including nonrecurring implementation 

costs) and 11.14 hours per respondent 

in the second and third years. See Table 

5 below. The Department estimates the 

total additional annual burden hours for 

respondents for the revised Form LM–

2 to be 650,407 hours in the first year 

and 49,599 hours in the second and 

third years. 

The Department estimates the 

additional weighted average annual cost 

for the revised Form LM–2 to be $4,310 

($29.50 (weighted average cost per hour) 

x 146.09 (additional hours to complete 

the proposed changes to Form LM–2 in 

first year) = $4,310) per respondent in 

the first year (including nonrecurring 

implementation costs) and $329 ($29.50 

(weighted average cost per hour) × 11.14 

(additional hours to complete the 

proposed changes to Form LM–2 in 

second and third year) = $329) per 

respondent in the second year and third 

year. The Department also estimates the 

total additional annual cost to 

respondents for the revised Form LM–

2 to be $19.19 million ($29.50×650,407 

(total hours to complete proposed 

changes to Form LM–2 in first year) = 

$19.19 million) in the first year and 

$1.46 million ($29.50×49,599 (total 

hours to complete proposed changes to 

Form LM–2 in second and third year) = 

$1.46 million) in the second and third 

years. 

The Department’s estimates of the 

additional burden and costs associated 

with the proposed revisions to the Form 

LM–2 are presented in Table 5. This 

table only presents the increases 

associated with the proposed changes to 

the form. Neither the burden or costs 

associated with the current Form LM–2 

nor the proposed revocation of the 

privilege of some labor organizations to 

file the Form LM–3 is included in these 

estimates. 

Appropriate information technology 

is used to reduce burden and improve 

efficiency and responsiveness. The 

current forms can be downloaded from 

the OLMS Web site. OLMS has also 

implemented a system to require Form 

LM–2 filers and permit Form LM–3 and 

Form LM–4 filers to submit forms 

electronically with digital signatures. 

Labor organizations are currently 

required to pay a minimal fee to obtain 

electronic signature capability for the 

two officers who sign the form. These 

digital signatures ensure the 

authenticity of the reports. Information 

about this system can be obtained on the 

OLMS Web site at http:// 

www.olms.dol.gov. 

The OLMS Online Public Disclosure 

Room is available for public use at 

http://www.unionreports.gov. The site 

contains a copy of each labor 

organization’s annual financial report 

for reporting year 2000 and thereafter as 

well as an indexed computer database 

on the information in each report that is 

searchable through the Internet. 

OLMS includes e.LORS information 

in its outreach program, including 

compliance assistance information on 

the OLMS website, individual guidance 

provided through responses to email, 

written, or telephone inquiries, and 

formal group sessions conducted for 

labor organization officials regarding 

compliance. 

2. Form LM–3 Revocation Procedures 

Burden Estimates 

The Department proposes to establish 

a procedure for revoking the simplified 

reports filing privilege, provided by 29 

CFR 403.4(a)(1), for labor organizations 

that are delinquent in their Form LM–

3 filing obligation, have failed to timely 

file an amended form after notification 

that the report is materially deficient, or 

those for which the Department 

otherwise finds that the purposes of 

section 208 of the LMRDA, 29 U.S.C. 

438, would be served by such 

revocation. The Department’s ultimate 

goal in revoking the filing privilege for 

such labor organizations is to promote 

greater financial transparency. As 

discussed above, the revised paperwork 

requirements are necessary to effectuate 

the purposes of the LMRDA by 

providing members of labor 

organizations with information about 

their labor organizations that will enable 

them to be responsible, informed, and 

effective participants in the governance 

of their labor organizations; discourage 

embezzlement and financial 

mismanagement; prevent the 

circumvention or evasion of the 

statutory reporting requirements; and 

strengthen the effective and efficient 

enforcement of the LMRDA by the 

Department. The manner in which the 

collected information will serve these 

purposes is discussed throughout the 

preamble to this proposed rule. 

As discussed in the preceding 

discussion about the Form LM–2, the 

Department estimates that Form LM–2 

filers will spend 463.08 hours (389.60 

(average recordkeeping hours to 

complete current Form LM–2) + 73.48 

(average recordkeeping hours to 

complete proposed changes to Form 

LM–2) = 463.08) fulfilling 

recordkeeping requirements and 219.01 

hours (146.40 (average reporting hours 

to complete current Form LM–2) + 72.61 

(average reporting hours to complete 

proposed changes to Form LM–2) = 

219.01) completing the proposed form 

in the first year. However, the 

Department assumes that labor 

organizations with total annual receipts 

under $250,000 will not devote as many 

hours nor incur as high a cost as labor 

organizations with greater annual 

receipts. As explained below, the 

Department has estimated that Form 

LM–3 filers who lose their filing 

privilege will expend 143.56 hours 

fulfilling the recordkeeping 

requirements of the Form LM–2 and 

67.89 hours completing the form itself, 

which corresponds to $3,359.92 in 

costs. 

In its PRA estimates for the 2003 final 

rule, the Department estimated that the 

average Form LM–2 filer in the first year 

of the final rule would expend 133.9 

hours on recurring recordkeeping 

functions related to Schedule 11 

(Officers) and an additional 69.3 hours 

on recurring recordkeeping burden 

hours related to Schedule 12 

(Employees). See Table 4 of the Form 

LM–2 final rule at 68 FR 58439. These 

203.2 hours (133.9 plus 69.3) represent 

the recurring recordkeeping hours that 

labor organization officers and 

employees spend tracking the functional 

reporting categories for their work (i.e., 

recordkeeping for Schedules 11 and 12 

on Form LM–2). These hours also 

represent over one half (56%) of the 

total estimated recurring recordkeeping 

burden hours for the average Form LM–

2 filer during the first year of the final 

rule. It bears repeating, however, that 

the total of 203.2 hours represents the 

burden for officers and employees of the 

average labor organization filing the 

Form LM–2, not the smallest labor 

organizations. 

In the 2003 rule, the Department 

estimated that officers and employees of 

the smallest Form LM–2 filers (Tier I 

filers) would spend only 30 minutes a 

month (rather than 60 minutes for larger 

labor organizations) during the year and 

an hour at the end of the year on 

recurring recordkeeping, corresponding 

to a total of seven hours per officer/ 

employee per year. Moreover, the 

Department estimated that Tier I labor 

organizations only have an average of 

eight officers and one employee. See 68 

FR 58436–37. The Department therefore 

estimated that these nine officers and 

employees would spend only 63 hours 

(nine officers/employees multiplied by 

seven burden hours) on recurring 

recordkeeping, rather than the average 

of 203 hours for all Form LM–2 filers. 

See 68 FR 58439. This 140 hour 

difference (203 minus 63) represents a 


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21 It should be noted that the increased cost to file 

the LM–2 ($1,955.92) is not the same as the cost 

associated with the increased burden hours to file 

the Form LM–2 instead of the Form LM–3 (95.45 

hours × the $15.89 average salary rate = $1516.68). 

As stated above, the Department assumes that the 

hourly cost for those Form LM–2 filers who have 

had their Form LM–3 privilege revoked to be the 

same as Tier I Form LM–2 filers or $15.89. 

Therefore, the additional cost to Form LM–2 filers 

who have had their Form LM–3 filing privilege 

revoked is based on the increased burden hours to 

file the Form LM–2 (95.45) and the additional 

hourly cost of $3.79 ($15.89 hourly cost to file Form 

LM–2¥$12.10 hourly cost to file Form LM–3 = 

$3.79). Thus, $3.79 (the additional hourly cost to 

complete the Form LM–2 rather than the Form LM–

3) × 116 (the original burden hours to complete the 

Form LM–3 that, under the proposal, would now 

be used to complete the Form LM–2) = $439.24 (the 

additional cost of completing the Form LM–2 rather 

than the Form LM–3). This sum ($439.24) added to 

$1,516.68 (which is the product of 95.45 (additional 

hours to complete the Form LM–2 rather than Form 

LM–3) and $15.89 (hourly cost to fill out the Form 

LM–2)) equals $1955.92 (the total additional cost of 

completing the Form LM–2 rather than the Form 

LM–3). 

69% difference in the overall average 

burden hours for all Tier I labor 

organization officers and employees on 

this aspect of the Form LM–2 rule. The 

Department has extrapolated from these 

2003 figures to determine estimates of 

the total burden and costs for Form LM–

3 filers that lose their simplified filing 

privilege and instead file a Form LM–2. 

As discussed below, the Department 

calculated an adjusted burden estimate 

for the average Form LM–2 filer, and 

then reduced this amount by 69%, to 

reflect the generally fewer assets, 

liabilities, and financial transactions of 

the ‘‘Tier I’’ labor organizations. 

In adjusting the overall burden of the 

average Form LM–2 filer, the 

Department eliminated those recurring 

and nonrecurring burden hours and 

costs (shown in Table 5) associated with 

electronic filing, because the proposed 

rule allows affected labor organizations 

the option of filing electronically or by 

paper. Form LM–3 filers currently have 

the option of filing the Form LM–3 

electronically. However, in the latest 

fiscal year for which data is available 

(2005) fewer than 20 did so. Given the 

very small number of Form LM–3 filers 

that voluntarily use the electronic filing 

system, the Department anticipates that 

none of the labor organizations that 

have their Form LM–3 filing privilege 

revoked will use electronic filing on 

their Form LM–2. Thus, for purposes of 

the proposed rule, the Department 

combined the remaining recurring and 

nonrecurring recordkeeping and 

reporting burden hours, because the 

typical Form LM–3 filer that must file 

a Form LM–2 will incur such burdens 

only once (i.e., the burden hours and 

costs will all be nonrecurring). The 

estimated totals for the average filer in 

these situations are 463.08 hours for 

recordkeeping and 219.01 hours for 

reporting. 

As mentioned, the Department 

reduced the combined Form LM–2 

recordkeeping and reporting burden 

estimates for the average Form LM–2 

filer (shown by Table 2) by 69%, 

concluding that affected labor 

organization will spend 211.45 hours 

completing Form LM–2 (143.55 burden 

hours for recordkeeping and 67.89 hours 

for reporting) for a total cost of 

$3,359.92 per respondent. To calculate 

the total cost, the Department has used 

the same weighted average salary rates 

for Tier I labor organizations ($15.89) 

used above in computing dollar costs. 

Form LM–3 filers spend an estimated 

64 hours fulfilling recordkeeping 

requirements and 52 hours completing 

the form (corresponding to a total cost 

of $1,404 per filer at $12.10 per hour). 

Therefore, the Department estimates 

that a Form LM–3 labor organization 

that loses its Form LM–3 filing privilege 

and files a Form LM–2 in its place will 

experience an increase of 79.55 hours 

(143.55¥64 = 79.55) for recordkeeping 

and 15.89 hours (67.89¥52 = 15.89 

hours) for reporting burdens associated 

with the Form LM–2, which translates 

to a total burden hour increase of 95.45 

hours and a cost increase of $1,955.92 

($3,359.92¥$1,404 = $1,955.92) per 

filer.21 The Department estimates that it 

will revoke the Form LM–3 filing 

privilege for an average of 96 filers 

during each of the first three years of the 

proposed rule. This will result in an 

increase of 7,637.37 recordkeeping 

burden hours (96 × 79.55) and 1,525.72 

reporting burden hours (96 × 15.89) per 

year. Thus, there is an estimated annual 

increase of 9,163.09 total burden hours 

and an estimated annual increase of 

$187,798.61 in costs. 

Finally, as discussed above in greater 

detail, this aspect of the proposed rule 

relies on appropriate information 

technology to reduce burden and 

improve efficiency and responsiveness. 

At the same time, the Department’s 

proposal has sought to minimize the 

burden on the reporting labor 

organization by permitting it to submit 

the report manually. Upon its receipt of 

manual reports, the Department will 

enter the information electronically so 

that members of labor organizations, the 

public, and the Department’s 

investigators will be able to access and 

fully search these reports through the 

OLMS Online Public Disclosure Room. 

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22This figure includes the burden estimates 

associated with the Department’s proposal to 

establish a reporting requirement concerning a labor 

organization’s section 3(1) trusts. See 73 FR 11754, 

March 4, 2008. 

3. Request for Public Comment 

Currently, the Department is soliciting 

comments concerning the information 

collection request (‘‘ICR’’) for the 

information collection requirements 

included in this proposed regulation at 

section 403.2, Annual financial report, 

of title 29, Code of Federal Regulations, 

which, when implemented, will revise 

the existing OMB control number 1215–

0188. A copy of this ICR, with 

applicable supporting documentation; 

including among other things a 

description of the likely respondents, 

proposed frequency of response, and 

estimated total burden may be obtained 

from the RegInfo.gov Web site at 

http://www.reginfo.gov/public/do/ 

PRAMain or by contacting Darrin King 

on 202–693–4129 (this is not a toll-free 

number)/e-mail: king.darrin@dol.gov. 

Please note that comments submitted in 

response to this notice will be made a 

matter of public record. 

The Department hereby announces 

that it has submitted a copy of the 

proposed regulation to the Office of 

Management and Budget (‘‘OMB’’) in 

accordance with 44 U.S.C. 3507(d) for 

review of its information collections. 

The Department and OMB are 

particularly interested in comments 

that: 

• Evaluate whether the proposed 

collection of information is necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

collection of information, including the 

validity of the methodology and 

assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., by permitting electronic submission 

of responses. 

Type of Review: Revision of a 

currently approved collection. 

Agency: Employment Standards 

Administration. 

Title: Labor Organization and 

Auxiliary Reports. 

OMB Number: 1215–0188. 

Affected Public: Private Sector: Notfor-profit institutions. 

Number of Annual Responses: 

34,054.22

Frequency of Response: Annual for 

most forms. 

Estimated Total Annual Burden 

Hours: 4,568,057. 

Estimated Total Annual Burden Cost: 

$111,071,724. 

Potential respondents are hereby duly 

notified that such persons are not 

required to respond to a collection of 

information or revision thereof unless 

approved by OMB under the PRA and 

it displays a currently valid OMB 

control number. See 35 U.S.C. 

3506(c)(1)(B)(iii)(V). In accordance with 

5 CFR 1320.11(k), the Department will 

publish a notice in the Federal Register 

informing the public of OMB’s decision 

with respect to the ICR submitted 

thereto under the PRA. 

4. Annualized Federal Costs 

The estimated annualized Federal 

cost of this rule is $231,924.52. This 

represents estimated operational 

expenses such as computer 

programming to amend the Form LM–2, 

and staff time to draft documents and 

review materials in cases where a labor 

organization’s privilege to file the Form 

LM–3 is revoked. 

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 proposed rule on children. 

The Department has determined that the 

proposed rule will have no effect on 

children. 

Executive Order 13175 (Consultation 

and Coordination With Indian Tribal 

Governments) 

The Department has reviewed this 

proposed rule in accordance with 

Executive Order 13175, and has 

determined that it does not have ‘‘tribal 

implications.’’ The proposed 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.’’

Executive Order 12630 (Governmental 

Actions and Interference With 

Constitutionally Protected Property 

Rights) 

This proposed 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. 

Executive Order 12988 (Civil Justice 

Reform) 

This proposed rule has been drafted 

and reviewed in accordance with 

Executive Order 12988, Civil Justice 

Reform, and will not unduly burden the 

federal court system. The proposed rule 

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. 

Environmental Impact Assessment 

The Department has reviewed the 

proposed 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 

proposed 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. 

Executive Order 13211 (Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use) 

This proposed 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 403 

Labor unions, Reporting and 

recordkeeping requirements. 

Text of Proposed Rule 

Accordingly, the Department 

proposes to amend part 403 of 29 CFR 

Chapter IV as set forth below: 

PART 403—LABOR ORGANIZATION 

ANNUAL FINANCIAL REPORTS 

1. The authority citation for part 403 

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. 4–2007, May 2, 2007, 

72 FR 26159. 


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2. Amend 29 CFR 403.4 by: 

a. Revising paragraph (a)(1) to read as 

set forth below. 

b. Redesignating paragraph (b) as 

paragraph (f). 

c. Adding new paragraphs (b), (c), (d), 

and (e) to read as set forth below. 

§ 403.4 Simplified annual reports for 

smaller labor organizations. 

(a)(1) If a labor organization, not in 

trusteeship, has gross annual receipts 

totaling less than $250,000 for its fiscal 

year, it may elect, subject to revocation 

of the privilege as provided in section 

208 of the LMRDA, to file the annual 

financial report called for in section 

201(b) of the LMRDA and § 403.3 on 

United States Department of Labor Form 

LM–3 entitled ‘‘Labor Organization 

Annual Report,’’ in accordance with the 

instructions accompanying such form 

and constituting a part thereof. 

* * * * * 

(b) The Secretary may revoke a labor 

organization’s privilege to file the Form 

LM–3 simplified annual report 

described in paragraph (a)(1) of this 

section and require the labor 

organization to file the Form LM–2 as 

provided in § 403.3, if the following 

conditions are met: 

(1) The Secretary has undertaken an 

investigation revealing: 

(i) The labor organization failed to file 

the Form LM–3 on or before the date it 

was due; or 

(ii) The labor organization filed the 

Form LM–3 with a material deficiency 

and failed to timely remedy this 

deficiency after notification by the 

Secretary that the report was deficient; 

or 

(iii) Other circumstances exist that 

warrant revocation of the labor 

organization’s privilege to file the Form 

LM–3. 

(2) The Secretary has provided notice 

to the labor organization of the proposed 

decision to revoke the filing privilege, 

the reason for such revocation, and an 

opportunity for the labor organization to 

submit in writing a position statement 

with relevant factual information and 

argument regarding: 

(i) The existence of the delinquency 

or the deficiency (including whether it 

is material) or other circumstances 

alleged in the notice; 

(ii) The reason for the delinquency or 

deficiency and whether it was caused by 

factors reasonably outside the control of 

the labor organization; and 

(iii) Any other factors that should be 

considered in mitigation of revoking the 

labor organization’s privilege to file the 

Form LM–3. 

(3) The Secretary (or his or her 

designee who will not have participated 

in the investigation), after review of all 

the information provided, shall issue a 

determination in writing to the labor 

organization, stating the reasons for the 

determination, and, as appropriate, 

informing the labor organization that it 

must file the Form LM–2 for such 

reporting periods as the Secretary finds 

appropriate. 

(c) A labor organization that receives 

a notice as set forth in paragraph (c)(2) 

of this section must submit its written 

statement of position and any 

supporting facts and argument (by mail, 

hand delivery, or by alternative means 

if specified in the notice) to the Office 

of Labor-Management Standards 

(OLMS) at the address provided in the 

notice within 30 days after the date of 

the letter proposing revocation. If the 

30th day falls on a Saturday, Sunday, or 

Federal holiday, the submission will be 

timely if received by OLMS on the first 

business day after the 30th day. Absent 

a timely submission to OLMS, the 

proposed revocation shall take effect 

automatically unless the Secretary in his 

or her discretion determines otherwise. 

(d) The Secretary shall make the 

determinations provided for in the 

foregoing paragraphs of this section. The 

determination shall be the Department’s 

final agency action on the revocation. 

(e) For purposes of this section, a 

deficiency is ‘‘material’’ if in the light of 

surrounding circumstances, the 

inclusion or correction of the item in the 

report is such that it is probable that the 

judgment of a reasonable person relying 

upon the report would have been 

changed or influenced. 

* * * * * 

Signed in Washington, DC, this 2nd day of 

May 2008. 

Victoria A. Lipnic, 

Assistant Secretary for Employment 

Standards. 

Don Todd, 

Deputy Assistant Secretary for LaborManagement Programs. 

Appendix 

Note: This appendix, which will not 

appear in the Code of Federal Regulations, 

contains the proposed revised Form LM–2, 

instructions and related charts. 

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27388 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.045</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27389 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.046</GPH>
27390 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.047</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27391 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.048</GPH>
27392 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.049</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27393 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.050</GPH>
27394 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.051</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27395 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.052</GPH>
27396 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.053</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27397 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.054</GPH>
27398 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.055</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27399 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.056</GPH>
27400 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.057</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27401 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.058</GPH>
27402 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.059</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27403 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.060</GPH>
27404 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.061</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27405 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.062</GPH>
27406 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.063</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27407 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.064</GPH>
27408 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.065</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27409 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.066</GPH>
27410 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.067</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27411 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.068</GPH>
27412 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.069</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27413 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.070</GPH>
27414 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.071</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27415 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.072</GPH>
27416 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.073</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27417 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.074</GPH>
27418 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.075</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27419 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.076</GPH>
27420 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.077</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27421 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.078</GPH>
27422 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.079</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27423 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.080</GPH>
27424 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.081</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27425 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.082</GPH>
27426 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.083</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27427 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.084</GPH>
27428 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.085</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27429 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.086</GPH>
27430 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.087</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27431 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.088</GPH>
27432 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.089</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27433 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.090</GPH>
27434 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.091</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27435 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.092</GPH>
27436 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.093</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27437 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.094</GPH>
27438 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.095</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27439 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.096</GPH>
27440 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.097</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27441 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.098</GPH>
27442 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.099</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27443 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.100</GPH>
27444 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.101</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27445 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.102</GPH>
27446 Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.103</GPH>
Federal Register / Vol. 73, No. 92 / Monday, May 12, 2008 / Proposed Rules 27447 

[FR Doc. E8–10151 Filed 5–9–08; 8:45 am] 

BILLING CODE 4510–86–C 


PWALKER on PROD1PC71 with PROPOSALS2EP12MY08.104</GPH>