18172 Federal Register / Vol. 74, No. 75 / Tuesday, April 21, 2009 / Proposed Rules 

retained without modification, 

amended, or rescinded. This Notice 

commences the Commission’s review of 

the Cooling-Off Rule. 

As part of its review, the Commission 

seeks comment on a number of general 

issues, including the continuing need 

for the Rule, its economic impact, and 

the effect of any technological, 

economic, or industry changes on the 

Rule. 

III. Issues for Comment 

The Commission requests written 

comment on any or all of the following 

questions. The Commission asks 

commenters to make their responses as 

specific as possible and to include both 

a reference to the question being 

answered and any references to 

empirical data or other evidence 

wherever available and appropriate. 

(1) Is there a continuing need for the 

Rule? Why or why not? 

(2) Are there practices addressed by 

the Rule for which regulation is no 

longer needed? If so, explain and 

provide supporting evidence. 

(3) What benefits has the Rule 

provided to consumers? What evidence 

supports the asserted benefits? 

(4) What modifications, if any, should 

be made to the Rule to increase its 

benefits to consumers? 

(a) What evidence supports the 

proposed modifications? 

(b) How would these modifications 

affect the costs and benefits of the Rule 

for consumers? 

(c) How would these modifications 

affect the costs and benefits of the Rule 

for businesses, and in particular for 

small businesses? 

(5) What impact has the Rule had on 

the flow of truthful information to 

consumers and on the flow of deceptive 

information to consumers? What 

evidence supports the impact that you 

have identified? 

(6) What significant costs has the Rule 

imposed on consumers? What evidence 

supports the asserted costs? 

(7) Should any modifications be made 

to the Rule to reduce the costs imposed 

on consumers? 

(a) What evidence supports the 

proposed modifications? 

(b) How would these modifications 

affect the costs and benefits of the Rule 

for consumers? 

(c) How would these modifications 

affect the costs and benefits of the Rule 

for businesses, and in particular for 

small businesses? 

(8) Is the cancellation notice language 

provided in the Rule easy for consumers 

to read and understand? Why or why 

not? Should the language be modified in 

any way to improve consumers’ 

understanding of their rights and 

obligations under the Rule? If so, how? 

(9) What benefits has the Rule 

provided to businesses, and in 

particular to small businesses? What 

evidence supports the asserted benefits? 

(10) Should any modifications be 

made to the Rule to increase its benefits 

to businesses, and in particular to small 

businesses? 

(a) What evidence supports your 

proposed modifications? 

(b) How would these modifications 

affect the costs and benefits of the Rule 

for consumers? 

(c) How would these modifications 

affect the costs and benefits of the Rule 

for businesses? 

(11) What significant costs, including 

costs of compliance, has the Rule 

imposed on businesses, and in 

particular on small businesses? What 

evidence supports the asserted costs? 

(12) Should any modifications be 

made to the Rule to reduce the costs 

imposed on businesses, and in 

particular on small businesses? 

(a) What evidence supports the 

proposed modifications? 

(b) How would these modifications 

affect the costs and benefits of the Rule 

for consumers? 

(c) How would these modifications 

affect the costs and benefits of the Rule 

for businesses? 

(13) What evidence is available 

concerning the degree of industry 

compliance with the Rule? 

(14) Should the Rule be modified to 

reflect any technological changes in 

communications methods or methods 

for buying and selling goods and 

services, including, for example, 

changes in the use of the Internet, 

electronic mail, or mobile 

communications? If so, how? What 

evidence supports the proposed 

modification? 

(15) Have there been any significant 

industry or economic changes since 

1995 that warrant modifying the types 

of sellers that are exempt from the Rule? 

(16) What potentially unfair or 

deceptive door-to-door sales practices, if 

any, are not covered by the Rule that 

should be? Provide evidence to support 

the assertion. 

(17) Does the Rule overlap or conflict 

with other federal, state, or local laws or 

regulations? If so, how? 

(a) What evidence supports the 

asserted conflicts? 

(b) With reference to the asserted 

conflicts, should the Rule be modified? 

If so, why, and how? If not, why not? 

(c) Is there evidence concerning 

whether the Rule has assisted in 

promoting national consistency with 

respect to the regulation of door-to-door 

sales? If so, please provide that 

evidence. 

(18) Have there been any significant 

changes since 1995 in U.S. consumer 

credit protection laws or other laws that 

warrant modification of the Rule? If so, 

explain and provide evidence to support 

the proposed modification. 

List of Subjects in 16 CFR Part 429 

Sales Made at Homes or at Certain 

Other Locations; Trade practices. 

Authority: Sections 1-23, FTC Act, 15 

U.S.C. 41-58. 

By direction of the Commission. 

Donald S. Clark, 

Secretary 

[FR Doc. E9–9135 Filed 4–20–09: 8:45 am] 

BILLING CODE 6750–01–S 

DEPARTMENT OF LABOR 

Office of Labor-Management 

Standards 

29 CFR Parts 403 and 408 

RIN 1215–AB62 

Labor Organization Annual Financial 

Reports 

AGENCY: Office of Labor-Management 

Standards, Employment Standards 

Administration, Department of Labor. 

ACTION: Notice of proposed rulemaking; 

request for comments. 

SUMMARY: This Notice of Proposed 

Rulemaking proposes to withdraw a rule 

published in the Federal Register on 

January 21, 2009, pertaining to the filing 

by labor organizations of the Form LM– 

2, an annual financial report required by 

the Labor-Management Reporting and 

Disclosure Act of 1959, as amended 

(LMRDA). On February 3, 2009, the 

Department’s Employment Standards 

Administration (ESA) Office of LaborManagement Standards (OLMS) 

published a request for comments about 

issues of law and policy raised by this 

rule (74 FR 5899), consistent with 

directions from the new Administration 

to review all regulations that had not yet 

become effective. On February 20, 2009, 

the Department of Labor postponed the 

effective date of this rule until April 21, 

2009, to allow additional time for the 

Department to review comments 

received pursuant to the earlier notice, 

which were due by March 5, 2009, and 

to permit labor unions to delay 

development and implementation of 

costly changes to their accounting and 

recordkeeping systems and procedures 

pending this review. A further extension 

of the rule’s effective date and an 


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extension of the rule’s applicability date 

were proposed on March 19, 2009, and 

the effective date is delayed until 

October 19, 2009 in a document 

published elsewhere in this issue of the 

Federal Register. Upon consideration of 

the comments received on questions of 

law and policy raised by the January 21 

rule, the Department proposes its 

withdrawal, because the rule was issued 

without an adequate review of the 

Department’s experience under the 

relatively recent revisions to Form LM– 

2 in 2003 and because the comments 

indicate that the Department may have 

underestimated the increased burden 

that would be placed on reporting labor 

organizations by the January 21 rule. 

Finally, the Department has concluded, 

based on the comments received, that 

the provisions related to the revocation 

of a small union’s authorization to file 

a simpler form because it has been 

delinquent or deficient in filing that 

form are not based upon realistic 

assessments of such a union’s ability to 

file the more complex form and are 

unlikely to achieve the intended goals of 

greater transparency and disclosure. 

DATES: Comments must be received on 

or before May 21, 2009. 

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. 

Delivery: Comments should be sent to: 

Denise M. Boucher, 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 delivered 

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 at http:// 

www.regulations.gov and during normal 

business hours at the above address. 

FOR FURTHER INFORMATION CONTACT: 

Denise M. Boucher, Director, Office of 

Policy, Reports and Disclosure, Office of 

Labor-Management Standards, 

Employment Standards Administration, 

U.S. Department of Labor, 200 

Constitution Avenue, NW., Room N– 

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

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

(800) 877–8339 (TTY/TDD). 

SUPPLEMENTARY INFORMATION: 

I. Statutory Authority 

This proposed rescission of the 

January 21, 2009 rule is issued pursuant 

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

438. Section 208 authorizes the 

Secretary of Labor to issue, amend, and 

rescind rules and regulations to 

implement the LMRDA’s reporting 

provisions. Section 208 also provides 

that the Secretary shall establish 

simplified reports for labor 

organizations or employers for whom 

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

detailed report would be unduly 

burdensome, and to revoke this 

authorization to file simplified reports 

for any labor organization or employer 

if the Secretary determines, after such 

investigation as she deems proper and 

due notice and opportunity for a 

hearing, that the purposes of section 208 

would be served by revocation. 

Secretary’s Order 01–2008, issued May 

30, 2008, and published in the Federal 

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

contains the delegation of authority and 

assignment of responsibility for the 

Secretary’s functions under the LMRDA 

to the Assistant Secretary for 

Employment Standards and permits redelegation of such authority. 

II. Background 

A. Introduction 

The proposal to rescind the January 

21, 2009 rule is part of the Department’s 

continuing effort to fairly effectuate the 

reporting requirements of the LMRDA. 

The LMRDA’s various reporting 

provisions are designed to empower 

labor organizations and their members 

by providing the means and information 

to ensure a proper accounting of labor 

organization funds. The Department 

believes that a fair and transparent 

government regulatory regime must 

consider and balance the interests of 

labor organizations, their members, and 

the public. Any change to a union’s 

recordkeeping, accounting, and 

reporting practices must be based on a 

demonstrated and significant need for 

additional information, consideration of 

the burden associated with such 

reporting, and any increased costs 

associated with reporting additional 

information. 

On January 21, 2009, OLMS 

published in the Federal Register (74 

FR 3677) a rule revising the Form LM– 

2 (used by the largest labor 

organizations to file their annual 

financial reports). The rule would 

require labor unions to report additional 

information on Schedules 3 (Sale of 

Investments and Fixed Assets), 4 

(Purchase of Investments and Fixed 

Assets), 11 (All Officers and 

Disbursements to Officers) and 12 

(Disbursement to Employees). The rule 

also would add itemization schedules 

corresponding to categories of receipts, 

and establish a procedure and standards 

by which the Secretary of Labor may 

revoke a particular labor organization’s 

authorization to file the simplified 

annual report, Form LM–3, where 

appropriate, after investigation, due 

notice, and opportunity for a hearing. 

The rule was scheduled to take effect on 

February 20, 2009, and apply to labor 

unions whose fiscal years began on or 

after July 1, 2009. 

Consistent with the memorandum of 

January 20, 2009, from the Assistant to 

the President and Chief of Staff, entitled 

‘‘Regulatory Review’’ and the 

memorandum of January 21, 2009, from 

the Director of the Office of 

Management and Budget (OMB), 

entitled ‘‘Implementation of 

Memorandum Concerning Regulatory 

Review,’’ on February 3, 2009, OLMS 

published a request for comments (74 

FR 5899) on a proposed 60-day 

extension of the effective date of the 

January 21 rule and requesting comment 

on legal and policy questions relating to 

the rule, including the merits of 

rescinding or retaining the rule. 

On February 20, 2009 (74 FR 7814), 

OLMS extended the effective date of the 

January 21 rule until April 21, 2009, to 

allow additional time for the 

Department to review questions of law 

and policy concerning the regulations, 

for the public to comment on the merits 

of the rule, and, meanwhile, to permit 

unions to delay costly development and 

implementation of any necessary new 

accounting and recordkeeping systems 

and procedures pending this further 

consideration. On March 19, 2009, 

OLMS published a proposed rule to 

further extend the effective date until 

October 19, 2009 and to extend the 

applicability date until January 1, 2010. 

The effective date is delayed until 

October 19, 2009 in a document 


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18174 Federal Register / Vol. 74, No. 75 / Tuesday, April 21, 2009 / Proposed Rules 

published elsewhere in this issue of the 

Federal Register. 

B. The LMRDA’s Reporting 

Requirements 

In enacting the LMRDA in 1959, a 

bipartisan Congress sought to protect 

the rights and interests of employees, 

labor organizations and the public 

generally as they relate to the activities 

of labor organizations, employers, labor 

relations consultants, and their officers, 

employees, and representatives. The 

LMRDA was the direct outgrowth of a 

congressional investigation conducted 

by the Select Committee on Improper 

Activities in the Labor or Management 

Field, commonly known as the 

McClellan Committee. The LMRDA 

addressed various ills through a set of 

integrated provisions aimed at labormanagement relations governance and 

management. These provisions include 

financial reporting and disclosure 

requirements for labor organizations, 

their officers and employees, employers, 

labor relations consultants, and surety 

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

The Department has developed 

several forms for implementing the 

LMRDA’s union financial reporting 

requirements. The annual reports 

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

U.S.C. 431(b) (Form LM–2, Form LM–3, 

and Form LM–4), contain information 

about a labor organization’s assets, 

liabilities, receipts, disbursements, 

loans to officers and employees and 

business enterprises, payments to each 

officer, and payments to each employee 

of the labor organization paid more than 

$10,000 during the fiscal year. The 

reporting detail required of labor 

organizations, as the Secretary has 

established by rule, varies depending on 

the amount of the labor organization’s 

annual receipts. 29 CFR 403.4. 

Forms LM–3 and LM–4 were 

developed by the Secretary to meet the 

LMRDA’s charge that she develop 

‘‘simplified reports for labor 

organizations and employers for whom 

[s]he finds by virtue of their size a 

detailed report would be unduly 

burdensome,’’ 29 U.S.C. 438. A labor 

organization not in trusteeship that has 

total annual receipts of less than 

$250,000 for its fiscal year may elect to 

file Form LM–3 instead of Form LM–2. 

See 29 CFR 403.4(a)(1). The Form LM– 

3 is a five-page document requiring 

labor organizations to provide 

particularized information by certain 

categories, but in less detail than Form 

LM–2. A labor organization not in 

trusteeship that has total annual receipts 

less than $10,000 for its fiscal year may 

elect to file Form LM–4 instead of Form 

LM–2 or Form LM–3. 29 CFR 

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

organization to report only the total 

aggregate amounts of its assets, 

liabilities, receipts, disbursements, and 

payments to officers and employees. 

In 2003, the Department enacted 

extensive changes to the Form LM–2, 

the largest regulatory change to that 

form in the history of the LMRDA 

(‘‘2003 rule,’’ 68 FR 58374 (Oct. 9, 

2003)). As a result of the changes, labor 

organizations with annual receipts of 

$250,000 or more are required to file a 

Form LM–2 report electronically and to 

itemize receipts and disbursements of 

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

reported elsewhere from, or 

disbursements to, a single entity that 

total $5,000 or more in the reporting 

year. Such disbursements are required 

to be reported in specific categories 

such as ‘‘Representational Activities,’’ 

and ‘‘Union Administration.’’ The 

changes eliminated a category entitled 

‘‘Other Disbursements’’ and, overall, 

sought much more detailed reporting. 

Labor organizations were permitted to 

report sensitive information for some 

categories that might harm legitimate 

union or privacy interests with other 

non-itemized receipts and 

disbursements, provided the labor 

organization indicated that it has done 

so and offered union members access to 

review the underlying data upon request 

pursuant to the statute (29 U.S.C. 436). 

The 2003 rule also included 

schedules for reporting information 

regarding delinquent accounts payable 

and receivable, and it required labor 

organizations to report investments with 

a book value of over $5,000 and exceed 

5% or more of the union’s investments. 

Another new schedule required labor 

organizations to report the number of 

members by category, and allowed each 

labor organization to define the 

categories used for reporting. Finally, 

the 2003 rule required reporting labor 

organizations to estimate the proportion 

of each officer’s and employee’s time 

spent in each of the functional 

categories on the Form LM–2 and report 

that percentage of gross salary in the 

relevant schedule. 

III. Proposal To Rescind 

For the reasons discussed below, the 

Department is proposing to rescind the 

January 21, 2009 rule (74 FR 3678). 

Rescission of the January 21 rule would 

not affect the filing of the Form LM–2 

as prescribed by the 2003 rule or the 

Form LM–3, thereby ensuring disclosure 

of financial information to union 

members and the public as required 

under the LMRDA. The Department 

invites comments on its proposal to 

rescind the January 21 rule. 

A. Proposal To Rescind the 2009 

Changes to Form LM–2 

1. Background 

The January 21, 2009 rule modified 

Form LM–2 by requiring labor 

organizations to disclose additional 

information about their financial 

activities to their members, this 

Department, and the public. On the 

revised form, labor organizations would 

provide additional information in 

Schedule 3 (‘‘Sale of Investments and 

Fixed Assets’’) and Schedule 4 

(‘‘Purchase of Investments and Fixed 

Assets’’), which the rule justified by 

stating that the changes would allow 

verification that these transactions were 

performed at arm’s length and without 

conflicts of interest. 74 FR at 3684–87. 

Schedules 11 and 12 were also revised 

to require reporting of the value of 

benefits paid to and on behalf of officers 

and employees. 74 FR at 3687–91. The 

preamble to the rule stated that this 

change would provide a more accurate 

picture of total compensation received 

by labor organization officers and 

employees. 74 FR at 3689. Labor 

organizations would report on 

Schedules 11 and 12 travel 

reimbursements indirectly paid on 

behalf of labor organization officers and 

employees. 74 FR at 3687–88. The Form 

LM–2 changes also included 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. 74 FR at 

3691–93. These new schedules would 

require the reporting of additional 

information, by receipt category, of 

aggregated receipts of $5,000 or more. 

Id. 

The preamble to the rule published on 

January 21, 2009, explained these 

changes to the Form LM–2 as an attempt 

to 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. 74 FR at 3680–81. The 

modifications were intended as 

enhancements designed to provide 

members of labor organizations with 

additional and more detailed 

information about the financial 

activities of their labor organization that 


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Federal Register / Vol. 74, No. 75 / Tuesday, April 21, 2009 / Proposed Rules 18175 

had not previously been available 

through the Form LM–2 reporting. Id. 

2. Reasons for Rescission of the Changes 

to Form LM–2 

Numerous labor organizations 

responded to the Department’s February 

3, 2009 notice proposing to delay the 

effective date of the January 21 rule and 

requesting comments on the merits of 

the rule, urging the Department to 

rescind the rule and claiming that the 

Department underestimated its costs. 

Several labor organizations identified 

what they viewed as two fundamental 

flaws with the 2009 regulations. First, 

they argued that the regulations had 

been promulgated without any 

meaningful review of the effect of the 

2003 rule, leaving unverified the 

assumptions underlying the 2003 

revision that union members would 

benefit from the itemization and other 

changes introduced in 2003. The 

commenters also noted that the 2009 

rule came only a few reporting cycles 

after the significant changes associated 

with the 2003 rule. Second, they argued 

that the Department’s burden estimates 

for the 2009 rule were based on 

estimates used in the 2003 rulemaking 

rather than the actual costs incurred by 

labor unions in reshaping their 

recordkeeping and accounting systems 

to comply with the changes associated 

with the 2003 rule. 

The Department’s revised Form 

LM–2 reporting and recordkeeping 

requirements were published in 2003, 

but labor organizations did not file 

initial reports under this revised system 

until 2005. The Department agrees with 

the commenters and now believes that 

it was a mistake to propose further 

changes to the Form LM–2 reporting 

requirements so soon after the 2003 

rule, without proper consideration of 

the effects of these changes, both in 

terms of benefits and costs. Without 

undertaking such review, the 

Department could not adequately weigh 

the competing interests of transparency 

and union autonomy. 

A federation of labor organizations 

and an international labor organization 

each stated that the Department had 

failed to demonstrate that the revised 

form would aid in the detection or 

prevention of corruption, noting its 

view that internal controls established 

by unions are the more effective 

approach. This commenter also asserted 

that the Department’s annual reports fail 

to demonstrate that enhanced reporting 

has assisted the Department’s 

compliance efforts. The Department 

acknowledges that the January 21 rule 

did not adequately consider the effects 

of the 2003 changes, particularly 

regarding the assumed potential benefits 

of the changes. Further, the Department 

agrees that additional review would be 

beneficial to determine how the 2003 

rule helped identify financial corruption 

before deciding that additional 

regulatory changes would facilitate this 

purpose. 

The Department also received 

comments from individuals and public 

policy groups that opposed the 

rescission of the rule, explaining their 

views that the regulations enhanced the 

transparency and accountability of labor 

unions. One of these groups urged the 

Department to discount any claims by 

labor unions that the regulations would 

entail substantial financial burden, 

stating that labor unions had 

consistently overstated costs associated 

with the Department’s 2003 revision to 

the Form LM–2. This policy group 

argued that the January 21 rule will 

provide increased financial disclosure 

that will benefit union members, and it 

provided cites to legislative history and 

recent examples of union financial 

wrongdoing to illustrate the necessity of 

more stringent reporting laws. This 

group went on to present what it 

thought was the key policy issue related 

to this rule: Whether the Department 

should have imposed even more 

stringent disclosure requirements for 

labor organizations, which would 

prevent, in its view, the concealment of 

expenditures made by union officials. It 

urged the Department to err on the side 

of increased disclosure, arguing, 

without further support, that the 

increased disclosure outweighed the 

burden. 

The Department agrees with the 

contention that financial transparency is 

necessary to protect against union fraud 

and corruption, enhance accountability 

among union officials, and that it is 

necessary for members to effectively 

engage in union self-governance. A 

review of the usefulness of the 

information that has been reported since 

the Form LM–2 was revised in 2003, as 

well as an examination of data regarding 

the burden placed on unions by that 

revision, will provide a better basis for 

determining whether additional changes 

are necessary in order to properly 

balance the need for transparency with 

the need to protect unions from 

excessive burdens imposed by reporting 

and disclosure requirements. 

A failure to consider the utility of 

increased reporting and its attendant 

burdens can result in a reporting regime 

not intended by the Congressional 

authors of the LMRDA. The Department 

is obliged to consider the intent of 

Congress to ‘‘strike a balance between 

too much and too little legislation in 

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

Jan. 20, 1959) (quoting Senator John F. 

Kennedy), reprinted in 2 NLRB Leg. 

Hist. of the LMRDA, at 969. A federation 

of labor unions pointed out that 

Congress expressed a preference that 

‘‘the major recommendations of the 

[McClellan] select committee [be 

implemented] within a general 

philosophy of legislative restraint.’’ S. 

Rep. No. 187 (1959), reprinted in 1 

NLRB Leg. Hist. of the LMRDA, at 403). 

Another federation of labor unions 

noted that the Department’s Form LM– 

2 rulemaking failed to take into account 

what it sees as an imperative underlying 

the LMRDA, i.e., that restraint and great 

care must be shown in regulating union 

internal affairs so as not to undermine 

union self government by the union’s 

members. A similar point was raised by 

another commenter, explaining that 

Congress expressed a preference to 

avoid impeding legitimate unionism, 

citing to remarks by Senator Frank 

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

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

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

by another commenter, citing to remarks 

by Senator John F. Kennedy, who 

observed that Congress intended ‘‘to 

permit responsible unionism to operate 

without being undermined by either 

racketeering tactics or bureaucratic 

controls.’’ 105 Cong. Rec. 816 (daily ed. 

Jan. 20, 1959), reprinted in 2 NLRB Leg. 

Hist. of the LMRDA, at 969). 

The Department now believes that the 

January 21 rule failed to appropriately 

consider the experience of reporting 

under the 2003 Form LM–2 rule, 

including the burden of the reporting 

requirements. Further consideration of 

that experience will enable the 

Department to determine whether the 

Form LM–2, as revised by the 2003 rule, 

reflects a proper balance of the need for 

transparency and union autonomy. For 

these reasons, the Department proposes 

rescission of the January 21 rule. 

B. Proposal To Rescind the Procedure 

To Revoke the Form LM–3 Filing 

Authorization 

1. Background 

The Department also proposes to 

rescind the part of the January 21 rule 

that established standards and 

procedures for revoking the simplified 

report filing authorization provided by 

29 CFR 403.4(a)(1) for those labor 

organizations that are delinquent in 

their Form LM–3 filing obligation, fail to 

cure a materially deficient Form LM–3 

report after notification by OLMS, or 

where other situations exist where 

revoking the Form LM–3 filing 


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authorization furthers the purposes of 

LMRDA section 208. 

Under the revocation procedure, 

when there appear to be grounds for 

revoking a labor organization’s 

authorization to file the Form LM–3, the 

Department could conduct an 

investigation to confirm the facts 

relating to the delinquency or other 

possible ground for revocation. If the 

Department after investigation found 

grounds for revocation, the Department 

could send the labor organization a 

notice of the proposed Form LM–3 

revocation stating the reason for the 

proposed revocation and explaining that 

revocation, if ordered, would require the 

labor organization to file the more 

detailed Form LM–2. The letter would 

provide notice that the labor 

organization has the right to a hearing 

if it chooses to challenge the proposed 

revocation, and that the hearing would 

be limited to written submissions due 

within 30 days of the date of the notice. 

In its written submission, the labor 

organization would be required to 

present relevant facts and arguments 

that address, in part, 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 any factors 

exist that mitigate against revocation. 

After review of the labor 

organization’s submission, the Secretary 

would issue a written determination, 

stating the reasons for the 

determination, and, as appropriate 

based on neutral criteria, inform the 

labor organization that it is required to 

file the Form LM–2 for such reporting 

periods as he or she finds appropriate. 

2. Reasons for Rescission of the 

Revocation Procedure 

After further review and 

consideration of the public comments 

received on this point, the Department 

believes that the January 21 rule 

establishing the revocation procedure 

and standards did not adequately assess 

the burden on the smaller labor 

organizations and the realistic 

likelihood that, in light of that burden, 

the rule will accomplish the intended 

results of increased transparency and 

more disclosure. Rather, the Department 

believes that there is no realistic 

likelihood that most small unions 

would have the information or means to 

file the more detailed Form LM–2. 

Further, as discussed above, the LMRDA 

requires a balancing of transparency and 

union autonomy. Therefore, the 

Department proposes to rescind the 

January 21 rule establishing the 

revocation procedure and standards. 

Section 208 mandates that the 

Secretary shall issue simplified reports 

for labor organizations for which she 

finds that ‘‘by virtue of their size a 

detailed report would be unduly 

burdensome,’’ but also permits the 

Secretary to revoke such filing 

authorization if ‘‘the purposes of this 

section would be served thereby.’’ 

Therefore, the ‘‘purposes’’ of section 208 

must include ensuring that a more 

detailed report for a smaller union 

would not be ‘‘unduly burdensome’’ by 

virtue of its size, as the Secretary is 

required to issue less detailed reports 

for smaller unions under these 

circumstances. The Department thus 

needed to create a balance between the 

need for financial transparency with the 

need to limit the burden and intrusion 

upon smaller labor organizations. 

The January 21 rule did not 

adequately address this balance, and it 

did not explain why a more detailed 

financial disclosure report for a smaller 

union would not be ‘‘unduly 

burdensome.’’ The rule calculated 

burden based on a projection that 96 

filers would be required to file the Form 

LM–2. This burden is necessarily 

understated. Form LM–3 filers, not 

merely those whose right to file a Form 

LM–3 is revoked, will be burdened to 

some extent. In order to file a Form LM– 

2, steps must be taken at the start of the 

fiscal year. Accounting systems and 

procedures must be in place that will 

track and maintain the data required by 

the Form LM–2. In this regard, the 

comments of an international union are 

instructive. It explained the difficulty it 

has experienced in converting the 

financial records of its affiliates to 

enable compliance with the Form LM– 

2 reporting requirements in 

circumstances involving trusteeship. 

(Under the labor organization reporting 

requirements an international union 

must file a Form LM–2 for any affiliate 

in trusteeship, regardless of its receipt 

size.) This commenter advised that the 

international’s auditors face an ‘‘almost 

impossible’’ task in retroactively 

converting financial records for use on 

Form LM–2 reporting. The difficulty for 

an LM–3 filer filing on its own behalf 

would be greater. 

Based on consideration of these 

comments, the Department now 

concludes that there is no realistic 

likelihood that most small unions 

would have the information or means to 

file the more detailed Form LM–2 and 

that the revocation procedures 

established by the January 21 rule will 

be unlikely to result in more disclosure. 

Moreover, the Department does not 

believe that it provided sufficient 

support in the final rule for the 

conclusion that revocation will reduce 

delinquency and deficiencies in 

reporting. Rather, the Department 

believes that its final rule was counterintuitive, because there is no 

justification in the rulemaking record 

that counters the logical conclusion that 

Form LM–3 filers required to file Form 

LM–2 reports pursuant to revocation 

may also fail to submit timely and 

accurate Form LM–2 reports. 

Several commenters voiced support 

for a compliance-based approach, 

including the Department’s use of 

international unions to aid in 

compliance, rather than what they 

viewed as a more punitive approach in 

the January 21 rule. One international 

union also commented that, in its 

experience, small local unions fail to 

file timely or complete Form LM–3 

reports because of inadequate staff to 

prepare the forms or the lack of finances 

to hire an accountant, which, the 

commenter noted, are in addition to the 

similar reasons offered by the 

Department in its NPRM. See 73 FR 

27354. Another commenter added to the 

rule’s list of reasons for delinquent and 

deficient filings the following: part-time 

officers, who are full-time employees 

outside of the union and lack 

accounting knowledge; few personnel 

and a lack of financial resources because 

of size; and simplified accounting 

systems. Given the above, the 

commenter asked how a typical Form 

LM–3 filer could be expected to file the 

more detailed and time-consuming 

Form LM–2, with aggregation, 

itemization, functional categorization, 

and a more complicated accounting 

system. The commenter added that 

Form LM–3 filers would not have 

enough time to change systems, and it 

believed it is not possible to recreate 

some of the records that would be 

necessary to accurately submit a Form 

LM–2 report. This filer concluded that 

the revocation procedure, which 

focused on isolated occurrences, was 

punitive and did not advance the 

interests of members or the LMRDA, 

and it advocated a compliance-based 

system that used international unions, 

as this process has worked in the past. 

The Department agrees with 

comments that advocated a compliance 

assistance approach, particularly one 

drawing upon the cooperative efforts of 

national and international unions, 

rather than a revocation procedure. For 

the reasons stated, a revocation 

procedure is not likely to improve 

delinquency and deficiencies in Form 

LM–3 reporting, and it could actually 

decrease these statistics since filers may 

have greater difficulty successfully 

meeting the Form LM–2 reporting 


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Federal Register / Vol. 74, No. 75 / Tuesday, April 21, 2009 / Proposed Rules 18177 

requirements. The Department instead 

believes that a compliance assistance 

approach is more likely to increase 

proper reporting than a revocation 

approach that is counter-intuitive and 

likely to damage compliance assistance 

efforts. 

One public policy organization 

commented that the effects of the 

revocation had been inflated by some 

commenters, and that until the 

Secretary is given the authority to issue 

civil monetary penalties to delinquent 

and deficient filers, the revocation 

procedure should serve as that penalty. 

The commenter went on to state that the 

approach seemed harmless and thus not 

problematic. The Department disagrees 

with this commenter. The purposes for 

which the Secretary may revoke an 

organization’s authorization to file a 

simpler form are the purposes of 

transparency and enhanced disclosure, 

not punishment. As shown above, those 

purposes are not served by imposing a 

requirement that there is no realistic 

expectation that most small labor 

organizations will be able to meet. 

Other commenters listed several 

possibly detrimental consequences of 

the revocation procedure, such as the 

diversion of union officials from 

grievance handling and other core 

business; the resignation of union 

officials; and the merger and imposition 

of trusteeships by international unions. 

The Department believes that the 

January 21 rule did not adequately 

address these comments, as it failed to 

appropriately balance the need for 

transparency with the need to limit 

burden and intrusion upon smaller 

unions. Further, the Department does 

not believe that it can justify revocation 

by merely lessening or playing down the 

acknowledged increased burden 

imposed by the Form LM–2 reporting 

requirements. As a matter of policy, the 

Department does not intend to 

encourage or discourage the 

participation of union members from 

running and serving in union office, nor 

does it otherwise desire to unnecessarily 

interfere in the internal affairs of 

unions. The Department intends to 

implement the LMRDA with as little 

interference as possible, with the 

overarching goal of empowering 

members to govern their unions 

democratically. Compliance assistance 

is a vital aspect of this approach, as are 

audit and enforcement options and both 

are better approaches than a revocation 

procedure that is viewed as punitive to 

Form LM–3 filers. 

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. 

Regulatory Flexibility Act 

The Regulatory Flexibility Act of 

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

agencies to prepare regulatory flexibility 

analyses, and to develop alternatives 

wherever possible, in drafting 

regulations that will have a significant 

impact on a substantial number of small 

entities. The Department does not 

believe that this proposed rule will have 

a significant economic impact on a 

substantial number of small entities, as 

the rule contains no collection of 

information and relieves the additional 

burden imposed upon labor 

organizations through the rescission of 

the regulations published on January 21, 

2009. Therefore, a regulatory flexibility 

analysis under the Regulatory 

Flexibility Act is not required. The 

Secretary has certified this conclusion 

to the Chief Counsel for Advocacy of the 

Small Business Administration. 

Unfunded Mandates Reform 

This proposed rule will not include 

any Federal mandate that may result in 

increased expenditures by State, local, 

and tribal governments, in the aggregate, 

of $100 million or more, or in increased 

expenditures by the private sector of 

$100 million or more. 

Paperwork Reduction Act 

This proposed rule contains no new 

information collection requirements for 

purposes of the Paperwork Reduction 

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

seq.). The January 21, 2009 rule would 

increase the burden of reporting under 

OMB No. 1215–0188, if the Department 

determines rescission is inappropriate 

and the January 21, 2009 rule become 

effective. Under the January 21, 2009 

rule the total burden hours per Form 

LM–2 respondent would be increased 

by approximately 60.06 hours, and the 

total burden hours will be increased by 

274,539. The average cost per Form 

LM–2 respondent would be increased 

by $1,939 and the total cost would be 

increased by $8,863,038. If this 

proposed rule is adopted these increases 

in reporting burden under OMB No. 

1215–0188 will not occur. The 

Department will seek OMB approval of 

any revisions of the existing information 

collection requirements, in accordance 

with the PRA. 

Small Business Regulatory Enforcement 

Fairness Act of 1996 

This proposed rule is not a major rule 

as defined by section 804 of the Small 

Business Regulatory Enforcement 

Fairness Act of 1996. This rule will not 

result in an annual effect on the 

economy of $100,000,000 or more; a 

major increase in costs or prices; or 

significant adverse effects on 

competition, employment, investment, 

productivity, innovation, or on the 

ability of the United States-based 

companies to compete with foreignbased companies in domestic and 

export markets. 

List of Subjects in 29 CFR Part 403 

Labor unions, Reporting and 

recordkeeping requirements. 

Text of Proposed Rule 

Accordingly, for the reasons stated 

herein, the Secretary proposes to 

withdraw the rule published on January 

21, 2009 (74 FR 3677) and retain the text 

of the regulations prior to that date. 

Signed in Washington, DC, this 16th day of 

April 2009. 

Shelby Hallmark, 

Acting Assistant Secretary for Employment 

Standards. 

Andrew D. Auerbach, 

Deputy Director, Office of Labor-Management 

Standards. 

[FR Doc. E9–9175 Filed 4–20–09; 8:45 am] 

BILLING CODE P 

ENVIRONMENTAL PROTECTION 

AGENCY 

40 CFR Part 52 

[EPA–R05–OAR–2007–1045; FRL–8893–9] 

Approval and Promulgation of Air 

Quality Implementation Plans; 

Minnesota 

AGENCY: Environmental Protection 

Agency (EPA). 

ACTION: Proposed rule. 

SUMMARY: EPA is proposing to approve 

a site-specific revision to the Minnesota 

sulfur dioxide (SO2) State 

Implementation Plan (SIP) for the 

Olmsted Waste to Energy Facility 

(OWEF), located in Rochester, Olmsted 

County, Minnesota. In its September 28, 

2007, submittal, the Minnesota 

Pollution Control Agency (MPCA) 

requested that EPA approve certain 

conditions contained in OWEF’s revised 

Federally enforceable Title V operating 

permit into the Minnesota SO2 SIP. The 

request is approvable because it satisfies 


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