51228 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Notices 

DEPARTMENT OF LABOR 

Office of Labor-Management 

Standards 

RIN 1215–AB52 

Union Officials: Guidelines for 

Fiduciary Responsibilities Under 

Section 501 of the Labor-Management 

Reporting and Disclosure Act, 29 

U.S.C. 501 

AGENCY: Office of Labor-Management 

Standards, Employment Standards 

Administration, United States 

Department of Labor. 

ACTION: Request for information from 

the public. 

SUMMARY: This notice is a request for 

information from the public to assist the 

Department of Labor (‘‘Department’’) in 

determining whether to issue guidelines 

concerning the fiduciary obligations of 

union officers, agents, shop stewards 

and other representatives under section 

501(a) of the Labor-Management 

Reporting and Disclosure Act 

(‘‘LMRDA’’), 29 U.S.C. 501. That section 

states, in general terms, that these 

persons occupy ‘‘positions of trust’’ 

within their labor organizations and 

must act in the best interests of their 

union. The LMRDA does not describe in 

detail the nature and scope of the 

fiduciary duties as applied to union 

officials. The Department also seeks 

comments on the nature and scope of 

such fiduciary obligations. 

The comments from interested 

parties, including unions, union 

members, union officers, agents, shop 

stewards, and other representatives, 

public interest groups, and the public 

will help determine whether the 

Department should issue specific 

guidelines describing the minimum 

standards officers, agents, shop 

stewards, and other union 

representatives must meet to fulfill their 

fiduciary responsibilities under section 

501 of the LMRDA. In addition, the 

comments should help delineate what 

issues concerning the fiduciary 

responsibilities of union officials should 

be addressed, if it is decided that the 

Department should issue such 

guidelines, and what specific standards 

should be included in the guidelines. 

These guidelines and standards could 

further the Department’s interest in 

ensuring that breaches of fiduciary 

obligations not be permitted to occur or 

remain undisclosed. 

DATES: Comments must be received on 

or before October 28, 2005. 

ADDRESSES: You may submit comments, 

identified by RIN 1215–AB52, by any of 

the following methods: E-mail: OLMSREG-1215-AB52@dol.gov. 

FAX: (202) 693–1340. To assure 

access to the FAX equipment, only 

comments of five or fewer pages will be 

accepted via FAX transmittal, unless 

arrangements are made prior to faxing, 

by calling the number below and 

scheduling a time for FAX receipt by the 

Office of Labor-Management Standards 

(‘‘OLMS’’). 

Mail: Mailed comments should be 

sent to Kay 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–5605, 

Washington, DC 20210. Because the 

Department continues to experience 

delays in U.S. mail delivery due to the 

ongoing concerns involving toxic 

contamination, commenters should take 

this into consideration when preparing 

to meet the deadline for submitting 

comments. 

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, Office of 

Labor-Management Standards, U.S. 

Department of Labor, 200 Constitution 

Avenue, NW., Room N–5605, 

Washington, DC 20210, olmspublic@dol.gov, (202) 693–1233 (this is 

not a toll-free number). Individuals with 

hearing impairments may call 1–800– 

877–8339 (TTY/TDD). 

SUPPLEMENTARY INFORMATION: 

I. Background 

A. Statutory, Regulatory and 

Administrative Framework 

Section 501 of the Labor-Management 

Reporting and Disclosure Act (LMRDA) 

imposes a fiduciary obligation on 

officers, agents, shop stewards, and 

other representatives of a labor 

organization. That section provides: 

The officers, agents, shop stewards, and 

other representatives of a labor organization 

occupy positions of trust in relation to such 

organization and its members as a group. It 

is, therefore, the duty of each such person, 

taking into account the special problems and 

functions of a labor organization, to hold its 

money and property solely for the benefit of 

the organization and its members and to 

manage, invest, and expend the same in 

accordance with its constitution and bylaws 

and any resolutions of the governing bodies 

adopted thereunder, to refrain from dealing 

with such organization as an adverse party or 

in behalf of an adverse party in any matter 

connected with his duties and from holding 

or acquiring any pecuniary or personal 

interest which conflicts with the interests of 

such organization, and to account to the 

organization for any profit received by him 

in whatever capacity in connection with 

transactions conducted by him or under his 

direction on behalf of the organization. A 

general exculpatory provision in the 

constitution and bylaws of such a labor 

organization or a general exculpatory 

resolution of a governing body purporting to 

relieve any such person of liability for breach 

of the duties declared in this section shall be 

void as against public policy. 

29 U.S.C. 501(a). The section, then, 

requires the union ‘‘officers, agents, 

shop stewards and other 

representatives’’ to do the following for 

their labor organization: 

(1) To hold its money and property solely 

for the benefit of the organization and its 

members; 

(2) To manage, invest, and expend [the 

union’s money and property] in accordance 

with its constitution and bylaws and any 

resolutions of the governing bodies adopted 

thereunder; 

(3) To refrain from dealing with such 

organization as an adverse party; 

(4) To refrain from dealing with such 

organization in behalf of an adverse party in 

any matter connected with his duties; 

(5) To refrain from holding or acquiring 

any pecuniary or personal interest which 

conflicts with the interests of such 

organization; and 

(6) To account to the organization for any 

profit received by him in whatever capacity 

in connection with transactions conducted 

by him or under his direction on behalf of 

the organization. 

In addition, the section specifically 

prohibits the labor organization from 

excusing its officers, agents, shop 

stewards and other representatives from 

these duties with any general 

exculpatory provisions or resolutions. 

While section 501 describes the 

fiduciary requirements in these general 

terms, it does not provide any specific 

guidance to union officers, agents, shop 

stewards, and other representatives or to 

union members concerning what 

specific actions or arrangements will be 

considered a violation of the fiduciary 

requirements established therein. 

Section 501(b) further describes the 

mechanism for enforcing the fiduciary 

responsibilities set out in section 501(a). 

The section states: 

When any officer, agent, shop steward, or 

representative of any labor organization is 

alleged to have violated the duties declared 

in subsection (a) of this section and the labor 

organization or its governing board or officers 

refuse or fail to sue or recover damages or 

secure an accounting or other appropriate 

relief within a reasonable time after being 

requested to do so by any member of the 

labor organization, such member may sue 

such officer, agent, shop steward, or 

representative in any district court of the 

United States or in any State court of 

competent jurisdiction to recover damages or 

secure an accounting or other appropriate 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Notices 51229 

relief for the benefit of the labor organization. 

No such proceeding shall be brought except 

upon leave of the court obtained upon 

verified application and for good cause 

shown, which application may be made ex 

parte. The trial judge may allot a reasonable 

part of the recovery in any action under this 

subsection to pay the fees of counsel 

prosecuting the suit at the instance of the 

member of the labor organization and to 

compensate such member for any expenses 

necessarily paid or incurred by him in 

connection with the litigation. 

29 U.S.C. 501(b). Several aspects of 

the enforcement procedures provided in 

this section should be noted. First, the 

section is enforced by a private right of 

action by the individual union member. 

Second, the member must first go to the 

union to ask the union to sue, recover 

damages or secure an accounting before 

bringing any action in court. Only after 

the union has refused or failed to take 

any remedial action may the member 

bring a lawsuit in court. Third, the 

member must show ‘‘good cause’’ to 

obtain ‘‘by leave of the court’’ the right 

to bring the legal action. Finally, the 

court may grant attorney’s fees and 

expenses to the member. 

The Secretary’s Interpretative 

Regulations at 29 CFR 401 et seq. do not 

contain any provision relating to 

Section 501. In addition, the 

Department of Labor’s Interpretative 

Manual stated until 2005 that ‘‘because 

the Secretary of Labor does not have 

authority to enforce Section 501(a) of 

the LMRDA, it is the policy of [the 

Office of Labor-Management Standards] 

to refrain from giving advisory opinions 

on the scope of the fiduciary obligations 

set forth in section 501(a) and the 

procedure for enforcement set forth in 

section 501(b).’’

While section 501 is enforced by a 

private right of action by the union 

member, the Secretary possesses the 

power to conduct investigations for any 

violation or potential violation of the 

LMRDA (with the exception of Title I), 

including breaches of fiduciary 

responsibilities in section 501. The 

Secretary may also make known her 

findings from any such investigation to 

‘‘interested persons or officials.’’ Section 

601 of the LMRDA provides that: 

The Secretary shall have power when he 

believes it necessary in order to determine 

whether any person has violated or is about 

to violate any provision of this Act (except 

title I or amendments made by this Act to 

other statutes) to make an investigation and 

in connection therewith he may enter such 

places and inspect such records and accounts 

and question such persons as he may deem 

necessary to enable him to determine the 

facts relative thereto. The Secretary may 

report to interested persons or officials 

concerning the facts required to be shown in 

any report required by this Act and 

concerning the reasons for failure or refusal 

to file such a report or any other matter 

which he deems to be appropriate as a result 

of such an investigation. 

29 U.S.C. 521(a). To date, the 

Department has not, as a matter of 

policy, addressed the question of what 

constitutes a breach of fiduciary duty 

under section 501. The Department has 

focused on investigations of 

embezzlement and theft made illegal 

under section 501(c) of the Act, and 

investigations of delinquencies of 

reports by union officers and employees 

required by section 202 of the Act, 

among other matters relating to the 

conduct of union officers and 

employees. 29 U.S.C. 432. However, as 

a result of further examination of the 

investigative powers given to the 

Secretary under section 601, the Office 

of Labor-Management Standards 

amended its Interpretative Manual to 

state in new entry 510.002 that the 

policy of the office was ‘‘to investigate, 

at its discretion, allegations of violations 

by union officers and other 

representatives of their fiduciary 

responsibilities under section 501(a) of 

the LMRDA.’’ In addition, the new 

policy indicated that ‘‘[t]he results of 

such investigations will be made known 

to interested persons as appropriate.’’

Section 501(c) establishes criminal 

penalties for the embezzlement of union 

assets. The section provides: 

Any person who embezzles, steals, or 

unlawfully and willfully abstracts or converts 

to his own use, or the use of another, any of 

the moneys, funds, securities, property, or 

other assets of a labor organization of which 

he is an officer, or by which he is employed, 

directly or indirectly, shall be fined not more 

than $10,000 or imprisoned for not more than 

five years, or both. 

29 U.S.C. 501(c). The Department of 

Labor will not address the provisions of 

section 501(c) through this particular 

request for information or any 

subsequent interpretative regulations or 

guidelines issued as a result of the 

information gathered here. Instead, any 

guidelines issued pursuant to this 

request for information will be the 

Department’s interpretation of what 

actions would constitute a failure to 

meet the fiduciary responsibilities of 

section 501. See, e.g., BLE International 

Reform Committee v. Sytsma, 802 F.2d 

180, 190 (6th Cir. 1986) (Although 

Secretary’s interpretative regulations are 

not binding, the courts have generally 

given the regulations considerable 

weight). 

B. Legislative History 

The Senate version of the LMRDA (S. 

1555) did not consider the fiduciary 

responsibilities of union officials in the 

same manner as the House version of 

the bill, which included a section 

identical to the current section 501(a). 

The Senate bill, S. 1555, provided only 

that union members could sue for 

recovery of funds when a union officer 

or employee had already been convicted 

of embezzlement, theft, or a conversion 

of funds. The bill did not apply the 

common law notion of a fiduciary 

relationship to the relationship between 

union officers and employees and the 

union. This omission was criticized in 

the minority views to Senate Report No. 

187. The minority, and in particular 

Senator Goldwater, stated: 

The committee bill professes to recognize 

the fiduciary nature of the union official’s 

relation to his union and its members, but 

makes no provision to establish such 

relationship, to impose the duties of a 

fiduciary on union officials, or to give union 

members any remedy for a breach of the 

fiduciary obligation. 

In virtually every State in the Nation, the 

officers and directors of corporations are 

made fiduciaries by statute and held to the 

strictest accountability in their handling of 

corporate funds and property. Moreover, any 

profit or gain which accrues to them by 

virtue of their official position, even if no 

damage to the corporation or stockholder 

results, is held in constructive trust for the 

benefit of the corporation and its 

stockholders. Under these statutes, 

stockholders are given the right to enforce the 

fiduciary obligation through a suit in the 

courts. The same obligations and remedies 

attach to the officers and directors of 

nonprofit and eleemosynary corporations—

churches, hospitals, charitable institutions, 

etc. Union officials alone seem to be free 

from what has become a normal, in fact a 

universal, obligation of officials similarly 

situated. * * * It is our intention to offer on 

the floor of the Senate amendments designed 

to fill this unjustifiable vacuum. 

S. Rep. No. 187, 86th Cong., 1st Sess., 

reprinted in 1959 U.S. Code Cong. and 

Admin. News 2318, 2376–77. 

As indicated above, the provisions 

that comprise the current 29 U.S.C. 501 

were contained in the House version of 

the LMRDA (H.R. 8342). House Report 

No. 741 described the reasons for the 

fiduciary responsibilities in section 501. 

The House Report stated: 

The committee bill also contains 

provisions dealing with breaches of trust and 

other questionable transactions, which, 

although not seriously criminal, nevertheless 

are incompatible with a strong and honestly 

run labor movement. 

For centuries the law of fiduciaries 

has forbidden any person in a position 

of trust subject to such law to hold 

interests or enter into transactions in 

which self-interest may conflict with 

complete loyalty to those whom he 

serves. Such a person may not deal with 

51230 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Notices 

himself, or acquire adverse interests, or 

make any personal profit as a result of 

his position. The same principle has 

long been applied to trustees, to agents, 

and to bank directors. It should be 

equally applicable to union officers and 

employees. The ethical practices code of 

the American Federation of Labor and 

Congress of Industrial Organization 

states: 

It is too plain for extended discussion that 

a basic ethical principle in the conduct of 

union affairs is that no responsible trade 

union official should have a personal 

financial interest which conflicts with the 

full performance of his fiduciary duties as a 

worker’s representative. 

Section 501 of the committee bill 

provides that the officers, agents, shop 

stewards, and other representatives of 

labor organizations occupy positions of 

trust in relation to such organization 

and its members as a group. 

H.R. Rep. No. 741, 86th Cong., 1st 

Sess., reprinted in 1959 U.S. Code Cong. 

and Admin. News 2424, 2433. 

The intent of the fiduciary 

responsibilities in section 501 was 

further explained in the Supplementary 

views to House Report No. 741. There, 

five members of the House stated: 

Union officials occupy positions of trust. 

They hold property of the union and manage 

its affairs on behalf of the members. It is the 

duty of union officers just as it is the duty 

of all similar trustees to put their obligations 

to the union and its members ahead of any 

personal interest. 

The committee bill sets forth this principle 

unequivocally and declares that union 

officers and agents occupy positions of trust 

in relationship to labor organizations and 

their members. * * * We affirm that the 

committee bill is broader and stronger than 

the provisions of S. 1555 which relate to 

fiduciary responsibilities. S. 1555 applied the 

fiduciary principle to union officials only in 

their handling of ‘‘money or other property’’

(see S. 1555, sec. 610), apparently leaving 

other questions to the common law of the 

several states. Although the common law 

covers the matter, we considered it important 

to write the fiduciary principle explicitly into 

Federal labor legislation. Accordingly the 

committee bill extends the fiduciary 

principle to all the activities of union 

officials and other union agents or 

representatives. 

H.R. Rep. No. 741, 86th Cong., 1st 

Sess., reprinted in 1959 U.S. Code Cong. 

and Admin. News 2424, 2479–80. 

The Conference Committee adopted 

the House version of section 501, which 

applied the broad legal concept of a 

fiduciary relationship to the 

relationship between union officers, 

agents, shop stewards, and other 

representatives of the union and its 

members, verbatim. 

Contemporary commentators 

suggested that the fiduciary 

responsibility sections had the potential 

to be among the most important 

provisions of the LMRDA. One wrote: 

The significance of these provisions 

transcends their literal commands. They 

represent the judgment of Congress, which 

almost certainly will never be reversed, as to 

the minimum ethical and legal standards by 

which the behavior of union leaders must be 

measured. 

Benjamin Aaron, The LaborManagement Reporting and Disclosure 

Act of 1959, 73 Harv. L. Rev. 851, 894 

(1960). 

Archibald Cox, who played a role in 

the development of this legislation as a 

Congressional staff member, expressed 

concern that the enforcement of the 

standards by individual members set 

out in section 501 might not be 

sufficient to assure that union officials 

would live up to their fiduciary 

responsibilities. Cox wrote: 

On the other hand, there is the danger, 

often expressed in the past, that individual 

employee’s suits are neither an effective 

sanction nor a practical remedy. Workers are 

unfamiliar with the law and hesitate to 

become involved in legal proceedings. The 

cost is likely to be heavy, and they have little 

money with which to post bonds, pay 

lawyer’s fees and print voluminous records. 

Time is always on the side of the defendant. 

Even if the suit is successful, there are 

relatively few situations in which the 

plaintiff or his attorney can reap financial 

advantage. Most men are reluctant to incur 

financial cost in order to vindicate intangible 

rights. Individual workers who sue union 

officers run enormous risks, for there are 

many ways, legal as well as illegal, by which 

entrenched officials can ‘‘take care of’’

recalcitrant members. 

Archibald Cox, Internal Affairs of 

Labor Unions Under the Labor Reform 

Act of 1959, 58 Mich. L. Rev. 819, 853 

(1960). 

C. The Nature of the Fiduciary 

Obligation 

Because the fiduciary responsibilities 

of union officials are enforced by a 

private right of action by individual 

union members, the courts have 

addressed the scope of the standards set 

out in section 501 on a case-by-case 

basis. Each case is decided on the 

particular facts of the alleged violation. 

As a result, the case law surrounding 

the fiduciary responsibilities of union 

officials under section 501 can be 

complex. Examination of the case law, 

however, reveals some general 

principles. 

Section 501 imposes the broadest 

possible fiduciary duty on union 

officials. See United States v. Bane, 583 

F.2d 832, 834–35 (6th Cir. 1978), cert. 

denied, 439 U.S. 1127 (1979); see also, 

Johnson v. Nelson, 325 F.2d 646 (8th 

Cir. 1963) (Section 501 should receive a 

broad interpretation). The purpose of 

the section is to deal with the misuse of 

union funds and union property in 

every manifestation by union officials. 

See Hood v. Journeymen Barbers, 

Hairdressers, Cosmetologists and 

Proprietors International Union 454 

F.2d 1347, 1354 (7th Cir. 1972). 

Therefore, the section can be applied 

not only to the monetary interests of the 

union and its members, but to any area 

of the union official’s authority. See 

Stelling et al. v. International 

Brotherhood of Electrical Workers, Local 

1547, 587 F.2d 1379, 1386–87 (9th Cir. 

1978), cert. denied, 442 U.S. 944 (1979); 

see also, United Food and Commercial 

Workers, Local 911 v. United Food and 

Commercial Workers International 

Union, 119 F. Supp. 2d 724, 734 (N.D. 

Ohio 2000) (loss of members’

democratic rights); Nelson v. Johnson, 

212 F. Supp. 233, 284–88 (D. Minn. 

1963), aff’d, 325 F.2d 646 (8th Cir. 1963) 

(examination of legislative history 

supports a broad interpretation of 

section 501). 

In general, union officials will not 

violate their statutory fiduciary duties 

under section 501 if they act: (1) With 

proper authorization from the union; (2) 

without any personal gain; and, (3) in 

accordance with the constitution and 

bylaws of the labor organization. See 

Tile, Marble, Terrazo Union Finishers, 

Shopworkers and Granite Cutters 

International Union v. Ceramic Tile 

Finishers Union, Local 25, 972 F.2d 738, 

744–45 (7th Cir. 1992). Congress did not 

intend authorization by the union to be 

a complete defense to claims under 

section 501. See Morrissey v. Curran, 

650 F.2d 1267, 1273–74 (2d Cir. 1981). 

While the courts will often defer to the 

actions of union officers, they will give 

no deference to an expenditure of union 

funds when it is unauthorized or, even 

if authorized, when it bestows a direct, 

personal benefit on the union officer. In 

either of these instances, the courts will 

determine whether the expenditure is so 

unreasonable as to constitute a breach of 

the statutory fiduciary duties under 

section 501. See, e.g., Talbot v. Robert 

Mathews Distributing Co., 961 F.2d 654, 

666 (7th Cir. 1992); Council 49, 

American Federation of State, County 

and Municipal Employees Union v. 

Reach, 843 F.2d 1343, 1347 (11th Cir. 

1988). Section 501 can be violated, for 

example, when union officials approve 

receipt of ‘‘excessive benefits, 

significantly above a fair range of 

reasonableness.’’ Morrissey v. Curran, 

650 F.2d at 1275. 

The courts have found a myriad of 

schemes and arrangements to have 

violated the statutory fiduciary duties 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Notices 51231 

under section 501. For example, a court 

found that a union officer’s alleged 

actions of taking money from employers 

and using the money to operate social 

organizations that helped the officer 

solidify his political control of the 

union would, if proven, violate the 

section’s requirement that union 

officials deal with employers at arm’s 

length. Chathas v. Local 134, 

International Brotherhood of Electrical 

Workers, 233 F.3d 508, 514 (7th Cir. 

2000). 

Procedurally, the actions brought by 

union members under section 501 are 

analogous to corporate shareholder 

suits. See Phillips v. Osborne, 403 F.2d 

826, 831 (9th Cir. 1968). The 

requirement under section 501(b) that a 

request to sue be made to the union 

before the member brings suit is 

designed to prevent the filing of 

harassing and vexatious suits that are 

without merit. See Sabolsky v. 

Budzanoski, 457 F.2d 1245, 1253 (3d 

Cir. 1972), cert. denied 409 U.S. 853 

(1972) (3d Cir. 1972). 

The Department seeks comment on 

whether officers, agents, shop stewards, 

and other representatives of a labor 

organization, as well as union members 

and the public, would benefit from 

additional, specific guidance, beyond 

that contained in the relevant court 

cases, concerning what actions or 

arrangements constitute violations of 

section 501(a), 29 U.S.C. 501(a). 

D. Interest of the Department of Labor 

While Congress chose to enforce the 

fiduciary responsibilities of union 

officers through private actions brought 

by individual union members, the 

Department of Labor maintains an 

interest and a role in assuring that union 

officers adhere to their fiduciary 

responsibilities. Several sections of the 

LMRDA indicate a nexus between the 

interests of the Department and the 

goals of section 501. 

Section 601 of the LMRDA provides 

that the Secretary shall have the power 

to undertake an investigation when she 

believes it necessary to determine 

whether any person has violated or is 

about to violate any provision of the 

LMRDA, including section 501(a). 29 

U.S.C. 521(a). Further, the Secretary 

may report to interested persons or 

officials any matter that she deems to be 

appropriate as a result of such an 

investigation. Id. These ‘‘interested 

persons and officials’’ may include: (1) 

The members of the specific union 

whose officers or employees were the 

subject of the investigation; (2) the 

specific union whose officers or 

employees were the subject of the 

investigation; (3) a court that is hearing 

a private lawsuit under section 501; (4) 

the Congress or appropriate 

Congressional Committees; and (5) the 

general public. Thus, the Congress 

specifically gave the Department the 

authority to investigate potential 

violations of section 501 and to publish 

the results of those investigations. More 

specific standards concerning what 

constitutes a violation of the fiduciary 

responsibilities in section 501 would be 

useful to Department investigators 

during such an investigation to 

determine whether a violation has 

occurred and whether a report should 

be made. 

Beyond this general authority to 

investigate, the failure of union officers 

to adhere to their statutory fiduciary 

duties could affect areas where the 

Department exercises enforcement 

authority. These areas include union 

elections, the imposition of trusteeships, 

deterrence and detection of 

embezzlement, and full financial 

disclosure by unions and union officers 

and employees. 

For example, union officers could 

improperly use union assets or 

employers’ monies to solidify their 

control of the union and to increase 

their chances at reelection. See, e.g., 

Chathas v. Local 134, International 

Brotherhood of Electrical Workers, 233 

F.3d 508 (7th Cir. 2000). The 

Department has an interest in this kind 

of breach of fiduciary duty because one 

of the purposes of the election 

provisions of the LMRDA is to offset the 

inherent advantage over potential rank 

and file challengers possessed by 

incumbent union leaders. International 

Organization of Masters, Mates & Pilots 

v. Brown, 498 U.S. 466, 478 (1991); 

Reich v. Local 396, International 

Brotherhood of Teamsters, 97 F.3d 

1269, 1273 (9th Cir. 1996). 

Two courts have held that a union 

official who takes actions or makes 

financial arrangements that improperly 

use pension or benefit funds violates 

section 501. See Morrissey v. Curran, 

650 F.2d at 1274 (section 501 applies to 

expenditures of pension fund); Hood v. 

Journeymen Barbers, Hairdressers, 

Cosmetologists and Proprietors 

International Union, 454 F.2d at 1355 

(failure of pension committee to observe 

requirements of pension agreement and 

maintain adequate reserves violated 

section 501); but see National Labor 

Relations Board v. Amax Coal Co., 453 

U.S. 322 (1981) (employer appointed 

trustee of a joint trust is not a 

representative of the employer, but 

instead owes an exclusive fiduciary 

duty to the trust fund participants and 

beneficiaries). 

In addition, the Department recently 

has been engaged in an ongoing process 

to improve the administration of the 

LMRDA. During this time, the 

Department has acted to update and 

improve reports that had remained 

unchanged for many years. Through 

these initiatives the Department is 

attempting to increase information 

available to union members and unions 

regarding their various rights and 

obligations under the LMRDA. The 

Department’s reforms advance the 

LMRDA’s stated purpose that ‘‘labor 

organizations, employers and their 

officials adhere to the highest standards 

of responsibility and ethical conduct in 

administering the affairs of their 

organizations.’’ 29 U.S.C. 401(a). 

For example, the new, more detailed 

reporting requirements with respect to 

the Form LM–2 reports work to increase 

transparency concerning union finances 

by providing more information to the 

union members in the union’s annual 

financial reports. Labor Organization 

Annual Financial Reports, 68 FR 58374 

(Oct. 9, 2003). Similarly, the Notice of 

Proposed Rulemaking to revise the Form 

LM–30, which discloses certain 

financial interests and transactions 

involving union officers and employees 

and their spouses and their minor 

children, is also aimed at improving 

disclosure to the rank-and-file union 

member (found in the proposed rules 

elsewhere in this issue). The goal of 

these initiatives is to make more 

detailed and transparent financial 

information available to union members 

and the public as the Congress intended 

with the passage of the LMRDA. 

This request for information is part of 

that effort. The request and any 

subsequent guidelines should help 

union officers and employees 

voluntarily comply with the statute. 

Like the previous initiatives, it is 

intended to increase the information 

available to union members as well as 

union officers, agents, stewards and 

other representatives. In this instance, it 

increases the information available to 

union officers and members regarding 

what actions or financial arrangements 

constitute a violation of the fiduciary 

standards in section 501. 

This increased information should 

help both union officers and union 

members. For example, well-intentioned 

union officers, agents, stewards and 

other representatives may find more 

specific guidelines concerning what 

actions or financial arrangements might 

constitute a violation of the fiduciary 

standards in section 501 to be helpful in 

shaping their own conduct on behalf of 

their members. This, in turn, may deter 

fraud and self-dealing by union officials. 

51232 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Notices 

In addition, members may come to 

possess a better sense of what actions or 

arrangements taken by their officers 

could be inappropriate. The members, 

then, could question or protest these 

questionable actions or arrangements at 

union meetings. As Archibald Cox 

noted at the outset of the LMRDA, union 

members may not be aware of such legal 

matters and may not pursue even valid 

claims under section 501. These 

members may need the assistance of 

more detailed guidelines in discerning 

what actions or arrangements constitute 

a violation of the fiduciary standards in 

section 501. However, even if the 

members do not pursue any claim under 

section 501, the more specific 

guidelines concerning what may 

constitute a violation of the fiduciary 

standards may enable the members to 

better monitor the financial affairs of 

their union and make more informed 

choices concerning the leaders of their 

union. 

II. Information Sought 

The Secretary seeks public comment 

concerning whether the Department 

should issue specific guidelines 

describing the minimum standards for 

union officers and employees to meet 

their fiduciary responsibilities under 

section 501 of the LMRDA. In addition, 

if the Department does decide to issue 

such guidelines, the Secretary seeks 

public comment regarding what issues 

concerning the fiduciary responsibilities 

of union officers and employees should 

be addressed in the guidelines and what 

specific standards should be included. 

In particular, the Secretary is seeking 

written submissions on the following 

topics: 

1—Should the Department issue 

guidelines defining the types of 

positions that are indicated by the 

phrase ‘‘officers, agents, shop stewards, 

and other representatives of a labor 

organization’’ found in section 501(a) of 

the Act? 

2—Should the guidelines include 

guidance about what specific actions an 

individual who is subject to section 

501(a) standards should consider taking 

in order to help the individual remain 

in compliance with the law? These 

actions might include seeking 

professional advice from independent 

authorities such as certified professional 

appraisers and actuaries or submitting 

resolutions for membership ratification. 

3—What actions or conduct, or types 

of action or conduct, should be included 

in the guidelines as violations of section 

501(a)? 

4—Should the guidelines indicate 

that it should be considered a breach of 

the responsibility of an individual 

fiduciary to fail to report the improper 

actions of another fiduciary? 

5—Should the guidelines include a 

definition of what a ‘‘reasonable amount 

of time’’ is when applied to the demand 

to sue provision in section 501(b)? 

6—What type of training and 

guidance do union officers and other 

union officials currently receive from 

their union or from other sources to 

help them carry out their duties in 

compliance with section 501(a)? 

7—Do unions have a Code of Ethics 

that outlines the fiduciary 

responsibilities of officers, agents, shop 

stewards and other representatives? 

8—If they do, are these Codes of 

Ethics distributed by the International 

or parent labor organization to all 

officers and employees at every level 

within the organization? 

9—Do unions have internal controls 

and procedures designed to prevent 

fraud, embezzlement, self-dealing, and 

other conflicts of interest that are 

followed by individuals who serve in a 

fiduciary capacity? If so, what are they? 

10—Do all unions issue an annual 

report? If so, do such annual reports 

contain an internal control report, that: 

(1) States the responsibility of union 

management for establishing and 

maintaining an adequate internal 

control structure and procedures for 

financial reporting; and (2) contains an 

assessment, as of the end of the issuer’s 

fiscal year, of the effectiveness of the 

internal control structure and 

procedures of the issuer for financial 

reporting? 

11—The Secretary also seeks 

comments on what specific 

arrangements or transactions by union 

officers and employees related to the 

following subject areas should be said to 

constitute a breach of fiduciary 

obligations: 

• Compensation plans of union 

officers or employees. 

• Payment of travel, entertainment, or 

like expenses. 

• Payment of political or election 

expenditures. 

• Failure to pay union taxes or other 

expenses. 

• Overpayment for contracts or 

expenses. 

• Purchase, sale, or lease of goods or 

property. 

• Creation or amendment of union 

administered pension funds systems. 

• Conflicts-of-interest for union 

attorneys. 

• Contacts with a rival union. 

• Votes for benefits for the officers, 

shop stewards and other 

representatives. 

• Failure to follow proper 

constitutional procedures in internal 

union affairs. 

Signed at Washington, DC, this 19th day of 

August, 2005. 

Victoria A. Lipnic, 

Assistant Secretary for Employment 

Standards. 

Don Todd, 

Deputy Assistant Secretary for LaborManagement Programs. 

[FR Doc. 05–16908 Filed 8–26–05; 8:45 am] 

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