51166 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

DEPARTMENT OF LABOR 

Office of Labor-Management 

Standards 

29 CFR Part 404 

RIN 1215–AB49 

Labor Organization Officer and 

Employee Reports 

AGENCY: Office of Labor-Management 

Standards, Employment Standards 

Administration, Department of Labor. 

ACTION: Notice of proposed rulemaking; 

request for comments. 

SUMMARY: The Employment Standards 

Administration (ESA) of the Department 

of Labor (Department) is proposing to 

revise the Form LM–30 and its 

instructions. The Form LM–30 

implements section 202 of the LaborManagement Reporting and Disclosure 

Act of 1959 (LMRDA or Act), 29 U.S.C. 

432, whose purpose is to require officers 

and employees of labor organizations to 

publicly disclose possible conflicts 

between their personal financial 

interests and their duty to the labor 

union and its members. The proposed 

rule would clarify the Form LM–30, and 

its instructions, by explaining key terms 

and providing examples of the financial 

matters that must be reported, eliminate 

exemptions in the current Form LM–30 

that permit filers to not report financial 

matters that would otherwise be 

required to be reported under the Act, 

and improve the usability of the reports 

by union members and the public. The 

Department invites general and specific 

comment on any aspect of the rule; it 

also invites comment on specific points, 

as noted throughout the text of this 

preamble. 

DATES: Comments must be received on 

or before October 28, 2005. 

ADDRESSES: You may submit comments, 

identified by RIN 1215–AB49, by any of 

the following methods: 

Federal eRulemaking Portal: http:// 

www.regulations.gov. 

E-mail: OLMS–REG–1215– 

AB49@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, you should take this into 

consideration when preparing to meet 

the deadline for submitting comments. 

OLMS recommends that you confirm 

receipt of your comment by contacting 

(202) 693–0123 (this is not a toll-free 

number). Individuals with hearing 

impairments may call (800) 877–8339 

(TTY/TDD). 

Comments will be available for public 

inspection during normal business 

hours at the above address. 

FOR FURTHER INFORMATION CONTACT: 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– 

5605, Washington, DC 20210, olmspublic@dol.gov, (202) 693–1233 (this is 

not a toll-free number), (800) 877–8339 

(TTY/TDD). 

SUPPLEMENTARY INFORMATION: 

I. Background 

The Form LM–30 is used by officers 

and employees of labor organizations 

subject to the Labor-Management 

Reporting and Disclosure Act of 1959 

(LMRDA or Act). The Act requires 

public disclosure of certain financial 

interests held, income received, and 

transactions engaged in by labor 

organization officers and employees and 

their spouses and minor children. 

Subject to certain exclusions, these 

interests, incomes, and transactions 

include: (1) Payments or benefits from, 

or interests in, an employer whose 

employees the filer’s union represents 

or is actively seeking to represent; (2) 

transactions involving interests in, or 

loans to or from, an employer whose 

employees the filer’s union represents 

or is actively seeking to represent; (3) 

interests in, income from, or 

transactions with a business a 

substantial part of which consists of 

dealing with an employer whose 

employees the filer’s union represents 

or is actively seeking to represent; (4) 

interests in, income from, or 

transactions with a business that deals 

with the filer’s union or a trust in which 

the filer’s union is interested; (5) 

transactions or arrangements with an 

employer whose employees the filer’s 

union represents or is actively seeking 

to represent; and (6) payments from an 

employer or labor relations consultant. 

The Form LM–30, which implements 

in part the financial disclosure 

provisions of Title II of the LMRDA, has 

remained essentially unchanged in the 

more than 40 years since 1963, when 

the Labor Department first approved the 

form LM–30. Over the past several 

years, the Department has engaged in a 

process to improve the administration of 

the LMRDA, including the design and 

usefulness of the financial reports 

required by the Act. In the course of this 

process, a number of problems were 

identified with Form LM–30. This 

proposed rule would address these 

problems by 

• Clarifying the instructions by 

explaining the key terms used in the Act 

and instructions, and by providing 

examples of the financial matters that 

must be reported under each subsection 

of the Act; 

• Eliminating exemptions that permit 

filers to not report financial matters that 

would otherwise be required to be 

reported under the Act, and which 

present the potential of conflicts of 

interests for union officers and 

employees; 

• Improving disclosure by creating a 

summary table on the front page of the 

report, supported by schedules, for 

disclosing (1) The filer’s interests, 

payments, loans, transactions or 

arrangements, (2) the other party to 

these financial practices, and (3) the 

dealings, if any, between the party and 

the filer’s labor organization or the 

employer whose employees the filer’s 

labor organization represents or actively 

seeks to represent. 

The Department invites comment on 

this proposed rule with respect to the 

benefits of these changes, the ease or 

difficulty with which labor organization 

officers and employees will be able to 

comply with these changes, and 

whether the changes will be meaningful, 

useful, and in accordance with the 

purposes of the LMRDA, which are to 

disclose to union members and the 

public information about certain 

financial interests of union officials. 

Interested parties and the public are 

invited to draw upon their experience 

with similar conflict and disclosure 

standards in other settings such as 

government employment, accounting, 

corporate governance, legal and judicial 

practice, medicine, and journalism. The 

Department invites general and specific 

comment on any aspect of the rule; it 

also invites comment on specific points, 

as noted throughout the text of this 

preamble. 

A. Financial Transparency 

This proposed rule seeks to revise the 

Form LM–30, the form used by labor 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51167 

organization officers and employees to 

file the annual financial reports required 

by section 202 of the LMRDA, 29 U.S.C. 

432. The rulemaking continues the 

Department’s efforts over the past four 

years to improve voluntary compliance 

with, and enforcement of, the LMRDA. 

In response to requests from union 

members, members of Congress, public 

interest groups, and others, the 

Department: 

• Launched a new disclosure web site 

(http://www.union-reports.dol.gov), 

where individuals may view union 

financial reports and conduct data 

searches; 

• Added reports filed by labor union 

officers and employees, employers, and 

labor relations consultants (Forms LM–

10, LM–20, LM–21, and LM–30) to the 

disclosure web site; 

• Modernized the annual financial 

disclosure report (Form LM–2) filed by 

the largest labor organizations (see 68 

FR 58374, Oct. 9, 2003); 

• Raised the filing threshold for Form 

LM–2, thereby increasing the number of 

labor organizations that may file a 

simplified version of the annual 

financial disclosure report; 

• Enhanced compliance assistance 

programs for filers; and 

• Increased the investigative 

resources of OLMS field offices to 

facilitate enforcement of the Act. 

The Secretary also created a new 

annual financial disclosure report (Form 

T–1) for use by the largest labor 

organizations to report on the financial 

operations of certain trusts in which 

they are interested (see 68 FR 58374, 

Oct. 9, 2003), but the requirement that 

union file this information report was 

vacated by the District of Columbia 

Circuit on appeal. See American 

Federation of Labor and Congress of 

Indus. Organizations v. Chao, 409 F. 3d 

377 (D.C. Cir. May 31, 2005), petition for 

rehearing and rehearing en banc filed 

July 15, 2005. The goal of these 

initiatives, like this proposal, has been 

to achieve more detailed and 

transparent reporting of the financial 

information that Congress, in enacting 

the LMRDA, intended to be made public 

for the benefit of union members and 

the public. Such transparency allows 

union members to obtain information 

needed by them to monitor their union’s 

affairs and to make informed choices 

about the leadership of their union and 

its direction. At the same time, this 

transparency promotes the unions’ own 

interests as democratic institutions and 

the interests of the public and the 

government. Financial transparency also 

deters fraud and self-dealing, and 

facilitates the discovery of such 

misconduct when it does occur. In these 

ways, the Department’s reforms advance 

the LMRDA’s declared purpose ‘‘that 

labor organizations, employers, and 

their officials adhere to the highest 

standards of responsibility and ethical 

conduct in administering the affairs of 

their organizations.’’ LMRDA § 2(a), 29 

U.S.C. 401(a). 

B. The History of the LMRDA 

In enacting the LMRDA in 1959, a 

bipartisan Congress expressed the 

conclusion 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.’’

LMRDA § 2(a), 29 U.S.C. 401(a). 

The legislation was the direct 

outgrowth of a Congressional 

investigation conducted by the Select 

Committee on Improper Activities in the 

Labor or Management Field, commonly 

known as the McClellan Committee, 

chaired by Senator John McClellan of 

Arkansas. In 1957, the committee began 

a highly publicized investigation of 

union racketeering and corruption; and 

its findings of financial abuse, 

mismanagement of union funds, and 

unethical conduct provided much of the 

impetus for enactment of the LMRDA’s 

remedial provisions. See generally 

Benjamin Aaron, The LaborManagement Reporting and Disclosure 

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

55 (1960). During the investigation, the 

committee uncovered a host of improper 

financial arrangements between officials 

of several international and local unions 

and employers (and labor consultants 

aligned with the employers) whose 

employees were represented by the 

unions in question or might be 

organized by them. Similar 

arrangements also were found to exist 

between union officials and the 

companies that handled matters relating 

to the administration of union benefit 

funds. See generally Interim Report of 

the Select Committee on Improper 

Activities in the Labor or Management 

Field, S. Report No. 85–1417 (1957) 

(‘‘Interim Report of the McClellan 

Committee’’). For examples of some of 

the improper arrangements directly or 

indirectly involving officials of these 

unions, see pp. 42–86, 122–30, 150–57, 

222–55, 376–420, 441–50. See also 

Robert F. Kennedy, The Enemy Within 

(1960) (discussing the committee’s 

investigation). 

The statute was designed to remedy 

these various ills through a set of 

integrated provisions aimed at union 

governance and management. These 

include a ‘‘bill of rights’’ for union 

members, which provides for equal 

voting rights, freedom of speech and 

assembly, and other basic safeguards for 

union democracy, see LMRDA §§ 101–

105, 29 U.S.C. 411–415; financial 

reporting and disclosure requirements 

for unions, union officers and 

employees, employers, labor relations 

consultants, and surety companies, see 

LMRDA §§ 201–206, 211, 29 U.S.C. 

431–436, 441; detailed procedural, 

substantive, and reporting requirements 

relating to union trusteeships, see 

LMRDA §§ 301–306, 29 U.S.C. 461–466; 

detailed procedural requirements for the 

conduct of elections of union officers, 

see LMRDA §§ 401–403, 29 U.S.C. 481–

483; safeguards for unions, including 

bonding requirements, the 

establishment of fiduciary 

responsibilities for union officials and 

other representatives, criminal penalties 

for embezzlement from a union, loans 

by a union to officers or employees, 

employment by a union of certain 

convicted felons, and payments to 

employees for prohibited purposes by 

an employer or labor relations 

consultant, see LMRDA §§ 501–505, 29 

U.S.C. 501–505; and prohibitions 

against extortionate picketing and 

retaliation for exercising protected 

rights, see LMRDA §§ 601–611, 29 

U.S.C. 521–531. 

The reporting requirement for officers 

and employees operates in tandem with 

the Act’s establishment of a fiduciary 

duty for union officials and 

representatives. 29 U.S.C. 501. Congress 

addressed conflicts of interest in both 

section 202 and section 501(a) of the 

Act. 29 U.S.C. 432, 501(a). The latter 

provides in part: 

The officers, agents, shop stewards, and 

other representatives of a labor organization 

occupy positions of trust in relation to such 

organization and its members as a group. It 

is, therefore, the duty of each such person, 

taking into account the special problems and 

functions of a labor organization, to hold its 

money and property solely for the benefit of 

the organization and its members and to 

manage, invest, and expend the same in 

accordance with its constitution and bylaws 

and any resolutions of the governing bodies 

adopted thereunder, to refrain from dealing 

with such organization as an adverse party or 

in behalf of an adverse party in any matter 

connected with his duties and from holding 

or acquiring any pecuniary or personal 

interest which conflicts with the interests of 

such organization, and to account to the 

51168 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

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. 

29 U.S.C. 501(a). Both provisions 

address the potential and actual conflict 

between a union representative’s 

personal interests and his or her duty to 

the union and its members. See 

Theodore Clark, Jr., The Fiduciary 

Duties of Union Officials under Section 

501 of the LMRDA, 52 Minn. L. Rev. 

437, 458–60 (1962). 

The need for the officer and employee 

disclosure provisions was not seriously 

debated during the consideration of the 

LMRDA legislation. The McClellan 

Committee hearings disclosed a history 

of self-dealing by certain union officials, 

often at the expense of their union’s 

membership. Then Senator John F. 

Kennedy was the chief sponsor of the 

Senate bill, S. 505, which served as the 

foundation for the LMRDA. In 

introducing the bill for the Senate’s 

consideration, Senator Kennedy 

addressed concerns about the 

involvement of union officials in 

matters that blurred their personal 

interests and their union’s interests, 

which would be remedied by the 

legislation. Senator Kennedy used the 

experience of the Teamsters union, as 

revealed by the investigation of the 

McClellan Committee, to underscore the 

purposes to be achieved by the Act: 

First. It will no longer be possible for the 

dues of Teamster members to be paid out to 

hoodlums posing as business agents, or be 

invested in improper or risky racetrack or 

real estate deals, or to be used by [the 

union’s] officers to build their own personal 

financial empires without the knowledge of 

the members themselves—or without 

investigation by the press and public 

authorities. 

Second. [A union official] would be 

required to disclose all his business dealings 

with insurance agents handling the union’s 

welfare funds, his private arrangements with 

employers, his hidden partnerships in 

business ventures foisted upon his members, 

and all other possible conflicts of interest. 

* * * * * * * 

Sixth. [Union officials] will find future 

collusion with employers vastly restricted—

with no more loans from employer groups, 

no more attacks on rival unions through 

middlemen * * *, and no more secrecy 

shrouding the use of union funds to bail out 

a collaborating employer. 

105 Cong. Rec. S817 (daily ed. Jan. 20, 

1959), reprinted in 2 NLRB Legislative 

History of the Labor-Management 

Reporting and Disclosure Act of 1959 

(‘‘Leg. History’’), at 969. The improper 

dealings by the Teamster officials, to 

which Senator Kennedy refers, are 

detailed in the Interim Report of the 

McClellan Committee, at, e.g., 48, 59–

60, 64–86, 222–54, 443–50. These 

dealings, like those identified by 

officials of other unions in the Interim 

Report, included actions undertaken by 

national officers, or others acting at their 

behest, involving matters affecting not 

only the national union’s operation but 

also matters of importance to local and 

intermediate bodies of their union. See 

e.g., Interim Report, at 4–7, 46–49, 51, 

55, 59–60, 63, 69, 74, 81, 87, 122–25, 

128, 130, 179, 186–87, 224, 228, 230–40, 

244, 250, 252, 284–85, 295, 297, 300, 

444–48, 264–66, 268, 281. See also The 

Enemy Within, at 97, 99, 104–05, 106, 

221–24. 

The Senate Committee Report 

provided an overview of section 202 of 

the LMRDA: 

[This section] requires a union officer or 

employee to disclose any securities or other 

interest which he has in a business whose 

employees his labor union represents or 

‘‘seeks to represent’’ in collective bargaining. 

When a prominent union official has an 

interest in the business with which the union 

is bargaining, he sits on both sides of the 

table. He is under temptation to negotiate a 

soft contract or to refrain from enforcing 

working rules so as to increase the company’s 

profits. This is unfair to both union members 

and competing businesses. 

S. Rep. No. 187 (‘‘Senate Report’’) 

(1959), at 15, reprinted in 2 Leg. History, 

at 411. As explained in the Senate 

Report: ‘‘The hearings before the 

McClellan committee brought to light a 

number of instances in which union 

officials gained personal profit from a 

business which dealt with the very same 

employer with whom they engaged in 

collective bargaining on behalf of the 

union.’’ Id. The committee endorsed the 

concern expressed in the AFL–CIO’s 

ethical practices code that the union 

official ‘‘may be given special favors or 

contracts by the employer in return for 

less than a discharge of his obligations 

as a trade-union leader.’’ Id. 

In explaining the purpose of the 

disclosure rules for union officers and 

employees, the Senate Report presented 

‘‘three reasons for relying upon the 

milder sanction of reporting and 

disclosure [relative to establishing 

criminal penalties] to eliminate 

improper conflicts of interest,’’ which 

can be summarized as follows: 

• Disclosure discourages questionable 

practices. ‘‘The searchlight of publicity 

is a strong deterrent.’’ Disclosure rules 

should be tried before more severe 

methods are employed. 

• Disclosure aids union governance. 

Reporting and publication will enable 

unions ‘‘to better regulate their own 

affairs. The members may vote out of 

office any individual whose personal 

financial interests conflict with his 

duties to members,’’ and reporting and 

disclosure would facilitate legal action 

by members against ‘‘officers who 

violate their duty of loyalty to the 

members.’’

• Disclosure creates a record. The 

reports will furnish a ‘‘sound factual 

basis for further action in the event that 

other legislation is required.’’

Senate Report, at 16, reprinted in 1 

Leg. History, at 412. The Report further 

stated: 

The committee bill attacks the problem [of 

conflicts of interest] by requiring union 

officers and employees to file reports with 

the Secretary of Labor disclosing to union 

members and the general public any 

investments or transactions in which their 

personal financial interests may conflict with 

their duties to the members. The bill requires 

only the disclosure of conflicts of interest as 

defined therein. The other investments of 

union officials and their sources of income 

are not matters of public concern. No union 

officer or employee is obliged to file a report 

unless he holds a questionable interest in or 

has engaged in a questionable transaction. 

The bill is drawn broadly enough, however, 

to require disclosure of any personal gain 

which an officer or employee may be 

securing at the expense of the union 

members. 

Senate Report, at 14–15, reprinted in 

1 Leg. History, at 410–11. The House 

Committee Report (‘‘House Report’’), 

H.R. Rep. No. 741 (1959), at 11, 

reprinted in 1 Leg. History, at 769, 

conveyed the same message. Both the 

Senate and House Reports recognize 

that a reportable interest is not 

necessarily an illegal practice. As the 

House Report stated: 

In some instances matters to be reported 

are not illegal and may not be improper but 

may serve to disclose conflicts of interest. 

Even in such instances, disclosure will 

enable the persons whose rights are affected, 

the public, and the Government, to determine 

whether the arrangements or activities are 

justifiable, ethical, and legal. 

House Report, at 4, reprinted in 1 Leg. 

History, at 762. See Senate Report, at 38, 

reprinted in 1 Leg. History, at 434 (‘‘By 

requiring reports * * *, the committee 

is not to be construed as necessarily 

condemning the matters to be reported 

if they are not specifically declared to be 

improper or made illegal under other 

provisions of the bill or other laws.’’). 

‘‘Reports are required as to matters 

which should be public knowledge so 

that their propriety can be explored in 

the light of known facts and 

conditions.’’ Id. As stated by Senator 

Barry Goldwater after the Act had been 

passed: 

Briefly, what must be reported are holdings 

of interest in or the receipt of economic 

benefits from employers who deal or might 

deal with such union official’s union, or 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51169 

holdings in or benefits from enterprises 

which do business with such union official’s 

union. 

105 Cong. Rec. A8512 (daily ed. Oct. 

2, 1959), reprinted in 2 Leg. History, at 

1846. 

Conflict of interest standards, 

including disclosure obligations of 

individuals and entities occupying 

positions of trust, are well grounded in 

U.S. law. As stated in the House Report, 

repeating almost verbatim the same 

point in the Senate Report: 

For centuries the law of fiduciaries has 

forbidden any person in a position of trust 

subject to such law to hold interests or enter 

into transactions in which self-interest may 

conflict with complete loyalty to those whom 

he serves. Such a person may not deal with 

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 [quoting the AFL–

CIO’s ethical practices code]: ‘‘[A] basic 

ethical principle in the conduct of union 

affairs is that no responsible trade union 

official should have a personal financial 

interest which conflicts with the full 

performance of his fiduciary duties as a 

worker’s representative.’’

Senate Report, at 11, reprinted in 1 

Leg. History, at 769. See generally 

Restatement (Second) of Trusts (1959) 

§§ 170, 173; Restatement (Second) of 

Agency (1958) §§ 381, 387–98. 

Section 202 is an effort, in part, to 

make effective the disclosure 

requirements associated with the 

fiduciary standards applied to union 

officials in Title V of the LMRDA, 

which, in turn, reflect the requirements 

of the extensive code voluntarily 

adopted by the AFL–CIO in 1957 and 

applied to its affiliated unions and 

officials. See Senate Report, at 12–16, 

reprinted in 1 Leg. History, at 408–12; 

House Report, at 9–12, reprinted in 1 

Leg. History, at 767–70. See also 

Archibald Cox, Internal Affairs of Labor 

Unions under the Labor Reform Act of 

1959, 58 Mich. L. Rev. 819, 824–29 

(1960). The following excerpts from this 

code demonstrate the nexus between the 

voluntary code and the disclosure 

requirements of section 202. 

[A] basic ethical principle in the conduct 

of trade union affairs is that no responsible 

trade union official should have a personal 

financial interest which conflicts with the 

full performance of his fiduciary duties as a 

workers’ representative. 

* * * * * 

[U]nion officers and agents should not be 

prohibited from investing their personal 

funds in their own way in the American free 

enterprise system so long as they are 

scrupulously careful to avoid any actual or 

potential conflict of interest. 

* * * * * 

In a sense, a trade union official holds a 

position comparable to that of a public 

servant. Like a public servant, he has a high 

fiduciary duty not only to serve the members 

of his union honestly and faithfully, but also 

to avoid personal economic interest which 

may conflict or appear to conflict with the 

full performance of his responsibility to those 

whom he serves. 

* * * * * 

There is nothing in the essential ethical 

principles of the trade union movement 

which should prevent a trade union official, 

at any level, from investing personal funds in 

the publicly traded securities of corporate 

enterprises unrelated to the industry or area 

in which the official has a particular trade 

union responsibility. 

* * * * * 

The policies * * * apply to: (a) all officers 

of the AFL–CIO and all officers of national 

and international unions affiliated with the 

AFL–CIO, (b) all elected or appointed staff 

representatives and business agents of such 

organizations, and (c) all officers of 

subordinate bodies of such organizations 

who have any degree of discretion or 

responsibility in the negotiation of collective 

bargaining agreements or their 

administration. 

* * * * * 

[These principles] apply not only where 

the investments are made by union officials, 

but also where third persons are used as 

blinds or covers to conceal the financial 

interests of union officials. 

Ethical Practices Code IV: Investments 

and business interests of union officials 

(‘‘AFL–CIO Ethical Practices Code’’), 

105 Cong. Rec.*16379 (daily ed. Sept. 3, 

1959), reprinted in 2 Leg. History, at 

1408. 

The Department intends by the 

proposals set forth herein to better 

achieve the purposes of the LMRDA, as 

demonstrated by the legislative history. 

To that end, and by this reform, the 

Department will increase compliance 

with the financial disclosure 

requirements in the Act, clarify the form 

and instructions by use of examples and 

defined terms, remove 

counterproductive exemptions to the 

filing requirements, and organize the 

information in a more useful format. 

C. Statutory Language 

Section 202 provides in its entirety: 

SEC. 202. (a) Every officer of a labor 

organization and every employee of a labor 

organization (other than an employee 

performing exclusively clerical or custodial 

services) shall file with the Secretary a signed 

report listing and describing for his 

preceding fiscal year—

(1) Any stock, bond, security, or other 

interest, legal or equitable, which he or his 

spouse or minor child directly or indirectly 

held in, and any income or any other benefit 

with monetary value (including reimbursed 

expenses) which he or his spouse or minor 

child derived directly or indirectly from, an 

employer whose employees such labor 

organization represents or is actively seeking 

to represent, except payments and other 

benefits received as a bona fide employee of 

such employer; 

(2) Any transaction in which he or his 

spouse or minor child engaged, directly or 

indirectly, involving any stock, bond, 

security, or loan to or from, or other legal or 

equitable interest in the business of an 

employer whose employees such labor 

organization represents or is actively seeking 

to represent; 

(3) Any stock, bond, security, or other 

interest, legal or equitable, which he or his 

spouse or minor child directly or indirectly 

held in, and any income or any other benefit 

with monetary value (including reimbursed 

expenses) which he or his spouse or minor 

child directly or indirectly derived from, any 

business a substantial part of which consists 

of buying from, selling or leasing to, or 

otherwise dealing with, the business of an 

employer whose employees such labor 

organization represents or is actively seeking 

to represent; 

(4) Any stock, bond, security, or other 

interest, legal or equitable, which he or his 

spouse or minor child directly or indirectly 

held in, and any income or any other benefit 

with monetary value (including reimbursed 

expenses) which he or his spouse or minor 

child directly or indirectly derived from, a 

business any part of which consists of buying 

from, or selling or leasing directly or 

indirectly to, or otherwise dealing with such 

labor organization; 

(5) Any direct or indirect business 

transaction or arrangement between him or 

his spouse or minor child and any employer 

whose employees his organization represents 

or is actively seeking to represent, except 

work performed and payments and benefits 

received as a bona fide employee of such 

employer and except purchases and sales of 

goods or services in the regular course of 

business at prices generally available to any 

employee of such employer; and 

(6) Any payment of money or other thing 

of value (including reimbursed expenses) 

which he or his spouse or minor child 

received directly or indirectly from any 

employer or any person who acts as a labor 

relations consultant to an employer, except 

payments of the kinds referred to in section 

302(c) of the Labor Management Relations 

Act, 1947, as amended. 

(b) The provisions of paragraphs (1), (2), 

(3), (4), and (5) of subsection (a) shall not be 

construed to require any such officer or 

employee to report his bona fide investments 

in securities traded on a securities exchange 

registered as a national securities exchange 

under the Securities Exchange Act of 1934, 

in shares in an investment company 

registered under the Investment Company 

Act or in securities of a public utility holding 

company registered under the Public Utility 

Holding Company Act of 1935, or to report 

any income derived therefrom. 

(c) Nothing contained in this section shall 

be construed to require any officer or 

employee of a labor organization to file a 

51170 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

report under subsection (a) unless he or his 

spouse or minor child holds or has held an 

interest, has received income or any other 

benefit with monetary value or a loan, or has 

engaged in a transaction described therein. 

29 U.S.C. 432. 

D. Increases in Sophistication and 

Complexity of Financial Practices 

The Form LM–30 has remained 

essentially unchanged since 1963, when 

the Department first approved the Form 

LM–30. See 28 FR 14384 (Dec. 27, 

1963). During this time the operations of 

unions have changed and financial 

matters affecting institutions and 

individuals have become more 

sophisticated. While the same statutory 

disclosure standard applies now as it 

did when the Act took effect, the 

financial activities of individuals and 

organizations have increased 

exponentially in scope, complexity and 

interdependence over the past four 

decades. 

For example, many unions manage 

benefit plans for their members, 

maintain close business relationships 

with financial service providers such as 

insurance companies and investment 

firms, operate revenue-producing 

subsidiaries, and participate in 

foundations and charitable activities. 

The complexity of union financial 

practices, including business 

relationships with outside firms and 

vendors, increases the likelihood that 

union officers and employees may have 

interests in, or receive income from, 

these businesses. As more labor 

organizations conduct their financial 

activities through sophisticated trusts, 

increased numbers of businesses have 

commercial relationships with such 

trusts, creating financial opportunities 

for union officers and employees who 

may operate, receive income from, or 

hold an interest in such businesses. In 

addition, employers also have fostered 

multi-faceted business interests, 

creating further opportunities for 

financial relationships between 

employers and union officers and 

employees. In this context, disclosure is 

critical to promoting good union 

governance, fostering ethical behavior, 

and deterring and detecting self-dealing. 

Moreover, present-day concerns about 

the intersection of personal interest and 

professional responsibilities are no 

longer associated only with traditional 

trustees, but are matters of central 

importance to the securities industry, 

corporate governance, and, among other 

professional groups, lawyers, 

physicians, accountants, researchers, 

journalists, and government employees. 

The Department believes that the 

purposes of the Act could be better 

accomplished by promoting increased 

compliance with the financial 

disclosure requirements in the Act, 

clarifying the form and instructions by 

use of examples and defined terms, 

removing counterproductive 

exemptions to the filing requirements, 

and organizing the information in a 

more useful format. By improving the 

form and promoting compliance with 

reporting requirements, union members 

will obtain a more accurate picture of 

the personal financial interests of their 

union’s officers and employees, as those 

interests may bear upon their actions on 

behalf of the union and its members. 

Publicly available information 

concerning potential conflicts of union 

officials allows union members to better 

understand any financial incentives or 

disincentives faced by their union’s 

officers and employees, and to make 

informed choices about the leadership 

of their union and its management of 

the union. Additional disclosure 

promotes the unions’ own interests as 

democratic institutions responsive to 

the concerns of union members, and 

deters, as well as facilitates the 

discovery of, fraud and self-dealing. 

E. The Current Form LM–30 

The Department initiated its 

enforcement of the section 202 reporting 

requirements within months of the 

enactment of the LMRDA in 1959, and 

a regulation making the Form LM–30 

effective was published in 1963. See 28 

FR 14384 (Dec. 27, 1963). 

The current Form LM–30 consists of 

four sections: a section for identifying 

data about the filer, and Parts A through 

C. (The current form and instructions 

are available at www.olms.dol.gov.) Part 

A of the form seeks transactions that 

would be reportable under sections 

202(a)(1), (a)(2), and (a)(5). See 29 U.S.C. 

432(a)(1), (2), (5). Part A thus generally 

requires reporting of holdings in, 

transactions and arrangements with, and 

income and loans from the employer 

whose employees the filer’s labor 

organization represents or actively seeks 

to represent. Part B attempts to 

implement sections 202(a)(3), and (a)(4). 

See 29 U.S.C. 432(a)(3), (4). Part B thus 

generally captures holdings in and 

income from businesses that deal either 

with the labor organization, a trust in 

which the labor organization is 

interested, or the employer whose 

employees the filer’s labor organization 

represents or actively seeks to represent. 

Part C attempts to implement section 

202(a)(6). See 29 U.S.C. 432(a)(6). Part C 

thus generally requires reporting of 

payments of money or other things of 

value from employers and labor 

relations consultants. 

Specifically, the first section gathers 

basic information about the filer, 

including the name of the organization 

in which the filer is an officer or 

employee, the filer’s position with the 

organization, and the fiscal year covered 

by the report. 

In the ‘‘General Instructions’’ filers are 

informed: ‘‘You do not have to report 

any sporadic or occasional gifts, 

gratuities, or loans of insubstantial 

value, given under circumstances or 

terms unrelated to the recipient’s status 

in a labor organization, or anything 

excluded in the specific instructions in 

Parts A, B, or C below.’’

Part A instructs the filer: ‘‘Complete 

[this part] if you (1) held an interest in, 

(2) engaged in transactions (including 

loans) with, or (3) derived income or 

other economic benefit of monetary 

value from, an employer whose 

employees your organization represents 

or is actively seeking to represent. 

Complete a separate Part A for each 

such employer and for each such 

interest, transaction, or item of income 

or other economic benefit connected 

with that employer.’’ For each such 

interest, transaction, or income, the filer 

is requested to disclose its nature, value, 

and date of receipt. With regard to the 

nature of a discloseable transaction, the 

instructions provide as examples: 

‘‘Continuing use of automobile for 

personal purposes, gift of refrigerator, 

payment for services.’’ Additional 

examples provided include: ‘‘Loan of 

money from employer, rental of loft 

building, located at X street, Y city, Z 

State, to employer.’’ The instructions 

provide additional information for 

reporting interests in, and transactions 

involving, stocks, bonds, securities, 

options and similar interests. 

After identifying the matters that have 

to be reported, the instructions advise 

the potential filer that he or she should 

not report holdings of, transactions in, 

or income from bona fide investments in 

registered securities; holdings of, 

transactions in, or income from other 

securities if they are of ‘‘insubstantial 

value or amount’’ (defined as holdings 

or transactions of $1,000 or less and 

income of $100 or less in any one 

security) and occur under terms 

unrelated to the filer’s status in the labor 

organization; transactions involving 

purchases and sales of goods and 

services in the regular course of 

business at prices generally available to 

any employee of the employer; and 

‘‘payments and benefits received as a 

bona fide employee of the employer for 

past or present services, including 

wages, payments or benefits received 

under a bona fide health, welfare, 

pension, vacation, training or other 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51171 

benefit plan; and payments for periods 

in which such employee engaged in 

activities other than productive work, if 

the payments for such period of time 

are: (a) Required by law or a bona fide 

collective bargaining agreement, or (b) 

made pursuant to a custom or practice 

under such a collective bargaining 

agreement, or (c) made pursuant to a 

policy, custom, or practice with respect 

to employment in the establishment 

which the employer has adopted 

without regard to any holding by such 

employee of a position with a labor 

organization.’’

Part B instructs the filer to report ‘‘an 

interest in or * * * income or other 

economic benefit with monetary value, 

including reimbursed expenses, from a 

business (1) a substantial part of which 

consists of buying from, selling or 

leasing to, or otherwise dealing with the 

business of an employer whose 

employees your labor organization 

represents or is actively seeking to 

represent, or (2) any part of which 

consists of buying from or selling or 

leasing directly or indirectly to, or 

otherwise dealing with your labor 

organization or a trust in which your 

labor organization is interested.’’ Filers 

are instructed that they are not required 

to report any of the interests or income 

identified in two exceptions to Part A 

(holdings in, transactions in, and 

income from bona fide investments in 

registered securities and insubstantial 

holdings in, transactions in, and income 

from other securities). The filer must 

identify the name and address of the 

business involved, describe the type of 

organization the business deals with 

(employer, labor organization, trust), 

enter the nature of the dealings between 

the two parties and the value of these 

dealings, enter the interest held or 

income received by the filer, and the 

dollar amount of such income or 

interest. 

In Part C, the filer is advised to 

‘‘Complete Part C if you received from 

any employer (other than an employer 

covered under Parts A and B above), or 

from any labor relations consultant to an 

employer, any payment of money or 

other thing of value.’’ The instructions 

identify the following as items that are 

not required to be reported: (1) 

Payments of the kind referred to in 

section 302(c) of the Labor Management 

Relations Act (LMRA); (2) bona fide 

loans, interest or dividends from banks, 

other bona fide credit institutions, and 

insurance companies; and (3) interest on 

bonds or dividends on stock, provided 

such interest or dividends are received, 

and such bonds or stock have been 

acquired, under circumstances and 

terms unrelated to the recipient’s status 

in a labor organization and the issuer of 

such securities is not an enterprise in 

competition with the employer whose 

employees the filer’s labor organization 

represents or actively seeks to represent. 

The instructions then advise that 

notwithstanding the exceptions, the filer 

must report any payments ‘‘(1) not to 

organize employees; (2) to influence 

employees in any way with respect to 

their rights to organize; (3) to take any 

action with respect to the status of 

employees or others as members of a 

labor organization; and (4) to take any 

action with respect to bargaining or 

dealing with employers whose 

employees [the filer’s] organization 

represents or seeks to represent.’’ For 

each interest or transaction to be 

reported under Part C, filers must 

identify the name of the employer or 

labor relations consultant and the nature 

and amount of the payment. 

The LMRA section 302(c) exclusions 

are not explained in the instructions. 

Instead, the instructions provide a fullpage quotation of that section. As a 

general rule, the section 302(c) 

exclusions make the following 

payments non-reportable: (1) Any 

money or other thing of value payable 

by an employer to (a) an employee 

whose established duties include acting 

openly for the employer in matters of 

labor relations or personnel 

administration, or (b) any officer or 

employee of a labor organization who 

also is an employee or former employee 

of such employer, as compensation for, 

or by reason of, his service as an 

employee of such employer; (2) money 

or other thing of value payable in 

satisfaction of a judgment, arbitral 

award, settlement or release of any 

claim in the absence of fraud or duress; 

(3) with respect to the sale or purchase 

of an article or commodity at the 

prevailing market price in the regular 

course of business; (4) with respect to 

deductions from wages in payment of 

dues in a labor organization by written 

assignment; (5) with respect to money or 

other thing of value paid to a trust fund 

established by the representative of an 

employer’s employees for the sole 

benefit of these employees, their 

families and dependents to pay for 

medical care, pensions, compensation 

for occupational injury, unemployment 

benefits, life insurance, disability 

insurance or accident insurance; (6) 

with respect to money or other thing of 

value paid by any employer to a trust 

fund established by the representative of 

the employer’s employees for the 

purpose of pooled vacation, holiday, 

severance or similar benefits, or 

apprenticeship or training programs; (7) 

with respect to money or other thing of 

value paid by any employer to an 

individual or pooled trust fund for the 

purpose of (a) educational scholarships 

for the benefit of employees, families, 

and dependents, (b) child care centers, 

or (c) employee housing; (8) with 

respect to money or other thing of value 

paid by any employer to a trust for 

defraying the costs of legal services; or 

(9) with respect to money or other thing 

of value paid by any employer to a labor 

management committee. 

F. Number of Current Form LM–30’s 

Filed 

Prior to initiating this rulemaking, the 

Department sought to determine the 

number of Form LM–30s filed, and the 

number of union officers and 

employees. The following table 

represents all reports filed in fiscal years 

2001 through 2004: 

Fiscal year 

Number 

of reports 

filed 

2001 .............................................. 59 

2002 .............................................. 49 

2003 .............................................. 41 

2004 .............................................. 95 

Total ....................................... 244 

Next, the Department attempted to 

identify the universe of people who are 

potentially subject to the reporting 

requirements by calculating the number 

of union officers and employees. The 

only source reasonably available to the 

Department was reports filed on Forms 

LM–2, LM–3 and LM–4. These reports 

are filed by labor organizations to 

disclose their financial conditions and 

operations, as well as limited 

information concerning officers and 

employees. The following table sets 

forth the Form LM–30 data gleaned from 

the FY 2002 LM reports: 

Source of data 

Number of 

officers or 

employees 

reported 

LM–2 Officers ....................... 66,749 

LM–2 Employees .................. 47,371 

LM–3 Officers ....................... 86,808 

LM–4 Officers ....................... 3,706 

Total ............................... 204,634 

Using these 2002 figures and the 

annual average of approximately 61 

Form LM–30 filings for this 4-year 

period, the Department computed a 

filing rate for Form LM–30 of 0.03% 

(61/204,634 × 100 = 0.03%). The Form 

LM–2, used by the largest labor 

organizations, requires the filer to list all 

the union’s officers and the employees 

51172 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

who received more than $10,000 in 

salary, allowances, and other direct and 

indirect disbursements from the union. 

Form LM–3, used by unions with under 

$200,000 in annual receipts (raised to 

$250,000 for fiscal years beginning July 

1, 2004 and thereafter), requires the filer 

to list all the union’s officers, but report 

employees who received more than 

$10,000 in salary, allowances, and other 

direct and indirect disbursements from 

the union only in the additional 

information item on the form. This 

information is not available in the 

OLMS disclosure database. Form LM–4 

filers (unions with annual receipts of 

less than $10,000) do not report either 

officers or employees. Form LM–4 is 

signed by two officers of the union. 

Although an estimate, the 0.03 

percentage can be used to gauge the 

filing rate in the absence of more precise 

figures. 

Recently, OLMS evaluated a small 

number of union employees to 

determine how many may have been 

required to file Form LM–30, but failed 

to do so. Employees of unions with 

titles identifying them as legal 

professionals, mostly lawyers, 

legislative affairs specialists, and 

lobbyists, were culled from information 

derived from Form LM–2 reports filed 

in FY 2002. Legal professionals were 

selected because it is possible, using 

Internet-based data, to investigate links 

between these employees or their 

spouses and firms that do business with 

the union, thereby indicating a 

potentially reportable interest under 

section 202(a)(4). None of the 438 

employees had filed Form LM–30. 

These 438 individuals’ full names were 

used in Internet searches for 

information indicating that they had 

outside legal employment. The use of 

the surname, coupled with other 

Internet-based biographical data, on one 

or two occasions revealed that an 

official’s spouse had such outside legal 

employment. Then, an Internet search of 

the name of the outside employer was 

conducted to determine whether the 

employer listed the union official’s 

union as a client, or otherwise indicated 

that it provided services to the union 

official’s union. OLMS contacted eight 

individuals who, based on the Internet 

research, appeared to have received, or 

whose spouse appeared to have 

received, payments from an employer 

that dealt with the individual’s union. 

Through these contacts, OLMS sought 

additional information from them to 

determine whether the individuals 

should have filed the Form LM–30 

based on a reportable interest under 

section 202(a)(4). Of these eight, six 

completed and filed a Form LM–30 

following the OLMS contact. Three of 

the six reports had to be returned to the 

filers for revisions or additional 

information. Review of the final 

amended reports confirmed that these 

six individuals had disclosed reportable 

interests. When asked, some filers did 

not give a reason for failing to earlier file 

the reports. Others said they had been 

unaware of the reporting requirements. 

Of the remaining two individuals, one 

had severed his relationship with the 

employer before becoming a union 

employee. In the final case, it was 

determined that the individual did not 

receive any benefits other than from the 

two unions that employed him. The 

filing rate for this group was 1.37% 

(6/438 × 100 = 1.37%). This filing rate 

is probably understated for the 438 

employees because OLMS was able to 

research only potential section 202(a)(4) 

reporting situations. Others in the group 

may well have owed reports based on 

payments from, transactions with, or 

holdings in, employers or businesses 

that deal with an employer whose 

employees the labor organization 

represents or is actively seeking to 

represent. 

Available data does not allow the 

Department to precisely measure the 

current filing rate of union officers and 

employees or predict what that rate 

would be if all individuals with 

reportable interests or transactions filed 

Form LM–30. The individuals covered 

by the informal inquiry discussed above 

may or may not be indicative of a 

typical union employee. Legal 

professionals may be more likely or less 

likely to engage in financial activities 

covered by the Form LM–30 than union 

employees in other professions. Further, 

the circumstances of these professionals 

may be different from those of union 

officers. As earlier mentioned, the 

number of estimated union officers and 

employees is necessarily understated, in 

that mid-size unions report in a readily 

available manner only officers, not 

employees, on their Form LM–3, small 

unions list only two signatory officers 

on their Form LM–4, and employees 

who receive $10,000 or less in a year are 

not reported on any of these forms. 

Certainly, the Department recognizes 

that not all union officers or employees 

have reportable interests or transactions. 

Nevertheless, it is clear that the 

identified employees had not filed Form 

LM–30 until they were contacted by 

OLMS, and half of them did not 

complete the report correctly on their 

first attempt. If union legal professionals 

had to be informed of their obligation to 

file the reports and failed to correctly 

complete the report, it is reasonable to 

conclude, in the Department’s view, that 

other employees are similarly unaware 

of their obligation to file and similarly 

confused by the form. The Department 

will continue to research the extent to 

which current Form LM–30 submissions 

are deficient, and requests comment on 

further data on this question. 

On many other occasions, OLMS has 

discovered during an audit or 

investigation that a union officer or 

employee was engaged in a reportable 

situation but had not filed the required 

Form LM–30 until OLMS became 

involved. For example: 

• A local president owned 50% of a 

business that resurfaced the union’s 

parking lot. Over two years, the business 

received $9,000 from the union. See 

section 202(a)(4), 29 U.S.C. 432(a)(4). 

• A union designated certain 

attorneys to represent injured members. 

Some of these attorneys, who were 

employers, furnished cash or items of 

value such as trips and golf clubs to 

union officials. See section 202(a)(6), 29 

U.S.C. 432(a)(6). 

• A union hired the accounting firm 

of an employee’s spouse. The firm 

received over $29,000 from the union 

over two years. See section 202(a)(4), 29 

U.S.C. 432(a)(4). 

• An officer of a union, whose 

members worked at a theater, formed a 

business with two partners. He put his 

share of the business in his wife’s name 

although he actually managed the 

business which employed members of 

his local to work for the theater. He and 

his wife received almost $75,000 in 

profits, expense reimbursements, and 

salary from the business. See section 

202(a)(1), 29 U.S.C. 432(a)(1). 

• A union president owned the 

building in which the union rented 

office space. See section 202(a)(4), 29 

U.S.C. 432(a)(4). 

• A union officer’s spouse owned a 

janitorial business that provided daily 

janitorial services to the union at $800 

per month. See section 202(a)(4), 29 

U.S.C. 432(a)(4). 

• A union employee’s spouse owned 

an advertising company which printed 

materials for the union and its funds. In 

one year, the company received over 

$245,000 from the union and the funds. 

See section 202(a)(4), 29 U.S.C. 

432(a)(4). 

• Four local officers formed a 

company that provided payroll services 

to the local as well as to theatrical 

companies that employed members of 

the local. Two other officers of the local 

received over $20,000 as employees of 

the company. See section 202(a)(4), 29 

U.S.C. 432(a)(4) (due to services 

provided to the local union); section 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51173 

202(a)(3), 29 U.S.C. 432(a)(3) (due to 

services provided to the theatrical 

company employers). 

• The spouse of a union officer 

owned a company that provided 

cleaning and maintenance services to 

the union and its trust. In one year, the 

company received over $94,000 from 

the union and the trust. See section 

202(a)(4), 29 U.S.C. 432(a)(4) 

• During a campaign for a state 

government office, a business agent 

received contributions from employers 

who were covered by the union’s 

collective bargaining agreement. See 

section 202(a)(1), 29 U.S.C. 432(a)(1) 

• A union officer was part-owner, 

along with his wife and daughter, of a 

copier supply company. He was the 

officer of several unions, including one 

which employed his daughter as a 

benefit representative and union trustee. 

All of the unions purchased office 

equipment and services from the 

family’s company. See section 202(a)(4), 

29 U.S.C. 432(a)(4) 

• A union employee owned a heating 

and air conditioning business that 

performed HVAC work for the union. 

See section 202(a)(4), 29 U.S.C. 432(a)(4) 

In these instances, compliance with 

the Form LM–30 requirements would 

have provided union members with 

valuable information concerning the 

finances of their unions’ employees and 

officers. This would have assisted union 

members in evaluating the efficacy of 

the work performed by union employees 

and the leadership provided by union 

officers. The information would have 

alerted them to potential conflicts of 

interests, and guided them as to which 

actions or decisions of their officers and 

employees might require greater 

scrutiny, to determine whether the 

conflicts have affected the union 

official’s service to the union. Armed 

with this information, union members 

could express their concerns at 

membership meetings, see 29 U.S.C. 

411(a), cast a more informed vote at the 

next internal union election, see 29 

U.S.C. 481–483, employ union 

procedures for removal of officers guilty 

of serious misconduct, see 29 U.S.C. 

481(h), or exercise their right to obtain 

judicial relief for violations of the 

fiduciary responsibilities of union 

officials, see 29 U.S.C. 501(b). 

In other instances, compliance with 

Form LM–30 requirements would have 

revealed criminal conduct. For example, 

the president of a national union had 

the sole authority to appoint or remove 

attorneys from a list of ‘‘Designated 

Legal Counsel.’’ These attorneys 

represented injured union members 

who sought compensation from the 

railroad for on-the-job injuries. Rather 

than selecting attorneys on the basis of 

their skills, the president awarded the 

designation to attorneys who paid the 

union president with cash or other 

things of value. In another instance, 

contractors were hired to make repairs 

and improvements to the offices of a 

local union. The contractors also 

performed work on the officers’ homes. 

However, all the expenses of the work, 

including about $1.2 million for work 

on the officers’ homes, was charged to 

and paid by the union. A third example 

involves a contractor, an investment 

firm that managed pension and 

investment accounts for unions. This 

company collapsed in September 2000, 

costing its clients about $355 million. 

The company’s former chairman was 

indicted on counts of fraud, money 

laundering, witness tampering and 

making illegal payments to union 

benefit plan trustees. As part of its 

scheme to buy the influence of pension 

fund trustees, who were union officers, 

the investment firm hired relatives of 

pension trustees as well as provided 

plan trustees with gifts including rifles, 

season tickets to sporting events, and 

fishing and hunting trips to various 

locations in the western U.S., Canada, 

Africa, Argentina and Mexico. 

OLMS expects that by clarifying the 

form and instructions, adding examples 

to the instructions, eliminating 

administrative exemptions, and 

providing extensive compliance 

assistance, the filing rate will increase. 

During the course of a meeting held 

under E.O. 12866, a stakeholder asserted 

that the Department receives few Form 

LM–30 reports because union officers 

and employees engage in few covered 

transactions. The Department invites 

comments concerning the number of 

union officers and employees, and the 

number of union officers and employees 

who have not filed a Form LM–30 but 

who have engaged in a transaction, or 

held an interest that required them to do 

so. 

The Department seeks comments on 

whether to promulgate a regulation that 

requires labor organizations to notify 

their officers and employees of the 

annual reporting obligations under the 

LMRDA. No notification obligation 

currently exists under the Department’s 

regulations, and the regulation proposed 

herein does not contain such a 

provision. Notification by labor 

organizations would, nevertheless, help 

ensure that officers and employees are 

aware of their reporting obligations 

under the LMRDA. An increase in 

awareness by union officers and 

employees could increase the number of 

reports filed each year, enabling union 

members and the public to learn more 

about financial transactions in which 

the union’s officers and employees are 

involved and, as needed, further inquire 

into the circumstances of these dealings 

to ensure that the interests of the 

members and the public are properly 

being served. 

Under one option, each labor 

organization would be required to 

inform its officers and employees, 

excluding those employed solely in 

clerical or custodial positions, of their 

obligation to annually file a Form LM–

30 if they, their spouse, or minor 

children, hold any interests, receive any 

payments, or engage in any transactions 

or arrangements covered by section 202 

of the Act. See 29 U.S.C. 432. 

Notification would have to be in writing 

and inform officers and employees that, 

subject to certain exemptions, they must 

file a report with the Department if they 

have interests in, receive payments or 

income from, or engage in transactions 

or arrangements with (1) an employer 

whose employees the labor organization 

represents or actively seeks to represent, 

(2) a business that deals with the labor 

organization, or a trust in which the 

labor organization is interested, (3) a 

business a substantial part of which 

consists of dealing with the business of 

an employer whose employees the labor 

organization represents or is actively 

seeking to represent, (4) any employer, 

or (5) a labor relations consultant to an 

employer. The union would inform its 

officers and employees that if they have 

any questions concerning which 

financial matters are reportable and 

whether they are required to file a 

report, they should consult the Form 

LM–30 and its instructions, and the 

union would provide the web site 

address where the form and instructions 

may be found. Notification would be 

provided by the union to an officer 

within 30 days of installation into office 

and to an employee within 30 days of 

the date of hire. Initial notification 

would be provided to officers and 

employees within 60 days of the 

effective date of the regulation, and 

thereafter to each on an annual basis. A 

labor organization could meet this 

requirement by providing employees 

and officers with a copy of the Form 

LM–30 and its instructions. E-mail 

notification might be considered an 

acceptable means of informing officers 

and employees. 

An alternative to providing a separate 

notice to each officer and employee 

would be to provide a general notice in 

a union publication that is addressed to 

every officer and employee. 

The Federal government informs 

employees at the time of their hire and 

reminds them on a regular basis 

51174 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

thereafter about their various ethical 

responsibilities, including conflict of 

interest rules and disclosure 

requirements. See E.O. 12674 (Apr. 12, 

1989), as modified by E.O. 12731 (Oct. 

17, 1990). The Department seeks 

comments on whether a similar 

approach is taken by other organizations 

and professions. The public is asked to 

comment on other ways in which 

employers and professional associations 

educate their employees and association 

members about their obligation to 

disclose possible conflicts between their 

personal interests and the interests of 

their employer or clients. 

The Department invites comments as 

to the need for and efficacy of a 

regulation that requires labor 

organizations to notify their officers and 

employees of the annual reporting 

obligations under the LMRDA. In this 

connection, it would be helpful to learn 

what steps are now being taken by labor 

organizations to inform their officers 

and employees about conflict-of-interest 

situations, including disclosure and 

reporting requirements to the union and 

its members. Is such information 

typically provided by an international 

or national union to all its affiliates? Is 

it typically contained in a national or 

international constitution or some other 

document, such as a handbook for 

officers and employees, or training 

materials? Do local and intermediate 

unions include such information in 

their constitutions or bylaws—or in 

other documents? What information is 

provided to union officials by trusts in 

which a union has an interest? Under 

what circumstances and how often have 

allegations of officer or employee 

conflicts of interests led to internal or 

judicial proceedings? 

During the course of a meeting held 

under E.O. 12866, a stakeholder 

questioned the Department’s authority 

to require labor organizations to notify 

their officers and employees of their 

disclosure obligations. The public is 

invited to comment on this issue. 

G. Deficiencies in the Reports Filed 

Using the Current Form LM–30 

OLMS examined each of the 244 Form 

LM–30 reports filed during fiscal years 

2001, 2002, 2003, and 2004 and 

determined that a majority of filers did 

not complete the form correctly. For 

example, although Part A is separate 

and distinct from Parts B and C, 100 

filers erroneously filled out Part A in 

addition to the appropriate and 

intended disclosure of an interest, 

transaction, income, or arrangement in 

Part B or C. A total of 136 filers who 

completed Part B failed to indicate 

whether the business they had an 

interest in, transaction with, or income 

from dealt with a labor organization, 

trust, or employer. A total of 117 of the 

filers who completed Part B provided no 

information or incomplete and 

insufficient information about the 

nature and approximate value of the 

dealings between the business and the 

employer, labor organization or trust. 

Further, 59 of the filers provided no 

information or inadequate information 

about the nature of the interest they 

held in, or the income they received 

from, the business. 

In addition to the deficiencies 

described above, numerous other errors 

occurred that resulted in inadequate and 

incomplete disclosure. For example, 

most filers failed to answer one or more 

required questions. In three instances, 

children of an officer or employee filed 

Form LM–30 rather than the officer or 

employee. Six filers did not specify 

their position within the union, four 

filers failed to report the fiscal year that 

was covered by the report, two filers did 

not sign the form, and one form was 

signed by the union official’s spouse. In 

Part A, 22 filers provided no 

information or inadequate information 

about the nature and amount of the 

interest in, transaction with, or income 

from an employer whose employees 

their union represented or was actively 

seeking to represent. 

The Department believes that the 

errors discussed above can be reduced 

by clarifying the form and instructions, 

adding examples to the instructions, 

and providing extensive compliance 

assistance. This rulemaking, further, is 

part of an overall initiative that includes 

greater scrutiny of Form LM–30 reports, 

and union financial records, as well as 

increased enforcement. The Department 

believes that these efforts will further 

reduce the error rate. The Form LM–30 

will be more useful to union members 

and the public when the reports that are 

filed are responsive to the questions 

asked, and can thus be meaningfully 

compared with the reports of other 

union officials. This will permit union 

members to understand the nature of the 

financial matter being reported, and its 

significance. This will allow union 

members to make informed decisions as 

to the leadership and management of 

their union. During the course of a 

meeting held under E.O. 12866, a 

stakeholder asserted that errors in filed 

reports could be reduced solely by 

increased compliance assistance by the 

Department. We will continue to 

research the extent to which current 

Form LM–30 submissions are deficient, 

and request comments on further data 

that may help the Department explore 

this question. The Department invites 

comments concerning all methods that 

would reduce the number of errors 

made in completing Form LM–30. 

H. Significant Proposed Changes to the 

Form LM–30, and Request for 

Comments Concerning Filing 

Exemptions Created by the Department 

1. Definitions, Examples and 

Administrative Exemptions 

Definitions: The proposal defines key 

terms. The current instructions do not 

explain terms that are essential to the 

form’s completion. The revised 

instructions define: actively seeks to 

represent, arrangement, benefit with 

monetary value, bona fide employee, 

bona fide investment, dealing, directly 

or indirectly, filer/reporting person/you, 

income, labor organization, labor 

organization employee, labor 

organization officer, legal or equitable 

interest, minor child, payer, publicly 

traded securities, substantial part, and 

trust in which a labor organization is 

interested. 

In defining the term ‘‘labor 

organization,’’ the instructions clarify 

that an officer or employee of a local 

union must file reports when he or she 

engages in transactions with a business 

that deals with his or her affiliated 

national labor organization, or engages 

in transactions with an employer whose 

employees the national labor 

organization is actively seeking to 

represent. Similarly, an officer or 

employee of a national union must file 

reports when he or she engages in 

transactions with a business that deals 

with an affiliated subordinate labor 

organization, or engages in transactions 

with an employer whose employees a 

subordinate labor organization is 

actively seeking to represent. By the 

same token, when determining whether 

a report must be filed due to payments 

from, or interests held in, a business 

that deals with a trust in which a labor 

organization is interested, the term 

‘‘labor organization’’ will retain this 

expanded meaning. Thus, for example, 

an officer of a local union must file 

reports when he or she engages in 

transactions with a business that deals 

with a trust in which his or her 

affiliated national labor organization is 

interested. 

Similarly, in defining ‘‘bona fide 

employee,’’ the revised Form LM–30 

would require the reporting of payments 

received by union officers from an 

employer for work performed for the 

union. A typical example involves a ‘‘no 

docking’’ arrangement where an 

employer allows a union steward or 

union officer to resolve grievances, often 

on an ‘‘as-needed’’ basis, without a loss 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51175 

of pay. In other instances, a union 

official is paid by an employer while 

working full time on union business. 

A full discussion of the new 

definitions is provided below in the 

discussion of the instructions. 

Examples: The proposal provides 

examples to help filers determine what 

must be reported under each subsection 

of section 202. These examples will 

provide illustrations of reportable and 

non-reportable interests, payments, 

income, transactions, and arrangements. 

A full discussion of the examples is 

provided below in the discussion of the 

instructions. 

Administrative Exemptions and 

Special Reports: The proposed 

instructions also eliminate some 

exemptions in the current form. These 

exemptions permit filers to omit certain 

financial matters from disclosure that 

would otherwise be reportable if 

engaged in by the filer or the filer’s 

spouse or minor child. These 

exemptions are discussed below, along 

with other exemptions that the 

Department does not propose to remove. 

Comments are invited on both the 

exemptions that the Department 

proposes to remove and the exemptions 

that are not proposed to be removed. 

Under the existing instructions, filers 

are notified: ‘‘You do not have to report 

any sporadic or occasional gifts, 

gratuities, or loans of insubstantial 

value, given under circumstances or 

terms unrelated to the recipient’s status 

in a labor organization.’’ The LMRDA 

Interpretative Manual (‘‘LMRDA 

Manual’’), revised in March 2005, states 

that ‘‘anything with a value of $25 or 

less will be considered ‘de minimis’ and 

therefore not reportable if it is given 

under circumstances unrelated to the 

recipient’s status in a labor 

organization.’’ LMRDA Manual, 

§ 241.700. 

The Department seeks comments 

regarding whether this exemption 

should be retained or removed. This 

exemption applies by its terms to all 

reports due under section 202. It does 

not provide guidance as to when a gift, 

gratuity, or loan is ‘‘unrelated to the 

recipient’s status in the labor 

organization.’’ The statute calls for 

disclosure of ‘‘any’’ stock, bond or other 

interest, ‘‘any’’ income, ‘‘any’’ loan, and 

‘‘any’’ payment or other thing of value. 

See 29 U.S.C. 432(a)(1)–(6). This 

language could indicate that Congress 

did not intend to exempt certain gifts, 

gratuities, or loans based on their dollar 

value. Further, Congress imposed a 

substantiality test in section 202(a)(3) 

(‘‘any business a substantial part of 

which consists of * * * dealing with 

the business of an employer’’), but did 

not do so, at least expressly, in 

describing the holdings, transactions, 

and income that is reportable under 

section 202. See 29 U.S.C. 432(a). 

At the same time, exceptions based on 

insubstantiality are commonly read into 

statutes that do not expressly contain 

them. See Wisconsin Dept. of Revenue 

v. William Wrigley, Jr., Co., 505 U.S. 

214, 231 (1992) (‘‘the venerable maxim 

de minimis non curat lex (‘the law cares 

not for trifles’) is part of the established 

background of legal principles against 

which all enactments are adopted, and 

which all enactments (absent contrary 

indication) are deemed to accept.’’). 

Furthermore, other reporting and 

disclosure systems do not require 

reports of small value items. For the 

purposes of comparison, one may look 

to the treatment of gifts in the financial 

disclosure reports for certain Federal 

Government employees. Employees 

with general schedule positions of grade 

15 and below whose duties may involve 

potential conflicts of interest must file 

Office of Government Ethics (OGE) 

Confidential Financial Disclosure 

Report 450 (OGE Form 450). The form 

has a range of standards for reporting 

different interests and transactions. Gifts 

totaling $285 or less from any one 

source need not be reported, and gifts 

valued at $114 or less need not be 

included in determining whether the 

$285 threshold has been exceeded. 

Federal employees in positions above 

GS–15 and in certain other positions of 

confidential or policymaking character 

must file a Public Financial Disclosure 

Report (SF 278). This form treats gifts in 

a manner similar to the OGE Form 450. 

Gifts totaling $260 or less from any one 

source need not be reported, and gifts 

valued at $104 or less need not be 

included in determining whether the 

$260 threshold has been exceeded. 

Similar to the current Form LM–30’s 

requirement that a de minimis gift be 

reported if the gift is related to the filer’s 

status in the union, under the 

government’s disclosure regime, gifts to 

a filer’s spouse or dependent child must 

be disclosed ‘‘to the extent the gift was 

not given to him or her totally 

independent of the relationship to you.’’

See SF 278, p. 12; OGE 450, p5. Unlike 

the Form LM–30, government 

employees must report gifts from any 

source, unless a specific exemption 

applies, while union officers and 

employees must report gifts received 

only from certain businesses and 

employers. See SF 278, p. 12–13; OGE 

450, p5. In one significant regard, 

government filers are permitted to 

exclude from their reports gifts of 

‘‘hospitality (food, lodging and 

entertainment) on the donor’s personal 

or family premises.’’ See SF 278, p. 12–

13; OGE 450, p5. 

Under the OGE Form 450, loans of 

$10,000 or less are not reportable, and 

there are four exceptions for loans 

exceeding the threshold, including 

mortgages on personal residences, and 

loans for personal automobiles, 

household furnishings, or appliances, 

where the loan does not exceed the 

purchase price. The loan reporting 

requirements of the SF 278 are very 

similar. A copy of both of these forms 

and instructions are available at the 

OGE Web site at: http://www.usoge.gov. 

The Department seeks comment on 

whether the term ‘‘insubstantial’’ left 

without further explanation in the 

instructions could be applied to shield 

from disclosure some financial 

transactions that would be of interest to 

union members. The Department could 

augment the existing instructions to 

define ‘‘insubstantial value’’ so that 

filers are able to distinguish between 

reportable and non-reportable gifts, 

gratuities, or loans based on a clearly 

articulated standard, like that in the 

Interpretative Manual or those in the 

Federal employee disclosure forms. The 

Department seeks comment on whether 

the $25 threshold set out in the LMRDA 

Interpretative Manual is an appropriate 

one, whether the burden to report small 

interests and transactions is reasonable, 

and whether it would be preferable to 

require reporting of all transactions and 

allow union members to assess whether 

a particular holding or transaction is 

substantial enough to possibly present a 

conflict between private interest and 

union responsibilities. During the 

course of a meeting held under E.O. 

12866, some stakeholders stated that the 

exemption for insubstantial transactions 

in the existing instructions should be 

clarified, and that the threshold for 

disclosure be increased. The public is 

invited to comment on all aspects of this 

issue. 

Part A of the current instructions 

exempts from reporting 

(ii) Holding of, transactions in, or income 

from, securities [that are not traded on a 

securities exchange registered as a national 

securities exchange under the Securities 

Exchange Act of 1934, in shares in an 

investment company registered under the 

Investment Company Act of 1940, or in 

securities of a public utility holding company 

registered under the Public Utility Holding 

Company Act of 1935], provided any such 

holding, or transaction, or receipt of income 

is of insubstantial value or amount and 

occurs under terms unrelated to your status 

in a labor organization. For purposes of this 

exclusion, holdings or transactions involving 

$1,000 or less and receipt of income of $100 

51176 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

or less in any one security shall be 

considered insubstantial; 

(iii) Transactions involving purchases and 

sales of goods and services in the regular 

course of business at prices generally 

available to any employee of the employer. 

(iv) Payments and benefits received as a 

bona fide employee of the employer for past 

or present services, including wages, 

payments or benefits received under a bona 

fide health, welfare, pension, vacation, 

training or other benefit plan; and payments 

for periods in which such employee engaged 

in activities other than productive work, if 

the payments for such period of time are: (a) 

Required by law or a bona fide collective 

bargaining agreement, or (b) made pursuant 

to a custom or practice under such a 

collective bargaining agreement, or (c) made 

pursuant to a policy, custom, or practice with 

respect to employment in the establishment 

which the employer has adopted without 

regard to any holding by such employee of 

a position with a labor organization. 

The Department does not propose to 

remove exemption (ii), but seeks 

comment on whether to remove or 

retain this exemption. This exception, 

which was created administratively, 

apparently was intended to discourage 

reporting of ‘‘insubstantial’’ matters 

unrelated to the filer’s position in the 

union. In like fashion, the LMRDA 

Manual provides an example of the 

application of this exception and states 

that a $400 purchase of stock, traded 

over the counter by an employee (and 

thus otherwise reportable) of a company 

that supplies his union over $1 million 

annually in goods and services need not 

be reported where the market value of 

the stock is $1000 or less and the yearly 

income from the stock is $100 or less 

and the holdings and interest are 

unrelated to the individual’s 

employment by the union. LMRDA 

Manual, § 246.700 (but also noting that 

the Department may always require a 

special report that disclosed the 

purchase). 

As discussed above, exceptions based 

on insubstantiality are commonly 

applied. Further, there is precedent for 

a similar use of reporting thresholds. 

Under the SF 278, stocks, bonds and 

securities from one source need not be 

reported if they total $1,000 or less in 

value. Investment income of $200 or 

less need not be reported. Under the 

OGE Form 450, investments with a 

value greater than $1,000 or which 

produce more than $200 in income are 

reportable. 

On the other hand, the exemption 

deals with unregistered securities, or 

securities sold through an unregistered 

exchange, which Congress considered 

reportable. See 29 U.S.C. 432(b). 

Further, unlike the federal disclosure 

forms, section 202 of the Act requires 

reporting only on financial matters that 

were considered to be potential conflicts 

for union officers and employees by 

Congress and identified in the statute. 

Likewise, section 202 does not require 

reports of financial matters that do not 

pose this danger, no matter how large 

the value of the holding or transaction. 

In this context, an exemption based on 

insubstantiality or union status factors 

could arguably result in nondisclosure 

of transactions that present conflicts of 

interests for union officials and were 

identified by Congress as reportable, 

denying union members relevant 

information to evaluate their officers 

and employees not only at the time of 

union elections but throughout their 

tenure. The Department seeks comment 

on whether this exemption should be 

removed or retained. 

Exemption (iii) is a statutory 

exemption for transactions involving 

purchases and sales of goods and 

services in the regular course of 

business at prices generally available to 

any employee of the employer. The 

statutory language applies by its terms 

to financial matters reportable under 

section 202(a)(5), not to section 

202(a)(1) or 202(a)(2). Section 202(a)(5) 

requires union officers and employees 

to report any ‘‘business transaction or 

arrangement’’ with an employer whose 

employees the union represents or is 

actively seeking to represent. It is for 

this reporting obligation alone that 

section 202 applies the exception for 

‘‘purchases and sales of goods and 

services in the regular course of 

business at prices generally available to 

any employee of such employer.’’

Sections 202(a)(1) and (a)(2) require 

union officers and employees to report 

(1) holdings in an employer whose 

employees the union represents or is 

actively seeking to represent, (2) 

transactions in such holdings, (3) loans 

to or from such employers, and (4) 

income or any other benefit with 

monetary value (including reimbursed 

expenses) received from such an 

employer. Sections 202(a)(1) and (a)(2) 

do not include the ‘‘regular-course-ofbusiness’’ exception. 

The instructions for Part A of the 

current form combine the separate 

reporting obligations of sections 

202(a)(1), (a)(2), (a)(5) into a single 

query. In so doing, the instructions also 

apply the statutory exceptions 

applicable to each obligation to the 

other obligations. Thus, the current form 

applies the ‘‘regular-course-of-business’’

exception to sections 202(a)(1) and 

(a)(2)’s requirement that union officers 

and employees report (1) holdings, (2) 

transactions in holdings, (3) loans, and 

(4) income or any other benefit with 

monetary value (including reimbursed 

expenses). 

The Department’s proposal adheres to 

the statutory design and thus proposes 

to remove the exemption for reports due 

under section 202(a)(1) and 202(a)(2). 

The proposed form would thus 

eliminate the application of the ‘‘regular 

course of business’’ exception to reports, 

due under sections 202(a)(1) and (a)(2), 

of (1) holdings in an employer whose 

employees the union represents or is 

actively seeking to represent, (2) 

transactions in such holdings, (3) loans 

to or from such employers, and (4) 

income or any other benefit with 

monetary value (including reimbursed 

expenses) received from such an 

employer. Rather, the proposed form 

applies the ‘‘regular-course-of-business’’

exception only to reports, due under 

section 202(a)(5), of any ‘‘business 

transaction or arrangement’’ with an 

employer whose employees the union 

represents or is actively seeking to 

represent. 

Union members have an interest in 

knowing of such holdings, transactions 

in holdings, loans, and income so they 

can evaluate whether each is significant 

enough, or of such a nature, to 

constitute a conflict of interest. The 

statutory exemption for payments and 

other benefits received as a bona fide 

employee of the employer is sufficient 

to exempt all the ordinary payments 

received as part of an employment 

relationship; the exemption in the 

current form, the Department believes, 

may provide a means to exclude other 

items that present conflicts of interest 

for union officials. For example, a union 

officer who receives income from the 

employer of union members for contract 

work could, at least arguably, avoid 

disclosing the payment by relying on 

this ‘‘regular-course-of-business’’

exemption. Also, it is conceivable that 

a union employee who purchases 

certain types of ownership interests 

could avoid disclosing the holding by 

relying on this exemption. A union 

official with an employer as a client has 

a conflict between personal interests 

and union loyalties, as does an official 

with an ownership interest in the 

employer. The change is consistent with 

the plain language of the statute, which 

applies the ‘‘regular-course-of-business’’

exception only to financial matters 

reportable under section 202(a)(5), not 

to section 202(a)(1) or 202(a)(2). The 

elimination of this exemption will result 

in more detailed and transparent 

reporting of financial information that 

union members may find helpful in 

determining whether their union’s 

officers and employees are subject to 

financial pressures inconsistent with 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51177 

their responsibilities to the union and 

the union members. 

Similarly, the first part of exemption 

(iv) (up to the semicolon) (dealing with 

payments and benefits received as a 

bona fide employee of the employer) is 

created by statute. Under the statute, it 

applies to reports due under sections 

202(a)(1) and 202(a)(5). Section 

202(a)(1) requires union officers and 

employees to report (1) holdings in an 

employer whose employees the union 

represents or is actively seeking to 

represent, and (2) income or any other 

benefit with monetary value (including 

reimbursed expenses) from such an 

employer. As discussed above, section 

202(a)(5) requires union officers and 

employees to report any ‘‘business 

transaction or arrangement’’ with such 

an employer. Sections 202(a)(1) and 

(a)(5) both contain an exception for 

‘‘payments and other benefits received 

as a bona fide employee of such 

employer.’’

Section 202(a)(2) requires union 

officers and employees to report (1) 

transactions in holdings in an employer 

whose employees the union represents 

or is actively seeking to represent, and 

(2) loans to or from such an employer. 

Section 202(a) does not include the 

‘‘bona fide employee’’ exception. 

By combining these separate reporting 

obligations—sections 202(a)(1), (a)(2), 

(a)(5)—into a single query, the 

instructions for Part A of the current 

form also apply the statutory exceptions 

applicable to each obligation to all three 

obligations. Thus, the current form 

applies the ‘‘bona fide employee’’

exception to section 202(a)(2)’s 

requirement that union officers and 

employees to report (1) transactions in 

holdings, and (2) loans. 

The proposed form applies the ‘‘bona 

fide employee’’ exception only to 

reports, due under sections 202(a)(1) 

and (a)(5), of (1) holdings in an 

employer whose employees the union 

represents or is actively seeking to 

represent, (2) income or any other 

benefit with monetary value (including 

reimbursed expenses) from such an 

employer, and (3) business transactions 

or arrangements with such an employer. 

The proposed form would eliminate 

the application of the ‘‘bona fide 

employee’’ exception to reports, due 

under sections 202(a)(2), of (1) 

transactions in holdings in an employer 

whose employees the union represents 

or is actively seeking to represent, and 

(2) loans to or from such an employer. 

Union members have an interest in 

knowing all transactions of union 

officers and employees involving 

transactions in ownership interests in, 

and loans to or from, the employer, so 

they can evaluate whether such matters 

are significant enough, or of such a 

nature, to constitute a conflict of 

interest. Under the current form, a 

union officer could avoid reporting a 

loan received from the employer on the 

ground that the loan was a benefit 

received as a bona fide employee, 

despite the union members’ legitimate 

interest in knowing whether the person 

who negotiates the terms and conditions 

of their employment is beholden to the 

employer. Removal of the exemption 

would thus provide union members 

with important information concerning 

the financial activities of their officers 

and employees. Further, sales and 

purchases of ownership interest in the 

employer are highly unlikely to 

constitute payments received as a bona 

fide employee, and, in any event, a 

union member would likely be 

interested to learn whether their union 

officers or employees availed 

themselves of the opportunity to 

purchase or divest in employer 

holdings. The exemption in the current 

form is all but superfluous in the 

context of ownership interests, and to 

the extent that it is not superfluous, it 

is counterproductive. The presence of a 

largely useless exemption can create 

confusion and complicate enforcement. 

Finally, the change is consistent with 

the plain language of the statute, which 

applies the ‘‘bona fide employee’’

exception only to financial matters 

reportable under sections 202(a)(1) and 

202(a)(5), not to section 202(a)(2). 

Following the statutory framework, 

the Department, therefore, proposes to 

eliminate this exemption for reports due 

under section 202(a)(2). Further, as 

discussed in greater detail in IV.B.2.b, 

below, the portion of the exemption that 

excludes payments for periods in which 

such employee engaged in activities 

other than productive work will also be 

removed. 

Part B of the current instructions 

adopts exemption (ii) from Part A. This 

exemption was created by the 

Department, and, for the reasons 

discussed above, the Department seeks 

comment on whether the exemption 

should be retained, but does not 

propose to remove this exemption. 

Part C of the current instructions 

contains the following exemptions: 

(ii) Bona fide loans, interest or dividends 

from national or state banks, credit unions, 

savings or loan associations, insurance 

companies, or other bona fide credit 

institutions. 

(iii) Interest on bonds or dividends on 

stock, provided such interest or dividends 

are received, and such bonds or stock have 

been acquired, under circumstances and 

terms unrelated to the recipient’s status in a 

labor organization and the issuer of such 

securities is not an enterprise in competition 

with the employer whose employees your 

labor organization represents or actively 

seeks to represent. 

The Department proposes to eliminate 

these two exemptions. Section 202(a)(6) 

requires union officers and employees 

to report ‘‘any payment of money or 

other thing of value (including 

reimbursed expenses)’’ received from 

‘‘any employer’’ or any labor relations 

consultant to an employer. 

Part C (Items 13 and 14) of the current 

form implements the statutory 

requirement for reporting payments 

received from an employer or a labor 

relations consultant to an employer. The 

first exemption permits union officers 

and employees to not report bona fide 

loans, interest or dividends from bona 

fide credit institutions. The proposed 

form would eliminate this exemption. 

The exemption operates as a barrier to 

disclosure. In one case, a credit union 

controlled by a local union made 61% 

of the credit union’s loans to four loan 

officers, three of whom were officers of 

the local. By eliminating this 

exemption, union officers and 

employees will be required to disclose 

such loans, interest payments, or 

dividends. Disclosure of these loans 

would have benefited the union 

members. The actions of these officials 

were not in the best interest of the credit 

union, or the labor organization that 

established it, because of the potential 

consequences of not spreading lending 

risk among multiple loan recipients and 

the granting of loans for reasons related 

to union status rather than ability to 

repay. 

The exemption in the current form is 

not required by the statute, which is 

silent on this issue. Indeed, the 

exemption tracks one that Congress 

chose to include in reports of 

employers, but omitted from the reports 

of union officers and employees. 

Compare 29 U.S.C. 433(a) with 29 

U.S.C. 432(a)(6). Further, this exemption 

leaves the filer to determine, without 

further guidance, whether a loan is bona 

fide. 

Exemption (iii) of Part C will also be 

eliminated under the Department’s 

proposal. This exemption is similar in 

certain respects to the statutory 

exemption of section 202(b), but unlike 

section 202(b), it exempts from 

reporting bonds and stocks that are not 

registered with the SEC or traded on a 

registered securities exchange. Further, 

section 202(a)(6), to which this 

exemption applies, already contains an 

exemption ‘‘with respect to the sale and 

purchase of an article or commodity at 

the prevailing market price in the 

51178 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

regular course of business.’’ To the 

extent that the exemption in the current 

form excludes from reporting 

transactions that fail to meet the 

statutory section 202(a)(6) exemption, it 

sanctions nondisclosure of transactions 

at below-market prices made outside of 

the regular course of business—the most 

suspect transactions. Union members 

would have an interest in knowing 

whether a union official has received a 

benefit not available to others on similar 

terms, in order to evaluate where the 

union official’s loyalties may lie and 

whether any divided loyalties could 

affect the official’s ability to represent 

the union members. Further, this 

exemption invites abuse by permitting 

the filer to make an unguided 

determination on whether the bonds 

and stocks have been acquired under 

circumstances unrelated to the 

recipient’s status in a labor organization. 

The exemption is not required by the 

statute, and its removal is consistent 

with it. 

The exceptions described above are 

not required by the statutory language 

and despite their apparent design to 

simplify reporting, they have added a 

layer of complexity to the proper 

understanding of the section 202 

reporting obligations. The exemptions 

are lengthy, and require study in 

addition to that needed to understand 

the reporting obligations. They are 

ambiguous, and may lead filers to 

believe that reportable transactions may 

be omitted from the form. 

Exemptions (ii) and (iv) of Part A, and 

exemptions (ii) and (iii) of Part C were 

not expected to be invariably available. 

See 29 CFR 404.4. A special report was 

intended to be used to obtain such 

exempted information upon demand of 

the Department, although the special 

report provision has proved useless in 

practice, in part because the Department 

cannot know when important 

information has been omitted and that 

a special report would be revealing. See 

29 CFR 404.4. The Department proposes 

to delete the special report provision. As 

mentioned above, at the time the Form 

LM–30 was created, the Department 

acted under the impression that more 

complete reporting could be realized 

through an ad hoc special report, and 

could be selectively required by the 

Secretary. See 29 CFR 404.4. These 

reports would allow the Secretary to 

require the disclosure of the information 

that was exempted from disclosure by 

operation of the four administrative 

exemptions discussed above. Id. No 

procedures were established, however, 

to govern the imposition of a special 

report; nor did the Department ever 

issue or seek a special report. The 

special report regulation is an 

acknowledgement that one or more of 

the exemptions potentially permit the 

non-reporting of conflict-of-interest 

transactions, but leaves no realistic 

method by which the Department can 

identify these cases and require more 

detailed reporting. Further, in today’s 

regulatory and statutory environment, 

which mandates numerous time 

consuming procedures and analyses 

before a reporting form may be issued or 

revised, the Department’s ability to 

implement a special report for a 

particular set of union officers and 

employees is questionable. 

In essence, the exemptions proposed 

to be eliminated render non-reportable 

transactions that by statute are subject to 

disclosure, a deficiency that has not 

been effectively eliminated through the 

use of a special report procedure. In 

addition to being not required by 

statute, the exemptions proposed to be 

removed necessarily reduce the 

information available to union members 

to evaluate their union officials. Instead 

of the Department determining in 

advance that entire categories of 

financial holdings or transactions 

should not be disclosed, the better 

course may be to require reporting so 

that union members may decide for 

themselves whether the financial 

matters are of concern. The resulting 

increased transparency will permit 

union members to obtain information 

needed by them to monitor their union’s 

affairs and to make informed choices 

about the leadership of their union and 

its direction. At the same time this 

increased transparency will promote the 

unions’ own interests as democratic 

institutions and the interests of the 

public and the government. The 

increased financial transparency will 

also deter fraud and self-dealing, and 

facilitate the discovery of such 

misconduct when it does occur. 

2. Restructured Form 

The broad purpose of the Form LM–

30 is to disclose possible conflicts 

between the personal financial interests 

of a union officer or employee and his 

union. A union member or other person 

reviewing a report should be able to 

easily discern the financial interests of 

the filer. The current form is not 

arranged to quickly provide such 

information. The current form does not 

provide a summary of the data on the 

report. The viewer must examine all the 

Parts A, B, and C that are filed; review 

the payers in all Items 6, 8, and 13; and 

sum the amounts in all Items 7b, 12b, 

and 14b to obtain an overview of what 

has been reported. Union members 

reviewing the report of a filer with 

multiple reportable transactions and 

interests from several sources would 

thus have to sort through numerous 

pages of the report to discern who had 

paid the filer and perform the math 

themselves. 

To remedy this problem, the 

Department’s proposal contains a 

summary information schedule that may 

satisfy the needs of many users of the 

report without need for greater detail. In 

the revised form, for convenience and 

ease of understanding, the term ‘‘payer’’

is used to describe the employer, 

business, or labor relations consultant 

that is financially involved with the 

filer. Using this terminology, a Payer 

Summary Schedule on the first page of 

the report shows the name of every 

payer from which the filer received 

money or in which the filer held an 

interest, and the total monetary value 

the filer derived from each payer. Each 

payer is numbered to correspond to the 

appropriate Payer Detail Page. Anyone 

interested in further information 

regarding the interests and transactions 

can skip directly to the appropriate 

detail page. 

The proposed form will call for 

additional contact information about the 

filer and his or her labor organization, 

including the e-mail address of each 

filer, and the telephone number, web 

site address, state of incorporation or 

registration, and state business 

identification number of each payer. 

The purpose of this additional contact 

information is to allow those who view 

the report to accurately identify the filer 

and, more important, accurately identify 

and further research the business with 

which the filer has a financial 

relationship. Ambiguous information 

about the filer or the source of payments 

to the filer can negate the utility of the 

report, by denying members sufficient 

information to assess the conflict 

situation. Comments are solicited on the 

significance of this information to 

readers of the reports and whether a 

filer has reasonable access to this 

information. 

A labor organization schedule will be 

added to the form allowing a filer to list 

the unions that the filer is employed by 

or an officer of, thus negating the need 

for filers to submit multiple reports. 

Continuation pages ease completion of 

the form, and facilitate search and 

retrieval. 

The proposal also organizes all the 

reported financial interests and 

transactions into tables. This will allow 

a member or other user to perform an 

electronic search on the OLMS 

disclosure database. Upon promulgation 

of a final rule, this database will be 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51179 

configured in a way that will facilitate 

such searches. 

The Department seeks comments on 

the proposed notice requirement, 

clarification of the form, use of 

examples to guide filers, removal of the 

administrative exemptions, deletion of 

the special report procedures, and 

restructuring of the form. 

III. Authority 

A. Legal Authority 

The legal authority for the notice of 

proposed rulemaking is sections 202 

and 208 of the Labor-Management 

Reporting and Disclosure Act of 1959, as 

amended (LMRDA), 29 U.S.C. 432, 438. 

B. Departmental Authorization 

Section 208 of the LMRDA 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 and 

such other reasonable rules and 

regulations as she may find necessary to 

prevent the circumvention or evasion of 

the reporting requirements. 29 U.S.C. 

438. Secretary’s Order 4–2001, issued 

May 24, 2001, and published in the 

Federal Register on May 31, 2001 (66 

FR 29656), continued the delegation of 

authority and assignment of 

responsibility to the Assistant Secretary 

for Employment Standards in 

Secretary’s Order 5–96 of those 

functions to be performed by the 

Secretary of Labor under the LMRDA. 

IV. Overview of the Regulations and 

Instructions 

The discussion that follows describes 

the Department’s proposal to revise its 

regulations implementing section 202(a) 

of the LMRDA, 29 CFR part 404, and the 

Form LM–30 and its accompanying 

instructions, which are incorporated 

into the regulations by reference. 29 

CFR 404.3. The following discussion 

highlights the key elements of each 

subsection of section 202 and the 

significant changes between the 

proposed and current regulations, form, 

and instructions. 

A. The Regulations 

1. The proposal would amend section 

404.4 of the regulations, 29 CFR 404.4, 

relating to special reports. This section 

provides that the Secretary may require 

the filer to file special reports on certain 

matters pertinent to an officer’s or 

employee’s holdings or interests 

covered by section 202, specifically 

including four categories of holdings, 

transactions, and payments that would 

be reportable but for four administrative 

exemptions. These include two 

administrative exemptions to Part A. 

The first permits the filer to exclude 

holdings of, transactions in, or income 

from non-registered securities of 

insubstantial value that are unrelated to 

the filer’s status in the labor 

organization. See Instructions, Part A, 

exclusion (ii). The second consists of an 

expansion of the statutory exclusion for 

payments and benefits received as a 

bona fide employee to include 

‘‘payments for periods in which such 

employee engaged in activities other 

than productive work.’’ See 

Instructions, Part A, exclusion (iv). They 

also include two administrative 

exemptions to Part C. The first specified 

Part C exemption excludes bona fide 

loans, interest, or dividends from banks, 

insurance companies and other bona 

fide credit institutions. See Instructions, 

Part C, exclusion (ii). The second 

concerns interest on bonds or dividends 

on stock, provided such interest or 

dividends are received, and such bonds 

or stock have been acquired, under 

circumstances and terms unrelated to 

the recipient’s status in a labor 

organization and the issuer of such 

securities is not an enterprise in 

competition with the employer whose 

employees the filer’s labor organization 

represents or actively seeks to represent. 

See Instructions, Part C, exclusion (iii). 

Although the special report provision 

will be deleted, the Department notes 

that it maintains statutory authority to 

assess each report for sufficiency, 

require amended reports, and to 

commence investigations where it is 

necessary to determine whether any 

person has or is about to violate any 

provision of the Act. 29 U.S.C. 440, 521. 

2. In addition, the Department 

proposes to amend section 404.7, which 

requires the maintenance and 

preservation of records. The language 

has been revised to better identify some 

of the documents that must be retained 

and to address the fact that records now 

may be maintained in electronic format. 

The Department intends no substantive 

change in meaning, as the revised 

language merely clarifies and makes 

explicit the retention requirements that 

have always been imposed by the 

regulation and statute. See 29 CFR 

404.7; 29 U.S.C. 436. 

3. The Department proposes to amend 

section 404.1 to add definitions for the 

following terms: Benefit with monetary 

value, dealing, income, labor 

organization, minor child, and trust in 

which a labor organization is interested. 

See 29 CFR 404.1. In addition, the 

existing definitions for the terms ‘‘labor 

organization officer,’’ and ‘‘labor 

organization employee’’ will be 

modified. These are terms that appear in 

29 CFR 404, and it is thus appropriate 

to define the terms in the regulations 

themselves. The terms and their 

definitions will also appear in the 

instructions, as will other terms, 

discussed below, that appear only in the 

instructions. This approach is used in 

the existing regulations and 

instructions. 

To be as effective as possible, a 

reporting and disclosure statute such as 

section 202(a) depends on a known and 

easily applied standard regarding what 

must be reported. Such a standard is 

important not only for union officials 

who must comply with the reporting 

requirements and for the administrative 

agency that enforces compliance, but 

also, because of the special objectives of 

the LMRDA, for union members and the 

general public who rely on disclosure 

and need to know what the disclosure 

or its absence represents. 

B. The Instructions 

The following discussion tracks the 

major sections of the proposed 

instructions. The proposed instructions, 

in turn, correspond roughly with the 

layout of the existing instructions. We 

identify the changes between the 

proposed and existing instructions; 

these changes also are reflected in the 

revised layout and design of the form 

itself. The proposed layout of the form 

is based on other updated OLMS 

financial disclosure reports and 

includes a summary schedule. 

1. General Changes 

The myriad types of financial 

transactions made reportable by section 

202 complicate the design of a ‘‘selfexplanatory’’ form. The filer must rely 

on the instructions to accurately 

complete the form. We invite comments 

as to the layout of the instructions, their 

clarity, and suggestions about how to 

better explain the reporting obligations. 

2. Introductory Section of the 

Instructions 

a. The first heading of the proposed 

instructions: ‘‘Why file’’ is identical to 

the current form. Like the current form 

it delineates the basic reporting 

obligations. However, the proposal adds 

more information to better place the 

filing obligation in the larger context of 

the LMRDA. We identify the elements of 

the statute and explain that the basic 

purpose of the section 202 report is to 

publicly identify any actual or apparent 

conflict between the personal financial 

interests of a filer, spouse, or minor 

child and the filer’s obligation to the 

union and its members. The proposal 

also clarifies that no report need be filed 

unless the filer, spouse, or minor child 

51180 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

held a covered interest or engaged in a 

covered transaction during the reporting 

period. 

b. The second heading of the 

proposed instructions is ‘‘Definitions.’’

This is a new section of the instructions. 

The terms defined include: actively 

seeking to represent, arrangement, 

benefit with monetary value, bona fide 

employee, bona fide investment, 

dealing, directly or indirectly, filer/ 

reporting person/you, income, labor 

organization, labor organization 

employee, labor organization officer, 

legal or equitable interest, minor child, 

payer, publicly traded securities, 

substantial part, and trust in which a 

labor organization is interested. 

The meaning of many of these terms 

is left unclear by the current 

instructions. By defining and explaining 

the key terms used by section 202, a 

filer will better understand his or her 

reporting obligations, which, in turn, 

will improve the likelihood of filing and 

the accuracy of the reports. Providing 

information that should be disclosed, 

based on statutory requirements, will 

aid union members in assessing whether 

their union’s officers and employees 

have entered into financial 

arrangements with employers, 

businesses, and others that could 

potentially compromise the officials’

ability to act in the best interests of, and 

achieve the best results for, the union 

and its members. 

Actively seeking to represent, as 

proposed, means that a labor 

organization has taken steps to become 

the bargaining representative of the 

employees of an employer, including 

but not limited to: 

• Sending organizers to an employer’s 

facility; 

• Placing an individual in a position 

as an employee of an employer that is 

the subject of an organizing drive and 

paying that individual subsidies to 

assist in the union’s organizing 

activities; 

• Circulating a petition for 

representation among employees; 

• Soliciting employees to sign 

membership cards; 

• Handing out leaflets; 

• Picketing; or 

• Demanding recognition or 

bargaining rights or obtaining or 

requesting an employer to enter into a 

neutrality agreement (whereby the 

employer agrees not to take a position 

for or against union representation of its 

employees), or otherwise committing 

labor or financial resources to seek 

representation of employees working for 

the employer. 

This definition, in large part, is based 

on a statement from the legislative 

history. See Senate Report, at 15, 

reprinted in 1 Leg. History, at 411 (The 

phrase ‘‘actively seeking to represent’’

denotes ‘‘more than that the union 

hopes some day to become the 

bargaining representative of a group of 

employees or claims jurisdiction to 

organize them. It requires specific 

organizational activities such as sending 

organizers into a community, handing 

out leaflets, picketing, or demanding 

recognition and bargaining rights’’); 

House Report, at 11; reprinted in 1 Leg. 

History, at 769. The examples are 

concrete actions commonly associated 

with attempts to organize a workforce. 

Comments are invited as to the merit 

and clarity of the enumerated activities 

and whether other examples would be 

helpful. In the Department’s view, the 

term ‘‘actively seek to represent’’ seeks 

to distinguish between situations where 

a union has taken steps to organize and 

those where the union merely has an 

interest in organizing employees of the 

employer in question. For example, a 

union may wish to represent employees 

of a certain employer, and may even 

have finalized an organizing plan, but 

has not yet begun to implement the 

plan. Such a union is not actively 

seeking to represent employees of this 

employer. Comments are sought as to 

whether it is appropriate to trigger the 

reporting obligation on the decision to 

organize an employer’s workforce 

distinct from taking the first concrete 

step to organize. The Department 

recognizes that some organizing 

activities are initiated without notice to 

the public or an employer, but there 

would appear to be few, if any, 

situations, where the disclosure of a 

reported interest on the Form LM–30 

would be the first open 

acknowledgment of the union’s active 

efforts to represent employees. 

Commenters are asked to address this 

assumption. 

Arrangement, as proposed, means any 

agreement or understanding, tacit or 

express, or any plan or undertaking, 

commercial or personal, by which the 

filer, spouse, or minor child will obtain 

a benefit, directly or indirectly, with an 

actual or potential monetary value. 

The term encompasses both personal 

and business transactions, including an 

unwritten understanding. For example, 

if an employer’s representative during 

the reporting period solicits a union 

officer to accept a job with the 

employer, the filer must report the 

solicitation, unless the filer rejects the 

offer. A standing job offer must be 

reported because it carries the potential 

of monetary value to the filer. Another 

example of a situation requiring a report 

would be one in which a covered 

employer provides insider information 

about a stock or other investment 

opportunity, unless the filer rejects the 

advice and takes no steps to act on it. 

Certain senior government officers 

and employees are required to file 

publicly available reports (SF 278) 

disclosing their financial interests as 

well as the interests of their spouse and 

dependent children. The SF 278 

requires a filer to report ‘‘arrangements’’

including ‘‘(1) future employment; (2) a 

leave of absence during [the filer’s] 

period of Government service; (3) 

continuation of payments by a former 

employer other than the United States 

Government; and (4) continuing 

participation in an employee welfare or 

benefit plan maintained by a former 

employer other than United States 

Government retirement benefits.’’ The 

form notes that disclosure ‘‘includes any 

agreements or arrangements with a 

future employer entered into by a 

termination filer.’’ SF 278, p. 15; See 

also OGE 450, p. 4. 

In addition, senior government filers 

‘‘must disclose any negotiations for 

future employment from the point you 

and a potential non-Federal employer 

have agreed to your future employment 

by that employer whether or not you 

have settled all of the terms, such as 

salary, title, benefits, and date 

employment is to begin.’’ SF 278, p. 15. 

Benefit with monetary value, as 

proposed, means anything of value, 

tangible or intangible, including any 

interest in personal or real property, gift, 

insurance, retirement, pension, license, 

copyright, forbearance, bequest or other 

form of inheritance, office, options, 

agreement for employment or property, 

or property of any kind. 

This definition is adopted from 

disclosure regulations applicable to 

federal employment. See 5 CFR 

2634.105(h); 5 CFR 2634.302(b)(1). 

Bona fide employee, as proposed, is 

an individual who performs work for, 

and subject to the control of, the 

employer. 

In considering the meaning to be 

given bona fide employee, the 

Department considered the purposes of 

the LMRDA, and the following point in 

the AFL–CIO’s Ethical Practices Code: 

‘‘No responsible trade union official 

should accept kickbacks, under-thetable payments, gifts of other than 

nominal value, or any personal payment 

of any kind other than regular pay and 

benefits for work performed as an 

employee from an employer or business 

enterprise with which his union 

bargains collectively.’’ AFL–CIO Ethical 

Practices Code, 105 Cong. Rec.*16379 

(daily ed. Sept. 3, 1959), reprinted in 2 

Leg. History, at 1408. The Department 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51181 

has also considered the disclosure form 

(SF 278) required to be completed by 

senior government officials and 

employees. The instructions for the SF 

278 require filers to report earned 

income, including ‘‘fees, salaries, 

commissions, compensation for 

personal services, retirement benefits, 

and honoraria,’’ excluding ‘‘income 

from employment by the United States 

government.’’ SF 278, p. 8. Finally, the 

Department recognizes that numerous 

federal agencies, including the 

Department, continue the pay of union 

representatives engaged in the conduct 

of union-management business. See 

Agreement between Local 12, AFGE, 

AFL–CIO and the U.S. Department of 

Labor, Article 45 (Effective March 20, 

2005). 

Under the proposed definition, to be 

exempt from reporting, payments and 

other benefits received as a bona fide 

employee of the employer must be 

attributable to work performed for, and 

subject to the control of, the employer. 

See Nationwide Mut. Ins. Co. v. Darden, 

503 U.S. 318, 322–24 (1992). Such 

payments and other benefits are nonreportable, even if they represent 

compensation for such work previously 

performed, such as earned or accrued 

wages, payments or benefits received 

under a bona fide health, welfare, 

pension, vacation, training or other 

benefit plan, leave for jury duty, and all 

payments required by law. In contrast, 

compensation for work performed as an 

independent contractor does not 

constitute payments or benefits to a 

bona fide employee, even if the 

individual also serves as a bona fide 

employee while performing other work. 

Most fundamentally, compensation paid 

to an individual who is carried on the 

employer’s payroll but who does not 

work (a ‘‘no-show employee’’) is not 

compensation to a bona fide employee. 

By its terms, the proposed definition 

excludes payments for work performed 

for an individual other than the 

employer, or work performed outside 

the control of the employer. This 

definition will, thus, require reporting 

of at least two types of compensation 

that are currently excluded from 

reporting as ‘‘payments and other 

benefits received as a bona fide 

employee.’’ See Instructions, Part A, 

exclusion (iv). These compensation 

types are ‘‘union leave’’ and ‘‘no 

docking’’ payments. Under a unionleave policy, the employer continues the 

pay and benefits of an individual who 

works full time for a union. Under a nodocking policy, the employer permits 

individuals to devote portions of their 

day or workweek to union business, 

such as processing grievances, with no 

loss of pay. Continuation of pay in this 

context is not ‘‘payments or other 

benefits received as a bona fide 

employee’’ because the payments are 

not attributable to work performed for, 

and subject to the control of, the 

employer. Rather, the pay is for services 

performed for, and subject to the control 

of, the union. The payments are, 

therefore, reportable. See 29 U.S.C. 

432(a)(1), (a)(5). 

The current instructions treat as nonreportable payments for ‘‘activities other 

than productive work,’’ depending in 

part on the collective bargaining 

agreement and the employer’s practices. 

Specifically, exemption (iv) of Part A of 

the current form excludes ‘‘payments for 

periods in which such employee 

engaged in activities other than 

productive work, if the payments for 

such period of time are: (a) Required by 

law or a bona fide collective bargaining 

agreement, or (b) made pursuant to a 

custom or practice under such a 

collective bargaining agreement, or (c) 

made pursuant to a policy, custom, or 

practice with respect to employment in 

the establishment which the employer 

has adopted without regard to any 

holding by such employee of a position 

with a labor organization.’’ See 

Instructions, Part A, exemption (iv). The 

LMRDA Manual discusses the situation 

when a union officer ‘‘is excused from 

his regular work to handle grievances 

and [is] paid his regular wages while 

handling grievances.’’ It states: ‘‘Such a 

situation will not normally require 

reports from the union officer * * * on 

the theory that the employee officer is 

being paid for work performed of value 

to the employer who is interested in 

seeing to it that grievances are 

immediately adjusted.’’ LMRDA 

Manual, § 248.005. 

The Department proposes to change 

this rule. Under the Department’s 

proposed instructions, an officer or 

employee would have to report any 

payments for other than ‘‘productive 

work,’’ including union-leave and nodocking payments. These payments are 

not received as a bona fide employee of 

the employer; they are received as a 

representative or employee of the union. 

The employer’s perception that an 

employee’s work for the union is 

valuable, a fact relied on by the LMRDA 

Manual, does not seem relevant. The 

question is whether the payment is 

received as a bona fide employee, not 

whether the employer considers the 

money well spent. The payments also 

represent a potential conflict of interest. 

Members have an interest in knowing 

how much union officers or employees 

are paid by the employer for time spent 

on union business. This information 

would be significant for members in 

assessing the effectiveness of union 

officers and employees and in 

evaluating candidates for union office. 

For example, during collective 

bargaining negotiations, an officer who 

enjoys union-leave or no-docking 

payments may agree, or feel pressure to 

agree, to reduced benefits for employees 

in exchange for increases in his or her 

employer payments. Similarly, a union 

employee may feel pressure to not 

zealously pursue a grievance on behalf 

of a union member for fear of alienating 

the employer and jeopardizing his or 

her payments. The exemption in the 

current form is not required by statute, 

which is silent on this issue. 

In discussing the legality of ‘‘nodocking’’ payments under the Labor 

Management Relations Act, one circuit 

judge wrote, ‘‘Congress was concerned 

about any form of payment that could 

upset the balance between labor and 

management. The payments at issue in 

this case do exactly that. They create a 

conflict of interest for union negotiators 

who may agree to reduced benefits for 

the employees in exchange for financial 

support for the union.’’ See Caterpillar 

v. United Auto Workers, 107 F.3d 1052 

(3rd Cir. 1997) (en banc) (emphasis in 

original) (Mansmann, J., dissenting), 

cert. granted, 521 U.S. 1152, dismissed 

as moot, 523 U.S. 1015 (1998). The 

Department finds this reasoning 

persuasive in the context of section 202 

of the LMRDA, and the proposed 

interpretation to be more consistent 

with the language of the statute than the 

current approach. These payments 

present a potential for conflicts of 

interest. By exempting these payments 

from reporting, the Department has 

deprived union members of information 

they may need to make an informed 

judgment on whether their union 

officers and employees are subject to 

financial incentives that could hinder 

them in fulfilling the trust that has been 

placed in them. The Department 

acknowledges that this proposal is a 

departure from the Department’s past 

practice and invites comment about the 

problems (or their absence) that have 

arisen by allowing such payments to go 

unreported. The Department also seeks 

comment about whether disclosure is 

always appropriate for ‘‘no docking’’

situations and, if not, suggestions as to 

whether quantitative (such as number of 

hours) or qualitative (such as discussing 

a grievance with a supervisor or 

management official) distinctions 

should affect the disclosure obligation. 

Bona fide investment, as proposed, 

means personal assets of the filer held 

to generate profit not acquired by 

improper means or as a gift from an 

51182 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

employer, a business that deals with the 

filer’s union or a trust in which the 

filer’s union is interested, a business a 

substantial part of which consists of 

dealing with an employer whose 

employees the filer’s union represents 

or is actively seeking to represent, or a 

labor relations consultant to an 

employer. See publicly traded 

securities. 

The primary purpose of this 

definition is to alert filers that stock or 

other securities received as a gift will 

not constitute a ‘‘bona fide investment,’’

under the provision that exempts from 

reporting bona fide investments in 

publicly traded securities when the gift 

is received from an employer, certain 

businesses, or a labor relations 

consultant. See discussion of publicly 

traded securities, below. A union officer 

or employee who receives a gift of 

publicly traded stock from an employer, 

for example, must therefore disclose the 

holding, unless another reporting 

exemption applies. 

Dealing, as proposed, means to engage 

in a transaction (bargain, sell, purchase, 

agree, contract) or to in any way traffic 

or trade. 

In the course of providing compliance 

assistance to union officers and 

employees, OLMS has been asked if 

payments from a union to a trust in 

which the union is interested constitute 

‘‘dealing[s]’’ between the trust and the 

union under section 202(a)(4) of the Act, 

which creates a reportable relationship 

when a union officer or employee 

receives a payment from a business 

engaged in ‘‘buying from, selling or 

leasing to, or otherwise dealing, with’’

the union. OLMS has been asked 

whether dealings between a union and 

a union related trust exist when 

payments are made by an employer to 

the trust pursuant to a collective 

bargaining agreement negotiated by the 

union. In addition, the public has asked 

whether contributions by a union to a 

charitable, social, educational, or 

political organization constitute 

dealings between the union and the 

organization. The Department’s current 

and proposed instructions do not speak 

explicitly to this issue, and the 

government’s reporting system is not 

directly on point. See OGE 450, p. 14 

(‘‘If you receive food, transportation, 

lodging, and entertainment or a 

reimbursement of official travel 

expenses from a non-profit tax-exempt 

institution categorized by the IRS as one 

falling within the terms of 26 U.S.C. 

501(c)(3), you must report the name of 

the organization, a brief description of 

the in-kind services or the 

reimbursement and the value.’’) The 

Department seeks comments on these 

issues, and the related issue of whether 

trusts and such organizations constitute, 

or can constitute, ‘‘business[es]’’ under 

sections 202(a)(3) and (a)(4), or 

‘‘employers’’ under section 202(a)(6), so 

that payments from such organizations 

to union officials would be reportable. 

What activities or transactions between 

trusts and other organizations and the 

union would rise to the level of 

dealings? What factors, if any, should 

the Department consider when 

determining if trusts and other 

organizations are businesses or 

employers? Finally, commenters are 

asked to consider these questions in 

regard to labor organizations and labor 

management committees. Can these 

entities constitute businesses under 

sections 202(a)(3) and (a)(4), or 

constitute employers under section 

202(a)(6), and, if so, what type of 

activities and transactions between such 

entities and the filer’s union should be 

considered dealings? 

Directly or indirectly, as proposed, 

means by any course, avenue, or 

method. Directly encompasses holdings 

and transactions in which the filer, 

spouse, or minor child receives a 

payment or other benefit without the 

intervention or involvement of another 

party. Indirectly includes any payment 

or benefit which is intended for the 

filer, spouse, or minor child or on 

whose behalf a transaction or 

arrangement is undertaken, even though 

the interest is held by a third party, or 

was received through a third party. 

The purpose of this definition is to 

clarify that filers must disclose any 

benefits received by them (or their 

spouse or minor child) from a third 

party where the third party is acting on 

the behalf, or at the behest, of an 

employer or business where the benefit 

would have to be reported if made by 

it directly to the filers (or their spouse 

or minor child). Benefits received from 

an employee, agent, or representative of 

an employer or business, or other entity 

acting on behalf of the employer or 

business, should be considered to be 

received from the employer or business. 

Payments to a third party to be held for 

the use or benefit of the filer are also 

reportable. The definition is deliberately 

drawn broadly, consistent with the 

legislative history ‘‘to require disclosure 

of any personal gain which an officer or 

employee may be securing at the 

expense of union members.’’ Senate 

Report, at 15, reprinted in 1 Leg. 

History, at 411. See also AFL–CIO 

Ethical Practices Code, reprinted in 2 

Leg. History, at 1406 (‘‘[The ethical 

principles] apply not only where the 

investments are made by union officials, 

but also where third parties are used as 

blinds or covers to conceal the financial 

interests of union officials’’) 

Filer/Reporting Person/You, as 

proposed, mean any officer or employee 

of a labor organization who is required 

to file Form LM–30. These terms are 

used synonymously and 

interchangeably throughout the 

instructions and, when referring to 

reportable interests, income, or 

transactions, these terms include 

interests, income, or transactions 

involving the union officer’s or 

employee’s spouse or minor child. 

Income, as proposed, means all 

income from whatever source derived, 

including, but not limited to, 

compensation for services, fees, 

commissions, wages, salaries, interest, 

rents, royalties, copyrights, licenses, 

dividends, annuities, honorarium, 

income and interest from insurance and 

endowment contracts, capital gains, 

discharge of indebtedness, share of 

partnership income, bequests or other 

forms of inheritance, and gifts, prizes or 

awards. 

This definition is designed to help 

filers identify the types of financial 

matters that are subject to the reporting 

requirements. The list is adopted from 

disclosure regulations applicable to 

federal employment. See 5 CFR 

2634.105(j); 5 CFR 2634.302. 

Labor organization, as proposed, 

means the local, intermediate, or 

national or international labor 

organization that employed the filer, or 

in which the filer held office, during the 

reporting period, and any parent or 

subordinate labor organization of the 

filer’s labor organization. 

Under sections 202(a)(1) through 

(a)(5), union officers and employees 

must report payments from, holdings in, 

or transactions with the following 

entities: 

(1) An employer whose employees the 

filer’s labor organization represents or is 

actively seeking to represent; 

(2) A business a substantial part of which 

consists of dealing with an employer whose 

employees the filer’s labor organization 

represents or is actively seeking to represent; 

or 

(3) A business that deals with the filer’s 

labor organization or a trust in which the 

filer’s labor organization is interested. 

The reporting obligation thus depends 

on what organization constitutes the 

filer’s labor organization. Many labor 

organizations consist of a three-tier 

hierarchy, such as a local labor 

organization, an intermediate body, and 

a national or international labor 

organization. 

The current instructions are silent 

about the obligation of an officer or 

employee to report, under section 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51183 

202(a)(4), interests or income from 

businesses that deal with parent or 

subordinate labor organizations within 

the filer’s labor organization. See 29 

U.S.C. 432(a)(4). In the same way, the 

instructions are silent as to whether 

labor organizations affiliated with that 

of the union officer or employee are 

encompassed by the phrase ‘‘an 

employer whose employees such labor 

organization represents or is actively 

seeking to represent.’’ See 29 U.S.C. 

202(a)(1), (2), (5). For example, one 

reading of the statute would mean that 

payments by an employer to a union 

official would not be reportable if a 

different labor union within the same 

overall union hierarchy was the entity 

actively seeking to represent the 

employees of the employer. As currently 

written, a filer would have to contact 

the Department or obtain a copy of the 

LMRDA Manual to learn that the 

obligation extends beyond the 

immediate organization in which the 

filer is an officer or employee. As 

provided in the LMRDA Manual: ‘‘An 

international union officer must report 

his income from [a] business [that has 

dealings with an employer whose 

employees a local union represents] 

even though he is not an officer of the 

local which represents the employees of 

the business, and even though his duties 

as an international officer do not 

include representation activities.’’

LMRDA Manual, § 241.100. 

Union members have an interest in 

knowing benefits their officers or 

employees receive from businesses that 

deal with their parent or subordinate 

unions or with employers whose 

employees their parent or subordinate 

unions represent, or are actively seeking 

to represent, so they can evaluate 

whether these benefits are significant 

enough, or of such a nature, to 

constitute a conflict of interest. For 

example, union members have an 

interest in knowing if a spouse of a local 

union officer owns a travel agency that 

does business with the national union. 

Likewise, under the current 

instructions, and unless the filer was 

familiar with the interpretative manual, 

union members would not know if a 

president of a national labor 

organization owns a printing company 

that provides services to many of the 

national union’s subordinate local labor 

organizations. Yet, employees of local 

unions may choose to patronize this 

printing company to seek favor with, or 

avoid alienating, the national president, 

despite less expensive services available 

elsewhere. 

The statutory language itself is 

ambiguous on this point. However, as 

discussed above, Senator Kennedy’s 

statement about how the Act would 

remedy the improper actions by certain 

high ranking international union 

officers evinces Congressional concern 

about the conflict posed by a union 

official’s personal interests and the 

official’s obligation to all the union’s 

members and constituent units, not 

merely concern about matters relating 

solely to the particular tier of the union 

in which the filer serves as an officer or 

employee. As discussed above, the 

McClellan Committee’s investigation 

disclosed a myriad of arrangements 

whereby union officials, whose personal 

interests were intertwined with those of 

employers and benefit providers, 

suborned the interests of their affiliated 

locals and their members to the officials’

personal interests and the interests of 

the officials’ financial benefactors. 

Confident that Congress would not have 

intended to ignore the serious problems 

identified by the McClellan Committee’s 

investigation, the Department’s proposal 

clarifies the reach of the disclosure 

obligation to include conflicts that arise 

between a union official and his 

responsibility to both the immediate 

unit of the union that he serves and any 

parent or subordinate unit of that unit. 

Labor organization employee, as 

proposed, means any individual (other 

than an individual performing 

exclusively clerical or custodial 

services) employed by a labor 

organization within the meaning of any 

law of the United States relating to the 

employment of employees. 

By statute, an employee ‘‘means an 

individual employed by an employer’’. 

29 U.S.C. 402(f). An employer is broadly 

defined to include ‘‘an employer within 

the meaning of any law of the United 

States relating to the employment of 

employees.’’ 29 U.S.C. 402(e). Under the 

common law, any individual working at 

the control and direction of a labor 

organization will be an employee of the 

organization. The common law contains 

various formulations and factors to be 

considered in determining the 

employment status of an individual. See 

Nationwide Mut. Ins. Co. v. Darden, 503 

U.S. at 318, 322–24 (1992). The 

contractual relationship between an 

individual and the labor organization 

and the actual duties of the individual, 

not the labels ‘‘independent contractor’’

or ‘‘consultant,’’ will determine whether 

an individual is a labor organization 

employee. A hired individual is an 

employee if the union has the right to 

control the manner and means by which 

the work product is accomplished. 

Among the other factors relevant to this 

inquiry are the skill required to perform 

the job; the source of the 

instrumentalities and tools; the location 

of the work; the duration of the 

relationship between the union and the 

individual; whether the union has the 

right to assign additional projects to the 

individual; the extent of the individual’s 

discretion over when and how long to 

work; the method of payment; the 

individual’s role in hiring and paying 

assistants; whether the work is part of 

the individual’s regular business; the 

provision of employee benefits; and the 

tax treatment of the individual. Id. 

Under this analysis, professionals 

who work ‘‘in house,’’ on more than an 

episodic basis, alongside other 

individuals employed by the union, 

typically are employees. For example, 

an accountant would be an employee of 

the labor organization if the labor 

organization determines the manner by 

which the accounting duties are 

performed, and the accountant is paid 

regularly by salary for his or her work 

activities. However, an accountant hired 

from a private firm for a fixed fee for a 

specific, non-recurring project likely 

would be an independent contractor. If 

the filer has any doubt about his or her 

status as an employee or independent 

contractor, the filer should consult a 

private attorney for legal advice or 

OLMS for further information. 

Although unions are required to 

report on their financial disclosure 

forms employees who receive more than 

$10,000 a year, 29 U.S.C. 431(b), there 

is no similar earnings threshold for 

reporting by labor union employees. A 

labor organization employee who earns 

less than $10,000 is subject to the 

reporting requirements. 

The source of payment is not 

dispositive of whether an individual is 

a labor organization employee. An 

individual who is paid by the employer 

to perform union work, either under a 

‘‘union leave’’ or ‘‘no docking’’ policy, 

is an employee of the union if the 

individual performs services for, and 

under the control of, the union. See 

discussion above, under the definition 

of ‘‘bona fide employee.’’ The mere fact 

that payment is made by the employer 

does not eliminate the individual’s 

status as an employee of the union. 

Thus, individuals who receive 

payments from an employer, either 

under a ‘‘union leave’’ or ‘‘no docking’’

policy, for work performed for, and 

under the control of, the union must file 

a Form LM–30. 

Labor organization officer, as 

proposed, means any constitutional 

officer, any person authorized to 

perform the functions of president, vice 

president, secretary, treasurer, or other 

executive functions of a labor 

organization, and any member of its 

executive board or similar governing 

51184 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

body. An officer is (1) a person 

identified as an officer by the 

constitution and bylaws of the labor 

organization; (2) any person authorized 

to perform the functions of president, 

vice president, secretary, or treasurer; 

(3) any person who in fact has executive 

or policy-making authority or 

responsibility; and (4) a member of a 

group identified as an executive board 

or a body which is vested with 

functions normally performed by an 

executive board. 

An officer thus includes a trustee 

appointed to oversee the union. A 

steward may not be identified in the 

union constitution as an officer, but may 

perform executive duties, and thus be 

an officer. 

This proposed definition tracks the 

definition of officer at section 3(n) of the 

LMRDA, 29 U.S.C. 402(n), and adds a 

new second sentence to the current 

regulation’s definition, 29 CFR 404.1(b). 

The LMRDA Manual applies the 

definition to trustees appointed to 

oversee a labor organization. See 

LMRDA Manual, 241.200. Comments 

are invited as to whether the proposed 

definition of ‘‘officer’’ is clear and, if 

not, how it may be improved. Title V of 

the LMRDA, like section 202, 

establishes a conflict of interest 

standard for union officials that extends 

to officers and other ‘‘representatives’’

of the union. Commenters are requested 

to address the Department’s 

determination that the reporting 

obligation does not reach all the union 

officials who are covered by the Act’s 

application of fiduciary standards to 

union officials and representatives. 29 

U.S.C. 501. 

Legal or equitable interest, as 

proposed, means any property or 

benefit, tangible or intangible, that has 

an actual or potential monetary value 

for the filer, spouse, or minor child 

without regard to whether the filer, 

spouse, or minor child holds possession 

or title to the interest. 

Minor child, as proposed, means a 

son, daughter, stepson, or stepdaughter 

less than 21 years of age. 

The current instructions, like the 

LMRDA, are silent about the age at 

which a child reaches his or her 

majority. There is no federal statute that 

prescribes a definition of ‘‘minor child’’

that would have application to section 

202(a) of the LMRDA. It is possible to 

construe the term ‘‘minor child’’ by 

reference to the law of the specific state 

where the action occurred, rather than 

construing the term to have a uniform, 

nationwide federal definition. State law 

definitions for the legal concept of 

childhood and age of majority differ 

from state to state but also may differ 

widely from legal context to legal 

context within the same state. Moreover, 

the general rule as set forth in 

Mississippi Band of Choctaw Indians v. 

Holyfield, 490 U.S. 30 (1989), is ‘‘in the 

absence of a plain indication to the 

contrary, * * * Congress when it enacts 

a statute is not making the application 

of the federal act dependant on state 

law.’’ Id. at 43, citing Jerome v. United 

States, 318 U.S. 101, 104 (1943). 

There is a need for a uniform, 

nationwide meaning of ‘‘minor child’’

under the LMRDA and without such a 

uniform definition the objective of the 

LMRDA will be frustrated. In this 

connection, not only do state law 

definitions for the legal concept of 

childhood and age of majority differ 

from state to state but also may differ 

widely from legal context to legal 

context within the same state. Thus, the 

same state may have differing age 

limitations for contracting, driving, 

marriage, child support and custody, 

voting, abortion, responsibility for 

medical care, taxes, tort law, welfare, 

and numerous other contexts. See 

generally Elizabeth S. Scott, The Legal 

Construction of Adolescence, 29 Hofstra 

L. Rev. 547 (2000). Further, court 

decisions are not always in agreement 

regarding how to determine which 

state’s law should apply in specific 

situations; i.e., a conclusion regarding a 

child’s age of majority may differ 

depending upon whether the situs of the 

activity or property, the actors’

residence, the actors’ domicile, or some 

other factor is controlling. See generally 

42 Am. Jur.2d Infants § 13, p. 21; 43 

C.J.S. Infants § 109, pp. 372–73. 

Decisions regarding which state law 

would be applicable to the age of 

majority of a specific ‘‘minor child’’ may 

also be made more difficult because of 

the significant changes in structure, 

scope, and complexity that labor 

organizations have undergone in recent 

decades. Such uncertainty as to which 

state law to apply and whether a report 

would be required would certainly 

function as obstacles to efficient and 

effective compliance, enforcement, and 

use of reports. A union member may be 

an officer of a local union, an 

intermediate union, and an 

international union, each located in a 

different state. Further, a rule that made 

the filing requirements vary by state 

could make an interest reportable by 

one officer in one state non-reportable 

by a different officer in another state. 

Both filers and union members who 

view filed reports require a known and 

easily applied single standard regarding 

when reports are required, and what a 

disclosure or its absence represents. 

In 1959 when the LMRDA was 

enacted, it was well established that at 

common law the age at which a person 

reached his or her majority in the states 

was twenty-one years. See, e.g., 5 

Samuel Williston and Richard A. Lord, 

A Treatise on the Law of Contracts § 9:3 

n.15 (4th ed. 1993 & Supp. 1999). The 

Department has concluded that in 1959 

when Congress used the term ‘‘minor 

child’’ in section 202(a) of the Act, 

Congress intended a uniform federal 

standard to apply and referred to the 

general common law meaning at that 

time, which was a person who had not 

yet reached the age of twenty-one years. 

We also believe that twenty-one is more 

suitable than an earlier age to 

distinguish between a child’s relative 

dependence upon, and independence 

from, the finances of a parent. 

Although the Department is not aware 

of any federal statute or policy 

counseling against the proposed 

definition, the Department 

acknowledges that 18 often is 

considered a threshold age, and that this 

age is sometimes used in federal statutes 

and regulations, e.g., 18 U.S.C. 25(a)(2) 

(crimes of violence using minors); 20 

U.S.C. 1228c(d)(5) (disclosure 

requirements for federal education 

activities); 42 U.S.C. 619 (block grants 

for temporary assistance for needy 

families); 42 U.S.C. 1396r–1a(b)(1) 

(grants to states for medical assistance 

programs); 42 U.S.C. 5106g(1) (child 

abuse treatment and prevention 

program); 5 CFR 843.102 

(administration of death benefits and 

employee refunds under federal 

retirement system); 34 CFR 263.3 (grant 

administration provision relating to 

professional development of certain 

educators allowing dependent 

allowance for care of children). Other 

statutes and regulations apply a state’s 

(or tribe’s) age of majority, e.g., 38 CFR 

1.464 (age of consent for certain medical 

treatment); 43 CFR 4.201 (testamentary 

interests of Native Americans). At the 

same time, other federal statutes and 

regulations, notably those with a focus 

on the financial dependency of an 

individual on his or her parents, apply 

a test that looks to both the individual’s 

age and circumstances. See, e.g., 5 

U.S.C. 8441 (survivor annuities for 

Federal employees); 26 U.S.C. 152(c)(3) 

(Internal Revenue Code); 28 U.S.C. 

376(a)(5) (survivor annuities for Federal 

judges); 38 CFR 3.57 (veterans’ benefits); 

20 CFR 645.120 (administration of 

welfare-to-work grants); 20 CFR 

416.1101 (supplemental security 

income). The SF 278 public disclosure 

form for senior government officials and 

employees defines the term ‘‘dependent 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51185 

child’’ to mean a filer’s ‘‘son, daughter, 

stepson, or stepdaughter if such person 

is either: (1) Unmarried, under age 21, 

and living in your household, or (2) a 

‘dependent’ of yours within the 

meaning of section 152 of the Internal 

Revenue Code of 1986.’’ SF 278, p. 2. 

The OGE 450, the confidential financial 

disclosure reports used by certain 

government employees at or below the 

GS–15 grade level, uses the same 

definition. OGE 450, p. 1. The 

Department, therefore, invites 

comments as to the appropriate age, 

particular circumstances, or both when 

financial holdings of, or transactions by, 

a child should no longer be reportable. 

Payer, as proposed, means: 

(1) An employer whose employees the 

filer’s labor organization represents or is 

actively seeking to represent; 

(2) A business a substantial part of which 

consists of dealing with an employer whose 

employees the filer’s labor organization 

represents or is actively seeking to represent; 

(3) A business that deals with the filer’s 

labor organization or a trust in which the 

labor organization is interested; or 

(4) Any employer or any person who acts 

as a labor relations consultant to an 

employer. 

The term payer is not used in the 

statute or the current form. In the 

revised form, the term ‘‘payer’’ is used 

to describe the employer, business, or 

labor relations consultant that is 

financially involved with the filer. The 

Department recognizes that the term is 

imperfect, in that in common parlance 

a business in which a filer holds an 

interest would not ordinarily be 

consider a ‘‘payer’’ of the filer. But the 

term, the Department believes, well 

describes an entity that provides income 

or other benefit, and adequately 

describes an entity that disburses the 

proceeds of a loan. It is thus used in the 

instructions as a shorthand description 

of the third party involved in a potential 

conflict-of-interest situation (as defined, 

‘‘payer’’ combines the key elements of 

section 202) and allows the filer to 

report on a single schedule all the 

reportable holdings and transactions 

which the filer had with a particular 

individual or entity. The Department 

requests comments on whether the term 

‘‘payer’’ is potentially confusing, in that 

some reportable events are not 

payments and the involved third party 

makes no disbursement, such as when 

a union officer holds an interest in the 

business of an employer. Comments are 

invited as to whether another word or 

short term would better describe the 

parties whose relationship to the filer 

triggers the reporting obligation. 

Publicly traded securities, as 

proposed, means bona fide investments 

in (1) securities traded on a registered 

national securities exchange under the 

Securities Exchange Act of 1934, (2) in 

shares in an investment company 

registered under the Investment 

Company Act of 1940, or (3) in 

securities of a public utility holding 

company registered under the Public 

Utility Holding Company Act of 1935, 

and income derived from such 

securities. The American Stock 

Exchange, Boston Stock Exchange, 

Chicago Board Options Exchange, 

Chicago Stock Exchange, International 

Securities Exchange, National Stock 

Exchange (formerly the Cincinnati Stock 

Exchange), New York Stock Exchange, 

Pacific Exchange, and Philadelphia 

Stock Exchange are registered with the 

Securities and Exchange Commission 

(SEC) under the Securities Exchange Act 

of 1934. The NASDAQ stock market is 

not a registered national securities 

exchange. As registration status may 

change, the filer should seek current 

information. Public investment 

companies comprise certain mutual 

funds, closed end funds, and unit 

investment trusts. Interstate public 

utility holding companies are engaged, 

through subsidiaries, in the electric 

utility business or in the retail 

distribution of natural or manufactured 

gas. A filer may determine whether an 

exchange is registered with the SEC by 

making inquiries with the exchange or 

by consulting the SEC. A list of 

registered exchanges is maintained by 

the SEC on its web site. A filer may 

determine whether an investment 

company or public utility holding 

company is registered with the SEC by 

making inquiries to the companies, 

checking any prospectus, or consulting 

the SEC. A list of registered public 

utility companies is maintained by the 

SEC on its web site. 

The statute treats certain securities 

differently than other holdings or 

transactions that trigger a reportable 

interest. Many securities, including 

certain stocks and bonds, are excluded 

from the reporting requirements, even 

when a security represents an 

ownership interest in an employer of 

the employees represented by the labor 

organization or in a business that deals 

with such an employer or with the 

filer’s labor organization, if the security 

constitutes a public traded security. 

Filers should also be aware that the 

security must also be a bona fide 

investment to be non-reportable. See 

discussion of bona fide investment 

above. Stock received as a gift, 

regardless of the exchange on which it 

is traded or its registration with the SEC, 

will not constitute a ‘‘bona fide 

investment,’’ under the provision that 

exempts from reporting bona fide 

investments in publicly traded 

securities when the gift is received from 

an employer, certain businesses, or a 

labor relations consultant. See 

discussion of bona fide investment, 

above. A union officer or employee who 

receives a gift of publicly traded stock 

from an employer, for example, must 

therefore disclose the holding, unless 

another exemption applies. A filer who 

is uncertain about whether a particular 

security must be reported should 

consult a securities specialist or OLMS. 

The SEC maintains a web site with 

general information about securities and 

how the public may contact the 

Commission for assistance: http:// 

www.sec.gov. 

The Senate Report addresses the 

‘‘publicly traded securities’’ exclusion 

as follows: 

[T]he reporting requirements contained in 

paragraphs (1) [through] (5) * * * shall not 

apply to publicly traded securities and other 

securities that are publicly regulated * * * 

[T]he committee believes that the holding of 

publicly traded or regulated stock can hardly 

lead to conflicts of interest because of the 

unlikelihood that such holdings will amount 

to a substantial or controlling interest. 

Existing public regulation of such securities 

held in such quantities provide sufficient 

safeguards of disclosure. 

Senate Report, at 38, reprinted in 1 

Leg. History, at 434. The House Report 

does not discuss an exclusion for 

publicly traded securities; however, the 

bill that was passed by the House 

contains the same exception for publicly 

traded securities as contained in both 

the Senate bill and the Act as passed. 

See H.R. 8400, reprinted in 1 Leg. 

History, at 619, 639, and 2 Leg. History, 

at 1691–92. 

The publicly traded securities 

exception echoes a point in the AFL–

CIO’s ethical practices code: 

The [restrictions on the holding of interests 

in a company that has substantial business 

with an employer whose employees are 

represented by the union or the latter’s 

competitors] do not apply in the case of an 

investment in the publicly traded securities 

of widely held corporations which 

investment does not constitute a substantial 

enough holding to affect or influence the 

course of corporate decision. 

AFL–CIO Ethical Practices Code, 

reprinted in 105 Cong. Rec. S16378 

(daily ed. Sept. 3, 1959) and 2 Leg. 

History, at 1408. 

The SF 278 instructions inform senior 

government employees to report the 

‘‘identity and category of valuation of 

any interest in property (real or 

personal) held by you, your spouse or 

dependent child in a trade or business, 

51186 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

or for investment or the production of 

income which has a fair market value 

which exceeds $1,000 as of the close of 

the reporting period. These interests 

include, but are not limited to, stocks, 

bonds, pension interests and annuities, 

futures contracts, mutual funds, IRA 

assets, tax shelters, beneficial interests 

in trusts, personal savings or other bank 

accounts, real estate, commercial crops, 

livestock, accounts or other funds 

receivable, and collectible items held for 

resale or investment.’’ There is no 

exception for bona fide investments in 

publicly traded securities. SF 278, p. 6–

7. The confidential form used by 

government employees of lower rank 

has comparable requirements, requiring 

reports of all assets that have a value 

greater than $1000 or that produce 

income over $200, although the filer 

need not report the value of the asset or 

the amount of income generated. OGE 

450, p. 2. 

The proposed instructions contain 

examples to highlight the differences 

among securities. The Department 

invites comments about its 

determination that a filer must report 

investments in securities that are traded 

on NASDAQ and any suggestions 

regarding the reporting of over-thecounter trades or similar transactions. 

Comments also are invited, as discussed 

above, as to whether some interests, 

income, and transactions in nonpublicly traded securities should be 

exempt from reporting, provided any 

such interests, income and transactions 

are of insubstantial value or amount and 

occur under terms unrelated to the 

filer’s status in a labor organization. 

Substantial part, as proposed, means 

5% or more. Where a business’s receipts 

from an employer whose employees the 

filer’s labor organization represents or is 

actively seeking to represent constitute 

5% or more of its annual receipts, a 

substantial part of the business consists 

of dealing with this employer. 

Substantial part, as used in section 

202(a)(3) of the LMRDA and the 

instructions for (a)(3), refers to the 

magnitude of the business transacted 

between the business and the employer 

whose employees the filer’s labor 

organization represents or is actively 

seeking to represent, as a percentage of 

all business transacted by the business. 

The threshold for substantiality is met 

when the business’s receipts from the 

employer constitutes 5% or more of the 

annual receipts of the business. The 

purpose of section 202(a)(3)’s 

substantial-part provision is to relieve 

union officials from having to report 

income or transactions that do not have 

potential conflict-of-interest 

implications. An official who has an 

interest in, or receives income from, a 

business that receives 5% or more of its 

income from the employer of the union 

members may well face a conflict. A 

business with 5% of its receipts from a 

single client will have the opportunity 

and inclination to make demands or 

offer inducements to retain that 

business. In negotiations with the 

union, the employer could use its 

relationship with the business as a 

bargaining tool, either threatening to 

end the relationship or promising to 

provide additional business 

opportunities. This presents the 

possibility that a union official may, for 

example, be coerced or have a financial 

incentive to accede to terms in 

negotiations with the employer of the 

union’s members that the official would 

otherwise reject. These possibilities 

counsel the disclosure of these 

relationships between the business and 

the employer, and the extent of the 

officer or employee’s interest in or 

income from the business. Disclosure of 

these relationships and financial 

interests and transactions will provide 

union members with important 

information about potential financial 

conflicts and will deter fraud and selfdealing, which can occur when an 

individual is subject to improper 

influence in the performance of official 

duties. This disclosure, like the other 

reforms proposed herein, will help 

union members ensure that their union 

officers and employees act on their 

behalf, and not give preferential 

treatment to any private business, 

employer, or individual. 

In proposing the 5% threshold, the 

Department has considered thresholds 

established by or under other statutes 

and regulations, e.g., 26 U.S.C. 72 (5% 

owners of an entity subject to different 

tax treatment under rules applicable to 

employee annuities and distributions); 5 

CFR 550.143(c) (a substantial part of a 

tour of duty constitutes at least 25%); 20 

CFR 416.211 (payment of a substantial 

part of an individual’s care means more 

than 50% for the purposes of reducing 

supplemental security income 

payments); 20 CFR 628.405 (substantial 

part of labor market to be defined by 

state ‘‘but shall not be less than 10% of 

the population of a labor market area’’); 

26 U.S.C. 501(c)(3) (‘‘an organization 

shall be exempt from taxation if, among 

other things, it is organized and 

operated exclusively for religious, 

charitable, scientific, testing for public 

safety, literary, or educational purposes 

and no substantial part of the activities 

of which is carrying on propaganda, or 

otherwise attempting, to influence 

legislation.’’); 26 CFR 1.501(c)(3)–1 (In 

determining whether the prohibited 

activities of an organization are 

‘‘substantial,’’ all the surrounding facts 

and circumstances, including the 

articles and activities of the 

organization, are to be considered); 

Haswell v. U.S., 500 F.2d 1133, 1146 

(Ct. Cl. 1974) (although finding 

percentage test inappropriate, court 

determines that where 20.5% of 

association’s expenditures in 1967 were 

for political activities, and 19.27% of 

total expenditures in 1968 were for 

political activities, political activities 

were a substantial part of association’s 

operations); Seasongood v. Comm’r, 227 

F.2d 907, 912 (6th Cir. 1955) (where less 

than 5 percent of time and effort of 

organization was devoted to political 

activities these activities were not a 

substantial part of the organization’s 

activities, and therefore contributions to 

the organization were tax deductible). 

A larger number of statutes and 

regulations leave ‘‘substantial’’

undefined or provide a qualitative factor 

in establishing its reach, e.g., 18 U.S.C. 

1093 (defining substantial as ‘‘such 

numerical significance,’’ the loss of 

which would destroy ‘‘group as a viable 

entity’’). The Department acknowledges 

that none of the statutes or regulations 

compels 5% or any other percentage as 

the threshold for defining substantiality 

of business dealings under the LMRDA, 

but, we believe that 5%, or something 

close to that figure, represents the 

appropriate level of business activity 

that may pose conflict of interest 

concerns and should be disclosed. The 

Department also believes that it is better 

to set the threshold at the lower end of 

the range of reasonableness in order to 

alert filers of the need to monitor their 

conduct to avoid actual conflict of 

interest situations. 

The Department seeks comments on 

whether a percentage threshold should 

be imposed, whether the percentage 

threshold should be higher or lower, 

whether a percentage of receipts is the 

appropriate consideration, whether 

union officials with holdings in, or 

income from, a business would be able 

to determine the percentage of the 

business’s income that comes from 

dealings with the employer, and 

whether a dollar amount threshold 

could lawfully be imposed, and, if so, 

what figure would represent an 

appropriate dollar threshold. 

Trust in which a labor organization is 

interested, as proposed, means a trust or 

other fund or organization (1) which 

was created or established by a labor 

organization, or one or more of the 

trustees or one or more members of the 

governing body of which is selected or 

appointed by a labor organization, and 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51187 

(2) a primary purpose of which is to 

provide benefits for the members of 

such labor organization or their 

beneficiaries. 

This definition is provided by section 

3(l) of the LMRDA. 29 U.S.C. 402(l). The 

inclusion of the definition in the 

instructions is meant to assist filers who 

otherwise might not recognize that the 

LMRDA prescribes a specific meaning to 

the term. 

c. The third heading of the proposed 

instructions is ‘‘Who Must File.’’ It 

combines the second and third 

categories of the existing form. The 

proposal restates the short description 

of the reporting obligation in the current 

form, but the proposal differs from the 

existing instruction in two ways. First, 

the proposal no longer provides for a 

‘‘Special Report.’’ As discussed, the 

special report was designed to inform 

filers that the Secretary could require 

additional information from them, 

specifically including certain 

information that the Secretary, by 

crafting administrative exclusions, had 

removed from the reporting obligation. 

Due to its lack of utility, the Department 

proposes to eliminate the provision 

regarding ‘‘Special Reports.’’

Second, as discussed above, the 

proposed instructions inform the filer 

that reports must include information 

about a spouse and minor child even if 

his or her status changes during the 

fiscal year, for example, by divorce or a 

child reaching age 21. 

3. The proposed instructions identify 

each subsection of section 202 by 

heading and explain the nature of the 

information that must be reported and 

any exceptions or exclusions under that 

particular subsection. Examples are 

provided to illustrate the application of 

each subsection. 

The revised instructions define the 

transactions that must be reported under 

this subsection. The Department expects 

that a more straightforward approach 

with clear examples will help eliminate 

the errors in previously filed Form LM–

30 reports, as discussed above, and 

increase compliance with the reporting 

requirements. 

Subsection 202(a)(1) 

The proposed instructions state: 

[A1] Payments or Benefits From, or Holdings 

in, an Employer Whose Employees Your 

Union Represents or Is Actively Seeking To 

Represent 

You must complete Form LM–30 if you or 

your spouse or your minor child, directly or 

indirectly, held a stock, bond, security, or 

other interest, legal or equitable, in, or 

derived any income or any other benefit with 

monetary value (including reimbursed 

expenses) from, an employer whose 

employees your labor organization represents 

or is actively seeking to represent. 

Exceptions 

You are not required to report: 

• Payments and benefits received as a bona 

fide employee of the employer. See definition 

of bona fide employee, above. 

• Holdings of, transactions in, or income 

from, bona fide investments in publicly 

traded securities. See definition of publicly 

traded securities. 

• Holdings of, transactions in, or income 

from, bona fide investments in securities that 

are not publicly traded provided any such 

holding, or transaction, or income is of 

insubstantial value or amount and occurs 

under terms unrelated to your status in a 

labor organization. Holdings or transactions 

involving $1,000 or less and receipt of 

income of $100 or less in any one security 

shall be considered insubstantial. See 

definition of publicly traded securities. 

Discussion: Under section 202(a)(1) of 

the LMRDA, officers and employees of 

a labor organization shall file with the 

Secretary a signed report listing and 

describing for the filer’s preceding fiscal 

year—‘‘any stock, bond, security, or 

other interest, legal or equitable, which 

he or his spouse or minor child directly 

or indirectly held in, and any income or 

any other benefit with monetary value 

(including reimbursed expenses) which 

he or his spouse or minor child derived 

directly or indirectly from, an employer 

whose employees such labor 

organization represents or is actively 

seeking to represent, except payments 

and other benefits received as a bona 

fide employee of such employer.’’ 29 

U.S.C. 432(a)(1). 

Three exclusions apply to reports 

under section 202(a)(1). The first is 

contained within 202(a)(1) and concerns 

payments received as a bona fide 

employee of the employer. See 

discussion of this exemption following 

the definition of bona fide employee. 

A second exclusion is prescribed by 

section 202(b) for publicly traded 

securities held as a bona fide 

investment. See discussion of this 

exemption following the definition of 

publicly traded securities. A third 

exclusion concerns insubstantial 

holdings, transaction, and income 

relating to securities that are not 

publicly traded. See discussion at 

section I.H.1, above. 

Insofar as section 202(a)(1) is 

concerned, the legislative history 

instructs: 

Section [202(a)(1)] requires a union officer 

or employee to disclose any securities or 

other interest which he has in a business 

whose employees his labor union represents 

or ‘‘seeks to represent’’ in collective 

bargaining. When a prominent union official 

has an interest in the business with which 

the union is bargaining, he sits on both sides 

of the table. He is under temptation to 

negotiate a soft contract or to refrain from 

enforcing working rules so as to increase the 

company’s profits. This is unfair to both 

union members and competing businesses. 

The same danger exists when the union 

official is interested in a business which his 

union is ‘‘actively seeking to represent’’ for 

the purposes of collective bargaining. 

Senate Report, at 15, reprinted in 1 

Leg. History, at 411. The text of the 

House Report repeats these points, 

virtually verbatim. House Report, at 11, 

reprinted in 1 Leg. History, at 769. 

To assist the filer, the instructions 

contain definitions of several terms used 

in this subsection, including legal or 

equitable interests, directly or indirectly, 

benefit with monetary value, actively 

seeking to represent, bona fide 

employee, and publicly traded 

securities. None of these key terms is 

explained in the current instructions. 

As discussed in section I.H.2., the 

Department proposes to remove an 

exemption found in the current 

instructions: Part A, exemption (iii) 

(dealing with goods and services in the 

regular course of business). Exemption 

(iv) (dealing with payments received as 

a bona fide employee) has been 

changed, as discussed above in 

connection with the definition of bona 

fide employee. 

The proposed instructions provide the 

following examples to help officers and 

employees identify interests and 

transactions that must be reported under 

this subsection. 

Example 1 

You are a union officer and truck 

driver who is paid for five days of work 

by the employer, even though you only 

drive a truck one day a week and spend 

the rest of the week handling union 

member grievances or other unionrelated work. You must report the pay 

and benefits received from the employer 

for the time spent performing union 

work under this subsection. 

Example 2 

You are an officer of a union that 

represents Widget Company employees. 

To help prepare for your retirement, you 

purchase 5,000 shares of Widget 

Company stock over the New York 

Stock Exchange or another registered 

stock exchange. You need not report the 

shares under this subsection, under the 

exception for bona fide investments in 

publicly traded securities. 

Example 3 

You are an officer of a union that 

represents Widget Company employees. 

Your wife owns 5,000 shares of Widget 

Company stock that Widget’s CEO gave 

51188 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

her on Mother’s Day two years ago. This 

stock is traded on the New York Stock 

Exchange or another registered stock 

exchange. You must report the shares 

under this subsection because the 

holding of this interest is reportable 

regardless of when it was obtained and, 

as a gift, the exclusion for bona fide 

investments in publicly traded 

securities does not apply. 

Example 4 

You are a full-time officer of a union 

that represents employees of several 

different employers. One of the 

employers pays your expenses on a trip 

with management officials to a plant in 

another part of the country to view some 

new equipment that the employer is 

considering purchasing. You must 

report the travel expenses under this 

subsection. 

Example 5 

You are an employee of a union that 

represents actors. You own a production 

company whose employees are 

represented by your union. You must 

report your interests in the production 

company under this subsection. 

Example 6 

You are an employee of union and 

your spouse works as a producer for a 

dinner theater that employs actors 

represented by your labor organization. 

She works 40 to 50 hours a week, 

producing shows and is paid a yearly 

salary. You do not have to report her 

earnings under this subsection because 

her payments are received as a bona fide 

employee of the theater company. 

Example 7 

You are a union officer and you 

receive payments under an ERISA 

qualified pension plan. The payments 

relate to your past employment for an 

employer whose employees your labor 

organization represents. These 

payments are received as a bona fide 

employee of the employer, and you do 

not have to report these payments under 

this subsection. 

The Department invites comments on 

this subsection and encourages 

commenters to propose additional 

examples that would help filers comply 

with the requirements of the Act. 

Subsection 202(a)(2) 

The proposed instructions state: 

[A2] Transactions Involving Loans From and 

Holdings in an Employer Whose Employees 

Your Union Represents or Is Actively Seeking 

To Represent 

You must complete Form LM–30 if you or 

your spouse or your minor child, directly or 

indirectly, engaged in any transaction 

involving any stock, bond, security, or loan 

to or from, or other legal or equitable interest 

in the business of an employer whose 

employees your labor organization represents 

or is actively seeking to represent. 

Exception 

You are not required to report: 

• Holdings of, transactions in, or income 

from, bona fide investments in publicly 

traded securities. See definition of publicly 

traded securities. 

• Holdings of, transactions in, or income 

from, bona fide investments in securities that 

are not publicly traded provided any such 

holding, or transaction, or income is of 

insubstantial value or amount and occurs 

under terms unrelated to your status in a 

labor organization. Holdings or transactions 

involving $1,000 or less and receipt of 

income of $100 or less in any one security 

shall be considered insubstantial. See 

definition of publicly traded securities. 

Special Note: [A2] covers situations where 

a union officer or employee or his or her 

spouse or minor child held an interest during 

the reporting year but sold, transferred or 

otherwise liquidated it prior to the end of the 

fiscal year. Such an interest must be reported 

under this subsection. 

Discussion: Under section 202(a)(2) of 

the LMRDA, officers and employees of 

a labor organization shall file with the 

Secretary a signed report listing and 

describing for the filer’s preceding fiscal 

year—‘‘any transaction in which he or 

his spouse or minor child engaged, 

directly or indirectly, involving any 

stock, bond, security, or loan to or from, 

or other legal or equitable interest in the 

business of an employer whose 

employees such labor organization 

represents or is actively seeking to 

represent.’’ 29 U.S.C. 432(a)(2). 

The legislative history explains that 

this subsection is designed to capture 

transactions during the reporting period 

of any matters that would be covered if 

the holdings or other property remained 

at the close of the reporting period. In 

virtually identical language, the 

committee reports stated: ‘‘[S]ection 

[202(a)(2)] is ancillary to [section 

[202(a)(1)]. * * * Its chief purpose is to 

prevent dishonest persons from 

circumventing [202(a)(1)] by transferring 

securities out of their names on the date 

of their report but this provision also 

covers other transactions such as loans 

from the employer.’’ Senate Report, at 

15 (quoted), reprinted in 1 Leg. History, 

at 411; House Report, at 11; reprinted in 

1 Leg. History, at 769. 

The proposed instructions inform 

filers that the obligation to report loans 

includes any transaction in which a 

payer acted as a guarantor of a loan. See 

LMRDA Manual, §§ 244.170; 253.041. 

[A2] covers only loans to or from the 

employer whose employees his 

organization represents or is actively 

seeking to represent. Loans from other 

employers are to be considered under 

[A6], discussed below. 

As discussed in section I.H.2., above, 

the Department proposes to remove 

exemption (iii) (dealing with goods and 

services in the regular course of 

business). Similarly, the Department 

proposes to eliminate exemption (iv) 

(dealing with payments received as a 

bona fide employee), now contained in 

the current instructions, as to reports 

under this subsection. 

The proposed instructions provide the 

following examples to help officers and 

employees identify interests and 

transactions that must be reported under 

this subsection. 

Example 1 

You are a union officer and after the 

beginning of the fiscal year, you are 

allowed to participate in the purchase of 

stock options at a preferred rate for a 

new business enterprise launched by 

the employer. Three weeks before the 

end of your fiscal year, you exercise the 

options to purchase the stock and then 

immediately sell it to realize a gain of 

$25,000. This transaction must be 

reported under this subsection even 

though you no longer own the stock. 

Example 2 

You are a union employee and your 

minor child receives 100 shares of stock 

as a high school graduation gift from an 

employer whose employees your union 

represents. She immediately sells it to 

assist with college expenses. Both 

transactions, the receipt and the sale, 

must be reported under this subsection. 

Example 3 

You are a union officer, and like all 

employees of the employer whose 

members your union represents, you 

hold an ownership interest in the 

business of the employer. In this fiscal 

year, you sell this interest to the 

employer. Although the holding of this 

interest is not reportable under section 

202(a)(1) because it is a benefit received 

as a bona fide employee, the sale of the 

interest is reportable under this 

subsection. 

Example 4 

You are a union officer and your 

husband receives a loan from an 

employer whose employees your union 

represents. The loan must be reported 

under this subsection. 

Example 5 

You are a union employee. Your wife 

is a partner of a package delivery 

company. The company receives a loan 

from Easy Credit Limited that was 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51189 

arranged with the assistance of an 

employer whose employees are 

represented by your union. The loan 

must be reported under this subsection. 

The Department invites comments on 

this subsection and encourages 

commenters to propose additional 

examples that would help filers comply 

with the requirements of the Act. 

Subsection 202(a)(3) 

The proposed instructions state: 

[A3] Holdings in or Transactions With a 

Business that Deals with an Employer Whose 

Employees Your Union Represents or Is 

Actively Seeking To Represent 

You must complete Form LM–30 if you, 

your spouse or your minor child, directly or 

indirectly, held an interest in, or received 

any income or other benefit with monetary 

value (including reimbursed expenses) from, 

any business a substantial part of which 

consists of buying from, selling or leasing to, 

or otherwise dealing with, the business of an 

employer whose employees your labor 

organization represents or is actively seeking 

to represent. 

Exception 

You are not required to report: 

• Holdings of, transactions in, or income 

from, bona fide investments in publicly 

traded securities. See definition of publicly 

traded securities. 

• Holdings of, transactions in, or income 

from, bona fide investments in securities that 

are not publicly traded provided any such 

holding, or transaction, or income is of 

insubstantial value or amount and occurs 

under terms unrelated to your status in a 

labor organization. Holdings or transactions 

involving $1,000 or less and receipt of 

income of $100 or less in any one security 

shall be considered insubstantial. See 

definition of publicly traded securities. 

Discussion: Under section 202(a)(3) of 

the LMRDA, officers and employees of 

a labor organization shall file with the 

Secretary a signed report listing and 

describing for the filer’s preceding fiscal 

year—‘‘any stock, bond, security, or 

other interest, legal or equitable, which 

he or his spouse or minor child directly 

or indirectly held in, and any income or 

any other benefit with monetary value 

(including reimbursed expenses) which 

he or his spouse or minor child directly 

or indirectly derived from, any business 

a substantial part of which consists of 

buying from, selling or leasing to, or 

otherwise dealing with, the business of 

an employer whose employees such 

labor organization represents or is 

actively seeking to represent.’’ 29 U.S.C. 

432(a)(3). 

Apart from paraphrasing the language 

of section 203(a)(3), the committee 

reports noted only that the McClellan 

Committee hearings disclosed ‘‘a 

number of instances in which union 

officials gained personal profit from a 

business which dealt with the very same 

employer with whom they engaged in 

collective bargaining on behalf of the 

union.’’ Senate Report, at 15 (quoted), 

reprinted in 1 Leg. History, at 411; see 

House Report, at 12 (virtually the same), 

reprinted in 1 Leg. History, at 770. The 

Senate and House committees each 

endorsed the concern expressed in the 

AFL–CIO’s Ethical Practices Code that 

the union official ‘‘may be given special 

favors or contracts by the employer in 

return for less than a discharge of his 

obligations as a trade-union leader.’’

Senate Report, at 15, reprinted in 1 Leg. 

History, at 411; House Report, at 12, 

reprinted in 1 Leg. History, at 770. 

The proposed instructions explain the 

key terms of this provision, most of 

which have been discussed in 

connection with [A1] and [A2]. The 

term substantial part is unique to [A3]. 

As discussed above, in the definition of 

this term, where a business’s receipts 

from an employer whose employees the 

filer’s labor organization represents or is 

actively seeking to represent constitute 

5% or more of its annual receipts, a 

substantial part of the business consists 

of dealing with this employer. 

The interest in, or income derived 

from the business must be disclosed in 

full. A filer is not permitted to reduce 

the amount reported by, for example, a 

percentage proportionate to the amount 

of work performed by the business for 

the employer. 

The proposed instructions provide the 

following examples to help officers and 

employees identify interests and 

transactions that must be reported under 

this subsection. 

Example 1 

You are a union officer. You own a 

small machine parts business. The 

employer of the employees your union 

represents purchased a large quantity of 

machine parts from your business. The 

employer’s purchases represented 10% 

of the total receipts of your business that 

year. You must report, under this 

subsection, your interest in the machine 

parts business and the dealings between 

the business and the employer. 

Example 2 

You are an officer of an international 

union. Your wife owns an accounting 

firm and last year 20% of the receipts 

of her firm were from an employer 

whose employees are represented by a 

local union that is subordinate to your 

international union. You must report, 

under this subsection, your wife’s 

interest in the accounting firm and the 

dealings between her business and the 

employer. 

Example 3 

You are a union officer and part 

owner of a copier supply company. 

Your union represents employees of 

employers A, B, and C. Last year 3% of 

the company’s receipts were from 

employer A, 2% were from employer B, 

and 4% were from employer C. You 

must report under this subsection 

because a total of 9% of the company’s 

receipts was from employers whose 

employees your labor organization 

represents. You must report your 

interests in the copier supply company, 

and its dealings with each of the 

employers. 

Example 4 

You are the business manager of a 

local union that represents stage 

technicians. You have a business 

supplying lighting and other equipment 

to companies putting on shows and 

conventions within the jurisdiction of 

your local. These companies employ 

members of your union, and 5% or more 

of your business is derived from these 

companies. You must report, under this 

subsection, your interest in your 

business and its dealings with the 

companies that hire the union members. 

Example 5 

You are the president of a union that 

represents employees of a trucking 

company. In addition to his full time 

job, your spouse moonlighted part-time 

last year and earned $9,000 cleaning 

business offices on Sundays. Once a 

month, the trucking company paid your 

spouse $80 to clean its office space, for 

an annual total of $960, about 10% of 

his company’s business. You must 

report the $9,000 in income under this 

subsection, as well as the dealings 

between the cleaning business and the 

trucking company. 

Example 6 

You are an employee of a union that 

has a collective bargaining agreement 

with trade show contractors. You were 

also a seasonal employee of a company 

that received 5% of its receipts last year 

from leasing fork lifts to these 

contractors. You must report, under this 

subsection, your income or other 

benefits with monetary value (including 

reimbursed expenses) received from the 

company and the dealings between the 

company and the contractors. 

Example 7 

You are the treasurer of a union that 

has a collective bargaining agreement 

with trade show contractors. You are the 

owner of a company that gets 100% of 

its income from providing laborers to 

those contractors for handling empty 

51190 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

crates. You must report, under this 

subsection, your ownership interest in 

the company and its dealing with the 

trade show contractors. 

Example 8 

You are a union employee. Your wife 

is an employee of a law firm that 

received 10% of its income last year 

from an employer whose employees 

your union represents. You must report, 

under this subsection, your wife’s 

income or other benefits with monetary 

value (including reimbursed expenses) 

received from the law firm, and the 

dealing between the law firm and the 

employer. 

The Department invites comments on 

this subsection and encourages 

comments proposing additional 

examples that would help filers comply 

with the requirements of the Act. The 

Department specifically requests 

comments on the threshold set to 

establish a ‘‘substantial part’’ of a 

company’s business. 

Subsection 202(a)(4) 

The proposed instructions state:

[A4] Holdings in or Transactions With a 

Business That Deals With Your Union or a 

Trust in Which Your Union Is Interested 

You must complete Form LM–30 if you or 

your spouse or your minor child, directly or 

indirectly, held an interest in, or received 

any income or other benefit with monetary 

value (including reimbursed expenses) from, 

a business any part of which consists of 

buying from, selling or leasing to, or 

otherwise dealing with, your labor 

organization or a trust in which your labor 

organization is interested. 

Exception 

You are not required to report: 

• Holdings of, transactions in, or income 

from, bona fide investments in publicly 

traded securities. See definition of publicly 

traded securities.

• Holdings of, transactions in, or income 

from, bona fide investments in securities that 

are not publicly traded provided any such 

holding, or transaction, or income is of 

insubstantial value or amount and occurs 

under terms unrelated to your status in a 

labor organization. Holdings or transactions 

involving $1,000 or less and receipt of 

income of $100 or less in any one security 

shall be considered insubstantial. See 

definition of publicly traded securities.

Discussion: Under section 202(a)(4) of 

the LMRDA, officers and employees of 

a labor organization shall file with the 

Secretary a signed report listing and 

describing for the filer’s preceding fiscal 

year—‘‘any stock, bond, security, or 

other interest, legal or equitable, which 

he or his spouse or minor child directly 

or indirectly held in, and any income or 

any other benefit with monetary value 

(including reimbursed expenses) which 

he or his spouse or minor child directly 

or indirectly derived from, a business 

any part of which consists of buying 

from, or selling or leasing directly or 

indirectly to, or otherwise dealing with 

such labor organization.’’

The committee reports use nearly 

identical language to explain this 

subsection:

Section [202(a)(4)] requires a union officer 

or employee to report any interests which he 

has in, or income which he derives from, a 

business which buys from, sells or leases to, 

or otherwise deals with, a labor organization.

Senate Report, at 15, reprinted in 1 

Leg. History, at 411; House Report, at 12 

(virtually verbatim), reprinted in 1 Leg. 

History, at 770. As an illustration of the 

practice, the committees described a 

situation where an ‘‘officer of a local 

union charged with purchasing supplies 

or services might be tempted to favor a 

firm in which he owned a dominant 

interest.’’ Senate Report, at 16, reprinted 

in 1 Leg. History, at 412; House Report, 

at 12 (virtually verbatim), reprinted in 1 

Leg. History, at 770. 

The committee reports provide as an 

additional illustration, a situation in 

which ‘‘an officer charged with placing 

the union’s insurance would be tempted 

to place it through a firm of insurance 

brokers in which he owned an interest.’’

Id.

The breadth of this subsection was 

described by Senator Goldwater as 

‘‘cover[ing] every conflict-of-interest 

situation.’’ Senate Report, at 90, 

reprinted in 1 Leg. History, at 486. This 

subsection uses no terms that have not 

been earlier discussed. Its chief 

difference from the other subsections is 

that its focus is on interests or income 

derived from a business that deals with 

the filer’s labor organization. 

As in the current form, the 

Department proposes to retain the 

requirement that transactions with 

businesses that deal with trusts in 

which the filer’s labor organization is 

interested are reportable. See 

Instructions, Part B. 

The interest in, or income derived 

from the business must be disclosed in 

full. A filer is not permitted to reduce 

the amount reported by, for example, a 

percentage proportionate to the amount 

of work performed by the business for 

the employer. 

The proposed instructions provide the 

following examples to help officers and 

employees identify interests and 

transactions that must be reported under 

this subsection. 

Example 1 

You are an officer of a district council. 

Your spouse owns and operates a small 

catering business. Your union purchases 

catering services from your spouse’s 

business during the fiscal year. You 

must report, under this subsection, your 

spouse’s ownership interest in the 

catering business, and its dealings with 

the union. 

Example 2 

You are a union officer. You work 

part time for a business that did 

maintenance work on the heating and 

air conditioning system at the union 

hall. You must report, under this 

subsection, the income and other 

benefits with monetary value (including 

reimbursed expenses) received from the 

maintenance business, and its dealings 

with the union. 

Example 3 

You are a business manager of a local 

union. You work on a contract basis for 

a plumbing supply company that sold 

tools and other supplies to the union 

and its training funds. You must report 

your income and other benefits with 

monetary value (including reimbursed 

expenses) received from the plumbing 

supply company under this subsection, 

and the dealings between the supply 

company, the union, and the training 

funds. 

Example 4 

You are an officer of a national union. 

You and your husband own a printing 

company that prints the union 

newsletters for a local union of the same 

national union. You must report, under 

this subsection, your and your 

husband’s ownership interest in the 

printing company and its dealing with 

the union. 

Example 5 

You are an officer of a joint board and 

run a snow plowing business. The joint 

board is subordinate to an international 

union. The international union 

contracted with the business to plow the 

parking lot of its headquarters. You 

must report your interest in the snow 

plowing business under this subsection, 

in addition to the business’s interest 

with the international union. 

Example 6 

You are the president of a local union 

and a partner in a company that was 

hired to resurface the union’s parking 

lot. You must report, under this 

subsection, your interest in the business 

and its dealings with the union. 

Example 7 

You are an employee of a national 

union. Your wife works for a travel 

agency that handles all the travel

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51191 

arrangements by officers and employees 

of the national union. In addition to 

your wife’s employment compensation 

from the travel agency, she also receives 

rebates from hotels for bookings made 

for the union. You must report your 

wife’s income and other benefits with 

monetary value (including reimbursed 

expenses) received from that business, 

and the value of the rebates she received 

under this subsection, as well as the 

dealings between the travel agency and 

the union. 

Example 8 

You are the president of a local union 

and your 19-year old son works for a 

business that produces customized 

t-shirts, caps, and jackets. Your local 

union buys logo items from his 

business. You must report your son’s 

income and other benefits with 

monetary value (including reimbursed 

expenses) received from this business 

under this subsection, and the dealing 

between the business and the union. 

Example 9 

You are a business representative of a 

local union that represents shipyard 

workers. You and two other business 

representatives own a company that 

does medical testing of local members, 

which is paid for by a health benefit 

plan that is a trust in which your local 

is interested. You must report your 

interest in the medical testing company 

under this subsection, and the dealings 

between the testing company and the 

health benefit plan. 

Example 10 

You are an employee of a union. Each 

year your union holds an annual 

workers’ summer school at a private 

university whose space and services are 

rented by the union. You go to the 

summer school as an instructor and 

bring your wife and two minor children. 

At no extra charge to you, the university 

provides accommodations for you, your 

wife and minor children, rather than the 

single room typically provided 

instructors. The use of the additional 

space and its fair market value must be 

reported under this subsection, in 

addition to the dealings between the 

university and the union. 

Example 11 

You are the president of a local union 

and own a building, which has 

numerous tenants, including your local. 

The ownership and income received 

from the operation of the building and 

the dealings between you and the union 

must be reported under this subsection. 

Example 12 

You are a national union president 

and a trustee of a jointly administered 

health care trust that insures union 

members through an insurance 

company. Premiums for coverage are 

paid by the trust to the insurance 

company. You are a member of the 

board of directors of the health 

insurance company, which pays you an 

annual fee and reimburses expenses for 

your attendance at board meetings. In 

your capacity as a trustee of the health 

care trust, you recuse yourself from all 

decisions concerning the health 

insurance company. As the insurance 

company is doing business with a trust 

in which your union is interested, you 

must report your annual fee and 

reimbursed expenses under this 

subsection. The dealings between the 

health insurance company and the trust 

must also be reported. 

Example 13 

You are an employee of a national 

union and your husband works for a law 

firm that represents a local union that is 

affiliated with your national union. You 

must report, under this subsection, your 

husband’s income and other benefits 

with monetary value (including 

reimbursed expenses) received from the 

law firm, and the dealings between the 

law firm and the local union. 

Example 14 

You are a national union president 

and director of a registered investment 

company that offers investment 

opportunities to unions or trusts in 

which unions are interested. Your union 

has invested several thousand dollars in 

fixed income or equity funds managed 

by the company. You receive no 

gratuities, compensation, or 

reimbursement for your duties as a 

director, but you are insured against 

personal liability for your actions as a 

director under a policy paid for by the 

company. The investment company 

paid for this insurance coverage. You 

must report the payment under this 

subsection, and the dealings between 

the investment company and the union. 

The Department invites comments on 

this subsection and encourages 

commenters to propose additional 

examples that would help filers comply 

with the requirements of the Act. 

Subsection 202 (a)(5) 

The proposed instructions state: 

[A5] Transactions or Arrangements With an 

Employer Whose Employees Your Union 

Represents or Is Actively Seeking To 

Represent 

You must complete Form LM–30 if you or 

your spouse or your minor child had any 

direct or indirect business transaction or 

arrangement with any employer whose 

employees your labor organization represents 

or is actively seeking to represent. 

Exceptions 

You are not required to report: 

• Payments and benefits received as a bona 

fide employee of the employer. See definition 

of bona fide employee. 

• Holdings of, transactions in, or income 

from, bona fide investments in securities that 

are not publicly traded provided any such 

holding, or transaction, or income is of 

insubstantial value or amount and occurs 

under terms unrelated to your status in a 

labor organization. Holdings or transactions 

involving $1,000 or less and receipt of 

income of $100 or less in any one security 

shall be considered insubstantial. See 

definition of publicly traded securities. 

• Purchases and sales of goods or services 

at prices generally available to any employee 

of the employer. 

• Holdings of, transactions in, or income 

from, bona fide investments in publicly 

traded securities. See definition of publicly 

traded securities. 

Special Note: You must report special 

discounts, special rates and other special 

treatment that you or your spouse or your 

minor child receives from an employer 

whose employees your labor organization 

represents or is actively seeking to represent. 

See definitions of labor organization and 

actively seeking to represent. A filer who 

purchases an item at a reduced price 

generally available to employees of the 

employer must nevertheless report the 

discount, and may not claim the exemption, 

unless the filer is an employee of the 

employer providing the discount. 

Discussion: Under section 202(a)(5) of 

the LMRDA, officers and employees of 

a labor organization shall file with the 

Secretary a signed report listing and 

describing for the filer’s preceding fiscal 

year—‘‘any direct or indirect business 

transaction or arrangement between him 

or his spouse or minor child and any 

employer whose employees his 

organization represents or is actively 

seeking to represent, except work 

performed and payments and benefits 

received as a bona fide employee of 

such employer and except purchases 

and sales of goods or services in the 

regular course of business at prices 

generally available to any employee of 

such employer.’’

The Senate and House Reports 

explained this provision in nearly 

identical language: 

[This subsection] requires a union official 

to disclose any business transaction with an 

employer with whom his organization deals. 

51192 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

The aim of this subsection is to prevent 

loans, under-the-table payments, special 

discounts, and other personal allowances 

which might influence a union official in the 

conduct of an organizational campaign or 

collective bargaining with the employer. The 

testimony before the McClellan committee 

demonstrates the need to compel disclosure. 

Normal transactions such as the payment of 

wages and the purchase and sale of goods or 

services at prices available to employees 

generally are excepted.

Senate Report, at 12 (quoted), 

reprinted in 1 Leg. History, at 412; 

House Report, at 12 (virtually verbatim), 

reprinted in 1 Leg. History, at 770. The 

only difference between the reports is 

that the House tied the exception to a 

product’s availability ‘‘on the open 

market’’ in place of the Senate’s 

qualification of the rule as ‘‘generally.’’

Id. The LMRDA Manual addresses (a)(5) 

as follows:

Section 205(a)(5) is designed to pick up 

any direct or indirect business transactions 

between the union officer (or his wife or 

minor child) and the employer whose 

employees the union officer’s organization 

represents. There are two very important 

statutory exceptions, namely payments of 

bona fide wages to the union officer for 

regular work performed, and purchases and 

sales in the regular course of business at 

prices generally available to any employee of 

the employer.

LMRDA Manual, § 247.300. The 

LMRDA Manual continues: Where a 

union official ‘‘is a regular employee on 

the assembly line,’’ he does not need to 

report a 20% discount on a new 

automobile that is available to any 

regular employee, but if the official is 

not a regular employee he must report 

the purchase. Id. Under the current 

instructions, however, the ‘‘regular 

course of business’’ exception appears 

to apply generally, without regard to 

whether the individual obtaining the 

discount is an employee of the employer 

providing the discount. Instructions, 

Part A, exclusion (iii). The proposed 

instructions clarify that the only 

individuals who may avoid reporting 

employee discounts are employees of 

the employer. 

[A5] covers only business transactions 

with the employer whose employees the 

filer’s organization represents or is 

actively seeking to represent. Payments 

of money or other things of value are to 

be considered under section [A6], 

discussed below. 

As discussed in section I.H.2., above, 

exemption (iv) (dealing with payments 

received as a bona fide employee) has 

been modified, as discussed following 

the definition of bona fide employee. 

The proposed instructions provide the 

following examples to help officers and 

employees identify interests and 

transactions that must be reported under 

this subsection. 

Example 1 

You are an officer of an international 

union affiliated with a local union that 

represents employees at an automobile 

plant. The employer permits you to 

participate in an executive purchase 

plan under which management 

executives are permitted to purchase 

vehicles produced by the employer at a 

discount and at a lower interest rate. 

The transaction must be reported under 

this subsection. 

Example 2 

You are an employee of a union that 

represents employees at Acme 

Warehouse. At your request, Acme 

allows your neighbor to store his 

company’s inventory at a rate below the 

customary storage rate. Your neighbor, 

in turn, shows his gratitude by allowing 

you to use his luxury box at a sporting 

event. You must report this 

arrangement. 

The Department invites comments on 

its interpretation of this subsection and 

encourages commenters to propose 

additional examples that would help 

filers comply with the requirements of 

the Act. 

Subsection 202(a)(6) 

The proposed instruction states:

[A6] Payments of Money or Other Thing of 

Value From Any Employer or Labor Relations 

Consultant 

You must file Form LM–30 if you or your 

spouse or your minor child received, directly 

or indirectly, any payment of money or other 

thing of value (including reimbursed 

expenses) from any employer or any labor 

relations consultant to an employer. 

The types of payments that must be 

reported under this subsection include any 

payment from an employer or a labor 

relations consultant to an employer for the 

following purposes: 

• Not to organize employees 

• To influence employees in any way with 

respect to their rights to organize 

• To take any action with respect to the 

status of employees or others as members of 

a labor organization; and 

• To take any action with respect to 

bargaining or dealing with employers whose 

employees your organization represents or 

seeks to represent.

Special Note: If you received a payment or 

other thing of value, including reimbursed 

expenses, from an employer whose 

employees your union represents or actively 

seeks to represent, or a business that consists 

in substantial part of dealing with such an 

employer, or a business that has any dealings 

with your union, the payment should be 

reported under sections [A1]–[A5]. Section 

202(a)(6) covers payments and other things of 

value, including reimbursed expenses, from 

businesses and employers that are not 

covered by the more specific provisions of 

sections 202(a)(1)–(5). Thus, for example, if 

a transaction concerns a payment to you from 

the employer whose employees your labor 

organization represents or actively seeks to 

represent, or a business that deals with such 

an employer or your labor organization, the 

payment should be reported under the 

appropriate subsection in section 202(a)(1)–

(5).

Exception 

You are not required to report: 

• Payments of the kinds referred to in 

LMRA section 302(c), summarized below:

Discussion: Under section 202(a)(6) of 

the LMRDA, officers and employees of 

a labor organization shall file with the 

Secretary a signed report listing and 

describing for the filer’s preceding fiscal 

year—‘‘any payment of money or other 

thing of value (including reimbursed 

expenses) which he or his spouse or 

minor child received directly or 

indirectly from any employer or any 

person who acts as a labor relations 

consultant to an employer, except 

payments of the kinds referred to in 

section 186(c) of this title,’’ 29 U.S.C. 

186(c) (also known as section 302 of the 

Labor Management Relations Act, 1947). 

The committee reports described 

subsection (a)(6) in identical language as 

follows:

Section [202(a)(6)] requires a union official 

to disclose any payment received from an 

employer or from any person who acts as a 

labor relations consultant for an employer 

except payments permitted by section 302 of 

the Labor-Management Relations Act of 1947, 

as amended. The purpose of this paragraph, 

among other things, is to reach the union 

official who may receive a payment from an 

employer not to organize [its] employees.

Senate Report, at 16, reprinted in 1 

Leg. History, at 412; House Report, at 12 

(virtually verbatim), reprinted in 1 Leg. 

History, at 770. As described by the 

LMRDA Manual, the subsection is 

designed to capture ‘‘situations that 

pose conflict of interest problems which 

are not covered in the previous five 

sections of 202.’’ LMRDA Manual, 

§ 248.005. By way of example, it 

continues: ‘‘A union officer must report 

under section 202(a)(6), if he receives 

any payment by way of dividends or 

otherwise from a firm which is 

competitive to one which has collective 

bargaining agreements with his own 

union.’’ Id.

Subsection (a)(6) has been interpreted 

consistent with its description as a 

‘‘catch-all’’ for transactions with 

employers not reportable under 

subsections (a)(1) through (a)(5). 

Language unique to section (a)(6) is 

found in the exception it provides for 

‘‘payments of the kinds referred to in

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51193 

section 302(c) of the Labor Management 

Relations Act, 1947, as amended.’’

Section 302(c) contains a number of 

categories with exceptions and provisos 

that limit their general availability. 

In explaining the reference to 302(c), 

the Senate Report stated: 

[T]he general ban in section 302 upon 

employer payments to unions is not to apply 

to money deducted from the wages of 

employees pursuant to a collective 

bargaining agreement in the form of periodic 

payments to a union in lieu of membership 

dues, not to employer payments to trust 

funds for pooled vacation, holiday, severance 

or similar benefits, or apprentice or other 

employee training programs. 

Senate Report, at 44 (discussing 

comparable language addressing an 

employer’s reporting obligation), 

reprinted in Leg. History, at 440; 

compare House Report, at 35 (no 

discussion beyond noting exception of 

‘‘payments of the kinds referred to in 

section 302(c)’’), reprinted in 1 Leg. 

History, at 793. 

The current instructions do not 

attempt to characterize the categories or 

assist the filer in applying them to his 

or her completion of the Form LM–30. 

Instead, the current instructions simply 

set out the entire text of section 302(c), 

verbatim. 

The Department’s proposed 

instructions describe the types of 

payments that, as a general rule, need 

not be reported under section (a)(6): 

• (1) Any money or other thing of value 

payable by an employer to 

—(a) An employee acting openly for the 

employer in matters of labor relations or 

personnel administration, or 

—(b) Any officer or employee of a labor 

organization who also is an employee or 

former employee of such employer, as 

compensation for or by reason of, his 

service as an employee of such employer; 

• (2) Money or other thing of value payable 

in satisfaction of a judgment, arbitral award, 

settlement or release of any claim in the 

absence of fraud or duress; 

• (3) With respect to the sale or purchase 

of an item at the prevailing market price in 

the regular course of business; 

• (4) With respect to deductions in 

payment of labor union dues from wages by 

written assignment; 

• (5) With respect to money or other thing 

of value paid to a trust fund established by 

the representative of an employer’s 

employees for the sole benefit of these 

employees, their families and dependents for 

medical or hospital care, pensions on 

retirement or death of employees, 

compensation for injuries or illness resulting 

from occupational activity or insurance to 

provide the foregoing, or unemployment 

benefits or life insurance, disability and 

sickness insurance, or accident insurance; 

• (6) With respect to money or other thing 

of value paid by any employer to a trust fund 

established by the representative of the 

employer’s employees for the purpose of 

pooled vacation, holiday, severance or 

similar benefits, or defraying costs of 

apprenticeship or other training programs; 

• (7) With respect to money or other thing 

of value paid by any employer to an 

individual or pooled trust fund for providing 

scholarships for the benefit of employees, 

families, and dependents, child care centers, 

or financial assistance for employee housing; 

• (8) With respect to money or other thing 

of value paid by any employer to a trust for 

defraying the costs of legal services; or 

• (9) With respect to money or other thing 

of value paid by any employer to a labormanagement committee. 

Under the proposed instructions, filers are 

cautioned that this exception applies only to 

the holdings and transactions reportable 

under section 202(a)(6). 

As discussed in section I.H.2., above, 

the current instructions provide for two 

additional exemptions that will not 

appear in the revised instructions. Filers 

need not report ‘‘bona fide loans, 

interest or dividends from national or 

state banks, credit unions, savings or 

loan associations, insurance companies, 

or other bona fide credit institutions,’’

and ‘‘(i)nterest on bonds or dividends 

on stock, provided such interest or 

dividends are received, and such bonds 

or stock have been acquired, under 

circumstances and terms unrelated to 

the recipient’s status in a labor 

organization and the issuer of such 

securities is not an enterprise in 

competition with the employer whose 

employees your labor organization 

represents or actively seeks to 

represent.’’ See Instructions, Part C, 

exemptions (ii) and (iii). The 

Department invites comments on the 

elimination of these exemptions, and 

the effect of such action. The 

Department seeks comments on whether 

the exceptions being deleted are 

duplicated, in any part, within the 

section 302(c) exceptions. Further, the 

Department seeks comments on whether 

the section 302(c) exceptions exclude 

from reporting ordinary payments of 

wages or salary of a filer’s spouse or 

minor child when the wages or salary 

are paid by an employer whose 

employees the filer’s labor organization 

does not represent and is not actively 

seeking to represent. Finally, the 

Department seeks comment on whether 

section 202(a)(6) limits the reporting 

obligation to only payments that present 

an actual conflict of interest, whether 

such an interpretation is a permissible 

reading of the statute, and, if so, how 

the instructions could be written to 

implement this interpretation, without 

granting impermissible discretion in the 

filer to determine which financial 

matters are reportable. LMRDA 

Interpretative Manual, § 248.005. 

The proposed instructions provide the 

following examples to help officers and 

employees identify interests and 

transactions that must be reported under 

this subsection. 

Example 1 

You are a union officer and an 

attorney. Employers whose employees 

your labor organization does not 

represent or actively seek to represent 

often hire your law firm. One of those 

employers gives you a special gift of a 

three-week all-expense-paid trip to 

France as a reward for winning a major 

lawsuit. You must report the trip and its 

value under this subsection. 

Example 2 

You are a union officer and you 

receive payments under an ERISA 

qualified pension plan. The payments 

relate to your employment for an 

employer whose employees your labor 

organization does not represent or 

actively seek to represent. You do not 

have to report these payments. 

Example 3 

You are an officer of a national union. 

Your spouse is hired as a senior 

executive of an employer on the 

understanding that your union will not 

seek to organize that employer. You 

must report all the income and benefits 

your spouse receives from the employer 

under this subsection. 

Example 4 

You are a local union president. An 

employer outside of the jurisdiction of 

your local offers your 20-year-old 

daughter a paid summer internship on 

the understanding that you will seek to 

have your members go on strike against 

an employer who is one of their 

competitors. You must report all the 

benefits your daughter receives as part 

of the internship under this subsection. 

The Department invites comments on 

its interpretation of this subsection and 

encourages commenters to propose 

additional examples that would help 

filers comply with the requirements of 

the Act. 

C. Completion of the Form 

The myriad types of financial 

transactions made reportable by section 

202 complicate the design of a ‘‘selfexplanatory’’ form. The filer must rely 

on the instructions to accurately 

complete the form. We invite comments 

addressing the layout and clarity of the 

form. Would the form benefit from 

adding additional text and, if so, what 

additions are recommended? Does the 

form have an intuitive feel to it? Does 

the form request information in logical 

51194 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

progression? How can the form be 

improved? 

Item 1—LM–30 Filer Number: No 

changes are proposed for this item. 

Item 2—Period Covered: No changes 

are proposed for this item. 

Item 3—Contact Information of 

Reporting Person: Requires filers to 

provide their email address if they have 

one. This entry would not have been 

possible in 1963 when the existing 

regulation was drafted. Today, an email 

address is an important part of a 

person’s contact information. 

Item 4—Labor Organization 

Identifying Information: Combines Items 

4 and 5 of the existing Form LM–30. It 

also requires filers to report whether 

they held their position in the union at 

the end of the reporting period. As an 

enforcement and compliance assistance 

matter, it is important to know whether 

the filer can still be reached at the 

union, and whether the filer may need 

to file Form LM–30 the following year. 

Item 5—Signed: No changes are 

proposed for this item. 

Payer Summary Schedule: As stated 

above, this schedule was created to 

provide a single place on the first page 

of the report where the filer’s total 

transactions, benefits, and interests are 

reported. This schedule also allows a 

person reviewing the report to skip 

directly to a payer of interest. This 

schedule contains information that 

could be derived from the existing Form 

LM–30 but not in one place. 

Payer Detail Page 

Schedule 1—Payer Identifying 

Information: Combines Items 6, 8, and 

13 of the existing Form LM–30. It also 

requires reporting of the telephone 

number, web site address, state of 

incorporation or registration, and state 

business identification number of each 

payer. This additional contact 

information will make it easier for a 

person reviewing the report to identify 

the payer. Finally, it requires the filer to 

indicate whether he or she was 

associated with the payer at the end of 

the reporting period. As an enforcement 

and compliance assistance matter, the 

Department needs to know whether the 

filer may be required to file a report the 

following year. In addition, union 

members have an interest in knowing 

whether the filer has severed his or her 

relationship with the payer or whether 

the relationship still exists, as they may 

wish to raise the matter within the 

union if the relationship still exists. 

Schedule 2—Filer’s Interest in, 

Payments or Loans From, or 

Transactions or Arrangements with the 

Payer: Combines Items 7, 12, and 14 of 

the existing Form LM–30. The schedule 

requires filers to list their interests, 

payments, loans, transactions, or 

arrangements. The schedule also 

requires reporting of the date and 

recipient of each reportable interest, 

payment, loan, transaction, or 

arrangement, which may or may not 

have been included by filers under the 

existing regulation. Finally, a column 

was created for filers to indicate the 

subsection(s) that requires the 

disclosure of each transaction, benefit, 

or interest. This function was partially 

accomplished in the existing regulation 

by the division of the form into Parts A, 

B, and C. The Department believes that 

this schedule with discrete columns and 

rows replacing narrative boxes will 

alleviate confusion on the part of filers 

and people reviewing the reports. 

Schedule 3—Payer’s Dealings with 

Union, Trust, or Employer: Combines 

and simplifies information reported in 

Items 9, 10, and 11 of the existing Form 

LM–30. For instance, filers no longer 

need to report the full address of a trust 

or employer; only a file number or zip 

code is required. 

The current instructions provide little 

information to the filer about how to 

report the value of particular holdings 

or transactions. To remedy this 

omission, the revised instructions 

provide a comprehensive list of ways in 

which the value of an interest or 

transaction must be reported. The filer 

is told that he or she must report the 

exact value of an interest or transaction, 

if known or easily obtainable by the 

filer; otherwise, the filer is instructed to 

enter a good faith estimate of the fair 

market value and explain the basis for 

the estimate in the space provided on 

the form. The list is adopted from the 

regulations addressing the disclosure 

requirements of federal employees. See 

5 CFR 2634.105(t). 

The revised instructions identify for 

the filer different ways by which ‘‘fair 

market value’’ may be determined: 

• The purchase price 

• Recent appraisal 

• Assessed value for tax purposes, 

adjusted to reflect market value if the 

assessed value is computed at less than 

100% of that market value 

• The year end book value of nonpublicly traded stock, the year-end 

exchange rate of corporate stock, or the 

face value of corporate bonds or 

comparable securities 

• The net worth of a business 

partnership or business venture 

• The equity value of an individuallyowned business or any other recognized 

indication of value (such as the sale 

price on the stock exchange at the time 

of the report or, for transactions, the sale 

price on the stock exchange at the time 

of the sale). 

Recently, a labor organization has 

asserted to the Department that the 

current Form LM–30 can require ‘‘the 

public disclosure of highly confidential 

and proprietary commercial information 

about arm’s length business transactions 

between’’ companies owned by union 

officers and employers with whom the 

union has negotiated a collective 

bargaining agreement, and that if 

confidential information were subject to 

the reporting requirements, ‘‘it would 

have a potentially devastating impact on 

the [labor organization].’’ The public is 

asked to comment on whether Form 

LM–30 may require the disclosure of 

sensitive information, whether highly 

confidential and proprietary commercial 

information should be protected, and 

the potential harm to union members or 

the public, if any, from the 

nondisclosure of such information. See 

68 FR 58386–88 (description of how 

union should handle confidential 

information when completing Form 

LM–2); SF 278, p. 16 (Public Financial 

Disclosure Report for senior government 

officials and employees) (excluding 

information to the extent that it is 

considered confidential as a result of a 

privileged relationship established by 

law). 

Continuation Pages 

Labor Organizations in Which the 

Reporting Person is an Officer or 

Employee—Continuation Page: This 

continuation page allows filers to report 

all of the unions in which they are 

employed. This schedule will ease the 

burden on filers who are employed by 

or are officers of multiple unions. These 

individuals will no longer need to file 

multiple reports. 

Payer Summary Schedule—

Continuation Page: This continuation 

page allows filers to report additional 

payers if the five lines provided on the 

first page are not sufficient. The existing 

Form LM–30 does not contain a 

summary schedule. 

Schedule 2—Filer’s Interest in, 

Payments or Loans From, or 

Transactions or Arrangements with the 

Payer—Continuation Page: This 

continuation page allows filers to report 

additional interests, payments, loans, 

transactions, or arrangements. This 

replaces the continuation pages for Parts 

A, B, and C on the existing Form LM–

30. 

Schedule 3—Payer’s Dealings with 

Union, Trust, or Employer—

Continuation Page: This continuation 

page allows filers to report additional 

dealings of a payer that would trigger a 

reporting requirement. This replaces the 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51195 

continuation pages for Parts A, B, and 

C on the existing Form LM–30. 

Additional Information Schedule: 

This schedule allows filers to provide 

additional information or explanations 

about other items in the form. For 

instance, filers who cannot assign a 

value to an item in Schedule 3 must 

enter N/A in Column E and explain the 

situation in this schedule. This is 

similar to additional information items 

found on other OLMS forms, but the 

existing Form LM–30 does not contain 

such an item. 

Regulatory Procedures 

A. Executive Order 12866 

The 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; (2) create a serious 

inconsistency or otherwise interfere 

with an action taken or planned by 

another agency; or (3) materially alter 

the budgetary impact of entitlements, 

grants, user fees, or loan programs or the 

rights and obligations of recipients 

thereof. 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 proposed 

is a significant regulatory action and 

was reviewed by the Office of 

Management and Budget. 

The burden imposed by the revision 

of the Form LM–30 is addressed in the 

Paperwork Reduction Act section, 

below. The Paperwork Reduction Act 

section also describes what the 

Department believes are the substantial 

benefits of this rulemaking. 

Prior to issuing this proposal, the 

Department sought the involvement of 

those individuals and organizations that 

will be affected by the Proposed Rule, 

including officers and employees of 

labor organizations that would be 

subject to the rule. 

B. Small Business Regulatory 

Enforcement Fairness Act 

For similar reasons, the Department 

has concluded that this proposed rule is 

not a ‘‘major’’ rule under the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (5 U.S.C. 801 et 

seq.). It will not likely result in (1) an 

annual effect on the economy of $100 

million or more, (2) a major increase in 

costs or prices for consumers, 

individual industries, Federal, State or 

local government agencies, or 

geographic regions, or (3) significant 

adverse effects on competition, 

employment, investment, productivity, 

innovation, or on the ability of United 

States-based enterprises to compete 

with foreign-based enterprises in 

domestic or export markets. 

C. Unfunded Mandates Reform 

For purposes of the Unfunded 

Mandates Reform Act of 1995, this rule 

does not include a Federal mandate that 

might result in increased expenditures 

by State, Local, and tribal governments, 

or increased expenditures by the private 

sector of more than $100 million in any 

one year. 

D. Executive Order 13132 (Federalism) 

The Department has reviewed this 

rule in accordance with Executive Order 

13132 regarding federalism and has 

determined that the rule does not have 

federalism implications. 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.’’

E. Regulatory Flexibility Act 

The Regulatory Flexibility Act of 

1980, 5 U.S.C. 601–612, requires 

agencies to prepare regulatory flexibility 

analyses, and to develop alternatives 

wherever possible, in drafting 

regulations that will have a significant 

impact on a substantial number of small 

entities, including ‘‘small businesses,’’

‘‘small organizations,’’ and ‘‘small 

governmental jurisdictions.’’ The rule 

revises the reporting obligations of 

union officers and employees, who, as 

individuals, do not constitute small 

business entities. Accordingly, the 

Proposed Rule would not have a 

significant economic impact on a 

substantial number of small business 

entities. The Secretary has certified to 

the Chief Counsel for Advocacy of the 

Small Business Administration to that 

effect. Therefore, under the Regulatory 

Flexibility Act, 5 U.S.C. 605(b), a 

regulatory flexibility analysis is not 

required. 

F. Paperwork Reduction Act 

Summary: This proposed rule 

modifies the annual financial disclosure 

report that section 202 of the Act 

requires to be filed by labor organization 

officers and employees who have 

certain holdings, receive certain 

payments or income, or engage in 

certain financial transactions or 

arrangements. The revised paperwork 

requirements are necessary to reduce 

the errors and deficiencies in the reports 

that are filed under section 202, and 

increase the transparency of the 

financial practices of union officers and 

employees, which the Act requires to be 

public information. More accurate 

reports and increased transparency will 

allow union members to view the 

information needed by them to monitor 

their union’s affairs and to make 

informed choices about the leadership 

of their union and its direction. 

Accurate disclosure and increased 

transparency promotes the unions’ own 

interests as democratic institutions and 

the interests of the public and the 

government. Financial disclosure deters 

fraud and self-dealing, and facilitates 

the discovery of such misconduct when 

it does occur. The revised financial 

disclosure form will promote increased 

compliance with the statute by 

clarifying the form and instructions, 

offering numerous examples to guide 

filers, deleting exemptions that permit 

filers to decline to disclose financial 

matters made reportable by the Act, and 

organizing the information in a more 

useful format. 

Published at the end of this notice are 

the proposed Form LM–30 and 

instructions that will implement the 

new reporting requirements. The 

electronic versions of the current Form 

LM–30 and instructions are available for 

download from the Department’s web 

site at www.olms.dol.gov. The proposed 

Form LM–30 and instructions will also 

be made available via the Internet. 

Pursuant to the Paperwork Reduction 

Act of 1995, the information collection 

requirements contained in this Notice of 

Proposed Rulemaking have been 

submitted to the Office of Management 

and Budget for approval. 

Background: The Form LM–30 is used 

by officers and employees of labor 

organizations, as the LMRDA defines 

that term. See 29 U.S.C. 402(i). The Act 

requires public disclosure of certain 

financial interests held, income 

received, and transactions and 

arrangements engaged in by labor 

organization officers and employees, 

who must file the reports, and their 

spouses and minor children. Subject to 

certain exclusions, these interests, 

incomes, transactions, and arrangement 

comprise: (1) Payments or benefits from, 

or holdings in, an employer whose 

employees the filer’s union represents 

51196 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

or is actively seeking to represent; (2) 

transactions involving holdings in an 

employer whose employees the filer’s 

union represents or is actively seeking 

to represent; (3) holdings in, income 

from, or transactions with a business a 

substantial part of which consists of 

dealing with an employer whose 

employees the filer’s union represents 

or is actively seeking to represent; (4) 

holdings in, income from, or 

transactions with a business that deals 

with the filer’s union or a trust in which 

the filer’s union is interested; (5) 

transactions or arrangements with an 

employer whose employees filer’s union 

represents or is actively seeking to 

represent; and (6) payments from an 

employer or labor relations consultant. 

See 29 U.S.C. 432. 

The Current Form: The existing Form 

LM–30 consists of four sections. The 

first section calls for identifying data. 

This section gathers information about 

the filer, including the filer’s name and 

address, the name and address of the 

labor organization in which the filer is 

an officer or employee, the filer’s 

position with the organization, and the 

fiscal year covered by the report. 

The second section, Part A of the 

current form, generally requires 

reporting of holdings in, transactions 

and arrangements with, and income and 

loans from the employer whose 

employees the filer’s labor organization 

represents or actively seeks to represent. 

For each holding, transaction, 

arrangement, income, or loan, the filer 

is required to disclose its nature, value, 

and date of receipt. 

Part A of the current form excludes 

certain financial matters from reporting. 

The instructions advise the potential 

filer that he or she should not report (i) 

holdings of, transactions in, or income 

from bona fide investments in registered 

securities; (ii) holdings of, transactions 

in, or income from other securities if 

they are of ‘‘insubstantial value or 

amount’’ (defined as holdings or 

transactions of $1,000 or less and 

income of $100 or less from any one 

security) and occur under terms 

unrelated to the filer’s status in the labor 

organization; (iii) transactions involving 

purchases and sales of goods and 

services in the regular course of 

business at prices generally available to 

any employee of the employer; and (iv) 

‘‘payments and benefits received as a 

bona fide employee of the employer for 

past or present services, including 

wages, payments or benefits received 

under a bona fide health, welfare, 

pension, vacation, training or other 

benefit plan; and payments for periods 

in which such employee engaged in 

activities other than productive work, if 

the payments for such period of time 

are: (a) Required by law or a bona fide 

collective bargaining agreement, or (b) 

made pursuant to a custom or practice 

under such a collective bargaining 

agreement, or (c) made pursuant to a 

policy, custom, or practice with respect 

to employment in the establishment 

which the employer has adopted 

without regard to any holding by such 

employee of a position with a labor 

organization.’’

The third section of the current form, 

Part B, generally requires reporting of 

‘‘an interest in or derived income or 

other economic benefit with monetary 

value, including reimbursed expenses, 

from a business (1) a substantial part of 

which consists of buying from, selling 

or leasing to, or otherwise dealing with 

the business of an employer whose 

employees your labor organization 

represents or is actively seeking to 

represent, or (2) any part of which 

consists of buying from or selling or 

leasing directly or indirectly to, or 

otherwise dealing with your labor 

organization or a trust in which your 

labor organization is interested.’’ The 

filer must identify the name and address 

of the business involved, describe the 

type of organization the business deals 

with (employer, labor organization, 

trust), enter the nature of the dealings 

between these two parties and the value 

of these dealings, enter the interest held 

or income received by the filer, and the 

dollar amount of such income or 

interest. 

Part B of the current form also 

excludes certain financial matters from 

reporting. Filers are instructed that they 

are not required to report any of the 

interests, transactions, or income 

identified in exclusions (i) and (ii) of 

Part A. As discussed, these nonreportable financial matters are (i) 

holdings in, transaction in, and income 

from bona fide investments in registered 

securities and (ii) insubstantial holdings 

in, transactions in, and income from 

other securities occurring under terms 

unrelated to the filer’s status in the labor 

organization. 

The fourth section of the current form, 

Part C, generally requires reporting of 

any payment of money or other thing of 

value received from any employer (other 

than an employer whose employees the 

filer’s union represents or is actively 

seeking to represent) or from any labor 

relations consultant to an employer. For 

each interest or transaction to be 

reported under Part C, filers must 

identify the name of the employer or 

labor relations consultant and the nature 

and amount of the payment. 

Part C of the current form also 

excludes certain financial matters from 

reporting. The instructions identify the 

following as items that are not required 

to be reported: (i) Payments of the kind 

referred to in section 302(c) of the Labor 

Management Relations Act (LMRA); (ii) 

bona fide loans, interest or dividends 

from banks, other bona fide credit 

institutions, and insurance companies; 

and (iii) interest on bonds or dividends 

on stock, provided such interest or 

dividends are received, and such bonds 

or stock have been acquired, under 

circumstances and terms unrelated to 

the recipient’s status in a labor 

organization and the issuer of such 

securities is not an enterprise in 

competition with the employer whose 

employees the filer’s labor organization 

represents or actively seeks to represent. 

In the ‘‘General Instructions’’ filers are 

informed: ‘‘You do not have to report 

any sporadic or occasional gifts, 

gratuities, or loans of insubstantial 

value, given under circumstances or 

terms unrelated to the recipient’s status 

in a labor organization.’’ This exclusion 

applies to financial matters reportable 

under Part A, B or C. 

In the instructions to the current Form 

LM–30, the information collection 

burden is reported to average 35 

minutes per response. 

Overview of Changes to Form LM–30: 

The proposed Form LM–30 and 

instructions will define terms used in 

the form, provide examples to assist the 

filer in identifying reportable financial 

events, and will remove certain 

exclusions that permitted filers to avoid 

reporting certain financial matters. 

The revised instructions define: 

Actively seeking to represent, 

arrangement, benefit with monetary 

value, bona fide employee, bona fide 

investment, dealing, directly or 

indirectly, filer/reporting person/you, 

income, labor organization, labor 

organization employee, labor 

organization officer, legal or equitable 

interest, minor child, payer, publicly 

traded securities, substantial part, and 

trust in which a labor organization is 

interested. These definitions clarify that 

certain holdings, payments, income, 

transactions or arrangements are 

reportable, and that others are nonreportable. 

The definition of the term ‘‘labor 

organization’’ will clarify that when 

determining whether an employer is one 

‘‘whose employees the filer’s labor 

organization represents or actively seeks 

to represent,’’ or whether a business is 

‘‘dealing with [the filer’s] labor 

organization,’’ the term ‘‘labor 

organization’’ will not be limited to the 

particular local, intermediate, national 

or international labor organization that 

the filer serves as an officer or 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51197 

employee, but rather will also include 

any parent or subordinate body of the 

filer’s labor organization. 

Similarly, in defining ‘‘bona fide 

employee,’’ the revised Form LM–30 

would require the reporting of payments 

received by union officers from an 

employer for work performed for the 

union. A typical example involves a ‘‘no 

docking’’ arrangement where an 

employer allows a union steward or 

other officer to resolve grievances, often 

on an occasional ‘‘as-needed’’ basis, 

without a loss of pay. In other instances, 

a union official is paid by an employer 

while working full time on union 

business. In a related area, the definition 

of ‘‘labor organization employee’’

clarifies that individuals who perform 

work for, and under the control of, the 

union must file a Form LM–30. 

Individuals who receive payments from 

an employer, either under a ‘‘union 

leave’’ or ‘‘no docking’’ policy, for work 

performed for, and under the control of, 

the union, will come under this 

definition, as may some workers 

previously denominated ‘‘independent 

contractors.’’

The definition of the term ‘‘minor 

child’’ would require union officers to 

report financial matters involving a 

child until the child reaches 21 years of 

age. The definition of the term 

‘‘substantial part’’ would require reports 

of income from a business where a 

business’s receipts from an employer 

whose employees the filer’s labor 

organization represents or is actively 

seeking to represent constitute 5% or 

more of its annual receipts. The 

definition of ‘‘minor child,’’ and the two 

other definitions discussed above, will 

likely increase the holdings, payments, 

income, transactions or arrangements 

that are reported. 

The proposed instructions also 

eliminate some exemptions in the 

current form. These exemptions operate 

to make nondiscloseable financial 

matters that the statute requires to be 

reported. The elimination of these 

exemptions will thus tend to increase 

the holdings, payments, income, 

transactions or arrangements that will 

be reported. 

Part A of the current instructions 

exempts from reporting: 

(iii) Transactions involving purchases and 

sales of goods and services in the regular 

course of business at prices generally 

available to any employee of the employer. 

(iv) Payments and benefits received as a 

bona fide employee of the employer for past 

or present services, including wages, 

payments or benefits received under a bona 

fide health, welfare, pension, vacation, 

training or other benefit plan; and payments 

for periods in which such employee engaged 

in activities other than productive work, if 

the payments for such period of time are: (a) 

Required by law or a bona fide collective 

bargaining agreement, or (b) made pursuant 

to a custom or practice under such a 

collective bargaining agreement, or (c) made 

pursuant to a policy, custom, or practice with 

respect to employment in the establishment 

which the employer has adopted without 

regard to any holding by such employee of 

a position with a labor organization. 

The Department proposes to limit the 

scope of exemption (iii) Exemption (iii) 

is a statutory exemption that applies by 

its terms to financial matters reportable 

under section 202(a)(5), not to section 

202(a)(1) or 202(a)(2). See 29 U.S.C. 

432(a)(1), (2), (5). The Department’s 

proposal adheres to the statutory design 

and thus ends the exemption for reports 

due under section 202(a)(1) and 

202(a)(2), but continues it for reports 

due under section 202(a)(5). Similarly, 

the first part of exemption (iv) (up to the 

semicolon) is created by statute. It 

applies to reports due under section 

202(a)(1) and 202(a)(5). See 29 U.S.C. 

432(a)(1), (5). The Department proposes 

to eliminate this exemption for reports 

due under section 202(a)(2). Further, the 

portion of the exemption that excludes 

payments for periods in which such 

employee engaged in activities other 

than productive work will also be 

removed. 

Part C of the current instructions 

contains the following exemptions: 

(ii) Bona fide loans, interest or dividends 

from national or state banks, credit unions, 

savings or loan associations, insurance 

companies, or other bona fide credit 

institutions. 

(iii) Interest on bonds or dividends on 

stock, provided such interest or dividends 

are received, and such bonds or stock have 

been acquired, under circumstances and 

terms unrelated to the recipient’s status in a 

labor organization and the issuer of such 

securities is not an enterprise in competition 

with the employer whose employees your 

labor organization represents or actively 

seeks to represent. 

The Department proposes to eliminate 

these two exemptions. 

Hour and Cost Burden Estimates for 

the Revised Form: The following table 

describes the information sought by 

both the existing form and instructions 

and the proposed form and instructions, 

where on each form the particular 

information is sought, if applicable, and 

the amount of time estimated for 

completion of each item of information. 

The time estimates include the 

additional time burdens associated with 

the Department’s proposed eliminated 

and curtailed administrative 

exemptions, and the proposed 

definitions. 

Burden description Current form Proposed form Time 

Maintaining and gathering records ........... N/A ........................................................... N/A ........................................................... 10 minutes. 

Reading the instructions to determine 

whether filer must complete the form.

N/A ........................................................... N/A ........................................................... 15 minutes. 

Additional reading of the instructions to 

determine how to complete the form.

N/A ........................................................... N/A ........................................................... 30 minutes. 

Reporting LM–30 file number ................... Item 1 ....................................................... Item 1 ....................................................... 30 seconds. 

Reporting covered fiscal year ................... Item 2 ....................................................... Item 2 ....................................................... 30 seconds. 

Reporting filer’s name, address, and contact information.Item 3 ....................................................... Item 3, A through I ...................................

In addition to the information sought on 

the existing form, the proposed form 

seeks filer’s e-mail address and full 

middle name.

2 minutes. 

Reporting name, file number, and address of filer’s union or unions.Item 4 ....................................................... Item 4, A through E Proposed form provides continuation page in which to report this information for an additional 

union.

2 minutes. 

51198 Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 

Burden description Current form Proposed form Time 

Reporting position in union ....................... Item 5 ....................................................... Item 4, F through H .................................

In addition to the information sought on 

the existing form, the proposed form 

asks whether filer is an officer or employee and whether filer is with the 

union at end of reporting period. In addition, the proposed form provides 

continuation page in which to report 

this information for an additional union.

1 minute. 

Reporting name, trade name, and address of (1) an employer whose employees the union represents or is actively seeking to represent, (2) a business that deals with such an employer, 

or the union, or a trust in which the 

union is interested, or (3) any employer 

or labor relations consultant.

Item 6 or Item 8 or Item 13 ..................... Schedule 1 ...............................................

In addition to the information sought on 

the existing form, the proposed form 

asks for a contact name, telephone 

number, web site address, state of incorporation or registration, state business ID number, and whether filer has 

an association with the business, employer, or labor relations consultant 

(called a payer on the proposed form) 

at the end of reporting period.

5 minutes. 

Reporting the employer, union, or trust 

that the business deals with.

Item 9a (referring back to Item 4) or Item 

9b/9c and Item 10.

Schedule 2, Items A and B .....................

The proposed form requires less information than the existing form by requiring only name and file number or 

zip code rather than complete address 

information for employers and trusts.

1 minute. 

Reporting the nature of the dealings between the employer, union, or trust and 

the business.

Item 11a ................................................... Schedule 2, Item C .................................. 3 minutes. 

Reporting the value of the dealings between the employer, union, or trust and 

the business.

Item 11b ................................................... Schedule 2, Item D ..................................

In addition to the information sought on 

the existing form, the proposed form 

requires a total of the values.

3 minutes. 

Reporting the nature of the interest held 

by the filer, the payment, income, or 

loan received by the filer, or the transactions and arrangements engaged by 

the filer.

Item 7a or Item 12a or Item 14a ............. Schedule 3, Items A through D ...............

In addition to the information sought on 

the existing form, the proposed form 

calls for the relevant reporting section, 

date of the financial matter, and 

whether person involved in the financial transaction was the officer, employee, spouse, or minor child.

4 minutes. 

Reporting the value of the interest held by 

the filer, the payment, income or loan 

received by the filer, or the transactions 

and arrangements engaged by the filer.

Item 7b or Item 12b or Item 14b ............. Schedule 3, Item E ..................................

In addition to the information sought on 

the existing form, the proposed form 

requires a total of the values.

2 minutes 

Signature, date and telephone number .... Item 15 ..................................................... Item 5 ....................................................... 1 minute. 

Completing payer summary schedule ...... N/A ........................................................... Beyond the information sought on the 

existing form, the proposed form requires listing each payer, which of four 

classifications describes the payer 

(employer, business, etc.), the total 

value from Schedule 3, Item E, and 

the total of the values for all payers.

5 minutes. 

Checking responses .................................. N/A ........................................................... N/A ........................................................... 5 minutes. 

Total Burden Hour Estimate Per Filer .................................................................. .................................................................. 90 minutes. 

The recordkeeping estimate of ten 

minutes reflects that the majority of 

financial books and records required to 

complete the report are those that 

respondents would maintain in the 

normal course of conducting business, 

personal, and union affairs, and thus 

should only take two minutes to 

maintain and gather. The other eight 

minutes has been estimated to be 

necessary to maintain and gather the 

books and records that would not 

ordinarily be maintained, including 

those concerning the dealings between a 

business and the filer’s union, a trust in 

which the filer’s union is interested, or 

an employee whose employees the 

union represents or is actively seeking 

to represent. 

These figures also assume that the use 

of an electronic form, which is more 

efficient than completion of a form by 

hand, will reduce the burden. In 

addition, burden is decreased by the 

proposed revised Form LM–30’s 

elimination of multiple form filings 

from the same filer for the same fiscal 

year resulting from the current form’s 

inadequate provision for those filers 

who are officers and/or employees of 

more than one relevant labor 

organization. 

The Department estimates that the 

clarification of the Form LM–30, the 

defined terms, the addition of examples 

that illustrate reportable and 

nonreportable transactions, and the 

removal of the administrative 

exemptions will increase the number of 

Federal Register / Vol. 70, No. 166 / Monday, August 29, 2005 / Proposed Rules 51199 

individuals who file the Form LM–30. 

Using the best data available, the 

Department estimates that there are 

204,634 union officers and employees. 

Further, based on the submittal of 

approximately 61 reports annually, the 

Department estimates a current filing 

rate of 0.03% (61 / 204,634 × 100 = 

0.03%). Due to the reform proposed 

herein, as well as increased compliance 

assistance and enforcement initiatives, 

the Department estimates that the filing 

rate will increase to approximately 1%, 

or 2,046 reports filed annually. Thus, 

the annual reporting and recordkeeping 

hour burden for all filers will be 184,140 

minutes (90 × 2,046 = 184,140) or 3,069 

hours (184,140 / 60 = 3,069). The 

Department believes this estimate is 

consistent with the opinion of some 

stakeholders that relatively few union 

officers and employees would be 

engaged in covered transactions. The 

Department’s own research also 

revealed little concrete evidence of the 

number of union officers and employees 

that would have to file. The Department 

acknowledges the considerable 

uncertainty in this estimate and requests 

comment on the number of reports that 

should be filed under the current 

requirements and that may be filed as a 

result of the new requirements. 

Using FY 2003 data taken from annual 

financial reports filed by labor 

organizations, the Department estimates 

that the average annual salary earned by 

union officers and employees is 

$17,596. This data does not, however, 

permit the derivation of an hourly wage, 

as the number of part-time officers and 

employees is unknown, and employees 

who receive in the aggregate $10,000 or 

less are not reported. Assuming the 

$21.85 mean hourly earnings of those 

engaged in white collar occupations 

(based on National Compensation 

Survey: Occupational Wages in the 

United States, July 2003, Bureau of 

Labor Statistics, U.S. Department of 

Labor, August 2004), the Department 

estimates that the annual reporting and 

recordkeeping cost burden for all filers 

will be $ 67,058 (3,069 × 21.85), or 

$32.78 per filer (67,058 / 2,046). 

In addition, the Department estimates 

that all union officers and employees 

will spend 15 minutes reading the 

revised form and instructions to 

determine whether they are required to 

file a report. By deducting the 2,046 

estimated filers whose preliminary 

review of the form has already been 

counted from the estimated 204,634 

union officers and employees, 202,588 

officers and employees remain who will 

review the form but determine that they 

are not required to file a report. The 

annual reporting and recordkeeping 

hour burden for these officers and 

employees will be 3,038,820 minutes 

(15 × 202,588 = 3,038,820) or 50,647 

hours (3,038,820 / 60 = 50,647). Using 

the $21.85 hourly wage, the Department 

estimates that the annual reporting and 

recordkeeping cost burden for non-filing 

union officers and employees will be 

$1,106,637 (50,647 × 21.85 = 1,106,637), 

or $5.46 per non-filing union officer or 

employee (1,106,637 / 202,588 = $5.46). 

The resulting total annual reporting 

and recordkeeping hour burden will be 

53,716 (50,647 + 3,069 = 53,716). The 

total annual reporting and 

recordkeeping cost burden will be 

$1,173,695 (53,716 × 21.85 = 1,173,695). 

G. Executive Order 13045 (Protection of 

Children From Environmental Health 

Risks and Safety Risks) 

In accordance with Executive Order 

13045, the Department has evaluated 

the environmental safety and health 

effects of the rule on children. The 

Department has determined that the 

final rule will have no effect on 

children. 

H. Executive Order 13175 (Consultation 

and Coordination With Indian Tribal 

Governments) 

The Department has reviewed this 

rule in accordance with Executive Order 

13175, and has determined that it does 

not have ‘‘tribal implications.’’ The rule 

does not ‘‘have substantial direct effects 

on one or more Indian tribes, on the 

relationship between the Federal 

government and Indian tribes, or on the 

distribution of power and 

responsibilities between the Federal 

government and Indian tribes.’’

I. Executive Order 12630 (Governmental 

Actions and Interference With 

Constitutionally Protected Property 

Rights) 

This rule is not subject to Executive 

Order 12630, Governmental Actions and 

Interference with Constitutionally 

Protected Property Rights, because it 

does not involve implementation of a 

policy with takings implications. 

J. Executive Order 12988 (Civil Justice 

Reform) 

This regulation has been drafted and 

reviewed in accordance with Executive 

Order 12988, Civil Justice Reform, and 

will not unduly burden the Federal 

court system. The regulation has been 

written so as to minimize litigation and 

provide a clear legal standard for 

affected conduct, and has been reviewed 

carefully to eliminate drafting errors and 

ambiguities. 

K. Environmental Impact Assessment 

The Department has reviewed the 

final rule in accordance with the 

requirements of the National 

Environmental Policy Act (NEPA) of 

1969 (42 U.S.C. 4321 et seq.), the 

regulations of the Council on 

Environmental Quality (40 U.S.C. part 

1500), and the Department’s NEPA 

procedures (29 CFR part 11). The final 

rule will not have a significant impact 

on the quality of the human 

environment, and, thus, the Department 

has not conducted an environmental 

assessment or an environmental impact 

statement. 

L. Executive Order 13211 (Actions 

Concerning Regulations That 

Significantly Affect Energy Supply, 

Distribution, or Use) 

This 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. 

Text of Proposed Rule 

In consideration of the foregoing, the 

Office of Labor-Management Standards, 

Employment Standards Administration, 

Department of Labor hereby proposes to 

amend part 404 of title 29 of the Code 

of Federal Regulations as set forth 

below. 

PART 404—LABOR ORGANIZATION 

OFFICER AND EMPLOYEE REPORTS 

1. The authority citation for part 404 

is revised to read as follows: 

Authority: Secs. 202, 207, 208, 73 Stat. 

525, 529 (29 U.S.C. 432, 437, 438); 

Secretary’s Order No. 4–2001, 66 FR 29656 

(May 31, 2001). 

§ 404.1 [Amended] 

2. Section 404.1 is amended by: 

a. Redesignating existing paragraph 

(b) as new paragraph (h) and adding a 

new sentence at the end; 

b. Add a new paragraph (b); 

c. Redesignating existing paragraph 

(c) as new paragraph (g) and by adding 

new text at the end; 

d. Redesignating existing paragraph 

(d) as new paragraph (c); 

e. Redesignating existing paragraph 

(a) as new paragraph (d); 

f. Adding a new paragraph (a); 

g. Adding paragraphs (e), (f), (i) and 

(j). 

The additions and revision read as 

follows: 

§ 404.1 Definitions. 

(a) Benefit with monetary value means 

anything of value, tangible or intangible, 

including any interest in personal or 

real property, gift, insurance, retirement, 

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pension, license, copyright, forbearance, 

bequest or other form of inheritance, 

office, options, agreement for 

employment or property, or property of 

any kind. 

(b) Dealing means to engage in a 

transaction (bargain, sell, purchase, 

agree, contract) or to in any way traffic 

or trade with another individual or 

entity. 

* * * * * 

(e) Income means all income from 

whatever source derived, including, but 

not limited to, compensation for 

services, fees, commissions, wages, 

salaries, interest, rents, royalties, 

copyrights, licenses, dividends, 

annuities, honorarium, income and 

interest from insurance and endowment 

contracts, capital gains, discharge of 

indebtedness, share of partnership 

income, bequests or other forms of 

inheritance, and gifts, prizes or awards. 

(f) Labor organization means a labor 

organization under 29 CFR 401.9 and 

includes the local, intermediate, or 

national or international labor 

organization that employed the filer of 

the Form LM–30, or in which the filer 

held office, during the reporting period, 

and any parent or subordinate labor 

organization. 

(g) * * * within the meaning of any 

law of the United States relating to the 

employment of employees. 

(h) * * * An officer is (1) a person 

identified as an officer by the 

constitution and bylaws of the labor 

organization; 

(2) Any person authorized to perform 

the functions of president, vice 

president, secretary, or treasurer; 

(3) Any person who in fact has 

executive or policy-making authority or 

responsibility; and 

(4) A member of a group identified as 

an executive board or a body which is 

vested with functions normally 

performed by an executive board. 

(i) Minor child means a son, daughter, 

stepson, or stepdaughter under 21 years 

of age. 

(j) Trust in which a labor organization 

is interested means a trust or other fund 

or organization (1) which was created or 

established by a labor organization, or 

one or more of the trustees or one or 

more members of the governing body of 

which is selected or appointed by a 

labor organization, and (2) a primary 

purpose of which is to provide benefits 

for the members of such labor 

organization or their beneficiaries. 

§ 404.4 [Removed and reserved] 

3. Section 404.4 is removed and 

reserved. 

§ 404.7 [Amended] 

4. Section 404.7 is revised to read as 

follows: 

§ 404.7 Maintenance and retention of 

records. 

Every person required to file any 

report under this part shall maintain 

records on the matters required to be 

reported which will provide in 

sufficient detail the necessary basic 

information and data from which the 

documents filed with the Office of 

Labor-Management Standards may be 

verified, explained or clarified, and 

checked for accuracy and completeness, 

and shall include vouchers, worksheets, 

receipts, financial and investment 

statements, contracts, correspondence, 

and applicable resolutions, in electronic 

and paper format, and any electronic 

programs by which they are maintained, 

available for examination for a period of 

not less than five years after the filing 

of the documents based on the 

information which they contain. 

Signed at Washington, DC this 19th day of 

August, 2005. 

Victoria A. Lipnic, 

Assistant Secretary for Employment 

Standards. 

Don Todd, 

Deputy Assistant Secretary for LaborManagement Programs. 

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