[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                    THE FUTURE OF UNION TRANSPARENCY
                           AND ACCOUNTABILITY

=======================================================================

                                HEARING

                               before the

                        SUBCOMMITTEE ON HEALTH,
                     EMPLOYMENT, LABOR AND PENSIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

             HEARING HELD IN WASHINGTON, DC, MARCH 31, 2011

                               __________

                           Serial No. 112-15

                               __________

  Printed for the use of the Committee on Education and the Workforce


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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Dale E. Kildee, Michigan
Judy Biggert, Illinois               Donald M. Payne, New Jersey
Todd Russell Platts, Pennsylvania    Robert E. Andrews, New Jersey
Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Duncan Hunter, California            Lynn C. Woolsey, California
David P. Roe, Tennessee              Ruben Hinojosa, Texas
Glenn Thompson, Pennsylvania         Carolyn McCarthy, New York
Tim Walberg, Michigan                John F. Tierney, Massachusetts
Scott DesJarlais, Tennessee          Dennis J. Kucinich, Ohio
Richard L. Hanna, New York           David Wu, Oregon
Todd Rokita, Indiana                 Rush D. Holt, New Jersey
Larry Bucshon, Indiana               Susan A. Davis, California
Trey Gowdy, South Carolina           Raul M. Grijalva, Arizona
Lou Barletta, Pennsylvania           Timothy H. Bishop, New York
Kristi L. Noem, South Dakota         David Loebsack, Iowa
Martha Roby, Alabama                 Mazie K. Hirono, Hawaii
Joseph J. Heck, Nevada
Dennis A. Ross, Florida
Mike Kelly, Pennsylvania
[Vacant]

                      Barrett Karr, Staff Director
                 Jody Calemine, Minority Staff Director

         SUBCOMMITTEE ON HEALTH, EMPLOYMENT, LABOR AND PENSIONS

                   DAVID P. ROE, Tennessee, Chairman

Joe Wilson, South Carolina           Robert E. Andrews, New Jersey
Glenn Thompson, Pennsylvania           Ranking Minority Member
Tim Walberg, Michigan                Dennis J. Kucinich, Ohio
Scott DesJarlais, Tennessee          David Loebsack, Iowa
Richard L. Hanna, New York           Dale E. Kildee, Michigan
Todd Rokita, Indiana                 Ruben Hinojosa, Texas
Larry Bucshon, Indiana               Carolyn McCarthy, New York
Lou Barletta, Pennsylvania           John F. Tierney, Massachusetts
Kristi L. Noem, South Dakota         David Wu, Oregon
Martha Roby, Alabama                 Rush D. Holt, New Jersey
Joseph J. Heck, Nevada               Robert C. ``Bobby'' Scott, 
Dennis A. Ross, Florida                  Virginia


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on March 31, 2011...................................     1

Statement of Members:
    Andrews, Hon. Robert E., ranking minority member, 
      Subcommittee on Health, Employment, Labor and Pensions.....     4
    Roe, Hon. David P., Chairman, Subcommittee on Health, 
      Employment, Labor and Pensions.............................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Fox, Arthur L., on behalf of the Association for Union 
      Democracy..................................................    23
        Prepared statement of....................................    25
    Furchtgott-Roth, Diana, senior fellow, Hudson Institute......    10
        Prepared statement of....................................    12
    Logan, John, professor and director of labor and employment 
      studies, San Francisco State University....................    15
        Prepared statement of....................................    16
    Mehrens, Nathan Paul, counsel, Americans for Limited 
      Government Research Foundation.............................     7
        Prepared statement of....................................     8

Additional Submissions:
    Mr. Andrews:
        Questions submitted for the record.......................    49
    Ms. Furchtgott-Roth:
        Response to questions submitted..........................    50
    Holt, Hon. Rush D., a Representative in Congress from the 
      State of New Jersey:
        Questions submitted for the record.......................    49


                          THE FUTURE OF UNION
                    TRANSPARENCY AND ACCOUNTABILITY

                              ----------                              


                        Thursday, March 31, 2011

                     U.S. House of Representatives

         Subcommittee on Health, Employment, Labor and Pensions

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The subcommittee met, pursuant to call, at 10:04 a.m., in 
room 2175, Rayburn House Office Building, Hon. David P. Roe 
[chairman of the subcommittee] presiding.
    Present: Representatives Roe, Walberg, DesJarlais, Rokita, 
Bucshon, Barletta, Heck, Andrews, Loebsack, Kildee, Hinojosa, 
McCarthy, Tierney, Wu, Holt, and Scott.
    Staff present: Katherine Bathgate, Press Assistant/New 
Media Coordinator; Kirk Boyle, General Counsel; Casey Buboltz, 
Coalitions and Member Services Coordinator; Ed Gilroy, Director 
of Workforce Policy; Marvin Kaplan, Professional Staff Member; 
Barrett Karr, Staff Director; Ryan Kearney, Legislative 
Assistant; Donald McIntosh, Professional Staff Member; Molly 
McLaughlin Salmi, Deputy Director of Workforce Policy; Ken 
Serafin, Workforce Policy Counsel; Alex Sollberger, 
Communications Director; Linda Stevens, Chief Clerk/Assistant 
to the General Counsel; Alissa Strawcutter, Deputy Clerk; Aaron 
Albright, Communications Director for Labor; Tylease Alli, 
Hearing Clerk; Daniel Brown, Staff Assistant; Jody Calemine, 
Staff Director; Brian Levin, New Media Press Assistant; Jerrica 
Mathis, Legislative Fellow, Labor; Megan O'Reilly, General 
Counsel; and Michele Varnhagen, Chief Policy Advisor and Labor 
Policy Director.
    Chairman Roe [presiding]. A quorum being present, the 
subcommittee will come to order.
    Good morning, everyone.
    Welcome to our witnesses, and thank you for joining us 
today. We appreciate your views and expertise on how we can 
best ensure union transparency and accountability.
    It has been almost 2 years since the recession that struck 
our economy in late 2007 officially ended. However, as we are 
reminded with the release of virtually every set of updated 
economic data, many Americans continue to struggle.
    More than 13 million workers are unemployed, and food and 
energy prices continue to rise. Budgets are stretched thin as 
families try to make ends meet.
    On payday, at the grocery store and at the gas pump, 
Americans recognize the value of every hour worked and every 
dollar earned. Whether it is their tax dollars or union dues, 
workers deserve to know how their hard-earned money is being 
spent.
    Joining a union is a right reserved by law for the American 
worker. Today, 6.9 percent of private sector workers have 
decided to obtain union representation. Congress has a 
longstanding responsibility to shine a bright light on how the 
dues of union workers are being spent.
    In 2009, unions reported collecting more than $8 billion in 
workers' dues. This figure alone highlights the importance of 
union transparency.
    In an effort to improve transparency, the Labor Management 
Reporting and Disclosure Act was enacted in 1959. The act 
guarantees basic standards of democracy and fiscal 
responsibility in unions representing private sector workers. 
Among its protections the act sets out standards for union 
officer elections and administrative practices, and requires 
the disclosure of certain financial transactions and the 
balance of union funds and assets.
    The Office of Labor Management Standards, located within 
the Department of Labor, is charged with enforcing the law. In 
recent years, important progress has been made in strengthening 
the law's protections. Starting in 2003, OLMS reformed the 
enforcement process to better reflect the needs of a 21st 
century workforce.
    More than 40 years after the law's enactment, transparency 
and accountability were finally enhanced on behalf of union 
workers.
    Unfortunately, this progress is now under assault by the 
culture of union favoritism that dominates the workforce 
policies of the current administration. Under President Obama's 
watch, the Department of Labor has rolled back many of these 
enhanced protections to benefit bosses at the expense of 
workers.
    One clear example of this trend can be seen in the 
administration's recent decision to rescind the Form T-1 
reporting requirements. After years of work and legal review, 
the Department of Labor finalized the T-1 form to provide 
greater transparency of the finances of trusts controlled by 
union officials.
    For the first time, workers would have had access to 
detailed information about receipts, disbursements and officer 
compensation for thousands of trusts that receive union dues, 
such as strike funds and job targeting funds.
    Yet, before a single report could be filed, the 
administration revoked the T-1 requirement. The 
administration's position is this information is valuable to 
workers only if the trust is wholly owned by a single union. 
However, union workers' dues are deposited in a trust 
controlled by more than one entity are not allowed the same 
degree of transparency.
    Greater protections for some and not for others is a 
disservice to all workers.
    The administration has also weakened reporting requirements 
on the Form LM-2 and proposed weakening the LM-30 reporting 
requirements that once provided unprecedented information to 
union workers. Enhanced reporting of LM-2 would have amounted 
to just 15 hours of additional administrative work for union 
officials annually.
    The administration has also significantly reduced the 
number of union audits, undermining a once robust audit program 
that identified numerous violations of the law.
    For more than 7 million private sector union members, the 
majority of whom are forced to pay union dues in non-right-to-
work states, these reporting requirements are the only way to 
see how their union dues are spent and judge the action of 
their union officials. Workers should be empowered with the 
knowledge of how their hard-earned dollars are being spent 
during the times of both economic turmoil and prosperity.
    Today's hearing will help determine whether workers have 
the tools they need to do just that.
    I now yield to Mr. Andrews, the subcommittee's senior 
Democratic member, for his opening remarks.
    [The statement of Dr. Roe follows:]

           Prepared Statement of Hon. David P. Roe, Chairman,
         Subcommittee on Health, Employment, Labor and Pensions

    Good morning everyone. Welcome to our witnesses; thank you for 
joining us today. We appreciate your views and expertise on how we can 
best ensure union transparency and accountability.
    It has been almost two years since the recession that struck our 
economy in late 2007 officially ended. However, as we are reminded with 
the release of virtually every set of updated economic data, many 
Americans continue to struggle. More than 13 million workers are 
unemployed, and food and energy prices continue to rise. Budgets are 
stretched thin as families try to make ends meet.
    On pay day, at the grocery store, and at the gas pump, Americans 
recognize the value of every hour worked and every dollar earned. 
Whether it is their tax dollars or union dues, workers deserve to know 
how their hard-earned money is being spent.
    Joining a union is a right reserved by law for American workers. 
Today, 6.9 percent of private-sector workers have decided to obtain 
union representation. Congress has a long-standing responsibility to 
shine a bright light on how the dues of union workers' are being spent. 
In 2009, unions reported collecting more than $8 billion in workers' 
dues. This figure alone highlights the importance of union 
transparency.
    In an effort to improve transparency, the Labor-Management 
Reporting and Disclosure Act was enacted in 1959. The act guarantees 
basic standards of democracy and fiscal responsibility in unions 
representing private sector workers. Among its protections, the act 
sets out standards for union officer election and administrative 
practices and requires the disclosure of certain financial transactions 
and the balance of union funds and assets.
    The Office of Labor-Management Standards, located within the 
Department of Labor, is charged with enforcing the law. In recent 
years, important progress has been made in strengthening the law's 
protections. Starting in 2003, OLMS reformed the enforcement process to 
better reflect the needs of a 21st century workforce. More than 40 
years after the law's enactment, transparency and accountability were 
finally enhanced on behalf of union workers.
    Unfortunately, this progress is now under assault by a culture of 
union favoritism that dominates the workforce policies of the current 
administration. Under President's Obama watch, the Department of Labor 
has rolled back many of these enhanced protections to benefit union 
bosses at the expense of workers.
    One clear example of this trend can been seen in the 
administration's most recent decision to rescind the form T-1 reporting 
requirements. After years of work and legal review, the Department of 
Labor finalized the T-1 form to provide greater transparency of the 
finances of trusts controlled by union officials. For the first time, 
workers would have had access to detailed information about receipts, 
disbursements, and officer compensation for thousands of trusts that 
receive union dues, such as strike funds and job targeting funds.
    Yet before a single report could be filed, the administration 
revoked the T-1 requirement. The administration's position is this 
information is valuable to workers only if the trust is wholly owned by 
a single union. However, workers whose dues are deposited in a trust 
controlled by more than one entity are not allowed the same degree of 
transparency. Greater protections for some and not for others do a 
disservice to all workers.
    The administration has also weakened reporting requirements on the 
form LM-2 and proposed weakening the form LM-30, reporting requirements 
that once provided unprecedented information to union workers. Enhanced 
reporting of the LM-2 would have amounted to just 15 hours of 
additional administrative work for union officials annually. The 
administration has also significantly reduced the number of union 
audits, undermining a once robust audit program that identified 
numerous violations of the law.
    For more than seven million private sector union members, the 
majority of whom are forced to pay union dues in non-right-to-work 
states, these reporting requirements are the only way to see how their 
union dues are spent and judge the actions of their union officials.
    Workers should be empowered with the knowledge of how their hard-
earned dollars are being spent, during times of both economic turmoil 
and prosperity. Today's hearing will help determine whether workers 
have the tools they need to do just that. I would like to now yield to 
Mr. Andrews, the subcommittee's senior Democrat member, for his opening 
remarks.
                                 ______
                                 
    Mr. Andrews. Senior? That sounds so foreboding.
    Thank you, Mr. Chairman, for your courtesy and 
professionalism, and that of your staff.
    We are happy to have the witnesses with us here this 
morning. We look forward to your testimony and appreciate your 
participation.
    I think the beginning of the chairman's remarks were right 
on point. We have more than 13 million Americans unemployed as 
we meet this morning. It is actually about 15 million.
    And everywhere I go in my district and, frankly, around the 
country, what I am hearing is that those Americans and their 
neighbors want us to find a way to work together to create an 
environment in which entrepreneurs and small businesses can 
create jobs in our country. I think that ought to be the 
principal focus of the Congress' agenda.
    Our committee could be finding ways to help make pension 
assets more available more readily for workers who are late in 
their careers and cannot find another job. But we are not doing 
that.
    Our committee could be working together to try to find ways 
to more quickly restrain health care costs for employers and 
employees to make the business climate more favorable. We are 
not doing that.
    Our committee could be working together to try to find ways 
to most effectively engage in job training, so people who lost 
a job or a career in a diminishing industry could find a way to 
shift to a growing industry. But we are not doing that.
    Instead what we are doing is engaging in what I believe is 
a political exercise to highlight what the chairman referred to 
as a ``culture of union favoritism'' at the OLMS.
    Let us examine the factual basis for that claim.
    If there were a culture of union favoritism, one would 
expect that three results would obtain. First, one would expect 
that there would be fewer indictments or actions initiated 
against improper union conduct than there had been previously.
    So, in other words, there would be a drop in the number of 
indictments from the Bush administration compared to the Obama 
administration.
    In fact, the opposite is the case. The average number of 
indictments by the OLMS in the Bush years was 122. The average 
number of indictments in the Obama years has been 126.
    The next that that you would assume would obtain, if there 
was in fact a culture of union favoritism is that the number of 
convictions for wrongful conduct would have dropped from the 
Bush years to the Obama years.
    In fact, the opposite is true. In the years that the Bush 
Labor Department was running this operation, the average 
convictions were 113 per year. The average number of 
convictions in the Obama administration has been 125 
convictions per year.
    And then the third claim that one might make is that the 
administration is not giving the OLMS the resources that it 
needs to do its job, whether it is conducting audits, filing 
indictments or winning convictions.
    Well, it is interesting to see that, in 1985, the OLMS was 
spending about $4.01 per worker covered by the OLMS protections 
in inflation-adjusted dollars. In other words, in 2010 dollars, 
we are spending $4 per worker covered by this law in America.
    You would think, that if there is a culture of union 
favoritism, that that resource number would have dropped. In 
fact, in 2010, we are spending $5.82 per covered worker in 2010 
dollars.
    So, the hypothesis here--because I know the chairman likes 
the scientific method as a good scientist, and so do I--the 
hypothesis is there is a culture of union favoritism under this 
administration at the OLMS.
    The fact is that the number of indictments has gone up, not 
down. The fact is that the number of convictions has gone up, 
not down. And the fact is, the dollars expended per worker to 
enforce these protections has gone up, not down.
    So, what we expect to engage in with these very fine, 
competent witnesses today, is their explanation as to why it 
is, if, given these facts, that in fact there is a culture of 
union favoritism.
    We look forward to the discussion, and I thank the chairman 
for the time.
    Chairman Roe. I thank the ranking member for yielding back.
    Pursuant to rule 7c, all members will be permitted to 
submit written statements to be included in the permanent 
hearing record.
    And without objection, the hearing record will remain open 
for 14 days to allow questions for the record, statements and 
extraneous material referenced during the hearing, to be 
submitted for the official hearing record.
    Now, I would like to take this opportunity to thank our 
witnesses for being here and introduce them. It is my pleasure 
to introduce our distinguished panel.
    Mr. Nathan Mehrens is currently the counsel for Americans 
for Limited Government. From February 2006 to January 2010, Mr. 
Mehrens served as a special assistant to the deputy secretary 
of labor for labor management programs. While at OLMS, he 
assisted in the drafting of the Form T-1 and the Form LM-2. Mr. 
Mehrens received his J.D. from Oak Brook College of Law and 
Government Policy.
    And Ms. Diana Furchtgott-Roth is a senior fellow and 
director of the Center for Employment Policy at the Hudson 
Institute. Prior to joining the Hudson Institute, Ms. 
Furchtgott-Roth was chief economist of the U.S. Department of 
Labor.
    From 2001 to 2002, she served as chief of staff of the 
President's Council of Economic Advisers under then-President 
George W. Bush, and also served as deputy executive director of 
the Domestic Policy Council and associate director of the 
Office of Policy Planning in the White House from 1991 to 1993. 
She received her B.A. in economics from Swarthmore College and 
her master's in philosophy in economics from Oxford University.
    Dr. John Logan is associate professor and director of labor 
studies at San Francisco State University and a senior labor 
policy specialist with U.C.-Berkeley's Labor Center. Dr. Logan 
is an expert in U.S. labor law and law policy labor management 
relations and comparisons between U.S. and other countries' 
labor law, corporate social responsibility and the union 
avoidance industry in the United States. Dr. Logan received his 
Ph.D. in U.S. labor history from the University of California-
Davis.
    Mr. Arthur Fox is counsel for the Association for Union 
Democracy. Mr. Fox specializes in labor relations with an 
emphasis on the internal affairs of unions, the democratic 
rights of members and the union duty of fair representation.
    He has represented numerous victims of union political 
repression and served as an outside general counsel for the 
National Postal Mail Handlers Union and the National 
Association of Air Traffic Specialists and the Fraternal Order 
of the Police Corrections Unit. Mr. Fox received his B.A. and 
LL.B. from the University of Virginia.
    Mr. Fox will be testifying on behalf of the Association of 
Union Democracy, the only national pro-labor and non-profit 
organization dedicated solely to advancing the principles and 
practices of democratic trade unionism in the North American 
labor movement.
    Now, for the witness testimony. Before I recognize each of 
you for your testimony, let me briefly explain the lighting 
system.
    Many of you have done this before, but you will have 5 
minutes to present your testimony. And when you begin, the 
light in front of you will turn green, as it will for us. And 
when 1 minute is left, the light will turn yellow, and when 
your time has expired, the light will turn red, at which point 
I would ask you to wrap up your remarks as best you can.
    After everyone has testified, each member will have 5 
minutes to ask questions of the panel. And the chairman will 
also gavel himself down at 5 minutes.
    Before we start, I would like to ask if any of you have any 
of your Final Four picks correctly. I do not. I am an ``oh-
fer'' in all that. If anybody up here got any of the Final Four 
picks right----
    Mr. Andrews. Shockingly, I had Bucknell going to the Final 
Four, and they were upset by Connecticut in the first round.
    Chairman Roe. Well, if you did, you do not know anything 
about basketball, if you picked any of them right.
    So, thank you.
    With that, let us have your opening remarks.
    Mr. Mehrens?

   STATEMENT OF NATHAN PAUL MEHRENS, COUNSEL, AMERICANS FOR 
             LIMITED GOVERNMENT RESEARCH FOUNDATION

    Mr. Mehrens. Mr. Chairman, Mr. Ranking Member and members 
of the committee, thank you for the invitation to testify 
today.
    I would like to touch on a few key areas where I believe 
that the actions of the U.S. Department of Labor and its Office 
of Labor Management Standards over the last 2 years have 
damaged the ability of that office to enforce the Labor 
Management Reporting and Disclosure Act of 1959.
    The act, among other things, provides for labor 
organization financial transparency, and OLMS has been 
delegated enforcement responsibilities for most of the act's 
provisions. Pursuant to the act, OLMS has promulgated a number 
of financial report forms, which are filed by labor 
organizations, their officers and employees, as well as 
consultants and outside employers.
    Prior to 2001, the main financial report form used by labor 
organizations--the largest labor organizations--to report their 
finances, the Form LM-2, was just a very basic form. It only 
reported the basic information.
    However, that changed during the tenure of the previous 
administration. Under the leadership of Secretary Elaine L. 
Chao, the Form LM-2 was overhauled. The new Form LM-2 required, 
among other things, the reporting of functional disbursements 
in categories such as representational activities, political 
activities and lobbying, and contributions, gifts and grants.
    Labor organizations were no longer able to report millions 
of dollars on a single line item. But now, individual 
disbursements in the functional categories were required to be 
disclosed if they were $5,000 or more.
    Part of the overhaul was the creation of a new form, Form 
T-1, on which unions were to report the finances of trusts in 
which they are interested. These are trusts such as building 
funds, strike funds and training funds. They generally have a 
lower level of disclosure and, in some cases, act like offshore 
accounts.
    In addition, the department also made a few select 
enhancements to the Form LM-2 in a final rule that was 
published on January 21, 2009. These enhancements would have 
required, among other things, the reporting of the full dollar 
value of the compensation packages paid to officers and 
employees of labor organizations.
    The old Form LM-2 did not adequately disclose this 
information. And research by the department found that 
significant amounts of money were disbursed to these officers 
and employees, but that money was not attributed to them on the 
form, due to that form's structure. That changed under the 
January 21, 2009, final rule.
    However, even before the Obama administration was sworn in, 
there were signs that the new administration would work 
aggressively to reduce the staff and resources of OLMS, as well 
as to roll back the improvements in transparency that were 
promulgated during the previous administration.
    During the presidential transition period, the AFL-CIO 
provided a document to the transition team that was a road map 
that showed how to roll back a lot of the transparency.
    After assuming office, the Obama administration first froze 
the effective date of the January 21, 2009, enhancements to the 
final rule and then rescinded that rule altogether. The 
administration also did the same to the Form T-1. It is now 
gone.
    Additionally, the department has slashed the budget of 
OLMS. In fiscal year 2006, OLMS had a full-time equivalent 
allocation of 384. For fiscal year 2012, the department's 
budget request is for 249.
    This represents a 35 percent reduction in staff from the 
fiscal year 2006 level, and it is only a matter of time before 
these staff cuts turn into reduced enforcement activities. And 
indeed, the department's own budget justification numbers bear 
this out.
    As part of its staff reduction, OLMS completely disbanded 
the Division of International Union Audits, a division that had 
responsibility for auditing the largest labor organizations in 
the country, some of which have assets that are huge, have 
received disbursements of over $600 million in some cases.
    On page 21 of its budget justification, OLMS flatly states 
that it plans to conduct quote,--``zero I-CAP audits in FY 
2012,''--end quote.
    So, imagine for a moment the outrage that would occur if 
the Securities and Exchange Commission publicly announced that 
it was disbanding the only division within it that audited the 
largest organizations that it had jurisdiction over, and then 
publicly announced that it would conduct no audits of them in 
the coming year.
    In the same vein of reducing transparency, OLMS enforcement 
data is notably missing from what is supposed to be a 
department-wide, online enforcement database. While this 
database discloses a lot of data from a bunch of different 
organizations within the department such as OSHA, MSHA, EBSA, 
OFCCP and the Wage and Hour Division, there is no data from 
OLMS.
    These actions and others, taken together, demonstrate that 
the administration is working very hard to roll back the clock 
at least 10 years and to provide less transparency for labor 
organization members and the public.
    Thank you, and happy to answer any questions you may have.
    [The statement of Mr. Mehrens follows:]

          Prepared Statement of Nathan Paul Mehrens, Counsel,
          Americans for Limited Government Research Foundation

    Mr. Chairman, Mr. Ranking Member, and Members of the Committee, 
thank you for the invitation to testify today.
    I would like to briefly touch on a few key areas where I believe 
the actions of the
    U.S. Department of Labor and its Office of Labor-Management 
Standards (OLMS) during the last two years have significantly damaged 
the ability of OLMS to enforce the Labor-Management Reporting and 
Disclosure Act of 1959 (LMRDA).
    As you know the LMRDA was passed with wide bi-partisan support. In 
the Senate the bill passed with 95 votes and the House passed it with 
352 votes.\1\ Before the Act was passed Congress held hearings over a 
two year period on 270 days and called over 1,500 witnesses.\2\ The Act 
among other things provides for labor organization financial 
transparency and OLMS has been delegated the responsibility for 
enforcing most of the Act's provisions. The Act is an important piece 
of legislation and requires serious, dedicated attention from OLMS in 
order work effectively. Pursuant to the Act OLMS has promulgated 
several financial reports that are required to be filed by labor pieces 
of major legislation, the LMRDA is only as good as the Secretary who 
enforces it.
---------------------------------------------------------------------------
    \1\ NATIONAL LABOR REL. BD., LEGISLATIVE HISTORY OF THE LABOR-
MANAGEMENT REPORTING AND DISCLOSURE ACT OF 1959, 1738, 9 (1985). See 
also Id., at 1453.
    \2\ See Michael J. Nelson, Slowing Union Corruption: Reforming the 
Landrum-Griffin Act to Better Combat Union Embezzlement, 8 GEO MASON L. 
REV. 527, 33 (2000).
---------------------------------------------------------------------------
    Prior to 2001 the annual financial form used by the largest labor 
organizations to report their finances, the Form LM-2, reported only 
basic information.
    During Secretary Elaine L. Chao's tenure the Form LM-2 was 
overhauled. The new Form LM-2 required among other things the reporting 
of disbursements in functional expense categories such as 
``Representational Activities,'' ``Political Activities and Lobbying,'' 
and ``Contributions, Gifts & Grants.'' Labor organizations were no 
longer able to report $42 million as a single line item, but now 
individual disbursements of $5,000 or more in categories such as these 
were required to be separately disclosed.
    Part of that overhaul was the creation of a Form T-1 on which 
unions would report the finances of ``trusts in which a labor 
organization is interested.'' These are trusts such as building funds, 
strike funds, and training funds. These generally have a lower level of 
disclosure and in some cases act like ``offshore accounts'' for labor 
organizations.
    In addition to the major overhaul of the Form LM-2 the Department 
also made a few select enhancements to the form in a final rule that 
was published on January 21, 2009. These enhancements would have 
required among other things the reporting of the full dollar value of 
compensation packages that labor organizations pay to their officers 
and most employees. The old Form LM-2 did not adequately disclose this 
were disbursed to labor organization officers and employees and on 
their behalf, money that was not attributed to them due to the 
structure of the form. That changed under the January 21, 2009 final 
rule.
    However, even before President Obama was sworn in there were signs 
that the new Administration would work aggressively to reduce the staff 
and resources of OLMS as well as to rollback the improvements in 
transparency that were promulgated under President George W. Bush and 
Secretary Elaine L. Chao. During the presidential transition period, 
the AFL-CIO provided the Department with a roadmap of changes to reduce 
labor organization transparency. It appears that the Department has 
been using this roadmap as their guide.
    After the Obama Administration assumed office OLMS first froze the 
effective date of the enhancements to the Form LM-2 and then rescinded 
the January 21, 2009 final rule altogether. The Department also did the 
same to the Form T-1. Additionally the regulation which set the 
procedure by which a labor organization would lose the privilege of 
filing a simplified report, the Form LM-3, pursuant to Sec. 208 of the 
LMRDA was rescinded as well. The LM-3 regulation was wholly 
discretionary because Sec. 208 of the LMRDA states in relevant part, 
``but the Secretary may revoke such provision for simplified forms of 
any labor organization or employer if he determines, after such 
investigation as he deems proper and due notice and opportunity for a 
hearing, that the purposes of this section would be served thereby.'' 
\3\ As such, if the Secretary believes that the privilege of filing a 
Form LM-3 should not be revoked for an individual labor organization 
then that privilege remains intact. Therefore rescinding this 
regulation was completely unnecessary.
---------------------------------------------------------------------------
    \3\ LMRDA Sec. 208, 29 U.S.C. Sec.  438.
---------------------------------------------------------------------------
    The Administration also refused to enforce the current regulation 
which requires labor organization officers and employees to report 
conflicts of interest on the Form LM-30. A ``non-enforcement policy'' 
was publicly issued regarding the current regulation so long as 
officers and employees comply ``in some manner.'' On that point OLMS 
stated on its website:
    Accordingly, OLMS will refrain from initiating enforcement actions 
against union officers and union employees based solely on the failure 
to file the report required by section 202, using the new, 2007 form, 
as long as individuals meet their statutorily-required filing 
obligation in some manner. OLMS will accept either the old Form LM-30 
or the new one for purposes of this non-enforcement policy.\4\
---------------------------------------------------------------------------
    \4\ Office of Labor-Management Standards, Forms-All Others, 
undated. Available online at: http://www.dol.gov/olms/regs/compliance/
GPEA--Forms/blanklmforms.htm#FLM30 (accessed March 25, 2011).
---------------------------------------------------------------------------
    Additionally the Department has aggressively slashed the staff of 
OLMS. In Fiscal Year 2006 OLMS had a full time equivalent allocation 
(FTE) of 384.\5\ For Fiscal Year 2012 the Department's request is for 
249 FTE.\6\ This is a 35% reduction in staff from the Fiscal Year 2006 
level. It is thus only a matter of time before these staff cuts turn 
into reduced enforcement activities. Indeed, the Department's Fiscal 
Year 2012 investigations, up from its target of 354.\7\ For Fiscal Year 
2011 OLMS sets a target of only 300 criminal investigations, and the 
same is true for Fiscal Year 2012.\8\ This is a 15% reduction for this 
target. For Fiscal Year 2012 OLMS sets a target of 200 compliance 
audits, down from the estimate of 300 for Fiscal Year 2010 and the 541 
audits actually conducted that year.\9\ Even though the Fiscal Year 
2010 target for compliance audits was only 200 the actual result was 
more than double the target. Further, this target is much lower than 
the results in Fiscal Year 2009 where OLMS conducted 746 audits, up 
from its target of 650.\10\ Comparing the 746 audits conducted in 
Fiscal Year 2009 with the Department's desired result of 200 for Fiscal 
Year 2012, it is clear that the Department is harming the ability of 
OLMS to do its job.
---------------------------------------------------------------------------
    \5\ FY 2012 Congressional Budget Justification, Office of Labor-
Management Standards, at 12.
    \6\ Id.
    \7\ FY 2012 Congressional Budget Justification, Office of Labor-
Management Standards, at 20.
    \8\ Id.
    \9\ Id.
    \10\ FY 2011 Congressional Budget Justification, Office of Labor-
Management Standards, at 22.
---------------------------------------------------------------------------
    As part of its reduction in the staff of OLMS, the Department 
completely disbanded the Division of International Union Audits, a 
division that had the responsibility of auditing the largest labor 
organizations in the country, some with receipts and disbursements 
exceeding $600 million.\11\ On page 21 of its Fiscal Year 2012 budget 
justifications OLMS flatly states that it plans to conduct ``zero I-CAP 
audits in FY 2012.'' The ``I-CAP audits'' are audits of the national 
and international labor organizations. This means no audits of the 
largest labor organizations will occur in Fiscal Year 2012. Imagine the 
outrage that would occur if the Securities and Exchange Commission 
disbanded a division with responsibility for overseeing the largest 
organizations under its jurisdiction and publicly announced that it 
would perform no audits of them in the coming year.
---------------------------------------------------------------------------
    \11\ See for instance the Form LM-2 filed by the Electrical Workers 
IBEW AFL-CIO on September 24, 2010. Available online at 
www.unionreports.gov, under OLMS File 000-016 (accessed March 25, 
2011).
---------------------------------------------------------------------------
    In the same vein of reducing transparency, the OLMS enforcement 
data is notably missing from what is supposed to be a Department wide 
online enforcement database. While this database discloses enforcement 
data from OSHA, MSHA, EBSA, OFCCP, and the Wage and Hour Division, 
there is no data from OLMS. Also, OLMS was almost a year late in 
publishing its Fiscal Year 2009 annual report and only made that report 
public after my office filed a Freedom of Information Act request for 
it.
    All of these actions and others demonstrate the Obama 
Administration is working hard to roll the clock back at least ten 
years and provide less transparency for labor organization members and 
the public.
    Thank you. I'd be happy to answer any questions you may have.
                                 ______
                                 
    Chairman Roe. Thank you.
    Ms. Furchtgott-Roth?

   STATEMENT OF DIANA FURCHTGOTT-ROTH, SENIOR FELLOW, HUDSON 
                           INSTITUTE

    Ms. Furchtgott-Roth. Mr. Chairman, ladies and gentlemen, 
thank you very much for giving me the privilege of testifying 
today.
    I was asked to talk about the compliance burden of these 
regulations, because one of the arguments is that unions face 
too high a compliance burden when filling out the LM-2, the LM-
30, T-1 forms.
    So, I was chief economist at the U.S. Department of Labor 
while these rules were going into place. And I want to testify 
that we offered unions free software, free advice, call-in 
lines to help with the compliance costs, and that any union 
that had problems filling out the forms could call on us for 
assistance, which was provided free of charge.
    The LM-30 forms were filed on paper. They were not filed 
electronically, so there was not any free software for that.
    But there was compliance assistance in the assistant 
secretary for policy's office, not just for the union forms, 
but other compliance areas. There was a big focus on how to 
make regulations easier to comply with, both in terms of 
electronic methods and in terms of call-in centers. And this 
was because we were focused on making it easier for employers 
to hire workers and lowering the unemployment rate.
    I would like to address the issue, the fundamental issue of 
fairness in this, as well as the compliance burden, because 
union workers, union members have a right to know where their 
money goes.
    Just as candidates running for election, all of you 
distinguished members up here have had to comply with federal 
election laws--minute laws that say where you can put a 
billboard, how much you can raise, who you can raise money 
from. So, it is fair for union members to be able to know where 
officers are spending the money.
    And that is one reason that the LM-2 forms had clearly how 
much money was spent on political activity, how much on 
representation, how much on gifts and lobbying, how much for 
administrative costs. So, any rank-and-file union member could 
go to the website and figure this out.
    Now, in the Federal Register, Tuesday, October 13th, an 
unnamed international union was quoted as saying, ``detailed 
reporting requirements are unnecessary because union members 
are sophisticated enough to seek information about union 
financial matters from their unions, as well as seek publicly 
available information, such as that provided by the IRS.''
    But if the information is not even required to be 
collected, then there is no way that even the most 
sophisticated union member can access it on the Internet. And 
rolling back these regulations that were put in place by 
Secretary Chao would mean that some of this information is not 
available to anyone, not even the most sophisticated union 
member.
    There are many states are right-to-work states, where 
workers do not have to join a union as a condition of 
employment. But many other states do not have that. They are 
forced unionization states where workers have to be a member of 
the union.
    So, on the one hand, if they have to be a member of the 
union, then it makes sense that they have the right to know 
where their dues are going. They are forced to be a member of 
the union. They should also have this information at their 
fingertips.
    And that is as important, I would say, as looking at 
pensions, health care and job training, because these are 
people who do not have the choice as to where their money goes.
    Furthermore, with the Supreme Court Beck decision, union 
members have the right to demand back any portion of their dues 
used for political activity. If the information on what is 
available for--used for political activity is not even 
available to them, how can they request the amount back in 
their dues?
    So, with that, I would like to thank you for giving me the 
privilege of testifying before you, and to say that this is a 
matter of fairness to the rank-and-file union member, and that 
he should have the same rights as any shareholder who is 
allowed to go over corporation's books.
    Thank you.
    [The statement of Ms. Furchtgott-Roth follows:]

              Prepared Statement of Diana Furchtgott-Roth,
                    Senior Fellow, Hudson Institute

    Mr. Chairman, members of the Committee, I am honored to be invited 
to testify before you today on the subject of union transparency and 
accountability. I have followed and written about this and related 
issues for many years. Currently I am a senior fellow at the Hudson 
Institute. From 2003 until April 2005 I was chief economist at the U.S. 
Department of Labor. From 2001 until 2002 I served at the Council of 
Economic Advisers as chief of staff. Previously, I was a resident 
fellow at the American Enterprise Institute. I have served as Deputy 
Executive Secretary of the Domestic Policy Council under President 
George H.W. Bush and as an economist on the staff of President Reagan's 
Council of Economic Advisers.
Introduction
    Financial transparency has assumed a prominent role in most sectors 
of the economy. Corporations are required by Sarbanes-Oxley to provide 
extensive disclosure of their financial activities. Candidates for 
political office have to adhere to Federal Election Commission 
regulations. The Internal Revenue Service collects taxes from citizens 
and ensures compliance through audits.
    The union sector, however, with assets of over $10 billion, was, 
until 2005, mostly exempt from any regulation that required detailed 
financial disclosure.
    The first major piece of legislation designed to compel union 
financial disclosure was the Labor Management Reporting and Disclosure 
Act, better known as the Landrum-Griffin Act (LMRDA). The law was 
passed in 1959 and followed more than two years of Senate 
investigations into widespread corruption in the organized labor 
movement, particularly in major unions such as the International 
Brotherhood of Teamsters, United Mine Workers, and International 
Longshoremen Workers Union. Organized labor's behavior at the time was 
so egregious that the bill gained overwhelming bipartisan support, 
passing the Senate by a vote of 95-2 and the House of Representatives 
by a 352-52 margin. Few pieces of labor law reform since Landrum-
Griffin have received this level of approval.\1\
---------------------------------------------------------------------------
    \1\ Daniel Yager and Phillip B. Wilson ``Comments on Notice of 
Proposed Rulemaking Labor Organization Annual Financial Reports,'' 
Labor Policy Association, January 24, 2003. Available at: http://
www.hrpolicy.org/memoranda/2003/03-09_LMRDA_Comments.pdf
---------------------------------------------------------------------------
    Title II of the LMRDA was written with the intention of requiring 
greater union transparency. While labor unions were compelled to file 
financial reports before the Act's passage, these reports were not made 
public and were of virtually no help in holding unions accountable to 
their members.\2\ Even Robert Kennedy, who was involved in the Senate 
investigations of organized labor, acknowledged that the union 
financial forms then in place were ineffective.\3\
---------------------------------------------------------------------------
    \2\ Ibid, 2.
    \3\ Robert Kennedy, The Enemy Within (1960) 30-31.
---------------------------------------------------------------------------
    The first substantive regulations on union financial reporting 
requirements were issued by Secretary of Labor James Mitchell in 1960. 
These required unions with $20,000 or more in total annual receipts to 
submit to the Department of Labor their financial information on a 
``Form LM-2.'' The filing threshold was gradually raised until it 
reached $200,000 in 1994.
    The great hope at the time of LMRDA's passage was that the new 
financial disclosures would empower rank and file union members and 
ensure that unions were more accountable to their membership, and, as a 
result, less corrupt overall.
    Unfortunately, the type of reforms that LMRDA envisioned never 
fully materialized.\4\ There were several reasons for this failure.
    First, some unions attempted to make sure that the financial 
information contained in the forms was never disclosed to the rank and 
file, much less widely disseminated to members. Some even took steps to 
ensure that their dues-paying members did not have proper notification 
about the existence of the LM-2 data. For example, the International 
Association of Machinists was involved in litigation for years over 
this issue. The union claimed that a one-time notification issued in 
1959 was sufficient to comply with the LMRDA's notification 
requirements. The Fourth Circuit Court of Appeals eventually disagreed 
with this reasoning, but these types of roadblocks were commonplace in 
the years after LMRDA's passage.\5\
---------------------------------------------------------------------------
    \4\ Yager and Wilson, 4.
    \5\ See Thomas v. Grand Lodge, International Association of 
Machinists & Aerospace Workers, 201 F.3d 517 (4th Cir. 2000)
---------------------------------------------------------------------------
    Furthermore, the old regulations and LM-2 forms did not require 
detailed information that properly reflected the complex financial 
world of today's labor unions.\6\ Large amounts of funds--in the 
millions of dollars--were reported by unions on the forms as ``other,'' 
``expenses,'' or ``miscellaneous.'' Information was deliberately vague 
and could be grouped into broad categories, allowing labor unions to 
escape the type of scrutiny faced by corporate and other non-profit 
entities.
---------------------------------------------------------------------------
    \6\ For a general idea of the financial complexity of today's 
unions, see Marick F. Masters Unions at the Crossroads: Strategic 
Membership, Financial, and Political Perspectives (1997) Westport, CT: 
Quorum.
---------------------------------------------------------------------------
    Secretary of Labor Elaine Chao argued for more detailed LM-2 forms 
saying that:

                  ``The forms no longer serve their underlying purpose 
                because they fail to provide union members with 
                sufficient information to reasonably disclose to them 
                the financial condition and operation[s] of labor 
                organizations * * *. [I]t is impossible for union 
                members to evaluate in any meaningful way the 
                operations or management of their unions when the 
                financial disclosure reports filed * * * simply report 
                large expenditures for broad, general categories. The 
                large dollar amount and vague description of such 
                entries make it essentially impossible for anyone to 
                determine with any degree of specificity what union 
                operations their dues are spent on, without which the 
                purposes of the LMRDA are not met.'' \7\
---------------------------------------------------------------------------
    \7\ http://pacer.cadc.uscourts.gov/docs/common/opinions/200505/04-
5057a.pdf, pg 15.

    In order to solve this problem, the Department of Labor proposed 
new rules to update the Form LM-2, including a requirement that all 
unions with receipts in excess of $200,000 file their disclosure forms 
electronically.
    Additionally, the new rules required eligible unions to disclose 
detailed membership status information on the form's Schedule 13. 
Historically, unions would report inconsistent numbers for their 
membership totals and not differentiate between the many different 
classes of union members such as active, associate, retired, agency-fee 
payers, etc. The new class system mandated by Schedule 13 allowed the 
rank and file to discern the exact composition of their union.
    Arguably the most important addition to the new LM-2 forms was the 
requirement that unions detail specific expenditures in more narrow 
categories than before on Schedules 14-19 of the LM-2 forms. Schedules 
14-19 demand itemized expenses for all expenditures over $5,000 in 
these schedules and categories. Specifically, other receipts were 
detailed in Schedule 14, representational activities in Schedule 15, 
political activities and lobbying in Schedule 16, contributions, gifts 
and grants in Schedule 17, general overhead in Schedule 18, and union 
administration in Schedule 19. These new forms were displayed on the 
Department of Labor website, thus allowing any rank and file union 
member instant access to the data in the new forms and compelling union 
leaders to list both their salaries and the percentage of time spent on 
various union-related activities.
    Union officers are required to complete the LM-30 form, which 
requires union officials to disclose conflicts of interest. If 
officials received things value for any reason other than in the course 
of their regular duties, then they would likely need to disclose the 
transaction and its reason.
    Under 2007 reform of the Form LM-30, stewards receiving leave from 
an employer to work on union matters--known as ``union leave'' or ``no 
docking'' policy--was reportable if it exceeded 250 hours a year.
    The AFL-CIO protested every change, publicly claiming that the LM-2 
reforms would impose an impossible burden on the unions. Amongst these 
burdens, the AFL-CIO cited the supposedly high cost of accounting that 
would be associated with tracking expenditures as well as an inability 
to comply with the Department's requested time frame for the new forms. 
In their legal pleadings against the new rules, the federation also 
disputed Secretary Chao's authority to issue the broad new regulations 
that she proposed.\8\
---------------------------------------------------------------------------
    \8\ See legal case.
---------------------------------------------------------------------------
    The labor federation won a minor court battle in January 2004 when 
U.S. District Court Judge Gladys Kessler ruled that the Department of 
Labor had to give unions more time to comply with the new rules. But 
Judge Kessler, a Clinton appointee to the bench, eventually said that 
the new rules themselves were appropriate and legal. The AFL-CIO was 
still not satisfied and appealed Judge Kessler's decision. In May 2005, 
the Federal Circuit Court in the District of Columbia upheld the new 
rules in a 2-1 decision.
    In 2009, in an attempt to make it easier for union members to 
identify corrupt behavior, the Labor Department issued revised and 
expanded LM-2 forms. Additional information included verification that 
sales and purchases of assets were performed without conflicts of 
interest; the value of benefits and travel reimbursements paid to union 
officers and employees; and additional details on funds received.
    These expenses are listed on Internal Revenue Service tax forms, 
but not on financial disclosure forms filed with the Labor Department. 
IRS documents are laborious to find, whereas Labor Department 
disclosure forms are available electronically.
    In addition to the LM-2 form, unions were required for the first 
time to file a disclosure form, known as T-1, about the finances of 
union-managed trusts, such as credit unions, strike funds, pension and 
welfare plans, and building funds. This is because any unions had 
created networks of trusts that allowed them to shield massive 
financial transactions from their members, analogous to the recent 
abuses involving ``off-the-books'' accounting by some corporations.
    All these regulations were of great value to union members. Just as 
shareholders can see how corporations spend their money, so union 
members could see how their union dues were being spent.
    But now the Labor Department is rolling back the financial 
disclosure rules. It does not want unions to file the enhanced LM-2 
forms, the new LM-30 forms, and the T-1 form. In the Federal Register 
of October 13, 2009, the Department states that ``comments received 
indicate that the Department may have underestimated the increased 
burden that the rule would place on reporting organizations.''
    It also cited an unnamed union: ``The union also asserted that 
detailed reporting requirements are unnecessary because union members 
are sophisticated enough to seek information about union financial 
matters from their unions, as well as seek publicly available 
information, such as that provided by the IRS.''
    The whole point is that if unions are misusing workers' dues, the 
union is going to disguise this, and not tell rank-and-file members. 
Furthermore, the IRS data to which the union refers, the Form 990s, 
come out with a 2-year delay, are not readily accessible, and disclose 
payroll and benefits information for only a very limited number of 
union officials.
    Throughout the LM-2 process, the Labor Department provided unions 
with free software and free training to complete the forms. The only 
reason that completing the forms would be too burdensome is that the 
organizations do not want to keep track of the expenses. But it is 
their duty to tell union members where their hard-earned dues are 
going.
    For comparison's sake, it is worth highlighting the costs of 
compliance for corporations to comply with one section of the Sarbanes-
Oxley Act of 2002. Section 404 of the act requires public companies to 
issue a management report on the effectiveness of companies' internal 
controls, and an independent audit report. In 2005, Charles Rivers 
Associates, an economic consulting firm, estimated that compliance 
costs averaged $7.8 million in 2004 for the Fortune 1000 companies. 
Smaller companies had to spend hundreds of thousands of dollars.
    If these companies had complained that the compliance costs were 
too high, and that the SEC should rescind the rules, they would have 
been mocked in the media and the public eye. Yet unions, who were 
offered free help and software to fill out the forms, receive a 
sympathetic hearing.
Conclusion
    The criticism of the LM-2, T-1, and LM-30 forms suggests that union 
financial activity is now an open book. But this is not so. Political 
activity is not always disclosed. Payments to third parties, often put 
down as charitable contributions, are in turn used for political 
activity. Some of this can be observed from the forms, but other 
activity is still hidden. Some payments are directed to third parties 
who have conflict of interest with union officials.
    Just as Sarbanes-Oxley sets standards for corporate disclosure so 
that shareholders have full information, the same protection should be 
extended to union assets and activity so that union members know that 
their contributions are being wisely used.
                                 ______
                                 
    Chairman Roe. Thank you.
    Dr. Logan?

STATEMENT OF JOHN LOGAN, PH.D., DIRECTOR OF LABOR STUDIES, SAN 
                   FRANCISCO STATE UNIVERSITY

    Mr. Logan. Thank you very much, Chairman Roe and Ranking 
Member Andrews, members of the committee. It is a great 
pleasure to come here and testify before you today.
    I want to say four very brief things from my testimony, all 
of which I talk about in much greater length in the written 
testimony. And as you know, academics tend to be fairly long-
winded, so I will start off by telling you what I am going to 
say, and then try to say it.
    First and most important, I want to say that the current 
OLMS is actually doing a very good job when it comes to 
enforcement of the LMRDA, that it is enforcing the law and 
enforcing the law robustly, that its record is, as Ranking 
Member Andrews said, very, very good in this area.
    Second, the revisions introduced by the Bush Department of 
Labor, which I talk about at length in the written testimony, 
actually do not achieve their objectives. They do not, and 
would not, uncover cases of union corruption. And they do not 
provide greater accountability to ordinary union members and 
provide them with valuable information in a useable form.
    Third, to the extent that anyone has benefited from these 
revisions, it has actually been self-styled union watchdog 
groups that report on unions who like to bark on ideological 
grounds; and to private, so-called union avoidance consultants 
that charge employers large amounts of money for the 
information that is taken selectively from these very detailed 
LM-2 forms.
    And finally, the regulations themselves have imposed a 
significant burden on unions. And the people who have paid for 
this burden have been the ordinary union members whose dues 
money have had to pay for the new accounting systems, for the 
new staff, for the outside expertise that has been needed to 
comply with these rules. And this has actually taken away from 
the core functions of the union in providing effective 
representation.
    So, as I said, the most important point that I want to 
emphasize is that the current Office of Labor Management 
Standards has an excellent record in this area.
    John Lund, the director of OLMS, is someone I have known in 
a professional capacity for a number of years. When I was a 
professor at London School of Economics, I knew Professor Lund, 
who was then at the University of Wisconsin. He is an 
internationally recognized expert in the area of union 
transparency and accountability.
    He has tremendous experience in this area, has spent most 
of his professional working life working with local and 
national union officers, teaching them how to improve their 
financial accountability and transparency.
    And he has brought that expertise with him to OLMS, as one 
would expect. That he has brought a degree of professionalism 
and balance to the rules on union accounting and union 
financial transparency to the office, that ought to be 
welcomed.
    And we can see this in his written publications too, that 
he repeatedly states that strong enforcement is desirable, 
strong enforcement is necessary.
    Of course, actions do speak louder than words. And when we 
look at the actions of the current OLMS in this area, it also 
reinforces the point that enforcement of the law has been 
robust.
    And again, as Chairman Andrews said, the record, when it 
comes to investigations, indictments and convictions compares 
extremely favorably to the last administration, to the Bush 
administration, and actually suggests that the current OLMS is 
doing a better job in terms of targeting of scarce resources in 
a way that actually gives the greatest bang for the buck, so to 
speak. In terms of indictments and convictions, the number is 
actually up.
    And finally, in terms of providing ordinary union members 
with the type of information they are most likely to want in a 
usable form, the current OLMS also has an excellent record. And 
if you go to the website, if you look at the information that 
is available to ordinary union members, and if you look at the 
form that the information is being presented in, I think that 
reinforces the point that the current OLMS is doing an 
excellent job in this area.
    So, I would like to sum up simply by saying that under the 
current OLMS, enforcement of the law in this area has been 
robust and has been very professional. It is living up to its 
obligations under the law.
    The previous revisions did not bring about their stated 
purpose. And the people who were most likely to be hurt by the 
previous revisions, the revisions of the previous 
administration, are ordinary union members themselves.
    And thank you for your time.
    [The statement of Mr. Logan follows:]

      Prepared Statement of John Logan, Professor and Director of
      Labor and Employment Studies, San Francisco State University

    In the testimony that follows, I will stress four main points: 
First, the Bush DoL revisions have failed to promote the goals of 
greater financial transparency and disclosure, and have failed to 
provide any real benefit to ordinary union members. Second, if anyone 
has benefited from these revisions it has been not been rank-and-file 
union members, the public or the government, but external organizations 
hostile to unions and collective bargaining on ideological grounds. 
Third, while they have failed to advance accountability and 
transparency, the Bush revisions have imposed a significant compliance 
burdens on unions, and ordinary union members have borne the financial 
and administrative costs of those burdens. Fourth, by any significant 
measure, the current OLMS is fully committed to and has effectively 
enforced the goals of the LMRDA, and has provided ordinary union 
members with more useful information in a more useable form than did 
its predecessor.
1. Have the Bush-era revisions improved transparency and 
        accountability?
    There is no evidence of increased transparency and accountability. 
A brief examination of the rule changes introduced by the Bush DoL 
makes clear the absence of any evidence of real benefit to ordinary 
union members, the public or the government.
     2003 LM-2 Revisions: The 2003 revisions--which have not 
been rescinded by the current OLMS--made the LM-2 form considerably 
longer and more complex. But, as discussed below, these more detailed 
LM-2s have neither exposed or deterred corrupt practices nor provided 
ordinary union members with greater transparency and accountability.
     2009 LM-2 revisions: The substantial last-minute 2009 
revisions to the LM-2s significantly increased the reporting burden 
over the already complex 2003 revisions with no attempt to determine if 
there would be any benefit to ordinary union members, the government or 
the public. The stated rationale, to expose cases of embezzlement, has 
not been achieved by the 2003 LM-2 revisions and would not have been 
achieved by these even more extreme revisions.
     2009 LM-3 revisions revoking authorization for reasons of 
untimely or deficient compliance: The 2009 proposal to make small 
organizations that had trouble filing the more simple and 
straightforward LM-3 forms on time, often due to a lack or resources, 
lack or expertise or lack of experience, file the more complicated and 
onerous LM-2 forms simply makes no sense--the Bush DoL itself stated 
that the rule ``may appear counterintuitive''--unless of course the 
true purpose behind this new rule is to force small organizations into 
criminal refusals to file. That is certainly likely to be the most 
common outcome of this revision, as it would be virtually impossible 
for most small organizations to comply with the complex LM-2 
requirements if they are unable to comply with the simpler LM-3 
requirements. Indeed, prior to the enactment of the LMRDA, Congress 
recognized that smaller organizations might face difficulty meeting the 
financial reporting requirements of the law. If transparency and 
accountability were really the goals of the revision, the logical 
solution to untimely or deficient compliance would not be to impose 
more onerous reporting requirements, but for OLMS to increase its 
compliance assistance for officers of small organizations. Rather than 
chose this logical option, the Bush DoL opted to take arbitrary and 
punitive measures that would cripple the ability of these organizations 
to represent effectively ordinary union members.
     T-1 Revision on reporting for union trust funds: The Bush 
DoL T-1 report was, from the very beginning, a failure. The courts have 
twice struck down this revision--the D.C. Court of Appeals struck down 
the 2003 T-1 rule in 2005, and the D.C. District Court struck down the 
revised 2006 T-1 rule in 2007. The Courts would almost certainly have 
struck down the Bush DoL's final 2008 iteration of the T-1 rule also, 
if only because it requires reporting on trust funds that unions do not 
finance or control. If the Bush T-1 had ever gone into effect, 
moreover, it would have covered subsidiary organizations, but not in as 
much detail as the LM-2 amendment adopted by the current OLMS. The OLMS 
has incorporated this reporting requirement into the LM-2 reports. The 
agency has reduced the threshold of gross annual receipts from $250,000 
to $200,000, and requires disclosure of expenditures of $5,000 or more, 
where the Bush T-1 had a reporting threshold of $10,000. Thus, in 
several respects, the current OLMS has actually extended and improved 
reporting in this area compared with that proposed by the Bush DoL.
     LM-30 2009 Revision: The Bush rule--which, in a sweeping 
departure from 40 years of past practice, introduced longer and more 
complex LM-30 forms--may as well have been designed to discourage rank-
and-file participation in unions. The Bush rule extends reporting 
requirements to a variety of workplace positions not on the union 
payroll--such as shop stewards and safety committee members--thereby 
greatly expanding the number of ordinary union members required to 
report personal financial information. This revision would affect at 
least 100,000 ordinary union members. The Bush LM-30 would require 
union members who are neither officers nor paid employees of the union 
to report, because it treats shop stewards and safety committee members 
as union employees if their employers do not dock their pay for time 
spent on grievances or safety matters. The Bush LM-30 also expands the 
reportable financial interests to require these union members to report 
on personal financial information, such as loans at commercial rates 
from a union-affiliated credit union or mortgages and other personal 
loans at commercial rates from any bank that did any business with the 
union or a union benefit fund or substantial business with any 
unionized employer. The potential filer must inquire of any lender how 
much business it does with unionized employers and keep records of the 
response in order to avoid criminal prosecution for willful failure to 
file.
     Additional and Unnecessary Complexity in Revised LM-30: 
The Bush LM-30 is vastly more complicated than the form that had been 
used successfully for the first four-and-a-half decades of the LMRDA. 
The old LM-30 was a clear and straightforward two-page form, while the 
revised Bush LM-30 is a complex and confusing nine-page form. The Bush 
DOL quickly acknowledged the extent of the confusion caused by its 
revised form. After releasing the revised LM-30, the Bush OLMS 
immediately issued 83 FAQs to explain the new form--which works out at 
almost 10 questions per page!--and then had to follow those FAQs with 
numerous additional clarifications. This revision is obviously contrary 
to sound and clear accounting standards, and has likely discouraged, 
not encouraged, rank-and-file participation in the effective governance 
of unions.
     Overall impact of revisions: It is clear from OLMS annual 
reports that all of the additional reporting requirements implemented 
throughout the Bush-era DoL--and still mandated by the current DoL--has 
resulted in only a minor increase in enforcement actions. The number of 
union audits increased greatly under the Bush DoL, but the number of 
enforcement actions barely increased, suggesting that the 2003 
revisions had not assisted OLMS in enforcing the law more effectively. 
In sum, these revisions have not furthered the OLMS mission of 
protecting the interests of ordinary union members through greater 
transparency and accountability, and have most likely achieved exactly 
the opposite--less transparency, less accountability, and unions less 
able to serve the best interests of their ordinary members.
    Has more detail and complex financial reporting under the revised 
LM-2s resulted in greater transparency and accountability? Not only 
does the answer to this appear to be ``no,'' but it seems more likely 
that they have resulted in less transparency and accountability in 
union financial affairs than existed before. Nor does the legislative 
history suggest that Congress had ever intended this level of detailed 
and burdensome scrutiny, even though it enacted the 1959 Labor 
Management Reporting and Disclosure Act (LMRDA) at a time when union 
corruption and embezzlement was a far more significant and newsworthy 
issue than it is today.\1\ The Bush DoL failed to demonstrate a 
significant need in this area. There is no evidence of more cases of 
union embezzlement and corruption being exposed as a result of the far 
more detailed reporting required by the Bush DoL rules. Indeed, it is 
highly improbable that significant cases of embezzlement would be 
exposed because of more detailed, complex and sometimes trivial 
information on the revised LM-2s. Crooks are unlikely to self-report 
their own embezzlement, and while some ordinary union members may 
believe that they would be able to uncover cases of corruption with 
detailed and complex information, this is highly unlikely. Significant 
cases of embezzlement are likely to be highly complex cases that will 
not be uncovered by these reporting revisions.
---------------------------------------------------------------------------
    \1\ Even one of the harshest critics of unions who runs a business 
advising employers on how to remain union free and who has twice 
testified in Congress about the need for greater union financial 
accountability, Philip Wilson, concedes that the detailed financial 
reporting required by Bush DoL rules may have exceeded what Congress 
had intended when it passed the LMRDA. ``If you dig around in the 
congressional history,'' Wilson writes, ``there is certainly some 
question as to the amount of detail some members of congress thought 
was appropriate.'' http://lrionline.com/lm-2-reform-appeal
---------------------------------------------------------------------------
    So what is the most effective way to uncover corruption, if not 
through complex and burdensome financial reporting requirements? OLMS 
conducts union audits, as it has always done, and if it finds something 
irregular, these may result in criminal cases. Moreover, the 
intelligence that forms the basis of union corruption cases often comes 
from the national union itself, as no one has a greater interest in 
dealing with cases of local corruption and embezzlement than the 
leadership of national unions. Many national unions now have detailed 
codes of conduct that cover not only the ethics of union officials but 
also financial misdeeds, and extensive internal controls to prevent and 
detect embezzlement. These kinds of controls, not more detailed but 
less transparent LM-2s, are most likely to deter and expose cases of 
fraud and theft.
    If the more detailed financial information and complex reporting 
requirements imposed by the Bush DoL have been ineffective when it 
comes to exposing cases of union corruption, one has to ask, what is 
the true motivation behind these rules? If the answer is really to go 
after the ``bad apples'' among union officials, then the current OLMS 
is doing this and doing it vigorously. If not, then it appears that, 
instead of finding a ``significant need,'' the Bush DoL imposed more 
burdensome and confusing reporting requirements for purely partisan 
political reasons--in order to misuse LM-2s to, in the words of then 
Republican Whip Newt Gingrich, ``weaken our opponents and encourage our 
allies.'' \2\
---------------------------------------------------------------------------
    \2\ Newt Gingrich (Republican Whip), letter to Lynn Martin 
(Secretary of Labor) and Clayton Yeutter, February 19, 1992.
---------------------------------------------------------------------------
    More Detailed Information and Greater Complexity is Not the Same 
Thing as Increased Transparency: These revisions greatly increased the 
length and complexity of the LM-2 forms that large unions are required 
to submit. But the OLMS annual reports from 2005-2009 provide no 
evidence of any real benefit to union members produced by the 2003 
revisions. Providing rank-and-file members with more detailed 
information in a more complex form is not the same thing as providing 
them with greater transparency and accountability. As a result of the 
Bush DoL 2003 revisions, LM-2s have increased enormously in size--forms 
can now be several hundred pages in length--and are not organized in an 
easily understandable form. Few ordinary union members have the time to 
read such long reports and make sense of them. Fewer still would know 
what is important and what is not, or know how to act upon on this 
detailed information. The 2003 revisions requirements for itemized 
disbursements--which had never existed previously--has likely made the 
reports much less easy for union members to understand and use. In 
instances such as this, less information, restricted to what is most 
important and presented in an accessible and useable form, really is 
more.
    The 2009 revisions introduce even greater complexity in LM-2s. The 
2003 and 2009 LM-2 revisions do not improve standards of financial 
accounting and reporting. Indeed, they do the opposite--they will 
produce greater confusion and obfuscation, not greater clarity. The 
more detailed reporting requirements under the Bush DoL have failed to 
provide ordinary union members with the kind of information they are 
likely to want, and has failed to provide information in a form they 
can easily make use of. One has to question whether the intention of 
the Bush reporting requirements was to assist and inform ordinary union 
members, or a politically motivated attempt to impose burdensome 
reporting requirements on unions and make available detailed union 
financial information that could then be used, including in misleading 
ways, by outside groups hostile to unions and their members.
    What kind of financial transparency and accountability do ordinary 
union members want? We have a dearth of empirical data when it comes to 
the financial literacy of union members, but based on the academic 
literature and my experience of running a university-based Labor and 
Employment Studies program that has connections with the practitioner 
community, I believe that they are interested in information in the 
following order of importance: first and foremost, they want access to 
salary information for officers in their local and national unions. 
Second, they want to know whether or not their union's revenues are 
greater than its expenditures. Third, they want information, in a 
general and understandable form, on where the union's money is coming 
from and where it goes. This financial information is currently 
available to union members, and was available prior to the Bush 
revisions. This information is most likely to be of interest during 
internal union election campaigns, and that is the way this information 
has always been used.
2. Who Has Really Benefited from the Bush DoL Revisions?
    If not ordinary union members, then who has benefitted most from 
the detailed and complex financial information on the revised LM-2s? 
While we have little or no evidence of ordinary union members 
requesting or using this more detailed financial information, we have 
many examples of so-called ``union avoidance consultants'' using the 
information, charging employers for it, and encouraging them to use it 
to discourage employees from exercising their right to form a union. 
Like Newt Gingrich, they encourage the use of detailed LM-2s ``to 
weaken our enemies and encourage our allies.'' A large number of union 
avoidance consultants and law firms have promoted the use of 
information on Bush LM-2s in this way. Below I cite only a few such 
examples.
    One of the largest union avoidance firms in the nation, Labor 
Relations Institute, Inc. (LRI), tells employers that, ``Facts drawn 
from these documents (LM-2s) * * * will help convince your employees to 
vote 'No' on election day.'' \3\ In its publication, ``Union Free: 5 
Keys To Winning Your Union Election,'' LRI tells employers that revised 
LM-2s ``contain a lot of valuable--and surprising--evidence to use 
against the union's arguments during a campaign.'' \4\ The firm 
customizes it counter-organizing campaigns to oppose specific unions, 
and advertises LM-2s as a key component of, for example, the ``Complete 
'Operating Engineers Exposed' Package,'' which costs employers $2,300. 
Another important union avoidance firm, Labor Relations Services, which 
provides ``Union Free Solutions for Employers,'' states that when faced 
with an organizing campaign, employers must ``use high grade union 
avoidance materials such as videos, LM-2 reports,'' in order to defeat 
the union.\5\ Several other union avoidance firms--often large and 
sophisticated operations--charge employers for (publicly available) LM-
2s, advising them that the information in these forms is an essential 
part of the tool kit they require to remain union-free. Highly-price 
union avoidance seminars, which promise to teach employers the tactics 
needed to defeating organizing campaigns, frequently include 
discussions of how to use the information in the more detailed LM-2s to 
oppose employee efforts to form unions.\6\ And the revised Bush LM-2 
reports are also widely used by a several organizations dedicated to 
opposing all unions and collective bargaining on ideological grounds. 
For example, Union Free South Carolina, which is committed to keeping 
unions out of the Palmetto state, has a link to ``Union LM-2 
Information'' from its homepage.\7\
---------------------------------------------------------------------------
    \3\ http://lrionline.com/union--avoidance/operating--engineers.htm. 
Another major union avoidance firm--Adam, Nash, Haskell & Sheridan--
charges employers for each LM-2 financial report and recommends them 
for use in fighting union organizing campaigns.
    \4\ LRI, ``Union Free: 5 Keys To Winning Your Union Election,'' 
http://www.slideshare.net/pbwilson/5-keys-to-winning-your-union-
election
    \5\ http://proemployer.net/FAQ.aspx
    \6\ See, for example, the union avoidance seminar, ``Not Your 
Father's Union Movement,'' at http://www.japantypeset.com/scope--
newsletter/pdf/union-campaign-seminar.pdf
    \7\ See http://www.unionfreesc.org/mx/hm.asp?id=home
---------------------------------------------------------------------------
    The Opposite of What Congress Intended when enacting the LMRDA: 
These union avoidance firms, and their clients who are determined to 
operate union free, have benefitted more from the detailed and readily 
available financial information contained in the revised LM-2s than 
have ordinary union members. When Congress enacted the LMRDA, it 
intended to ensure not only transparency in internal union affairs, but 
also transparency when employers hire outside consultants for the 
purpose of dissuading their employees from supporting unionization. 
However, this critical part of the law is rarely enforced, and as a 
result employees and other stakeholders usually have no idea how much 
money employers are spending on efforts to defeat organizing campaigns, 
and whom they are paying for this service. Indeed, this is perhaps a 
more pressing topic for a congressional hearing than the one under 
consideration today. Thus, not only does the multi-million dollar 
industry of union avoidance consultants and lawyers benefit from the 
Bush LM-2s, it also benefits from the one-sided enforcement of the 
LMRDA in general.\8\
---------------------------------------------------------------------------
    \8\ On this point, see John Logan, ``Lifting the Veiling on Anti-
Union Activities: Employer and Consultant Reporting Under the LMRDA, 
1959-2001,'' Advances in Industrial and Labor Relations, Vol. 15 
(2007), pp. 295-332.
---------------------------------------------------------------------------
3. The Burdens of Compliance: Who Pays?
    Have the Bush DoL rules imposed an onerous burden on unions? 
According to research conduct by three of the nation's pre-eminent 
employment relations scholars at Cornell and Penn State 
Universities,\9\ the answer appears to be ``yes.'' These scholars have 
conducted the most extensive and credible survey to date of the actual 
impact of these new rules on unions' financial and administration 
resources. Their results are based on empirical evidence, not on 
unsubstantiated or anecdotal statements or speculation. It is important 
to note that prior to the 2009 revisions, the Bush DoL made no real 
effort to assess the impact of the 2003 revisions on the actual 
experience of union officers, despite having had the opportunity to 
study four years of compliance with the new LM-2s. These scholars have 
investigated what the Bush DoL chose to ignore, and their findings 
demonstrate that the Bush DOL underestimated the burden of compliance. 
Based on a detailed survey of the administrative practices of 62 
national unions, these academics concluded the following:
---------------------------------------------------------------------------
    \9\ Professor Paul Clark, Penn State University, Professor Lois 
Gray, Cornell University, and Professor Paul Whitehead, Penn State 
University, ``Survey of Administrative Practices in American Unions,'' 
Fall 2010
---------------------------------------------------------------------------
     83% of unions responding reported that existing staff were 
required to spend more time on LM-2 compliance and less time on other 
duties to comply with the new LM-2 requirements
     38% of unions responding reported that they had to 
significantly change their accounting practices in order to comply with 
the new LM-2 requirements
     29% of unions responding reported that the union had to 
hire consultants to comply with the new LM-2 requirements
     9% of unions responding reported hiring additional staff 
to comply with the new LM-2 requirements
    This striking evidence of a significantly increased recordkeeping 
and reporting burden--in terms of increased administrative time and 
effort to comply with the revised LM-2s--is based on an academic survey 
of national unions. One would expect to find an even greater impact on 
the recordkeeping and accounting practices of smaller unions with fewer 
resources and less expertise and experience in financial compliance. 
Thus, there is no doubt the Bush LM-2 revisions have had a significant 
impact on union resources and finances. Even if these new requirements 
had improved union transparency and accountability, one would need to 
weigh the financial and administrative costs of complying with the new 
rules. Part of the job of OLMS is to balance its mission of promoting 
transparency with the burden of compliance. Those who have had to pay 
for the greater investment in time, money and administrative resources 
to meet the new, complex reporting requirements are ordinary union 
members. Their membership fees that pay for the hiring of additional 
staff and external consultants, new recordkeeping and accounting 
systems, and existing staff time devoted to compliance with detailed, 
itemized financial reports. However, absent any evidence of real 
benefits to ordinary union members--as is the case here--the excessive 
burden of complying with these new rules seems completely unjustified.
4. Has the OLMS Backed Off From Its Enforcement Duties?
    Strong Record on and Commitment to Enforcement: In the area of 
internal union transparency and accountability, the OLMS is currently 
doing exactly what it is supposed to do--providing an invaluable 
service to rank-and-file union members, the general public and the 
government. Not only has the agency not retreated for its historic 
enforcement mission, but there is considerable evidence that it is now 
carrying out the mission more effectively--that it is achieving ``more 
with less,'' which in this tough budgetary environment is something we 
commend. The current director of the OLMS, Dr. John Lund, recently 
stated his belief that, ``strong enforcement [of the LMRDA] is 
necessary.'' Having spent much of professional career teaching local 
and national union officers how to improve the management of their 
financial affairs, Lund has impeccable credentials to fulfill this 
role. Lund is the country's leading scholarly and practitioner expert 
in this area--indeed, he is an internationally-recognized expert who 
has advised on union transparency and accountability throughout the 
world--and has published several articles on union financial 
transparency and accountability in leading peer-reviewed academic 
journals. His publications have consistently stressed the need for 
strong rules and effective enforcement on union transparency and 
accountability.\10\ In contrast, the head of the Bush-era OLMS had no 
background and no qualifications in an area that requires both a 
knowledge of labor-management relations and technical expertise in 
financial reporting and transparency for non-profit organizations. 
Indeed, it appears that the background of the Director of the Bush 
OLMS, Don Todd, was largely in the area of campaigning against 
political ``adversaries'' of the Republican Party.\11\ In sum, it 
appears that both Todd and Lund were chosen to carry out their assigned 
roles--one to use the agency for political purposes, the other to bring 
professional expertise and balance to union financial reporting rules.
---------------------------------------------------------------------------
    \10\ On Lund's publications in this area, see, for example, John 
Lund and John McLuckie, ``Labor Organization Financial Transparency and 
Accountability: A Comparative Analysis,'' Labor Law Journal, 58:4 
(Winter 2007), pp. 251-266; John Lund, ``Financial Reporting and 
Disclosure Requirements for Trade Unions: A Comparison of UK and US 
Public Policy,'' Industrial Relations Journal, 40:2 (March 2009), pp. 
122-139.
    \11\ On Don Todd's extensive background in Republican Party 
politics, see Scot Lily, Beyond Justice: Bush Administration's Labor 
Department Abuses Labor Union Regulatory Authorities (Center for 
American Progress, December 2007), pp. 4-6.
---------------------------------------------------------------------------
    Actions speak louder than words, of course, and a direct comparison 
of OLMS activities in fiscal years 2008 and 2009 also demonstrates the 
commitment of the current OLMS to vigorous enforcement of the law. In 
the area of internal union elections, the record is stable. In 2009 the 
agency investigated 129 complaints about union elections, compared with 
130 in 2008; it supervised 32 rerun union elections in 2009, compared 
with 35 rerun elections in 2008; and it filed 32 voluntary compliance 
election agreements or suits in 2009, compared with 35 in 2009.\12\ The 
current OLMS also has a strong record in the area of investigations, 
indictments, and convictions. OLMS has increased slightly the number of 
criminal investigations--404 in 2009 versus 393 in 2008; it won 122 
indictments in 2009 versus 131 in 2008; and it increased slightly the 
number of convictions--120 in 2009 versus 103 in 2008. Finally, it 
completed 754 compliance audits in 2009, compared with 798 in 2008.\13\ 
Thus, convictions (Figure A) and indictments (Figure B)--important 
measures of OLMS activity, though not the only ones--have increased or 
held steady in number compared with the rate under the latter years of 
the previous administration, while compliance audits (Figure C) are 
down slightly only because the fall-out rate has increased. In short, 
the current OLMS has both a strong commitment to and good record on 
enforcement, and has promoted greater, not less, transparency and 
accountability in union affairs more generally.
---------------------------------------------------------------------------
    \12\ Daily Labor Report, ``OLMS Rethinks and Rescinds Bush-Era 
Rules but Retains Enforcement Role,'' January 19, 2010.
    \13\ Daily Labor Report, ``OLMS Rethinks and Rescinds Bush-Era 
Rules but Retains Enforcement Role,'' January 19, 2010.
---------------------------------------------------------------------------
    Is OLMS currently providing ordinary union members with useful 
information? An examination of the OLMS website illustrates that the 
agency is producing more useful information in a more usable form than 
during previous administrations. The current OLMS site has, for 
example, uploaded and made available audit letters, internal union 
election information, union trusteeship information, and historical 
conviction and indictment information dating back to the late 1990s. 
Improving on past practice, moreover, the website now defines clearly 
the terminology on indictments and convictions, making it much more 
understandable and usable for ordinary union members. Much of this 
information is now available in an accessible form to ordinary union 
members for the first time. Thus, it appears that the record of the 
current OLMS when it comes to promoting real accountability and 
transparency is better than that of its predecessor.
Conclusion: Who Benefits and Who is Hurt?
    When analyzing the impact of the Bush financial reporting 
requirements, one should ask the question: who has benefited from the 
revisions and whom have they hurt? As mentioned above, there is no 
reliable evidence that the new reporting requirements have benefited 
ordinary union members, either by exposing or discouraging corrupt 
practices, or by making union officials more accountable to their 
membership. But certain people have profited from the Bush DoL's 
significant departure from previous long-standing and well-functioning 
union financial reporting rules--just not the ones intended by those 
who passed the legislation. Perhaps the most obvious beneficiaries of 
the Bush rules have been external financial experts hired by unions 
seeking to comply with the complex new reporting requirements--between 
one quarter and one third of international unions have hired external 
experts--and the ``union avoidance'' consultants who have charged 
employers seeking to oppose employee organizing efforts thousands of 
dollars for the LM-2 reports, repackaging the information in these 
public reports as sophisticated anti-union ammunition.
    Those hurt by the Bush DoL revisions have not been corrupt union 
officials or those seeking to hide information from their membership. 
Rather, those most damaged by the rules are the ordinary union members 
themselves. Their money has paid for the increased costs of compliance 
and they most likely have experienced worse representation at work. 
Instead of providing their members with effective services, union 
officers have spent time and resources on reporting rules that provide 
no discernable benefit to their members. To restate the survey findings 
of the scholars from Cornell and Penn State: under the Bush DoL 
reporting requirements, 82% of national unions reported that existing 
staff were required to spend more time on LM-2 compliance and less time 
on ``other duties.'' The impact on local unions is likely even greater. 
These other duties include contract negotiations, grievance handling, 
and a variety of other essential union activities. In sum, the Bush DOL 
reporting revisions have hurt the very people whom the LMRDA is 
intended to protect.






                                 ______
                                 
    Chairman Roe. Thank you, Dr. Logan.
    Mr. Fox?

  STATEMENT OF ARTHUR L. FOX, II, OF COUNSEL, LOBEL, NOVINS & 
 LAMONT, LLP, ON BEHALF OF THE ASSOCIATION FOR UNION DEMOCRACY

    Mr. Fox. Chairman Roe and members of the committee, I want 
to thank you for inviting me to testify today on behalf of the 
Association for Union Democracy, which I will refer to as AUD, 
short form.
    By way of background, AUD is a non-political organization 
that seeks to promote democracy in unions as a means of 
strengthening the union movement among workers and the public. 
AUD believes that a strong labor movement is an essential 
element in American democracy.
    AUD has been over the past 50 years in touch with tens of 
thousands of rank-and-file unionists, reform caucuses, a number 
of which have been engaged in battles against corruption and 
authoritarianism in their unions, and have become targets or 
even victims of unlawful and undemocratic repressive tactics by 
their union officers.
    It is on the basis of this experience that AUD has 
participated over the years in a dialogue with Congress over 
the extent to which the LMRDA has succeeded in promoting 
Congress' objectives when enacting the law in 1959, and how it 
has fallen short and is in need of being strengthened.
    Personally, I have devoted nearly my entire professional 
career to representing underdogs, be they subordinate union 
entities, union reform caucuses or individual union members in 
their struggles with higher-ups in the union hierarchies bent 
on suppressing their rights under our labor laws--principally, 
the LMRDA. And I have served on AUD's board of directors for 
many years.
    The overriding objective of the LMRDA was to rid the union 
movement of corruption and tyranny. Congress chose to achieve 
this objective by giving union members the means to clean up 
their own unions from within by bestowing on union members a 
host of democratic rights, including the right to elect local 
union officers.
    Of course, the cornerstone of any democracy is information, 
without which the right to vote is pretty meaningless--a 
``naked right.'' We recognized this axiom as we watched 
symbolic elections behind the Iron Curtain during the Cold War. 
And today we are observing as the Internet has allowed 
populations in North Africa and the Middle East to come alive 
and seek, as we say in union parlance, to throw the bums out.
    Accordingly, when enacting the LMRDA, Congress charged the 
DOL with responsibility for requiring unions to become 
financially transparent. With information, members would be 
able to detect conflicts of interest and financial abuse by 
their elected officers, whom they could then vote to remove 
from office--and perhaps even to sue for breach of fiduciary in 
very, very serious cases.
    Sadly, this informational cornerstone of the LMRDA has yet 
to be fully realized. A few years ago, the OLMS did take steps 
to improve the union financial reporting requirements.
    While some of the changes to the reporting requirements 
promulgated by OLMS would arguably have been unduly burdensome 
on unions and of little value to members, many other of the 
provisions of the reformed reporting requirements would have 
been of great value to union members, enabling them more 
accurately to understand how their dues are being spent, as 
well as to detect conflicts of interest by their elected 
officers.
    Not only would the more detailed information have enabled 
union members to hold miscreant officers accountable for their 
misdeeds, in all likelihood, they would have had an important--
the revised rules would have had an important prophylactic 
effect by discouraging elicit behavior in the first place.
    Unfortunately, rather than fine tuning these new reporting 
requirements after the change of administrations, OLMS 
rescinded wholesale the prior administration's more detailed 
reporting requirements. I am submitting for the record the 
written comments that were submitted by AUD in response to 
OLMS's regulatory proposals.
    So be it for my remarks about the main topic of this 
hearing. However, this problem pales by comparison to the many, 
many even more serious weaknesses in the LMRDA itself. And over 
the years, AUD has participated in a number of hearings which 
have produced a very solid record in support of statutory 
reforms--a number of bills but, unfortunately, no legislative 
relief.
    And I would like to encourage this committee to look at the 
written statement that I submitted, which catalogues the 
various hearings that have been conducted over the years, and 
urge the committee to breathe new life into the LMRDA by 
enacting some very well needed amendments that would enable 
achievement of the objectives of the 86th Congress when 
enacting the LMRDA a half-century ago.
    Thank you.
    [The statement of Mr. Fox follows:]

         Prepared Statement of Arthur L. Fox, on Behalf of the
                    Association for Union Democracy

    Thank you for inviting the Association for Union Democracy to 
testify today. By way of background, the Association (``AUD'') is a 
non-political organization that seeks to promote democracy in unions as 
a means of strengthening the union movement among workers and the 
public. AUD believes that a strong labor movement is an essential 
element in American democracy. It seeks to educate members concerning 
their rights under the Labor Management Reporting and Disclosure Act 
(``LMRDA'') and to defend members, regardless of their politics, 
against abuses by their union officials. Its Board of Directors 
includes persons who are eminent in the field of union democracy law 
and related issues. Until his demise some months ago, law Professor 
Clyde Summers, a cofounder with Herman Benson and the draftsman of 
LMRDA's Title I, served on the Board along with labor law Professors 
Michael Goldberg and Alan Hyde. Experienced public interest litigators 
Paul Alan Levy, Barbara Harvey and myself, who have devoted much of 
their professional careers to representing individual union members and 
caucuses seeking to reform unions, also sit on the Board. Another 
distinguished Board member is James McNamara, former consultant on 
labor racketeering to the Manhattan District Attorney's office.
    Founded shortly after enactment of the LMRDA, AUD has been, over 
the past 50 years, in touch with tens of thousands of unionists, 
individual rank and filers, organized caucuses, elected officers in 
most major unions in our country, and members who have been engaged in 
battles against corruption or authoritarianism in their unions, a 
number of whom have become targets, or victims, of unlawful and 
undemocratic repressive tactics by their union officials. It is on the 
basis of this experience that AUD has participated over the years in a 
dialogue with Congress over the extent to which the LMRDA has succeeded 
in promoting Congressional objectives, and how it has fallen short and 
is in need of being strengthened.
    The overriding objective of the LMRDA was to rid the union movement 
of corruption and tyranny. Congress chose to achieve this objective by 
giving union members the means to clean up their unions from within by 
bestowing on members a host of democratic rights. Of course, and as 
many LMRDA scholars as well as a number of courts have noted, the 
cornerstone of any democracy is information without which the right to 
vote is meaningless--a ``naked right.'' Accordingly, when enacting 
Title II, Congress charged the DOL with responsibility for promulgating 
rules requiring unions to become financially transparent entities such 
that their members would be able to detect, inter alia, conflicts of 
interest and financial abuse by their elected officials whom they could 
then vote to remove from office, and perhaps even sue for breach of 
fiduciary duty under Title V. Or, as set forth in S. Rep. No. 187 on S. 
1555 at 9, Vol. 1, NLRB Legis. Hist. of the LMRDA 405, this Title was 
intended to ``insure[] that union members [would] have all the vital 
information necessary for them to take effective action * * * [such] 
that union members armed with adequate information and having the 
benefit of secret elections * * * would rid themselves of untrustworthy 
or corrupt officers.'' See also March 17, 1999 Testimony of Professor 
Clyde Summers before the Committee on Education and the Workforce, 
Report No. 106-11 at p. 8 (Addendum H, attached hereto).
---------------------------------------------------------------------------
    The documents may be accessed at the following Internet 
address:
    http://www.gpo.gov/fdsys/pkg/CPRT-112HPRT68422/pdf/CPRT-
112HPRT68422.pdf
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    Sadly, this informational cornerstone has yet to be fully realized. 
A few years ago, the Labor Department's Office of Labor-Management 
Standards (``OLMS'') did take steps to improve union financial 
reporting requirements. While some of the proposed changes to the LM-2 
and T-1 reporting requirements under the LMRDA's Title II would 
arguably have been unduly burdensome for unions and of little value to 
members, many others would have been of great value to members, 
enabling them more accurately to understand how their dues are being 
spent, as well as to detect conflicts of interest by their elected 
officers that could lead to, or already had resulted in, political, 
contractual, or financial abuse. Not only would the more detailed 
reporting requirements have enabled union members to hold miscreant 
union officers accountable for their misdeeds, in all likelihood they 
would have had an important prophylactic effect by discouraging illicit 
behavior in the first place.
    Unfortunately, rather than fine-tuning these new reporting 
requirements, after the change of administrations in January of 2009, 
OLMS rescinded wholesale the prior administration's more detailed 
reporting requirements. I am attaching for the record, as Addenda A-
C, the comments AUD has filed over the past two years on this 
and related OLMS agenda items.
Needed LMRDA reforms
            The OLMS political tightrope
    Indeed, while OLMS' critical role in developing and enforcing 
democratic standards under the LMRDA has generally improved over the 
past half century, the Office suffers from an endemic political 
problem. Residing as it does within the Department of Labor, which 
serves as every administrations' liaison to the incumbents within the 
institutional labor movement, OLMS suffers from an institutional 
conflict of interest. While many union officers have learned to live 
with the LMRDA and the political vicissitudes that are the hallmark of 
any democracy, very few union officials genuinely support the law and 
most would be thrilled to see it weakened if not repealed outright. As 
a consequence, as AUD has pointed out on numerous occasions over the 
years, the Labor Department is simply not an ideal home for OLMS given 
its responsibility for promoting Congress' objectives embodied in the 
LMRDA and enforcing many of its provisions against unions and their 
incumbent officials. This fundamental problem has been identified on a 
significant number of occasions in the past by AUD. See, e.g., October, 
1994 memorandum, originally prepared for the Dunlop Commission, 
entitled ``Proposals of AUD for Strengthening The Rights of Union 
Members,'' p. 15, submitted to Congressman Ford (Addendum D, 
attached hereto); Herman Benson June 25, 1998 testimony before House 
Committee on Education and the Workforce, Report No. 105-125, at pp. 8-
9 (Addendum E, attached hereto), and his accompanying Statement 
at 4 (Addendum F, attached hereto); March 17, 1999, Hearing 
Report No. 106--11 of the Committee on Education and the Workforce, 
Benson Testimony at p. 18, Professor Clyde Summers Testimony at p. 28, 
Chairman Boehner concluding remarks at p. 29: ``I am one who believes 
that the best disinfectant is sunlight. And having reviewed some LM2s * 
* * over at the Department of Labor, I would agree that they are almost 
useless.'' (Addendum H, attached hereto). As mentioned, while 
OLMS did subsequently promulgate regulations modifying the LM-2 and T-1 
forms to require unions to report more useful detail, those regulations 
have now been rescinded, most likely as a consequence of the sort of 
political pressure that conflicts with OLMS' statutory mission.
    Quite apart from the adequacy of the content of financial reports 
mandated by the LMRDA and promulgated by OLMS, there exists a serious 
problem with respect to their preparation and submission by unions to 
OLMS that was the subject of hearings before the Committee on Education 
and the Workforce in 2002 and 2003. In a June 24, 2003 Statement 
submitted by OLMS' Deputy Director (Addendum J, attached 
hereto), ``a significant number of unions consistently fail to comply 
with the statutory requirements that they timely file annual reports 
with the DOL. * * * In report year 2002, over 43 percent [of unions] 
either were late or have failed to file * * * for that year.'' He went 
on to explain that OLMS' only recourse was to ask the Department of 
Justice to sue the non-reporting unions for injunctive relief, a very 
time-consuming activity for DOJ to undertake--indeed, a task that has 
rarely, if ever, been undertaken. As a consequence, a Bill was 
introduced to give OLMS the authority to impose civil fines on non-
reporting unions (Addendum K, attached hereto) which, 
unfortunately, was never enacted.
    While AUD has, over the years, identified a number of weaknesses in 
the basic provisions of the LMRDA, unions have also been creative in 
finding ways to circumvent them that AUD has brought to Congress' 
attention. Thus, for example, while the statute requires all local 
unions to have periodic, secret-ballot elections directly among their 
members, it permits the indirect election of intermediate and national 
union officers by convention delegates rather than by members. See 29 
U.S.C. Sec.  481. Similarly, while the statute gives members a secret-
ballot right to vote for dues increases, it permits delegates at 
intermediate and national union conventions to approve dues increases 
under the watchful eyes of the unions' top officers, individuals who 
will have the power of the purse strings and the ability to visit 
various forms of reprisal, political and/or financial, on subordinate 
``delegates'' who fail to ``vote the `one-party' line.'' See Summers, 
``Democracy in a One-Party State: Perspectives from Landrum Griffin,'' 
43 Maryland L. Rev. 93 (1984). See also Addendum E, Benson 
Testimony at 34-35.
UBC eviscerates members' democratic rights via district councils
    In the 1990's, the United Brotherhood of Carpenters (``UBC'') 
devised a mechanism which has been successful in eviscerating its 
members' democratic rights under the LMRDA by creating and then 
transferring to ``intermediate'' District Councils 95 percent of the 
authority previously exercised by local unions, including the right to 
negotiate and enforce collective bargaining agreements and to raise 
dues. And after creating these new District Councils, and ordering a 
bunch of locals within various defined geographic areas to affiliate 
with them, the UBC president appoints the Councils' all-powerful CEO 
who then hires as business agents those local union Council 
``delegates'' who demonstrate their fealty to him--a classic ``I 
scratch your back, and you scratch my back by electing me several years 
after my initial appointment to continue as the Council CEO.'' For all 
intents and purposes, the rank and file in the UBC have been written 
out of the democratic process and their local unions have been reduced 
to social clubs which are even prohibited from hiring any elected 
officers or staff other than a single secretary to accept members' 
dues.
    This undemocratic ``business model,'' conceived and implemented by 
the UBC, a model other unions particularly in the construction trades 
had begun to adopt, was the subject of the 2008 and 2009 hearings 
before the Committee on Education and the Workforce. See, e.g., 
Addendum E, Hearing Report at pp. 23, 40; Addendum F, 
Statement of Herman Benson at 3; Addendum G, Statement of Clyde 
Summers; Addendum I at p. 2. And while AUD proposed, and Bills 
were introduced to give union members (particularly including 
Carpenters) the direct right to vote in secret-ballot elections for the 
officers responsible for negotiating and/or administering their 
collective bargaining agreements, whether holding office in a local or 
a regional or District council, i.e., a ``intermediate'' union entity 
as defined in 29 U.S.C. Sec.  402, remedial legislation has yet to be 
enacted. See, e.g., Addendum N, attached hereto, and discussion 
infra at p. 8. Indeed, as recently as by letter from Herman Benson to 
Speaker Boehner, dated March 27, 2011, AUD stressed the urgency of 
Congress' enacting relief from the UBC's ``autocratic mold.''
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Political restructuring via mergers and acquisitions
    Politically re-engineering union structures through mergers and 
acquisitions is by no means unique to the UBC. In recent years, unions 
have consolidated at both the national and local levels via 
affiliations and mergers at the national level, and the mergers of 
locals which have, in most instances, resulted in substantial 
alterations in both the structure and governance of the affected 
unions. In every instance, the changes have been either negotiated or 
engineered by officers with little or no input from affected members 
whose ability to participate in the democratic governance of their 
unions is, as a consequence, often diluted or otherwise eroded 
substantially by the merger/affiliation agreements and/or new, or 
substantially modified constitutions.
    So also has there been a movement within a number of unions, 
particularly including the Service Employees International Union 
(``SEIU''), to consolidate ``subordinate'' locals. Indeed, some 
national union officers have largely abandoned the use of trusteeships 
as a device for retaliating against dissident local officials and 
manipulating the political landscape, opting instead to utilize their 
constitutional authority unilaterally to redefine the jurisdiction of 
subordinate union entities to reward loyal local officials with more 
members, a stronger financial base, and greater authority, while 
shrinking the authority, membership, and finances of dissident locals 
and their democratically elected officers. In a number of cases, 
national union officials have revoked local charters altogether, issued 
new local charters, and transferred members into newly created locals 
whose officers were appointed by the national, rather than elected by 
the locals' members. See generally Steve Early, Civil Wars in U.S. 
Labor (Haymarket Books 2011); Addendum D, Dunlop Memo at p. 9. 
While some of these consolidations have been necessitated by economic 
considerations, often they have been utilized to retaliate against 
dissident locals and their democratically elected officers.
    To curb such abuses as well as to promote the underlying democratic 
objectives of the LMRDA, members affected by significant structural 
changes of their unions caused by mergers, affiliations, or 
jurisdictional changes should be given the right to ratify them by 
secret ballot vote on either a union-by-union, or local-by-local basis.
Members need the right to ratify collective bargaining agreements
    Of great importance to all workers are the wages, and other terms 
and conditions of their employment. While some union constitutions 
grant their members the right to ratify collective bargaining 
agreements, many more do not. The LMRDA is silent on the subject and 
should be amended to guarantee to all union members a right to ratify 
the collective bargaining agreements under which they work. See, e.g., 
Addendum D, Dunlop Memo at p. 3.
Members' right under Title I to vote on dues and fees has disappeared
    Section 101(a)(3) currently provides that members have the right to 
vote by secret ballot on proposed local dues increases while per capita 
taxes and/or dues collected by intermediate and national unions are 
allowed to be raised by other means. As a consequence, over the years 
unions have amended their constitutions to withhold authority from 
local and their members to establish and raise dues and placed it in 
the hands of intermediate and national executive boards and conventions 
that are not directly accountable to members. To restore to members the 
right to determine how much of their money they are willing to pay in 
union dues, section 101(a)(3), 29 U.S.C. Sec.  411a)(3), should be 
amended to read:
    ``All dues and initiation fees payable by members of any labor 
organization in effect on the date of enactment of this Act shall not 
be increased, and no general or special assessments shall be levied 
upon such members, except by majority vote by secret ballot of the 
members in good standing.''
Abusive trusteeships need to be curbed
    Over the years, AUD has called Congress' attention to the ease with 
which national, parent unions have been able to get around the intended 
restraints of LMRDA's Title III when imposing trusteeships on 
politically recalcitrant locals. See, e.g., Addendum D, Dunlop 
Memo at pp. 10-11; Addendum E, testimony of Herman Benson at p. 9; 
Addendum I, Statement of Herman Benson at p. 2; Addendum 
N, Bill to Amend Title III of the LMRDA.
    While this Title was enacted to curb politically abusive 
trusteeships by national union officers, the presumption of validity 
accorded by it to trusteeships for a period of 18 months has operated 
to make it extraordinarily difficult as a practical matter to challenge 
abusive trusteeships. While AUD supports outright elimination of this 
presumption, if any presumption of legitimacy is to remain in the 
statute, it should be shortened to 6 months. Whatever the problem that 
may arguably have necessitated imposition of a trusteeship, it can 
invariably be remedied within that shorter time frame, after which the 
trusteeship should be presumed to be unlawful and the burden of proof 
shifted from those challenging trusteeships to those imposing them to 
demonstrate by a preponderance of the evidence that the trusteeship 
was, and its continuance is, necessary for a purpose sanctioned by the 
statute. See proposed language in Section 4 of Addendum N, 
attached hereto.
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    However, even these changes would be meaningless if local members 
are effectively deprived of the financial means judicially to challenge 
trusteeships. By seizing control of the local treasury when imposing 
trusteeships, the parent union can deprive members of access to their 
own dues without which they may be unable to retain legal counsel to 
preserve their democratic rights and their local's autonomy. Hence, 
Title III should be amended specifically to grant courts to authority 
to order trustees to provide plaintiff members sufficient funds to 
retain legal counsel on a preliminary showing of good cause that the 
trusteeship may be unlawful. Thereafter, if and whenever the court 
should become satisfied that the trusteeship is lawful, the court would 
be authorized to withhold further funding of plaintiff-members' legal 
expenses.
Title IV--Officer elections
    AUD has long been championing amendment of LMRDA's Title IV which 
confers exclusive authority on OLMS to enforce the statute's officer 
election requirements. See, e.g., Addendum D, Dunlop Memo at 
12-15; Addendum E, Testimony of Herman Benson at 9.
    To assure that union officers are democratically accountable to 
those members whose lives and welfare they are empowered to impact via 
the collective bargaining process, the following provision should be 
added to Title IV, 29 U.S.C. Sec.  481:
    ``In the event that officers of any intermediate union body, are 
responsible, in whole or in part, for the negotiation, administration 
or enforcement of collective bargaining agreements, or who exercise 
control over the finances or other major functions of local unions, 
such officers shall be directly elected by secret ballot among all 
members in good standing of all local unions affiliated with the 
intermediate union body, such as general committees, system or joint 
boards, district or joint councils, in which they hold office. Officers 
of other intermediate bodies may be elected by representatives of such 
local members who have been elected by secret ballot.''
    This amendment would, for example, restore democracy to the UBC.
    Further, section 402(c)(2), 29 U.S.C. Sec.  482(c)(2), should be 
amended by striking ``affected the outcome of an election'' and 
inserting ``substantially understated or overstated the support of one 
of the candidates for office such that the democratic process was 
undermined.'' The ``affected the outcome'' language has been construed 
over the years to impose on OLMS a burden of mathematical proof to 
demonstrate that the outcome of a given election would very likely have 
been different but/for a specific violation of Title IV. Given the 
difficulty of meeting this burden, only a small percent of Title IV 
violations get remedied and the overwhelming majority are effectively 
pushed under the rug, thereby giving encouragement to incumbent union 
officers to improve their odds of getting re-elected by violating Title 
IV.
    See also Addendum N, Section 5.
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The duty to inform members of their rights under the LMRDA
    The last area of concern at AUD that I will highlight in this 
Statement is the failure of unions to inform their members about the 
rights conferred upon them by the LMRDA, as mandated by Section 105 of 
the Act, 29 U.S.C. Sec.  415. The Employer-Employee Subcommittee of the 
Committee on Education and the Workforce conducted an exhaustive 
hearing, Report No. 108-22, on this problem and reported out of 
Subcommittee two remedial Bills (H.R. 5373 and 5374) which, like so 
many other Bills to remedy deficiencies in the LMRDA also died on the 
legislative vine. See, e.g., Addenda H and L, attached hereto. 
While AUD has done its best over the past half century, through its 
publications, website, conferences, letters and telephone 
conversations, to inform union members of their LMRDA rights, the only 
way to get this job done is to have unions, themselves, undertake this 
task as Congress mandated in the statute. Why is it that after more 
than a half century since enactment of the LMRDA compliance by unions 
with this statutory mandate is only occasional and sporadic? An 
enforcement mechanism clearly needs to be built into the statute.
                                 ______
                                 
    Chairman Roe. Thank you, Mr. Fox.
    I will now yield to Mr. Andrews.
    Mr. Andrews. Thank you, Mr. Chairman.
    I thank the witnesses for their testimony and their 
preparation. We appreciate your contribution.
    To those of you who are returning, thank you, and to those 
newcomers, thank you.
    I would ask if any of the witnesses would contradict the 
facts in my opening statement about the number of indictments 
or prosecutions, or the amount spent per worker. Do you have 
any data which would conflict with any of those points?
    Ms. Furchtgott-Roth. The amount spent per worker is 
accurate, but it is caused by the decline in the number of 
unionized workers. Right now, 6.9 percent of private sector 
workers belong to unions.
    Mr. Andrews. That is right.
    Ms. Furchtgott-Roth. The percentage was a lot higher in----
    Mr. Andrews. No, I completely agree. So, if you are trying 
to protect a certain class of people, if there are fewer people 
in the class, it seems you would spend less money. We are 
actually spending more per worker.
    So, Mr. Mehrens----
    Ms. Furchtgott-Roth. But it is economies of scale.
    Mr. Andrews [continuing]. Do you have any data that would 
contradict what I said earlier, Mr. Mehrens?
    Mr. Mehrens. No, Mr. Ranking Member.
    Mr. Andrews. I wanted to ask, Mr. Mehrens, your comments 
about the LM-2 form. Let us say that we have a union leader who 
is stealing from the members of his union. And what I want to 
know is if there is anything that the proposed changes to the 
LM-2 rule add that would help members identify that theft, that 
cannot be found in the existing LM-2 form or the Form 5500 
filed with the IRS.
    So, I am a union member. I suspect that my union leader is 
stealing from me. Is there anything I would find out from the 
proposed enhancements of the LM-2 that I could not find out 
from the old LM-2 or the 5500?
    Mr. Mehrens. There were four different areas that were in--
the January 21, 2009, final rule had four different areas where 
enhancements were made to the LM-2.
    Mr. Andrews. Right.
    Mr. Mehrens. These were sales of investment, fixed assets. 
There was an additional disclosure made there. So, that----
    Mr. Andrews. But if a fund sells a fixed asset, isn't that 
reported in either its 5500 or its LM-2 now?
    Mr. Mehrens. If a fixed asset is sold, the sale is reported 
on the LM-2 if it is from the union's general treasury fund----
    Mr. Andrews. Okay.
    Mr. Mehrens [continuing]. Or in the name of the party----
    Mr. Andrews. So, what new information would this 
enhancement add?
    Mr. Mehrens. The name of the party transacting with the 
labor organization, either the purchaser or the seller of that 
fixed or investment asset.
    Mr. Andrews. Okay. And that is not disclosed presently in 
the LM-2 or the 5500?
    Mr. Mehrens. It is certainly not disclosed on the LM-2 
and----
    Mr. Andrews. Do you know about the 5500?
    Mr. Mehrens. I do not believe it is.
    Mr. Andrews. But you are not sure.
    Mr. Mehrens. I am not sure.
    Mr. Andrews. Okay. What is the second change?
    Mr. Mehrens. Well, the two are closely related. The first 
two are closely related. The sales of investments and fixed 
assets----
    Mr. Andrews. Right.
    Mr. Mehrens [continuing]. The purchase of investments with 
fixed assets.
    Mr. Andrews. Okay.
    Mr. Mehrens. There was an additional disclosure requirement 
there. I----
    Mr. Andrews. I would ask the same question. Is there 
anything about the purchase of a fixed asset or investment that 
one could not find from the 5500 or the LM-2 without the 
enhancements?
    Mr. Mehrens. The 5500 generally covers a different universe 
of filers. Most labor organizations would not be filing a 5500 
for their own general----
    Mr. Andrews. I understand that. But is there anything about 
the purchase of an asset that would be an additional disclosure 
in the enhanced LM-2?
    Mr. Mehrens. You would have the name of the party 
transacting.
    Mr. Andrews. You sure that is not in a 5500?
    Mr. Mehrens. If it is, I am not sure.
    Mr. Andrews. Okay.
    What is the third change?
    Mr. Mehrens. The third change was the itemization of 
additional categories of receipts.
    Mr. Andrews. What does that mean?
    Mr. Mehrens. What this does is it enables the union members 
and the public to say we will look at the incoming receipts of 
a labor organization. And there is a bunch of different 
categories of them.
    Let us say that you are a national labor organization, and 
you receive per capita due payments from various locals under 
your jurisdiction. Those payments would be itemized by the 
local, so that a member of that local could determine whether 
or not----
    Mr. Andrews. How does that itemization differ from the 
existing LM-2?
    Mr. Mehrens. Most categories of receipts on the LM-2 are 
not itemized.
    Mr. Andrews. But some of them are.
    Mr. Mehrens. There is a category called ``other receipts.''
    Mr. Andrews. Right.
    Mr. Mehrens. Those are itemized, but most of them are not 
itemized.
    Mr. Andrews. Which are the ones that are not itemized?
    Mr. Mehrens. I do not have that list in front of me.
    Mr. Andrews. Okay. My time is short, but I would also want 
to ask this quickly about the additional regulations. Let us 
say you have a shop steward who has nothing to do with the 
operation of a pension fund. And her husband gets a mortgage 
for a business he operates from a bank that the pension fund 
does business with.
    Under the proposed enhancements to the LM-30, would she 
have to disclose her husband's mortgage loan for his business? 
Anybody know?
    Mr. Mehrens. The vendor to that entity, yes----
    Mr. Andrews. Even though she, as a shop steward, has no 
control over the fund.
    Mr. Mehrens. Yes.
    Mr. Andrews. Thank you.
    I yield back.
    Chairman Roe. Thank you, Mr. Andrews.
    Mr. Walberg?
    Mr. Walberg. Thank you, Mr. Chairman, and thank you to the 
panelists for being here today, and giving your testimony.
    As a former member of the Steelworkers Union myself and 
working at U.S. Steel Southworks, south side of Chicago, as 
well as a short-time member of the Michigan Education 
Association, I have an appreciation for much of what the union 
is purported to and attempting to do, and some of the good 
things that they have done. Great concern, though, about our 
topic today.
    And in lieu of Ranking Member Andrews' figures, and those 
being what they are, if they are that, let me ask Mr. Mehrens, 
you know, in your testimony, you discussed how staffing levels 
at OLMS are decreasing--approximately 135 people, a 35 percent 
reduction from 2010 to 2012.
    We know that in fiscal year 2010, OLMS conducted 356 
criminal investigations, slightly up from the goal of 355. But 
for fiscal year 2011, the agency set a target of only 300 
criminal investigations, a 15 percent reduction, for whatever 
reason that might be. The agency set a goal of 200 compliance 
audits for fiscal year 2012, down again from 300 in fiscal 
2010.
    We could go on and on with figures that point to these type 
of reductions. But I am bothered that the enforcement goals 
seem to be lessening.
    In the subcommittee which I chair, Workforce Protections, 
we have seen the administration engage in many efforts to 
increase enforcement to protect worker safety--as it ought. Yet 
when protecting the worker's right to know and right to 
transparency on how their money is being spent, we see 
cutbacks.
    Why do you believe this is the case?
    Mr. Mehrens. I think you have to look at certain comments 
that were submitted to the Obama-Biden transition team. You 
know, some of those talked about in my testimony.
    The AFL-CIO put together a list of things that they would 
like to see done during the transition time, were filtered 
around that the appropriate size of OLMS that the transition 
team would like was approximately the level that it was at in 
2001, I think in the Clinton administration after the budget 
and staff had been slashed for a number of years.
    So, I think what you are seeing now in terms of the 
appropriations request and the FTE request reflects the 
administration's priority in this area.
    I think it is also noteworthy to point out that the last 
time I looked, the OLMS budget was approximately nine one-
hundredths of 1 percent of the department's budget. So, we are 
talking about a very small agency.
    And the department has asked for tremendous appropriations 
increases in other agencies. And it apparently had money to 
spend there, but deciding not to spend it here. So, I think 
that is a reflection of the administration's priorities.
    Mr. Walberg. Mr. Fox, excluding LMRDA reporting forms, 
where can union members find financial information on their 
union or their union trusts?
    Mr. Fox. Excluding the reports?
    Mr. Walberg. Excluding. Excluding their report forms.
    Mr. Fox. They cannot.
    Mr. Walberg. So, none at all.
    Mr. Fox. Correct.
    Mr. Walberg. No place to go.
    Mr. Fox. Well, some unions do voluntarily have at their 
monthly meetings, the financial secretary will give some sort 
of a report. Some unions will publish in their newspapers some 
sort of a financial report.
    But it is an overview of finances, and it typically is not 
sufficiently detailed to enable the union members really to 
look closely at and understand where there might have been 
conflicts in finances, et cetera.
    Mr. Walberg. Ms. Furchtgott, how do union reporting 
requirements compare to private sector reporting requirements?
    Ms. Furchtgott-Roth. I think it depends on whether the 
private sector is a corporation or the private sector is a 
small business. The reporting requirements for publicly traded 
corporations are very substantive. And these forms--these forms 
are not--the compliance burden is not as high as for publicly 
traded corporations.
    The compliance burden is probably higher than for small 
businesses in certain areas, although small businesses also 
have to provide a lot of details as to their expenses for tax 
purposes.
    I would also like to say, with response to the stealing, is 
it possible from the new LM-2 form to see if someone is 
stealing. The answer to that is, yes, because what is needed is 
verification that sales and purchases of assets were performed 
without conflicts of interest.
    And if I could give you an example. If, for example, a 
tractor is sold to a friend of someone in the union at a lower 
price, that is in essence stealing, because this piece of 
machinery is going out at a lower price. And so, that is in 
essence an incorrect valuation of the asset.
    So, what the new LM-2, what the regulations that were 
brought out in January 2009 were supposed to do, was make sure 
that the transactions were at arm's length as the case may be. 
And that prevents that kind of stealing.
    Chairman Roe. Complete your--we are a little over time.
    Mr. Walberg. Thank you for your latitude, Mr. Chairman.
    Chairman Roe. Mr. Kildee?
    Mr. Kildee. Thank you, Mr. Chairman.
    Mr. Chairman, I really will not be profound or cogent, or 
maybe even relevant in my remarks, so I apologize for that. But 
I just want to get them on the record.
    This weekend, I will attend four union meetings, as is my 
custom when I go home, make my rounds in my four counties. If I 
were announced at one of those, any of those meetings that I 
have a very important announcement to make, that we had a 
hearing of the Education and Labor Committee on the union 
transparency and accountability, they would be sitting there.
    But if I were to say, by the way, as co-chair of the 
Automotive Caucus in the Congress, I have been working with 
General Motors and the UAW, and we are going to add a third 
shift to the truck plant, I would get hosannas in the highest. 
I would probably be carried out, you know, with shouts.
    The jobs are so--people are so desperate for a job. They 
really are concerned about jobs.
    Oh, I am not saying we should not be concerned about what 
we are doing here today. But we are spending so much time on 
things that really are relatively not touching the lives of 
most of the workers in Flint, Michigan.
    Most of the workers in Flint, Michigan, are not being hurt 
by a lack of transparency or accountability on union 
leadership. But they are being hurt by a lack of jobs.
    So, I know my workers. I would like to do both. I would 
like to make sure that--and we certainly agree that there 
should be honesty everywhere--honesty in the Congress, honesty 
in unions, honesty wherever people gather together.
    But my priority right now--and this committee does not seem 
to spend much time on that--is jobs. In Flint, Michigan, we 
used to have 80,000 General Motors employees. Now we have about 
8,000.
    The house I was born in has been torn down, as all the 
houses in the whole block are being torn down. The house I was 
raised in is being torn down, as are all the houses in that 
whole block are being torn down.
    I am not demeaning what we are talking about today. But I 
do wish that we would emphasize the need to help in some way, 
shape, manner or form, bringing all the sources of power 
together in this country to create jobs.
    Because if I were to tell them what our hearing was today, 
there would be a big yawn. If I were to tell them that, by the 
way, there is going to be a third shift at the truck plant, 
then there will be hosannas in the highest on that.
    Thank you very much, Mr. Chairman.
    Chairman Roe. Thank you.
    Dr. Heck?
    Mr. Heck. Thank you. Thank you, Mr. Chairman.
    Mr. Mehrens, we heard testimony that there was an increased 
burden on the unions in trying to comply with these new forms. 
And in some of the written testimony, that seems to be based 
upon an academic study of self-reported information from the 
unions themselves, which would call into question the validity 
of the study.
    Do you know how OLMS calculated the burdens associated with 
the individual reporting forms in arriving at their decision 
that the burden was too great, that they would need to suspend 
those forms?
    Mr. Mehrens. Congressman, it depends on which of the rules 
you are referring to.
    If you are referring to the most recent rule, the way that 
worked is, the department first built a spreadsheet of tasks 
that had to be accomplished in order to file the reports. You 
would break the reporting burden down by specific categories. 
You would figure out how many line items would exist in that 
particular category.
    You would assign a dollar value to the amount of time that 
was spent based on the type of personnel that would be doing 
that particular task. And then you would aggregate that number 
together to come to a final burden number that would meet the 
requirements of the analysis necessary under the Paperwork 
Reduction Act.
    Mr. Heck. And so, in your opinion, was that analysis, as it 
was conducted, a valid analysis, and such that the findings 
would justify suspending the final rule, or not using the 
forms?
    Mr. Mehrens. Well, I would say this. The department's 
numbers in the 2009 final rule were supposedly part of the 
basis for the department now proposing, and then finally 
rescinding, those enhancements.
    However, if you look at the Paperwork Reduction Act section 
of both, in those rulemaking, as well as the final rule, the 
current administration adopts wholesale the burden numbers that 
were used in 2009.
    And so, if the current administration had different 
numbers, or believed that that number was too high or too 
burdensome, it would have submitted a new statement as to what 
it actually believed those numbers were.
    Mr. Logan. Mr. Heck, can I also answer that question?
    Mr. Heck. I just want to have a question for Ms. Roth.
    You brought up the right to work, some states in your----
    Ms. Furchtgott-Roth. Correct, yes.
    Mr. Heck [continuing]. In your testimony.
    My state, Nevada, is a right-to-work state. And 
periodically, the state legislature is faced with a fair share 
law, in which non-union members would be required to pay a 
certain amount, not as union dues, but for the services of the 
recognized collective bargaining unit.
    Without the forms currently under discussion, would there 
be any place that those individuals who are not union members, 
but may be subjected to a fair share law, be able to ascertain 
whether or not their payments or their assessments were 
actually being used for the purposes of representation versus 
being used for representational activities, potential lobbying 
or political activities, or contributions, gifts and grants?
    Ms. Furchtgott-Roth. The original LM-2 form would give them 
some of that information. But the new, enhanced LM-2 form, 
which the Labor Department is trying to roll back, gives far 
more information.
    There is no way they could find out that information 
without the new LM-2 form that the department is trying to roll 
back, or the T-1 form that shows information about trusts, 
overseen by the unions. That is correct.
    There is no way they could find out that information. There 
is information in these forms that they could not find out 
otherwise.
    Some information is provided by the 990 IRS forms, but 
those come out with a 2-year delay.
    Mr. Heck. Thank you. Thank you, Ms. Roth.
    I yield back, Mr. Chair. Thank you.
    Chairman Roe. Thank you.
    Mrs. McCarthy?
    Mrs. McCarthy. Thank you, Mr. Chairman, and I appreciate 
having this hearing.
    You know, I sit here wondering what kind of witch hunt we 
are on. We have 15 million people unemployed. We have nine 
million people underemployed.
    And I also am on the Financial Services Committee. And for 
a year-and-a-half, we have been working, and we did work, on 
legislation to have transparency and clarity on what caused the 
economical crisis that this country has gone through.
    And yet, for the last couple of weeks, all we have been 
doing is tearing that apart and taking away that transparency. 
And yet, here we have a hearing, in my opinion, which I think 
everybody on this committee certainly wants to have 
transparency, wants to have clarity on where our unions are. We 
do not want any bad union bosses, or anything like that. And we 
have put the regulations there.
    And yet, with H.R. 1, we have seen the large amount of 
money to protect workers taken away. And yet, we have so many 
people killed every year, injured in the job.
    So, instead of not, certainly, working on the clarity, why 
aren't we doing something to make sure our workers in this 
country, whether they are union or non-union, why aren't they 
working? Why aren't we doing stuff to get them back to work, to 
get the economy going?
    But with that being said, Mr. Logan, I wanted to ask you a 
question, and I saw you kind of like jumping before that. You 
wanted to answer some questions, so I am going to give you time 
to pick any points up that you might have heard from your 
colleagues that you might want to answer.
    In your testimony, you noted that part of the duty of OLMS 
is to balance the mission of promoting transparency with the 
burden of compliance.
    What, if any, considerations do you think were given by 
either the Bush administration for the financial costs, the 
administration's time and effort needed by these unions to 
comply with reporting changes?
    And there is a follow up. In most cases, who footed the 
bill for these new expenses?
    Dr. Logan?
    Mr. Logan. Thank you. I think the clear answer is, very 
little examination, very little thought was given to this. When 
the new revisions were introduced in 2009, they were based on 
estimates that were carried out prior to the 2003 revisions. So 
there was no actual study of the actual administrative burdens 
imposed on unions.
    Now, as we said, I mean, this is not a debate about the 
desirability of transparency and accountability. We all agree 
that those are desirable goals. It is simply about, partly 
about, the utility of the Bush era revisions, and also about 
the records of the current OLMS, which I said, at the least, be 
very good in this area.
    But Mr. Heck is no longer here, but he cited a study I 
mentioned in my written testimony that was conducted by two 
scholars at Penn State, one at Cornell University, who are 
among the preeminent scholars of employment relations in the 
country. They did a nationwide survey of union administrative 
practices. And their findings are quite startling about the 
administrative burden of the 2003 revisions to the LM-2 form, 
which are still in place, and they are still mandated by the 
current OLMS.
    And what they found was, 83 percent of unions responding 
report that existing staff were required to spend more time on 
LM-2 compliance, less time on other duties, to comply with the 
new LM-2 requirements.
    They go through a number of other areas about new 
accounting practices, about hiring external consultants to 
comply, about hiring new staff to comply.
    And Mr. Heck suggested that, since this is based on union 
self-reporting, it is discredited. I do not really know what to 
say, but, I mean, even union officials tell the truth sometime.
    But, you know, there is a serious point. I mean, I do 
research on union practices. I do research on company 
practices. And, of course, when doing research on company 
practices, I survey companies and ask them.
    But you do not simply accept what they say at face value. 
You design surveys. And academics have background, you know, 
they have certain skills in these areas to design surveys, to 
try and uncover some kind of empirical truth.
    And, you know, this is what we want. I mean, we do not have 
predesigned notions of what the results should tell us. We do 
not belong to a think tank of the right or to the left and say 
we are going to design a survey that is going to come up with 
this particular result.
    These are leading scholars in the field. They design the 
survey. It is something like a process of trust examination, 
not unlike what you are doing here, to come up with a number of 
questions to make sure that the answers are consistent and to 
try and uncover what is really happening in terms of the 
administrative burdens input.
    And as you said, I mean, the people who are bearing the 
cost of this additional administrative burden, or the union 
members themselves.
    But the burden would be fine, perhaps. I mean, you always 
have to balance, of course, the goals with the administrative 
burden involved. The burden would be fine, if there was a very, 
very clear payoff in terms of increased transparency and 
greater accountability.
    The point is, there is no evidence of that whatsoever with 
these revisions. We do not have any evidence that union members 
are being provided with useful information in a usable form.
    But nonetheless, they have created this enormous new burden 
on unions, which ordinary union members have to pay for, both 
in terms of paying out of their dues money, and in terms of 
paying in--that union staff time is being used to comply with 
these very detailed, very complex forms, rather than contract 
negotiations, rather than dealing with grievances, et cetera.
    So----
    Chairman Roe. Mr. Logan, could you----
    Mr. Logan. Sorry.
    Chairman Roe [continuing]. Finish? Thank you.
    Mr. Logan. Okay. I said academics could be long-winded, so 
I apologize.
    Chairman Roe. So can politicians.
    Mr. Logan. I said, I think, you know, you simply cannot say 
this survey does not have credibility because it is based on a 
national survey of union officers.
    The people conducting the survey have impeccable 
credentials. They know what they are doing. They are trying to 
uncover the truth, not come up with some polemical argument 
concerning the impact of these new revisions.
    Chairman Roe. Dr. Bucshon?
    Mr. Bucshon. Thank you, all the witnesses, for coming. And 
I would also like to say that my major focus in the Congress is 
job creation, and also has been stated on the other side.
    And in that context, I think this hearing is very 
important, because I believe that the policies that are 
currently in place and the ongoing policy positions, 
specifically related to regulations that we currently have in 
regards to the administration, are detrimental to job creation.
    And in that context, noting that AFSCME was the top outside 
political donor to all political candidates, promoting 
candidates that are putting these policies in place, this is a 
very important hearing.
    In regards to the fact that--my question is, is the change 
in reporting going to significantly hamper the ability not only 
of union employees, but everyone else, to determine where 
political dollars are being directed? And if they are being 
directed from union dues, sometimes specifically in contrast to 
the political views of the people that are forced in many cases 
to contribute.
    So, my question is, to Ms. Roth, is the current change, or 
the rescinding of the changes that were put into place for 
transparency reasons, does it--will it hamper the ability of us 
to determine where political donations have been made by union 
organizations?
    Ms. Furchtgott-Roth. Absolutely. And it is very much 
connected with jobs.
    I mean, here Congress spends a lot of time on Sarbanes-
Oxley, Dodd-Frank. Transparency is fine for shareholders when 
it comes to the man in the street. The union rank-and-file 
worker, we are saying that he does not have the same right to 
transparency as the shareholders.
    He has the right to know where his money is going, because, 
as you mentioned, $90 million, the largest single contributor 
to the 2010 electoral campaign was actually SEIU, AFL-CIO. They 
boast about how much they contribute.
    Ninety-nine percent of the funds go to Democratic 
candidates, who are in favor of bills such as the Employee Free 
Choice Act, the Paycheck Fairness Act, the cap-and-trade energy 
tax, the new Obama health care law--all of which reduce jobs in 
the United States. And that is one reason we have had such slow 
job creation.
    The recovery was started June 2009. We still have 14 
million Americans out of work. Our unemployment rate is close 
to 9 percent.
    The link could not be clearer.
    Mr. Bucshon. Thank you. And I also would like to just say 
as a background, my dad was a United Mineworker for 37 years, 
so I have a great deal of respect for the workers and their 
ability to hold their unions accountable.
    I went through three strikes when I was a kid, and so, 
again, this to me is about the workers and their rights and 
their ability to assess whether or not their union is 
appropriately using their dues.
    And that is, I think, where this hearing, in contrast to 
what has been said, does have a very direct connection to job 
creation, because the policies that are put in place in the 
United States government have--the union donations, the 
political candidates do have a major effect on the direction of 
policies in this government. And in my view, it has stymied job 
creation over the last 2 years.
    So, my main focus also is job creation. And in that 
context, that is where my concern lies in this hearing.
    So, with that I yield back my time. Thank you.
    Chairman Roe. Thank you.
    Mr. Hinojosa?
    Mr. Hinojosa. Thank you, Mr. Chairman. Thank you for 
holding this hearing.
    And I want to thank each of our witnesses for your 
participation.
    I want to thank you, Dr. John Logan, for your honesty in 
saying that you are long-winded. I want to ask you to be short, 
so that we can have longer opportunity to dialogue on some 
questions that I want to address.
    I want to talk about the Obama administration's 
effectiveness.
    You have heard today from other witnesses that they Obama 
administration has weakened union financial reporting 
requirements to the detriment of union members. Do you agree 
with that statement?
    Mr. Logan. No, I do not agree with the statement. As I 
said----
    Mr. Hinojosa. Tell me why.
    Mr. Logan. I think it is partly to do--the question is not 
whether or not transparency is a desirable goal. It is to do 
with the utility of the previous revisions. And I think if you 
look at the record of the OLMS, it demonstrates that it has not 
weakened it.
    What we saw under the previous administration was there was 
a great increase in the budget of OLMS, and a great deal of 
increased audit activity, but very little payoff in terms of 
increased enforcement activity.
    And so, if you look at the record of the department OLMS, 
in terms of criminal investigations and in terms of 
indictments, the record, it stands up. It is in my written 
testimony. I show it in the figures--at the back I have all of 
the figures comparing 2010 to 2009.
    I mean, I think the figures do speak for themselves.
    Mr. Hinojosa. I agree with you that the figures speak for 
themselves, because if you look at the second term of President 
Bush and his administration, the losses that we had in jobs was 
the greatest that I have ever seen while I have been in 
Congress 15 years.
    A good example would be, the last month that he was in 
office we lost 700,000 jobs. And the months before that, it was 
all in the hundreds of thousands of jobs lost.
    And I do not see or hear my friends on the other side of 
the aisle questioning why we did not have more transparency and 
clarity as to see why all of that was occurring.
    Let me ask--or at least make a statement--that in my 
opinion, Secretary of Labor Hilda Solis is focused in 
protecting all men and women in the labor force, and that she 
is doing a good job.
    So, let me ask you, Dr. Logan, Obama as compared to 
President Bush. In your testimony, you state that the Obama 
administration has strongly enforced the rights of workers 
under the Labor Management Reporting and Disclosure Act.
    How does the Obama administration's efforts compare with 
the Bush administration?
    Mr. Logan. Well, I think it compares very favorably. It is 
to do with the more efficient use of resources and the better 
targeting of these resources.
    And that is why we find, despite the fact that we are in a 
period of flat budgets--there is no doubt about that all 
government agencies are having to make do with fewer resources. 
But now, effectively, the agency is doing more with less. It is 
targeting its investigations better, and this is having a 
direct payoff in terms of indictments and convictions. And as I 
said, the data shows this very, very clearly.
    And it is trying to provide union members with the type of 
information they want in a usable form, and not simply to pass 
revisions to the existing law that have no clear benefit for 
ordinary union members, the government or the public.
    Now, it has been noted from the very early history of the 
LMRDA that there is a danger of using union accountability, 
which everyone agrees that unions should be accountable----
    Mr. Hinojosa. Dr. Logan, I am going to interrupt you, 
because I think you have made your point.
    Let me ask you this last question. In your testimony that I 
read, you cite evidence that the enhanced LM-2 requirement has 
imposed an increased recordkeeping and reporting burden.
    So, when unions spend more time and money complying with 
those requirements, does that mean unions have less time and 
resources advocating for workers?
    Mr. Logan. Yes, I mean, it does mean that. And it also 
means that the money that is used to pay for these new 
recordkeeping procedures, which do not provide any useful 
information to rank-and-file union members--the new software, 
the new accounting procedures, the outside expertise, the new 
staff that are hired to comply with the new revisions--all--
members choose money.
    And again, as I said before, if there was some clear payoff 
for this, you know, perhaps one could justify the use of 
members' dues money for this reason and the administrative 
burden.
    But in the complete absence of any concrete evidence of any 
useful information being provided to ordinary union members, I 
think it seems, if not the intention being to impose a greater 
burden, then to tie unions up in these sort of administrative 
knots, then that is clearly being----
    Mr. Hinojosa. My time has expired, Dr. Logan. Thank you 
very much.
    Chairman Roe. Thank the gentleman.
    Mr. Barletta?
    Mr. Barletta. Thank you, Mr. Chairman.
    Ms. Roth, in your testimony, you said that until 2005 the 
union sector was mostly exempt from any regulation that 
required detailed financial disclosure.
    Ms. Furchtgott-Roth. Yes, correct.
    Mr. Barletta. Why do you think it took so long for the 
Department of Labor to get it straight and update these forms?
    Ms. Furchtgott-Roth. Well, the Labor Department under 
Secretary Chao started updating the forms as soon as they came 
in, and then the new form was ready in 2003.
    That sounds like a long time, but it takes a couple of 
years to actually get a form ready to go, because you have to 
have notice of proposed rulemaking and comment. You have to 
allow the public to comment. Then you have to deal with the 
comments.
    So, it was out in 2003.
    Then the department was sued by the AFL-CIO to prevent the 
form going into place. And it was put in place in 2004 after 
the suits were resolved with Judge Kessler. And then it became 
operative for fiscal years from 2005 onwards. So, that is why.
    Mr. Barletta. Are the reporting requirements for unions 
vastly different from the reporting requirements for the 
private sector companies?
    Ms. Furchtgott-Roth. I would say that they are less 
stringent than the requirements for publicly traded private 
sector companies.
    The forms, the LM-2 forms before 2005 had vast gaps in them 
with expenses, with millions of dollars, other millions of 
dollars. So, the form existed before 2005. But many of the 
forms--the LM-30, for example--were not enforced.
    Under its current status, I would say the forms are less 
onerous than those filed by publicly traded companies.
    Mr. Barletta. In your opinion, is there a way for Congress 
and this committee to work with the current Department of Labor 
to reach some kind of compromise on what the unions must report 
on these forms?
    Ms. Furchtgott-Roth. I think that it is to the great 
advantage of rank-and-file union members to know what is going 
into the trusts, which is the T-1 form. It is very useful to 
know if a piece of equipment is being sold at its correct price 
or not, with the difference being absorbed either by the union 
or by some friend of the union.
    So, I would say that Congress has a duty to protect the 
rank-and-file union member, who does not have any power, who is 
potentially intimidated by union bosses. Therefore, he cannot 
speak for himself. And he deserves the utmost protection. And 
all this information is something that he deserves to have.
    Mr. Barletta. Mr. Mehrens, why do you think it took over 
four decades to stir up this much anger in the labor movement? 
I mean, it is 40 years.
    Mr. Mehrens. I think, like any piece of major legislation, 
it really depends on the secretary that is enforcing the act. 
The sponsor of the renewal, after the act was passed, said that 
the utility of this act is going to depend greatly on the 
secretary of labor.
    If the secretary of labor is engaged and interested in 
making the act effective, then it will be. And if that 
secretary is not, then the act will not be really effective.
    And for a number of years, like you said, Republican and 
Democratic administrations did not really have a lot of 
interest in updating the reports. And it took a new 
administration to come in that did have an interest and saw the 
value of transparency to make that happen.
    Mr. Barletta. Thank you.
    Ms. Furchtgott-Roth. It was difficult for Secretary Chao. 
She was threatened. She was sued by the AFL-CIO. It took a 
really tough woman--not a man, a woman--to take this issue on 
and get these forms.
    And also the overtime rule; it just had not been updated 
for 40 years, either. But she updated that to have--and that 
again took a great deal of toughness on her part.
    And that is why it had not been done before. No one else 
was tough enough to take it on.
    Mr. Barletta. Thank you, Mrs. Roth. I have four daughters. 
I know how tough women can be. [Laughter.]
    I yield back the balance of my time, Mr. Chairman.
    Chairman Roe. I thank the gentleman.
    Mr. Tierney?
    Mr. Tierney. Thank you, Mr. Chairman.
    I am moved nearly to tears by the great concern for the 
labor rank-and-file from my Republican colleagues and from some 
of the witnesses down there. It is absolutely touching.
    You know, I look at the Labor Management Reporting and 
Disclosure Act, and it says, to ensure the basic standards of 
democracy and fiscal responsibility in labor organizations 
representing employees in private industry. And that is the 
goal of that act.
    And I can tell you that I do not have people knocking my 
door down, rank-and-file members of a union, saying that this 
is not being done right, and that they feel their rights are 
not being protected.
    This secretary of labor and others under Democratic 
administrations, as well, have done investigations. They have 
done audits. They have done good work in making sure that 
people comply with this and with the disclosure.
    So, I was a little bit surprised, but at least I think it 
is honest for Ms. Furchtgott-Roth to come forward and 
acknowledge that there are politics involved here.
    So, let me just state for the record a little bit of 
history on this that has been reported, and then I will go on 
with it. Former Speaker Newt Gingrich was the first person to 
suggest the use of the act as a means to weaken unions.
    Gingrich directed the secretary of labor at the time, Lynn 
Martin, to use the act to enhance union reporting requirements 
as a means to, open quote,--``weaken our opponents and 
encourage our allies,''--close quote.
    Grover Norquist has said, open quote,--``every dollar that 
is spent on disclosure and reporting is a dollar that can't be 
spent on labor union activities,''--close quote.
    You know, I seem to--back the recession period, 2001 to 
2007, and there was tremendous loss of jobs on that. I see the 
fingerprints of weak performance by the SEC and other 
regulatory agents, the deregulation of Wall Street all over 
that.
    I do not see any fingerprints of labor union activity doing 
that. In fact, during that period, labor had extensive 
reporting requirements under George W. Bush. So, I do not see a 
direction of those lost jobs from labor action as much as we do 
from deregulation of Wall Street.
    There was a former staff member to Vice President Dan 
Quayle. The fellow's name was Robert Guttman. He was the 
assistant secretary of labor for employment standards. And he 
was the one who was charged with running the OLMS, the act.
    He strongly objected to the reporting changes, and argued 
that they were a lot of junk, in quotes. And, quote,--``would 
produce little useful information, while imposing 
unconscionable burdens on unions,''--close quote. The 
department went ahead with the changes, and Mr. Guttman 
resigned.
    The second Bush administration continued where the previous 
one left off. The man that was charged with running OLMS was 
formerly the head of opposition research at the Republican 
National Committee and did not have extensive experience with 
labor issues.
    And one of his first efforts was to implement changes to 
the LM-2 reporting requirement and greatly increase the volume 
of what unions were mandated to report. It is estimated that 
the amount of information required in the form increased at 
least 60 percent on average. One union reported an increase in 
the pages of reporting from 125 pages to 800 pages.
    The problem with the enhanced requirements was not just 
that the volume was increased, but also with the lack of 
usefulness for the information.
    Dr. Logan, does that sound like an accurate history of what 
was going on here to you?
    Mr. Logan. Yes, it is an accurate history. I think I would 
say--I mean, it would be inappropriate for me to comment on the 
intentions of the previous administration--say that if the 
revisions were designed to produce greater accountability and 
transparency, they were ill-thought-out and clearly failed in 
doing so.
    We have not uncovered any cases of corruption that would 
not have come to light otherwise. They have not produced 
ordinary union members with useful information in a useful 
form.
    And so, since it failed so abysmally in achieving that, I 
think there is a question as to what was the real motivation 
behind some of these revisions, and whether it was really to 
burden unions with all sorts of additional administrative costs 
and to reduce their effectiveness, and to supply information 
that could be misused by people who are hostile to unions and 
to collective bargaining.
    Because as I pointed out in my written testimony, while we 
do not actually have any reliable evidence to suggest that the 
Bush era revisions either have or would have produced 
additional and useful information to ordinary union members, 
they certainly have been used extensively by people who are 
hostile to unions and to collective bargaining on ideological 
grounds.
    Mr. Tierney. And I note that the Obama administration 
record on pursuing them on this act, on investigations and on 
prosecutions is actually more rigorous than that under the 
previous administration on that.
    And I do not think any of us want to try just ad hoc to 
ascribe motivations to others. We look to their own words. The 
quotes that I gave you from former Speaker Newt Gingrich, from 
Grover Norquist and from Mr. Guttman, I think pretty much speak 
in their own words about the motivation on that.
    Mr. Logan. And I would also say that, again, to speak to 
the qualifications of the current head of OLMS under this 
administration is someone who really is the country's leading 
expert in this area of union financial transparency and 
accountability, and an internationally recognized expert. I 
mean, his qualifications really--it would be difficult to find 
anyone who matches him in terms of his experience, his 
professionalism. And he has brought this to the agency.
    And the agency is doing precisely what it is supposed to do 
under the law, and doing it very well.
    Mr. Tierney. And that would be in contrast to the head of 
opposition research for a political party that was previously 
there.
    I yield back.
    Chairman Roe. Thank you, Mr. Tierney.
    Mr. Wu?
    Mr. Wu. I thank you, Mr. Chairman. I have no questions of 
this particular panel of witnesses. Thank you very much.
    Chairman Roe. I thank the gentleman.
    I will ask a few questions, and then we will wrap this up.
    We want to thank you all for being here.
    And I am sorry Mr. Kildee is gone, because I did my part. I 
bought a new Chevrolet Equinox for my wife. Unfortunately, the 
Toyota that I traded in on it, which was made in Georgetown, 
Kentucky, my Chevrolet was made in Toronto, Canada, I found 
out. But I did do my part there.
    I also take a little bit of issue with one of my colleagues 
about not caring about union workers. My father, too, was a 
union worker for 40 years. He worked in a factory making shoe 
heels, and I cared very much about him and about the treatment 
he got and where his union dues were spent.
    I want to go a little different direction. What is the 
purpose of the trusts that the unions set up? I know there 
are--I am very familiar with the 5500 reporting forms in a 
trust, because of some experience I have had as a--in college 
trusts.
    But my question is, why are these trusts necessary? And why 
are they set up? If it is transparent, those funds ought to be 
easily followed. It should not be difficult to follow.
    And I would think that the union would want transparency, 
because there are all these questions swirling around about the 
activity anyway, and have been for decades.
    So, why wouldn't you want to have transparency? And why do 
they set up these trusts?
    Ms. Furchtgott-Roth. Well, some of the trusts are credit 
unions, strike funds, pension and welfare plans and building 
funds. And it is important that the books of these funds be 
open so that rank-and-file members can see how much is in them 
and what they are being used for, and so that parts of them are 
not siphoned off for other purposes.
    Chairman Roe. I did a little quick math in my head. If we 
have 6.9 million private sector union workers and $8 billion, 
that is over $1,000 a piece. It is almost $100 a month per 
union worker. And that is a fair amount of money if you are--
depending on what wage scale--if you are not a six-figure 
income person, after taxes, that is a pretty good chunk of 
money.
    So, I know that you mentioned in your, Ms. Furchtgott-Roth, 
that you mentioned in your testimony earlier about the 
reporting requirements that were required of us members of 
Congress here. And the comment was made that, if we have to 
fill out these forms in union, this is not time we have to 
spend on other issues.
    Well, the same thing came be said of us. It is time we do 
not have to spend with our constituents.
    But I think it is important for a person looking at me to 
be able to look to see if I have any conflicts of interest, or 
what I am doing. I have no problem with that whatsoever. I do 
not like to do it.
    I was in a horrible mood Monday. I did my taxes. So, I get 
that.
    But why wouldn't the unions want transparency and make it 
easy to have this information out there?
    Ms. Furchtgott-Roth. Because they contribute immense 
amounts of money to political campaigns. They brag about it. 
And most of that money goes to Democratic politicians, and they 
want to hide that.
    They also, if it was also open, then union members would 
not be able to take advantage of their rights under Beck to get 
back the portion of their union dues used for political 
contributions. They have the right to do that. But if they do 
not know what the political contributions are, then they cannot 
ask for it.
    Chairman Roe. The other one I want to talk about just 
momentarily are audits. When I was reading the prep material 
here, it said that the OLMS reduced the time between union 
audits from once every 133 years--I doubt that anybody in this 
room will be around for the next set of audits--in 2000, to 
once every 33 years in 2006.
    I found that astonishing when the audits occurred only once 
every 133 years. And to move it to 33 years was considered a 
burden?
    Any comment about that? Does that seem reasonable?
    Mr. Mehrens. One thing I would add there is that the 
department has a goal, I believe, of 14 percent, what they call 
fall-out cases from audits that are conducted. So, as a natural 
enforcement matter, the more audits that are conducted, the 
more criminal investigations that will occur, as well.
    And I believe in the previous fiscal year, there was 
actually a 12 percent actual result where 12 percent of all 
audits led to fall-out criminal cases.
    Chairman Roe. I would like to--my time is about up--but I 
would like to mention also, I would like to know, these 
indictments that occurred in 2009, I do not think you can just 
get all the investigation done in 2009. I have a feeling that 
some of that was a hold-over from the previous year of 2008. I 
would almost bet on that.
    Ms. Furchtgott-Roth. Correct.
    Chairman Roe. And we can look at that and find out, because 
I do want to find that information out. I think that the 
reporting requirements of the 5500 form is just a form that you 
fill out through the trust.
    Mr. Mehrens, you were mentioning that. That is what that 
is.
    Mr. Mehrens. The 5500 is generally filed by ERISA-covered 
entities. A lot of the trusts are not ERISA-covered entities.
    Chairman Roe. Well, I want to thank the distinguished panel 
we have had. It has been informative.
    And, Mr. Andrews, do you have any closing comment?
    Mr. Andrews. I do. I would also like to thank the panel and 
the chairman, and just note, I think the hearing is remarkable 
for what did not happen and what did happen, and what did not 
happen.
    What did not happen was anyone putting on the record any 
facts to refute the record that this administration has 
vigorously prosecuted any wrongdoing.
    What did happen is a refreshingly honest admission by Ms. 
Furchtgott-Roth and others that this is really about politics--
the majority's concern that unions are supporting candidates 
they do not like, so they are going to try to stop that.
    I think it is a little ironic, the same majority would 
fight tooth and nail under the Citizens United decision against 
the DISCLOSE Act, that would make corporations disclose their 
political behavior.
    But what also did not happen was not one word, not one 
moment, not one idea about the 15 million unemployed people in 
this country we should be helping.
    This was about politics. We are happy you admitted it.
    Chairman Roe. Mr. Holt?
    Mr. Holt. Thank you, Mr. Chair, for accommodating.
    I apologize for coming in late. I have tried to follow what 
has been going on this morning. And I must admit, I am a little 
puzzled by what I have heard.
    Let me address this question to you, Ms. Furchtgott-Roth. 
In response to a previous question, you mentioned that 
organized labor, that unions were kind of misusing the money 
that had been collected from members for such things as the 
Paycheck Fairness Act. And you explained how a bill to help 
women fight pay discrimination, that that law is not something 
that should be advanced by unions, it is not something that 
should be advocated for by unions.
    Did I understand that correctly?
    Ms. Furchtgott-Roth. What I said was, I listed the Paycheck 
Fairness Act as one of four bills that were the object of 
lobbying activities, favorable lobbying activities by unions. 
They were using their political--they were using money to lobby 
for four bills: the Employee Free Choice Act; the Paycheck 
Fairness Act; the cap-and-trade energy tax; and the new health 
care law.
    I said that those bills reduce employment in the United 
States. And that is one reason we have fewer jobs now.
    Mr. Holt. I see.
    Ms. Furchtgott-Roth. And the Paycheck Fairness Act----
    Mr. Holt. So would you include child labor in that also?
    Ms. Furchtgott-Roth. There was not a child labor law----
    Mr. Holt. I know. But would you----
    Ms. Furchtgott-Roth [continuing]. That.
    Mr. Holtt [continuing]. Is that--would you include that in 
the same category?
    Ms. Furchtgott-Roth. No.
    With regard to the Paycheck Fairness Act, we have many laws 
that prevent discrimination against women. What the Paycheck 
Fairness Act would have done is require employers to report to 
the government the race, sex and earnings of their workers.
    Mr. Holt. Yes.
    Ms. Furchtgott-Roth. So, the government could check that 
groups of men and groups of women were being paid equally, even 
if they were not necessarily in the same job with the same 
amount of work experience and the same tenure.
    Mr. Holt. Would it be okay if unions spent money on, you 
know, to advocate workplace conditions of fairness that were 
not enforceable? Is it improper for them to be using union 
funds to advocate enforcement of fairness in the workplace? Is 
that the distinction?
    I must admit, I am puzzled by what I hear.
    Ms. Furchtgott-Roth. It is fine to be--we have these forms 
so that people can see what unions lobby for. And it is 
completely legal for them to do that.
    I was mentioning these four bills, because before you came, 
people were saying, why aren't we concentrating on job 
creation? Why are we worrying about these small matters and not 
worrying about creating jobs?
    Well, it so happens that the four major bills that the 
unions completely legally lobbied for would have resulted, have 
resulted, in a decrease in employment. That is one reason why, 
even though the recovery started in January 2009, we still have 
almost 14 million Americans out of work and an unemployment 
rate of almost 9 percent.
    The Paycheck Fairness Act impeded job creation. The health 
care law, with its mandate that if you employ 51 or more 
workers, you have to pay a penalty of $2,000 per worker per 
year, that has prevented firms at 48 workers from increasing to 
51. It has made firms of 55 of 60 workers think, how do I get 
rid of five or 10 workers, so I get below the 50 limit?
    And I can go through, if there were time, these other 
bills, the cap-and-trade energy bill, how that reduces 
employment by making energy more expensive.
    Mr. Andrews. Will the gentleman yield?
    Mr. Holt. I would be happy to yield to my colleague.
    Mr. Andrews. Just wondered if the witness would supplement 
the record with any empirical studies she is aware of that 
would support the point you just made about the firms with 60 
workers laying people off because of the health care bill. 
Would you care to do that for us?
    Mr. Holt. If you would, please. That was exactly to be my 
question, because we have looked for that, because you are not 
the first person to raise this concern. And we just do not find 
any evidence.
    And as for the energy, the would-be energy legislation that 
did not become law, I think it is very speculative what it 
would have done. On this, you are entitled to your opinion, 
because you will not be able to provide us facts.
    Ms. Furchtgott-Roth. It is speculative that raising the 
cost of energy in the economy reduces employment? That is 
speculative? Why don't we make it--why don't we make gasoline, 
you know, $20 a gallon, instead of $4?
    Mr. Holt. It is speculative that that legislation would 
have increased the cost of energy at the workplace.
    I mean, certainly, you know, the financial speculation that 
has resulted in increase of gas prices by 50 or 100 percent, 
you know, far more than production--actually, production, 
domestic production of oil has doubled, and yet the gas prices 
have gone up in the opposite direction of what, you know, the 
arguments would suggest.
    Ms. Furchtgott-Roth. But CBO----
    Mr. Holt. That kind of speculation we can talk about, 
because there are facts.
    Ms. Furchtgott-Roth. Okay.
    Mr. Holt. But the speculation on what the so-called cap-
and-trade legislation would have done is purely speculation.
    So, on these other matters----
    Ms. Furchtgott-Roth. The CBO estimated----
    Mr. Holt [continuing]. On these other matters that you 
cite, if you would provide the committee any hard facts, we 
would be grateful. Thank you.
    Ms. Furchtgott-Roth. I can provide you with a number of 
studies that show that raising the cost of labor reduces 
employment. It is a given in the academic labor economics 
literature. I would be happy to supply you with a list.
    Chairman Roe. Okay. I thank the gentleman.
    To summarize, I certainly agree, this has been an important 
event today. I think that jobs are the single most important, 
but also looking after workers with transparency, sunshine and 
information. The sun needs to shine, so people can see where 
their resources are going.
    I think it is important--and, Mr. Fox, I would like to meet 
with you later to discuss about how you feel like that the law 
can be changed, the 1959 law can be changed to improve it.
    I would certainly argue, and I would like to with my 
colleague, Mr. Holt, at some point. We have an Eastman Chemical 
Corporation in Kingsport, Tennessee, that has 9,000 employees 
and uses 60 carloads of coal every day.
    If you tax coal and carbon, which is what organic chemists 
make stuff out of, the cost of their business compared to 
someone else that does not have those same regulations, will 
strangle that business, and 9,000 jobs will be gone from 
Eastman. And it will be in China or India, or someplace else 
that does not have that.
    AGC Glass, which has a plant that makes solar panels, it 
uses $1 million--their energy bill is $1 million per year--they 
would be gone if energy prices doubled, as we thought this 
would be. So, I would be delighted to have that.
    Now, I am not arguing the benefit of lowering carbon 
dioxide. I am not saying that. I am just saying that this bill 
would have had a catastrophic effect on northeast Tennessee.
    I would like to thank the panelists for being here, and I 
look forward to carrying on this conversation in the future.
    This meeting is adjourned.
    [Questions submitted for the record and their responses 
follow:]




                                ------                                


         Response by Ms. Furchtgott-Roth to Questions Submitted

    Thanks for inviting me to testify before your committee on March 
30, 2011. I am writing to respond to your questions for the record. 
Please excuse my delay in replying. I wanted to wait until I had 
completed a detailed study of the franchise industry so that I could 
provide you with complete data. A copy of the study, which will be 
released on Tuesday, is attached. [Editor's Note: The attachment 
referred to, ``The Effects of the Patient Protection and Affordable 
Care Act on the Franchise Industry,'' may be accessed at the following 
Internet address:]

               http://www.hudson.org/files/publications/
       The%20Effects%20of%20PPACA%20on%20Franchising-%20Final.pdf

    You asked for empirical studies that support the statement that 
firms with 60 workers lay off workers because of the health care bill. 
The attached study, The Effect of the Patient Protection and Affordable 
Care Act on the Franchise Industry, shows that the new law will make it 
harder for small businesses with 50 or more employees to compete with 
those with fewer than 50 employees.
    Franchisors and franchisees, who often own groups of small 
businesses, such as stores, restaurants, hotels, and service 
businesses, will be at a comparative disadvantage relative to other 
businesses with fewer locations and fewer employees. This will occur 
when a franchisor or franchisee employs 50 or more persons at several 
locations and finds itself competing against independent establishments 
with fewer than 50.
    What's surprising is the incentive in the Act not to hire 
additional workers. This is illustrated in Table A4 of the attached 
reoirt. If a business does not offer health insurance, then, beginning 
2014, it will be subject to a penalty if it employs more than 49 
workers in all its establishments. For 49 workers, the penalty is 0. 
For 50 workers, the penalty is $40,000; for 75 workers, it is $90,000; 
and for 150 workers, the penalty is $240,000. Each time a business adds 
another employee, the penalty rises.
    On the other hand, as is shown in Table A6, businesses can reduce 
costs by hiring part-time workers instead of full-time workers. A firm 
with 85,000 full-time workers and 7,000 part-time workers that does not 
offer health insurance would pay a penalty of $170 million. By keeping 
the number of hours worked the same, and gradually reducing full-time 
workers and increasing part-time workers, until the firm reaches 17,000 
full-time workers and 92,000 part-time workers, the penalty is reduced 
to $34 million. If the firm abandons full-time workers altogether, the 
penalty is reduced to zero.
    Many people think that because the Act is fully effective in 2014 
then it is not affecting current employment. Nothing could be further 
than the truth. Businesses are rational and plan ahead. They see a 
penalty coming, so they adjust to it now. They don't take on additional 
workers with the risk of a penalty.
    Second, you asked me to offer evidence that the Employee Free 
Choice Act, the Paycheck Fairness Act, the American Clean Energy and 
Security Act, and the Patient Protection and Affordable Care Act are 
one reason we have fewer jobs today.
    The Employee Free Choice Act, the Paycheck Fairness Act, the 
American Clean Energy and Security Act created a climate of uncertainty 
among employers. If these laws had passed--and, with a Democratic 
Congress and Democratic president, there was a strong likelihood of 
passage--costs on businesses would have risen. This was especially true 
of large, energy-intensive, unionized businesses. As I mentioned above, 
businesses are rational an look ahead.
    One need only look at the illegal violence and destruction wrought 
in the ports of Washington State by the Longshoremen to understand why 
the Paycheck Fairness Act, which would have removed the rights to 
secret ballots in elections for union representation, would have been 
so harmful. Workers would have been intimidated into voting for unions, 
and businesses would have been in danger of work stoppages and 
destruction of private property.
    The Patient Protection and Affordable Care Act passed, and I repeat 
my answer to the first question as evidence.
                                 ______
                                 
    [Whereupon, at 11:36 a.m., the subcommittee was adjourned.]

                                 
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