[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
THE FUTURE OF UNION TRANSPARENCY
SUBCOMMITTEE ON HEALTH,
EMPLOYMENT, LABOR AND PENSIONS
COMMITTEE ON EDUCATION
AND THE WORKFORCE
U.S. House of Representatives
ONE HUNDRED TWELFTH CONGRESS
HEARING HELD IN WASHINGTON, DC, MARCH 31, 2011
Serial No. 112-15
Printed for the use of the Committee on Education and the Workforce
Available via the World Wide Web:
Committee address: http://edworkforce.house.gov
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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
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
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
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
Questions submitted for the record....................... 49
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
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
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
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
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
More than 40 years after the law's enactment, transparency
and accountability were finally enhanced on behalf of union
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
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
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
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
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
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
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
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
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
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
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
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
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
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-
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
Now, for the witness testimony. Before I recognize each of
you for your testimony, let me briefly explain the lighting
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
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.
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
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
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
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
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
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
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
\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
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
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
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.
\7\ FY 2012 Congressional Budget Justification, Office of Labor-
Management Standards, at 20.
\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,
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
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
Thank you. I'd be happy to answer any questions you may have.
Chairman Roe. Thank you.
STATEMENT OF DIANA FURCHTGOTT-ROTH, SENIOR FELLOW, HUDSON
Ms. Furchtgott-Roth. Mr. Chairman, ladies and gentlemen,
thank you very much for giving me the privilege of testifying
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
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
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
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
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
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.
[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.
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
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://
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
\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:
Secretary of Labor Elaine Chao argued for more detailed LM-2 forms
``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\
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
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
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
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
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.
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
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
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
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
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
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
1. Have the Bush-era revisions improved transparency and
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
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
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
\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
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
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\
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,''
\6\ See, for example, the union avoidance seminar, ``Not Your
Father's Union Movement,'' at http://www.japantypeset.com/scope--
\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,''
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.
\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.
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,
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
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
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
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
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.
[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
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'
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.''
The documents may be accessed at the following Internet
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,
The documents may be accessed at the following Internet
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
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
See also Addendum N, Section 5.
The documents may be accessed at the following Internet
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
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
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
Mr. Andrews. Right.
Mr. Mehrens [continuing]. The purchase of investments with
Mr. Andrews. Okay.
Mr. Mehrens. There was an additional disclosure requirement
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
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
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
Mr. Andrews. How does that itemization differ from the
Mr. Mehrens. Most categories of receipts on the LM-2 are
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
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?
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. 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
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
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
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
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
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
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.
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
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
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
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
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
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
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. 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?
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
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
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
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.
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
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
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
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
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. Thank you, Mr. Chairman. Thank you for
holding this hearing.
And I want to thank each of our witnesses for your
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
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
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
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
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
Chairman Roe. Thank the gentleman.
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
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
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. 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
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
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
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
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
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
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
I yield back.
Chairman Roe. Thank you, Mr. Tierney.
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
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
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
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
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
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
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
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
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
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
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
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.]