[Federal Register Volume 70, Number 166 (Monday, August 29, 2005)]
[Proposed Rules]
[Pages 51166-51225]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-16907]



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Part III





Department of Labor





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Office of Labor-Management Standards



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29 CFR Part 404



Labor Organization Officer and Employee Reports; Proposed Rules

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

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DEPARTMENT OF LABOR

Office of Labor-Management Standards

29 CFR Part 404

RIN 1215-AB49


Labor Organization Officer and Employee Reports

AGENCY: Office of Labor-Management Standards, Employment Standards 
Administration, Department of Labor.

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: The Employment Standards Administration (ESA) of the 
Department of Labor (Department) is proposing to revise the Form LM-30 
and its instructions. The Form LM-30 implements section 202 of the 
Labor-Management Reporting and Disclosure Act of 1959 (LMRDA or Act), 
29 U.S.C. 432, whose purpose is to require officers and employees of 
labor organizations to publicly disclose possible conflicts between 
their personal financial interests and their duty to the labor union 
and its members. The proposed rule would clarify the Form LM-30, and 
its instructions, by explaining key terms and providing examples of the 
financial matters that must be reported, eliminate exemptions in the 
current Form LM-30 that permit filers to not report financial matters 
that would otherwise be required to be reported under the Act, and 
improve the usability of the reports by union members and the public. 
The Department invites general and specific comment on any aspect of 
the rule; it also invites comment on specific points, as noted 
throughout the text of this preamble.

DATES: Comments must be received on or before October 28, 2005.

ADDRESSES: You may submit comments, identified by RIN 1215-AB49, by any 
of the following methods:
    Federal eRulemaking Portal: http://www.regulations.gov.
    E-mail: [email protected].
    FAX: (202) 693-1340. To assure access to the FAX equipment, only 
comments of five or fewer pages will be accepted via FAX transmittal, 
unless arrangements are made prior to faxing, by calling the number 
below and scheduling a time for FAX receipt by the Office of Labor-
Management Standards (OLMS).
    Mail: Mailed comments should be sent to Kay Oshel, Director of the 
Office of Policy, Reports and Disclosure Office of Labor-Management 
Standards, U.S. Department of Labor, 200 Constitution Avenue NW., Room 
N-5605, Washington, DC 20210. Because the Department continues to 
experience delays in U.S. mail delivery due to the ongoing concerns 
involving toxic contamination, you should take this into consideration 
when preparing to meet the deadline for submitting comments.
    OLMS recommends that you confirm receipt of your comment by 
contacting (202) 693-0123 (this is not a toll-free number). Individuals 
with hearing impairments may call (800) 877-8339 (TTY/TDD).
    Comments will be available for public inspection during normal 
business hours at the above address.

FOR FURTHER INFORMATION CONTACT: For further information contact Kay H. 
Oshel, Director of the Office of Policy, Reports and Disclosure, at: 
Kay H. Oshel, U.S. Department of Labor, Employment Standards 
Administration, Office of Labor-Management Standards, 200 Constitution 
Avenue NW., Room N-5605, Washington, DC 20210, [email protected], 
(202) 693-1233 (this is not a toll-free number), (800) 877-8339 (TTY/
TDD).

SUPPLEMENTARY INFORMATION:

I. Background

    The Form LM-30 is used by officers and employees of labor 
organizations subject to the Labor-Management Reporting and Disclosure 
Act of 1959 (LMRDA or Act). The Act requires public disclosure of 
certain financial interests held, income received, and transactions 
engaged in by labor organization officers and employees and their 
spouses and minor children. Subject to certain exclusions, these 
interests, incomes, and transactions include: (1) Payments or benefits 
from, or interests in, an employer whose employees the filer's union 
represents or is actively seeking to represent; (2) transactions 
involving interests in, or loans to or from, an employer whose 
employees the filer's union represents or is actively seeking to 
represent; (3) interests in, income from, or transactions with a 
business a substantial part of which consists of dealing with an 
employer whose employees the filer's union represents or is actively 
seeking to represent; (4) interests in, income from, or transactions 
with a business that deals with the filer's union or a trust in which 
the filer's union is interested; (5) transactions or arrangements with 
an employer whose employees the filer's union represents or is actively 
seeking to represent; and (6) payments from an employer or labor 
relations consultant.
    The Form LM-30, which implements in part the financial disclosure 
provisions of Title II of the LMRDA, has remained essentially unchanged 
in the more than 40 years since 1963, when the Labor Department first 
approved the form LM-30. Over the past several years, the Department 
has engaged in a process to improve the administration of the LMRDA, 
including the design and usefulness of the financial reports required 
by the Act. In the course of this process, a number of problems were 
identified with Form LM-30. This proposed rule would address these 
problems by
     Clarifying the instructions by explaining the key terms 
used in the Act and instructions, and by providing examples of the 
financial matters that must be reported under each subsection of the 
Act;
     Eliminating exemptions that permit filers to not report 
financial matters that would otherwise be required to be reported under 
the Act, and which present the potential of conflicts of interests for 
union officers and employees;
     Improving disclosure by creating a summary table on the 
front page of the report, supported by schedules, for disclosing (1) 
The filer's interests, payments, loans, transactions or arrangements, 
(2) the other party to these financial practices, and (3) the dealings, 
if any, between the party and the filer's labor organization or the 
employer whose employees the filer's labor organization represents or 
actively seeks to represent.
    The Department invites comment on this proposed rule with respect 
to the benefits of these changes, the ease or difficulty with which 
labor organization officers and employees will be able to comply with 
these changes, and whether the changes will be meaningful, useful, and 
in accordance with the purposes of the LMRDA, which are to disclose to 
union members and the public information about certain financial 
interests of union officials. Interested parties and the public are 
invited to draw upon their experience with similar conflict and 
disclosure standards in other settings such as government employment, 
accounting, corporate governance, legal and judicial practice, 
medicine, and journalism. The Department invites general and specific 
comment on any aspect of the rule; it also invites comment on specific 
points, as noted throughout the text of this preamble.

A. Financial Transparency

    This proposed rule seeks to revise the Form LM-30, the form used by 
labor

[[Page 51167]]

organization officers and employees to file the annual financial 
reports required by section 202 of the LMRDA, 29 U.S.C. 432. The 
rulemaking continues the Department's efforts over the past four years 
to improve voluntary compliance with, and enforcement of, the LMRDA. In 
response to requests from union members, members of Congress, public 
interest groups, and others, the Department:
     Launched a new disclosure web site (http://www.union-reports.dol.gov), where individuals may view union financial reports 
and conduct data searches;
     Added reports filed by labor union officers and employees, 
employers, and labor relations consultants (Forms LM-10, LM-20, LM-21, 
and LM-30) to the disclosure web site;
     Modernized the annual financial disclosure report (Form 
LM-2) filed by the largest labor organizations (see 68 FR 58374, Oct. 
9, 2003);
     Raised the filing threshold for Form LM-2, thereby 
increasing the number of labor organizations that may file a simplified 
version of the annual financial disclosure report;
     Enhanced compliance assistance programs for filers; and
     Increased the investigative resources of OLMS field 
offices to facilitate enforcement of the Act.
    The Secretary also created a new annual financial disclosure report 
(Form T-1) for use by the largest labor organizations to report on the 
financial operations of certain trusts in which they are interested 
(see 68 FR 58374, Oct. 9, 2003), but the requirement that union file 
this information report was vacated by the District of Columbia Circuit 
on appeal. See American Federation of Labor and Congress of Indus. 
Organizations v. Chao, 409 F. 3d 377 (D.C. Cir. May 31, 2005), petition 
for rehearing and rehearing en banc filed July 15, 2005. The goal of 
these initiatives, like this proposal, has been to achieve more 
detailed and transparent reporting of the financial information that 
Congress, in enacting the LMRDA, intended to be made public for the 
benefit of union members and the public. Such transparency allows union 
members to obtain information needed by them to monitor their union's 
affairs and to make informed choices about the leadership of their 
union and its direction. At the same time, this transparency promotes 
the unions' own interests as democratic institutions and the interests 
of the public and the government. Financial transparency also deters 
fraud and self-dealing, and facilitates the discovery of such 
misconduct when it does occur. In these ways, the Department's reforms 
advance the LMRDA's declared purpose ``that labor organizations, 
employers, and their officials adhere to the highest standards of 
responsibility and ethical conduct in administering the affairs of 
their organizations.'' LMRDA Sec.  2(a), 29 U.S.C. 401(a).

B. The History of the LMRDA

    In enacting the LMRDA in 1959, a bipartisan Congress expressed the 
conclusion that in the labor and management fields ``there have been a 
number of instances of breach of trust, corruption, disregard of the 
rights of individual employees, and other failures to observe high 
standards of responsibility and ethical conduct which require further 
and supplementary legislation that will afford necessary protection of 
the rights and interests of employees and the public generally as they 
relate to the activities of labor organizations, employers, labor 
relations consultants, and their officers and representatives.'' LMRDA 
Sec.  2(a), 29 U.S.C. 401(a).
    The legislation was the direct outgrowth of a Congressional 
investigation conducted by the Select Committee on Improper Activities 
in the Labor or Management Field, commonly known as the McClellan 
Committee, chaired by Senator John McClellan of Arkansas. In 1957, the 
committee began a highly publicized investigation of union racketeering 
and corruption; and its findings of financial abuse, mismanagement of 
union funds, and unethical conduct provided much of the impetus for 
enactment of the LMRDA's remedial provisions. See generally Benjamin 
Aaron, The Labor-Management Reporting and Disclosure Act of 1959, 73 
Harv. L. Rev. 851, 851-55 (1960). During the investigation, the 
committee uncovered a host of improper financial arrangements between 
officials of several international and local unions and employers (and 
labor consultants aligned with the employers) whose employees were 
represented by the unions in question or might be organized by them. 
Similar arrangements also were found to exist between union officials 
and the companies that handled matters relating to the administration 
of union benefit funds. See generally Interim Report of the Select 
Committee on Improper Activities in the Labor or Management Field, S. 
Report No. 85-1417 (1957) (``Interim Report of the McClellan 
Committee''). For examples of some of the improper arrangements 
directly or indirectly involving officials of these unions, see pp. 42-
86, 122-30, 150-57, 222-55, 376-420, 441-50. See also Robert F. 
Kennedy, The Enemy Within (1960) (discussing the committee's 
investigation).
    The statute was designed to remedy these various ills through a set 
of integrated provisions aimed at union governance and management. 
These include a ``bill of rights'' for union members, which provides 
for equal voting rights, freedom of speech and assembly, and other 
basic safeguards for union democracy, see LMRDA Sec. Sec.  101-105, 29 
U.S.C. 411-415; financial reporting and disclosure requirements for 
unions, union officers and employees, employers, labor relations 
consultants, and surety companies, see LMRDA Sec. Sec.  201-206, 211, 
29 U.S.C. 431-436, 441; detailed procedural, substantive, and reporting 
requirements relating to union trusteeships, see LMRDA Sec. Sec.  301-
306, 29 U.S.C. 461-466; detailed procedural requirements for the 
conduct of elections of union officers, see LMRDA Sec. Sec.  401-403, 
29 U.S.C. 481-483; safeguards for unions, including bonding 
requirements, the establishment of fiduciary responsibilities for union 
officials and other representatives, criminal penalties for 
embezzlement from a union, loans by a union to officers or employees, 
employment by a union of certain convicted felons, and payments to 
employees for prohibited purposes by an employer or labor relations 
consultant, see LMRDA Sec. Sec.  501-505, 29 U.S.C. 501-505; and 
prohibitions against extortionate picketing and retaliation for 
exercising protected rights, see LMRDA Sec. Sec.  601-611, 29 U.S.C. 
521-531.
    The reporting requirement for officers and employees operates in 
tandem with the Act's establishment of a fiduciary duty for union 
officials and representatives. 29 U.S.C. 501. Congress addressed 
conflicts of interest in both section 202 and section 501(a) of the 
Act. 29 U.S.C. 432, 501(a). The latter provides in part:

    The officers, agents, shop stewards, and other representatives 
of a labor organization occupy positions of trust in relation to 
such organization and its members as a group. It is, therefore, the 
duty of each such person, taking into account the special problems 
and functions of a labor organization, to hold its money and 
property solely for the benefit of the organization and its members 
and to manage, invest, and expend the same in accordance with its 
constitution and bylaws and any resolutions of the governing bodies 
adopted thereunder, to refrain from dealing with such organization 
as an adverse party or in behalf of an adverse party in any matter 
connected with his duties and from holding or acquiring any 
pecuniary or personal interest which conflicts with the interests of 
such organization, and to account to the

[[Page 51168]]

organization for any profit received by him in whatever capacity in 
connection with transactions conducted by him or under his direction 
on behalf of the organization.

    29 U.S.C. 501(a). Both provisions address the potential and actual 
conflict between a union representative's personal interests and his or 
her duty to the union and its members. See Theodore Clark, Jr., The 
Fiduciary Duties of Union Officials under Section 501 of the LMRDA, 52 
Minn. L. Rev. 437, 458-60 (1962).
    The need for the officer and employee disclosure provisions was not 
seriously debated during the consideration of the LMRDA legislation. 
The McClellan Committee hearings disclosed a history of self-dealing by 
certain union officials, often at the expense of their union's 
membership. Then Senator John F. Kennedy was the chief sponsor of the 
Senate bill, S. 505, which served as the foundation for the LMRDA. In 
introducing the bill for the Senate's consideration, Senator Kennedy 
addressed concerns about the involvement of union officials in matters 
that blurred their personal interests and their union's interests, 
which would be remedied by the legislation. Senator Kennedy used the 
experience of the Teamsters union, as revealed by the investigation of 
the McClellan Committee, to underscore the purposes to be achieved by 
the Act:

    First. It will no longer be possible for the dues of Teamster 
members to be paid out to hoodlums posing as business agents, or be 
invested in improper or risky racetrack or real estate deals, or to 
be used by [the union's] officers to build their own personal 
financial empires without the knowledge of the members themselves--
or without investigation by the press and public authorities.
    Second. [A union official] would be required to disclose all his 
business dealings with insurance agents handling the union's welfare 
funds, his private arrangements with employers, his hidden 
partnerships in business ventures foisted upon his members, and all 
other possible conflicts of interest.
* * * * * * *
    Sixth. [Union officials] will find future collusion with 
employers vastly restricted--with no more loans from employer 
groups, no more attacks on rival unions through middlemen * * *, and 
no more secrecy shrouding the use of union funds to bail out a 
collaborating employer.

    105 Cong. Rec. S817 (daily ed. Jan. 20, 1959), reprinted in 2 NLRB 
Legislative History of the Labor-Management Reporting and Disclosure 
Act of 1959 (``Leg. History''), at 969. The improper dealings by the 
Teamster officials, to which Senator Kennedy refers, are detailed in 
the Interim Report of the McClellan Committee, at, e.g., 48, 59-60, 64-
86, 222-54, 443-50. These dealings, like those identified by officials 
of other unions in the Interim Report, included actions undertaken by 
national officers, or others acting at their behest, involving matters 
affecting not only the national union's operation but also matters of 
importance to local and intermediate bodies of their union. See e.g., 
Interim Report, at 4-7, 46-49, 51, 55, 59-60, 63, 69, 74, 81, 87, 122-
25, 128, 130, 179, 186-87, 224, 228, 230-40, 244, 250, 252, 284-85, 
295, 297, 300, 444-48, 264-66, 268, 281. See also The Enemy Within, at 
97, 99, 104-05, 106, 221-24.
    The Senate Committee Report provided an overview of section 202 of 
the LMRDA:

    [This section] requires a union officer or employee to disclose 
any securities or other interest which he has in a business whose 
employees his labor union represents or ``seeks to represent'' in 
collective bargaining. When a prominent union official has an 
interest in the business with which the union is bargaining, he sits 
on both sides of the table. He is under temptation to negotiate a 
soft contract or to refrain from enforcing working rules so as to 
increase the company's profits. This is unfair to both union members 
and competing businesses.

    S. Rep. No. 187 (``Senate Report'') (1959), at 15, reprinted in 2 
Leg. History, at 411. As explained in the Senate Report: ``The hearings 
before the McClellan committee brought to light a number of instances 
in which union officials gained personal profit from a business which 
dealt with the very same employer with whom they engaged in collective 
bargaining on behalf of the union.'' Id. The committee endorsed the 
concern expressed in the AFL-CIO's ethical practices code that the 
union official ``may be given special favors or contracts by the 
employer in return for less than a discharge of his obligations as a 
trade-union leader.'' Id.
    In explaining the purpose of the disclosure rules for union 
officers and employees, the Senate Report presented ``three reasons for 
relying upon the milder sanction of reporting and disclosure [relative 
to establishing criminal penalties] to eliminate improper conflicts of 
interest,'' which can be summarized as follows:
     Disclosure discourages questionable practices. ``The 
searchlight of publicity is a strong deterrent.'' Disclosure rules 
should be tried before more severe methods are employed.
     Disclosure aids union governance. Reporting and 
publication will enable unions ``to better regulate their own affairs. 
The members may vote out of office any individual whose personal 
financial interests conflict with his duties to members,'' and 
reporting and disclosure would facilitate legal action by members 
against ``officers who violate their duty of loyalty to the members.''
     Disclosure creates a record. The reports will furnish a 
``sound factual basis for further action in the event that other 
legislation is required.''
    Senate Report, at 16, reprinted in 1 Leg. History, at 412. The 
Report further stated:

    The committee bill attacks the problem [of conflicts of 
interest] by requiring union officers and employees to file reports 
with the Secretary of Labor disclosing to union members and the 
general public any investments or transactions in which their 
personal financial interests may conflict with their duties to the 
members. The bill requires only the disclosure of conflicts of 
interest as defined therein. The other investments of union 
officials and their sources of income are not matters of public 
concern. No union officer or employee is obliged to file a report 
unless he holds a questionable interest in or has engaged in a 
questionable transaction. The bill is drawn broadly enough, however, 
to require disclosure of any personal gain which an officer or 
employee may be securing at the expense of the union members.

    Senate Report, at 14-15, reprinted in 1 Leg. History, at 410-11. 
The House Committee Report (``House Report''), H.R. Rep. No. 741 
(1959), at 11, reprinted in 1 Leg. History, at 769, conveyed the same 
message. Both the Senate and House Reports recognize that a reportable 
interest is not necessarily an illegal practice. As the House Report 
stated:

    In some instances matters to be reported are not illegal and may 
not be improper but may serve to disclose conflicts of interest. 
Even in such instances, disclosure will enable the persons whose 
rights are affected, the public, and the Government, to determine 
whether the arrangements or activities are justifiable, ethical, and 
legal.

    House Report, at 4, reprinted in 1 Leg. History, at 762. See Senate 
Report, at 38, reprinted in 1 Leg. History, at 434 (``By requiring 
reports * * *, the committee is not to be construed as necessarily 
condemning the matters to be reported if they are not specifically 
declared to be improper or made illegal under other provisions of the 
bill or other laws.''). ``Reports are required as to matters which 
should be public knowledge so that their propriety can be explored in 
the light of known facts and conditions.'' Id. As stated by Senator 
Barry Goldwater after the Act had been passed:

    Briefly, what must be reported are holdings of interest in or 
the receipt of economic benefits from employers who deal or might 
deal with such union official's union, or

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holdings in or benefits from enterprises which do business with such 
union official's union.

    105 Cong. Rec. A8512 (daily ed. Oct. 2, 1959), reprinted in 2 Leg. 
History, at 1846.
    Conflict of interest standards, including disclosure obligations of 
individuals and entities occupying positions of trust, are well 
grounded in U.S. law. As stated in the House Report, repeating almost 
verbatim the same point in the Senate Report:

    For centuries the law of fiduciaries has forbidden any person in 
a position of trust subject to such law to hold interests or enter 
into transactions in which self-interest may conflict with complete 
loyalty to those whom he serves. Such a person may not deal with 
himself, or acquire adverse interests, or make any personal profit 
as a result of his position. The same principle has long been 
applied to trustees, to agents, and to bank directors. It should be 
equally applicable to union officers and employees [quoting the AFL-
CIO's ethical practices code]: ``[A] basic ethical principle in the 
conduct of union affairs is that no responsible trade union official 
should have a personal financial interest which conflicts with the 
full performance of his fiduciary duties as a worker's 
representative.''

    Senate Report, at 11, reprinted in 1 Leg. History, at 769. See 
generally Restatement (Second) of Trusts (1959) Sec. Sec.  170, 173; 
Restatement (Second) of Agency (1958) Sec. Sec.  381, 387-98.
    Section 202 is an effort, in part, to make effective the disclosure 
requirements associated with the fiduciary standards applied to union 
officials in Title V of the LMRDA, which, in turn, reflect the 
requirements of the extensive code voluntarily adopted by the AFL-CIO 
in 1957 and applied to its affiliated unions and officials. See Senate 
Report, at 12-16, reprinted in 1 Leg. History, at 408-12; House Report, 
at 9-12, reprinted in 1 Leg. History, at 767-70. See also Archibald 
Cox, Internal Affairs of Labor Unions under the Labor Reform Act of 
1959, 58 Mich. L. Rev. 819, 824-29 (1960). The following excerpts from 
this code demonstrate the nexus between the voluntary code and the 
disclosure requirements of section 202.

    [A] basic ethical principle in the conduct of trade union 
affairs is that no responsible trade union official should have a 
personal financial interest which conflicts with the full 
performance of his fiduciary duties as a workers' representative.
* * * * *
    [U]nion officers and agents should not be prohibited from 
investing their personal funds in their own way in the American free 
enterprise system so long as they are scrupulously careful to avoid 
any actual or potential conflict of interest.
* * * * *
    In a sense, a trade union official holds a position comparable 
to that of a public servant. Like a public servant, he has a high 
fiduciary duty not only to serve the members of his union honestly 
and faithfully, but also to avoid personal economic interest which 
may conflict or appear to conflict with the full performance of his 
responsibility to those whom he serves.
* * * * *
    There is nothing in the essential ethical principles of the 
trade union movement which should prevent a trade union official, at 
any level, from investing personal funds in the publicly traded 
securities of corporate enterprises unrelated to the industry or 
area in which the official has a particular trade union 
responsibility.
* * * * *
    The policies * * * apply to: (a) all officers of the AFL-CIO and 
all officers of national and international unions affiliated with 
the AFL-CIO, (b) all elected or appointed staff representatives and 
business agents of such organizations, and (c) all officers of 
subordinate bodies of such organizations who have any degree of 
discretion or responsibility in the negotiation of collective 
bargaining agreements or their administration.
* * * * *
    [These principles] apply not only where the investments are made 
by union officials, but also where third persons are used as blinds 
or covers to conceal the financial interests of union officials.

    Ethical Practices Code IV: Investments and business interests of 
union officials (``AFL-CIO Ethical Practices Code''), 105 Cong. 
Rec.*16379 (daily ed. Sept. 3, 1959), reprinted in 2 Leg. History, at 
1408.
    The Department intends by the proposals set forth herein to better 
achieve the purposes of the LMRDA, as demonstrated by the legislative 
history. To that end, and by this reform, the Department will increase 
compliance with the financial disclosure requirements in the Act, 
clarify the form and instructions by use of examples and defined terms, 
remove counterproductive exemptions to the filing requirements, and 
organize the information in a more useful format.

C. Statutory Language

    Section 202 provides in its entirety:

    SEC. 202. (a) Every officer of a labor organization and every 
employee of a labor organization (other than an employee performing 
exclusively clerical or custodial services) shall file with the 
Secretary a signed report listing and describing for his preceding 
fiscal year--
    (1) Any stock, bond, security, or other interest, legal or 
equitable, which he or his spouse or minor child directly or 
indirectly held in, and any income or any other benefit with 
monetary value (including reimbursed expenses) which he or his 
spouse or minor child derived directly or indirectly from, an 
employer whose employees such labor organization represents or is 
actively seeking to represent, except payments and other benefits 
received as a bona fide employee of such employer;
    (2) Any transaction in which he or his spouse or minor child 
engaged, directly or indirectly, involving any stock, bond, 
security, or loan to or from, or other legal or equitable interest 
in the business of an employer whose employees such labor 
organization represents or is actively seeking to represent;
    (3) Any stock, bond, security, or other interest, legal or 
equitable, which he or his spouse or minor child directly or 
indirectly held in, and any income or any other benefit with 
monetary value (including reimbursed expenses) which he or his 
spouse or minor child directly or indirectly derived from, any 
business a substantial part of which consists of buying from, 
selling or leasing to, or otherwise dealing with, the business of an 
employer whose employees such labor organization represents or is 
actively seeking to represent;
    (4) Any stock, bond, security, or other interest, legal or 
equitable, which he or his spouse or minor child directly or 
indirectly held in, and any income or any other benefit with 
monetary value (including reimbursed expenses) which he or his 
spouse or minor child directly or indirectly derived from, a 
business any part of which consists of buying from, or selling or 
leasing directly or indirectly to, or otherwise dealing with such 
labor organization;
    (5) Any direct or indirect business transaction or arrangement 
between him or his spouse or minor child and any employer whose 
employees his organization represents or is actively seeking to 
represent, except work performed and payments and benefits received 
as a bona fide employee of such employer and except purchases and 
sales of goods or services in the regular course of business at 
prices generally available to any employee of such employer; and
    (6) Any payment of money or other thing of value (including 
reimbursed expenses) which he or his spouse or minor child received 
directly or indirectly from any employer or any person who acts as a 
labor relations consultant to an employer, except payments of the 
kinds referred to in section 302(c) of the Labor Management 
Relations Act, 1947, as amended.
    (b) The provisions of paragraphs (1), (2), (3), (4), and (5) of 
subsection (a) shall not be construed to require any such officer or 
employee to report his bona fide investments in securities traded on 
a securities exchange registered as a national securities exchange 
under the Securities Exchange Act of 1934, in shares in an 
investment company registered under the Investment Company Act or in 
securities of a public utility holding company registered under the 
Public Utility Holding Company Act of 1935, or to report any income 
derived therefrom.
    (c) Nothing contained in this section shall be construed to 
require any officer or employee of a labor organization to file a

[[Page 51170]]

report under subsection (a) unless he or his spouse or minor child 
holds or has held an interest, has received income or any other 
benefit with monetary value or a loan, or has engaged in a 
transaction described therein.

29 U.S.C. 432.

D. Increases in Sophistication and Complexity of Financial Practices

    The Form LM-30 has remained essentially unchanged since 1963, when 
the Department first approved the Form LM-30. See 28 FR 14384 (Dec. 27, 
1963). During this time the operations of unions have changed and 
financial matters affecting institutions and individuals have become 
more sophisticated. While the same statutory disclosure standard 
applies now as it did when the Act took effect, the financial 
activities of individuals and organizations have increased 
exponentially in scope, complexity and interdependence over the past 
four decades.
    For example, many unions manage benefit plans for their members, 
maintain close business relationships with financial service providers 
such as insurance companies and investment firms, operate revenue-
producing subsidiaries, and participate in foundations and charitable 
activities. The complexity of union financial practices, including 
business relationships with outside firms and vendors, increases the 
likelihood that union officers and employees may have interests in, or 
receive income from, these businesses. As more labor organizations 
conduct their financial activities through sophisticated trusts, 
increased numbers of businesses have commercial relationships with such 
trusts, creating financial opportunities for union officers and 
employees who may operate, receive income from, or hold an interest in 
such businesses. In addition, employers also have fostered multi-
faceted business interests, creating further opportunities for 
financial relationships between employers and union officers and 
employees. In this context, disclosure is critical to promoting good 
union governance, fostering ethical behavior, and deterring and 
detecting self-dealing.
    Moreover, present-day concerns about the intersection of personal 
interest and professional responsibilities are no longer associated 
only with traditional trustees, but are matters of central importance 
to the securities industry, corporate governance, and, among other 
professional groups, lawyers, physicians, accountants, researchers, 
journalists, and government employees.
    The Department believes that the purposes of the Act could be 
better accomplished by promoting increased compliance with the 
financial disclosure requirements in the Act, clarifying the form and 
instructions by use of examples and defined terms, removing 
counterproductive exemptions to the filing requirements, and organizing 
the information in a more useful format. By improving the form and 
promoting compliance with reporting requirements, union members will 
obtain a more accurate picture of the personal financial interests of 
their union's officers and employees, as those interests may bear upon 
their actions on behalf of the union and its members. Publicly 
available information concerning potential conflicts of union officials 
allows union members to better understand any financial incentives or 
disincentives faced by their union's officers and employees, and to 
make informed choices about the leadership of their union and its 
management of the union. Additional disclosure promotes the unions' own 
interests as democratic institutions responsive to the concerns of 
union members, and deters, as well as facilitates the discovery of, 
fraud and self-dealing.

E. The Current Form LM-30

    The Department initiated its enforcement of the section 202 
reporting requirements within months of the enactment of the LMRDA in 
1959, and a regulation making the Form LM-30 effective was published in 
1963. See 28 FR 14384 (Dec. 27, 1963).
    The current Form LM-30 consists of four sections: a section for 
identifying data about the filer, and Parts A through C. (The current 
form and instructions are available at www.olms.dol.gov.) Part A of the 
form seeks transactions that would be reportable under sections 
202(a)(1), (a)(2), and (a)(5). See 29 U.S.C. 432(a)(1), (2), (5). Part 
A thus generally requires reporting of holdings in, transactions and 
arrangements with, and income and loans from the employer whose 
employees the filer's labor organization represents or actively seeks 
to represent. Part B attempts to implement sections 202(a)(3), and 
(a)(4). See 29 U.S.C. 432(a)(3), (4). Part B thus generally captures 
holdings in and income from businesses that deal either with the labor 
organization, a trust in which the labor organization is interested, or 
the employer whose employees the filer's labor organization represents 
or actively seeks to represent. Part C attempts to implement section 
202(a)(6). See 29 U.S.C. 432(a)(6). Part C thus generally requires 
reporting of payments of money or other things of value from employers 
and labor relations consultants.
    Specifically, the first section gathers basic information about the 
filer, including the name of the organization in which the filer is an 
officer or employee, the filer's position with the organization, and 
the fiscal year covered by the report.
    In the ``General Instructions'' filers are informed: ``You do not 
have to report any sporadic or occasional gifts, gratuities, or loans 
of insubstantial value, given under circumstances or terms unrelated to 
the recipient's status in a labor organization, or anything excluded in 
the specific instructions in Parts A, B, or C below.''
    Part A instructs the filer: ``Complete [this part] if you (1) held 
an interest in, (2) engaged in transactions (including loans) with, or 
(3) derived income or other economic benefit of monetary value from, an 
employer whose employees your organization represents or is actively 
seeking to represent. Complete a separate Part A for each such employer 
and for each such interest, transaction, or item of income or other 
economic benefit connected with that employer.'' For each such 
interest, transaction, or income, the filer is requested to disclose 
its nature, value, and date of receipt. With regard to the nature of a 
discloseable transaction, the instructions provide as examples: 
``Continuing use of automobile for personal purposes, gift of 
refrigerator, payment for services.'' Additional examples provided 
include: ``Loan of money from employer, rental of loft building, 
located at X street, Y city, Z State, to employer.'' The instructions 
provide additional information for reporting interests in, and 
transactions involving, stocks, bonds, securities, options and similar 
interests.
    After identifying the matters that have to be reported, the 
instructions advise the potential filer that he or she should not 
report holdings of, transactions in, or income from bona fide 
investments in registered securities; holdings of, transactions in, or 
income from other securities if they are of ``insubstantial value or 
amount'' (defined as holdings or transactions of $1,000 or less and 
income of $100 or less in any one security) and occur under terms 
unrelated to the filer's status in the labor organization; transactions 
involving purchases and sales of goods and services in the regular 
course of business at prices generally available to any employee of the 
employer; and ``payments and benefits received as a bona fide employee 
of the employer for past or present services, including wages, payments 
or benefits received under a bona fide health, welfare, pension, 
vacation, training or other

[[Page 51171]]

benefit plan; and payments for periods in which such employee engaged 
in activities other than productive work, if the payments for such 
period of time are: (a) Required by law or a bona fide collective 
bargaining agreement, or (b) made pursuant to a custom or practice 
under such a collective bargaining agreement, or (c) made pursuant to a 
policy, custom, or practice with respect to employment in the 
establishment which the employer has adopted without regard to any 
holding by such employee of a position with a labor organization.''
    Part B instructs the filer to report ``an interest in or * * * 
income or other economic benefit with monetary value, including 
reimbursed expenses, from a business (1) a substantial part of which 
consists of buying from, selling or leasing to, or otherwise dealing 
with the business of an employer whose employees your labor 
organization represents or is actively seeking to represent, or (2) any 
part of which consists of buying from or selling or leasing directly or 
indirectly to, or otherwise dealing with your labor organization or a 
trust in which your labor organization is interested.'' Filers are 
instructed that they are not required to report any of the interests or 
income identified in two exceptions to Part A (holdings in, 
transactions in, and income from bona fide investments in registered 
securities and insubstantial holdings in, transactions in, and income 
from other securities). The filer must identify the name and address of 
the business involved, describe the type of organization the business 
deals with (employer, labor organization, trust), enter the nature of 
the dealings between the two parties and the value of these dealings, 
enter the interest held or income received by the filer, and the dollar 
amount of such income or interest.
    In Part C, the filer is advised to ``Complete Part C if you 
received from any employer (other than an employer covered under Parts 
A and B above), or from any labor relations consultant to an employer, 
any payment of money or other thing of value.'' The instructions 
identify the following as items that are not required to be reported: 
(1) Payments of the kind referred to in section 302(c) of the Labor 
Management Relations Act (LMRA); (2) bona fide loans, interest or 
dividends from banks, other bona fide credit institutions, and 
insurance companies; and (3) interest on bonds or dividends on stock, 
provided such interest or dividends are received, and such bonds or 
stock have been acquired, under circumstances and terms unrelated to 
the recipient's status in a labor organization and the issuer of such 
securities is not an enterprise in competition with the employer whose 
employees the filer's labor organization represents or actively seeks 
to represent. The instructions then advise that notwithstanding the 
exceptions, the filer must report any payments ``(1) not to organize 
employees; (2) to influence employees in any way with respect to their 
rights to organize; (3) to take any action with respect to the status 
of employees or others as members of a labor organization; and (4) to 
take any action with respect to bargaining or dealing with employers 
whose employees [the filer's] organization represents or seeks to 
represent.'' For each interest or transaction to be reported under Part 
C, filers must identify the name of the employer or labor relations 
consultant and the nature and amount of the payment.
    The LMRA section 302(c) exclusions are not explained in the 
instructions. Instead, the instructions provide a full-page quotation 
of that section. As a general rule, the section 302(c) exclusions make 
the following payments non-reportable: (1) Any money or other thing of 
value payable by an employer to (a) an employee whose established 
duties include acting openly for the employer in matters of labor 
relations or personnel administration, or (b) any officer or employee 
of a labor organization who also is an employee or former employee of 
such employer, as compensation for, or by reason of, his service as an 
employee of such employer; (2) money or other thing of value payable in 
satisfaction of a judgment, arbitral award, settlement or release of 
any claim in the absence of fraud or duress; (3) with respect to the 
sale or purchase of an article or commodity at the prevailing market 
price in the regular course of business; (4) with respect to deductions 
from wages in payment of dues in a labor organization by written 
assignment; (5) with respect to money or other thing of value paid to a 
trust fund established by the representative of an employer's employees 
for the sole benefit of these employees, their families and dependents 
to pay for medical care, pensions, compensation for occupational 
injury, unemployment benefits, life insurance, disability insurance or 
accident insurance; (6) with respect to money or other thing of value 
paid by any employer to a trust fund established by the representative 
of the employer's employees for the purpose of pooled vacation, 
holiday, severance or similar benefits, or apprenticeship or training 
programs; (7) with respect to money or other thing of value paid by any 
employer to an individual or pooled trust fund for the purpose of (a) 
educational scholarships for the benefit of employees, families, and 
dependents, (b) child care centers, or (c) employee housing; (8) with 
respect to money or other thing of value paid by any employer to a 
trust for defraying the costs of legal services; or (9) with respect to 
money or other thing of value paid by any employer to a labor 
management committee.

F. Number of Current Form LM-30's Filed

    Prior to initiating this rulemaking, the Department sought to 
determine the number of Form LM-30s filed, and the number of union 
officers and employees. The following table represents all reports 
filed in fiscal years 2001 through 2004:

------------------------------------------------------------------------
                                                               Number of
                         Fiscal year                            reports
                                                                 filed
------------------------------------------------------------------------
2001.........................................................         59
2002.........................................................         49
2003.........................................................         41
2004.........................................................         95
                                                              ----------
    Total....................................................        244
------------------------------------------------------------------------

    Next, the Department attempted to identify the universe of people 
who are potentially subject to the reporting requirements by 
calculating the number of union officers and employees. The only source 
reasonably available to the Department was reports filed on Forms LM-2, 
LM-3 and LM-4. These reports are filed by labor organizations to 
disclose their financial conditions and operations, as well as limited 
information concerning officers and employees. The following table sets 
forth the Form LM-30 data gleaned from the FY 2002 LM reports:

------------------------------------------------------------------------
                                                             Number of
                                                            officers or
                     Source of data                          employees
                                                             reported
------------------------------------------------------------------------
LM-2 Officers...........................................          66,749
LM-2 Employees..........................................          47,371
LM-3 Officers...........................................          86,808
LM-4 Officers...........................................           3,706
                                                         ---------------
    Total...............................................         204,634
------------------------------------------------------------------------

    Using these 2002 figures and the annual average of approximately 61 
Form LM-30 filings for this 4-year period, the Department computed a 
filing rate for Form LM-30 of 0.03% (61/204,634 x 100 = 0.03%). The 
Form LM-2, used by the largest labor organizations, requires the filer 
to list all the union's officers and the employees

[[Page 51172]]

who received more than $10,000 in salary, allowances, and other direct 
and indirect disbursements from the union. Form LM-3, used by unions 
with under $200,000 in annual receipts (raised to $250,000 for fiscal 
years beginning July 1, 2004 and thereafter), requires the filer to 
list all the union's officers, but report employees who received more 
than $10,000 in salary, allowances, and other direct and indirect 
disbursements from the union only in the additional information item on 
the form. This information is not available in the OLMS disclosure 
database. Form LM-4 filers (unions with annual receipts of less than 
$10,000) do not report either officers or employees. Form LM-4 is 
signed by two officers of the union. Although an estimate, the 0.03 
percentage can be used to gauge the filing rate in the absence of more 
precise figures.
    Recently, OLMS evaluated a small number of union employees to 
determine how many may have been required to file Form LM-30, but 
failed to do so. Employees of unions with titles identifying them as 
legal professionals, mostly lawyers, legislative affairs specialists, 
and lobbyists, were culled from information derived from Form LM-2 
reports filed in FY 2002. Legal professionals were selected because it 
is possible, using Internet-based data, to investigate links between 
these employees or their spouses and firms that do business with the 
union, thereby indicating a potentially reportable interest under 
section 202(a)(4). None of the 438 employees had filed Form LM-30. 
These 438 individuals' full names were used in Internet searches for 
information indicating that they had outside legal employment. The use 
of the surname, coupled with other Internet-based biographical data, on 
one or two occasions revealed that an official's spouse had such 
outside legal employment. Then, an Internet search of the name of the 
outside employer was conducted to determine whether the employer listed 
the union official's union as a client, or otherwise indicated that it 
provided services to the union official's union. OLMS contacted eight 
individuals who, based on the Internet research, appeared to have 
received, or whose spouse appeared to have received, payments from an 
employer that dealt with the individual's union. Through these 
contacts, OLMS sought additional information from them to determine 
whether the individuals should have filed the Form LM-30 based on a 
reportable interest under section 202(a)(4). Of these eight, six 
completed and filed a Form LM-30 following the OLMS contact. Three of 
the six reports had to be returned to the filers for revisions or 
additional information. Review of the final amended reports confirmed 
that these six individuals had disclosed reportable interests. When 
asked, some filers did not give a reason for failing to earlier file 
the reports. Others said they had been unaware of the reporting 
requirements. Of the remaining two individuals, one had severed his 
relationship with the employer before becoming a union employee. In the 
final case, it was determined that the individual did not receive any 
benefits other than from the two unions that employed him. The filing 
rate for this group was 1.37% (6/438 x 100 = 1.37%). This filing rate 
is probably understated for the 438 employees because OLMS was able to 
research only potential section 202(a)(4) reporting situations. Others 
in the group may well have owed reports based on payments from, 
transactions with, or holdings in, employers or businesses that deal 
with an employer whose employees the labor organization represents or 
is actively seeking to represent.
    Available data does not allow the Department to precisely measure 
the current filing rate of union officers and employees or predict what 
that rate would be if all individuals with reportable interests or 
transactions filed Form LM-30. The individuals covered by the informal 
inquiry discussed above may or may not be indicative of a typical union 
employee. Legal professionals may be more likely or less likely to 
engage in financial activities covered by the Form LM-30 than union 
employees in other professions. Further, the circumstances of these 
professionals may be different from those of union officers. As earlier 
mentioned, the number of estimated union officers and employees is 
necessarily understated, in that mid-size unions report in a readily 
available manner only officers, not employees, on their Form LM-3, 
small unions list only two signatory officers on their Form LM-4, and 
employees who receive $10,000 or less in a year are not reported on any 
of these forms. Certainly, the Department recognizes that not all union 
officers or employees have reportable interests or transactions. 
Nevertheless, it is clear that the identified employees had not filed 
Form LM-30 until they were contacted by OLMS, and half of them did not 
complete the report correctly on their first attempt. If union legal 
professionals had to be informed of their obligation to file the 
reports and failed to correctly complete the report, it is reasonable 
to conclude, in the Department's view, that other employees are 
similarly unaware of their obligation to file and similarly confused by 
the form. The Department will continue to research the extent to which 
current Form LM-30 submissions are deficient, and requests comment on 
further data on this question.
    On many other occasions, OLMS has discovered during an audit or 
investigation that a union officer or employee was engaged in a 
reportable situation but had not filed the required Form LM-30 until 
OLMS became involved. For example:
     A local president owned 50% of a business that resurfaced 
the union's parking lot. Over two years, the business received $9,000 
from the union. See section 202(a)(4), 29 U.S.C. 432(a)(4).
     A union designated certain attorneys to represent injured 
members. Some of these attorneys, who were employers, furnished cash or 
items of value such as trips and golf clubs to union officials. See 
section 202(a)(6), 29 U.S.C. 432(a)(6).
     A union hired the accounting firm of an employee's spouse. 
The firm received over $29,000 from the union over two years. See 
section 202(a)(4), 29 U.S.C. 432(a)(4).
     An officer of a union, whose members worked at a theater, 
formed a business with two partners. He put his share of the business 
in his wife's name although he actually managed the business which 
employed members of his local to work for the theater. He and his wife 
received almost $75,000 in profits, expense reimbursements, and salary 
from the business. See section 202(a)(1), 29 U.S.C. 432(a)(1).
     A union president owned the building in which the union 
rented office space. See section 202(a)(4), 29 U.S.C. 432(a)(4).
     A union officer's spouse owned a janitorial business that 
provided daily janitorial services to the union at $800 per month. See 
section 202(a)(4), 29 U.S.C. 432(a)(4).
     A union employee's spouse owned an advertising company 
which printed materials for the union and its funds. In one year, the 
company received over $245,000 from the union and the funds. See 
section 202(a)(4), 29 U.S.C. 432(a)(4).
     Four local officers formed a company that provided payroll 
services to the local as well as to theatrical companies that employed 
members of the local. Two other officers of the local received over 
$20,000 as employees of the company. See section 202(a)(4), 29 U.S.C. 
432(a)(4) (due to services provided to the local union); section

[[Page 51173]]

202(a)(3), 29 U.S.C. 432(a)(3) (due to services provided to the 
theatrical company employers).
     The spouse of a union officer owned a company that 
provided cleaning and maintenance services to the union and its trust. 
In one year, the company received over $94,000 from the union and the 
trust. See section 202(a)(4), 29 U.S.C. 432(a)(4)
     During a campaign for a state government office, a 
business agent received contributions from employers who were covered 
by the union's collective bargaining agreement. See section 202(a)(1), 
29 U.S.C. 432(a)(1)
     A union officer was part-owner, along with his wife and 
daughter, of a copier supply company. He was the officer of several 
unions, including one which employed his daughter as a benefit 
representative and union trustee. All of the unions purchased office 
equipment and services from the family's company. See section 
202(a)(4), 29 U.S.C. 432(a)(4)
     A union employee owned a heating and air conditioning 
business that performed HVAC work for the union. See section 202(a)(4), 
29 U.S.C. 432(a)(4)
    In these instances, compliance with the Form LM-30 requirements 
would have provided union members with valuable information concerning 
the finances of their unions' employees and officers. This would have 
assisted union members in evaluating the efficacy of the work performed 
by union employees and the leadership provided by union officers. The 
information would have alerted them to potential conflicts of 
interests, and guided them as to which actions or decisions of their 
officers and employees might require greater scrutiny, to determine 
whether the conflicts have affected the union official's service to the 
union. Armed with this information, union members could express their 
concerns at membership meetings, see 29 U.S.C. 411(a), cast a more 
informed vote at the next internal union election, see 29 U.S.C. 481-
483, employ union procedures for removal of officers guilty of serious 
misconduct, see 29 U.S.C. 481(h), or exercise their right to obtain 
judicial relief for violations of the fiduciary responsibilities of 
union officials, see 29 U.S.C. 501(b).
    In other instances, compliance with Form LM-30 requirements would 
have revealed criminal conduct. For example, the president of a 
national union had the sole authority to appoint or remove attorneys 
from a list of ``Designated Legal Counsel.'' These attorneys 
represented injured union members who sought compensation from the 
railroad for on-the-job injuries. Rather than selecting attorneys on 
the basis of their skills, the president awarded the designation to 
attorneys who paid the union president with cash or other things of 
value. In another instance, contractors were hired to make repairs and 
improvements to the offices of a local union. The contractors also 
performed work on the officers' homes. However, all the expenses of the 
work, including about $1.2 million for work on the officers' homes, was 
charged to and paid by the union. A third example involves a 
contractor, an investment firm that managed pension and investment 
accounts for unions. This company collapsed in September 2000, costing 
its clients about $355 million. The company's former chairman was 
indicted on counts of fraud, money laundering, witness tampering and 
making illegal payments to union benefit plan trustees. As part of its 
scheme to buy the influence of pension fund trustees, who were union 
officers, the investment firm hired relatives of pension trustees as 
well as provided plan trustees with gifts including rifles, season 
tickets to sporting events, and fishing and hunting trips to various 
locations in the western U.S., Canada, Africa, Argentina and Mexico.
    OLMS expects that by clarifying the form and instructions, adding 
examples to the instructions, eliminating administrative exemptions, 
and providing extensive compliance assistance, the filing rate will 
increase. During the course of a meeting held under E.O. 12866, a 
stakeholder asserted that the Department receives few Form LM-30 
reports because union officers and employees engage in few covered 
transactions. The Department invites comments concerning the number of 
union officers and employees, and the number of union officers and 
employees who have not filed a Form LM-30 but who have engaged in a 
transaction, or held an interest that required them to do so.
    The Department seeks comments on whether to promulgate a regulation 
that requires labor organizations to notify their officers and 
employees of the annual reporting obligations under the LMRDA. No 
notification obligation currently exists under the Department's 
regulations, and the regulation proposed herein does not contain such a 
provision. Notification by labor organizations would, nevertheless, 
help ensure that officers and employees are aware of their reporting 
obligations under the LMRDA. An increase in awareness by union officers 
and employees could increase the number of reports filed each year, 
enabling union members and the public to learn more about financial 
transactions in which the union's officers and employees are involved 
and, as needed, further inquire into the circumstances of these 
dealings to ensure that the interests of the members and the public are 
properly being served.
    Under one option, each labor organization would be required to 
inform its officers and employees, excluding those employed solely in 
clerical or custodial positions, of their obligation to annually file a 
Form LM-30 if they, their spouse, or minor children, hold any 
interests, receive any payments, or engage in any transactions or 
arrangements covered by section 202 of the Act. See 29 U.S.C. 432. 
Notification would have to be in writing and inform officers and 
employees that, subject to certain exemptions, they must file a report 
with the Department if they have interests in, receive payments or 
income from, or engage in transactions or arrangements with (1) an 
employer whose employees the labor organization represents or actively 
seeks to represent, (2) a business that deals with the labor 
organization, or a trust in which the labor organization is interested, 
(3) a business a substantial part of which consists of dealing with the 
business of an employer whose employees the labor organization 
represents or is actively seeking to represent, (4) any employer, or 
(5) a labor relations consultant to an employer. The union would inform 
its officers and employees that if they have any questions concerning 
which financial matters are reportable and whether they are required to 
file a report, they should consult the Form LM-30 and its instructions, 
and the union would provide the web site address where the form and 
instructions may be found. Notification would be provided by the union 
to an officer within 30 days of installation into office and to an 
employee within 30 days of the date of hire. Initial notification would 
be provided to officers and employees within 60 days of the effective 
date of the regulation, and thereafter to each on an annual basis. A 
labor organization could meet this requirement by providing employees 
and officers with a copy of the Form LM-30 and its instructions. E-mail 
notification might be considered an acceptable means of informing 
officers and employees.
    An alternative to providing a separate notice to each officer and 
employee would be to provide a general notice in a union publication 
that is addressed to every officer and employee.
    The Federal government informs employees at the time of their hire 
and reminds them on a regular basis

[[Page 51174]]

thereafter about their various ethical responsibilities, including 
conflict of interest rules and disclosure requirements. See E.O. 12674 
(Apr. 12, 1989), as modified by E.O. 12731 (Oct. 17, 1990). The 
Department seeks comments on whether a similar approach is taken by 
other organizations and professions. The public is asked to comment on 
other ways in which employers and professional associations educate 
their employees and association members about their obligation to 
disclose possible conflicts between their personal interests and the 
interests of their employer or clients.
    The Department invites comments as to the need for and efficacy of 
a regulation that requires labor organizations to notify their officers 
and employees of the annual reporting obligations under the LMRDA. In 
this connection, it would be helpful to learn what steps are now being 
taken by labor organizations to inform their officers and employees 
about conflict-of-interest situations, including disclosure and 
reporting requirements to the union and its members. Is such 
information typically provided by an international or national union to 
all its affiliates? Is it typically contained in a national or 
international constitution or some other document, such as a handbook 
for officers and employees, or training materials? Do local and 
intermediate unions include such information in their constitutions or 
bylaws--or in other documents? What information is provided to union 
officials by trusts in which a union has an interest? Under what 
circumstances and how often have allegations of officer or employee 
conflicts of interests led to internal or judicial proceedings?
    During the course of a meeting held under E.O. 12866, a stakeholder 
questioned the Department's authority to require labor organizations to 
notify their officers and employees of their disclosure obligations. 
The public is invited to comment on this issue.

G. Deficiencies in the Reports Filed Using the Current Form LM-30

    OLMS examined each of the 244 Form LM-30 reports filed during 
fiscal years 2001, 2002, 2003, and 2004 and determined that a majority 
of filers did not complete the form correctly. For example, although 
Part A is separate and distinct from Parts B and C, 100 filers 
erroneously filled out Part A in addition to the appropriate and 
intended disclosure of an interest, transaction, income, or arrangement 
in Part B or C. A total of 136 filers who completed Part B failed to 
indicate whether the business they had an interest in, transaction 
with, or income from dealt with a labor organization, trust, or 
employer. A total of 117 of the filers who completed Part B provided no 
information or incomplete and insufficient information about the nature 
and approximate value of the dealings between the business and the 
employer, labor organization or trust. Further, 59 of the filers 
provided no information or inadequate information about the nature of 
the interest they held in, or the income they received from, the 
business.
    In addition to the deficiencies described above, numerous other 
errors occurred that resulted in inadequate and incomplete disclosure. 
For example, most filers failed to answer one or more required 
questions. In three instances, children of an officer or employee filed 
Form LM-30 rather than the officer or employee. Six filers did not 
specify their position within the union, four filers failed to report 
the fiscal year that was covered by the report, two filers did not sign 
the form, and one form was signed by the union official's spouse. In 
Part A, 22 filers provided no information or inadequate information 
about the nature and amount of the interest in, transaction with, or 
income from an employer whose employees their union represented or was 
actively seeking to represent.
    The Department believes that the errors discussed above can be 
reduced by clarifying the form and instructions, adding examples to the 
instructions, and providing extensive compliance assistance. This 
rulemaking, further, is part of an overall initiative that includes 
greater scrutiny of Form LM-30 reports, and union financial records, as 
well as increased enforcement. The Department believes that these 
efforts will further reduce the error rate. The Form LM-30 will be more 
useful to union members and the public when the reports that are filed 
are responsive to the questions asked, and can thus be meaningfully 
compared with the reports of other union officials. This will permit 
union members to understand the nature of the financial matter being 
reported, and its significance. This will allow union members to make 
informed decisions as to the leadership and management of their union. 
During the course of a meeting held under E.O. 12866, a stakeholder 
asserted that errors in filed reports could be reduced solely by 
increased compliance assistance by the Department. We will continue to 
research the extent to which current Form LM-30 submissions are 
deficient, and request comments on further data that may help the 
Department explore this question. The Department invites comments 
concerning all methods that would reduce the number of errors made in 
completing Form LM-30.

H. Significant Proposed Changes to the Form LM-30, and Request for 
Comments Concerning Filing Exemptions Created by the Department

1. Definitions, Examples and Administrative Exemptions
    Definitions: The proposal defines key terms. The current 
instructions do not explain terms that are essential to the form's 
completion. The revised instructions define: actively seeks to 
represent, arrangement, benefit with monetary value, bona fide 
employee, bona fide investment, dealing, directly or indirectly, filer/
reporting person/you, income, labor organization, labor organization 
employee, labor organization officer, legal or equitable interest, 
minor child, payer, publicly traded securities, substantial part, and 
trust in which a labor organization is interested.
    In defining the term ``labor organization,'' the instructions 
clarify that an officer or employee of a local union must file reports 
when he or she engages in transactions with a business that deals with 
his or her affiliated national labor organization, or engages in 
transactions with an employer whose employees the national labor 
organization is actively seeking to represent. Similarly, an officer or 
employee of a national union must file reports when he or she engages 
in transactions with a business that deals with an affiliated 
subordinate labor organization, or engages in transactions with an 
employer whose employees a subordinate labor organization is actively 
seeking to represent. By the same token, when determining whether a 
report must be filed due to payments from, or interests held in, a 
business that deals with a trust in which a labor organization is 
interested, the term ``labor organization'' will retain this expanded 
meaning. Thus, for example, an officer of a local union must file 
reports when he or she engages in transactions with a business that 
deals with a trust in which his or her affiliated national labor 
organization is interested.
    Similarly, in defining ``bona fide employee,'' the revised Form LM-
30 would require the reporting of payments received by union officers 
from an employer for work performed for the union. A typical example 
involves a ``no docking'' arrangement where an employer allows a union 
steward or union officer to resolve grievances, often on an ``as-
needed'' basis, without a loss

[[Page 51175]]

of pay. In other instances, a union official is paid by an employer 
while working full time on union business.
    A full discussion of the new definitions is provided below in the 
discussion of the instructions.
    Examples: The proposal provides examples to help filers determine 
what must be reported under each subsection of section 202. These 
examples will provide illustrations of reportable and non-reportable 
interests, payments, income, transactions, and arrangements. A full 
discussion of the examples is provided below in the discussion of the 
instructions.
    Administrative Exemptions and Special Reports: The proposed 
instructions also eliminate some exemptions in the current form. These 
exemptions permit filers to omit certain financial matters from 
disclosure that would otherwise be reportable if engaged in by the 
filer or the filer's spouse or minor child. These exemptions are 
discussed below, along with other exemptions that the Department does 
not propose to remove. Comments are invited on both the exemptions that 
the Department proposes to remove and the exemptions that are not 
proposed to be removed.
    Under the existing instructions, filers are notified: ``You do not 
have to report any sporadic or occasional gifts, gratuities, or loans 
of insubstantial value, given under circumstances or terms unrelated to 
the recipient's status in a labor organization.'' The LMRDA 
Interpretative Manual (``LMRDA Manual''), revised in March 2005, states 
that ``anything with a value of $25 or less will be considered `de 
minimis' and therefore not reportable if it is given under 
circumstances unrelated to the recipient's status in a labor 
organization.'' LMRDA Manual, Sec.  241.700.
    The Department seeks comments regarding whether this exemption 
should be retained or removed. This exemption applies by its terms to 
all reports due under section 202. It does not provide guidance as to 
when a gift, gratuity, or loan is ``unrelated to the recipient's status 
in the labor organization.'' The statute calls for disclosure of 
``any'' stock, bond or other interest, ``any'' income, ``any'' loan, 
and ``any'' payment or other thing of value. See 29 U.S.C. 432(a)(1)-
(6). This language could indicate that Congress did not intend to 
exempt certain gifts, gratuities, or loans based on their dollar value. 
Further, Congress imposed a substantiality test in section 202(a)(3) 
(``any business a substantial part of which consists of * * * dealing 
with the business of an employer''), but did not do so, at least 
expressly, in describing the holdings, transactions, and income that is 
reportable under section 202. See 29 U.S.C. 432(a).
    At the same time, exceptions based on insubstantiality are commonly 
read into statutes that do not expressly contain them. See Wisconsin 
Dept. of Revenue v. William Wrigley, Jr., Co., 505 U.S. 214, 231 (1992) 
(``the venerable maxim de minimis non curat lex (`the law cares not for 
trifles') is part of the established background of legal principles 
against which all enactments are adopted, and which all enactments 
(absent contrary indication) are deemed to accept.''). Furthermore, 
other reporting and disclosure systems do not require reports of small 
value items. For the purposes of comparison, one may look to the 
treatment of gifts in the financial disclosure reports for certain 
Federal Government employees. Employees with general schedule positions 
of grade 15 and below whose duties may involve potential conflicts of 
interest must file Office of Government Ethics (OGE) Confidential 
Financial Disclosure Report 450 (OGE Form 450). The form has a range of 
standards for reporting different interests and transactions. Gifts 
totaling $285 or less from any one source need not be reported, and 
gifts valued at $114 or less need not be included in determining 
whether the $285 threshold has been exceeded. Federal employees in 
positions above GS-15 and in certain other positions of confidential or 
policymaking character must file a Public Financial Disclosure Report 
(SF 278). This form treats gifts in a manner similar to the OGE Form 
450. Gifts totaling $260 or less from any one source need not be 
reported, and gifts valued at $104 or less need not be included in 
determining whether the $260 threshold has been exceeded. Similar to 
the current Form LM-30's requirement that a de minimis gift be reported 
if the gift is related to the filer's status in the union, under the 
government's disclosure regime, gifts to a filer's spouse or dependent 
child must be disclosed ``to the extent the gift was not given to him 
or her totally independent of the relationship to you.'' See SF 278, p. 
12; OGE 450, p5. Unlike the Form LM-30, government employees must 
report gifts from any source, unless a specific exemption applies, 
while union officers and employees must report gifts received only from 
certain businesses and employers. See SF 278, p. 12-13; OGE 450, p5. In 
one significant regard, government filers are permitted to exclude from 
their reports gifts of ``hospitality (food, lodging and entertainment) 
on the donor's personal or family premises.'' See SF 278, p. 12-13; OGE 
450, p5.
    Under the OGE Form 450, loans of $10,000 or less are not 
reportable, and there are four exceptions for loans exceeding the 
threshold, including mortgages on personal residences, and loans for 
personal automobiles, household furnishings, or appliances, where the 
loan does not exceed the purchase price. The loan reporting 
requirements of the SF 278 are very similar. A copy of both of these 
forms and instructions are available at the OGE Web site at: http://www.usoge.gov.
    The Department seeks comment on whether the term ``insubstantial'' 
left without further explanation in the instructions could be applied 
to shield from disclosure some financial transactions that would be of 
interest to union members. The Department could augment the existing 
instructions to define ``insubstantial value'' so that filers are able 
to distinguish between reportable and non-reportable gifts, gratuities, 
or loans based on a clearly articulated standard, like that in the 
Interpretative Manual or those in the Federal employee disclosure 
forms. The Department seeks comment on whether the $25 threshold set 
out in the LMRDA Interpretative Manual is an appropriate one, whether 
the burden to report small interests and transactions is reasonable, 
and whether it would be preferable to require reporting of all 
transactions and allow union members to assess whether a particular 
holding or transaction is substantial enough to possibly present a 
conflict between private interest and union responsibilities. During 
the course of a meeting held under E.O. 12866, some stakeholders stated 
that the exemption for insubstantial transactions in the existing 
instructions should be clarified, and that the threshold for disclosure 
be increased. The public is invited to comment on all aspects of this 
issue.
    Part A of the current instructions exempts from reporting

    (ii) Holding of, transactions in, or income from, securities 
[that are not traded on a securities exchange registered as a 
national securities exchange under the Securities Exchange Act of 
1934, in shares in an investment company registered under the 
Investment Company Act of 1940, or in securities of a public utility 
holding company registered under the Public Utility Holding Company 
Act of 1935], provided any such holding, or transaction, or receipt 
of income is of insubstantial value or amount and occurs under terms 
unrelated to your status in a labor organization. For purposes of 
this exclusion, holdings or transactions involving $1,000 or less 
and receipt of income of $100

[[Page 51176]]

or less in any one security shall be considered insubstantial;
    (iii) Transactions involving purchases and sales of goods and 
services in the regular course of business at prices generally 
available to any employee of the employer.
    (iv) Payments and benefits received as a bona fide employee of 
the employer for past or present services, including wages, payments 
or benefits received under a bona fide health, welfare, pension, 
vacation, training or other benefit plan; and payments for periods 
in which such employee engaged in activities other than productive 
work, if the payments for such period of time are: (a) Required by 
law or a bona fide collective bargaining agreement, or (b) made 
pursuant to a custom or practice under such a collective bargaining 
agreement, or (c) made pursuant to a policy, custom, or practice 
with respect to employment in the establishment which the employer 
has adopted without regard to any holding by such employee of a 
position with a labor organization.

    The Department does not propose to remove exemption (ii), but seeks 
comment on whether to remove or retain this exemption. This exception, 
which was created administratively, apparently was intended to 
discourage reporting of ``insubstantial'' matters unrelated to the 
filer's position in the union. In like fashion, the LMRDA Manual 
provides an example of the application of this exception and states 
that a $400 purchase of stock, traded over the counter by an employee 
(and thus otherwise reportable) of a company that supplies his union 
over $1 million annually in goods and services need not be reported 
where the market value of the stock is $1000 or less and the yearly 
income from the stock is $100 or less and the holdings and interest are 
unrelated to the individual's employment by the union. LMRDA Manual, 
Sec.  246.700 (but also noting that the Department may always require a 
special report that disclosed the purchase).
    As discussed above, exceptions based on insubstantiality are 
commonly applied. Further, there is precedent for a similar use of 
reporting thresholds. Under the SF 278, stocks, bonds and securities 
from one source need not be reported if they total $1,000 or less in 
value. Investment income of $200 or less need not be reported. Under 
the OGE Form 450, investments with a value greater than $1,000 or which 
produce more than $200 in income are reportable.
    On the other hand, the exemption deals with unregistered 
securities, or securities sold through an unregistered exchange, which 
Congress considered reportable. See 29 U.S.C. 432(b). Further, unlike 
the federal disclosure forms, section 202 of the Act requires reporting 
only on financial matters that were considered to be potential 
conflicts for union officers and employees by Congress and identified 
in the statute. Likewise, section 202 does not require reports of 
financial matters that do not pose this danger, no matter how large the 
value of the holding or transaction. In this context, an exemption 
based on insubstantiality or union status factors could arguably result 
in nondisclosure of transactions that present conflicts of interests 
for union officials and were identified by Congress as reportable, 
denying union members relevant information to evaluate their officers 
and employees not only at the time of union elections but throughout 
their tenure. The Department seeks comment on whether this exemption 
should be removed or retained.
    Exemption (iii) is a statutory exemption for transactions involving 
purchases and sales of goods and services in the regular course of 
business at prices generally available to any employee of the employer. 
The statutory language applies by its terms to financial matters 
reportable under section 202(a)(5), not to section 202(a)(1) or 
202(a)(2). Section 202(a)(5) requires union officers and employees to 
report any ``business transaction or arrangement'' with an employer 
whose employees the union represents or is actively seeking to 
represent. It is for this reporting obligation alone that section 202 
applies the exception for ``purchases and sales of goods and services 
in the regular course of business at prices generally available to any 
employee of such employer.''
    Sections 202(a)(1) and (a)(2) require union officers and employees 
to report (1) holdings in an employer whose employees the union 
represents or is actively seeking to represent, (2) transactions in 
such holdings, (3) loans to or from such employers, and (4) income or 
any other benefit with monetary value (including reimbursed expenses) 
received from such an employer. Sections 202(a)(1) and (a)(2) do not 
include the ``regular-course-of-business'' exception.
    The instructions for Part A of the current form combine the 
separate reporting obligations of sections 202(a)(1), (a)(2), (a)(5) 
into a single query. In so doing, the instructions also apply the 
statutory exceptions applicable to each obligation to the other 
obligations. Thus, the current form applies the ``regular-course-of-
business'' exception to sections 202(a)(1) and (a)(2)'s requirement 
that union officers and employees report (1) holdings, (2) transactions 
in holdings, (3) loans, and (4) income or any other benefit with 
monetary value (including reimbursed expenses).
    The Department's proposal adheres to the statutory design and thus 
proposes to remove the exemption for reports due under section 
202(a)(1) and 202(a)(2). The proposed form would thus eliminate the 
application of the ``regular course of business'' exception to reports, 
due under sections 202(a)(1) and (a)(2), of (1) holdings in an employer 
whose employees the union represents or is actively seeking to 
represent, (2) transactions in such holdings, (3) loans to or from such 
employers, and (4) income or any other benefit with monetary value 
(including reimbursed expenses) received from such an employer. Rather, 
the proposed form applies the ``regular-course-of-business'' exception 
only to reports, due under section 202(a)(5), of any ``business 
transaction or arrangement'' with an employer whose employees the union 
represents or is actively seeking to represent.
    Union members have an interest in knowing of such holdings, 
transactions in holdings, loans, and income so they can evaluate 
whether each is significant enough, or of such a nature, to constitute 
a conflict of interest. The statutory exemption for payments and other 
benefits received as a bona fide employee of the employer is sufficient 
to exempt all the ordinary payments received as part of an employment 
relationship; the exemption in the current form, the Department 
believes, may provide a means to exclude other items that present 
conflicts of interest for union officials. For example, a union officer 
who receives income from the employer of union members for contract 
work could, at least arguably, avoid disclosing the payment by relying 
on this ``regular-course-of-business'' exemption. Also, it is 
conceivable that a union employee who purchases certain types of 
ownership interests could avoid disclosing the holding by relying on 
this exemption. A union official with an employer as a client has a 
conflict between personal interests and union loyalties, as does an 
official with an ownership interest in the employer. The change is 
consistent with the plain language of the statute, which applies the 
``regular-course-of-business'' exception only to financial matters 
reportable under section 202(a)(5), not to section 202(a)(1) or 
202(a)(2). The elimination of this exemption will result in more 
detailed and transparent reporting of financial information that union 
members may find helpful in determining whether their union's officers 
and employees are subject to financial pressures inconsistent with

[[Page 51177]]

their responsibilities to the union and the union members.
    Similarly, the first part of exemption (iv) (up to the semicolon) 
(dealing with payments and benefits received as a bona fide employee of 
the employer) is created by statute. Under the statute, it applies to 
reports due under sections 202(a)(1) and 202(a)(5). Section 202(a)(1) 
requires union officers and employees to report (1) holdings in an 
employer whose employees the union represents or is actively seeking to 
represent, and (2) income or any other benefit with monetary value 
(including reimbursed expenses) from such an employer. As discussed 
above, section 202(a)(5) requires union officers and employees to 
report any ``business transaction or arrangement'' with such an 
employer. Sections 202(a)(1) and (a)(5) both contain an exception for 
``payments and other benefits received as a bona fide employee of such 
employer.''
    Section 202(a)(2) requires union officers and employees to report 
(1) transactions in holdings in an employer whose employees the union 
represents or is actively seeking to represent, and (2) loans to or 
from such an employer. Section 202(a) does not include the ``bona fide 
employee'' exception.
    By combining these separate reporting obligations--sections 
202(a)(1), (a)(2), (a)(5)--into a single query, the instructions for 
Part A of the current form also apply the statutory exceptions 
applicable to each obligation to all three obligations. Thus, the 
current form applies the ``bona fide employee'' exception to section 
202(a)(2)'s requirement that union officers and employees to report (1) 
transactions in holdings, and (2) loans.
    The proposed form applies the ``bona fide employee'' exception only 
to reports, due under sections 202(a)(1) and (a)(5), of (1) holdings in 
an employer whose employees the union represents or is actively seeking 
to represent, (2) income or any other benefit with monetary value 
(including reimbursed expenses) from such an employer, and (3) business 
transactions or arrangements with such an employer.
    The proposed form would eliminate the application of the ``bona 
fide employee'' exception to reports, due under sections 202(a)(2), of 
(1) transactions in holdings in an employer whose employees the union 
represents or is actively seeking to represent, and (2) loans to or 
from such an employer.
    Union members have an interest in knowing all transactions of union 
officers and employees involving transactions in ownership interests 
in, and loans to or from, the employer, so they can evaluate whether 
such matters are significant enough, or of such a nature, to constitute 
a conflict of interest. Under the current form, a union officer could 
avoid reporting a loan received from the employer on the ground that 
the loan was a benefit received as a bona fide employee, despite the 
union members' legitimate interest in knowing whether the person who 
negotiates the terms and conditions of their employment is beholden to 
the employer. Removal of the exemption would thus provide union members 
with important information concerning the financial activities of their 
officers and employees. Further, sales and purchases of ownership 
interest in the employer are highly unlikely to constitute payments 
received as a bona fide employee, and, in any event, a union member 
would likely be interested to learn whether their union officers or 
employees availed themselves of the opportunity to purchase or divest 
in employer holdings. The exemption in the current form is all but 
superfluous in the context of ownership interests, and to the extent 
that it is not superfluous, it is counterproductive. The presence of a 
largely useless exemption can create confusion and complicate 
enforcement. Finally, the change is consistent with the plain language 
of the statute, which applies the ``bona fide employee'' exception only 
to financial matters reportable under sections 202(a)(1) and 202(a)(5), 
not to section 202(a)(2).
    Following the statutory framework, the Department, therefore, 
proposes to eliminate this exemption for reports due under section 
202(a)(2). Further, as discussed in greater detail in IV.B.2.b, below, 
the portion of the exemption that excludes payments for periods in 
which such employee engaged in activities other than productive work 
will also be removed.
    Part B of the current instructions adopts exemption (ii) from Part 
A. This exemption was created by the Department, and, for the reasons 
discussed above, the Department seeks comment on whether the exemption 
should be retained, but does not propose to remove this exemption.
    Part C of the current instructions contains the following 
exemptions:

    (ii) Bona fide loans, interest or dividends from national or 
state banks, credit unions, savings or loan associations, insurance 
companies, or other bona fide credit institutions.
    (iii) Interest on bonds or dividends on stock, provided such 
interest or dividends are received, and such bonds or stock have 
been acquired, under circumstances and terms unrelated to the 
recipient's status in a labor organization and the issuer of such 
securities is not an enterprise in competition with the employer 
whose employees your labor organization represents or actively seeks 
to represent.

    The Department proposes to eliminate these two exemptions. Section 
202(a)(6) requires union officers and employees to report ``any payment 
of money or other thing of value (including reimbursed expenses)'' 
received from ``any employer'' or any labor relations consultant to an 
employer.
    Part C (Items 13 and 14) of the current form implements the 
statutory requirement for reporting payments received from an employer 
or a labor relations consultant to an employer. The first exemption 
permits union officers and employees to not report bona fide loans, 
interest or dividends from bona fide credit institutions. The proposed 
form would eliminate this exemption.
    The exemption operates as a barrier to disclosure. In one case, a 
credit union controlled by a local union made 61% of the credit union's 
loans to four loan officers, three of whom were officers of the local. 
By eliminating this exemption, union officers and employees will be 
required to disclose such loans, interest payments, or dividends. 
Disclosure of these loans would have benefited the union members. The 
actions of these officials were not in the best interest of the credit 
union, or the labor organization that established it, because of the 
potential consequences of not spreading lending risk among multiple 
loan recipients and the granting of loans for reasons related to union 
status rather than ability to repay.
    The exemption in the current form is not required by the statute, 
which is silent on this issue. Indeed, the exemption tracks one that 
Congress chose to include in reports of employers, but omitted from the 
reports of union officers and employees. Compare 29 U.S.C. 433(a) with 
29 U.S.C. 432(a)(6). Further, this exemption leaves the filer to 
determine, without further guidance, whether a loan is bona fide.
    Exemption (iii) of Part C will also be eliminated under the 
Department's proposal. This exemption is similar in certain respects to 
the statutory exemption of section 202(b), but unlike section 202(b), 
it exempts from reporting bonds and stocks that are not registered with 
the SEC or traded on a registered securities exchange. Further, section 
202(a)(6), to which this exemption applies, already contains an 
exemption ``with respect to the sale and purchase of an article or 
commodity at the prevailing market price in the

[[Page 51178]]

regular course of business.'' To the extent that the exemption in the 
current form excludes from reporting transactions that fail to meet the 
statutory section 202(a)(6) exemption, it sanctions nondisclosure of 
transactions at below-market prices made outside of the regular course 
of business--the most suspect transactions. Union members would have an 
interest in knowing whether a union official has received a benefit not 
available to others on similar terms, in order to evaluate where the 
union official's loyalties may lie and whether any divided loyalties 
could affect the official's ability to represent the union members. 
Further, this exemption invites abuse by permitting the filer to make 
an unguided determination on whether the bonds and stocks have been 
acquired under circumstances unrelated to the recipient's status in a 
labor organization. The exemption is not required by the statute, and 
its removal is consistent with it.
    The exceptions described above are not required by the statutory 
language and despite their apparent design to simplify reporting, they 
have added a layer of complexity to the proper understanding of the 
section 202 reporting obligations. The exemptions are lengthy, and 
require study in addition to that needed to understand the reporting 
obligations. They are ambiguous, and may lead filers to believe that 
reportable transactions may be omitted from the form.
    Exemptions (ii) and (iv) of Part A, and exemptions (ii) and (iii) 
of Part C were not expected to be invariably available. See 29 CFR 
404.4. A special report was intended to be used to obtain such exempted 
information upon demand of the Department, although the special report 
provision has proved useless in practice, in part because the 
Department cannot know when important information has been omitted and 
that a special report would be revealing. See 29 CFR 404.4. The 
Department proposes to delete the special report provision. As 
mentioned above, at the time the Form LM-30 was created, the Department 
acted under the impression that more complete reporting could be 
realized through an ad hoc special report, and could be selectively 
required by the Secretary. See 29 CFR 404.4. These reports would allow 
the Secretary to require the disclosure of the information that was 
exempted from disclosure by operation of the four administrative 
exemptions discussed above. Id. No procedures were established, 
however, to govern the imposition of a special report; nor did the 
Department ever issue or seek a special report. The special report 
regulation is an acknowledgement that one or more of the exemptions 
potentially permit the non-reporting of conflict-of-interest 
transactions, but leaves no realistic method by which the Department 
can identify these cases and require more detailed reporting. Further, 
in today's regulatory and statutory environment, which mandates 
numerous time consuming procedures and analyses before a reporting form 
may be issued or revised, the Department's ability to implement a 
special report for a particular set of union officers and employees is 
questionable.
    In essence, the exemptions proposed to be eliminated render non-
reportable transactions that by statute are subject to disclosure, a 
deficiency that has not been effectively eliminated through the use of 
a special report procedure. In addition to being not required by 
statute, the exemptions proposed to be removed necessarily reduce the 
information available to union members to evaluate their union 
officials. Instead of the Department determining in advance that entire 
categories of financial holdings or transactions should not be 
disclosed, the better course may be to require reporting so that union 
members may decide for themselves whether the financial matters are of 
concern. The resulting increased transparency will permit union members 
to obtain information needed by them to monitor their union's affairs 
and to make informed choices about the leadership of their union and 
its direction. At the same time this increased transparency will 
promote the unions' own interests as democratic institutions and the 
interests of the public and the government. The increased financial 
transparency will also deter fraud and self-dealing, and facilitate the 
discovery of such misconduct when it does occur.
2. Restructured Form
    The broad purpose of the Form LM-30 is to disclose possible 
conflicts between the personal financial interests of a union officer 
or employee and his union. A union member or other person reviewing a 
report should be able to easily discern the financial interests of the 
filer. The current form is not arranged to quickly provide such 
information. The current form does not provide a summary of the data on 
the report. The viewer must examine all the Parts A, B, and C that are 
filed; review the payers in all Items 6, 8, and 13; and sum the amounts 
in all Items 7b, 12b, and 14b to obtain an overview of what has been 
reported. Union members reviewing the report of a filer with multiple 
reportable transactions and interests from several sources would thus 
have to sort through numerous pages of the report to discern who had 
paid the filer and perform the math themselves.
    To remedy this problem, the Department's proposal contains a 
summary information schedule that may satisfy the needs of many users 
of the report without need for greater detail. In the revised form, for 
convenience and ease of understanding, the term ``payer'' is used to 
describe the employer, business, or labor relations consultant that is 
financially involved with the filer. Using this terminology, a Payer 
Summary Schedule on the first page of the report shows the name of 
every payer from which the filer received money or in which the filer 
held an interest, and the total monetary value the filer derived from 
each payer. Each payer is numbered to correspond to the appropriate 
Payer Detail Page. Anyone interested in further information regarding 
the interests and transactions can skip directly to the appropriate 
detail page.
    The proposed form will call for additional contact information 
about the filer and his or her labor organization, including the e-mail 
address of each filer, and the telephone number, web site address, 
state of incorporation or registration, and state business 
identification number of each payer. The purpose of this additional 
contact information is to allow those who view the report to accurately 
identify the filer and, more important, accurately identify and further 
research the business with which the filer has a financial 
relationship. Ambiguous information about the filer or the source of 
payments to the filer can negate the utility of the report, by denying 
members sufficient information to assess the conflict situation. 
Comments are solicited on the significance of this information to 
readers of the reports and whether a filer has reasonable access to 
this information.
    A labor organization schedule will be added to the form allowing a 
filer to list the unions that the filer is employed by or an officer 
of, thus negating the need for filers to submit multiple reports. 
Continuation pages ease completion of the form, and facilitate search 
and retrieval.
    The proposal also organizes all the reported financial interests 
and transactions into tables. This will allow a member or other user to 
perform an electronic search on the OLMS disclosure database. Upon 
promulgation of a final rule, this database will be

[[Page 51179]]

configured in a way that will facilitate such searches.
    The Department seeks comments on the proposed notice requirement, 
clarification of the form, use of examples to guide filers, removal of 
the administrative exemptions, deletion of the special report 
procedures, and restructuring of the form.

III. Authority

A. Legal Authority

    The legal authority for the notice of proposed rulemaking is 
sections 202 and 208 of the Labor-Management Reporting and Disclosure 
Act of 1959, as amended (LMRDA), 29 U.S.C. 432, 438.

B. Departmental Authorization

    Section 208 of the LMRDA provides that the Secretary of Labor shall 
have authority to issue, amend, and rescind rules and regulations 
prescribing the form and publication of reports required to be filed 
under Title II of the Act and such other reasonable rules and 
regulations as she may find necessary to prevent the circumvention or 
evasion of the reporting requirements. 29 U.S.C. 438. Secretary's Order 
4-2001, issued May 24, 2001, and published in the Federal Register on 
May 31, 2001 (66 FR 29656), continued the delegation of authority and 
assignment of responsibility to the Assistant Secretary for Employment 
Standards in Secretary's Order 5-96 of those functions to be performed 
by the Secretary of Labor under the LMRDA.

IV. Overview of the Regulations and Instructions

    The discussion that follows describes the Department's proposal to 
revise its regulations implementing section 202(a) of the LMRDA, 29 CFR 
part 404, and the Form LM-30 and its accompanying instructions, which 
are incorporated into the regulations by reference. 29 CFR 404.3. The 
following discussion highlights the key elements of each subsection of 
section 202 and the significant changes between the proposed and 
current regulations, form, and instructions.

A. The Regulations

    1. The proposal would amend section 404.4 of the regulations, 29 
CFR 404.4, relating to special reports. This section provides that the 
Secretary may require the filer to file special reports on certain 
matters pertinent to an officer's or employee's holdings or interests 
covered by section 202, specifically including four categories of 
holdings, transactions, and payments that would be reportable but for 
four administrative exemptions. These include two administrative 
exemptions to Part A. The first permits the filer to exclude holdings 
of, transactions in, or income from non-registered securities of 
insubstantial value that are unrelated to the filer's status in the 
labor organization. See Instructions, Part A, exclusion (ii). The 
second consists of an expansion of the statutory exclusion for payments 
and benefits received as a bona fide employee to include ``payments for 
periods in which such employee engaged in activities other than 
productive work.'' See Instructions, Part A, exclusion (iv). They also 
include two administrative exemptions to Part C. The first specified 
Part C exemption excludes bona fide loans, interest, or dividends from 
banks, insurance companies and other bona fide credit institutions. See 
Instructions, Part C, exclusion (ii). The second concerns interest on 
bonds or dividends on stock, provided such interest or dividends are 
received, and such bonds or stock have been acquired, under 
circumstances and terms unrelated to the recipient's status in a labor 
organization and the issuer of such securities is not an enterprise in 
competition with the employer whose employees the filer's labor 
organization represents or actively seeks to represent. See 
Instructions, Part C, exclusion (iii). Although the special report 
provision will be deleted, the Department notes that it maintains 
statutory authority to assess each report for sufficiency, require 
amended reports, and to commence investigations where it is necessary 
to determine whether any person has or is about to violate any 
provision of the Act. 29 U.S.C. 440, 521.
    2. In addition, the Department proposes to amend section 404.7, 
which requires the maintenance and preservation of records. The 
language has been revised to better identify some of the documents that 
must be retained and to address the fact that records now may be 
maintained in electronic format. The Department intends no substantive 
change in meaning, as the revised language merely clarifies and makes 
explicit the retention requirements that have always been imposed by 
the regulation and statute. See 29 CFR 404.7; 29 U.S.C. 436.
    3. The Department proposes to amend section 404.1 to add 
definitions for the following terms: Benefit with monetary value, 
dealing, income, labor organization, minor child, and trust in which a 
labor organization is interested. See 29 CFR 404.1. In addition, the 
existing definitions for the terms ``labor organization officer,'' and 
``labor organization employee'' will be modified. These are terms that 
appear in 29 CFR 404, and it is thus appropriate to define the terms in 
the regulations themselves. The terms and their definitions will also 
appear in the instructions, as will other terms, discussed below, that 
appear only in the instructions. This approach is used in the existing 
regulations and instructions.
    To be as effective as possible, a reporting and disclosure statute 
such as section 202(a) depends on a known and easily applied standard 
regarding what must be reported. Such a standard is important not only 
for union officials who must comply with the reporting requirements and 
for the administrative agency that enforces compliance, but also, 
because of the special objectives of the LMRDA, for union members and 
the general public who rely on disclosure and need to know what the 
disclosure or its absence represents.

B. The Instructions

    The following discussion tracks the major sections of the proposed 
instructions. The proposed instructions, in turn, correspond roughly 
with the layout of the existing instructions. We identify the changes 
between the proposed and existing instructions; these changes also are 
reflected in the revised layout and design of the form itself. The 
proposed layout of the form is based on other updated OLMS financial 
disclosure reports and includes a summary schedule.
1. General Changes
    The myriad types of financial transactions made reportable by 
section 202 complicate the design of a ``self-explanatory'' form. The 
filer must rely on the instructions to accurately complete the form. We 
invite comments as to the layout of the instructions, their clarity, 
and suggestions about how to better explain the reporting obligations.
2. Introductory Section of the Instructions
    a. The first heading of the proposed instructions: ``Why file'' is 
identical to the current form. Like the current form it delineates the 
basic reporting obligations. However, the proposal adds more 
information to better place the filing obligation in the larger context 
of the LMRDA. We identify the elements of the statute and explain that 
the basic purpose of the section 202 report is to publicly identify any 
actual or apparent conflict between the personal financial interests of 
a filer, spouse, or minor child and the filer's obligation to the union 
and its members. The proposal also clarifies that no report need be 
filed unless the filer, spouse, or minor child

[[Page 51180]]

held a covered interest or engaged in a covered transaction during the 
reporting period.
    b. The second heading of the proposed instructions is 
``Definitions.'' This is a new section of the instructions.
    The terms defined include: actively seeking to represent, 
arrangement, benefit with monetary value, bona fide employee, bona fide 
investment, dealing, directly or indirectly, filer/reporting person/
you, income, labor organization, labor organization employee, labor 
organization officer, legal or equitable interest, minor child, payer, 
publicly traded securities, substantial part, and trust in which a 
labor organization is interested.
    The meaning of many of these terms is left unclear by the current 
instructions. By defining and explaining the key terms used by section 
202, a filer will better understand his or her reporting obligations, 
which, in turn, will improve the likelihood of filing and the accuracy 
of the reports. Providing information that should be disclosed, based 
on statutory requirements, will aid union members in assessing whether 
their union's officers and employees have entered into financial 
arrangements with employers, businesses, and others that could 
potentially compromise the officials' ability to act in the best 
interests of, and achieve the best results for, the union and its 
members.
    Actively seeking to represent, as proposed, means that a labor 
organization has taken steps to become the bargaining representative of 
the employees of an employer, including but not limited to:
     Sending organizers to an employer's facility;
     Placing an individual in a position as an employee of an 
employer that is the subject of an organizing drive and paying that 
individual subsidies to assist in the union's organizing activities;
     Circulating a petition for representation among employees;
     Soliciting employees to sign membership cards;
     Handing out leaflets;
     Picketing; or
     Demanding recognition or bargaining rights or obtaining or 
requesting an employer to enter into a neutrality agreement (whereby 
the employer agrees not to take a position for or against union 
representation of its employees), or otherwise committing labor or 
financial resources to seek representation of employees working for the 
employer.
    This definition, in large part, is based on a statement from the 
legislative history. See Senate Report, at 15, reprinted in 1 Leg. 
History, at 411 (The phrase ``actively seeking to represent'' denotes 
``more than that the union hopes some day to become the bargaining 
representative of a group of employees or claims jurisdiction to 
organize them. It requires specific organizational activities such as 
sending organizers into a community, handing out leaflets, picketing, 
or demanding recognition and bargaining rights''); House Report, at 11; 
reprinted in 1 Leg. History, at 769. The examples are concrete actions 
commonly associated with attempts to organize a workforce. Comments are 
invited as to the merit and clarity of the enumerated activities and 
whether other examples would be helpful. In the Department's view, the 
term ``actively seek to represent'' seeks to distinguish between 
situations where a union has taken steps to organize and those where 
the union merely has an interest in organizing employees of the 
employer in question. For example, a union may wish to represent 
employees of a certain employer, and may even have finalized an 
organizing plan, but has not yet begun to implement the plan. Such a 
union is not actively seeking to represent employees of this employer. 
Comments are sought as to whether it is appropriate to trigger the 
reporting obligation on the decision to organize an employer's 
workforce distinct from taking the first concrete step to organize. The 
Department recognizes that some organizing activities are initiated 
without notice to the public or an employer, but there would appear to 
be few, if any, situations, where the disclosure of a reported interest 
on the Form LM-30 would be the first open acknowledgment of the union's 
active efforts to represent employees. Commenters are asked to address 
this assumption.
    Arrangement, as proposed, means any agreement or understanding, 
tacit or express, or any plan or undertaking, commercial or personal, 
by which the filer, spouse, or minor child will obtain a benefit, 
directly or indirectly, with an actual or potential monetary value.
    The term encompasses both personal and business transactions, 
including an unwritten understanding. For example, if an employer's 
representative during the reporting period solicits a union officer to 
accept a job with the employer, the filer must report the solicitation, 
unless the filer rejects the offer. A standing job offer must be 
reported because it carries the potential of monetary value to the 
filer. Another example of a situation requiring a report would be one 
in which a covered employer provides insider information about a stock 
or other investment opportunity, unless the filer rejects the advice 
and takes no steps to act on it.
    Certain senior government officers and employees are required to 
file publicly available reports (SF 278) disclosing their financial 
interests as well as the interests of their spouse and dependent 
children. The SF 278 requires a filer to report ``arrangements'' 
including ``(1) future employment; (2) a leave of absence during [the 
filer's] period of Government service; (3) continuation of payments by 
a former employer other than the United States Government; and (4) 
continuing participation in an employee welfare or benefit plan 
maintained by a former employer other than United States Government 
retirement benefits.'' The form notes that disclosure ``includes any 
agreements or arrangements with a future employer entered into by a 
termination filer.'' SF 278, p. 15; See also OGE 450, p. 4.
    In addition, senior government filers ``must disclose any 
negotiations for future employment from the point you and a potential 
non-Federal employer have agreed to your future employment by that 
employer whether or not you have settled all of the terms, such as 
salary, title, benefits, and date employment is to begin.'' SF 278, p. 
15.
    Benefit with monetary value, as proposed, means anything of value, 
tangible or intangible, including any interest in personal or real 
property, gift, insurance, retirement, pension, license, copyright, 
forbearance, bequest or other form of inheritance, office, options, 
agreement for employment or property, or property of any kind.
    This definition is adopted from disclosure regulations applicable 
to federal employment. See 5 CFR 2634.105(h); 5 CFR 2634.302(b)(1).
    Bona fide employee, as proposed, is an individual who performs work 
for, and subject to the control of, the employer.
    In considering the meaning to be given bona fide employee, the 
Department considered the purposes of the LMRDA, and the following 
point in the AFL-CIO's Ethical Practices Code: ``No responsible trade 
union official should accept kickbacks, under-the-table payments, gifts 
of other than nominal value, or any personal payment of any kind other 
than regular pay and benefits for work performed as an employee from an 
employer or business enterprise with which his union bargains 
collectively.'' AFL-CIO Ethical Practices Code, 105 Cong. Rec.*16379 
(daily ed. Sept. 3, 1959), reprinted in 2 Leg. History, at 1408. The 
Department

[[Page 51181]]

has also considered the disclosure form (SF 278) required to be 
completed by senior government officials and employees. The 
instructions for the SF 278 require filers to report earned income, 
including ``fees, salaries, commissions, compensation for personal 
services, retirement benefits, and honoraria,'' excluding ``income from 
employment by the United States government.'' SF 278, p. 8. Finally, 
the Department recognizes that numerous federal agencies, including the 
Department, continue the pay of union representatives engaged in the 
conduct of union-management business. See Agreement between Local 12, 
AFGE, AFL-CIO and the U.S. Department of Labor, Article 45 (Effective 
March 20, 2005).
    Under the proposed definition, to be exempt from reporting, 
payments and other benefits received as a bona fide employee of the 
employer must be attributable to work performed for, and subject to the 
control of, the employer. See Nationwide Mut. Ins. Co. v. Darden, 503 
U.S. 318, 322-24 (1992). Such payments and other benefits are non-
reportable, even if they represent compensation for such work 
previously performed, such as earned or accrued wages, payments or 
benefits received under a bona fide health, welfare, pension, vacation, 
training or other benefit plan, leave for jury duty, and all payments 
required by law. In contrast, compensation for work performed as an 
independent contractor does not constitute payments or benefits to a 
bona fide employee, even if the individual also serves as a bona fide 
employee while performing other work. Most fundamentally, compensation 
paid to an individual who is carried on the employer's payroll but who 
does not work (a ``no-show employee'') is not compensation to a bona 
fide employee.
    By its terms, the proposed definition excludes payments for work 
performed for an individual other than the employer, or work performed 
outside the control of the employer. This definition will, thus, 
require reporting of at least two types of compensation that are 
currently excluded from reporting as ``payments and other benefits 
received as a bona fide employee.'' See Instructions, Part A, exclusion 
(iv). These compensation types are ``union leave'' and ``no docking'' 
payments. Under a union-leave policy, the employer continues the pay 
and benefits of an individual who works full time for a union. Under a 
no-docking policy, the employer permits individuals to devote portions 
of their day or workweek to union business, such as processing 
grievances, with no loss of pay. Continuation of pay in this context is 
not ``payments or other benefits received as a bona fide employee'' 
because the payments are not attributable to work performed for, and 
subject to the control of, the employer. Rather, the pay is for 
services performed for, and subject to the control of, the union. The 
payments are, therefore, reportable. See 29 U.S.C. 432(a)(1), (a)(5).
    The current instructions treat as non-reportable payments for 
``activities other than productive work,'' depending in part on the 
collective bargaining agreement and the employer's practices. 
Specifically, exemption (iv) of Part A of the current form excludes 
``payments for periods in which such employee engaged in activities 
other than productive work, if the payments for such period of time 
are: (a) Required by law or a bona fide collective bargaining 
agreement, or (b) made pursuant to a custom or practice under such a 
collective bargaining agreement, or (c) made pursuant to a policy, 
custom, or practice with respect to employment in the establishment 
which the employer has adopted without regard to any holding by such 
employee of a position with a labor organization.'' See Instructions, 
Part A, exemption (iv). The LMRDA Manual discusses the situation when a 
union officer ``is excused from his regular work to handle grievances 
and [is] paid his regular wages while handling grievances.'' It states: 
``Such a situation will not normally require reports from the union 
officer * * * on the theory that the employee officer is being paid for 
work performed of value to the employer who is interested in seeing to 
it that grievances are immediately adjusted.'' LMRDA Manual, Sec.  
248.005.
    The Department proposes to change this rule. Under the Department's 
proposed instructions, an officer or employee would have to report any 
payments for other than ``productive work,'' including union-leave and 
no-docking payments. These payments are not received as a bona fide 
employee of the employer; they are received as a representative or 
employee of the union. The employer's perception that an employee's 
work for the union is valuable, a fact relied on by the LMRDA Manual, 
does not seem relevant. The question is whether the payment is received 
as a bona fide employee, not whether the employer considers the money 
well spent. The payments also represent a potential conflict of 
interest. Members have an interest in knowing how much union officers 
or employees are paid by the employer for time spent on union business. 
This information would be significant for members in assessing the 
effectiveness of union officers and employees and in evaluating 
candidates for union office. For example, during collective bargaining 
negotiations, an officer who enjoys union-leave or no-docking payments 
may agree, or feel pressure to agree, to reduced benefits for employees 
in exchange for increases in his or her employer payments. Similarly, a 
union employee may feel pressure to not zealously pursue a grievance on 
behalf of a union member for fear of alienating the employer and 
jeopardizing his or her payments. The exemption in the current form is 
not required by statute, which is silent on this issue.
    In discussing the legality of ``no-docking'' payments under the 
Labor Management Relations Act, one circuit judge wrote, ``Congress was 
concerned about any form of payment that could upset the balance 
between labor and management. The payments at issue in this case do 
exactly that. They create a conflict of interest for union negotiators 
who may agree to reduced benefits for the employees in exchange for 
financial support for the union.'' See Caterpillar v. United Auto 
Workers, 107 F.3d 1052 (3rd Cir. 1997) (en banc) (emphasis in original) 
(Mansmann, J., dissenting), cert. granted, 521 U.S. 1152, dismissed as 
moot, 523 U.S. 1015 (1998). The Department finds this reasoning 
persuasive in the context of section 202 of the LMRDA, and the proposed 
interpretation to be more consistent with the language of the statute 
than the current approach. These payments present a potential for 
conflicts of interest. By exempting these payments from reporting, the 
Department has deprived union members of information they may need to 
make an informed judgment on whether their union officers and employees 
are subject to financial incentives that could hinder them in 
fulfilling the trust that has been placed in them. The Department 
acknowledges that this proposal is a departure from the Department's 
past practice and invites comment about the problems (or their absence) 
that have arisen by allowing such payments to go unreported. The 
Department also seeks comment about whether disclosure is always 
appropriate for ``no docking'' situations and, if not, suggestions as 
to whether quantitative (such as number of hours) or qualitative (such 
as discussing a grievance with a supervisor or management official) 
distinctions should affect the disclosure obligation.
    Bona fide investment, as proposed, means personal assets of the 
filer held to generate profit not acquired by improper means or as a 
gift from an

[[Page 51182]]

employer, a business that deals with the filer's union or a trust in 
which the filer's union is interested, a business a substantial part of 
which consists of dealing with an employer whose employees the filer's 
union represents or is actively seeking to represent, or a labor 
relations consultant to an employer. See publicly traded securities.
    The primary purpose of this definition is to alert filers that 
stock or other securities received as a gift will not constitute a 
``bona fide investment,'' under the provision that exempts from 
reporting bona fide investments in publicly traded securities when the 
gift is received from an employer, certain businesses, or a labor 
relations consultant. See discussion of publicly traded securities, 
below. A union officer or employee who receives a gift of publicly 
traded stock from an employer, for example, must therefore disclose the 
holding, unless another reporting exemption applies.
    Dealing, as proposed, means to engage in a transaction (bargain, 
sell, purchase, agree, contract) or to in any way traffic or trade.
    In the course of providing compliance assistance to union officers 
and employees, OLMS has been asked if payments from a union to a trust 
in which the union is interested constitute ``dealing[s]'' between the 
trust and the union under section 202(a)(4) of the Act, which creates a 
reportable relationship when a union officer or employee receives a 
payment from a business engaged in ``buying from, selling or leasing 
to, or otherwise dealing, with'' the union. OLMS has been asked whether 
dealings between a union and a union related trust exist when payments 
are made by an employer to the trust pursuant to a collective 
bargaining agreement negotiated by the union. In addition, the public 
has asked whether contributions by a union to a charitable, social, 
educational, or political organization constitute dealings between the 
union and the organization. The Department's current and proposed 
instructions do not speak explicitly to this issue, and the 
government's reporting system is not directly on point. See OGE 450, p. 
14 (``If you receive food, transportation, lodging, and entertainment 
or a reimbursement of official travel expenses from a non-profit tax-
exempt institution categorized by the IRS as one falling within the 
terms of 26 U.S.C. 501(c)(3), you must report the name of the 
organization, a brief description of the in-kind services or the 
reimbursement and the value.'') The Department seeks comments on these 
issues, and the related issue of whether trusts and such organizations 
constitute, or can constitute, ``business[es]'' under sections 
202(a)(3) and (a)(4), or ``employers'' under section 202(a)(6), so that 
payments from such organizations to union officials would be 
reportable. What activities or transactions between trusts and other 
organizations and the union would rise to the level of dealings? What 
factors, if any, should the Department consider when determining if 
trusts and other organizations are businesses or employers? Finally, 
commenters are asked to consider these questions in regard to labor 
organizations and labor management committees. Can these entities 
constitute businesses under sections 202(a)(3) and (a)(4), or 
constitute employers under section 202(a)(6), and, if so, what type of 
activities and transactions between such entities and the filer's union 
should be considered dealings?
    Directly or indirectly, as proposed, means by any course, avenue, 
or method. Directly encompasses holdings and transactions in which the 
filer, spouse, or minor child receives a payment or other benefit 
without the intervention or involvement of another party. Indirectly 
includes any payment or benefit which is intended for the filer, 
spouse, or minor child or on whose behalf a transaction or arrangement 
is undertaken, even though the interest is held by a third party, or 
was received through a third party.
    The purpose of this definition is to clarify that filers must 
disclose any benefits received by them (or their spouse or minor child) 
from a third party where the third party is acting on the behalf, or at 
the behest, of an employer or business where the benefit would have to 
be reported if made by it directly to the filers (or their spouse or 
minor child). Benefits received from an employee, agent, or 
representative of an employer or business, or other entity acting on 
behalf of the employer or business, should be considered to be received 
from the employer or business. Payments to a third party to be held for 
the use or benefit of the filer are also reportable. The definition is 
deliberately drawn broadly, consistent with the legislative history 
``to require disclosure of any personal gain which an officer or 
employee may be securing at the expense of union members.'' Senate 
Report, at 15, reprinted in 1 Leg. History, at 411. See also AFL-CIO 
Ethical Practices Code, reprinted in 2 Leg. History, at 1406 (``[The 
ethical principles] apply not only where the investments are made by 
union officials, but also where third parties are used as blinds or 
covers to conceal the financial interests of union officials'')
    Filer/Reporting Person/You, as proposed, mean any officer or 
employee of a labor organization who is required to file Form LM-30. 
These terms are used synonymously and interchangeably throughout the 
instructions and, when referring to reportable interests, income, or 
transactions, these terms include interests, income, or transactions 
involving the union officer's or employee's spouse or minor child.
    Income, as proposed, means all income from whatever source derived, 
including, but not limited to, compensation for services, fees, 
commissions, wages, salaries, interest, rents, royalties, copyrights, 
licenses, dividends, annuities, honorarium, income and interest from 
insurance and endowment contracts, capital gains, discharge of 
indebtedness, share of partnership income, bequests or other forms of 
inheritance, and gifts, prizes or awards.
    This definition is designed to help filers identify the types of 
financial matters that are subject to the reporting requirements. The 
list is adopted from disclosure regulations applicable to federal 
employment. See 5 CFR 2634.105(j); 5 CFR 2634.302.
    Labor organization, as proposed, means the local, intermediate, or 
national or international labor organization that employed the filer, 
or in which the filer held office, during the reporting period, and any 
parent or subordinate labor organization of the filer's labor 
organization.
    Under sections 202(a)(1) through (a)(5), union officers and 
employees must report payments from, holdings in, or transactions with 
the following entities:

    (1) An employer whose employees the filer's labor organization 
represents or is actively seeking to represent;
    (2) A business a substantial part of which consists of dealing 
with an employer whose employees the filer's labor organization 
represents or is actively seeking to represent; or
    (3) A business that deals with the filer's labor organization or 
a trust in which the filer's labor organization is interested.

    The reporting obligation thus depends on what organization 
constitutes the filer's labor organization. Many labor organizations 
consist of a three-tier hierarchy, such as a local labor organization, 
an intermediate body, and a national or international labor 
organization.
    The current instructions are silent about the obligation of an 
officer or employee to report, under section

[[Page 51183]]

202(a)(4), interests or income from businesses that deal with parent or 
subordinate labor organizations within the filer's labor organization. 
See 29 U.S.C. 432(a)(4). In the same way, the instructions are silent 
as to whether labor organizations affiliated with that of the union 
officer or employee are encompassed by the phrase ``an employer whose 
employees such labor organization represents or is actively seeking to 
represent.'' See 29 U.S.C. 202(a)(1), (2), (5). For example, one 
reading of the statute would mean that payments by an employer to a 
union official would not be reportable if a different labor union 
within the same overall union hierarchy was the entity actively seeking 
to represent the employees of the employer. As currently written, a 
filer would have to contact the Department or obtain a copy of the 
LMRDA Manual to learn that the obligation extends beyond the immediate 
organization in which the filer is an officer or employee. As provided 
in the LMRDA Manual: ``An international union officer must report his 
income from [a] business [that has dealings with an employer whose 
employees a local union represents] even though he is not an officer of 
the local which represents the employees of the business, and even 
though his duties as an international officer do not include 
representation activities.'' LMRDA Manual, Sec.  241.100.
    Union members have an interest in knowing benefits their officers 
or employees receive from businesses that deal with their parent or 
subordinate unions or with employers whose employees their parent or 
subordinate unions represent, or are actively seeking to represent, so 
they can evaluate whether these benefits are significant enough, or of 
such a nature, to constitute a conflict of interest. For example, union 
members have an interest in knowing if a spouse of a local union 
officer owns a travel agency that does business with the national 
union. Likewise, under the current instructions, and unless the filer 
was familiar with the interpretative manual, union members would not 
know if a president of a national labor organization owns a printing 
company that provides services to many of the national union's 
subordinate local labor organizations. Yet, employees of local unions 
may choose to patronize this printing company to seek favor with, or 
avoid alienating, the national president, despite less expensive 
services available elsewhere.
    The statutory language itself is ambiguous on this point. However, 
as discussed above, Senator Kennedy's statement about how the Act would 
remedy the improper actions by certain high ranking international union 
officers evinces Congressional concern about the conflict posed by a 
union official's personal interests and the official's obligation to 
all the union's members and constituent units, not merely concern about 
matters relating solely to the particular tier of the union in which 
the filer serves as an officer or employee. As discussed above, the 
McClellan Committee's investigation disclosed a myriad of arrangements 
whereby union officials, whose personal interests were intertwined with 
those of employers and benefit providers, suborned the interests of 
their affiliated locals and their members to the officials' personal 
interests and the interests of the officials' financial benefactors. 
Confident that Congress would not have intended to ignore the serious 
problems identified by the McClellan Committee's investigation, the 
Department's proposal clarifies the reach of the disclosure obligation 
to include conflicts that arise between a union official and his 
responsibility to both the immediate unit of the union that he serves 
and any parent or subordinate unit of that unit.
    Labor organization employee, as proposed, means any individual 
(other than an individual performing exclusively clerical or custodial 
services) employed by a labor organization within the meaning of any 
law of the United States relating to the employment of employees.
    By statute, an employee ``means an individual employed by an 
employer''. 29 U.S.C. 402(f). An employer is broadly defined to include 
``an employer within the meaning of any law of the United States 
relating to the employment of employees.'' 29 U.S.C. 402(e). Under the 
common law, any individual working at the control and direction of a 
labor organization will be an employee of the organization. The common 
law contains various formulations and factors to be considered in 
determining the employment status of an individual. See Nationwide Mut. 
Ins. Co. v. Darden, 503 U.S. at 318, 322-24 (1992). The contractual 
relationship between an individual and the labor organization and the 
actual duties of the individual, not the labels ``independent 
contractor'' or ``consultant,'' will determine whether an individual is 
a labor organization employee. A hired individual is an employee if the 
union has the right to control the manner and means by which the work 
product is accomplished. Among the other factors relevant to this 
inquiry are the skill required to perform the job; the source of the 
instrumentalities and tools; the location of the work; the duration of 
the relationship between the union and the individual; whether the 
union has the right to assign additional projects to the individual; 
the extent of the individual's discretion over when and how long to 
work; the method of payment; the individual's role in hiring and paying 
assistants; whether the work is part of the individual's regular 
business; the provision of employee benefits; and the tax treatment of 
the individual. Id.
    Under this analysis, professionals who work ``in house,'' on more 
than an episodic basis, alongside other individuals employed by the 
union, typically are employees. For example, an accountant would be an 
employee of the labor organization if the labor organization determines 
the manner by which the accounting duties are performed, and the 
accountant is paid regularly by salary for his or her work activities. 
However, an accountant hired from a private firm for a fixed fee for a 
specific, non-recurring project likely would be an independent 
contractor. If the filer has any doubt about his or her status as an 
employee or independent contractor, the filer should consult a private 
attorney for legal advice or OLMS for further information.
    Although unions are required to report on their financial 
disclosure forms employees who receive more than $10,000 a year, 29 
U.S.C. 431(b), there is no similar earnings threshold for reporting by 
labor union employees. A labor organization employee who earns less 
than $10,000 is subject to the reporting requirements.
    The source of payment is not dispositive of whether an individual 
is a labor organization employee. An individual who is paid by the 
employer to perform union work, either under a ``union leave'' or ``no 
docking'' policy, is an employee of the union if the individual 
performs services for, and under the control of, the union. See 
discussion above, under the definition of ``bona fide employee.'' The 
mere fact that payment is made by the employer does not eliminate the 
individual's status as an employee of the union. Thus, individuals who 
receive payments from an employer, either under a ``union leave'' or 
``no docking'' policy, for work performed for, and under the control 
of, the union must file a Form LM-30.
    Labor organization officer, as proposed, means any constitutional 
officer, any person authorized to perform the functions of president, 
vice president, secretary, treasurer, or other executive functions of a 
labor organization, and any member of its executive board or similar 
governing

[[Page 51184]]

body. An officer is (1) a person identified as an officer by the 
constitution and bylaws of the labor organization; (2) any person 
authorized to perform the functions of president, vice president, 
secretary, or treasurer; (3) any person who in fact has executive or 
policy-making authority or responsibility; and (4) a member of a group 
identified as an executive board or a body which is vested with 
functions normally performed by an executive board.
    An officer thus includes a trustee appointed to oversee the union. 
A steward may not be identified in the union constitution as an 
officer, but may perform executive duties, and thus be an officer.
    This proposed definition tracks the definition of officer at 
section 3(n) of the LMRDA, 29 U.S.C. 402(n), and adds a new second 
sentence to the current regulation's definition, 29 CFR 404.1(b). The 
LMRDA Manual applies the definition to trustees appointed to oversee a 
labor organization. See LMRDA Manual, 241.200. Comments are invited as 
to whether the proposed definition of ``officer'' is clear and, if not, 
how it may be improved. Title V of the LMRDA, like section 202, 
establishes a conflict of interest standard for union officials that 
extends to officers and other ``representatives'' of the union. 
Commenters are requested to address the Department's determination that 
the reporting obligation does not reach all the union officials who are 
covered by the Act's application of fiduciary standards to union 
officials and representatives. 29 U.S.C. 501.
    Legal or equitable interest, as proposed, means any property or 
benefit, tangible or intangible, that has an actual or potential 
monetary value for the filer, spouse, or minor child without regard to 
whether the filer, spouse, or minor child holds possession or title to 
the interest.
    Minor child, as proposed, means a son, daughter, stepson, or 
stepdaughter less than 21 years of age.
    The current instructions, like the LMRDA, are silent about the age 
at which a child reaches his or her majority. There is no federal 
statute that prescribes a definition of ``minor child'' that would have 
application to section 202(a) of the LMRDA. It is possible to construe 
the term ``minor child'' by reference to the law of the specific state 
where the action occurred, rather than construing the term to have a 
uniform, nationwide federal definition. State law definitions for the 
legal concept of childhood and age of majority differ from state to 
state but also may differ widely from legal context to legal context 
within the same state. Moreover, the general rule as set forth in 
Mississippi Band of Choctaw Indians v. Holyfield, 490 U.S. 30 (1989), 
is ``in the absence of a plain indication to the contrary, * * * 
Congress when it enacts a statute is not making the application of the 
federal act dependant on state law.'' Id. at 43, citing Jerome v. 
United States, 318 U.S. 101, 104 (1943).
    There is a need for a uniform, nationwide meaning of ``minor 
child'' under the LMRDA and without such a uniform definition the 
objective of the LMRDA will be frustrated. In this connection, not only 
do state law definitions for the legal concept of childhood and age of 
majority differ from state to state but also may differ widely from 
legal context to legal context within the same state. Thus, the same 
state may have differing age limitations for contracting, driving, 
marriage, child support and custody, voting, abortion, responsibility 
for medical care, taxes, tort law, welfare, and numerous other 
contexts. See generally Elizabeth S. Scott, The Legal Construction of 
Adolescence, 29 Hofstra L. Rev. 547 (2000). Further, court decisions 
are not always in agreement regarding how to determine which state's 
law should apply in specific situations; i.e., a conclusion regarding a 
child's age of majority may differ depending upon whether the situs of 
the activity or property, the actors' residence, the actors' domicile, 
or some other factor is controlling. See generally 42 Am. Jur.2d 
Infants Sec.  13, p. 21; 43 C.J.S. Infants Sec.  109, pp. 372-73. 
Decisions regarding which state law would be applicable to the age of 
majority of a specific ``minor child'' may also be made more difficult 
because of the significant changes in structure, scope, and complexity 
that labor organizations have undergone in recent decades. Such 
uncertainty as to which state law to apply and whether a report would 
be required would certainly function as obstacles to efficient and 
effective compliance, enforcement, and use of reports. A union member 
may be an officer of a local union, an intermediate union, and an 
international union, each located in a different state. Further, a rule 
that made the filing requirements vary by state could make an interest 
reportable by one officer in one state non-reportable by a different 
officer in another state. Both filers and union members who view filed 
reports require a known and easily applied single standard regarding 
when reports are required, and what a disclosure or its absence 
represents.
    In 1959 when the LMRDA was enacted, it was well established that at 
common law the age at which a person reached his or her majority in the 
states was twenty-one years. See, e.g., 5 Samuel Williston and Richard 
A. Lord, A Treatise on the Law of Contracts Sec.  9:3 n.15 (4th ed. 
1993 & Supp. 1999). The Department has concluded that in 1959 when 
Congress used the term ``minor child'' in section 202(a) of the Act, 
Congress intended a uniform federal standard to apply and referred to 
the general common law meaning at that time, which was a person who had 
not yet reached the age of twenty-one years. We also believe that 
twenty-one is more suitable than an earlier age to distinguish between 
a child's relative dependence upon, and independence from, the finances 
of a parent.
    Although the Department is not aware of any federal statute or 
policy counseling against the proposed definition, the Department 
acknowledges that 18 often is considered a threshold age, and that this 
age is sometimes used in federal statutes and regulations, e.g., 18 
U.S.C. 25(a)(2) (crimes of violence using minors); 20 U.S.C. 
1228c(d)(5) (disclosure requirements for federal education activities); 
42 U.S.C. 619 (block grants for temporary assistance for needy 
families); 42 U.S.C. 1396r-1a(b)(1) (grants to states for medical 
assistance programs); 42 U.S.C. 5106g(1) (child abuse treatment and 
prevention program); 5 CFR 843.102 (administration of death benefits 
and employee refunds under federal retirement system); 34 CFR 263.3 
(grant administration provision relating to professional development of 
certain educators allowing dependent allowance for care of children). 
Other statutes and regulations apply a state's (or tribe's) age of 
majority, e.g., 38 CFR 1.464 (age of consent for certain medical 
treatment); 43 CFR 4.201 (testamentary interests of Native Americans). 
At the same time, other federal statutes and regulations, notably those 
with a focus on the financial dependency of an individual on his or her 
parents, apply a test that looks to both the individual's age and 
circumstances. See, e.g., 5 U.S.C. 8441 (survivor annuities for Federal 
employees); 26 U.S.C. 152(c)(3) (Internal Revenue Code); 28 U.S.C. 
376(a)(5) (survivor annuities for Federal judges); 38 CFR 3.57 
(veterans' benefits); 20 CFR 645.120 (administration of welfare-to-work 
grants); 20 CFR 416.1101 (supplemental security income). The SF 278 
public disclosure form for senior government officials and employees 
defines the term ``dependent

[[Page 51185]]

child'' to mean a filer's ``son, daughter, stepson, or stepdaughter if 
such person is either: (1) Unmarried, under age 21, and living in your 
household, or (2) a `dependent' of yours within the meaning of section 
152 of the Internal Revenue Code of 1986.'' SF 278, p. 2. The OGE 450, 
the confidential financial disclosure reports used by certain 
government employees at or below the GS-15 grade level, uses the same 
definition. OGE 450, p. 1. The Department, therefore, invites comments 
as to the appropriate age, particular circumstances, or both when 
financial holdings of, or transactions by, a child should no longer be 
reportable.
    Payer, as proposed, means:

    (1) An employer whose employees the filer's labor organization 
represents or is actively seeking to represent;
    (2) A business a substantial part of which consists of dealing 
with an employer whose employees the filer's labor organization 
represents or is actively seeking to represent;
    (3) A business that deals with the filer's labor organization or 
a trust in which the labor organization is interested; or
    (4) Any employer or any person who acts as a labor relations 
consultant to an employer.

    The term payer is not used in the statute or the current form. In 
the revised form, the term ``payer'' is used to describe the employer, 
business, or labor relations consultant that is financially involved 
with the filer. The Department recognizes that the term is imperfect, 
in that in common parlance a business in which a filer holds an 
interest would not ordinarily be consider a ``payer'' of the filer. But 
the term, the Department believes, well describes an entity that 
provides income or other benefit, and adequately describes an entity 
that disburses the proceeds of a loan. It is thus used in the 
instructions as a shorthand description of the third party involved in 
a potential conflict-of-interest situation (as defined, ``payer'' 
combines the key elements of section 202) and allows the filer to 
report on a single schedule all the reportable holdings and 
transactions which the filer had with a particular individual or 
entity. The Department requests comments on whether the term ``payer'' 
is potentially confusing, in that some reportable events are not 
payments and the involved third party makes no disbursement, such as 
when a union officer holds an interest in the business of an employer. 
Comments are invited as to whether another word or short term would 
better describe the parties whose relationship to the filer triggers 
the reporting obligation.
    Publicly traded securities, as proposed, means bona fide 
investments in (1) securities traded on a registered national 
securities exchange under the Securities Exchange Act of 1934, (2) in 
shares in an investment company registered under the Investment Company 
Act of 1940, or (3) in securities of a public utility holding company 
registered under the Public Utility Holding Company Act of 1935, and 
income derived from such securities. The American Stock Exchange, 
Boston Stock Exchange, Chicago Board Options Exchange, Chicago Stock 
Exchange, International Securities Exchange, National Stock Exchange 
(formerly the Cincinnati Stock Exchange), New York Stock Exchange, 
Pacific Exchange, and Philadelphia Stock Exchange are registered with 
the Securities and Exchange Commission (SEC) under the Securities 
Exchange Act of 1934. The NASDAQ stock market is not a registered 
national securities exchange. As registration status may change, the 
filer should seek current information. Public investment companies 
comprise certain mutual funds, closed end funds, and unit investment 
trusts. Interstate public utility holding companies are engaged, 
through subsidiaries, in the electric utility business or in the retail 
distribution of natural or manufactured gas. A filer may determine 
whether an exchange is registered with the SEC by making inquiries with 
the exchange or by consulting the SEC. A list of registered exchanges 
is maintained by the SEC on its web site. A filer may determine whether 
an investment company or public utility holding company is registered 
with the SEC by making inquiries to the companies, checking any 
prospectus, or consulting the SEC. A list of registered public utility 
companies is maintained by the SEC on its web site.
    The statute treats certain securities differently than other 
holdings or transactions that trigger a reportable interest. Many 
securities, including certain stocks and bonds, are excluded from the 
reporting requirements, even when a security represents an ownership 
interest in an employer of the employees represented by the labor 
organization or in a business that deals with such an employer or with 
the filer's labor organization, if the security constitutes a public 
traded security. Filers should also be aware that the security must 
also be a bona fide investment to be non-reportable. See discussion of 
bona fide investment above. Stock received as a gift, regardless of the 
exchange on which it is traded or its registration with the SEC, will 
not constitute a ``bona fide investment,'' under the provision that 
exempts from reporting bona fide investments in publicly traded 
securities when the gift is received from an employer, certain 
businesses, or a labor relations consultant. See discussion of bona 
fide investment, above. A union officer or employee who receives a gift 
of publicly traded stock from an employer, for example, must therefore 
disclose the holding, unless another exemption applies. A filer who is 
uncertain about whether a particular security must be reported should 
consult a securities specialist or OLMS. The SEC maintains a web site 
with general information about securities and how the public may 
contact the Commission for assistance: http://www.sec.gov.
    The Senate Report addresses the ``publicly traded securities'' 
exclusion as follows:

    [T]he reporting requirements contained in paragraphs (1) 
[through] (5) * * * shall not apply to publicly traded securities 
and other securities that are publicly regulated * * * [T]he 
committee believes that the holding of publicly traded or regulated 
stock can hardly lead to conflicts of interest because of the 
unlikelihood that such holdings will amount to a substantial or 
controlling interest. Existing public regulation of such securities 
held in such quantities provide sufficient safeguards of disclosure.

    Senate Report, at 38, reprinted in 1 Leg. History, at 434. The 
House Report does not discuss an exclusion for publicly traded 
securities; however, the bill that was passed by the House contains the 
same exception for publicly traded securities as contained in both the 
Senate bill and the Act as passed. See H.R. 8400, reprinted in 1 Leg. 
History, at 619, 639, and 2 Leg. History, at 1691-92.
    The publicly traded securities exception echoes a point in the AFL-
CIO's ethical practices code:

    The [restrictions on the holding of interests in a company that 
has substantial business with an employer whose employees are 
represented by the union or the latter's competitors] do not apply 
in the case of an investment in the publicly traded securities of 
widely held corporations which investment does not constitute a 
substantial enough holding to affect or influence the course of 
corporate decision.

    AFL-CIO Ethical Practices Code, reprinted in 105 Cong. Rec. S16378 
(daily ed. Sept. 3, 1959) and 2 Leg. History, at 1408.
    The SF 278 instructions inform senior government employees to 
report the ``identity and category of valuation of any interest in 
property (real or personal) held by you, your spouse or dependent child 
in a trade or business,

[[Page 51186]]

or for investment or the production of income which has a fair market 
value which exceeds $1,000 as of the close of the reporting period. 
These interests include, but are not limited to, stocks, bonds, pension 
interests and annuities, futures contracts, mutual funds, IRA assets, 
tax shelters, beneficial interests in trusts, personal savings or other 
bank accounts, real estate, commercial crops, livestock, accounts or 
other funds receivable, and collectible items held for resale or 
investment.'' There is no exception for bona fide investments in 
publicly traded securities. SF 278, p. 6-7. The confidential form used 
by government employees of lower rank has comparable requirements, 
requiring reports of all assets that have a value greater than $1000 or 
that produce income over $200, although the filer need not report the 
value of the asset or the amount of income generated. OGE 450, p. 2.
    The proposed instructions contain examples to highlight the 
differences among securities. The Department invites comments about its 
determination that a filer must report investments in securities that 
are traded on NASDAQ and any suggestions regarding the reporting of 
over-the-counter trades or similar transactions. Comments also are 
invited, as discussed above, as to whether some interests, income, and 
transactions in non-publicly traded securities should be exempt from 
reporting, provided any such interests, income and transactions are of 
insubstantial value or amount and occur under terms unrelated to the 
filer's status in a labor organization.
    Substantial part, as proposed, means 5% or more. Where a business's 
receipts from an employer whose employees the filer's labor 
organization represents or is actively seeking to represent constitute 
5% or more of its annual receipts, a substantial part of the business 
consists of dealing with this employer.
    Substantial part, as used in section 202(a)(3) of the LMRDA and the 
instructions for (a)(3), refers to the magnitude of the business 
transacted between the business and the employer whose employees the 
filer's labor organization represents or is actively seeking to 
represent, as a percentage of all business transacted by the business. 
The threshold for substantiality is met when the business's receipts 
from the employer constitutes 5% or more of the annual receipts of the 
business. The purpose of section 202(a)(3)'s substantial-part provision 
is to relieve union officials from having to report income or 
transactions that do not have potential conflict-of-interest 
implications. An official who has an interest in, or receives income 
from, a business that receives 5% or more of its income from the 
employer of the union members may well face a conflict. A business with 
5% of its receipts from a single client will have the opportunity and 
inclination to make demands or offer inducements to retain that 
business. In negotiations with the union, the employer could use its 
relationship with the business as a bargaining tool, either threatening 
to end the relationship or promising to provide additional business 
opportunities. This presents the possibility that a union official may, 
for example, be coerced or have a financial incentive to accede to 
terms in negotiations with the employer of the union's members that the 
official would otherwise reject. These possibilities counsel the 
disclosure of these relationships between the business and the 
employer, and the extent of the officer or employee's interest in or 
income from the business. Disclosure of these relationships and 
financial interests and transactions will provide union members with 
important information about potential financial conflicts and will 
deter fraud and self-dealing, which can occur when an individual is 
subject to improper influence in the performance of official duties. 
This disclosure, like the other reforms proposed herein, will help 
union members ensure that their union officers and employees act on 
their behalf, and not give preferential treatment to any private 
business, employer, or individual.
    In proposing the 5% threshold, the Department has considered 
thresholds established by or under other statutes and regulations, 
e.g., 26 U.S.C. 72 (5% owners of an entity subject to different tax 
treatment under rules applicable to employee annuities and 
distributions); 5 CFR 550.143(c) (a substantial part of a tour of duty 
constitutes at least 25%); 20 CFR 416.211 (payment of a substantial 
part of an individual's care means more than 50% for the purposes of 
reducing supplemental security income payments); 20 CFR 628.405 
(substantial part of labor market to be defined by state ``but shall 
not be less than 10% of the population of a labor market area''); 26 
U.S.C. 501(c)(3) (``an organization shall be exempt from taxation if, 
among other things, it is organized and operated exclusively for 
religious, charitable, scientific, testing for public safety, literary, 
or educational purposes and no substantial part of the activities of 
which is carrying on propaganda, or otherwise attempting, to influence 
legislation.''); 26 CFR 1.501(c)(3)-1 (In determining whether the 
prohibited activities of an organization are ``substantial,'' all the 
surrounding facts and circumstances, including the articles and 
activities of the organization, are to be considered); Haswell v. U.S., 
500 F.2d 1133, 1146 (Ct. Cl. 1974) (although finding percentage test 
inappropriate, court determines that where 20.5% of association's 
expenditures in 1967 were for political activities, and 19.27% of total 
expenditures in 1968 were for political activities, political 
activities were a substantial part of association's operations); 
Seasongood v. Comm'r, 227 F.2d 907, 912 (6th Cir. 1955) (where less 
than 5 percent of time and effort of organization was devoted to 
political activities these activities were not a substantial part of 
the organization's activities, and therefore contributions to the 
organization were tax deductible).
    A larger number of statutes and regulations leave ``substantial'' 
undefined or provide a qualitative factor in establishing its reach, 
e.g., 18 U.S.C. 1093 (defining substantial as ``such numerical 
significance,'' the loss of which would destroy ``group as a viable 
entity''). The Department acknowledges that none of the statutes or 
regulations compels 5% or any other percentage as the threshold for 
defining substantiality of business dealings under the LMRDA, but, we 
believe that 5%, or something close to that figure, represents the 
appropriate level of business activity that may pose conflict of 
interest concerns and should be disclosed. The Department also believes 
that it is better to set the threshold at the lower end of the range of 
reasonableness in order to alert filers of the need to monitor their 
conduct to avoid actual conflict of interest situations.
    The Department seeks comments on whether a percentage threshold 
should be imposed, whether the percentage threshold should be higher or 
lower, whether a percentage of receipts is the appropriate 
consideration, whether union officials with holdings in, or income 
from, a business would be able to determine the percentage of the 
business's income that comes from dealings with the employer, and 
whether a dollar amount threshold could lawfully be imposed, and, if 
so, what figure would represent an appropriate dollar threshold.
    Trust in which a labor organization is interested, as proposed, 
means a trust or other fund or organization (1) which was created or 
established by a labor organization, or one or more of the trustees or 
one or more members of the governing body of which is selected or 
appointed by a labor organization, and

[[Page 51187]]

(2) a primary purpose of which is to provide benefits for the members 
of such labor organization or their beneficiaries.
    This definition is provided by section 3(l) of the LMRDA. 29 U.S.C. 
402(l). The inclusion of the definition in the instructions is meant to 
assist filers who otherwise might not recognize that the LMRDA 
prescribes a specific meaning to the term.
    c. The third heading of the proposed instructions is ``Who Must 
File.'' It combines the second and third categories of the existing 
form. The proposal restates the short description of the reporting 
obligation in the current form, but the proposal differs from the 
existing instruction in two ways. First, the proposal no longer 
provides for a ``Special Report.'' As discussed, the special report was 
designed to inform filers that the Secretary could require additional 
information from them, specifically including certain information that 
the Secretary, by crafting administrative exclusions, had removed from 
the reporting obligation. Due to its lack of utility, the Department 
proposes to eliminate the provision regarding ``Special Reports.''
    Second, as discussed above, the proposed instructions inform the 
filer that reports must include information about a spouse and minor 
child even if his or her status changes during the fiscal year, for 
example, by divorce or a child reaching age 21.
    3. The proposed instructions identify each subsection of section 
202 by heading and explain the nature of the information that must be 
reported and any exceptions or exclusions under that particular 
subsection. Examples are provided to illustrate the application of each 
subsection.
    The revised instructions define the transactions that must be 
reported under this subsection. The Department expects that a more 
straightforward approach with clear examples will help eliminate the 
errors in previously filed Form LM-30 reports, as discussed above, and 
increase compliance with the reporting requirements.

Subsection 202(a)(1)

    The proposed instructions state:

[A1] Payments or Benefits From, or Holdings in, an Employer Whose 
Employees Your Union Represents or Is Actively Seeking To Represent

    You must complete Form LM-30 if you or your spouse or your minor 
child, directly or indirectly, held a stock, bond, security, or 
other interest, legal or equitable, in, or derived any income or any 
other benefit with monetary value (including reimbursed expenses) 
from, an employer whose employees your labor organization represents 
or is actively seeking to represent.

Exceptions

    You are not required to report:
     Payments and benefits received as a bona fide employee 
of the employer. See definition of bona fide employee, above.
     Holdings of, transactions in, or income from, bona fide 
investments in publicly traded securities. See definition of 
publicly traded securities.
     Holdings of, transactions in, or income from, bona fide 
investments in securities that are not publicly traded provided any 
such holding, or transaction, or income is of insubstantial value or 
amount and occurs under terms unrelated to your status in a labor 
organization. Holdings or transactions involving $1,000 or less and 
receipt of income of $100 or less in any one security shall be 
considered insubstantial. See definition of publicly traded 
securities.

    Discussion: Under section 202(a)(1) of the LMRDA, officers and 
employees of a labor organization shall file with the Secretary a 
signed report listing and describing for the filer's preceding fiscal 
year--``any stock, bond, security, or other interest, legal or 
equitable, which he or his spouse or minor child directly or indirectly 
held in, and any income or any other benefit with monetary value 
(including reimbursed expenses) which he or his spouse or minor child 
derived directly or indirectly from, an employer whose employees such 
labor organization represents or is actively seeking to represent, 
except payments and other benefits received as a bona fide employee of 
such employer.'' 29 U.S.C. 432(a)(1).
    Three exclusions apply to reports under section 202(a)(1). The 
first is contained within 202(a)(1) and concerns payments received as a 
bona fide employee of the employer. See discussion of this exemption 
following the definition of bona fide employee.
    A second exclusion is prescribed by section 202(b) for publicly 
traded securities held as a bona fide investment. See discussion of 
this exemption following the definition of publicly traded securities. 
A third exclusion concerns insubstantial holdings, transaction, and 
income relating to securities that are not publicly traded. See 
discussion at section I.H.1, above.
    Insofar as section 202(a)(1) is concerned, the legislative history 
instructs:

    Section [202(a)(1)] requires a union officer or employee to 
disclose any securities or other interest which he has in a business 
whose employees his labor union represents or ``seeks to represent'' 
in collective bargaining. When a prominent union official has an 
interest in the business with which the union is bargaining, he sits 
on both sides of the table. He is under temptation to negotiate a 
soft contract or to refrain from enforcing working rules so as to 
increase the company's profits. This is unfair to both union members 
and competing businesses. The same danger exists when the union 
official is interested in a business which his union is ``actively 
seeking to represent'' for the purposes of collective bargaining.

    Senate Report, at 15, reprinted in 1 Leg. History, at 411. The text 
of the House Report repeats these points, virtually verbatim. House 
Report, at 11, reprinted in 1 Leg. History, at 769.
    To assist the filer, the instructions contain definitions of 
several terms used in this subsection, including legal or equitable 
interests, directly or indirectly, benefit with monetary value, 
actively seeking to represent, bona fide employee, and publicly traded 
securities. None of these key terms is explained in the current 
instructions.
    As discussed in section I.H.2., the Department proposes to remove 
an exemption found in the current instructions: Part A, exemption (iii) 
(dealing with goods and services in the regular course of business). 
Exemption (iv) (dealing with payments received as a bona fide employee) 
has been changed, as discussed above in connection with the definition 
of bona fide employee.
    The proposed instructions provide the following examples to help 
officers and employees identify interests and transactions that must be 
reported under this subsection.

Example 1

    You are a union officer and truck driver who is paid for five days 
of work by the employer, even though you only drive a truck one day a 
week and spend the rest of the week handling union member grievances or 
other union-related work. You must report the pay and benefits received 
from the employer for the time spent performing union work under this 
subsection.

Example 2

    You are an officer of a union that represents Widget Company 
employees. To help prepare for your retirement, you purchase 5,000 
shares of Widget Company stock over the New York Stock Exchange or 
another registered stock exchange. You need not report the shares under 
this subsection, under the exception for bona fide investments in 
publicly traded securities.

Example 3

    You are an officer of a union that represents Widget Company 
employees. Your wife owns 5,000 shares of Widget Company stock that 
Widget's CEO gave

[[Page 51188]]

her on Mother's Day two years ago. This stock is traded on the New York 
Stock Exchange or another registered stock exchange. You must report 
the shares under this subsection because the holding of this interest 
is reportable regardless of when it was obtained and, as a gift, the 
exclusion for bona fide investments in publicly traded securities does 
not apply.

Example 4

    You are a full-time officer of a union that represents employees of 
several different employers. One of the employers pays your expenses on 
a trip with management officials to a plant in another part of the 
country to view some new equipment that the employer is considering 
purchasing. You must report the travel expenses under this subsection.

Example 5

    You are an employee of a union that represents actors. You own a 
production company whose employees are represented by your union. You 
must report your interests in the production company under this 
subsection.

Example 6

    You are an employee of union and your spouse works as a producer 
for a dinner theater that employs actors represented by your labor 
organization. She works 40 to 50 hours a week, producing shows and is 
paid a yearly salary. You do not have to report her earnings under this 
subsection because her payments are received as a bona fide employee of 
the theater company.

Example 7

    You are a union officer and you receive payments under an ERISA 
qualified pension plan. The payments relate to your past employment for 
an employer whose employees your labor organization represents. These 
payments are received as a bona fide employee of the employer, and you 
do not have to report these payments under this subsection.
    The Department invites comments on this subsection and encourages 
commenters to propose additional examples that would help filers comply 
with the requirements of the Act.

Subsection 202(a)(2)

    The proposed instructions state:

[A2] Transactions Involving Loans From and Holdings in an Employer 
Whose Employees Your Union Represents or Is Actively Seeking To 
Represent

    You must complete Form LM-30 if you or your spouse or your minor 
child, directly or indirectly, engaged in any transaction involving 
any stock, bond, security, or loan to or from, or other legal or 
equitable interest in the business of an employer whose employees 
your labor organization represents or is actively seeking to 
represent.

Exception

    You are not required to report:
     Holdings of, transactions in, or income from, bona fide 
investments in publicly traded securities. See definition of 
publicly traded securities.
     Holdings of, transactions in, or income from, bona fide 
investments in securities that are not publicly traded provided any 
such holding, or transaction, or income is of insubstantial value or 
amount and occurs under terms unrelated to your status in a labor 
organization. Holdings or transactions involving $1,000 or less and 
receipt of income of $100 or less in any one security shall be 
considered insubstantial. See definition of publicly traded 
securities.


    Special Note: [A2] covers situations where a union officer or 
employee or his or her spouse or minor child held an interest during 
the reporting year but sold, transferred or otherwise liquidated it 
prior to the end of the fiscal year. Such an interest must be 
reported under this subsection.

    Discussion: Under section 202(a)(2) of the LMRDA, officers and 
employees of a labor organization shall file with the Secretary a 
signed report listing and describing for the filer's preceding fiscal 
year--``any transaction in which he or his spouse or minor child 
engaged, directly or indirectly, involving any stock, bond, security, 
or loan to or from, or other legal or equitable interest in the 
business of an employer whose employees such labor organization 
represents or is actively seeking to represent.'' 29 U.S.C. 432(a)(2).
    The legislative history explains that this subsection is designed 
to capture transactions during the reporting period of any matters that 
would be covered if the holdings or other property remained at the 
close of the reporting period. In virtually identical language, the 
committee reports stated: ``[S]ection [202(a)(2)] is ancillary to 
[section [202(a)(1)]. * * * Its chief purpose is to prevent dishonest 
persons from circumventing [202(a)(1)] by transferring securities out 
of their names on the date of their report but this provision also 
covers other transactions such as loans from the employer.'' Senate 
Report, at 15 (quoted), reprinted in 1 Leg. History, at 411; House 
Report, at 11; reprinted in 1 Leg. History, at 769.
    The proposed instructions inform filers that the obligation to 
report loans includes any transaction in which a payer acted as a 
guarantor of a loan. See LMRDA Manual, Sec. Sec.  244.170; 253.041. 
[A2] covers only loans to or from the employer whose employees his 
organization represents or is actively seeking to represent. Loans from 
other employers are to be considered under [A6], discussed below.
    As discussed in section I.H.2., above, the Department proposes to 
remove exemption (iii) (dealing with goods and services in the regular 
course of business). Similarly, the Department proposes to eliminate 
exemption (iv) (dealing with payments received as a bona fide 
employee), now contained in the current instructions, as to reports 
under this subsection.
    The proposed instructions provide the following examples to help 
officers and employees identify interests and transactions that must be 
reported under this subsection.

Example 1

    You are a union officer and after the beginning of the fiscal year, 
you are allowed to participate in the purchase of stock options at a 
preferred rate for a new business enterprise launched by the employer. 
Three weeks before the end of your fiscal year, you exercise the 
options to purchase the stock and then immediately sell it to realize a 
gain of $25,000. This transaction must be reported under this 
subsection even though you no longer own the stock.

Example 2

    You are a union employee and your minor child receives 100 shares 
of stock as a high school graduation gift from an employer whose 
employees your union represents. She immediately sells it to assist 
with college expenses. Both transactions, the receipt and the sale, 
must be reported under this subsection.

Example 3

    You are a union officer, and like all employees of the employer 
whose members your union represents, you hold an ownership interest in 
the business of the employer. In this fiscal year, you sell this 
interest to the employer. Although the holding of this interest is not 
reportable under section 202(a)(1) because it is a benefit received as 
a bona fide employee, the sale of the interest is reportable under this 
subsection.

Example 4

    You are a union officer and your husband receives a loan from an 
employer whose employees your union represents. The loan must be 
reported under this subsection.

Example 5

    You are a union employee. Your wife is a partner of a package 
delivery company. The company receives a loan from Easy Credit Limited 
that was

[[Page 51189]]

arranged with the assistance of an employer whose employees are 
represented by your union. The loan must be reported under this 
subsection.
    The Department invites comments on this subsection and encourages 
commenters to propose additional examples that would help filers comply 
with the requirements of the Act.

Subsection 202(a)(3)

    The proposed instructions state:

[A3] Holdings in or Transactions With a Business that Deals with an 
Employer Whose Employees Your Union Represents or Is Actively 
Seeking To Represent

    You must complete Form LM-30 if you, your spouse or your minor 
child, directly or indirectly, held an interest in, or received any 
income or other benefit with monetary value (including reimbursed 
expenses) from, any business a substantial part of which consists of 
buying from, selling or leasing to, or otherwise dealing with, the 
business of an employer whose employees your labor organization 
represents or is actively seeking to represent.

Exception

    You are not required to report:
     Holdings of, transactions in, or income from, bona fide 
investments in publicly traded securities. See definition of 
publicly traded securities.
     Holdings of, transactions in, or income from, bona fide 
investments in securities that are not publicly traded provided any 
such holding, or transaction, or income is of insubstantial value or 
amount and occurs under terms unrelated to your status in a labor 
organization. Holdings or transactions involving $1,000 or less and 
receipt of income of $100 or less in any one security shall be 
considered insubstantial. See definition of publicly traded 
securities.

    Discussion: Under section 202(a)(3) of the LMRDA, officers and 
employees of a labor organization shall file with the Secretary a 
signed report listing and describing for the filer's preceding fiscal 
year--``any stock, bond, security, or other interest, legal or 
equitable, which he or his spouse or minor child directly or indirectly 
held in, and any income or any other benefit with monetary value 
(including reimbursed expenses) which he or his spouse or minor child 
directly or indirectly derived from, any business a substantial part of 
which consists of buying from, selling or leasing to, or otherwise 
dealing with, the business of an employer whose employees such labor 
organization represents or is actively seeking to represent.'' 29 
U.S.C. 432(a)(3).
    Apart from paraphrasing the language of section 203(a)(3), the 
committee reports noted only that the McClellan Committee hearings 
disclosed ``a number of instances in which union officials gained 
personal profit from a business which dealt with the very same employer 
with whom they engaged in collective bargaining on behalf of the 
union.'' Senate Report, at 15 (quoted), reprinted in 1 Leg. History, at 
411; see House Report, at 12 (virtually the same), reprinted in 1 Leg. 
History, at 770. The Senate and House committees each endorsed the 
concern expressed in the AFL-CIO's Ethical Practices Code that the 
union official ``may be given special favors or contracts by the 
employer in return for less than a discharge of his obligations as a 
trade-union leader.'' Senate Report, at 15, reprinted in 1 Leg. 
History, at 411; House Report, at 12, reprinted in 1 Leg. History, at 
770.
    The proposed instructions explain the key terms of this provision, 
most of which have been discussed in connection with [A1] and [A2]. The 
term substantial part is unique to [A3]. As discussed above, in the 
definition of this term, where a business's receipts from an employer 
whose employees the filer's labor organization represents or is 
actively seeking to represent constitute 5% or more of its annual 
receipts, a substantial part of the business consists of dealing with 
this employer.
    The interest in, or income derived from the business must be 
disclosed in full. A filer is not permitted to reduce the amount 
reported by, for example, a percentage proportionate to the amount of 
work performed by the business for the employer.
    The proposed instructions provide the following examples to help 
officers and employees identify interests and transactions that must be 
reported under this subsection.

Example 1

    You are a union officer. You own a small machine parts business. 
The employer of the employees your union represents purchased a large 
quantity of machine parts from your business. The employer's purchases 
represented 10% of the total receipts of your business that year. You 
must report, under this subsection, your interest in the machine parts 
business and the dealings between the business and the employer.

Example 2

    You are an officer of an international union. Your wife owns an 
accounting firm and last year 20% of the receipts of her firm were from 
an employer whose employees are represented by a local union that is 
subordinate to your international union. You must report, under this 
subsection, your wife's interest in the accounting firm and the 
dealings between her business and the employer.

Example 3

    You are a union officer and part owner of a copier supply company. 
Your union represents employees of employers A, B, and C. Last year 3% 
of the company's receipts were from employer A, 2% were from employer 
B, and 4% were from employer C. You must report under this subsection 
because a total of 9% of the company's receipts was from employers 
whose employees your labor organization represents. You must report 
your interests in the copier supply company, and its dealings with each 
of the employers.

Example 4

    You are the business manager of a local union that represents stage 
technicians. You have a business supplying lighting and other equipment 
to companies putting on shows and conventions within the jurisdiction 
of your local. These companies employ members of your union, and 5% or 
more of your business is derived from these companies. You must report, 
under this subsection, your interest in your business and its dealings 
with the companies that hire the union members.

Example 5

    You are the president of a union that represents employees of a 
trucking company. In addition to his full time job, your spouse 
moonlighted part-time last year and earned $9,000 cleaning business 
offices on Sundays. Once a month, the trucking company paid your spouse 
$80 to clean its office space, for an annual total of $960, about 10% 
of his company's business. You must report the $9,000 in income under 
this subsection, as well as the dealings between the cleaning business 
and the trucking company.

Example 6

    You are an employee of a union that has a collective bargaining 
agreement with trade show contractors. You were also a seasonal 
employee of a company that received 5% of its receipts last year from 
leasing fork lifts to these contractors. You must report, under this 
subsection, your income or other benefits with monetary value 
(including reimbursed expenses) received from the company and the 
dealings between the company and the contractors.

Example 7

    You are the treasurer of a union that has a collective bargaining 
agreement with trade show contractors. You are the owner of a company 
that gets 100% of its income from providing laborers to those 
contractors for handling empty

[[Page 51190]]

crates. You must report, under this subsection, your ownership interest 
in the company and its dealing with the trade show contractors.

Example 8

    You are a union employee. Your wife is an employee of a law firm 
that received 10% of its income last year from an employer whose 
employees your union represents. You must report, under this 
subsection, your wife's income or other benefits with monetary value 
(including reimbursed expenses) received from the law firm, and the 
dealing between the law firm and the employer.
    The Department invites comments on this subsection and encourages 
comments proposing additional examples that would help filers comply 
with the requirements of the Act. The Department specifically requests 
comments on the threshold set to establish a ``substantial part'' of a 
company's business.

Subsection 202(a)(4)

    The proposed instructions state:

[A4] Holdings in or Transactions With a Business That Deals With 
Your Union or a Trust in Which Your Union Is Interested

    You must complete Form LM-30 if you or your spouse or your minor 
child, directly or indirectly, held an interest in, or received any 
income or other benefit with monetary value (including reimbursed 
expenses) from, a business any part of which consists of buying 
from, selling or leasing to, or otherwise dealing with, your labor 
organization or a trust in which your labor organization is 
interested.

Exception

    You are not required to report:
     Holdings of, transactions in, or income from, bona fide 
investments in publicly traded securities. See definition of 
publicly traded securities.
     Holdings of, transactions in, or income from, bona fide 
investments in securities that are not publicly traded provided any 
such holding, or transaction, or income is of insubstantial value or 
amount and occurs under terms unrelated to your status in a labor 
organization. Holdings or transactions involving $1,000 or less and 
receipt of income of $100 or less in any one security shall be 
considered insubstantial. See definition of publicly traded 
securities.

    Discussion: Under section 202(a)(4) of the LMRDA, officers and 
employees of a labor organization shall file with the Secretary a 
signed report listing and describing for the filer's preceding fiscal 
year--``any stock, bond, security, or other interest, legal or 
equitable, which he or his spouse or minor child directly or indirectly 
held in, and any income or any other benefit with monetary value 
(including reimbursed expenses) which he or his spouse or minor child 
directly or indirectly derived from, a business any part of which 
consists of buying from, or selling or leasing directly or indirectly 
to, or otherwise dealing with such labor organization.''
    The committee reports use nearly identical language to explain this 
subsection:

    Section [202(a)(4)] requires a union officer or employee to 
report any interests which he has in, or income which he derives 
from, a business which buys from, sells or leases to, or otherwise 
deals with, a labor organization.

    Senate Report, at 15, reprinted in 1 Leg. History, at 411; House 
Report, at 12 (virtually verbatim), reprinted in 1 Leg. History, at 
770. As an illustration of the practice, the committees described a 
situation where an ``officer of a local union charged with purchasing 
supplies or services might be tempted to favor a firm in which he owned 
a dominant interest.'' Senate Report, at 16, reprinted in 1 Leg. 
History, at 412; House Report, at 12 (virtually verbatim), reprinted in 
1 Leg. History, at 770.
    The committee reports provide as an additional illustration, a 
situation in which ``an officer charged with placing the union's 
insurance would be tempted to place it through a firm of insurance 
brokers in which he owned an interest.'' Id.
    The breadth of this subsection was described by Senator Goldwater 
as ``cover[ing] every conflict-of-interest situation.'' Senate Report, 
at 90, reprinted in 1 Leg. History, at 486. This subsection uses no 
terms that have not been earlier discussed. Its chief difference from 
the other subsections is that its focus is on interests or income 
derived from a business that deals with the filer's labor organization.
    As in the current form, the Department proposes to retain the 
requirement that transactions with businesses that deal with trusts in 
which the filer's labor organization is interested are reportable. See 
Instructions, Part B.
    The interest in, or income derived from the business must be 
disclosed in full. A filer is not permitted to reduce the amount 
reported by, for example, a percentage proportionate to the amount of 
work performed by the business for the employer.
    The proposed instructions provide the following examples to help 
officers and employees identify interests and transactions that must be 
reported under this subsection.

Example 1

    You are an officer of a district council. Your spouse owns and 
operates a small catering business. Your union purchases catering 
services from your spouse's business during the fiscal year. You must 
report, under this subsection, your spouse's ownership interest in the 
catering business, and its dealings with the union.

Example 2

    You are a union officer. You work part time for a business that did 
maintenance work on the heating and air conditioning system at the 
union hall. You must report, under this subsection, the income and 
other benefits with monetary value (including reimbursed expenses) 
received from the maintenance business, and its dealings with the 
union.

Example 3

    You are a business manager of a local union. You work on a contract 
basis for a plumbing supply company that sold tools and other supplies 
to the union and its training funds. You must report your income and 
other benefits with monetary value (including reimbursed expenses) 
received from the plumbing supply company under this subsection, and 
the dealings between the supply company, the union, and the training 
funds.

Example 4

    You are an officer of a national union. You and your husband own a 
printing company that prints the union newsletters for a local union of 
the same national union. You must report, under this subsection, your 
and your husband's ownership interest in the printing company and its 
dealing with the union.

Example 5

    You are an officer of a joint board and run a snow plowing 
business. The joint board is subordinate to an international union. The 
international union contracted with the business to plow the parking 
lot of its headquarters. You must report your interest in the snow 
plowing business under this subsection, in addition to the business's 
interest with the international union.

Example 6

    You are the president of a local union and a partner in a company 
that was hired to resurface the union's parking lot. You must report, 
under this subsection, your interest in the business and its dealings 
with the union.

Example 7

    You are an employee of a national union. Your wife works for a 
travel agency that handles all the travel

[[Page 51191]]

arrangements by officers and employees of the national union. In 
addition to your wife's employment compensation from the travel agency, 
she also receives rebates from hotels for bookings made for the union. 
You must report your wife's income and other benefits with monetary 
value (including reimbursed expenses) received from that business, and 
the value of the rebates she received under this subsection, as well as 
the dealings between the travel agency and the union.

Example 8

    You are the president of a local union and your 19-year old son 
works for a business that produces customized t-shirts, caps, and 
jackets. Your local union buys logo items from his business. You must 
report your son's income and other benefits with monetary value 
(including reimbursed expenses) received from this business under this 
subsection, and the dealing between the business and the union.

Example 9

    You are a business representative of a local union that represents 
shipyard workers. You and two other business representatives own a 
company that does medical testing of local members, which is paid for 
by a health benefit plan that is a trust in which your local is 
interested. You must report your interest in the medical testing 
company under this subsection, and the dealings between the testing 
company and the health benefit plan.

Example 10

    You are an employee of a union. Each year your union holds an 
annual workers' summer school at a private university whose space and 
services are rented by the union. You go to the summer school as an 
instructor and bring your wife and two minor children. At no extra 
charge to you, the university provides accommodations for you, your 
wife and minor children, rather than the single room typically provided 
instructors. The use of the additional space and its fair market value 
must be reported under this subsection, in addition to the dealings 
between the university and the union.

Example 11

    You are the president of a local union and own a building, which 
has numerous tenants, including your local. The ownership and income 
received from the operation of the building and the dealings between 
you and the union must be reported under this subsection.

Example 12

    You are a national union president and a trustee of a jointly 
administered health care trust that insures union members through an 
insurance company. Premiums for coverage are paid by the trust to the 
insurance company. You are a member of the board of directors of the 
health insurance company, which pays you an annual fee and reimburses 
expenses for your attendance at board meetings. In your capacity as a 
trustee of the health care trust, you recuse yourself from all 
decisions concerning the health insurance company. As the insurance 
company is doing business with a trust in which your union is 
interested, you must report your annual fee and reimbursed expenses 
under this subsection. The dealings between the health insurance 
company and the trust must also be reported.

Example 13

    You are an employee of a national union and your husband works for 
a law firm that represents a local union that is affiliated with your 
national union. You must report, under this subsection, your husband's 
income and other benefits with monetary value (including reimbursed 
expenses) received from the law firm, and the dealings between the law 
firm and the local union.

Example 14

    You are a national union president and director of a registered 
investment company that offers investment opportunities to unions or 
trusts in which unions are interested. Your union has invested several 
thousand dollars in fixed income or equity funds managed by the 
company. You receive no gratuities, compensation, or reimbursement for 
your duties as a director, but you are insured against personal 
liability for your actions as a director under a policy paid for by the 
company. The investment company paid for this insurance coverage. You 
must report the payment under this subsection, and the dealings between 
the investment company and the union.
    The Department invites comments on this subsection and encourages 
commenters to propose additional examples that would help filers comply 
with the requirements of the Act.

Subsection 202 (a)(5)

    The proposed instructions state:

[A5] Transactions or Arrangements With an Employer Whose Employees 
Your Union Represents or Is Actively Seeking To Represent

    You must complete Form LM-30 if you or your spouse or your minor 
child had any direct or indirect business transaction or arrangement 
with any employer whose employees your labor organization represents 
or is actively seeking to represent.

Exceptions

    You are not required to report:
     Payments and benefits received as a bona fide employee 
of the employer. See definition of bona fide employee.
     Holdings of, transactions in, or income from, bona fide 
investments in securities that are not publicly traded provided any 
such holding, or transaction, or income is of insubstantial value or 
amount and occurs under terms unrelated to your status in a labor 
organization. Holdings or transactions involving $1,000 or less and 
receipt of income of $100 or less in any one security shall be 
considered insubstantial. See definition of publicly traded 
securities.
     Purchases and sales of goods or services at prices 
generally available to any employee of the employer.
     Holdings of, transactions in, or income from, bona fide 
investments in publicly traded securities. See definition of 
publicly traded securities.

    Special Note:  You must report special discounts, special rates 
and other special treatment that you or your spouse or your minor 
child receives from an employer whose employees your labor 
organization represents or is actively seeking to represent. See 
definitions of labor organization and actively seeking to represent. 
A filer who purchases an item at a reduced price generally available 
to employees of the employer must nevertheless report the discount, 
and may not claim the exemption, unless the filer is an employee of 
the employer providing the discount.

    Discussion: Under section 202(a)(5) of the LMRDA, officers and 
employees of a labor organization shall file with the Secretary a 
signed report listing and describing for the filer's preceding fiscal 
year--``any direct or indirect business transaction or arrangement 
between him or his spouse or minor child and any employer whose 
employees his organization represents or is actively seeking to 
represent, except work performed and payments and benefits received as 
a bona fide employee of such employer and except purchases and sales of 
goods or services in the regular course of business at prices generally 
available to any employee of such employer.''
    The Senate and House Reports explained this provision in nearly 
identical language:

    [This subsection] requires a union official to disclose any 
business transaction with an employer with whom his organization 
deals.

[[Page 51192]]

The aim of this subsection is to prevent loans, under-the-table 
payments, special discounts, and other personal allowances which 
might influence a union official in the conduct of an organizational 
campaign or collective bargaining with the employer. The testimony 
before the McClellan committee demonstrates the need to compel 
disclosure. Normal transactions such as the payment of wages and the 
purchase and sale of goods or services at prices available to 
employees generally are excepted.

    Senate Report, at 12 (quoted), reprinted in 1 Leg. History, at 412; 
House Report, at 12 (virtually verbatim), reprinted in 1 Leg. History, 
at 770. The only difference between the reports is that the House tied 
the exception to a product's availability ``on the open market'' in 
place of the Senate's qualification of the rule as ``generally.'' Id. 
The LMRDA Manual addresses (a)(5) as follows:

    Section 205(a)(5) is designed to pick up any direct or indirect 
business transactions between the union officer (or his wife or 
minor child) and the employer whose employees the union officer's 
organization represents. There are two very important statutory 
exceptions, namely payments of bona fide wages to the union officer 
for regular work performed, and purchases and sales in the regular 
course of business at prices generally available to any employee of 
the employer.

    LMRDA Manual, Sec.  247.300. The LMRDA Manual continues: Where a 
union official ``is a regular employee on the assembly line,'' he does 
not need to report a 20% discount on a new automobile that is available 
to any regular employee, but if the official is not a regular employee 
he must report the purchase. Id. Under the current instructions, 
however, the ``regular course of business'' exception appears to apply 
generally, without regard to whether the individual obtaining the 
discount is an employee of the employer providing the discount. 
Instructions, Part A, exclusion (iii). The proposed instructions 
clarify that the only individuals who may avoid reporting employee 
discounts are employees of the employer.
    [A5] covers only business transactions with the employer whose 
employees the filer's organization represents or is actively seeking to 
represent. Payments of money or other things of value are to be 
considered under section [A6], discussed below.
    As discussed in section I.H.2., above, exemption (iv) (dealing with 
payments received as a bona fide employee) has been modified, as 
discussed following the definition of bona fide employee.
    The proposed instructions provide the following examples to help 
officers and employees identify interests and transactions that must be 
reported under this subsection.

Example 1

    You are an officer of an international union affiliated with a 
local union that represents employees at an automobile plant. The 
employer permits you to participate in an executive purchase plan under 
which management executives are permitted to purchase vehicles produced 
by the employer at a discount and at a lower interest rate. The 
transaction must be reported under this subsection.

Example 2

    You are an employee of a union that represents employees at Acme 
Warehouse. At your request, Acme allows your neighbor to store his 
company's inventory at a rate below the customary storage rate. Your 
neighbor, in turn, shows his gratitude by allowing you to use his 
luxury box at a sporting event. You must report this arrangement.
    The Department invites comments on its interpretation of this 
subsection and encourages commenters to propose additional examples 
that would help filers comply with the requirements of the Act.

Subsection 202(a)(6)

    The proposed instruction states:

[A6] Payments of Money or Other Thing of Value From Any Employer or 
Labor Relations Consultant

    You must file Form LM-30 if you or your spouse or your minor 
child received, directly or indirectly, any payment of money or 
other thing of value (including reimbursed expenses) from any 
employer or any labor relations consultant to an employer.
    The types of payments that must be reported under this 
subsection include any payment from an employer or a labor relations 
consultant to an employer for the following purposes:
     Not to organize employees
     To influence employees in any way with respect to their 
rights to organize
     To take any action with respect to the status of 
employees or others as members of a labor organization; and
     To take any action with respect to bargaining or 
dealing with employers whose employees your organization represents 
or seeks to represent.

    Special Note:  If you received a payment or other thing of 
value, including reimbursed expenses, from an employer whose 
employees your union represents or actively seeks to represent, or a 
business that consists in substantial part of dealing with such an 
employer, or a business that has any dealings with your union, the 
payment should be reported under sections [A1]-[A5]. Section 
202(a)(6) covers payments and other things of value, including 
reimbursed expenses, from businesses and employers that are not 
covered by the more specific provisions of sections 202(a)(1)-(5). 
Thus, for example, if a transaction concerns a payment to you from 
the employer whose employees your labor organization represents or 
actively seeks to represent, or a business that deals with such an 
employer or your labor organization, the payment should be reported 
under the appropriate subsection in section 202(a)(1)-(5).

Exception

    You are not required to report:
     Payments of the kinds referred to in LMRA section 
302(c), summarized below:

    Discussion: Under section 202(a)(6) of the LMRDA, officers and 
employees of a labor organization shall file with the Secretary a 
signed report listing and describing for the filer's preceding fiscal 
year--``any payment of money or other thing of value (including 
reimbursed expenses) which he or his spouse or minor child received 
directly or indirectly from any employer or any person who acts as a 
labor relations consultant to an employer, except payments of the kinds 
referred to in section 186(c) of this title,'' 29 U.S.C. 186(c) (also 
known as section 302 of the Labor Management Relations Act, 1947).
    The committee reports described subsection (a)(6) in identical 
language as follows:

    Section [202(a)(6)] requires a union official to disclose any 
payment received from an employer or from any person who acts as a 
labor relations consultant for an employer except payments permitted 
by section 302 of the Labor-Management Relations Act of 1947, as 
amended. The purpose of this paragraph, among other things, is to 
reach the union official who may receive a payment from an employer 
not to organize [its] employees.

    Senate Report, at 16, reprinted in 1 Leg. History, at 412; House 
Report, at 12 (virtually verbatim), reprinted in 1 Leg. History, at 
770. As described by the LMRDA Manual, the subsection is designed to 
capture ``situations that pose conflict of interest problems which are 
not covered in the previous five sections of 202.'' LMRDA Manual, Sec.  
248.005. By way of example, it continues: ``A union officer must report 
under section 202(a)(6), if he receives any payment by way of dividends 
or otherwise from a firm which is competitive to one which has 
collective bargaining agreements with his own union.'' Id.
    Subsection (a)(6) has been interpreted consistent with its 
description as a ``catch-all'' for transactions with employers not 
reportable under subsections (a)(1) through (a)(5). Language unique to 
section (a)(6) is found in the exception it provides for ``payments of 
the kinds referred to in

[[Page 51193]]

section 302(c) of the Labor Management Relations Act, 1947, as 
amended.'' Section 302(c) contains a number of categories with 
exceptions and provisos that limit their general availability.
    In explaining the reference to 302(c), the Senate Report stated:

    [T]he general ban in section 302 upon employer payments to 
unions is not to apply to money deducted from the wages of employees 
pursuant to a collective bargaining agreement in the form of 
periodic payments to a union in lieu of membership dues, not to 
employer payments to trust funds for pooled vacation, holiday, 
severance or similar benefits, or apprentice or other employee 
training programs.

    Senate Report, at 44 (discussing comparable language addressing an 
employer's reporting obligation), reprinted in Leg. History, at 440; 
compare House Report, at 35 (no discussion beyond noting exception of 
``payments of the kinds referred to in section 302(c)''), reprinted in 
1 Leg. History, at 793.
    The current instructions do not attempt to characterize the 
categories or assist the filer in applying them to his or her 
completion of the Form LM-30. Instead, the current instructions simply 
set out the entire text of section 302(c), verbatim.
    The Department's proposed instructions describe the types of 
payments that, as a general rule, need not be reported under section 
(a)(6):

     (1) Any money or other thing of value payable by an 
employer to
--(a) An employee acting openly for the employer in matters of labor 
relations or personnel administration, or
--(b) Any officer or employee of a labor organization who also is an 
employee or former employee of such employer, as compensation for or 
by reason of, his service as an employee of such employer;
     (2) Money or other thing of value payable in 
satisfaction of a judgment, arbitral award, settlement or release of 
any claim in the absence of fraud or duress;
     (3) With respect to the sale or purchase of an item at 
the prevailing market price in the regular course of business;
     (4) With respect to deductions in payment of labor 
union dues from wages by written assignment;
     (5) With respect to money or other thing of value paid 
to a trust fund established by the representative of an employer's 
employees for the sole benefit of these employees, their families 
and dependents for medical or hospital care, pensions on retirement 
or death of employees, compensation for injuries or illness 
resulting from occupational activity or insurance to provide the 
foregoing, or unemployment benefits or life insurance, disability 
and sickness insurance, or accident insurance;
     (6) With respect to money or other thing of value paid 
by any employer to a trust fund established by the representative of 
the employer's employees for the purpose of pooled vacation, 
holiday, severance or similar benefits, or defraying costs of 
apprenticeship or other training programs;
     (7) With respect to money or other thing of value paid 
by any employer to an individual or pooled trust fund for providing 
scholarships for the benefit of employees, families, and dependents, 
child care centers, or financial assistance for employee housing;
     (8) With respect to money or other thing of value paid 
by any employer to a trust for defraying the costs of legal 
services; or
     (9) With respect to money or other thing of value paid 
by any employer to a labor-management committee.
    Under the proposed instructions, filers are cautioned that this 
exception applies only to the holdings and transactions reportable 
under section 202(a)(6).

    As discussed in section I.H.2., above, the current instructions 
provide for two additional exemptions that will not appear in the 
revised instructions. Filers need not report ``bona fide loans, 
interest or dividends from national or state banks, credit unions, 
savings or loan associations, insurance companies, or other bona fide 
credit institutions,'' and ``(i)nterest on bonds or dividends on stock, 
provided such interest or dividends are received, and such bonds or 
stock have been acquired, under circumstances and terms unrelated to 
the recipient's status in a labor organization and the issuer of such 
securities is not an enterprise in competition with the employer whose 
employees your labor organization represents or actively seeks to 
represent.'' See Instructions, Part C, exemptions (ii) and (iii). The 
Department invites comments on the elimination of these exemptions, and 
the effect of such action. The Department seeks comments on whether the 
exceptions being deleted are duplicated, in any part, within the 
section 302(c) exceptions. Further, the Department seeks comments on 
whether the section 302(c) exceptions exclude from reporting ordinary 
payments of wages or salary of a filer's spouse or minor child when the 
wages or salary are paid by an employer whose employees the filer's 
labor organization does not represent and is not actively seeking to 
represent. Finally, the Department seeks comment on whether section 
202(a)(6) limits the reporting obligation to only payments that present 
an actual conflict of interest, whether such an interpretation is a 
permissible reading of the statute, and, if so, how the instructions 
could be written to implement this interpretation, without granting 
impermissible discretion in the filer to determine which financial 
matters are reportable. LMRDA Interpretative Manual, Sec.  248.005.
    The proposed instructions provide the following examples to help 
officers and employees identify interests and transactions that must be 
reported under this subsection.

Example 1

    You are a union officer and an attorney. Employers whose employees 
your labor organization does not represent or actively seek to 
represent often hire your law firm. One of those employers gives you a 
special gift of a three-week all-expense-paid trip to France as a 
reward for winning a major lawsuit. You must report the trip and its 
value under this subsection.

Example 2

    You are a union officer and you receive payments under an ERISA 
qualified pension plan. The payments relate to your employment for an 
employer whose employees your labor organization does not represent or 
actively seek to represent. You do not have to report these payments.

Example 3

    You are an officer of a national union. Your spouse is hired as a 
senior executive of an employer on the understanding that your union 
will not seek to organize that employer. You must report all the income 
and benefits your spouse receives from the employer under this 
subsection.

Example 4

    You are a local union president. An employer outside of the 
jurisdiction of your local offers your 20-year-old daughter a paid 
summer internship on the understanding that you will seek to have your 
members go on strike against an employer who is one of their 
competitors. You must report all the benefits your daughter receives as 
part of the internship under this subsection.
    The Department invites comments on its interpretation of this 
subsection and encourages commenters to propose additional examples 
that would help filers comply with the requirements of the Act.

C. Completion of the Form

    The myriad types of financial transactions made reportable by 
section 202 complicate the design of a ``self-explanatory'' form. The 
filer must rely on the instructions to accurately complete the form. We 
invite comments addressing the layout and clarity of the form. Would 
the form benefit from adding additional text and, if so, what additions 
are recommended? Does the form have an intuitive feel to it? Does the 
form request information in logical

[[Page 51194]]

progression? How can the form be improved?
    Item 1--LM-30 Filer Number: No changes are proposed for this item.
    Item 2--Period Covered: No changes are proposed for this item.
    Item 3--Contact Information of Reporting Person: Requires filers to 
provide their email address if they have one. This entry would not have 
been possible in 1963 when the existing regulation was drafted. Today, 
an email address is an important part of a person's contact 
information.
    Item 4--Labor Organization Identifying Information: Combines Items 
4 and 5 of the existing Form LM-30. It also requires filers to report 
whether they held their position in the union at the end of the 
reporting period. As an enforcement and compliance assistance matter, 
it is important to know whether the filer can still be reached at the 
union, and whether the filer may need to file Form LM-30 the following 
year.
    Item 5--Signed: No changes are proposed for this item.
    Payer Summary Schedule: As stated above, this schedule was created 
to provide a single place on the first page of the report where the 
filer's total transactions, benefits, and interests are reported. This 
schedule also allows a person reviewing the report to skip directly to 
a payer of interest. This schedule contains information that could be 
derived from the existing Form LM-30 but not in one place.

Payer Detail Page

    Schedule 1--Payer Identifying Information: Combines Items 6, 8, and 
13 of the existing Form LM-30. It also requires reporting of the 
telephone number, web site address, state of incorporation or 
registration, and state business identification number of each payer. 
This additional contact information will make it easier for a person 
reviewing the report to identify the payer. Finally, it requires the 
filer to indicate whether he or she was associated with the payer at 
the end of the reporting period. As an enforcement and compliance 
assistance matter, the Department needs to know whether the filer may 
be required to file a report the following year. In addition, union 
members have an interest in knowing whether the filer has severed his 
or her relationship with the payer or whether the relationship still 
exists, as they may wish to raise the matter within the union if the 
relationship still exists.
    Schedule 2--Filer's Interest in, Payments or Loans From, or 
Transactions or Arrangements with the Payer: Combines Items 7, 12, and 
14 of the existing Form LM-30. The schedule requires filers to list 
their interests, payments, loans, transactions, or arrangements. The 
schedule also requires reporting of the date and recipient of each 
reportable interest, payment, loan, transaction, or arrangement, which 
may or may not have been included by filers under the existing 
regulation. Finally, a column was created for filers to indicate the 
subsection(s) that requires the disclosure of each transaction, 
benefit, or interest. This function was partially accomplished in the 
existing regulation by the division of the form into Parts A, B, and C. 
The Department believes that this schedule with discrete columns and 
rows replacing narrative boxes will alleviate confusion on the part of 
filers and people reviewing the reports.
    Schedule 3--Payer's Dealings with Union, Trust, or Employer: 
Combines and simplifies information reported in Items 9, 10, and 11 of 
the existing Form LM-30. For instance, filers no longer need to report 
the full address of a trust or employer; only a file number or zip code 
is required.
    The current instructions provide little information to the filer 
about how to report the value of particular holdings or transactions. 
To remedy this omission, the revised instructions provide a 
comprehensive list of ways in which the value of an interest or 
transaction must be reported. The filer is told that he or she must 
report the exact value of an interest or transaction, if known or 
easily obtainable by the filer; otherwise, the filer is instructed to 
enter a good faith estimate of the fair market value and explain the 
basis for the estimate in the space provided on the form. The list is 
adopted from the regulations addressing the disclosure requirements of 
federal employees. See 5 CFR 2634.105(t).
    The revised instructions identify for the filer different ways by 
which ``fair market value'' may be determined:
     The purchase price
     Recent appraisal
     Assessed value for tax purposes, adjusted to reflect 
market value if the assessed value is computed at less than 100% of 
that market value
     The year end book value of non-publicly traded stock, the 
year-end exchange rate of corporate stock, or the face value of 
corporate bonds or comparable securities
     The net worth of a business partnership or business 
venture
     The equity value of an individually-owned business or any 
other recognized indication of value (such as the sale price on the 
stock exchange at the time of the report or, for transactions, the sale 
price on the stock exchange at the time of the sale).
    Recently, a labor organization has asserted to the Department that 
the current Form LM-30 can require ``the public disclosure of highly 
confidential and proprietary commercial information about arm's length 
business transactions between'' companies owned by union officers and 
employers with whom the union has negotiated a collective bargaining 
agreement, and that if confidential information were subject to the 
reporting requirements, ``it would have a potentially devastating 
impact on the [labor organization].'' The public is asked to comment on 
whether Form LM-30 may require the disclosure of sensitive information, 
whether highly confidential and proprietary commercial information 
should be protected, and the potential harm to union members or the 
public, if any, from the nondisclosure of such information. See 68 FR 
58386-88 (description of how union should handle confidential 
information when completing Form LM-2); SF 278, p. 16 (Public Financial 
Disclosure Report for senior government officials and employees) 
(excluding information to the extent that it is considered confidential 
as a result of a privileged relationship established by law).

Continuation Pages

    Labor Organizations in Which the Reporting Person is an Officer or 
Employee--Continuation Page: This continuation page allows filers to 
report all of the unions in which they are employed. This schedule will 
ease the burden on filers who are employed by or are officers of 
multiple unions. These individuals will no longer need to file multiple 
reports.
    Payer Summary Schedule--Continuation Page: This continuation page 
allows filers to report additional payers if the five lines provided on 
the first page are not sufficient. The existing Form LM-30 does not 
contain a summary schedule.
    Schedule 2--Filer's Interest in, Payments or Loans From, or 
Transactions or Arrangements with the Payer--Continuation Page: This 
continuation page allows filers to report additional interests, 
payments, loans, transactions, or arrangements. This replaces the 
continuation pages for Parts A, B, and C on the existing Form LM-30.
    Schedule 3--Payer's Dealings with Union, Trust, or Employer--
Continuation Page: This continuation page allows filers to report 
additional dealings of a payer that would trigger a reporting 
requirement. This replaces the

[[Page 51195]]

continuation pages for Parts A, B, and C on the existing Form LM-30.
    Additional Information Schedule: This schedule allows filers to 
provide additional information or explanations about other items in the 
form. For instance, filers who cannot assign a value to an item in 
Schedule 3 must enter N/A in Column E and explain the situation in this 
schedule. This is similar to additional information items found on 
other OLMS forms, but the existing Form LM-30 does not contain such an 
item.

Regulatory Procedures

A. Executive Order 12866

    The proposed rule has been drafted and reviewed in accordance with 
Executive Order 12866, section 1(b), Principles of Regulation. The 
Department has determined that this proposed rule is not an 
``economically significant'' regulatory action under section 3(f)(1) of 
Executive Order 12866. Based on a preliminary analysis of the data, the 
rule is not likely to: (1) Have an annual effect on the economy of $100 
million; (2) create a serious inconsistency or otherwise interfere with 
an action taken or planned by another agency; or (3) materially alter 
the budgetary impact of entitlements, grants, user fees, or loan 
programs or the rights and obligations of recipients thereof. As a 
result, the Department has concluded that a full economic impact and 
cost/benefit analysis is not required for the rule under Section 
6(a)(3) of the Order. However, because of its importance to the public 
the proposed is a significant regulatory action and was reviewed by the 
Office of Management and Budget.
    The burden imposed by the revision of the Form LM-30 is addressed 
in the Paperwork Reduction Act section, below. The Paperwork Reduction 
Act section also describes what the Department believes are the 
substantial benefits of this rulemaking.
    Prior to issuing this proposal, the Department sought the 
involvement of those individuals and organizations that will be 
affected by the Proposed Rule, including officers and employees of 
labor organizations that would be subject to the rule.

B. Small Business Regulatory Enforcement Fairness Act

    For similar reasons, the Department has concluded that this 
proposed rule is not a ``major'' rule under the Small Business 
Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801 et seq.). It 
will not likely result in (1) an annual effect on the economy of $100 
million or more, (2) a major increase in costs or prices for consumers, 
individual industries, Federal, State or local government agencies, or 
geographic regions, or (3) significant adverse effects on competition, 
employment, investment, productivity, innovation, or on the ability of 
United States-based enterprises to compete with foreign-based 
enterprises in domestic or export markets.

C. Unfunded Mandates Reform

    For purposes of the Unfunded Mandates Reform Act of 1995, this rule 
does not include a Federal mandate that might result in increased 
expenditures by State, Local, and tribal governments, or increased 
expenditures by the private sector of more than $100 million in any one 
year.

D. Executive Order 13132 (Federalism)

    The Department has reviewed this rule in accordance with Executive 
Order 13132 regarding federalism and has determined that the rule does 
not have federalism implications. Because the economic effects under 
the rule will not be substantial for the reasons noted above and 
because the rule has no direct effect on States or their relationship 
to the Federal government, the rule does not have ``substantial direct 
effects on the States, on the relationship between the national 
government and the States, or on the distribution of power and 
responsibilities among the various levels of government.''

E. Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980, 5 U.S.C. 601-612, requires 
agencies to prepare regulatory flexibility analyses, and to develop 
alternatives wherever possible, in drafting regulations that will have 
a significant impact on a substantial number of small entities, 
including ``small businesses,'' ``small organizations,'' and ``small 
governmental jurisdictions.'' The rule revises the reporting 
obligations of union officers and employees, who, as individuals, do 
not constitute small business entities. Accordingly, the Proposed Rule 
would not have a significant economic impact on a substantial number of 
small business entities. The Secretary has certified to the Chief 
Counsel for Advocacy of the Small Business Administration to that 
effect. Therefore, under the Regulatory Flexibility Act, 5 U.S.C. 
605(b), a regulatory flexibility analysis is not required.

F. Paperwork Reduction Act

    Summary: This proposed rule modifies the annual financial 
disclosure report that section 202 of the Act requires to be filed by 
labor organization officers and employees who have certain holdings, 
receive certain payments or income, or engage in certain financial 
transactions or arrangements. The revised paperwork requirements are 
necessary to reduce the errors and deficiencies in the reports that are 
filed under section 202, and increase the transparency of the financial 
practices of union officers and employees, which the Act requires to be 
public information. More accurate reports and increased transparency 
will allow union members to view the information needed by them to 
monitor their union's affairs and to make informed choices about the 
leadership of their union and its direction. Accurate disclosure and 
increased transparency promotes the unions' own interests as democratic 
institutions and the interests of the public and the government. 
Financial disclosure deters fraud and self-dealing, and facilitates the 
discovery of such misconduct when it does occur. The revised financial 
disclosure form will promote increased compliance with the statute by 
clarifying the form and instructions, offering numerous examples to 
guide filers, deleting exemptions that permit filers to decline to 
disclose financial matters made reportable by the Act, and organizing 
the information in a more useful format.
    Published at the end of this notice are the proposed Form LM-30 and 
instructions that will implement the new reporting requirements. The 
electronic versions of the current Form LM-30 and instructions are 
available for download from the Department's web site at 
www.olms.dol.gov. The proposed Form LM-30 and instructions will also be 
made available via the Internet. Pursuant to the Paperwork Reduction 
Act of 1995, the information collection requirements contained in this 
Notice of Proposed Rulemaking have been submitted to the Office of 
Management and Budget for approval.
    Background: The Form LM-30 is used by officers and employees of 
labor organizations, as the LMRDA defines that term. See 29 U.S.C. 
402(i). The Act requires public disclosure of certain financial 
interests held, income received, and transactions and arrangements 
engaged in by labor organization officers and employees, who must file 
the reports, and their spouses and minor children. Subject to certain 
exclusions, these interests, incomes, transactions, and arrangement 
comprise: (1) Payments or benefits from, or holdings in, an employer 
whose employees the filer's union represents

[[Page 51196]]

or is actively seeking to represent; (2) transactions involving 
holdings in an employer whose employees the filer's union represents or 
is actively seeking to represent; (3) holdings in, income from, or 
transactions with a business a substantial part of which consists of 
dealing with an employer whose employees the filer's union represents 
or is actively seeking to represent; (4) holdings in, income from, or 
transactions with a business that deals with the filer's union or a 
trust in which the filer's union is interested; (5) transactions or 
arrangements with an employer whose employees filer's union represents 
or is actively seeking to represent; and (6) payments from an employer 
or labor relations consultant. See 29 U.S.C. 432.
    The Current Form: The existing Form LM-30 consists of four 
sections. The first section calls for identifying data. This section 
gathers information about the filer, including the filer's name and 
address, the name and address of the labor organization in which the 
filer is an officer or employee, the filer's position with the 
organization, and the fiscal year covered by the report.
    The second section, Part A of the current form, generally requires 
reporting of holdings in, transactions and arrangements with, and 
income and loans from the employer whose employees the filer's labor 
organization represents or actively seeks to represent. For each 
holding, transaction, arrangement, income, or loan, the filer is 
required to disclose its nature, value, and date of receipt.
    Part A of the current form excludes certain financial matters from 
reporting. The instructions advise the potential filer that he or she 
should not report (i) holdings of, transactions in, or income from bona 
fide investments in registered securities; (ii) holdings of, 
transactions in, or income from other securities if they are of 
``insubstantial value or amount'' (defined as holdings or transactions 
of $1,000 or less and income of $100 or less from any one security) and 
occur under terms unrelated to the filer's status in the labor 
organization; (iii) transactions involving purchases and sales of goods 
and services in the regular course of business at prices generally 
available to any employee of the employer; and (iv) ``payments and 
benefits received as a bona fide employee of the employer for past or 
present services, including wages, payments or benefits received under 
a bona fide health, welfare, pension, vacation, training or other 
benefit plan; and payments for periods in which such employee engaged 
in activities other than productive work, if the payments for such 
period of time are: (a) Required by law or a bona fide collective 
bargaining agreement, or (b) made pursuant to a custom or practice 
under such a collective bargaining agreement, or (c) made pursuant to a 
policy, custom, or practice with respect to employment in the 
establishment which the employer has adopted without regard to any 
holding by such employee of a position with a labor organization.''
    The third section of the current form, Part B, generally requires 
reporting of ``an interest in or derived income or other economic 
benefit with monetary value, including reimbursed expenses, from a 
business (1) a substantial part of which consists of buying from, 
selling or leasing to, or otherwise dealing with the business of an 
employer whose employees your labor organization represents or is 
actively seeking to represent, or (2) any part of which consists of 
buying from or selling or leasing directly or indirectly to, or 
otherwise dealing with your labor organization or a trust in which your 
labor organization is interested.'' The filer must identify the name 
and address of the business involved, describe the type of organization 
the business deals with (employer, labor organization, trust), enter 
the nature of the dealings between these two parties and the value of 
these dealings, enter the interest held or income received by the 
filer, and the dollar amount of such income or interest.
    Part B of the current form also excludes certain financial matters 
from reporting. Filers are instructed that they are not required to 
report any of the interests, transactions, or income identified in 
exclusions (i) and (ii) of Part A. As discussed, these non-reportable 
financial matters are (i) holdings in, transaction in, and income from 
bona fide investments in registered securities and (ii) insubstantial 
holdings in, transactions in, and income from other securities 
occurring under terms unrelated to the filer's status in the labor 
organization.
    The fourth section of the current form, Part C, generally requires 
reporting of any payment of money or other thing of value received from 
any employer (other than an employer whose employees the filer's union 
represents or is actively seeking to represent) or from any labor 
relations consultant to an employer. For each interest or transaction 
to be reported under Part C, filers must identify the name of the 
employer or labor relations consultant and the nature and amount of the 
payment.
    Part C of the current form also excludes certain financial matters 
from reporting. The instructions identify the following as items that 
are not required to be reported: (i) Payments of the kind referred to 
in section 302(c) of the Labor Management Relations Act (LMRA); (ii) 
bona fide loans, interest or dividends from banks, other bona fide 
credit institutions, and insurance companies; and (iii) interest on 
bonds or dividends on stock, provided such interest or dividends are 
received, and such bonds or stock have been acquired, under 
circumstances and terms unrelated to the recipient's status in a labor 
organization and the issuer of such securities is not an enterprise in 
competition with the employer whose employees the filer's labor 
organization represents or actively seeks to represent.
    In the ``General Instructions'' filers are informed: ``You do not 
have to report any sporadic or occasional gifts, gratuities, or loans 
of insubstantial value, given under circumstances or terms unrelated to 
the recipient's status in a labor organization.'' This exclusion 
applies to financial matters reportable under Part A, B or C.
    In the instructions to the current Form LM-30, the information 
collection burden is reported to average 35 minutes per response.
    Overview of Changes to Form LM-30: The proposed Form LM-30 and 
instructions will define terms used in the form, provide examples to 
assist the filer in identifying reportable financial events, and will 
remove certain exclusions that permitted filers to avoid reporting 
certain financial matters.
    The revised instructions define: Actively seeking to represent, 
arrangement, benefit with monetary value, bona fide employee, bona fide 
investment, dealing, directly or indirectly, filer/reporting person/
you, income, labor organization, labor organization employee, labor 
organization officer, legal or equitable interest, minor child, payer, 
publicly traded securities, substantial part, and trust in which a 
labor organization is interested. These definitions clarify that 
certain holdings, payments, income, transactions or arrangements are 
reportable, and that others are non-reportable.
    The definition of the term ``labor organization'' will clarify that 
when determining whether an employer is one ``whose employees the 
filer's labor organization represents or actively seeks to represent,'' 
or whether a business is ``dealing with [the filer's] labor 
organization,'' the term ``labor organization'' will not be limited to 
the particular local, intermediate, national or international labor 
organization that the filer serves as an officer or

[[Page 51197]]

employee, but rather will also include any parent or subordinate body 
of the filer's labor organization.
    Similarly, in defining ``bona fide employee,'' the revised Form LM-
30 would require the reporting of payments received by union officers 
from an employer for work performed for the union. A typical example 
involves a ``no docking'' arrangement where an employer allows a union 
steward or other officer to resolve grievances, often on an occasional 
``as-needed'' basis, without a loss of pay. In other instances, a union 
official is paid by an employer while working full time on union 
business. In a related area, the definition of ``labor organization 
employee'' clarifies that individuals who perform work for, and under 
the control of, the union must file a Form LM-30. Individuals who 
receive payments from an employer, either under a ``union leave'' or 
``no docking'' policy, for work performed for, and under the control 
of, the union, will come under this definition, as may some workers 
previously denominated ``independent contractors.''
    The definition of the term ``minor child'' would require union 
officers to report financial matters involving a child until the child 
reaches 21 years of age. The definition of the term ``substantial 
part'' would require reports of income from a business where a 
business's receipts from an employer whose employees the filer's labor 
organization represents or is actively seeking to represent constitute 
5% or more of its annual receipts. The definition of ``minor child,'' 
and the two other definitions discussed above, will likely increase the 
holdings, payments, income, transactions or arrangements that are 
reported.
    The proposed instructions also eliminate some exemptions in the 
current form. These exemptions operate to make nondiscloseable 
financial matters that the statute requires to be reported. The 
elimination of these exemptions will thus tend to increase the 
holdings, payments, income, transactions or arrangements that will be 
reported.
    Part A of the current instructions exempts from reporting:

    (iii) Transactions involving purchases and sales of goods and 
services in the regular course of business at prices generally 
available to any employee of the employer.
    (iv) Payments and benefits received as a bona fide employee of 
the employer for past or present services, including wages, payments 
or benefits received under a bona fide health, welfare, pension, 
vacation, training or other benefit plan; and payments for periods 
in which such employee engaged in activities other than productive 
work, if the payments for such period of time are: (a) Required by 
law or a bona fide collective bargaining agreement, or (b) made 
pursuant to a custom or practice under such a collective bargaining 
agreement, or (c) made pursuant to a policy, custom, or practice 
with respect to employment in the establishment which the employer 
has adopted without regard to any holding by such employee of a 
position with a labor organization.

    The Department proposes to limit the scope of exemption (iii) 
Exemption (iii) is a statutory exemption that applies by its terms to 
financial matters reportable under section 202(a)(5), not to section 
202(a)(1) or 202(a)(2). See 29 U.S.C. 432(a)(1), (2), (5). The 
Department's proposal adheres to the statutory design and thus ends the 
exemption for reports due under section 202(a)(1) and 202(a)(2), but 
continues it for reports due under section 202(a)(5). Similarly, the 
first part of exemption (iv) (up to the semicolon) is created by 
statute. It applies to reports due under section 202(a)(1) and 
202(a)(5). See 29 U.S.C. 432(a)(1), (5). The Department proposes to 
eliminate this exemption for reports due under section 202(a)(2). 
Further, the portion of the exemption that excludes payments for 
periods in which such employee engaged in activities other than 
productive work will also be removed.
    Part C of the current instructions contains the following 
exemptions:

    (ii) Bona fide loans, interest or dividends from national or 
state banks, credit unions, savings or loan associations, insurance 
companies, or other bona fide credit institutions.
    (iii) Interest on bonds or dividends on stock, provided such 
interest or dividends are received, and such bonds or stock have 
been acquired, under circumstances and terms unrelated to the 
recipient's status in a labor organization and the issuer of such 
securities is not an enterprise in competition with the employer 
whose employees your labor organization represents or actively seeks 
to represent.

    The Department proposes to eliminate these two exemptions.
    Hour and Cost Burden Estimates for the Revised Form: The following 
table describes the information sought by both the existing form and 
instructions and the proposed form and instructions, where on each form 
the particular information is sought, if applicable, and the amount of 
time estimated for completion of each item of information. The time 
estimates include the additional time burdens associated with the 
Department's proposed eliminated and curtailed administrative 
exemptions, and the proposed definitions.

----------------------------------------------------------------------------------------------------------------
         Burden description                 Current form            Proposed form                 Time
----------------------------------------------------------------------------------------------------------------
Maintaining and gathering records...  N/A....................  N/A....................  10 minutes.
Reading the instructions to           N/A....................  N/A....................  15 minutes.
 determine whether filer must
 complete the form.
Additional reading of the             N/A....................  N/A....................  30 minutes.
 instructions to determine how to
 complete the form.
Reporting LM-30 file number.........  Item 1.................  Item 1.................  30 seconds.
Reporting covered fiscal year.......  Item 2.................  Item 2.................  30 seconds.
Reporting filer's name, address, and  Item 3.................  Item 3, A through I....  2 minutes.
 contact information.                                          In addition to the
                                                                information sought on
                                                                the existing form, the
                                                                proposed form seeks
                                                                filer's e-mail address
                                                                and full middle name.
Reporting name, file number, and      Item 4.................  Item 4, A through E      2 minutes.
 address of filer's union or unions.                            Proposed form provides
                                                                continuation page in
                                                                which to report this
                                                                information for an
                                                                additional union.

[[Page 51198]]

 
Reporting position in union.........  Item 5.................  Item 4, F through H....  1 minute.
                                                               In addition to the
                                                                information sought on
                                                                the existing form, the
                                                                proposed form asks
                                                                whether filer is an
                                                                officer or employee
                                                                and whether filer is
                                                                with the union at end
                                                                of reporting period.
                                                                In addition, the
                                                                proposed form provides
                                                                continuation page in
                                                                which to report this
                                                                information for an
                                                                additional union.
Reporting name, trade name, and       Item 6 or Item 8 or      Schedule 1.............  5 minutes.
 address of (1) an employer whose      Item 13.                In addition to the
 employees the union represents or                              information sought on
 is actively seeking to represent,                              the existing form, the
 (2) a business that deals with such                            proposed form asks for
 an employer, or the union, or a                                a contact name,
 trust in which the union is                                    telephone number, web
 interested, or (3) any employer or                             site address, state of
 labor relations consultant.                                    incorporation or
                                                                registration, state
                                                                business ID number,
                                                                and whether filer has
                                                                an association with
                                                                the business,
                                                                employer, or labor
                                                                relations consultant
                                                                (called a payer on the
                                                                proposed form) at the
                                                                end of reporting
                                                                period.
Reporting the employer, union, or     Item 9a (referring back  Schedule 2, Items A and  1 minute.
 trust that the business deals with.   to Item 4) or Item 9b/   B.
                                       9c and Item 10.         The proposed form
                                                                requires less
                                                                information than the
                                                                existing form by
                                                                requiring only name
                                                                and file number or zip
                                                                code rather than
                                                                complete address
                                                                information for
                                                                employers and trusts.
Reporting the nature of the dealings  Item 11a...............  Schedule 2, Item C.....  3 minutes.
 between the employer, union, or
 trust and the business.
Reporting the value of the dealings   Item 11b...............  Schedule 2, Item D.....  3 minutes.
 between the employer, union, or                               In addition to the
 trust and the business.                                        information sought on
                                                                the existing form, the
                                                                proposed form requires
                                                                a total of the values.
Reporting the nature of the interest  Item 7a or Item 12a or   Schedule 3, Items A      4 minutes.
 held by the filer, the payment,       Item 14a.                through D.
 income, or loan received by the                               In addition to the
 filer, or the transactions and                                 information sought on
 arrangements engaged by the filer.                             the existing form, the
                                                                proposed form calls
                                                                for the relevant
                                                                reporting section,
                                                                date of the financial
                                                                matter, and whether
                                                                person involved in the
                                                                financial transaction
                                                                was the officer,
                                                                employee, spouse, or
                                                                minor child.
Reporting the value of the interest   Item 7b or Item 12b or   Schedule 3, Item E.....  2 minutes
 held by the filer, the payment,       Item 14b.               In addition to the
 income or loan received by the                                 information sought on
 filer, or the transactions and                                 the existing form, the
 arrangements engaged by the filer.                             proposed form requires
                                                                a total of the values.
Signature, date and telephone number  Item 15................  Item 5.................  1 minute.
Completing payer summary schedule...  N/A....................  Beyond the information   5 minutes.
                                                                sought on the existing
                                                                form, the proposed
                                                                form requires listing
                                                                each payer, which of
                                                                four classifications
                                                                describes the payer
                                                                (employer, business,
                                                                etc.), the total value
                                                                from Schedule 3, Item
                                                                E, and the total of
                                                                the values for all
                                                                payers.
Checking responses..................  N/A....................  N/A....................  5 minutes.
                                     --------------------------
    Total Burden Hour Estimate Per    .......................  .......................  90 minutes.
     Filer.
----------------------------------------------------------------------------------------------------------------

    The recordkeeping estimate of ten minutes reflects that the 
majority of financial books and records required to complete the report 
are those that respondents would maintain in the normal course of 
conducting business, personal, and union affairs, and thus should only 
take two minutes to maintain and gather. The other eight minutes has 
been estimated to be necessary to maintain and gather the books and 
records that would not ordinarily be maintained, including those 
concerning the dealings between a business and the filer's union, a 
trust in which the filer's union is interested, or an employee whose 
employees the union represents or is actively seeking to represent.
    These figures also assume that the use of an electronic form, which 
is more efficient than completion of a form by hand, will reduce the 
burden. In addition, burden is decreased by the proposed revised Form 
LM-30's elimination of multiple form filings from the same filer for 
the same fiscal year resulting from the current form's inadequate 
provision for those filers who are officers and/or employees of more 
than one relevant labor organization.
    The Department estimates that the clarification of the Form LM-30, 
the defined terms, the addition of examples that illustrate reportable 
and nonreportable transactions, and the removal of the administrative 
exemptions will increase the number of

[[Page 51199]]

individuals who file the Form LM-30. Using the best data available, the 
Department estimates that there are 204,634 union officers and 
employees. Further, based on the submittal of approximately 61 reports 
annually, the Department estimates a current filing rate of 0.03% (61 / 
204,634 x 100 = 0.03%). Due to the reform proposed herein, as well as 
increased compliance assistance and enforcement initiatives, the 
Department estimates that the filing rate will increase to 
approximately 1%, or 2,046 reports filed annually. Thus, the annual 
reporting and recordkeeping hour burden for all filers will be 184,140 
minutes (90 x 2,046 = 184,140) or 3,069 hours (184,140 / 60 = 3,069). 
The Department believes this estimate is consistent with the opinion of 
some stakeholders that relatively few union officers and employees 
would be engaged in covered transactions. The Department's own research 
also revealed little concrete evidence of the number of union officers 
and employees that would have to file. The Department acknowledges the 
considerable uncertainty in this estimate and requests comment on the 
number of reports that should be filed under the current requirements 
and that may be filed as a result of the new requirements.
    Using FY 2003 data taken from annual financial reports filed by 
labor organizations, the Department estimates that the average annual 
salary earned by union officers and employees is $17,596. This data 
does not, however, permit the derivation of an hourly wage, as the 
number of part-time officers and employees is unknown, and employees 
who receive in the aggregate $10,000 or less are not reported. Assuming 
the $21.85 mean hourly earnings of those engaged in white collar 
occupations (based on National Compensation Survey: Occupational Wages 
in the United States, July 2003, Bureau of Labor Statistics, U.S. 
Department of Labor, August 2004), the Department estimates that the 
annual reporting and recordkeeping cost burden for all filers will be $ 
67,058 (3,069 x 21.85), or $32.78 per filer (67,058 / 2,046).
    In addition, the Department estimates that all union officers and 
employees will spend 15 minutes reading the revised form and 
instructions to determine whether they are required to file a report. 
By deducting the 2,046 estimated filers whose preliminary review of the 
form has already been counted from the estimated 204,634 union officers 
and employees, 202,588 officers and employees remain who will review 
the form but determine that they are not required to file a report. The 
annual reporting and recordkeeping hour burden for these officers and 
employees will be 3,038,820 minutes (15 x 202,588 = 3,038,820) or 
50,647 hours (3,038,820 / 60 = 50,647). Using the $21.85 hourly wage, 
the Department estimates that the annual reporting and recordkeeping 
cost burden for non-filing union officers and employees will be 
$1,106,637 (50,647 x 21.85 = 1,106,637), or $5.46 per non-filing union 
officer or employee (1,106,637 / 202,588 = $5.46).
    The resulting total annual reporting and recordkeeping hour burden 
will be 53,716 (50,647 + 3,069 = 53,716). The total annual reporting 
and recordkeeping cost burden will be $1,173,695 (53,716 x 21.85 = 
1,173,695).

G. Executive Order 13045 (Protection of Children From Environmental 
Health Risks and Safety Risks)

    In accordance with Executive Order 13045, the Department has 
evaluated the environmental safety and health effects of the rule on 
children. The Department has determined that the final rule will have 
no effect on children.

H. Executive Order 13175 (Consultation and Coordination With Indian 
Tribal Governments)

    The Department has reviewed this rule in accordance with Executive 
Order 13175, and has determined that it does not have ``tribal 
implications.'' The rule does not ``have substantial direct effects on 
one or more Indian tribes, on the relationship between the Federal 
government and Indian tribes, or on the distribution of power and 
responsibilities between the Federal government and Indian tribes.''

I. Executive Order 12630 (Governmental Actions and Interference With 
Constitutionally Protected Property Rights)

    This rule is not subject to Executive Order 12630, Governmental 
Actions and Interference with Constitutionally Protected Property 
Rights, because it does not involve implementation of a policy with 
takings implications.

J. Executive Order 12988 (Civil Justice Reform)

    This regulation has been drafted and reviewed in accordance with 
Executive Order 12988, Civil Justice Reform, and will not unduly burden 
the Federal court system. The regulation has been written so as to 
minimize litigation and provide a clear legal standard for affected 
conduct, and has been reviewed carefully to eliminate drafting errors 
and ambiguities.

K. Environmental Impact Assessment

    The Department has reviewed the final rule in accordance with the 
requirements of the National Environmental Policy Act (NEPA) of 1969 
(42 U.S.C. 4321 et seq.), the regulations of the Council on 
Environmental Quality (40 U.S.C. part 1500), and the Department's NEPA 
procedures (29 CFR part 11). The final rule will not have a significant 
impact on the quality of the human environment, and, thus, the 
Department has not conducted an environmental assessment or an 
environmental impact statement.

L. Executive Order 13211 (Actions Concerning Regulations That 
Significantly Affect Energy Supply, Distribution, or Use)

    This rule is not subject to Executive Order 13211, because it will 
not have a significant adverse effect on the supply, distribution, or 
use of energy.

Text of Proposed Rule

    In consideration of the foregoing, the Office of Labor-Management 
Standards, Employment Standards Administration, Department of Labor 
hereby proposes to amend part 404 of title 29 of the Code of Federal 
Regulations as set forth below.

PART 404--LABOR ORGANIZATION OFFICER AND EMPLOYEE REPORTS

    1. The authority citation for part 404 is revised to read as 
follows:

    Authority: Secs. 202, 207, 208, 73 Stat. 525, 529 (29 U.S.C. 
432, 437, 438); Secretary's Order No. 4-2001, 66 FR 29656 (May 31, 
2001).


Sec.  404.1  [Amended]

    2. Section 404.1 is amended by:
    a. Redesignating existing paragraph (b) as new paragraph (h) and 
adding a new sentence at the end;
    b. Add a new paragraph (b);
    c. Redesignating existing paragraph (c) as new paragraph (g) and by 
adding new text at the end;
    d. Redesignating existing paragraph (d) as new paragraph (c);
    e. Redesignating existing paragraph (a) as new paragraph (d);
    f. Adding a new paragraph (a);
    g. Adding paragraphs (e), (f), (i) and (j).
    The additions and revision read as follows:


Sec.  404.1  Definitions.

    (a) Benefit with monetary value means anything of value, tangible 
or intangible, including any interest in personal or real property, 
gift, insurance, retirement,

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pension, license, copyright, forbearance, bequest or other form of 
inheritance, office, options, agreement for employment or property, or 
property of any kind.
    (b) Dealing means to engage in a transaction (bargain, sell, 
purchase, agree, contract) or to in any way traffic or trade with 
another individual or entity.
* * * * *
    (e) Income means all income from whatever source derived, 
including, but not limited to, compensation for services, fees, 
commissions, wages, salaries, interest, rents, royalties, copyrights, 
licenses, dividends, annuities, honorarium, income and interest from 
insurance and endowment contracts, capital gains, discharge of 
indebtedness, share of partnership income, bequests or other forms of 
inheritance, and gifts, prizes or awards.
    (f) Labor organization means a labor organization under 29 CFR 
401.9 and includes the local, intermediate, or national or 
international labor organization that employed the filer of the Form 
LM-30, or in which the filer held office, during the reporting period, 
and any parent or subordinate labor organization.
    (g) * * * within the meaning of any law of the United States 
relating to the employment of employees.
    (h) * * * An officer is (1) a person identified as an officer by 
the constitution and bylaws of the labor organization;
    (2) Any person authorized to perform the functions of president, 
vice president, secretary, or treasurer;
    (3) Any person who in fact has executive or policy-making authority 
or responsibility; and
    (4) A member of a group identified as an executive board or a body 
which is vested with functions normally performed by an executive 
board.
    (i) Minor child means a son, daughter, stepson, or stepdaughter 
under 21 years of age.
    (j) Trust in which a labor organization is interested means a trust 
or other fund or organization (1) which was created or established by a 
labor organization, or one or more of the trustees or one or more 
members of the governing body of which is selected or appointed by a 
labor organization, and (2) a primary purpose of which is to provide 
benefits for the members of such labor organization or their 
beneficiaries.


Sec.  404.4  [Removed and reserved]

    3. Section 404.4 is removed and reserved.


Sec.  404.7  [Amended]

    4. Section 404.7 is revised to read as follows:


Sec.  404.7  Maintenance and retention of records.

    Every person required to file any report under this part shall 
maintain records on the matters required to be reported which will 
provide in sufficient detail the necessary basic information and data 
from which the documents filed with the Office of Labor-Management 
Standards may be verified, explained or clarified, and checked for 
accuracy and completeness, and shall include vouchers, worksheets, 
receipts, financial and investment statements, contracts, 
correspondence, and applicable resolutions, in electronic and paper 
format, and any electronic programs by which they are maintained, 
available for examination for a period of not less than five years 
after the filing of the documents based on the information which they 
contain.

    Signed at Washington, DC this 19th day of August, 2005.
Victoria A. Lipnic,
Assistant Secretary for Employment Standards.
Don Todd,
Deputy Assistant Secretary for Labor-Management Programs.
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[FR Doc. 05-16907 Filed 8-24-05; 8:45 am]
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