The U.S. Department of Labor’s (DOL) Office of Labor-Management Standards recently issued a Notice of Proposed Rulemaking seeking to implement the Form T-1 for union-related trusts. The rulemaking, whose public comment period is set to close one week from yesterday, on July 29, is DOL’s third attempt to pass a key piece of former Secretary of Labor Elaine L. Chao’s hard-charging effort to expand financial disclosure by labor unions.
Promulgated in 2003, the centerpiece of that effort was the final rule changing the Form LM-2, which required more detailed reporting about union financial practices that had largely escaped scrutiny for decades. The rule also included a Form T-1 for “trusts in which a labor organization is interested,” such as strike funds, that historically did not have to disclose financial information.
The AFL-CIO challenged the 2003 rule in federal court under the dubious premise that the Secretary of Labor lacked the statutory authority to promulgate a regulation “to require labor organizations to report every receipt and disbursement, in any amount.” In 2004, the United States District Court for the District of Columbia upheld the final rule in part and found that the Secretary had the authority to require trust reports.
On appeal, the D.C. Circuit in 2005 similarly found that “[t]here can be little doubt that some of the trust reporting the Secretary has required on Form T-1 is tied to a union’s financial reporting requirements under LMRDA Title II.” However, it vacated the Form T-1 because the final rule amounted to “general trust reporting” that was too broad in scope.
Because the Department had already gone through the notice and comment period in proposing the Form T-1 during its 2002-2003 rulemaking process, it reissued the Form T-1 in September 2006 without repeating that process, which prompted another legal challenge by the AFL-CIO. Without reaching the merits of the case, the U.S. District Court for the District of Columbia in June 2007 vacated the Department’s 2006 final rule for failing to allow public comments.
That development caused another unfortunate delay in establishing a reporting mechanism for union-related trusts. For reasons that remain unknown, it took the Department until March 2008—almost nine months, including an extension for comments—to issue a proposed rule for a revised Form T-1.
After notice and comment, DOL issued the 2008 Form T-1 final rule October 2, 2008, with an effective date of January 1, 2009. The delay opened the door for the incoming Obama administration to do away with the Form T-1 altogether, which is precisely what it did in 2010.
The seventeen year saga of DOL’s Form T-1 has been a tortured one, and one might expect a renewed legal challenge to it. Nevertheless, given the recent headlines highlighting “widespread corruption” including multiple indictments and convictions involving a union training center, it would be hard to argue that a little more transparency is such a bad thing.
About the authors
Sean P. Redmond
Sean P. Redmond is Vice President, Labor Policy at the U.S. Chamber of Commerce.
