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The U.S. Department of Labor’s Office of Labor-Management Standards (OLMS) on March 6 published a final rule creating the “Labor Organization Annual Financial Reports For Trusts In Which A Labor Organization Is Interested, Form T-1,” colloquially referred to simply as the T-1. As the name implies, the T-1 will require financial disclosure reports from union-related trusts, such as strike funds, which heretofore have not been required to do so, though not for lack of effort.
Indeed, the T-1 rule implements one of the signature proposals from the era of Secretary of Labor Elaine L. Chao, who made it a key priority during her tenure to greatly improve financial disclosure from labor unions. To that end, she embarked on an effort to revamp the Form LM-2 used by labor unions with receipts of at least $250,000 so that the form contained useful, detailed information theretofore absent. Part and parcel of the LM-2 reform was the creation of the T-1 for union-related trusts such as strike funds that never had to disclose such financial information.
The effort to improve financial reporting from unions met with considerable resistance from organized labor, to say the least, and the AFL-CIO challenged the entire rule, which included both the LM-2 and T-1. That lawsuit succeeded in delaying the LM-2, but not for long, and in the end the new disclosure form went into effect. The result was an unprecedented insight into the internal management of unions contemplated by the Labor-Management Reporting and Disclosure Act (LMRDA), and over time the improved disclosure revealed numerous instances of corruption resulting in federal felony convictions in some cases.
Unfortunately, the fate of the T-1 was a different story. The United States District Court for the District of Columbia in 2004 upheld the final rule in part, but in 2005 the D.C. Circuit Court of Appeals found the T-1’s scope to be too broad. Thus, the Department of Labor (DOL) went back and in late 2006 attempted to reissue a revised T-1 without the usual notice and comment period required since it had already done so in the original LM-2 proposal.
That strategy prompted yet another challenge on the grounds that it violated the Administrative Procedures Act (APA). The U.S. District Court for the District of Columbia agreed and in June 2007 vacated the revised T-1, which sent DOL back to the drawing board once again. In the end, DOL issued the last iteration of the Form T-1 final rule October 2, 2008, with an effective date of January 1, 2009, just as the days of the Bush administration drew to a close. Not surprisingly, the incoming Obama administration heeded the call from labor leaders to undo the T-1, leaving the effort to require trust reporting to die on the proverbial vine.
With the current administration’s new T-1 rule, union members and the public will finally have a look into union-related trusts that could reveal even more instances of corruption that Congress wrote the LMRDA to combat. Recent headlines highlighting “widespread corruption” including multiple indictments and convictions at a union training fund illustrate the unfortunate fact that the rationale for such reporting is as relevant today as when the law was written in 1959.
It has been nearly eighteen years since the original LM-2 reform sought to require trust reporting, but if it succeeds in rooting out corruption it will have been worth the wait. As the saying goes, better late than never.