The Labor Department wants stricter financial reporting requirements for labor organizations and their affiliates. Labor groups almost certainly will challenge the plan in court as they have in the past, sources told Bloomberg Law.

The DOL estimates that by December it will issue proposed rules covering “intermediate bodies” such as state, regional, or district union offices, and union “trusts.”

The two proposals out of the Office of Labor-Management Standards mirror policies from the George W. Bush administration. The Bush era faced legal challenges from the AFL-CIO and the National Education Association and were overturned altogether during the Obama presidency.

Unions likely will push back on these rules given the strain they put on finances, said Michael Hayes, an associate professor of law at the University of Baltimore and the former OLMS director under President Barack Obama.

These financial disclosure rules could cripple unions that already are struggling after the U.S. Supreme Court’s Janus v. AFSCME decision, he said. The Janus ruling prohibited public-sector unions from collecting mandatory fees from nonmember workers.

“It’s another layer of paper pushing and bureaucracy that has to be paid for,” Rosemarie Cipparulo, an assistant teaching professor at Rutgers University and labor lawyer, told Bloomberg Law. “In my mind, it’s just another way to enforce costs on unions without any real reason other than to bust public sector unions financially.”

Clarity Needed: Chamber

One proposal would require intermediate unions to file annual financial reporting forms when their parent organization separately represents private-sector employees, which means they’re covered by federal disclosure laws. The agency also aims to re-establish the Form T-1 requiring union trusts, which can include a strike fund or apprenticeship programs, to file annual spending reports.

There’s a need to clarify financial reporting requirements for unions, said Glenn Spencer, senior vice president for the U.S. Chamber of Commerce.

International unions can represent a combination of government workers and private-sector employees through local chapters. The unions also have regional labor councils and offices that don’t bargain directly for employees, but are affiliated with the union.

Those regional offices should have to disclose their finances, Spencer said. Technically, those councils do represent workers, “because you supervise locals in the field who directly represent workers.”

If those local chapters represent both private- and public-sector workers, those entities should be submitting financial disclosures, he said. If it’s clear a union only represents public workers, then the disclosure law doesn’t apply.

“It’s very burdensome and expensive to comply with these guidelines,” Hayes said, noting the union costs of hiring additional staff to comb through finances, fill out disclosure forms, and submit forms on time.

Union coffers already have been hit by the Janus case, he said. That decision has spawned lawsuits from conservative groups seeking reimbursement for union fees already paid. Twenty-five states also have right-to-work laws, allowing workers to remain outside union membership.

Given that, it makes even less sense to implement these reporting requirements. “Any employee who doesn’t want to join a union and pay dues, doesn’t have to,” Hayes said.

Previous Litigation

The NEA and its affiliates sued the Labor Department over the intermediate union rule in 2004, and will challenge the proposals again.

“This is the third time in the past year the U.S. Department of Labor has posted a notice that it intends to try to resurrect the Bush-era proposal on intermediate labor organizations,” Alice O’Brien, general counsel of the NEA, told Bloomberg Law. “On behalf of its affiliates, the National Education Association challenged the Bush-era proposal, which was subsequently rescinded, and NEA stands ready to do so again.”

The OLMS enforces the 1959 Labor-Management Reporting and Disclosure Act, which generally requires labor organizations to provide information on their constitution, bylaws, filing annual publicly accessible reports detailing expenses, assets, and officer salaries.

The AFL-CIO is watching for the proposals, but it’s too soon to say whether the federation will pursue litigation, said Matthew Ginsburg, associate general counsel for the labor federation.

Legal Basis

A union’s challenge to the proposals wouldn’t have much standing because the 1959 disclosure law is meant to be read “very broadly,” Spencer said.

The OLMS also has its own interpretive manual addressing situations where affiliates and labor councils must report finances, he said. But the criteria changes based on the type of affiliate and doesn’t provide one uniform reporting requirement for all of the forms labor affiliates can take, including union regional councils, trade councils, and state legislative boards.

It’s unlikely the DOL could get past a lawsuit arguing the policies violate the Constitution, said Rutgers’ Cipparulo.

The government can regulate private-sector unions because they’re involved in interstate commerce, but public-sector unions aren’t. The commerce clause in the Constitution gives the federal government power to regulate commerce with states and other government entities.