Department of Labor (DOL)

President Barack Obama frequently has vowed to make ethics in government a top priority.  On January 21, his first full day in office, he announced, “Let me say it as clearly as I can:  Transparency and the rule of law will be the touchstones of this presidency.”  He had timed his words to coincide with separate executive orders that froze the pay of White House officials whose salaries exceeded $100,000, imposed gift bans on political appointees, and restricted lobbyists’ access to government jobs.  Yet this “new era of openness,” as the president termed it, apparently hasn’t extended to oversight of supportive organizations – like labor unions. 

The year 2008 will be remembered most of all for the $7 trillion in stock market assets that evaporated.  The losses were a consequence of the widespread attitude among Wall Street money managers that debt-fueled growth has no limits or negative consequences.  The equivalent view among union leaders is that institutional growth must come at any cost, whether to the unions themselves, employers or the country as a whole.  Only 7.5 percent of the nation’s private-sector work force now belongs to a union.  Labor officials are convinced that with the right laws and programs in place, that figure could double, even triple.  Everyone supposedly would win, save for certain "greedy" employers and ideologues hostile to the interests of working families.

Union officials have made little secret of their desire to use member benefit plans as leverage to achieve a higher social good.  Such a goal, however, may conflict with another, overriding goal inscribed in federal law:  prudent and sound asset management.  The Employee Retirement Income Security Act of 1974, or ERISA, requires fiduciaries of most private-sector benefit plans to base investment decisions solely on the welfare of their participants and beneficiaries.  Advancement of broader social objectives, however desirable they might be, is not a criterion.  The U.S. Chamber of Commerce, in recent years a target of union shareholder activists, recently wrote a letter to the U.S. Department of Labor asking for a clarification of the permissibility of a planned AFL-CIO shareholder campaign.  In its response, dated June 27, 2008, the DOL wrote back that it was not.  Employers thus won – that is, until the next round.      

What union lawyers say to their clients in private is off the record.  But how much they bill them, and for what services, is a different story.  That was the view conveyed on May 5 in U.S. District Court for the Northern District of Georgia in a case that grew out of the convictions nearly a half-decade ago of several key members of the United Transportation Union (UTU).  In the new case, Warshauer v. Chao, the court ruled that the union’s designated legal counsel must file an “LM-10” employer financial report with the U.S. Department of Labor (DOL).  As an employer, the counsel provides money or other things of value to the union, and thus is subject to the Labor-Management Reporting and Disclosure Act of 1959, also known as LMRDA or the Landrum-Griffin Act.  In addition to filing an LM-10, this lawyer has other rules to play by.