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Federal Register / Vol. 86, No. 248 / Thursday, December 30, 2021 / Rules and Regulations
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organizations involvement or contribution to the entity.
The Department believes that this, and the other practical complications mentioned above, could result in a substantial number of delinquencies, many through no fault of the unions.
Such a result would force the Department to direct substantial amounts of valuable, scarce resources to investigate these delinquencies, even where the Department reasonably predicts that the substantial of such cases would not involve efforts to circumvent or evade Title II reporting requirements, but rather, technical or procedural missteps resulting from unworkable policy decisions. Further, the Department would need to expend significant resources creating and maintaining an electronic Form T1 and database; provide compliance assistance to unions and trusts on such filing and related recordkeeping requirements; and pursue delinquent Form T1 reports, particularly for unions unable to obtain timely and complete necessary information from the trust. The resources would thus inevitably be pulled away from other, well-settled areas of enforcement, such as officer elections, alleged financial malfeasance, delinquent reporting on unions annual financial reports, among many others.
From the standpoint of promoting sound agency policy decision-making and resource allocation, the 2020 rule falls far short. Such unreasonable policy decisions and the ensuing unjustified costs to both the regulated community and Department justify rescission of the 2020 Form T1 final rule.
Consequently, for all the reasons above, the Department rescinds the 2020
Form T1 rule. The reporting requirements set forth in the 2020 Form T1 rule are not justified in light of the heavy burden they impose and the negligible benefits they offer.
The 2020 Form T1 Rule Is Overbroad Because It Requires Reporting on Certain Trusts That Cannot Be Used To Circumvent or Evade LMRDA Reporting In addition to the foregoing policy reasons which alone justify rescission of the Form T1, it is also appropriate to rescind the 2020 Form T1 rule because it is overbroad and inconsistent with Title IIs mandate. The only statutory basis for requiring reporting on the activities of entities that are not labor organizations as defined by the LMRDA
is if the Department determines that such reporting is necessary to prevent circumvention or evasion of the statutes reporting requirements. See 29 U.S.C.
438. The 2020 rule is deficient because it requires reporting on certain entities,
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such as Taft-Hartley funds, without the requisite showing that such reporting is necessary to prevent circumvention or evasion of the reporting requirements.
This over-breadth requires the rule to be rescinded. It is not enough that the Form T1 may capture some transactions that could prevent the circumvention or evasion of the LMRDAs reporting requirements. The rule is defective if it necessarily captures transactions as to which there is no statutory basis permitting the capture. American Federation of Labor & Congress of Industrial Organizations v. Chao, 409 F.3d 377, 389 D.C. Cir.
2005 finding that although there can be little doubt that some of the trust reporting the Secretary has required on Form T1 is tied to a unions financial reporting requirements under LMRDA
Title II, and therefore lawful, the rule also reaches information unrelated to union reporting requirements and mandates reporting on trusts even where there is no appearance that the unions contribution of funds to an independent organization could circumvent or evade union reporting requirements, and thus must be vacated.
Under the Act, the Secretarys rulemaking authority is limited. The Secretary has the authority to issue, amend, and rescind rules and regulations prescribing the form and publication of reports required to be filed under this title and such other reasonable rules and regulations including rules concerning trusts in which a labor organization is interested as he may find necessary to prevent the circumvention or evasion of such reporting requirements. 29 U.S.C. 438.
The Secretarys regulatory authority thus includes the reporting mandated by the Act and discretionary authority to require reporting on trusts falling within the statutory definition of a trust in which a labor organization is interested. 29 U.S.C. 402l. The Secretarys discretion to require separate trust reporting applies to trusts if, and only if: 1 The union has an interest in a trust as defined by 29 U.S.C. 402l and 2 reporting is determined to be necessary to prevent the circumvention or evasion of Title II reporting requirements. 29 U.S.C. 438. As both the Department and the court recognized, this is a two-part requirement. See AFL
CIO v. Chao, 409 F.3d 377, 38687 D.C.
Cir. 2005 discussion of two-part test.
A key feature of the Secretarys discretionary authority to regulate trust reporting is the requirement that the Secretary conclude that such reporting is necessary to prevent circumvention or evasion of a labor organizations
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requirement to report on its financial condition and operations under the LMRDA. The Department now believes that the 2020 Form T1 rule was overly broad, requiring financial reporting by many types of trusts, including trusts funded by employers pursuant to collective bargaining agreements, without an adequate showing that such a change is necessary to prevent circumvention or evasion of the reporting requirements.
In particular, the rule provides that, for purposes of evaluating whether payments to a trust indicate that the union is financially dominant over the trust, payments made by employers to fund trusts under section 302c of the Labor Management Relations Act LMRA, 29 U.S.C. 186c Taft-Hartley funds should be treated as funds of the union. Taft-Hartley funds are created and maintained through employer contributions paid to a trust fund, pursuant to a collective bargaining agreement, and must have equal numbers of union and management trustees, who owe a duty of loyalty to the trust. Taft-Hartley funds are established for the sole and exclusive benefit of the employees and are exempt from the statutory prohibition against an employer paying money to employees, representatives, or labor organizations. See 29 U.S.C. 186a and c5.
The Department recognizes that the section 3l trusts in which a union is interested term is sufficiently broad to encompass Taft-Hartley plans. However, as explained above, this is only the first part of the section 208 analysis. The second part of the analysis requires that the Secretary determine that the reporting is necessary to prevent circumvention or evasion of the reporting of union money subject to Title II.
As explained in the 2020 Form T1
rule, section 201 of the LMRDA requires that unions file annual, public reports with the Department, detailing the unions cash flow during the reporting period, and identifying its assets and liabilities, receipts, salaries and other direct or indirect disbursements to each officer and all employees receiving $10,000 or more in aggregate from the union, direct or indirect loans in excess of $250 aggregate to any officer, employee, or member, any loans of any amount to any business enterprise, and other disbursements. 85 FR at 13414
citing 29 U.S.C. 431b. Further, section 201 requires that such information shall be filed in such detail as may be necessary to disclose a labor organizations financial condition and operations. 85 FR at 13414 citing
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