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Federal Register / Vol. 86, No. 248 / Thursday, December 30, 2021 / Rules and Regulations Id.. Significantly, each financial transaction to be reported is one that reflects upon the unions financial condition and operations. 29 U.S.C.
201b. Consequently, trust reporting is only permissible to prevent a labor union from using a trust to circumvent reporting of the labor unions finances.
However, money contributed to a Taft-Hartley plan does not bear on the labor unions finances and is not by law required to be reflected on a labor unions Title II reporting; accordingly, the T1 Form cannot be deemed necessary to prevent circumvention or evasion of the reporting of union money subject to Title II. The 2020 Form T1
rule presumes that employer contributions to Taft-Hartley plans establish labor union financial domination of a trust. After review, the Department has determined that money contributed by an employer to a TaftHartley fund is not property of the union. Thus, its disclosure does not disclose the unions financial condition and operations. 29 U.S.C.
201b. Conversely, a unions nondisclosure of such funds would not be an evasion of the unions reporting requirement as ordinary employer fundseven if placed into such a trustare not within the control of the union, and would in no instance be reported by a union under the LMRDA
reporting requirements.
One union commenter in particular agreed with the Departments position in the NPRM that the 2020 Form T1 is overbroad because it is not targeted at preventing evasion or circumvention of the labor organizations reporting requirement. It argued that the rule attempts to erase the distinction between benefit plan and labor organization reporting, in defiance of the will of Congress, which chose to address the McClellan Committee concerns regarding labor organization pension, health, and welfare fund reporting in the Welfare and Pension Fund Act of 1958 and later superseded by ERISA.
Another union commenter argued that the 2020 Form T1 is not necessary to prevent circumvention or evasion of LMRDA reporting requirements because properly structured Taft-Hartley funds are by definition not controlled by unions. Because Taft-Hartley fund assets are notand could not beassets of the union, the Form T1 cannot be said to be necessary to prevent circumvention of union reporting requirements.
Commenters also supported the Departments view that counting employer contributions towards union financial dominance is not justifiable.
As one union commenter stated,
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employers are separate business entities that have their own assets, management, employees, and business operations. Further, the commenter pointed out, even in consideration of an employers failure to contribute according to the terms of a CBA with a union, the union will file a grievance under the CBAs arbitration clause or will file a suit under LMRA section 301
for violating the contract, demonstrating that the union does not have control or authority over the disposition of the employers assets. Rather, the dispute is treated under LMRA Section 301 as one involving the employers breach of its contractual obligation to contribute to the fund, not as a dispute over the employer holding on to the unions money. The commenter went on to explain, as did other commenters, that the idea of employer contributions being union controlled funds is expressly contradicted by the logic of section 302
of the LMRA; the employer willfully giving funds to the union in such a manner would be illegal, but for the explicit exception made in part c of that section, which acknowledges such contributions as still being employer funds. However, even when employer funds reach the plan, as one commenter reminded, under EBSA regulation and advisory opinions the assets immediately become assets of the plan.
Thus, at no point in the lifecycle of the employers contribution do the funds become union funds. See DOL ERISA
Advisory Opinion 9314A; Preamble to Prohibited Transaction Exemption 761, 41 FR 12740 at 12741 Mar. 26, 1976.
In addition, by definition, TaftHartley funds may not have union managerial dominance because employees and employers are equally represented in the administration of such funds, together with such neutral persons as the representatives of the employers and the representatives of employees may agree upon. See 29
U.S.C. 186c5B. Disclosure of such funds is thus unnecessary to ensure that unions comply with their own financial reporting requirements under the LMRDA. One commenter argued specifically that this rationale also applied to Labor Management Cooperation Committee funds. Another union commenter made the observation that technically and nonsensically under the 2020 Form T1, a fund in which 100% of the funds came from the employer and was wholly governed by an equal number of employers and union officials would nonetheless still be counted as proof of union dominance, a result that simply does not comport with the facts. Finally, the
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2020 Form T1 rules preamble failed to establish that the Form T1 would be necessary to prevent circumvention and evasion of the LMRDA reporting requirements.
First, the 2020 rule states that the Form T1 will make it more difficult for a labor organization to avoid, simply by transferring money from the labor organization to a trust, the basic reporting obligation that applies if the funds had been retained by the labor organization. 85 FR 13418. However, the rule provided no evidence that labor organizations were transferring their own funds to Taft-Hartley trusts, an objection cited by a number of comments. And, of course, if a union transferred funds to a Taft-Hartley trust, the transaction itself would be reportable on the unions LM report.
In AFLCIO v. Chao, the Court of Appeals for the D.C. Circuit held that the 2003 Form T1 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. AFL
CIO v. Chao, 409 F.3d at 389. The 2020
Form T1 rule is overly broad in the same manner, requiring many labor organizations to file the Form T1 for independent Taft-Hartley trusts, even where there is no apparent means by which the union could use the trust as a means of circumventing or evading its Title II reporting requirements.
Second, the Department argued in the 2020 rule that the money an employer contributes to such trusts pursuant to a CBA might otherwise have been paid directly to a labor organizations members in the form of increased wages and benefits, the members on whose behalf the financial transaction was negotiated have an interest in knowing what funds were contributed, how the money was managed, and how it was spent. 85 FR 13418. Assuming this is so, these underlying wages and benefits would not have been reported on a Form LM2. Therefore, it is not apparent that payment of these potential wages and benefits to a trust involves the circumvention or evasion of Title II
reporting. Thus, with respect to these funds, it is not clear from the 2020 Form T1 final rule how the Form T1 would have closed a reporting gap where labor organization finances related to LMRDA section 3l trusts were not disclosed to members, the public, or the
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