Deadline for Filing Reports of Payments to Unions/Union Officials Looms, Department of Labor to Increase Enforcement Efforts

The Department of Labor (DOL) has announced that it will begin active enforcement of the reporting requirements contained in the Labor-Management Reporting Disclosure Act (LMRDA), 29 U.S.C. § 401 et. seq. essentially for the first time since 1959. The LMRDA requires employers to disclose to the DOL nearly all payments they make to labor organizations, union officials, employees, and labor relations consultants. The LMRDA also requires employers to maintain records supporting or used in compiling their disclosures for five years. The filing deadline for most employers is rapidly approaching, and there are significant issues to consider.

What Triggers An LM-10 Reporting Obligation?

An employer must file an LM-10 if it has given anything of value to a labor organization, union official, employee or labor relations consultant, or made certain expenditures relating to activities and employees or a union during the employer's fiscal year. Importantly, this standard is not limited to unions that actively represent an employer's work force.

An employer need not report "sporadic or occasional gifts, gratuities, or favors of insubstantial value, given under circumstances and terms unrelated to the recipients' status in a labor organization." For this "de minimis exemption" to be available, the gift or gratuity must be insubstantial, which the DOL defines as having an aggregate value of $250 or less. The de minimis exemption will be lost if the aggregate value of multiple gifts or loans from a single employer to a single union or union official exceeds $250 in a fiscal year. The DOL has indicated that it will not seek to enforce the reporting requirement for small gratuities that are not given on an infrequent or sporadic basis so long as the aggregate value does not exceed $250 per union or official. In addition, the gift or gratuity must be unrelated to the recipients' status in a labor organization. The applicable test is whether the employer ordinarily provides the gift or payment at issue to individuals in similar circumstances who are not union officials. The practical effect of these qualifiers may be that relatively few payments will escape reporting under the "de minimis" exemption. Indeed, the DOL has confirmed that employer payments for such things as union officials' meals, educational conferences (including refreshments, meals, travel and lodging) and even coffee and donuts must be reported if over the de minimis exemption amount.

Penalties for Not Filing, Filing False Information or Omitting Material Information Under the LMRDA

The LMRDA imposes civil and criminal penalties, including up to $10,000 and/or imprisonment for up to one year, on ANY person who (1) willfully violates the reporting requirement; (2) knowingly makes a false statement or representation of material fact in a required report; (3) knowingly fails to disclose a material fact in a required report; or (4) willfully falsifies, conceals, withholds, or destroys any records required to be kept by the LMRDA. These penalties can be imposed personally on a company's President and/or Treasurer, who are required to sign and provide a certification on the LM-10 under penalty of perjury, for fiscal years after 2005.

First-Time Filers

In response to the vocal concerns of employers who have relied on the DOL's lax enforcement of LM-10 reporting obligations over the past several decades, the DOL has also announced a "grace period" for those employers who have not previously filed. To take advantage of the grace period, employers must file an LM-10 within 90 days of the close of the employer's 2005 fiscal year (for those operating on a calendar year basis, the due date is March 31, 2006). The DOL has advised that it will not seek reports for fiscal years prior to 2005 absent extraordinary circumstances.

In addition, first-time filers taking advantage of the grace period who make diligent, good faith efforts to search for records and file the LM-10 may strike out the statement that their 2005 form is being filed "under penalty of perjury" and replace it with specified language. For fiscal year 2005 submissions only, the certification can be signed by the company official who supervised or conducted the good faith search for records, rather than the President and Treasurer.

For fiscal year 2005 only, the DOL will also accept any reasonable estimate of the cost per person of events with union and non-union attendees (i.e. holiday receptions) as long as the estimate is made in good faith and based on available and reconstructed records. If union and non-union individuals attend a conference, the costs to the employer for the attendee's refreshments, meals, travel, or lodging must be reported, but the costs of the conference rooms and audio-visual equipment are not required to be reported.

Implications Under the Labor Management Relations Act

Many of the kinds of payments reportable on the LM-10 mirror those prohibited by the Labor Management Relations Act ("LMRA"), 29 U.S.C. § 186. The LMRA prohibits employers from, among other things, providing money or things of value to unions or union officials that represent or seek to represent employees of the employer. Courts have broadly construed the term "thing of value" to include virtually anything, including lunches, watches, and preferred rates on hotel rooms. The prohibitions of the LMRA are independent of the renewed reporting requirements of the LMRDA, and violations carry their own set of substantial civil and criminal penalties.

The DOL maintains that employers must submit LM-10 reports notwithstanding the fact that those very reports may disclose a violation of the LMRA. Compounding this obvious concern, the DOL has also committed to renew its enforcement of its LM-30 reporting requirements. LM-30s are filed by unions/union officials and report payments and things of value received from employers, thus serving as a check on items reported and/or omitted by employers on their LM-10s covering the same period of time. To illustrate the breadth of the DOL's perspective, its proposed rule for LM-30 compliance would require union officials, who are also employees of the employer, to begin reporting wages received from the employer for time spent in union activities such as grievance processing. The DOL's comments and proposals reflect a clear change in enforcement perspective.

Many employers may have been lulled into complacency by the DOL's non-enforcement of the LM-10 requirements over the years. Needless to say, many common practices previously thought of as good for labor-management relations may need to be altered or eliminated going forward. Payments made during 2005 that must now be reported and may lead to liability under the LMRA should be discussed with counsel on a case-by-case basis. Finally, employers will need to consider implementation of processes to better track and/or authorize certain expenditures covered or potentially covered by these laws.