Guest Opinion/Editorial - Union Transparency

Ruling clears way for union accountability
By Michael Reitz

As Stephen Covey, the best-selling author of The Seven Habits of Highly Effective People, once said: “Accountability breeds response-ability.” Thanks to a recent decision by the U.S. Court of Appeals, labor unions will finally be required to show some accountability and transparency for how they spend their members’ money—a crucial step in making Big Labor more responsive to its membership.

On August 1, Chief Judge Douglas Ginsburg ruled the U.S. Department of Labor can require state affiliates of the National Education Association to provide detailed financial records to members.

The federal Labor-Management Reporting and Disclosure Act (LMRDA) requires labor organizations to annually file detailed reports, including information about staff salaries and benefits, income, and expenditures. Congress declared the law was “necessary to eliminate or prevent improper practices on the part of labor organizations.”

In 2002, Secretary of Labor Elaine Chao undertook a comprehensive effort to modernize regulations that had remained unchanged for 40 years. These union disclosure reports are now posted online, rather than gathering dust in a Washington, D.C. basement.

Union members have benefited from a new era of union transparency. They have learned that labor organizations use their dues for a host of things that have nothing to do with collective bargaining. For example, in 2005, organized labor spent $1.3 million on golf, $7.3 million at plush resorts, nearly $1.3 million for amusement park events, and $641,000 for sporting events. Ironworkers Local 40 in New York spent $52,879 on a new Cadillac for a retiring president. SEIU Local 660 in Los Angeles spent $153,000 on movie tickets.

For the past four decades, federal disclosure requirements applied only to unions that represented private sector employees. Unions that consisted wholly of government employees, such as the Washington Education Association or the Washington Federation of State Employees, were exempt. As a result, millions of union members have no idea how union officials spend their dues.
Secretary Chao addressed this issue by requiring local and state public sector unions to also comply with the law if they are affiliated with a national union that falls under the Act. The implications of this change are enormous and will affect local unions in all 50 states.

Thirty-two affiliates of the National Education Association, including the Washington Education Association, sued to avoid disclosure in 2003. The recent Court of Appeals decision overturned a lower court ruling and stated the U.S. Department of Labor did not exceed its authority by applying federal rules to state government unions. The Court instructed the Department of Labor to reissue its analysis for why the change was necessary. This process will likely require several months to complete.
This ruling brings organized labor a step in the right direction. Washington state’s government collective bargaining agreements mandate union representation for tens of thousands of public employees. These employees are forced to pay union dues as a condition of employment, but have little information about how their dues are spent.

Financial transparency is essential to good stewardship. As a matter of public policy, we give voters access to information about the finances of political candidates. Shareholders of corporations receive regular financial reports. But when union funds are mismanaged, union members are often unknowing victims. Establishing financial disclosure rules for labor organizations will ensure accountability to union shareholders and will reduce the potential for corruption.
Public employees cannot make informed decisions about the benefit of union representation unless they know the details of the union’s income and expenditures.

Unions routinely argue against this level of accountability to their members. The AFL-CIO objected to Secretary Chao’s modernized reporting forms, claiming that compliance would cost organized labor over a billion dollars. In reality, as reported by National Review, the AFL-CIO spent only $54,000 for the bookkeeping and related expenses.

The Washington Education Association actually argued in court that it had no fiduciary responsibility to the teachers it represents. In other words, the union doesn’t have to account to its own members for how dues are spent.

Labor unions will continue to use and abuse their members as long as they are permitted to operate in the shadows. Only accountability will breed the responsiveness the modern labor movement is in such dire need of recapturing, and Washington state can be a leader in this process.

The Washington Legislature need not wait for a federal directive. The American Legislative Exchange Council has state model legislation that mandates disclosure. If the legislature does nothing, however, the U.S. Department of Labor may soon require unions to open their books.

Michael Reitz is legal counsel and director of the Labor Policy Center. He earned a juris doctorate from Oak Brook College of Law in Fresno, California. He is a member of the Washington and California Bars and is admitted to practice before the U.S. Court of Appeals for the Ninth Circuit.