Union financial disclosure rule

STATUS: New rule released

The Department of Labor's Employment Standards Administration is proposing to revise the financial disclosure requirements for labor unions. For over 40 years, since the enactment of the Labor-Management Reporting and Disclosure Act of 1959, labor union financial reporting

The department suggests that the proposed rule's stronger disclosure requirements would improve transparency of union financial activities. That would enhance the accountability of union leadership to rank and file members by making it more difficult to hide financial mismanagement.

In addition to existing filing requirements, under the new rule unions will be required to file seven other reports, including detailed schedules of accounts receivable and accounts payable activity, book value of investments (other than U.S. treasuries), detailed disbursement schedules of payments to union employees and officers, and schedules listing lobbying and other political activities conducted by unions.

Mercatus estimates suggest that, over the lifetime of the rule, the cost of the new disclosure requirements would average about $11 per union member. That figure is a little higher than the Labor Department's estimate of $6 per member, but still not a lot to pay if it achieves the rule's intended goals. However, our analysis suggests that, while the proposal may provide net benefits through improved transparency of union financial activities, it may not solve the underlying problem of the lack of accountability of union leadership. That is because the usual market checks and balances have been attenuated by government-- granted privileges and immunities to organized labor.

Because the problem is not with financial disclosure per se, but rather with the market distortions created by government interference in the labor market, it may not be realistic to expect the new set of regulations for enhanced financial disclosure to achieve its intended aim.