DOL Extends Filing Deadline for Initial LM-10
Last week, the Department of Labor (DOL) announced an extension of the filing deadline for initial LM-10 reports and issued additional guidance concerning employer LM-10 reporting obligations under the Labor-Management Reporting and Disclosure Act (LMRDA or Act), 29 U.S.C. §§ 401 et seq. Employers with fiscal years ending December 31 now have until May 15, 2006 to submit their initial LM-10 reports to the DOL. Reports filed by this date will be considered “timely” for purposes of the DOL’s previously announced grace period.
The newly issued guidance expands the frequently asked questions published by the DOL in November 2005 and provides additional information as to the nature and extent of employer reporting requirements. Although the guidance does not change significantly the reporting obligations, it does offer clarification in several areas not addressed by the statute or previous DOL guidance. The important elements of this new guidance are summarized below. Additional information concerning the LM-10 reporting obligations and prior guidance may be obtained from our website by clicking here.
New Exemptions for Widely Attended Gatherings
In response to requests for additional relief from the technical requirements of the LM-10 reporting obligations, the DOL has established two new reporting exemptions for payments made in connection with widely attended gatherings. Widely attended gatherings for purposes of these exemptions are those gatherings in which a large number of people are expected to attend, a substantial number of attendees have no relationship with a union, and the union and nonunion attendees are treated alike. The first of these new exemptions provides that an employer need not track or report a widely attended gathering that costs $20 or less per attendee. This exemption applies to all widely attended gatherings, without regard to the number of events held throughout the course of the employer’s fiscal year. The values of the events are neither reportable nor included when applying the $250 de minimis exception unless the cost per attendee exceeds $20 and no other reporting exception applies. Widely attended events that cost of more than $20 per attendee should be analyzed under either the $250 de minimis exception or the $125 widely attended gathering exemption (discussed below). The $250 de minimis exception was established in prior LM-10 guidance and provides that payments need not be reported if (1) the total value of payments provided to any one union, union officer, union agent, or union employee is less than $250 in any fiscal year and (2) the payment is unrelated to the recipient’s status in a labor organization.
The new $125 exemption applies to up to two widely attended gatherings during an employer’s fiscal year in which the employer spends more than $20 per attendee. If an employer holds one or two widely attended gatherings in a year and spends $125 or less per attendee for each event, the employer is under no obligation to track or report those payments. Once the cost of a single widely attended gathering exceeds $125 per attendee, the value of that event becomes reportable if no other reporting exception applies. Similarly, once an employer hosts more than two events in the same fiscal year with a cost of more than $20 per attendee, all the events become reportable if no other reporting exception applies. In either circumstance, events or gatherings that do not qualify for the new $125 exemption should be analyzed under the $250 de minimis exception.
Dedicated Union Office Space
A number of clients have inquired as to whether office space dedicated to use by a union is reportable on an LM-10 report. The DOL has clarified that the value of office space provided to a union at no cost is a reportable payment or thing of value under the LMRDA. An employer that has dedicated offices in its facility for use by the union must disclose the reasonable market value of that space on its LM-10 report. The reporting obligation does not, however, extend to a union’s temporary use of employer office space on an as-needed basis (e.g., temporary use of a conference room). The DOL deems occasional use at the employer’s discretion as being without a quantifiable market value and not reportable on the LM-10 report.
Union-Appointed Trustees
The DOL’s new guidance provides that an individual appointed to serve as a union representative on the board of trustees of a Taft-Hartley pension or welfare plan is a “union official” for purposes of the LM-10 reporting obligation. Thus, payments to a union trustee of a Taft-Hartley plan may be reportable even if that individual is a professional trustee and holds no position in the union. This interpretation by the DOL was not contained in prior guidance, which primarily addressed payments to a union trustee on a Taft-Hartley plan who also held a position as a union official.
In circumstances in which an employer provided a payment or other thing of value to a trustee and does not know whether the trustee was appointed by the union, the DOL’s guidance explains that the employer should make a reasonable inquiry and exercise due diligence to determine the trustee’s status. This could include contacting the pension or welfare plan and asking the trustee directly. In future years, the DOL expects employers to more accurately keep track of information relevant to the LM-10 reporting obligation, including whether the recipient of a payment is an official or agent of a union.
Payments to Officers or Employees of Pure Public Sector Unions
The DOL has confirmed that the LM-10 reporting obligations do not apply to payments to officers or employees of unions that only represent public sector employees. The guidance directs employers to search the DOL’s website (http://www.dol.gov) for reports filed by a particular union or to contact the DOL’s Office of Labor Management Standards (http://www.dol.gov/esa/olms_org.htm) when there is uncertainty as to whether that union is covered by the LMRDA.
Payments to Spouses of Union Officials
The guidance provides that payments to the spouse of a union official ordinarily are not reportable. In unusual circumstances, however, a payment to a union official’s spouse may be considered a reportable indirect payment to the union official. Although it has not clearly defined the unusual circumstances that trigger a reporting obligation, the DOL has indicated that relevant considerations include the reason for the payment, the relationship between the spouse and the employer, and the relationship between the union officer and the employer.
Consolidated LM-10 Reports
The DOL has stated that a consolidated LM-10 report may be filed by a large parent corporation on behalf of one or more related or affiliated companies, but only if that parent corporation is the employing entity that ultimately made the payments disclosed on the report. The filing employer must either employ the individual who made the payments or reimburse the entity or individual that made payments on its behalf. The DOL’s guidance indicates that an employer may make a “reasonable judgment” in determining whether the filing entity actually is the “employer” that made the payment. In some instances, the fact that a related or subsidiary company would have an independent LM-10 reporting obligation as an employer covered by the LMRDA will substitute for a parent corporation’s obligation to file an LM-10 report covering payments made by that related or subsidiary company’s employees. Relevant considerations could include whether the related or affiliated companies are separate corporate or legal entities, have an independent employment relationship with employees, or have separate tax identification numbers.
Qualifying for the Grace Period When No Reportable Payments Were Made
Following the November 2005 announcement of a grace period for employers that submitted their initial LM-10 reports on time, there was some question as to how employers that did not make reportable payments during the first fiscal year beginning on or after January 1, 2005 could take advantage of the grace period. The DOL has stated that those employers may take advantage of the grace period without filing an LM-10 report. Instead, they only must maintain records sufficient to verify that they conducted reasonable, good-faith efforts and determined that they did not have a reporting obligation. The DOL’s guidance makes it clear that employers should not submit blank or placeholder LM-10 reports if they have made no reportable payments.
Compliance During Initial Reporting Period
To the extent that the issue was unclear in prior guidance, the DOL has confirmed that an employer must make a diligent and good-faith effort to comply with the LM-10 filing requirements during the initial reporting period. An employer that made reasonable attempts to locate and reconstruct missing records, completed the report as accurately as possible, and refrained from negligently withholding information will be deemed to have made a diligent and good-faith effort and satisfied its reporting obligation.
Payments that Are Rejected, Returned, or Repaid
The DOL guidance clarifies the circumstances under which employers must report payments that are rejected, returned, or repaid. Specifically, payments that are rejected, returned, or repaid by the recipient in the same fiscal year in which the payments originally were made are not reportable if the payments did not create a serious conflict of interest and the reimbursement was not designed to evade the reporting obligations. If the original payment was made near the end of the employer’s fiscal year, timely reimbursement in the next fiscal year similarly will eliminate any obligation to report the value of the item provided. Regardless of when the payment is made, however, an employer must report interest or reasonable usage value on payments or other things of value that are not promptly rejected, returned, or repaid. Employers should consider developing policies and procedures to help determine whether and when payments and other gratuities provided to unions and union officials were rejected, returned, or repaid.
If you would like further information concerning the issues raised in this Morgan Lewis LawFlash, please contact any of the following Morgan Lewis attorneys:
Chicago
Philip A. Miscimarra
312.324.1165
pmiscimarra@morganlewis.com
New York
Craig A. Bitman
212.309.7190
cbitman@morganlewis.com
Michael A. Curley
212.309.6711
mcurley@morganlewis.com
Philadelphia
Doreen S. Davis
215.963.5376
dsdavis@morganlewis.com
I. Lee Falk
215.963.5616
ilfalk@morganlewis.com
Steven D. Spencer
215.963.5714
sspencer@morganlewis.com
Marianne R. Yudes
215.963.5490
myudes@morganlewis.com
Washington, D.C.
Charles I. Cohen
202.739.5710
ccohen@morganlewis.com
Daniel R. Kleinman
202.739.5143
dkleinman@morganlewis.com
John F. Ring
202.739.5096
jring@morganlewis.com
Steven W. Stone
202.739.5453
sstone@morganlewis.com