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Office of Labor-Management Standards (OLMS)

OLMS News

Number: 12-06

May 12, 2006

Additional FAQ on Form LM-10, Employer Report, Now Available on the OLMS Web Site

The Department of Labor, Office of Labor-Management Standards (OLMS) has today posted on the OLMS Web site the following new FAQ regarding Form LM-10, Employer Report:

NEW! Q3(A). Are payments for services, such as legal services provided by a lawyer to a union official, exempt from reporting because they are regular marketplace transactions?

A3(A). Generally, yes. A lawyer that employs employees is an employer under the LMRDA, and categories of employers are subject to the Form LM-10 reporting requirements. See FAQ, Questions 1-2 (who is an employer), 6 (employers subject to the Form LM-10), 3 & 10 (discussing designated legal counsel). Section 203(a) of the LMRDA requires employers to report certain payments to labor organizations and their officials, subject to multiple exceptions. 29 U.S.C. - 433. One of these exceptions exempts employers from disclosing -payments of the kind referred to in section 302(c)- of the Labor Management Relations Act. Section 302(c) excludes, among other things, payments -with respect to the sale or purchase of an article or commodity at the prevailing market price in the regular course of business.- 29 U.S.C. - 186(c).

The Department considers the purchase of legal services as a payment of the kind referred to in section 302(c). Payments relating to the purchase of legal services are, therefore, not reportable if the purchase is made at the prevailing market price in the regular course of business. No report would be due from a law firm that provides a union official with a contract for legal services the firm regularly offers the public and on the same terms it provides similarly situated individuals who are not union officials. If any of the terms of the agreement are altered because of the official's role in the union, however, the exemption does not apply.

A contingency fee agreement may require a lawyer to pay for the costs of the litigation in return for a right to a percentage of any recovery received by the client-union official. Under these circumstances, all the litigation expenses made by the lawyer are with respect to the purchase of the legal services and the sale by the union official of conditional right to a portion of his or her recovery. The litigation expenses are thus not reportable.

In cases in which the exemption does not apply because the purchase of the legal services was not made at the prevailing market price or was not made in the regular course of business, the lawyer must report any agreement, payments provided to the union official, as well as expenditures made on behalf of the official, including litigation-related expenses fronted by the lawyer. The following guidance is intended to assist lawyers or law firms in reporting such payments and expenditures.

The following guidance on completing the Form LM-10 is applicable only for reports in which Item 8a is answered -yes.- Item 8a concerns payments to any labor organization or official of a labor organization. The guidance is not applicable to reports in which any of Items 8b through 8f are answered -yes.- Speaking broadly, these items concern payments, expenditures and agreements with respect to bargaining and representation rights.

In completing the Form LM-10, the law firm, having answered -yes- to item 8a, will complete item 9a by checking -both,- indicating that a contingency agreement and payments under the agreement have been made. Item 9b will provide the name and address of the union official who is the client of the law firm. Item 9d will provide the name and address of the union official's union. Item 10a will provide the date of the contingency agreement, and 10b will disclose whether the agreement was written or oral. Pursuant to 10b, the contingency agreement, and any documents modifying, supplementing or superseding the agreement, must be attached to the Form LM-10. Filers are advised that the Department does not require any report, or attachment thereto, to contain privileged information lawfully communicated to a filer who is an attorney by any of his or her clients in the course of a legitimate attorney-client relationship. See 29 U.S.C. - 434. If the agreement contains such privileged information, the information may be redacted or obscured prior to filing.

In Item 11a, the filer should provide the date of each payment or expenditure made. Item 11b must disclose the amount of each payment, and Item 11c must describe the payment. A sufficient description need not include the identity of the individual who received the payment. It need only reveal the type of payment, such as -court costs,- -expert witness fees,- -witness fees,- -court reporter,- -filing fees,- -duplication expenses,- -deposition expenses,- etc. The filer will complete Item 12 by providing information that identifies the pertinent case caption, and any other information necessary to identify the case and court proceeding.

Subject to the de minimis exemption, and any other applicable exemptions, gifts, payments and gratuities provided to a union official or union in order to gain the union official as a client or otherwise generate business are reportable. See FAQ, Questions 45-46. The fact that the official ultimately becomes a client or receives the benefit of payments exempt from reporting does not eliminate this requirement.

If an employer believes that completing Form LM-10 will result in the disclosure of sensitive, confidential or proprietary information that could cause substantial harm to the employer's business interests, the issue should be discussed with OLMS prior to the filing of the report. See FAQ, Question 24.

The new FAQ has been posted on the existing Form LM-10 Frequently Asked Questions page.

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Last Updated: 05/12/06

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