Number: 03-04

March 12, 2004

Updated FAQs

The Department of Labor’s Office of Labor-Management Standards (OLMS) has posted additional information to the Revised Form LM-2 and Form T-1 FAQs.

Below are new questions that we have recently posted to our Web site broken out by subject heading. This is in addition to the most recent update on December 30, 2003 (OLMS News 07-03). Should you have any follow-up questions please feel free to submit them via e-mail to OLMS at:

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Form LM-2

General Questions

Q. Must Form LM-2 terminal reports be filed for those smaller locals in trusteeship which normally would file Forms LM-3 or LM-4, and if so why is this still required when these locals do not meet the threshold for filing an LM-2?

A. Just as under the current rule, Form LM-2 must be filed for any union that is in trusteeship.

Q. What steps must be taken by a local, which customarily files an LM-3, but, upon being forced to sell its building in November (e.g., because of a plant closing), has generated unexpected one-time revenue in excess of $250,000? Must the local file an LM-2 for the year even though the local would not have maintained its records as an LM-2 filer - i.e, what triggers LM-2 status - the previous year's finances or a one time event during a year?

A. If a union's receipts exceed $250,000 during the reporting year, the union must file Form LM-2 regardless if it is caused by a one-time event.

Q. When bylaws have been changed, in what format are they electronically filed and what happens if the labor organization is not capable of filing electronically?

A. Bylaws should be filed electronically in a pdf or word processing format. If the labor organization is incapable of filing electronically, it may apply for a continuing hardship exemption.

Electronic Filing Questions

Q. When filing for a hardship exemption, what is considered undue burden and expense?

A. As stated in the instructions for revised Form LM-2 and new Form T-1, the condition for a temporary hardship exemption is whether the labor organization "experiences technical difficulties that prevent the timely preparation and submission of an electronic filing . . ." and the condition for a continuing hardship exemption is whether the form cannot be filed electronically "without undue burden or expense." The union submitting an application for a continuing hardship exemption should document the burden or expense that would be necessary for it to file electronically (for example, detail any hardship imposed by the need to purchase a computer or obtain an Internet connection). Hardship exemptions will be evaluated on a case-by-case basis.

Q. Can the OLMS field offices approve a hardship exemption?

A. No.

Q. How will information about the process and software be communicated to the unions?

A. Information will be available on the OLMS Web site at and through the OLMS e-mail messaging service, which you can subscribe to on the Web site.

Q. How will the DOL prevent unauthorized users from submitting data for our union?

A. A digital certificate is used to sign a transaction creating what is known as a digital signature. Filers must apply for a digital certificate from an approved Certifying Authority. The Certifying Authority verifies identity prior to issuing the digital certificate. The user loads the digital certificate on his/her computer and uses a "private key" to create a digital signature. The private key that is used belongs solely to the certificate holder; no one else can have or hold this key. The certificate holder (union officer) is responsible for keeping his/her key confidential. Most people store their private key using the password protection of their Web browser.

Q. How will the DOL ensure the security of my data when it is being transmitted and on the storage end?

A. The data will be transmitted electronically over a secure channel, encrypted and will use an SSL certificate.

Q. How will the DOL ensure the integrity of my data? In other words, how will I know that my data was received exactly as it was sent?

A. When the report is signed using a digital signature, key report data is stored in the signature, which is encrypted and locked so that it cannot be altered. Once the report is received at OLMS, the key report data is compared to the copy stored in the signature to verify that the data has not been altered.

Q. If we need to make changes to our filing after it has been sent, how will we do that?

A. An amended report should be submitted electronically and Item 3(a) should be selected to indicate that it is an amended submission.

Q. Why are e-signatures allowed/required when signature facsimile stamps are not permitted?

A. An electronic signature has the legal status of an original signature. A signature facsimile stamp is not an original signature.

Computer and Software Requirements

Q. How will revisions of the software be introduced?

A. Any revisions will be available for download from the OLMS Web site at

Q. How will information about the process and software be communicated to the unions?

A. Information will be available on the OLMS Web site at and through the OLMS e-mail messaging service, which you can subscribe to on the Web site.

Questions on Schedules 11 - 13

Q. Would it be a fair statement to say that the only change between the new Schedule 11 and the old Schedule 9 is the addition of Line (I), which is the allocation of time percentages between the five functional categories?

A. Yes, that is the only major change.

Q. When you state in the Form LM-2 instructions that time allocation percentages for the five functional categories may be imprecise and you are looking for good faith estimates, what is your criteria for evaluating whether the percentage estimates are acceptable?

A. Good faith percentage estimates are based on the best information and knowledge available to the officers.

Q. It appears that the employee expenses are going to be allocated into the functional categories based upon the time allocations as reported on Line (I) of Schedules 11 and 12. Thus, it would appear that employee salary and expenses that are reported on Schedules 11 and 12 do not need to be allocated during the year into the functional categories because they will be allocated at the end of the year based upon the time allocations reported on Line (I). Is this correct, and are there any reasons to track the employees' salary and expenses that normally get reported on Schedules 11 and 12 into the functional categories?

A. Disbursements to officers and employees that are required to be reported in Schedules 11 and 12 are allocated to the functional categories based upon the time allocations and do not have to be separately tracked by functional category.

Q. How do we allocate time for the officers who perform multiple tasks during the reporting period?

A. As stated in the instructions for the revised Form LM-2, on Line (I) of Schedule 11 enter the estimated percentage of time spent by the officer on activities that fall within Schedules 15 through 19 in the box by that schedule. You may round to the nearest 10%. When the time reported by an individual in an activity is less than 5% of his or her total work time, the officer's best estimate to the nearest percentage should be reported rather than rounding to zero. The total must equal 100%. It is understood that these figures may be imprecise. For instance, the president of an intermediate body may spend four months working on a multi-state contract negotiation, two months lobbying against a state referendum, two more months on an organizing drive, while also keeping up with his other duties as president. The president's good-faith estimate might be based on adding together the four months spent in contract negotiations and the two months on the organizing drive and allocating the six months as 50% (6/12) on Schedule 15 - Representational Activities. The president might then allocate the two months spent on the referendum as 17% (2/12) of his year on Schedule 16 - Political Activities and Lobbying. Finally, the president might determine that the remainder of his time was primarily devoted to union administration except for approximately one and one-half weeks devoted to administering a union scholarship program. Therefore, he would allocate 3% of his time to Schedule 17 - Contributions, Gifts, and Grants, and 30% to Schedule 19 - Union Administration. The example is not intended to be a representation of a typical allocation of time but it should be used to help understand the rationale that should be employed when making these determinations.

Q. How do we allocate expenses for officers who perform multiple tasks during the reporting period?

A. Disbursements that are required to be reported in Schedule 11 will be allocated according to the time allocations entered in Line I. Disbursements that are not required to be reported in Schedule 11 (such as disbursements for temporary lodging (room rent charges only) or transportation by public carrier necessary for conducting official business while the officer is on travel status if the disbursement is made directly to the provider or through a credit arrangement) should be allocated according to the purpose of the trip.

Q. For Schedules 11 and 12, the instructions for Line (I) state "you may round to the nearest 10%". Are we allowed to round to the nearest percent?

A. Yes. For Schedules 11 and 12, you may round to the nearest percent.

Q. If we round to the nearest 10% according to your instructions, but one or more categories are less than 5% and those categories are thus rounded to the nearest percent, then one or more of the remaining categories cannot be rounded to the nearest 10% because the total would not equal 100%. What guidelines do you offer when this situation arises?

A. One or more of the remaining categories should be rounded to the nearest percent as necessary for the total to equal 100%.

Q. Would it be a fair statement to say that the only change between the new Schedule 12 and the old Schedule 10 is the addition of Line (I), which is the allocation of time percentages between the five functional categories?

A. Yes, that is the only major change.

Q. For a "good faith estimate" that is imprecise, would it be acceptable for our employees to submit a declaration at the end of the year stating their personal allocations into the five categories?

A. Yes. It is acceptable for employees to submit a declaration at the end of the year stating their personal allocations into the five categories. If employees have records that will enable them to better estimate their time, however, they should use them in order to improve the accuracy of the estimate. Such records, of course, must be maintained for not less than five years after the report is filed.

Q. According to the instructions for the LM-2, the DOL is not going to require detailed time records to support the percentage allocations for the employees. What, if anything, would the DOL be looking for in terms of documentation supporting the percentage allocations?

A. Whatever documentation was actually used to support the percentage allocations should be retained by the union, whether it is employee declarations, internal records, samplings, personal calendars, or other documents.

Q. Will Business Representatives follow the same percentages as the Directing Business Representative percentages?

A. The reporting union can determine how to establish the allocation for business representatives as long as it is done in good faith. Thus, similar percentages may be used if the result is likely to be an accurate representation with respect to all affected individuals.

Questions on Schedules 14 - 19

Q. What will happen if items are mistakenly posted and reported in the wrong schedule?

A. If mistakes are discovered, an amended report can be filed.

Q. With the instructions requiring the reporting of direct and indirect payments in Schedules 15 through 19, how would a labor organization report the payment made to an organization such as the Kaiser Family Foundation that directly produces research and writes papers, which may be indirectly used by others to impact legislation? This research can also be used indirectly in contract negotiations. Should the payment be characterized as political activity under Schedule 16, a contribution under Schedule 17, or could it be union administration in Schedule 19? What if the labor organization's subjective motivation in supporting the foundation is to generate factual evidence which will influence legislation or, for example, provide targeted information for negotiations? What if the payments are made to an entity without nonprofit or not-for-profit status?

A. The purpose of the disbursement should determine where it is reported. If it is a disbursement for research used to affect legislation, it should be reported as political activity on Schedule 16. If it is primarily a charitable contribution the disbursement should be reported as such on Schedule 17. If the research is to aid union administration the disbursement should be reported on Schedule 19. The profit or non-profit status of an entity may help shed light on the purpose of a disbursement, but it is not necessarily a relevant factor.

Q. How should a labor organization report expenditures which are made in support of the members of other labor organizations (strike or litigation support), or on behalf of working people more generally (litigation or public demonstrations of support), where the objective is not to influence legislation and not to organize new members or negotiate an agreement on behalf of existing members? May expenditures on Schedule 17 (Contributions) include those made to entities which are not non-profit or not-for-profit institutions?

A. Labor organizations should use all available data in order to accurately allocate disbursements to the appropriate functional categories. To the extent that disbursements are made to enhance the union's ability to represent its members or to influence legislation or political elections, however circuitously, such as to strengthen the labor movement generally or to draw attention to adverse legislation or disfavored candidates, those disbursements should be allocated to the relevant schedule. Disbursements to be included in Schedule 17 are not limited to disbursements to non-profit or not-for-profit entities.

Form T-1

General Questions

Q. For the first year, if a labor organization has a trust whose fiscal year runs from January 1 through December 31, would the labor organization have to file a Form T-1 for 2004?

A. No, a Form T-1 would not be required for the fiscal year ending December 31, 2004, because that fiscal year began before July 1, 2004, the effective date of the Form T-1.

Q. Who reports a building corporation on Form T-1? The union or the actual building corporation?

A. While Form T-1 can be prepared by the building corporation or other trust, it must be signed by the president and treasurer of the reporting labor organization.

Questions on the Definition of a Trust

Q. What is the definition of "financial contribution" in the instructions for the Form T-1, Trust Annual Report - "if the union's financial contribution to the trust, or a contribution made on the union's behalf".

A. The term "contribution" is broadly construed and in addition to direct contributions from a labor organization or from an employer pursuant to a collective bargaining agreement also includes purchases of goods and services. Rent, stock purchases, investments, and in-kind contributions are all considered to be contributions. However, a deposit to an account of the labor organization in a credit union or other financial institution would not be a contribution to the financial institution.

Q. Would the $10,000 threshold for "significant" contributions include receipts through collective bargaining and in-kind contributions?

A. Yes.

Q. In regards to trusts and filing the Form T-1:

a. A health and safety fund that provides benefits to union members is negotiated in the collective bargaining agreement, which requires the employer to fund the program at $X/hr. This is not a Taft-Hartley trust as the program is administered exclusively by the employer. Is this situation a covered trust in which the local is interested? What authority is provided by the Secretary to enable a labor organization to acquire the required information from the employer or administrator of the trust? What steps should the Union take in the event it is unable to obtain required information?

A. The health and safety fund described satisfies the statutory definition of a trust in which a labor organization is interested pursuant to 29 U.S.C. §402(l). Even though a trust is a separate entity from the reporting labor organization, it is reasonable to expect that the labor organization will have sufficient authority and/or influence to obtain the required information from a trust for which it must file a Form T-1 because (1) the labor organization had established the trust and/or selected one or more of the members of the trust's governing body, and (2) the labor organization directly or indirectly made a substantial ($10,000 or more) contribution to the trust. The labor organization will be expected to take whatever reasonable steps it can to secure the necessary information. OLMS expects that in many instances the trust will prepare the Form T-1 and provide it to the labor organization for filing. OLMS recognizes that there may be some situations when a labor organization will not be able to obtain trust records. In that situation, the labor organization should contact OLMS, and provide evidence that it has made a good faith effort to obtain the information. OLMS may then contact the trust and attempt to assist the labor organization in obtaining the necessary records. A union that makes a good faith effort to obtain the information necessary to prepare a Form T-1 but is unsuccessful will not be penalized.

b. What about ESOP companies where the union has members on the Board of Trustees as part of the employee ownership, and the sale to employees is negotiated by the labor organization with the seller (collectively bargained agreement) - is this a covered trust?

A. A determination as to whether a particular ESOP company meets the definition of a trust in which a labor organization is interested would depend upon the specific circumstances and must be made on a case-by-case basis.

c. What if the union creates a fund that benefits not just members of the union, but also covers non-members, is this a covered trust?

A. The entity would be a trust in which a labor organization is interested if a primary purpose of the entity is to provide benefits for the members of the union or their beneficiaries.

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Last Updated: 03/12/04