Outlook 2018: Union-Auditing Office Awaits Political Imprint

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By Ben Penn

The Labor Department’s Office of Labor-Management Standards enters 2018 with leadership and budgetary uncertainties, muddying what was once considered a likely effort by the Trump administration to escalate scrutiny of union finances.

Clarity should begin to take shape when Labor Secretary Alexander Acosta appoints a director of the agency, which investigates union officer embezzlement and election ballot stuffing, among other alleged violations of the Labor-Management Reporting Disclosure Act. Former National Labor Relations Board General Counsel Arthur Rosenfeld (R) is awaiting a final background check clearance to head OLMS, sources recently told Bloomberg Law.

A politically appointed leader may enable the agency to respond to pressure from business groups and Republican lawmakers to restore the office’s enforcement capacity closer to levels seen in the prior GOP White House, and to take a closer look at whether worker centers should be classified as labor organizations. Under previous Republican presidents, the DOL has leveraged the OLMS to shine a brighter light on labor union expenses. The agency’s workforce and budget were significantly slashed over the past nine years, and Congress appears unlikely to approve the White House’s request for a 20 percent OLMS funding hike.

“Obviously Secretary Chao took this on as one of her signature policy priorities,” Sean Redmond, executive director of the U.S. Chamber of Commerce’s Workforce Freedom Initiative, told Bloomberg Law. “I don’t know that Secretary Acosta is going to be in the same position. But I am under the impression that he is fully aware of the significance of the budget cuts that have taken place over the last eight years.”

Redmond was chief of staff at OLMS under then-Labor Secretary Elaine Chao, a period when the office, armed at its peak with twice the current level of full-time employees, conducted full-scale audits of union headquarters.

Depending on the office’s finances next year, “unions should be prepared to see Department of Labor auditors like they had 10 years ago,” Michael Hayes, who ran OLMS throughout Obama’s second term, told Bloomberg Law. Unions probably will have to “turn over any of their internal audit reports, which they conduct pretty regularly.”

In spring 2017, the department requested additional spending in part to re-establish an OLMS unit solely tasked with auditing national and international union headquarters. When this program was last functioning under the George W. Bush administration it led to criminal indictments and convictions of union officers, but it was quickly disbanded during the Obama administration and replaced with a data-driven approach that focused on violations at union locals.

New Leadership

Whether the next director would be inclined to rebuild the Bush-era OLMS that drew ire from the labor movement remains to be seen. Acosta may approach this office with caution, as he has shown a willingness to cooperate with the labor movement on certain issues. Further, the presumed next director, Rosenfeld, would not bring a reputation as a hard-charging anti-union advocate, sources who know Rosenfeld said.

A key sign as to whether the agency will have a major role in Acosta’s agenda may lie in personnel below the director.

“We need to keep a close eye on how many political appointees are moved into OLMS and who they are,” Seth Harris, a deputy and acting labor secretary in the Obama administration, told Bloomberg Law.

“We had four or five” political hires at OLMS in the Bush presidency, “and I’d be surprised if they could afford that level of staffing,” Redmond said. “That being said, I think that Nick Geale and Nathan Mehrens are in the position where they can help drive some of this at the policy level.”

Mehrens, an OLMS attorney under Chao, is now the acting head of the DOL’s policy office, and Geale, who worked in the solicitor’s office for Chao, is now Acosta’s acting chief of staff and solicitor.

Even under the leadership of career officials this year, the office has been working to finalize a rescission of the Obama administration’s signature OLMS priority: the persuader rule, which was blocked in court. The regulation would’ve extended disclosure requirements to employers when they hire consultants to block union organizing drives.

Budget Limitations

Heading into the second year of this administration, the low-profile office continues to operate with a roughly $40 million annual budget.

“It’s going to be a long, hard slog for them to restore the funding. I think that’s the most critical issue,” Redmond said.

Despite the Trump administration’s budget request to lift OLMS spending to $47 million in fiscal year 2018, the appropriations bills under consideration in both the House and the Senate would essentially flatline the agency’s funding. To revive the union-auditing task force, known as the International Compliance Audit Program (I-CAP), the department is seeking $1.7 million and 12 new employees.

Cause for Worker Center Concern

The agency also faces persistent calls from the U.S. Chamber of Commerce to begin treating alternative worker organizing centers as labor organizations that are subject to reporting requirements,

Acosta told a House panel in November that the department is already looking into whether to begin defining worker centers as unions for LMRDA compliance purposes.

To Redmond, this signals the issue is on Acosta’s radar and could see some action soon. Mehrens and the Chamber have argued in recent years that these increasingly influential organizations, such as the Fight for $15 and Restaurant Opportunities Centers United, are designed as union front groups. Some of the groups, which have substituted for traditional unions to provide workers with a voice on the job but without engaging in collective bargaining, may eventually be reclassified as unions and forced to submit paperwork to OLMS.

“Worker centers are not labor organizations—they don’t exist to engage in formal bargaining with employers to negotiate contracts,” Kate Andrias, a University of Michigan labor law professor who advised the Obama White House on labor, told Bloomberg Law. “It’s a specious argument, but I think worker centers should be concerned about it gaining traction.”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editor responsible for this story: Chris Opfer at copfer@bloomberglaw.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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