Chamber Sparks DOL Restraint on Union Pension Fund Abuse
Over the past 10 years or so, organized labor has become a sophisticated player in financial markets by using (some would say abusing) the power of the hundreds of billions of dollars held in union pension funds.
Unions have used the shares of company stock held in these funds to offer shareholder resolutions at corporate annual meetings — badgering employers with proposals on labor policies, global warming, political contributions, and other matters having little, if any, connection to the financial performance of the company, but advance the goals of union bosses.
In other cases, unions have used their pension funds like a sledgehammer, attempting to force employers to negotiate union contracts, agree to specific contract demands, or sign "Card Check" and neutrality agreements that effectively hand over their workforce to union organizers. In a glaring example, the AFL-CIO and other unions wrote to a communications company and threatened to "reevaluate" their pension holdings in the company if it did not negotiate a new contract with its workers.
We have long suspected that this type of activity borders on being illegal. And a recent opinion letter issued by the U.S. Department of Labor (DOL) suggests we are right.
Union pension funds are supposed to be used for the sole purpose of providing a secure retirement. This requirement is enshrined in ERISA, the federal retirement law, which is overseen by DOL.
In the June 24 letter to the U.S. Chamber of Commerce, DOL reiterated its view that under the law, pension assets are to be used "solely for the exclusive purpose of providing benefits to participants and beneficiaries" and that pension managers are prohibited from "subordinating the interests of participants and beneficiaries ... to unrelated objectives."
The letter goes on to state that "the use, or threat of use, of pension plan assets or plan management to achieve a particular collective bargaining objective is activity that subordinates the interest of participants and beneficiaries in their retirement income to unrelated objectives."
Slamming the door shut on a theory by some union advocates that pension plan assets can be used to promote unionizing, DOL states that these assets cannot be used to "promote or oppose union organizing goals[.]"
Finally, in particularly strong language, DOL concludes that using plan assets "to urge union representation of employees in the collective bargaining process or to promote a particular collective bargaining demand may constitute a prohibited transfer of plan assets…and potentially an act of self-dealing[.]" In other words, it would be illegal.
This is the second opinion letter the U.S. Chamber has received reining in union abuses of pension assets (see the first letter here: http://www.dol.gov/ebsa/regs/aos/ao2007-07a.html). With DOL having made its view of the law more than clear, union bosses ought to get back to managing their pensions for the benefit of workers, not for their own self-interest.
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