Safeguarding Union Welfare Funds:

...It is not my purpose here either to detail the abuses or to point the accusing finger at anyone...

...The pressure for such funds came from below--as the security and welfare benefits became popular with locals and rank-and-file members...

...It is my purpose to raise the question of how to deal with the local or joint council--or even higher body--that is permitting or indulging in the misuse of welfare funds...

...And how much toward administrative costs...

...These supervisory controls over welfare funds are imbedded deep in our ILGWU constitution...

...So-called insurance agents and agencies appear out of nowhere to cut fat commissions...

...But, in the face of the evil that does exist, we must begin to think about lending our support to legislation that may call for publication of the financial facts about welfare funds, including administrative costs and commissions, or that may set a minimum code of propriety and responsibility in the handling of these funds...

...It appears to me that, under these circumstances, where labor recognizes the existence of a real evil--no matter how limited--and where the internal union structure does not provide controls for the elimination of abuses, the pressure for legislative action to control union welfare funds will inevitably mount...

...And so far as the employers go, they count the percentage contributions as a wage increase and do not care much how it is spent so long as they are not asked for more...

...The moneys in such account shall be used only for the specific purpose of such fund and for the administrative expense thereof, and shall not be used for any other purpose...

...It it handing out money--huge sums of money...

...The internal structure or unwillingness of some unions to deal with this problem among their units, where an abuse does develop, leaves the trade-union movement in a weak position to argue against governmental intervention...

...Some of these selfsame unions had an elaborate and adequate system for insuring honest and businesslike procedures in the handling of the funds based on member contributions...

...In 1938, the convention report of the American Federation of Labor showed total benefit payments--covering death, sickness, old age, disability and miscellaneous benefits--of some $25 million for all AFL affiliates...

...the latter are employer-contributed, based on a percentage of the payroll, as embodied in collective agreements...

...Undoubtedly, cases of mismanagement and malpractice in the handling of welfare funds are exceptional rather than typical...

...Many top union leaders did not look with favor upon the introduction of these welfare benefits because they believed that a union's job was solely its concern with wages and hours...

...Welfare funds are a new era of labor-management relations and a new form of union-membership relations...

...We are also concerned with what happens to him when he needs or wants a vacation away from the plant...

...Out of this power to audit, to publish and to police has come a general supervisory practice, contained in Article 4 of the Constitution: "The health and welfare funds committee [of the international] shall have general power of supervision and coordination over all health and welfare funds, retirement funds or other similar funds...

...It is in this vein that I propose that labor take a positive approach, a constructive approach, toward legislation--conceived with a proper respect for labor's rights--to end the abuse of union welfare funds...

...Whether justly or unjustly, the employer will use the abuse as a weapon against all labor...

...Special insurance companies are created to act as carriers...

...Many rank-and-file trade-unionists, with a long and passionate devotion to the freedom and independence of free trade-unionism, know that any form of governmental intervention in union affairs is an evil...

...It shall strive to bring about uniformity in such plans, to the extent that it is feasible...

...American labor has traditionally and properly resisted all efforts on the part of governmental agencies to interfere with the conduct of internal union affairs...

...A number of rackets have sprung up...

...Article 15...

...We must know when and how to adjust traditional rights and privileges so that we may attain new strength and fulfil new responsibilities...

...Our practice is the outgrowth of our history, our experience, our industry and union structure...

...until the same has received the approval of this committee...

...How much received...

...we are concerned with his health and his ability to meet medical bills...

...This one union in 1953 paid out more than the combined affiliates of the AFL did in 1938...

...The ILGWU's program has gradually evolved not so much in response to actual abuses as in a steady effort to avoid the development of such abuses in the first place...

...The fact that--to quote Fortune--many of the abuses were practiced with the tacit consent of industry trustees" will not deter a grasping employer from denying welfare funds to his employes so long as he can point to abuse of funds anywhere...

...For that reason, we have opposed Government intervention in union elections, strike votes, handling of funds in the general treasury, etc...

...All bonds or other securities representing investments of such funds shall be placed in safekeeping under the joint control of representatives of the ILGWU, designated by the health and welfare funds committee of the GEB...

...These welfare funds are self-insured, that is, they are not farmed out to insurance companies but are administered by local and board committees under international policing and supervision...

...Anti-labor legislators will seize upon this situation to advance legislation that will merely use the evil as an excuse for punitive legislation directed against labor as a whole...

...The auditing of the local books--including the local health, welfare and retirement funds--by a well-trained corps of international auditors is the key to vigilant policing...

...The key to the proper policing of these funds lies in the international union's practice of auditing the local's books...

...Section 2. for instance, specifies: "All moneys received by a local union, joint board or other subordinate body for the benefits of its membership, as contributions to a fund described in Section 1, shall be deposited and held in an account separately maintained under the name of such fund...

...Dramatic evidence of the growth in welfare funds is contained in the single fact that in 1953 the International Ladies' Garment Workers Union paid out benefits of more than $36 million and had an income of $54 million...

...Section 12 states: "The general secretary-treasurer shall publish in the official publication of the ILGWU annual reports giving a summary of the income and disbursements of all funds of union and the general office, after audit by the auditing department of the ILGWU...

...I do not cite our practice in order to induce other unions to copy our model...

...As a result of this rapid movement in the direction of welfare funds, the horizons of labor have been broadened and the wage-earning family enjoys new securities...

...Out of our own experiences, I can tell how one international union tackles this problem...

...Our horizons have been broadened because we are no longer simply concerned with what happens to the dues-payer in the plant...

...The nature of our reaction to such legislation, it seems to me, must inevitably be affected by the ability of the trade-union movement itself to set up standards and methods of enforcing these standards among its units...

...The fact that the unions are here moving in a new direction, with no great body of tradition and precedent, and the further fact that this new aspect of unionism involves millions of dollars open the door to mismanagement and malpractice...

...Ours is a system that combines local control and operation of welfare funds with international supervision and policing, which we refer to as controlled autonomy...

...No plan, by-law, rule or regulation or amendment thereto, and no provision establishing new benefits or altering benefits already established...

...This right of the international union to audit the books of the locals goes back many years in the ILGWU...

...Fortune magazine wrote in April of this year: "Given the tens of thousands of welfare funds in the United States, the cases of glaring abuses may be few...

...Certain general regulations concerning the handling of welfare funds are contained in our constitution...

...There is a great difference, however, between the character of the welfare funds listed by the AFL in 1938 and the character of the present ILGWU welfare funds...

...But the big push by labor as a whole in the direction of such funds came during the war years...

...The surplus moneys or reserves of such a fund shall be invested only in securities which have received the approval of the health and welfare funds committee of the GEB...

...The practice of insurance companies of giving commissions to these agents--even where no agent is involved and no commission warranted--instead of reducing rates to these funds is one of the most important sources of corruption...

...The wage freeze made it difficult to get wage increases, then interpreted as being inflationary...

...If there are structural barriers or an unwillingness within some unions making needed controls impossible or unlikely, then it seems to me that the trade-union movement will have to support some measure of legislative action to protect union members and their families against abuse of welfare funds...

...No loans shall be made therefrom to the LU, JB, or other subordinate body or to any of the members thereof...

...Although in the main these funds are by law jointly administered by employers and unions, organized labor has the responsibility of helping to clean up these funds so that the idea generally may not be discredited by an irresponsible and grasping few...

...Overnight consultants mushroom into existence to claim fees...

...This is a positive alternative, in my opinion, to any attempt on the part of anti-labor legislators to seize upon a limited evil in some unions as an excuse to attack or weaken the labor movement as a whole...

...Public report of abuses in some union welfare funds, however, makes legislative intervention more and more likely, arid perhaps inevitable...

...All attempts to intervene are immediately resisted as interference with the local autonomy of the local union...

...shall become operative...

...Today, these fringes have grown to be so huge and substantial that they are increasingly looked upon as a vital and normal part of a labor-management contract...

...Surely, we of labor cannot afford to ignore them...

...How much paid out...

...In the case of union welfare funds, locals and joint councils have negotiated agreements that make local and council officers trustees for funds running into millions of dollars...

...Undoubtedly, some employers will seize upon the misuse of funds in one case to deny a proper and justified welfare fund in another trade or industry...

...Article 15, Section 4 declares that "an expenditure of 5 per cent of the total contribution to any such fund in any 1 year shall be deemed a reasonable administrative expense...

...The rapid growth of welfare funds caught many union leaders by surprise...

...The American Federation of Labor officially recognized this responsibility in a recent resolution of the Executive Council urging the international unions to take steps to put welfare funds on a clean and businesslike basis, to insure proper administration of health and welfare funds...

...The 5 per cent also covers administration of vacation benefits--a costly item to administer--which in the ILGWU alone is part of the employer-contributed health and welfare funds...

...The main problem, though not necessarily the sole problem, is at the local level...

...The resistance on the part of local units, including very honest local units, has been too great...

...The amount of unfavorable publicity arising from the glaring few tends to discredit the case of labor generally...

...Under the welfare plans, the union is giving more than service...

...The 124 separate funds are handled autonomously by the locals and joint boards, scattered across many states and many cities...

...The problem of keeping union welfare funds clean is, in many respects, akin to curbing racketeering when it, too, seeks to worm its way into the ranks of organized labor...

...As our unions face new problems, we must find new answers...

...We felt that to open the door to interference is to allow a wedge to be driven into our "house" that could ultimately shatter the union home we have so laboriously built...

...When members of a union contributed out of their own pocket to union benefit funds, these self-same members had a greater inclination to keep their eyes on the handling of the funds...

...The word "fringe" was intended to convey the idea that the new benefit was sort of a little decoration around the basic terms contained in a collective agreement...

...That has been done in detail--and, unless the abuse is halted, the accusing finger of the newspapers and the law will embarrass the entire labor movement, punishing all for the sins of the few...

...In December 1953, the net resources of the health, welfare and retirement funds of our various locals and joint boards affiliated with the ILGWU totaled $129,579,578.16...

...The new point of view--namely, that it is desirable and proper for a union to write a contract that covers matters of health, welfare, vacation and retirement, in addition to hours and wages--brought new problems with it in the administration of such funds...

...But when these same unionists see some of the welfare funds squandered and misused by racketeering elements, some of whom are muscling their way into the trade unions precisely in order to get their hands on these welfare funds, many rank-and-filers and leaders will come to look upon governmental intervention--to protect welfare funds--as a lesser evil...

...Needless to say, any such legislation, conceived against labor and put through without any regard to the wishes of the responsible spokesmen for labor, must be fought with every ounce of energy we have...

...But when the funds come from the outside, the member is less inclined to scrutinize the handling of the finances...

...Out of this concern, the wage-earner has increasingly found in his union a bulwark against the many insecurities that dog the life of a worker and his family...

...Our right to audit local books goes back some forty years, preceding the establishment of any regular welfare funds...

...It is in respect to this last item--administrative costs--often covering a variety of strange practices, that publication of the thoroughly audited facts will check many abuses...

...I cite our practice, indeed, because I know that some international unions are seeking to set up methods of control over local welfare funds, thus far without any success...

...I quote our experiences not because they are typical but because they may be so non-typical as to raise the question of inevitable action by some other agencies outside the ranks of labor...

...The desire for local autonomy has been raised to a principle that refuses to yield to any kind of international supervision...

...Since the juggling of administrative costs is responsible for much of the shenanigans in fund abuses, our regulations put a limitation on this item of expense...

...It should be added that in the case of retirement funds the administrative cost is limited to only 3 per cent...

...But they had no plans for insuring proper use of the new and immense funds coming in through employer contributions...

...The fact that the cases are few does not mean, however, that they can be ignored...

...These new-type welfare funds--employer-contributed--represent a marked departure from the traditional union policy that a union contract should be limited to wages, hours and working conditions...

...we are concerned with his ability to live in dignity in old age...

...The former were financed through dues and assessments of union members...

...This 5 per cent includes the cost of auditing employer payrolls to make certain that the proper amounts are being paid into the fund...

...Millions and millions of dollars, instead of adding to employers' profits, went into special funds set aside to help working people in the hours of death, sickness, retirement, maternity and accident...

...Overwhelmingly, these funds are a source of strength to unions and of security to workers and their families...

...When finally these welfare systems became a fact of life, the international unions, were in no way prepared to advise, supervise or control these funds...

...Since in more than 90 per cent of the cases it is the local or the joint council that generally makes the agreement, it is the same body that finds itself naturally and properly participating in the control of these funds...

...A companion to our international audit is the publication by the international of the full financial facts about the welfare funds administered by locals and joint boards...

...We have also resisted all Government intervention for fear that politicians would use Government agencies in acts of reprisal against unions that may have opposed them at the polls...

...There were a few unions, including the ILGWU, which set up their first employer-contributed welfare funds before World War II...

...These welfare plans are different from normal union operations...

...we are concerned with his family--when the breadwinner passes away...

...Generally, what a union gives to its members is service: the negotiation of an agreement, the handling of a complaint...