Olms interpretative Manual

UNIONLOANS—DIRECTORINDIRECT

541.005SPECIALTRUSTFUNDS

Where an employer makes a contribution to a special fund to be used to insure againstfuture uncertainty and risk to which an employee is subject, he is at the time of the contribution,making a payment on behalf of the employee. This is so even though the employee himself maynever receive any of the benefits contemplated by the plan, since the payment made on his behalfaccords him the same protection in the form of potential benefits as the employee who actuallyreceivesbenefits.Itwould thusfollowthatloanssubsequentlymadefromsuchvestedpaymentsinaccordance with the plan should not be considered as direct or indirect loans made by a labororganizationwithinthemeaningoftheprohibitioncontainedinsection503(a)oftheAct.SeealsoManualEntry 541.100, immediately below.

(TechnicalRevisions:Dec. 2016)

541.100LOAN TODISCHARGEDMEMBER

Mr. X, a union member, was discharged from his job. He filed a grievance and while itwasbeing adjudicated, themembership of the unionvotedtopayhimhis weekly salaryof

$125.00 for the period from his discharge until his grievance is finally settled. Mr. X signed anagreement to the effect that if he succeeds in obtaining a back-wage settlement on finaladjudication,the amountadvanced bythe unionwill beconsidered aloantobe repaid.Nothing intheconstitution or bylawsof the local orinternational prohibit such atransaction.

Even if the amount paid to Mr. X under this arrangement ultimately aggregates to morethan $2,000, the limitation of section 503(a) of LMRDA does notapply as long as Mr. X is neitheran “officer,” as that term is defined in section 3(n) of the Act, nor an employee of the labororganization.

The act prohibited by section 502(a) is the making of loans in excess of $2,000 by labororganizations “to any officer or employee of such organization.” The language of the sectionsclearlydoes notapply toall“employees” as defined in section3(f).

(TechnicalRevisions:Dec. 2016 andRevised: Dec. 2019)

541.200LOANSFORBENEFIT OFTHE UNION

Section 503(a) of the Act does not contain any exception for secured loans or for loanswhich are of benefit to the union. Therefore, a loan to a union employee to assist him inpurchasingan automobileused for unionbusiness wouldin ouropinion be aviolationofsection503(a) if the advance resulted in a total indebtedness on the part of the employee to the union ofmore than$2,000.

541.300PRE-LMRDADEBTS

Areasonableconstructionofsection 503wouldbethat itcannotrenderanindebtednessillegalwhich exceeded$2,000 priorto the effective date ofthe Act (September 14,1959).

However, if the total indebtedness was $2,000 or more on the effective date of the Act, section503(a)wouldmake illegalanyloansafterthat datewhich wouldincreasethe totalindebtednessby
anyamount. Furtherloanswould beprohibiteduntilthetotalindebtednesshad beenreduced tothepoint wherean additional loanwould resultina totaldebt tothe union of$2,000 orless.

541.400BLOCKMORTGAGE LOAN

An international bought a block of 20 mortgages for investment purposes from amortgage-lending institution. One of the mortgages was for a loan of $20,000.00 extended to anemployee of the international by the institution at the request of a key official of the international,whoalso requestedthatthis mortgage be included in the block.

Inasmuch as the loan in question was one made indirectly by the international, thereappearsto be a violationof sections503(a) of the Act.

Seealso ManualEntry 214.720.