James B. Kennedy.

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Reserving to the national officials the right to pass finally upon
sick-benefit claims is not effective as a precaution against such
frauds. The national officials cannot inform themselves as to the
honesty of the physician who signs the certificate nor as to the good
faith with which the visiting committee has performed its duties. On the
whole, the better policy seems to be to place the responsibility of
passing upon individual claims directly upon the local union, and to
reserve to the national officials an oversight of the administration of
the local unions.

In several of the unions no effective measures appear to have been taken
to keep the local unions up to their duties, but in others a close
scrutiny is maintained. The system in use by the Iron Molders is
probably the most effective of those used by the unions which do not pay
a money out-of-work benefit and in which consequently the need for
supervision is greatest. Every member of the union is catalogued on a
card. When he is reported as having received a benefit payment from any
local union, this fact is entered on his card. Members removing from one
local union to another and drawing more sick benefits than they are
allowed by the rules are thus detected and forced to make restitution.
The "financier" of the union also notes the sick rate in each local
union. When the amount of sickness in any locality appears to be
excessive, he employs for a limited time a reputable physician, who must
sign all claims for sick relief. The result usually is the discovery of
laxity in the local administration and the necessary corrective measures
are applied.[232] The Cigar Makers have a staff of travelling auditors
who from time to time inspect the accounts of local unions and
scrutinize the administration of the benefits.

[Footnote 232: Proceedings of the Twenty-second Convention, 1902, in
Supplement to Iron Molders' Journal, September, 1902; Proceedings of the
Twenty-third Convention, in Supplement to Iron Molders' Journal,
September, 1907.]

The administration of out-of-work relief is similar to that of sick
benefits in that the national union must of necessity rely upon the
local union. The requirement of registration from day to day is the
chief administrative check upon the payment of the benefit to members
not entitled thereto.

The more complete the system of benefits the less is the difficulty in
preventing the payment of fraudulent claims. A union such as the Cigar
Makers or the Typographia has a comparatively small problem in
administration as compared with that of a union like the Iron Molders.
Since the Iron Molders do not maintain an out-of-work benefit unemployed
members are tempted to try to secure sick benefits. Even in the Cigar
Makers the sick benefit and the out-of-work benefit are used as a form
of superannuation relief. The addition of a superannuation benefit would
lower the expense of maintaining the sick and out-of-work benefits.

The administration of trade-union benefits is subject to certain rules
imposed by the statutes of the various states. All the commonwealths of
the United States regulate by law the conduct of insurance business. In
this regulation, distinction has necessarily been made between regular
insurance companies and that class of organizations known as fraternal
or beneficiary societies. The trade organizations described in this
monograph as maintaining insurance or benefit departments fall under the
latter class.

The unions paying insurance, as distinguished from benefits, have
conformed to certain requirements of these laws, either by incorporating
their insurance departments or by modifying the rules of the
organizations in harmony with special state regulations for fraternal
insurance companies.

Prior to 1894 - from December, 1867, to 1894 - the Brotherhood of
Locomotive Engineers had its headquarters in the state of New York. In
the latter year the State Superintendent of Insurance notified the
Brotherhood that incorporation of the insurance department was necessary
for the continuance of the business. In consequence thereof the central
office of the Brotherhood was transferred to Cleveland, Ohio, and on the
twenty-second of February, 1894, the insurance department was
incorporated under the laws of the state of Ohio as a separate
organization.[233] Similarly, the Conductors were forced to incorporate
by the pressure of the state laws. In December, 1885, the Order moved
its central office from Cedar Rapids to Chicago. In order to strengthen
its power and to broaden its influence, the Order, in 1886, applied for
a certificate of incorporation under the laws of the state of Illinois.
The Secretary of State refused the certificate on the ground that the
insurance regulations of the Order were not in accordance with the state
laws, and requested that these be changed and that the insurance
department be incorporated as a separate organization. The Secretary of
State was willing to incorporate the Order under the Act of 1872,
provided the Order eliminated from the object of organization the
clauses referring to the payment of benefits or indemnity; or he was
willing to issue a charter based on the Act of 1883 which provided that
only such powers could be taken as are specifically granted therein,
namely, "the furnishing of life indemnity or pecuniary benefits to
widows, orphans, heirs, relatives, and devisees of deceased members, or
accident or permanent disability indemnity to members."[234] In other
words, the Order could have been incorporated under the Act of 1872 to
do all business except insurance, while under the Act of 1883 it could
have been incorporated to maintain a system of insurance, but nothing
else. The only alternative was separate organization for the protective
and the benevolent departments. The Order was unwilling to separate the
two departments and consequently transferred its central office to Cedar
Rapids, Iowa. The Board of Directors, on July 12, 1887, ordered the
grand secretary to proceed with incorporation under the laws of the
state of Iowa.[235] The certificate of incorporation, however, was not
issued until the laws of the union were made to conform to the insurance
laws of the state. These changes were only unimportant ones, such as the
change of the name of the Insurance Department to "Mutual Benefit
Department," and in no way affected the intent of any laws of the Order.

[Footnote 233: Locomotive Engineers' Journal, Vol. 28, p. 360.]

[Footnote 234: Proceedings of the Nineteenth Convention of the Order of
Railway Conductors, New Orleans, 1887 (Cedar Rapids, n.d.), pp. 51-52,

[Footnote 235: Proceedings of the Nineteenth Convention of the Order of
Railway Conductors, New Orleans, 1887 (Cedar Rapids, n.d.), pp.

The other railway brotherhoods have conformed to the insurance laws of
the states in which they do business. The insurance department of the
Switchmen's Union is incorporated under the laws of the state of New
York. The Brotherhood of Locomotive Firemen does business in the state
of Illinois under a law enacted in 1893 whereby all beneficial fraternal
associations are declared to be corporations, the insurance features of
which are subject to state laws.[236] The Brotherhood of Railroad
Trainmen operates its insurance department under a license issued by the
insurance department of the state of Ohio under the Fraternal
Beneficiary Society Act.

[Footnote 236: Hurd, Revised Statutes of Illinois, 1901 (Chicago, 1901),
secs. 258-260, p. 1071.]

The National Association of Letter Carriers, at the time of organizing
the Benefit Association, on August 7, 1891, incorporated the Association
under the laws of the state of New Jersey. But less than one year later,
on February 26, 1892, the Association was reincorporated under the laws
of the state of Tennessee. This change was made, according to Collector
Dunn,[237] in order that both the National Association and the Mutual
Benefit Association might operate under a single charter.

[Footnote 237: Letter to the author, February 14, 1905.]

The unions that pay benefits as distinguished from insurance are less
subject to legal regulation. They do not issue beneficiary certificates
as do the railway unions, the Letter Carriers' Association, and the
large class of fraternal beneficiary societies, and hence are not deemed
to be maintaining insurance departments. With one exception, the
Brotherhood of Painters,[238] the unions of this group have neither
taken out charters of incorporation nor in any way obtained authority to
operate benefit departments within their respective states. These unions
cannot be said to operate their beneficiary systems irrespective of
state laws. In all the states the laws define the scope and functions of
such organizations.

[Footnote 238: Constitution, 1901 (La Fayette, n.d.), p. 1. Chartered
under the laws of the State of Indiana.]

The Brotherhood of Painters, in the incorporation of its organization,
has taken a step beyond the practices of unions of its type. On December
7, 1894, the Secretary of State of Indiana issued a certificate of
incorporation to the Brotherhood under the state law entitled "An act to
authorize the formation of voluntary associations;" and in order to
conform more strictly to the state laws the corporate name was changed,
in December, 1899, to the present name.[239] Incorporation, however, has
not proved satisfactory. For many years the Brotherhood maintained one
general fund from which local unions received assistance in time of
strikes, or in other cases of need. As a chartered institution the
funds were liable at legal action and all payments from them subject to
injunction. This state of affairs led the officials to urge complete
separation of protective and benevolent funds, thereby offering greater
protection to the membership. Consequently in 1904 the Brotherhood
adopted the recommendations of the national officials and apportioned
the national receipts into separate funds to be used only as specified.

[Footnote 239: Constitution of the Brotherhood of Painters, Decorators,
and Paperhangers of America, 1899 (La Fayette, n.d.), pp. 2-5.]

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Online LibraryJames B. KennedyBeneficiary Features of American Trade Unions → online text (page 11 of 11)