Contributions to union benefit fund not voluntary; employer must pay delinquent contributions
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Monday, January 4, 2016

Contributions to union benefit fund not voluntary; employer must pay delinquent contributions

By Ronald Miller, J.D. Finding that a plumbing contractor had entered into a number of written agreements setting out its obligation to contribute to union fringe benefit funds as required by Section 302(c)(5)(B) of the LMRA, a divided Sixth Circuit, in a 2-1 decision, concluded that the employer was bound to pay delinquent contributions owed to the funds. Examining the employer’s course of conduct, the court noted that it executed a surety bond in favor of the union as required by signatories under the CBA, and submitted monthly contribution reports and fringe benefit contributions to the funds as required. Further, the court rejected the employer’s contention that it voluntarily made contributions to the funds for 10 years. Accordingly, the appeals court reversed the district court’s grant of summary judgment in favor of the employer. Judge Gibbons filed a separate dissenting opinion (Board of Trustees of the Plumbers, Pipe Fitters & Mechanical Equipment Service, Local Union No. 392 Pension Fund v. B&B Mechanical Services, Inc., December 29, 2015, Stranch, J.). Delinquent contributions. Five multi-employer fringe benefit funds filed suit to collect delinquent employee fringe benefit contributions from a commercial plumbing contractor. The funds were established for the benefit of contractors’ employees who performed work under a collective bargaining agreement (CBA) negotiated between the union and an employer association. The employer argued that the funds failed to produce proof that its principal independently signed the CBA and that it had merely made 10 years of contributions to the funds on a voluntary basis. In August 2011, the funds conducted an audit of the employer’s records for the period January 1, 2009 through December 31, 2010. The auditor determined that the employer did not forward the correct amount of contributions to the funds for reported employees and did not make contributions on behalf of the company’s two owners, who were also members of the union, and performed work covered by the CBA. During the course of discovery, the funds were unable to produce a copy of the CBA that was signed by employer through its principals. Thereafter, the employer argued that it was not bound by the CBA and did not owe the funds any unpaid contributions for employees. Employer conduct. The evidence established that during the 10 years between 2002 and 2012, the employer conducted itself as if it were bound by the CBAs negotiated between the association and the union. For example, in 2002 it executed a surety bond in favor of the funds providing that it had entered into a written contract or signed a letter of assent to be bound by the terms of the CBA as required under the contract. In mid-December 2006, the surety amended the bond to reflect the company’s name change. Contribution reports. For 10 years after executing the surety bond, the employer submitted monthly fringe benefit contributions for its union employees and the associated contribution reports to the funds as required by the CBA. Those contribution amounts matched the rates required by the CBAs that were in effect for various time periods. In March 2009, the association sent a letter to all signatory contractors inviting them to designate it as the bargaining agent for new contract negotiations. Although the employer did not return the form, it also did not withdraw its membership from the association. Moreover, on four occasions, the employer received wage subsidies from the union pursuant to the CBA. The employer’s president denied that it entered into a CBA with the union, or that it expressly authorized the association to bargain on its behalf. Because it employed union workers, the employer’s principals believed it was appropriate for the company to make contributions to the funds on behalf of the union employees, the company asserted. Thus, the principals contended that the employer acted voluntarily in making contributions to the funds for 10 years. The district court ruled in favor of the employer on cross-motions for summary judgment. Written agreement. The Sixth Circuit reversed the district court’s holding that the funds failed to produce evidence to prove that the employer signed the CBA or entered into any written agreement binding it to the CBA. In the Sixth Circuit, the “written agreement” required by Section 302(c)(5)(B) does not have to be a CBA as long as the written agreement “sets out the employer’s obligation to contribute” to the benefit funds. Moreover, the employer does not have to sign the written agreement to be bound. The appeals court examined various writings to determine whether the employer was required to make contributions to the funds. It concluded that the employer was bound by the written CBA negotiated between the employer association and the union to make contributions to the funds, even though neither of its principals signed the CBA. The union and association negotiated the CBA, set down its terms in writing, and representatives of both parties signed the CBA. Again the court observed that Section 302(c)(5)(B) imposes no requirement that the employer independently sign the CBA in order to be bound to make contributions to the funds. Because the employer was bound by the CBA, it was an “employer” under that agreement and required to make contributions to the trust funds for union employees during the time period that it was a member of the association in 2009-2010, the period covered by the funds’ audit. Further, it was bound to make employee contributions to the funds under the applicable trust documents. Additionally, the surety bond executed in favor of the funds constituted an agreement by the employer promising to make contributions to the funds. Moreover, the court observed that for 10 years, it submitted contributions and contribution reports to the funds as required by the CBA. Finally, the employer applied for and received wage subsidies on four occasions from the union, and its principal signed participation agreements acknowledging that the program was designed to help union contractors compete with nonunion contractors. As a result, the appeals court enforced the written agreements binding the employer to make contributions to the funds. Dissent. In a dissenting opinion, Judge Julia Gibbons argued that there were genuine issues of material fact as to whether the employer intended to be bound by the CBA. She agreed that the “written agreement” contemplated by Section 302(c)(5)(B) need not be a CBA nor need it contain an employer’s signature. However, the dissent found the majority’s conclusion that the employer was bound to contribute to the funds as a matter of law ignored factual insufficiencies in the record and overstated the independent legal effect of some of the writings. According to the dissent, there was a genuine question of material fact as to whether the employer association was acting as the employer’s agent while it negotiated the relevant CBAs, and thus, whether the employer was or ever intended to be bound by the CBA.

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