Pension & Benefits News Casino group not liable under ERISA’s “bargaining out” provision after closure of just one location
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Wednesday, October 23, 2019

Casino group not liable under ERISA’s “bargaining out” provision after closure of just one location

By Pension and Benefits Editorial Staff

When an operator of multiple casinos stopped contributing to a union’s multiemployer pension fund for engineering work at one of its four Atlantic City casinos but continued to contribute for engineering work at its remaining three casinos, it was not liable under the “bargaining out” of ERISA Sec. 4205’s partial withdrawal rules provision, the U.S. Court of Appeals in Philadelphia (CA-3) has ruled.

The four casinos operated by Caesar’s Entertainment Corporation (CEC) in Atlantic City—Caesars, Bally’s, Harrah’s, and Showboat—comprised a “controlled group” under ERISA, with CEC being the single employer of the group. It bargained with the union for engineering work at all four casinos. Under the collective bargaining agreements, each casino had to contribute to the union’s multiemployer pension fund.

Showboat closure. When the Showboat casino closed in 2014, Caesars stopped contributing to the fund for engineering work there but continued to pay the fund for engineering work at the other three casinos. Showboat’s closure reduced CEC’s total contributions to the fund by 17 percent, which was below the 70-percent threshold under ERISA Sec. 4205(a)(1) that would have automatically triggered liability for a partial withdrawal.

Bargaining out provision. Nevertheless, the fund claimed CEC was liable under the so-called “bargaining out” provision of ERISA Sec. 4205(b)(2)(A)(1). Under this section, a partial cessation of the employer’s contribution obligation occurs when an employer [1] permanently ceases to have an obligation to contribute under one or more but fewer than all collective bargaining agreements under which the employer has been obligated to contribute under the plan but [2] “continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required or transfers such work to another location, or to an entity or entities owned or controlled by the employer.”

Siding with the fund, an arbitrator determined that clause [2] applied because “[t]he type of work for which contributions were required at the closed Showboat is the same type of work currently being done at the remaining casinos.”

The district court disagreed. Assuming without deciding that under clause [1], the jurisdiction of the Showboat CBA included all engineering work in Atlantic City, the court held that under clause [2], liability exists only when an employer replaces work that contributes to the pension fund with “work—of the same sort—that does not.” Relying on guidance from the PBGC, the district court found that such a replacement hadn’t occurred here because CEC’s “constituent members [aside from the shuttered Showboat] continue to contribute to the Fund for all engineering work they perform throughout Atlantic City.”

PBGC guidance. Identifying the dispositive question as whether, under the bargaining out provision, “work . . . of the type for which contributions were previously required” includes work of the type for which contributions are still required, the Third Circuit found that the “statutory text and PBGC guidance confirm that the answer is no.”

The fund argued that Caesars continued to perform “work . . . of the type for which contributions were previously required” because engineering work continued at the three remaining casinos. From the fund’s perspective, it was irrelevant that Caesars still was required to contribute to the plan for the engineering work performed at those casinos. Disagreeing, the court found that the language at issue means “work . . . of the type for which contributions are no longer required.” “Previously,” when given its ordinary meaning at the time Congress enacted the provision, connotes something that is no longer the case. “So to say something is ‘previously required’ is to suggest it is no longer required,” the court reasoned.

Explaining that the best reading of the statutory language “work . . . of the type for which contributions were previously required” excludes work of the type for which contributions are still required, the court noted that to hold otherwise would conflict with it sister courts’ interpretation of identical language in the complete withdrawal requirements of ERISA Sec. 4203.

In addition, longstanding guidance from the PBGC also provided support for this interpretation, said the court, noting that PBGC Opinion Letter 83-20 states that no withdrawal liability results from “merely ceasing or terminating an operation.” According to the PBGC, liability under the bargaining out provision arises “only [in] situations where work of the same type is continued by the employer but for which contributions to a plan which were required are no longer required.” Thus, an employer isn’t liable when it “closes one [facility] and shifts the work of that [facility] to other [facilities] which are covered by other [CBAs] under which contributions are made to the plan.” “In sum,” wrote the court, “when the PBGC addressed practically the same situation we face here, it refused to find withdrawal liability against the employer.”

SOURCE: Caesars Entertainment Corporation v. International Union of Operating Engineers Local 68 Pension Fund (CA-3)

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