Pension & Benefits News Construction contractor, “employer” under MPPAA, must arbitrate disputed withdrawal liability amount
Wednesday, December 2, 2020

Construction contractor, “employer” under MPPAA, must arbitrate disputed withdrawal liability amount

By Pension and Benefits Editorial Staff

Under ERISA Sec. 4221, a construction contractor must arbitrate disputes over a pension fund’s assessment of withdrawal liability, because the contractor was obligated to contribute to the fund and was therefore an employer under the Multiemployer Pension Plan Amendments Act, the U.S. District Court in New Jersey has ruled.

Construction project. A construction contractor signed a Letter of Assent in order to work on a certain project. In so doing, it agreed to be bound by the provisions of two documents: (1) the Project Labor Agreement (PLA) governing various aspects of the project and (2) the collective bargaining agreement in effect between the unions and contractors executing the PLA. The PLA stated that contractors were required to contribute to various union funds in certain amounts. One of these funds was the Trucking Employees of North Jersey Welfare Fund, Inc.-Pension Fund.

The contractor made contributions to the Fund from 2007 to 2015. In 2017, the Fund sent the contractor a Notice and Demand for Withdrawal Liability stating that the contractor ceased its contribution obligations to the Fund in October 2015 and was therefore assessed withdrawal liability in the amount of $766,878.

The contractor contested various aspects of the liability assessment and initially requested arbitration. It then filed a petition in district court, contesting whether the contractor is an “employer” as defined under ERISA (as amended by the Multiemployer Pension Plan Amendments Act) and whether the contractor is required to submit to arbitration.

Arbitration mandate. The contractor argued that no clear agreement existed between the parties regarding arbitration. The Letter of Assent it signed does not itself contain an explicit agreement to arbitrate, the contractor reasoned, and the Letter’s reference to the CBA does not specifically mention the CBA’s arbitration provision.

This contractual argument is beside the point, the court said. Courts have repeatedly held that ERISA Sec. 4221 mandates arbitration for disputes between an employer and the plan sponsor. Therefore, if the contractor qualifies as an “employer” under the MPPAA, then it is required by statute to arbitrate the withdrawal liability dispute.

Definition of employer. The court concluded that the contractor was an “employer” for purposes of ERISA’s arbitration mandate in withdrawal liability disputes. ERISA does not specifically define “employer” in the context of withdrawal liability. While the Third Circuit has not yet considered the issue, other appellate courts agree that “an ‘employer’ under the MPPAA is ‘a person who is obliged to contribute to a plan either as a direct employer or in the interest of an employer of the plan’s participants.’”

This so called “contribution obligor” definition of employer under the MPPAA, which is Title IV of ERISA, is consistent with the structure of the definition of “employer” under Title I of ERISA. Thus, the contractor’s dispute about the scope of withdrawal (and the effect of an alleged oral agreement protecting it from liability) are subject to arbitration.

Source: J. Supor & Son Trucking Trucking & Rigging Co., Inc. v. Trucking Employees of North Jersey Welfare Fund (DC NJ).

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