Pension & Benefits News Employer must make fund contributions despite prior withdrawal from CBA
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Friday, June 7, 2019

Employer must make fund contributions despite prior withdrawal from CBA

By Pension and Benefits Editorial Staff

An employer that submitted three monthly contribution reports to multiemployer pension and welfare funds must remit contributions to the funds based on those reports, in spite of the employer’s prior termination of its agreement to be bound by the collective bargaining agreement, a U.S. district court in Illinois has ruled.

ERISA Sec. 515 provides that an employer obligated to contribute to a multiemployer plan “under the terms of the plan or under the terms of a collectively bargained agreement” must do so in accordance with the terms of the plan or agreement.

Fund contributions. For ten years, from 1994 to 2004, an employer made contributions to multiemployer pension and welfare funds in accordance with a 1994 agreement to be bound by a collective bargaining agreement with a carpenters’ union. Under this CBA, employers report their contribution obligations on monthly reports, identifying the employees for whom contributions are due and, for each worker, state the number of hours worked and the amount paid.

In 2004, the employer’s owner sold his interest in the employer. Several years passed during which no members of the carpenters’ union worked for the employer and there was no evidence that contributions to the funds were made during this period. Then in 2010, the new owner notified the carpenters’ union in writing that that the employer was terminating its agreement to be bound by the CBA. The employer also canceled the surety bond it had been required to maintain by the CBA.

In 2015, the employer entered an arrangement with a third party whereby the third party’s employees performed millwork for the employer. The employer put the third party’s employees on its payroll and paid them.

Apparently, the union became aware that the third party’s employees, who were now working for the employer, were members of the carpenters’ union. Subsequently the employer submitted the signed contribution reports covering work performed in three months of 2015. Each report contained language under which the signatory agreed “to be bound by and ratify, confirm and adopt all provisions of” the CBA.

After the employer failed to make the contributions specified in the three reports, the funds filed suit under ERISA Sec. 515 to recover the unpaid contributions.

The court disagreed with the funds’ assertions that the employer was required to make contributions based on the 1994 agreement. It was undisputed that in 2010 the employer terminated its 1994 agreement and canceled its surety bond without complaint from the union.

Effect of contribution reports. However, the court granted summary judgment to the funds on their contention that the employer was required to make contributions based on the language of the contribution reports themselves. Case law has established that employers do not need to sign a collective bargaining agreement in order to be bound. Submitting contribution reports containing language similar to language agreed to by the new employer has been deemed enough to conclude the employer is bound by a CBA. By submitting the contributions reports, the employer effectively obligated the funds to pay benefits based on the hours reported.

Rejecting the employer’s concern that the reports were not submitted voluntarily, the court found no evidence suggestion that any legally meaningful coercion had occurred. While the court conceded the employer may have a dispute with its third-party vendor as to who employs the union workers, that does not mean the funds should be denied contributions based on the contribution reports.

The court ordered the employer to pay the funds $42,426 in unpaid contributions; $8,581 in liquidated damages; and $2,313 in interest.

SOURCE:  Trustees of the Chicago Regional Council of Carpenters Pension Fund v. American Mechanical, Inc. (DC IL).

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