Pension & Benefits News Employer waived right to contest liability by failing to arbitrate dispute
Wednesday, March 20, 2019

Employer waived right to contest liability by failing to arbitrate dispute

By Pension and Benefits Editorial Staff

An employer waived its right to contest either liability or damages concerning the withdrawal liability owed to a pension fund when it failed to commence arbitration proceedings regarding the fund’s demand for payment, a U.S. district court in New York has ruled. Thus, the employer must pay about $167,000 in withdrawal liability, as well as interest, attorney’s fees and costs.

In 2006 an employer agreed to the terms of a collective bargaining agreement and a related site agreement requiring it to contribute to a pension fund at specified rates for each hour of work performing trucking and delivery services. The employer ceased making contributions to the fund in September 2009. The fund engaged the Segal Company to calculate withdrawal liability and in June 2013 sent to the employer a Notice and Demand for Withdrawal Liability in the amount of $167,132, payable in monthly installments. The employer made no withdrawal liability payments and failed to commence arbitration proceedings to challenge the fund’s assessment.

The fund filed suit, seeking to recover the withdrawal liability plus mandatory interest payments and attorney’s fees and costs.

Required arbitration. The court granted the fund’s motion for summary judgment. Under ERISA §4221, any dispute concerning a plan’s assessment of liability must be settled through arbitration. Either party may initiate arbitration but must do so within a certain timeframe.

The employer contended it received a letter from the fund in 2010 stating that its withdrawal liability was zero. The fund disputed this and a copy of such a letter was not produced. However, regardless of the existence of such a letter, the employer conceded it did not initiate arbitration to challenge the liability amount assessed in 2013. As such, under ERISA the employer waived its right to contest the amount of withdrawal liability. Quoting the Second Circuit, the court explained that “Congress intended that disputes over withdrawal liability would be resolved quickly.”

The court also ordered the employer to pay interest on the unpaid withdrawal liability as well as liquidated damages, attorney’s fees and costs.

Unpaid contributions. In addition, the court resolved in the fund’s favor a dispute over about $12,500 in unpaid contributions for work performed for the period October 2006 through April 2007. The amount of unpaid contributions was calculated pursuant to an audit of the employer’s books and records conducted by a third party. The fund submitted evidence detailing the results of the audit. In contrast, the employer denied it owed unpaid contributions but cited no admissible evidence to support the denial. The court therefore awarded the funds the $12,500 in unpaid contributions, plus interest.

SOURCE: Gesualdi v. Interstate Payroll Company, Inc. (DC NY).

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