Pension & Benefits News No retaliation found in fund’s refusal to negotiate employer’s withdrawal liability proposal
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Tuesday, April 2, 2019

No retaliation found in fund’s refusal to negotiate employer’s withdrawal liability proposal

By Pension and Benefits Editorial Staff

Grocery store employees could not pursue their claim under ERISA Sec. 510 that a multiemployer plan fund retaliated against them for filing a breach of fiduciary duty claim, a U.S. district court in Illinois has ruled. The employees asserted that the fund retaliated by refusing to negotiate with their employer over the possibility of waiving the employer’s withdrawal liability in exchange for the employer establishing a new plan for its employees.

Proposal. A chain of grocery stores, along with its union, presented a proposal to an underfunded multiemployer plan fund to which the grocer contributed on behalf of its employees. The grocer would set up a separate, fully-funded pension plan for its employees, taking on the multiemployer plan’s liabilities to the grocer’s employees. In exchange, however, the grocer wanted to be excused from its duty to pay withdrawal liability under ERISA to the plan.

The fund rejected this proposal, stating that it had a firm policy against facilitating employer withdrawals in any way. The employees filed suit, alleging the fund trustees violated their fiduciary duty to all participants by failing to negotiate over the proposal.

Apparently, some negotiation did take place thereafter but the grocer eventually withdrew from the plan and in February 2018 agreed to pay just under $420 million dollars in withdrawal liability. In April 2018, the employees amended their original complaint by adding a new count, alleging the fund had violated their rights under ERISA Sec. 510 by refusing to negotiate over the proposal after the original complaint was filed.

No adverse action. The court dismissed the ERISA Sec. 510 count for failure to state a claim. ERISA Sec. 510 makes it “unlawful for any person to discharge, fine, suspend, expel, discipline, or discriminate against a participant or beneficiary for exercising any right to which he is entitled under the provisions of an employee benefit plan.”

The employees failed to allege the fund committed an adverse action that violated ERISA Sec. 510. While the Seventh Circuit has resisted holding that only employers can be liable for violations of ERISA Sec. 510, the district court found no similar Sec. 510 case against a plan for refusing to negotiate with an employer. In any event, the court explained, the employees’ own factual timeline did not support their allegation of adverse action. The plan refused to negotiate with the grocer before the lawsuit was ever filed. This fatally undermined the plausibility of the employees’ claim that the plan’s failure to negotiate was in retaliation for the lawsuit.

The court declined to rule as to whether the employees had adequately alleged, as required under Sec. 510, that the fund specifically intended to prevent the employees from obtaining their benefits. The court also noted that monetary relief would not have been available to the employees for the retaliation claim.

SOURCE: Campbell v. Whobrey (DC IL).

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