Pension & Benefits News Union health care plan ordered to accept employer benefit contributions even after CBAs expired
Friday, January 11, 2019

Union health care plan ordered to accept employer benefit contributions even after CBAs expired

By Pension and Benefits Editorial Staff

A health care plan administered by a union was ordered to accept all employer contributions made on behalf of union members, even after the employers’ collective bargaining agreements with the union expired, and the union refused to negotiate successor CBAs with a trade group of employers, preferring instead to negotiate individually with employers. A federal district court in Michigan granted a motion for a preliminary injunction brought by 20 employees left without health care insurance because the union health care plan refused to accept the employer contributions upon the CBAs’ expiration. The Taft-Hartley Act likely required the health care plan to accept the employer contributions based on the expired CBAs, and the employees had shown irreparable harm because they were forced to forgo medical treatment in the absence of health coverage.

Health care contributions. Employees belonging to a local engineers’ union worked under various collective bargaining agreements that were negotiated between the union and a state trade association acting on the employers’ behalf. The CBAs required the employers to contribute to the union, as permitted under the Taft-Hartley Act, specific amounts to a health care plan for the benefit of each employee. In the spring of 2018, the CBAs expired. However, even in the absence of a new CBA, the union members continued to report to work, and their employers continued to contribute to the union’s health care plan as the expired CBAs had provided.

Disagreement over continued contributions. The trade group sent a letter to the health care plan’s trustees, advising that even though the CBAs had expired, the plan should continue to accept employer contributions on behalf of all employees who reported to work. Alternatively, the trade group recommended that the trustees escrow the contributions pending negotiation of new CBAs.

The union disagreed, and issued its own letter to the trustees, stating that the union had no interest in negotiating new CBAs with the trade group and instead planned to negotiate directly with each employer. Consequently, the union advised the trustees not to accept employer contributions from the trade group or any employer that gave the trade group power-of-attorney. The union affirmed that it intended to negotiate CBAs with employers who did not give power-of-attorney to the trade association.

Refusal to accept contributions. Following lengthy consultations by the trustees, and conflicting legal advice as to whether accepting contributions from employers who had granted power-of-attorney to the trade association violated Taft-Hartley, the trustees voted to reject all contributions made by power-of-attorney employers. Although union members continued to work for the power-of-attorney employers, the health care plan refused to accept and credit contributions those employers made.

Lawsuit. Twenty union employees of the power-of-attorney employers sued the health care plan and its trustees, alleging breach of fiduciary duty. The employees claimed it was not unlawful for the health care plan to accept contributions from the power-of-attorney employers, but it was unlawful to refuse to do so under ERISA.

The employees claimed that the health care plan’s actions effectively caused them to lose their health insurance. They sought a preliminary injunction, requesting the court to order the health care plan to accept contributions made on their behalf. The court found that the likelihood of success and of irreparable harm favored the employees, and granted a preliminary injunction, ordering the trust funds to accept and credit all employer contributions made on the employees’ behalf, pending the case’s resolution.

Success on the merits. The court found that the employees showed a likelihood of success on the merits because the trustees likely would not violate Taft-Hartley by accepting and crediting the employers’ contributions. Courts that considered the Taft-Hartley exception allowing for employer contributions to a union trust fund for the exclusive benefit of the employer’s employees specifically stipulated in a written CBA, held that even after a CBA expired, both the employer and union were obligated to maintain the status quo while negotiating a new CBA.

Even after the CBA expired, union members could continue to report to work, and employers could continue to contribute to union trust funds under Taft-Hartley. Courts routinely rejected employer arguments that they did not need to contribute funds after a CBA expired because doing so would violate Taft-Hartley. Rather, an expired CBA satisfied Taft-Hartley’s written agreement requirement, and protected the union members’ fringe benefits as Taft-Hartley intended by including a detailed basis for employer contributions to fringe benefit funds.

The obligation to accept payments continued even though the union repudiated the CBA. Taft-Hartley’s plain language required only a written agreement, not a written agreement plus an agreement by all parties to continue to be bound by the written agreement. Additionally, the union members were beneficiaries of the health care trust funds, and so the trustees owed their beneficiaries a duty of loyalty, and likely breached their fiduciary duty by refusing to accept and credit employer contributions.

Irreparable harm. The court agreed with the employees that the trustees’ breach of duty caused them to suffer irreparable harm. Under the expired CBA’s terms, the employees had worked the required hours to receive coverage through the health care plan. Yet, they were left without health care insurance, and were forced to forgo medical treatment, because the health care plan was not accepting and crediting the contributions their employers made on their behalf.

SOURCE: Furwa v. Operating Engineers Local 324 Health Care Plan (E.D. Mich.) No. 18-12392, December 3, 2018.

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