Prevailing Wage Recovery

[mal]

We had an employer with a major delinquency problem.

One cause of action the Union and Plan brought was

under the state prevailing wage law. (Very similiar

to Davis-Bacon in all material respects.) The theory

was that by failing to pay his fringes, he had also violated

the prevailing wage act.

The order from the court awards the monies and penalties,

but specifies the payments are to be made to the

employees...not their benefit plans. This creates the

obvious problem that our db/dc plans must grant them

service credit for all hours worked...even though we

will not be receiving the contributions.

Questions:

1. Can we somehow negate the service credit that

would otherwise be earned? How?

2. Do we have to collect the monies from our members?

3. Any other ideas?

[Bill Ecklund]

The state court action doesn't negate the obligation under the CBA to contribute. Have the trustees sue the employer in Federal Court under ERISA secs 502 and 515. You don't want to collect monies from the members. Most db plans prohibit employee contributions, it creates an accounting nightmare when distribution time occurs. As to service credits, I assume you mean vesting service credits. There is no way to stop the accrual of those credits. If you mean benefit accruals, ERISA expressly requires db plans to provide benefit accruals, even if the contributions are not made. It is irrelevant in a dc plan because the benefit is directly related to the contribution to the plan

[GBurns]

Prevailing wage laws, whether State, DB or SCA, require wages to be paid either in cash, in specified benefits or a combination. In your situation I see multiple problems that should require expert experienced advice, which seems to lacking in the drafting of the original plan and in this court settlement.

The first thing that I would do is to request an amended Court Order after making sure of what the PD really says, explaining the problem to the Judge. The problem should have been foreseen by your lawyer.

I think that the Judge will tell you that it is the employee's money and since you did not buy benefits at the time or earning then you must pay the cash directly. But you might get lucky.

To solve your Plan service credit problem is another issue. I suggest a good re-read, first to ensure that you even have a bona fide plan (one that meets the prevailing wage law requirements), second to ensure whether there is an either/or regarding the contributions, third I question whether your plan is a db/dc plan as you state or is a dc only plan, which will make a difference e eventually.

Have you looked up the requirements of your state prevailing wage law? Is Davis Bacon also applicable?

[mal]

Easy killer...I AM the lawyer.

The Davis-Bacon act is not applicable. The

root of the problem comes from the remedy

section of the state's PW statutes, which

suggest that underpaid wages or fringes

are to be paid in cash to the employee,

not the plan. As there is no caselaw, we

may have to appeal.

Our db plan is a multiemployer arrangement

and definitely qualifies as a "bona fide" plan

for PW purposes. There is no doubt that

under ERISA we must grant the members

vesting and service credits for all time

worked...regardless of whether the

contributions actually come in.

On the bright side, the members get

the amount due plus a penalty amount

of 25%.