Taft-Hartley Question

[Brian Haynes]

An employer maintains a single employer collectively bargained defined benefit pension plan. A Pension Committee is the named fiduciary and plan administer of the plan. Under the plan document, the employer appoints members to the Pension Committee. The union has requested that it be allowed to appoint 1-2 union members of the Pension Committee (which would be a minority of the total members of the Pension Committee). Would this violate the Taft-Hartley Act because the employer does not have exclusive control over the plan or can the union appoint some members provided that the employer still dominates and controls the vote of the Pension Commtitee? The 2nd Circuit's 1968 case, Independent Association of Mutuel Employees of New York State v. New York Racing Association, Inc., 398 F.2d 587 has been crticized by other Circuits. Any help would be greatly appreciated. Thanks.

[Effen]

I don't know the legality of it but I have worked with single employer collectively bargained plans that have joint trustees (union/employer). This can become problematic because as a single employer plan, the employer has all the liability to fund the negotiated benefit. I have seen situations where the union wants "their people" (actuary, investment guy, custodian, etc) who are often beholden to the union instead of the Plan or the employer. This can cause problems for the employer if they want to look at the impact of various changes without the union's knowledge. For example during a period of negotiations. It often evolves into a situation where each side hires their own consultants. This is especially true in larger plans where each side can afford it.

I think most smaller single employer collectively bargained plans are totally controlled by the employers, except for the negotiated benefit level.

[Bill Ecklund]

Under the Taft Hartley Act, if a fund is going to be jointly administered, there must be an equal number of union and employer trustees. Having a majority of employer trustees doesn't work. Having only employer trustees does work. Having said that if the committee is merely advisory and has no control over the plan, other than to recommend, that would not be a violation of the law.

[Guest Brian4]

I would like a cite to support the above assertion: "Having a majority of employer trustees doesn't work." The quoted case in the initial posting states that "... the plan specifies the conditions ... and makes it impossible for the representatives of the employee who participate in the administration of the plan to use any funds as they see fit, or to authorize use of funds without the employer's consent, the dangers which Section 302 was designed to combat are not present and there is no need to invoke the specific safeguards of Section 302(e)(5)."

[Bill Ecklund]

I don't know what circuit you are in but see: Michael COSTELLO et al., Plaintiffs-Appellants, v. Barry LIPSITZ et al., Defendants-Appellees, (03/07/1977) 547 F2d 1267 , 94 BNA LRRM 3075 , U.S. Court of Appeals, 5th Circuit. Even though there may be a defect in the trust agreement, Federal Courts do not have jurisdiction to correct the defect. See Local 144 Nursing Home Pension Fund v. Demisay, 508 U.S. 581 , 113 S.Ct. 2252 , 124 L.Ed.2d 522 (1993). The sole remedy is prosection of a violation of 302©

[Lori Friedman]

Hi Bill,

(How are you?) In the context of this discussion, would you have a moment to explain the relevance of Sec. 302©(5) of the Taft-Hartley Act? I've been using that section of the law as authority for the 50/50 composition of a Joint Board of Trustees. Am I off-base here? Given your expertise with multiemployer plans, I'll be grateful for any help you can share.

Thanks so much,

Lori

[Bill Ecklund]

Lori,

You are correct. The traditional "Taft Hartley trust" must be jointly administered by an equal number of union appointed trustees and employer appointed trustees. That is established by 302©(5) of the Act. It can be a multiemployer plan trust or a single employer plan trust. All of these plans are established through collective bargaining. A plan to which more than one employer contributes but not through a collective bargaining agreement, would be a multiple employer plan and trust.

You can also have an employer only trusteed plan which can be a single employer plan or a multiemployer plan. This would not be a "Taft Hartley" plan and trust even though it was collectively bargained.

In the case of a 302©(5) trust, the governing trust document must provide for an equal number of union and employer trustees, although from time to time through resignations etc, there may not be an equal number of trustees appointed or attending mettings, but the trust document must provide that one side cannot outvote the other side. So for example if there are three union trustees attending a meeting with four employer trustees, the trust agreement has to either allocate four votes somehow among the attending union trustees, or in the alternative, the trust agreement could provide for block voting.

[Kirk Maldonado]

Maybe I'm off-base here, but I thought that the joint trustees requirement only applied to multiemployer plans and we have a single employer plan here.

[Bill Ecklund]

It applies to both single employer plans and multiemployer plans. You don't see too many single employer plans jointly administered, but there are some. I represented one for many years.

[Guest Dell]

Just one point I want to get clarified. I did not think that the trust document had to require an equal number of employer and union trustees, only that there be equal representation. If the Trust document calls for block voting, with acceptable procedures in place to handle ties, I thought that was good enough.

This was mentioned above, but I just want to clarify whether the trust agreement really has to mandate equal numbers of employer and union trustees.

[Guest Brian4]

Thanks to Bill for the case citations. My work is national in scope. The first case says that a taft hartley trust cannot have the employer or union trustees have sole control over same part of the administration of the trust fund. The second case is about a party that wanted to impose a spinoff of part of a trust fund when a unit exited the fund. The court ruled for the fund trustees and said this did not need to be done. It also made the procedural point mentioned. The comment about circuit court differences makes more sense now. Is there a case that ruled on the issue of a majority of employer trustees doesn't work? It wouldn't be a taft hartley trust.

In response to Dells's post: The requirement is for equal representation in voting between the employer and union trustees. An unequal number of trustees can happen by design, by vacancy, or by absence. Block voting is not required. If the document says each trustee votes separately, then a motion could pass with a minority on one side of the table, and a majority vote among all of the trustees.

In response to Effen's post: In my experience, on company controlled plans, the fiduciaries sometimes don't properly appreciate their status as looking out for the interests of participants. Also, the fiduciaries can and do pressure the professionals to act in their interests as company officials, rather than in the interests of the participants. This leads to the workers wanting representation on the committee.

[Brian Haynes]

Independent Association of Mutuel Employees of New York State involved a collectively bargained pension plan where all payments were made directly to the corporate bank trustee (the trustee was in charge of the investment and handling of contributions to the trust). The employer had the exclusive authority to appoint the corporate bank trustee. There was a pension committee composed of three members appointed by the union and three members appointed by the employer. There was also a chairman appointed by the employer to break any tie votes. The pension committee had the authority to pay benefits to participants but handled no funds. Under these facts, the Second Court held that the Taft-Hartley Act requirements did not apply.

Under my facts (I started this) I believe Independent Association of Mutuel Employees of New York State is distinguishable since the Pension Committee for the Plan at issue has broad discretionary powers over the Plan, has the authority to issue directions to the corporate trustee (which is only a directed trustee), and in fact directly appoints and controls several Investment Managers who have direct control over the investment of assets in the Plan.

The 5th Circuit in Costello v. Lipsitz questioned the reasoning of Mutuel and stated that it found it impossible to approve its simplistic holding that if a trust is wholly funded by the employer it is not governed by the Taft-Hartley Act. A district court in the 6th Circuit criticized Mutel for its suggestion that there is no need for strict compliance with the Taft-Hartley Act unless the employer contributions themselves violate its requirements. See Reinforcing Iron Workers v. Bechtel Power Corp., 463 F.Supp. 643.

The Union may have conceded this issue but are now arguing that the appointment of a union employee of the employer and an employee of the union itself would not subject the appointments to the Taf-Hartley Act since these indivudals would not be considered "representatives of the employees." Since the requirement to appoint these individuals would be set forth in the collective bargaining agreement, how can anyone argue that such appointees would not be considered union representatives subject to the Taft-Hartley Act? I understand that these individuals have a fiduciary obligation under ERISA to act soley in the interests of participants, but this should not negate the fact that they are union representatives when the employer has contractually agreed to appoint them as members of the Pension Committee. Any thoughts? Thanks.

[Guest Brian4]

Thanks for the comment and case reference. The Bechtel case involved a trust for paying union stewards, and not a trust for paying employee benefits. It says: It is therefore necessary to determine whether that money is paid to a representative of that employer's employees, who is not also an employee, or to an officer or employee of a labor organization which represents those employees, both prohibited by section 186. A question is whether a majority of employer trustees on an employee benefit trust is acceptable. One could argue this is acceptable, based on the Costello case, as in this situation the union representatives couldn't act without the employers' consent.