Building and Construction WL

[Brian Haynes]

Under ERISA Section 4203(b), a building and construction industry employer incurs withdrawal liability only if it both ceases to have an obligation to contribute to the multiemployer pension plan and continues to perform, in the jurisdiction of the cba that required contributions to the plan, work of the type for which contributions were previosuly required. The requirement that the employer continues to perform work of the type covered by the plan in the geographical jurisdiction of the cba seems to me to pose a problem when there is a difference between the jurisdiction of the cba requiring contributions to the plan and the jurisdiction of the plan itself. Assuming that the jurisdiction of the plan is wider, an employer arguably has a withdrawal when it leaves the jurisdiction of the cba but remains in the jurisdiction of the plan without making contributions. Any thoughts on what the geographical scope should be would be helpful. More particularly, if the cba at issue is a project labor agreement that only covers a particular project in one location this should seem to control so that the employer can perform non-union work 1 mile away at a different project without incurring withdrawal liability. However, the legislative history contains a phrase that says that the mere expansion of the plan's jurisdiction after the obligation to contribute ends should not create a withdrawal. This seems to imply that it is the plan's jurisdiction (covered by all its cbas) controls. Any further thoughts? Thanks!

[mal]

There is no good answer. The EWL rules (especially for construction industry employers) are riddled with holes. There is a district court decision from the east coast (Massachusetts maybe??) involving the carpenters that upheld an arbitration decsion..the arbitrator had ruled that contributions to a plan under a project labor agreement did not trigger EWL once the employer discontinued the project and began working non-union in the same area. However, the court's review was limited and used an abuse of discretion standard.

I think the only solution for these questions is for the plan to make the EWL assessment and for the employer to demand arbitration. Unfortunately, this means time, money, effort and inconsistent decisions for similar factual scenarios.

[Kirk Maldonado]

mal:

I agree that your approach is the only practical solution, but isn't it risky, given the extent to which the Title IV rules are slanted in favor of the plan?

[mal]

Risky? I don't know...

I represent the Plans, not any individual employer. If I were an employer I would have to weigh the costs of arbitration versus the amount of the quarterly assessment. If the factual issues were relatively simple it shouldn't cost more than $12,000-$15,000 to push the case through AAA (in the midwest using a smaller firm that cares more about a good use of a client's money rather than billable hours)

Even if the employer loses, they can accept the decision and keep it out of court.

[Kirk Maldonado]

Mal:

I realize that I did a dreadful job of trying to explain my two points.

My first point was implicit; the multiemployer plan may not ever even spot this issue, so that if the employer didn't voluntarily bring it to the attention of the plan, it may never surface.

I was more explicit about the second point; the employer faces a deck that is stacked against the employer in the arbitration.

When you consider both of those points, my guess is that few employers would elect to voluntarily bring this issue to the attention of the plan.

But I want to make it very clear that I don't always believe in "hiding the ball" from the plan. My experience has been that if you know that the plan will eventually uncover the problem, you are much better off if you approach them first. I've found that they generally appreciate your coming to talk to them ahead of time to try to work something out that works for both of you, rather than being in an adversial position after the fact. I've had uniformly positive interactions with the plans where we approached them before the problem actually occurred.

[Bill Ecklund]

Mal:

I realize that I did a dreadful job of trying to explain my two points.

My first point was implicit; the multiemployer plan may not ever even spot this issue, so that if the employer didn't voluntarily bring it to the attention of the plan, it may never surface.

I was more explicit about the second point; the employer faces a deck that is stacked against the employer in the arbitration.

When you consider both of those points, my guess is that few employers would elect to voluntarily bring this issue to the attention of the plan.

But I want to make it very clear that I don't always believe in "hiding the ball" from the plan. My experience has been that if you know that the plan will eventually uncover the problem, you are much better off if you approach them first. I've found that they generally appreciate your coming to talk to them ahead of time to try to work something out that works for both of you, rather than being in an adversial position after the fact. I've had uniformly positive interactions with the plans where we approached them before the problem actually occurred.

[Bill Ecklund]

The issue that Brian raises is one that national plans are aware of. I do work in both the Sheet Metal Industry and the Finishing Industry, and although I do not represent either of the national plans in those industries, I do get involved in withdrawal liability issues. Theoretically, the jurisdiction of a national plan is nationwide. It is very common for a contractor to be working in an area in which the collective bargaining agreement requires contributions to the national plan, and then moves to another area in which the local agreement does not require contributions to the national plan. I have never seen the national plan attempt to impose withdrawal liability in these circumstances. The PBGC Opinion Letters make it crystal clear that it is up to each plan to adopt its own withdrawal liability rules and the way for the employer to challenge those rules is through arbitration.

One hidden issue, however, is that there are some contractors in some parts of the construction industry that think they are building and construction industry employers when they are really not. For example, a sheet metal contractor that does a lot of fabrication may not meet the definition of a building and construction industry employer. The Sheet Metal Workers National Plan says that to meet the test to be a building and construction industry employer, 85% or more of the employees have to spend 25% or more of their time in the field. Many contractors that have production shops will not meet this test, especially when they may have a number of employees that work strictly in their shop producing materials to be installed in the field. Other plans have their own definition.