Complete withdrawal

[Guest JM123]

Can an employer avoid having a complete withdrawal where all union employees quit by hiring replacement workers and entering into a CBA that requires contributions at the same level?

[JanetM]

Under section 4203(a) of ERISA, a complete withdrawal from a multiemployer plan generally occurs when an employer permanently ceases to have an obligation to contribute under the plan or permanently ceases all covered operations under the plan. So if you replace all covered union employees with other union employees that you are required to make contributions for you do not have withdrawal.

[Guest JM123]

And I assume that the employer would have a reasonable period of time to enter into a new CBA without having been treated as having withdrawn. I know a complete withdrawal generally requires that the cessation of the obligation to contribute must be "permanent," but that rule does not apply for employers in special industries.

[JanetM]

You didn't mention entertaining or construction so I ignored the special trades rules. I would guess a reasonable time to bargain new CBA. But the key is the union you are dealing with. What we might see as reasonable they see as not. I would suggest you call the folks at the plan and ask. With the exception of a few (sheet metal workers, central states) they are very open to working with you. Especially since in the OP you said the union folks all quit and you are hiring new folks who would be in the union.

[Guest JM123]

You didn't mention entertaining or construction so I ignored the special trades rules. I would guess a reasonable time to bargain new CBA. But the key is the union you are dealing with. What we might see as reasonable they see as not. I would suggest you call the folks at the plan and ask. With the exception of a few (sheet metal workers, central states) they are very open to working with you. Especially since in the OP you said the union folks all quit and you are hiring new folks who would be in the union.

Thanks. What's concerning me most is the absence of the word "permanent" before "cessation of obligation to contribute." This could imply that even a short period of covered operations and no contributions (or legal obligation to make contributions) could be viewed as resulting in a withdrawal. Agree?

[JanetM]

No I don't agree. For example, a comany shuts down production for 10 to 45 days to retool, retro fit, or preventive maintenace. All employees subject to CBA are not getting contributions made for them. This is normal operating procedure for this employer and it happens at least once a year. This sort of normal operation shutdown is allowed and does not construe withdrawal.