non-union pay for union employees?

A plan sponsor is telling us that their union employees are getting non-union pay for small amounts of pay during the same pay periods as they are getting union pay - a couple hours of 'regular' pay, some bonus pay, some sick pay.  This is not being reported to the union hall, as they are saying it's for non-union work.

This isn't something I've knowingly seen before - if you're a union employee, I've always figured that your compensation was union unless you switched in or out of it during the year.  But I'm not a payroll person, and I'm no labor expert; is this really a thing?  I've seen it for prevailing wage work, but not for union people.

Do we need to be asking our clients if their union people are really 100% union?  Or at least putting that assumption in small font somewhere?

Thanks.

Your question is focusing on work and pay practices which primarily are in the realm of the collective bargaining agreement between the company and the union or unions involved.  Some agreements go into extraordinary detail about the type of work and related pay, and each and every benefit available to union members.  It is an issue of labor law if the company has pay practices do not comply with the bargaining agreement, and the company needs to work with their employment law attorneys to sort that out with their union(s).

You did not provide any details about how this issue is affecting any retirement plans that the company or union may sponsor.  If the union employees are treated in the retirement plans in exactly the same way as non-union employees, then there likely are some but not a lot of complications.  If the union employees are excluded as a classification and the non-union pay is being considered in the plan as eligible compensation, then there likely are operational and compliance issues that need to be addressed.

In our practice when a union is involved, we ask for a copy of the sections of the bargaining agreement dealing with benefits and compensation as part of the information we collect.  We also monitor when the contract is up for renewal and ask for updated documentation in the new agreement.

AlbanyConsultant: Non-union pay to union employees is surprisingly, in my experience, something that happens frequently. It presents an additional compliance challenge as Paul I alluded to: Mainly, to the extent these employees are receiving non-union pay, they cannot be excluded from the non-union plan's 410(b) testing, unless another plan exception applies (i.e., 410(b)'s statutory exclusions). In practice, this means that you will need to convert their non-union pay into hours of service for purposes of determining eligibility, benefits, etc... I have not found much guidance on how to do this, but one possible method is below:

Example: if total W-2 compensation (definition of compensation under the plan) is $100,000, and the non-union portion is only $5,000, then about 5% of their hours of service (however that is measured under the plan) would be counted as hours of service for eligibility/benefits/vesting under the non-union portion of the plan. 

I am sure there are other methods, but the above is purely on my experience.

It's our first year with the plan, and they said "we have X number of union employees", and as usual union employees are excluded from the plan.  We were going to let it go at that (i.e., they are union and were with the union all year long, so we were going to take it as read that they are able to be excluded) until we saw the payroll report that showed these employees with "regular" compensation and we asked for more information.

In our experience, to the best of our knowledge, in all our plans, if you have been a union employee for the entire year, then all your compensation has been union compensation (or, at the least, all your hours have been union hours).  Maybe we've just lived a charmed life that way.  Or you don't know what you don't know you don't know.  We would never have thought this was common.

I would think that there could be a difference between getting non-union pay and working non-union hours.  But in the case I've got here, they clearly are saying that at least some of these people do have non-union hours worked.

I'd love to refer them to an attorney to get this reviewed, because it will probably be much easier to correct if they are administering it incorrectly on their end (as in it should be all considered union pay and they owe past money to the union hall) than to fix the plan for the past 15 years.

I think consulting with an attorney on this specific issue is a good idea. Myself excluded, you can contact me directly, if you would like some recommendations based on where you are located. This is because I know of other ERISA attorneys around the country who have looked into this before in detail. 

Check the plan document(s) - I think hours of service for eligibility, vesting and allocation entitlement must include all hours worked for the employer (or all employers in a control group). For example, someone who worked a number of years over 1000 hours goes from excluded union to non-union status, they do not have to complete a year of eligibility as a non-union employee before being eligible and all their service counts for vesting. So anyone who otherwise satisfied eligibility requirements should be eligible upon having any compensation or being credited with any hours in an eligible class (i.e., non-union). This does create a headache for you, but if I'm working 2000 union hours "in the shop" but work an extra 200 non-union hours in the office, I'm entitled to non-union plan benefits on the basis of compensation paid for those 200 hours and allocation entitlement and vesting crediting of 2200 hours.

These situations could be excluded by plan design, but would count in coverage and nondiscrimination testing as they are not statutory exclusions. I think it's no different than someone switching once from union to non-union, you just have the headache of that happening in multiple pay periods.

I don't see how you can treat differently and continue to exclude that non-union piece, unless you argue they are still covered under CBA while doing non-union work? Maybe if the CBA provides accommodation and/or the non-union work is minimal, but I see potential abuse if that were allowed - using union labor for non-union work and avoiding both union and non-union benefits on those hours.

Agree that having an attorney involved makes sense, I would want someone with both labor and ERISA knowledge, especially if the employer desires to exclude the non-union activity of union covered employees.

Completely agree that service in the union counts as "service" for our plan definition - we had always assumed that if a person was "union" then all their compensation was paid through the union and therefore they met the exclusion for collectively bargained employees (and obviously if they switched to a non-union position, that service counts towards eligibility).  It's the finding out that this plan is paying their union employees some non-union wages at the same time they are getting paid union wages that is the novel thing for us.

Well, it's only 40+ union employees (vs. the 3 office employees) going back 15 years to the start of the plans (yes, DB and DC).  How bad could this be? *eyeroll*  And maybe some attorney fees just for good measure.  It's a shame the prior TPA is out of business...