Even With No CBA, Withdrawing Employer May Have to Pay Multiemployer Plan

A federal appeals court has reinstated a lawsuit against an employer that was a member of a multiemployer plan and withdrew from the plan when its collective bargaining agreement (CBA) expired.

The 4th U.S. Circuit Court of Appeals disagreed with a District Court’s dismissal of the lawsuit which was filed by the plan when Four-C-Aire refused to pay an exit contribution after withdrawing from the plan. The exit contribution was required by the Sheet Metal Workers’ National Pension Fund trust documents. Four-C-Aire’s withdrawal liability was reduced to zero under the “de minimis reduction,” an exception under the Employee Retirement Income Security Act (ERISA) which reduces or eliminates withdrawal liability when the amount would be relatively small (less than $150,000).

The appellate court noted that under Section 515 of ERISA, a multiemployer plan can enforce, as written, the contribution requirements found in the controlling documents.

According to the court opinion, Four-C-Aire signed onto a CBA to remain in effect until April 30, 2016, that required Four-C-Aire to contribute to the fund and “incorporated by reference” the fund’s trust documents. The CBA also bound Four-C-Aire to abide by the terms and conditions of the trust documents, “including any amendments thereto and policies and procedures adopted by the [Fund’s] Board[] of Trustees.

Under Article V, Section 6(a) of the trust documents, Four-C-Aire was required to pay an exit contribution to the fund when three criteria were met: (1) it ceased to have an obligation to contribute to the fund, and (2) as a result of the cessation of its obligation to contribute, it had an event of withdrawal under Title IV of ERISA, but (3) did not have to pay a statutorily-mandated withdrawal liability. While the CBA was in effect, the trust documents were amended to state that the employer’s obligation to pay an exit contribution is independent of the employer’s CBA and continues to apply after the termination of the CBA, notwithstanding any language to the contrary in the CBA.

The fund demanded an exit contribution of $97,601.01, which it claimed to be the amount required by the trust documents based on Four-C-Aire’s contribution history.

Because Four-C-Aire signed the CBA and, thereby, agreed to be bound by the trust documents, the trust documents provided that a participating employer would be obligated to pay an exit contribution under certain circumstances, the amendment additionally stated that the obligation would survive the expiration of the CBA, and Four-C-Aire failed to pay the exit contribution despite the occurrence of events requiring such a contribution, the court found that the fund has set forth a viable claim.