By: Mark M. Trapp

Under the Multiemployer Pension Plan Amendments Act (“MPPAA”), an employer who ceases to contribute to a multiemployer pension fund generally incurs “withdrawal liability.” However, employers in the building and construction industry are exempt from withdrawal liability under certain conditions.

To qualify for the “construction industry exemption,” an employer must demonstrate that “substantially all the employees with respect to whom the employer has an obligation to contribute under the plan perform work in the building and construction industry[.]” 29 U.S.C. §1383(b)(1)(A). “Substantially all” has been interpreted to mean at least 85 percent.

Next, the plan must either: (1) primarily cover employees in the building and construction industry; or (2) have been amended to provide that the exemption applies to building and construction industry employers. 29 U.S.C. §1383(b)(1)(B).

If those two criteria are met, an employer that ceases having an obligation to contribute to a plan will trigger a complete withdrawal only if it also either “(i) continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required, or (ii) resumes such work within 5 years after the date on which the obligation to contribute under the plan ceases.” 29 U.S.C. §1383(b)(2)(B).

A recent arbitration decision in Gemelli Concrete, LLC, v. Laborers Pension Trust Fund – Detroit and Vicinity, AAA No. 01-21-0016-5107 (June 7, 2022) dealt with an interesting scenario. The parties there agreed that the employer (Gemelli) had ceased having an obligation to contribute but disputed whether Gemelli continued to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required.

The facts showed that Gemelli had for some time performed concrete “flat work” – that is, concrete work which was not elevated and did not require pumping services or a pump truck. In approximately 2016, Gemelli apparently purchased a pump truck and brought in an operator to run it and train some of its Laborers to operate pump trucks. It then purchased additional pump trucks to use on its own projects and to rent to other contractors. Gemelli paid the Laborers engaged in such work at the “general laborer” rate under its CBA with the Laborers’ Union and made contributions to the Laborers’ Fund for such work.

At some point, the Operating Engineers Union got wind of the pump work being performed by Gemelli and informed it that such work came within that Union’s exclusive jurisdiction. Thereafter, Gemelli ceased performing “flat work” altogether and another company in the same control group as Gemelli (PumpCo) began performing the pump truck concrete operations. PumpCo signed a CBA with the Operating Engineers and made contributions for the pump truck work to the Operating Engineers Fund.

The Laborers’ Fund determined Gemelli had continued (through PumpCo) to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required and assessed it withdrawal liability. Gemelli contested the assessment, arguing that because the Operating Engineers claimed exclusive jurisdiction over the pump truck work, and PumpCo was signatory to and making contributions for such work pursuant to a CBA with the Operating Engineers, the exemption applied, and no withdrawal had occurred.

Arbitrator Kathryn A. VanDagens held that, notwithstanding the fact that Gemelli had for several years apparently made contributions to the Laborers Fund for pump truck work, because the Operating Engineers Union claimed jurisdiction over such work, it was not within the jurisdiction of the Laborers’ CBA. Moreover, the Arbitrator held that the mere fact that Gemelli had in fact made contributions for that work did not convert it into covered work under that CBA.

Accordingly, the Arbitrator ruled that despite its previous contributions for that very work, “the record does not support [the Fund’s] determination that [Gemelli] continued to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required.” Accordingly, the Arbitrator reversed as unreasonable the Fund’s finding that the construction industry exemption did not apply, held that no withdrawal had occurred, and ordered the Fund to refund Gemelli’s overpayments with interest.

Building and construction industry employers may profitably take note of the Gemelli decision, which serves as a good reminder of two things: (1) the jurisdiction of the collective bargaining agreement is defined by the relevant terms of the agreement; and (2) the written terms of the collective bargaining agreement also control the obligation to contribute.

This is consistent with bedrock ERISA law, which requires employers who are parties to a collective bargaining agreement to make contributions “in accordance with the terms” of that agreement. See 29 U.S.C. §1145. In addition, the Labor Management Relations Act forbids any contributions other than those made pursuant to a written agreement setting forth the “detailed basis” for such contributions. See 29 U.S.C. §186(c)(5)(B).

All employers are well advised to ensure that any contributions to a multiemployer pension fund are being made pursuant to the clear written terms of a written agreement, and to consider that the mere fact that contributions may (or may not) have been made is not dispositive. Rather, the written terms of the collective bargaining agreement control the obligation to contribute.