Author: Mark Trapp

Join CMC’s Employer Coalition to Work on OSHA’s Inspection Walkaround Rulemaking (Expanding Union Access to Non-Union Workplaces)

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By Eric J. Conn and Mark Trapp

We wanted to reach out to notify you about OSHA’s latest gift to organized labor.  Consistent with the Biden Administration’s promise to be “the most labor-friendly administration in history,” last week, OSHA revealed its Notice of Proposed Rulemaking about the “Worker Walkaround Representative Designation Process.”  Specifically, OSHA proposes to amend 29 CFR 1903.8(c), which is the regulation governing the rights of third parties to participate as employee representatives in OSHA inspections. The NPRM for OSHA’s Inspection Walkaround Rule would greatly expand when non-employees can accompany OSHA inspectors during physical inspections at your workplaces.  Specifically, the proposed rule would open the door to third parties, including specifically union representatives even at non-union workplaces, if the OSHA compliance officer determines the third party would positively impact the inspection.

History of Union Access to Workplaces During OSHA Inspections

As a reminder, The Obama/Biden Administration tried to contort the meaning of the Inspection Walkaround regulation by granting union representatives the ability to participate in OSHA inspections at non-union workplaces by way of a formal letter of interpretation in February 2013.  The interpretation letter responded to this inquiry by a labor union: “May workers at a worksite without a collective bargaining agreement designate a person affiliated with a union or a community organization to act on their behalf as a walkaround representative?”

OSHA has an existing regulation at 29 C.F.R. § 1903.8(c) that speaks to this issue, and it sets a strong bias against third party participation in OSHA inspections, unless the third party has some special skill (such as industrial hygienist or a language translator) that OSHA is lacking.  Here is the existing regulatory text: Continue reading →

In withdrawal liability, a non-employer may always employ its defense that it was never an “employer”

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When a multiemployer pension fund determines that an employer owes withdrawal liability, the fund must send the employer a notice and demand for payment. 29 U.S.C. § 1399(b)(1). To challenge the fund’s withdrawal-liability assessment, the employer must timely request a review by the fund, 29 U.S.C. § 1399(b)(2)(A), and if the employer disagrees with the results of the review, it must timely initiate arbitration.

An employer that fails to initiate arbitration waives any defenses to the assessed withdrawal liability and the amount demanded becomes due and owing. The Multiemployer Pension Plan Amendments Act (“MPPAA” or “the Act”) states:

If no arbitration proceeding has been initiated pursuant to subsection (a), the amounts demanded by the plan sponsor … shall be due and owing on the schedule set forth by the plan sponsor. The plan sponsor may bring an action in a State or Federal court of competent jurisdiction for collection. 29 U.S.C. § 1401(b)(1).

Thus, the failure to initiate arbitration has a simple result – the amount demanded by the plan sponsor becomes due and owing. Numerous court decisions have noted this harsh consequence of the failure to initiate arbitration, stating “In short, arbitration reigns supreme under the MPPAA.” Robbins v. Admiral Merchants Motor Freight, Inc., 846 F.2d 1054, 1057 (7th Cir. 1988).

But what if the entity claims not to have been an “employer” at all? Does the failure to initiate arbitration preclude such an entity from contesting the withdrawal liability assessment? The short answer is “no” – whether a company is an “employer” within the meaning of the MPPAA is a threshold question for the court. And since only an “employer” is required to arbitrate, a district court may address this threshold question before arbitration.

This exception was at issue in Central States, Southeast and Southwest Areas Pension Fund v. Event Productions, Inc., No. 21-cv-5695 (N.D. Ill. June 1, 2023). In that case, Continue reading →

Responding to an Assessment of Withdrawal Liability from a Multiemployer Pension Plan

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By: Mark M. Trapp

CaptureNearly nine years ago, in 2014, Mark M. Trapp authored a Practical Law “Practice Note” titled “Responding to an Assessment of Withdrawal Liability from a Multiemployer Pension Plan.” Trapp is a Partner in Conn Maciel Carey’s Labor and Employment Practice Group. Practical Law, a division of West Publishing Corporation, is a well-known legal publishing company.

Periodically during the ensuing years, Trapp has revised and updated the practice note to reflect changes to the law and to keep it current. The latest update was recently published by Practical Law in January 2023.

As its name implies, the practice note addresses key procedural issues in an employer’s response to an assessment of withdrawal liability from a multiemployer pension plan under the Multiemployer Pension Plan Amendments Act of 1980. Specifically, the published article guides an employer in responding to an assessment and covers: Continue reading →

“Pay Now, Dispute Later” Rule Bares Its Teeth

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Under the Multiemployer Pension Plan Amendments Act (“MPPAA”), an employer that withdraws from a multiemployer pension plan is assessed “withdrawal liability” which the fund must demand in accordance with a schedule of installment payments in amounts determined under the statute. Any disputes the employer has as to the fund’s assessment must be resolved through arbitration.

Importantly, however, initiating a dispute of the withdrawal liability does not relieve the employer of the duty to make the installment payments as they come due. That is, even where an employer challenges the assessment by requesting review and then initiating arbitration, it still must make interim payments of the assessed amounts in accordance with the fund’s demand and payment schedule. These interim payments must begin within 60 days of the assessment, notwithstanding any request for review, and are colloquially referred to as the “pay now, dispute later” rule.

A recent decision from the District of Columbia district court serves as a useful reminder of the potentially strict application of this rule. In Trustees of the IAM National Pension Fund v. M&K Employee Solutions, LLC, No. 1:20-cv-433 (D.D.C. 2022), the Court held that where an employer refused to make the required interim payments until after successfully challenging and reducing through arbitration the amount demanded by the fund, it was nevertheless liable for the statutory penalties and liquidated damages associated with its failure to make interim payments.

Relying on cases from the Seventh Circuit, the Court stated:

Continue reading →

District Court Allows Pension Fund to Exercise “Nuclear Option”

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Two months ago, we brought you the story of the ongoing fight between Penske Truck Leasing (“Penske”) and the Central States Pension Fund (“Central States”). Close,Up,Of,Time,And,Money,With,Green,Bokeh,BackgroundThis article will provide an update in the case of Penske Truck Leasing Co. v. Central States, Southeast and Southwest Areas Pension Plan, 21-cv-05518 (N.D. Ill).

By way of background, just before Christmas, a Chicago district court entered a temporary restraining order preventing Central States from ejecting a unit of Penske employees or from taking any action to trigger a partial withdrawal. The contemplated expulsion would have triggered a partial withdrawal, which Penske alleged would trigger well over ten million dollars in withdrawal liability for the company.

As noted in our earlier article, Central States asserted that Penske was engaged in “a scheme to minimize its withdrawal liability by lining up all ten of its bargaining units for negotiations in 2022 in order to trigger a complete withdrawal from the Fund in 2022 rather than triggering a partial withdrawal in 2021 followed by a complete withdrawal in 2022.” Thus, when Penske and its local union in Dallas also agreed to extend that agreement until 2022, Central States’ trustees rejected the extension, asserting the extension “could significantly reduce Penske’s withdrawal liability exposure.”

Last week, following expedited discovery and briefing by the parties, the district court Continue reading →

You’re Expelled! A Pension Fund’s “Nuclear Option”

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An ongoing matter in Chicago federal court may be worth watching, as it centers on the authority of a multiemployer pension fund to expel a participating employer and stick it with millions of dollars in withdrawal liability. Even the threat of the exercise of this “nuclear option” by a multiemployer pension fund may cause an employer to acquiesce to the fund’s desired view, which (surprise, surprise) almost always coincides with the objectives of the union.

In Penske Truck Leasing Co. v. Central States, Southeast and Southwest Areas Pension Plan, 21-cv-05518 (N.D. Ill), filed on October 18, 2021, Penske urged a Chicago federal court to prevent the Central States fund (“Central States”) from expelling the company’s Dallas bargaining unit, a move Penske alleged would trigger well over ten million dollars in withdrawal liability for the company.

Continue reading →

Shift in Labor Board’s Composition Portends Likely Shift in Policy at NLRB

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By Kara M. Maciel and Mark M. Trapp

Last week, National Labor Relations Board (“NLRB”) Member William Emanuel’s term expired. His Democrat replacement, David Prouty, who was confirmed by the Senate on July 28 (along with another Democrat nominee, Gwynne Wilcox), ensures a 3-2 Democrat majority at the agency for the first time in almost four years. As usually occurs when there is a change in the composition and control of the Board, this shift portends a shift in policy.

Labor,Law,Books,With,A,Judges,Gavel,On,Desk,InA recent labor and employment conference held in Big Sky, Montana and attended by many current and former government officials provided a glimpse into several issues that will undoubtedly be subject to reexamination as the new Democrat majority takes control. One interesting panel featured current (Republican) Member John Ring and former (Democrat) Chair Wilma Liebman, moderated by former (Republican) Chair Philip Miscimarra.

During her remarks, former Chair Liebman noted three cases/issues she declared “need to be reversed” by the new Democrat majority. Liebman first noted PCC Structurals, Inc., a 2017 Board decision that overruled a prior 2011 ruling by the former Democrat majority (Specialty Healthcare) and reinstated the traditional community of interest standard for determining an appropriate bargaining unit in union representation cases.

A return to the Specialty Healthcare standard would make it easier for unions to narrow the scope of proposed bargaining units, which can make a significant difference in union organizing efforts. In general, according to one recent review by Bloomberg Law, Continue reading →

Don’t “Default” to the Fund’s View of Withdrawal Liability

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A recent case out of the U.S. District Court for the Northern District of Illinois provides an interesting window into how opportunistic pension funds attempt, and sometimes succeed, in taking advantage of employers and perhaps recovering more than the amount to which they are entitled under the Multiemployer Pension Plan Amendments Act (“MPPAA”).

Background

In United Food and Commercial Workers International Union-Industry Pension Fund v. Gordon, Case Number 1:21-cv-01585, the UFCW pension fund declared the withdrawn employer to be in “default” and accelerated the outstanding amount of withdrawal liability it had previously assessed. In a complaint brought against the owner of a now-defunct Connecticut food distributor, the fund alleged that it had previously assessed the withdrawn employer $2,350,762.00 in withdrawal liability as a result of its shutting down in the summer of 2020. Of course, under the MPPAA’s 20-year payment cap, withdrawal liability is limited to no more than 20 annual payments, calculated pursuant to the statute. Thus, the fund prepared an installment schedule which demanded the withdrawal liability be paid in 80 quarterly installments of $11,216.00. One does not have to be very good at math to realize that this schedule limited the total withdrawal liability to $897,280.00, payable over twenty years.

The complaint further alleged that shortly after receipt of the assessment the owner requested a waiver of the assessed withdrawal liability because the company no longer existed and had no assets. This request, and the owner’s subsequent failure to make the first scheduled payment, caused the fund to declare the employer in default. Finally, the complaint alleged that the employer had failed to either request review or initiate arbitration, “foreclosing any challenge to the Fund’s assessment and fixing the amounts due.”

However, rather than merely claim entitlement to immediate payment of the “outstanding” 80 quarterly payments pursuant to its assessed installment schedule, the fund asserted the right to collect the more than $2.3 million in (what must have been the) total unfunded vested benefits attributable to the withdrawn employer, as well as a 20% penalty, interest, and attorneys’ fees. Thereafter, the parties engaged in settlement talks, which ultimately resulted in the court signing off on a consent judgment in which the employer agreed to pay $1,454,500.00, approximately half the total amounts claimed by the fund, but well above the amount due pursuant to the 20-year schedule of payments.

This case appears to follow a trend in recent years in which funds have become more aggressive and creative in using the concept of statutory default to their advantage. In fact, as the case illustrates, some funds take the position that in a default situation they can ignore the MPPAA’s 20-year payment cap on withdrawal liability payments. A few key points (and there are others) should equip withdrawn employers to push back against this trend.

Discussion

First, withdrawal liability must be assessed and paid in level installments for a period not exceeding twenty years. The MPPAA states that a withdrawn employer must pay its withdrawal liability “over the period of years necessary to amortize the amount in level annual payments” and “[i]n any case in which the amortization period … exceeds 20 years, the employer’s liability shall be limited to the first 20 annual payments[.]”[i] The level annual payments “shall be payable in 4 equal installments due quarterly, or at other intervals specified by plan rules.”[ii] Moreover, to provide proper notice under the MPPAA, a fund’s withdrawal liability assessment must include the “schedule for liability payments” and “demand payment in accordance with the schedule.”[iii] Once assessed, an employer’s withdrawal liability “shall be payable in accordance with the schedule set forth” by the fund.[iv]

Continue reading →

Jersey Boys Gets No Love in Vegas

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A recent opinion from a Nevada federal district court serves as a good reminder to those litigating withdrawal liability assessments of the rather mundane issue of burden of proof. Namely, that an assessment of withdrawal liability is presumed correct unless the employer proves otherwise.

The case, Nevada Resort Association — International Alliance of Theatrical Stage Employees and Moving Picture Machine Operators of the United States and Canada Local 720 Pension Trust v. JB Viva Vegas LP, (D. Nev. 2:19-cv-00499), dealt with the so-called “entertainment industry exception” to withdrawal liability for work performed in the entertainment industry. Section 4203(c)(1) of ERISA provides that in the entertainment industry, a complete withdrawal occurs only if an employer ceases to have an obligation to contribute under a plan, but nevertheless performs previously covered work in the jurisdiction of the plan anytime within five years after its obligation to contribute to the fund ceased.

In September of 2016 the Las Vegas producer of the musical “Jersey Boys” shut down its long-running show. In assessing the producer withdrawal liability, the pension fund determined that the entertainment industry exemption did not apply because, although it had once been, the fund was no longer a fund in the entertainment industry due to the fact that many of the contributing employers’ employees performed work in the convention industry, rather than the entertainment industry. The producer challenged this determination in arbitration.

Continue reading →

Senate Confirms Two to NLRB, Ensuring Balance and Stability for Foreseeable Future

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After passing out of committee earlier this summer, two nominees to the National Labor Relations Board – one Republican, one Democrat – were recently confirmed by the full Senate.gavel

Even though both nominees have Board experience, the confirmation votes reflected the ongoing partisan contention that has in recent years surrounded the labor agency, with Republican nominee Marvin Kaplan confirmed by a vote of 52-46 without a single Democrat voting in support, while just seven Republicans crossed over to confirm Lauren McFerran, who was confirmed 53-42. Kaplan is currently serving on the Board, while McFerran was previously confirmed in 2014 and served until last December, when her five-year term expired.

Traditionally, three board seats are held by members of the president’s political party while two are set aside for the opposition party. Thus, last week’s confirmations Continue reading →