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

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

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International Union-Industry Pension Fund v. Gordon, Case Number 1:21-cv-01585, the UFCW pension fund declared the withdrawn employer to be in “default” and accelerated the outstanding amount of withdrawal liability it had previously assessed.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]

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Jersey Boys Gets No Love in Vegas

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.

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

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

New City Ordinance Prevents Retaliation Against Employees Who Obey COVID-19 Governmental Orders – Yet Another Reason to Ensure Your Workplace Is Following All COVID-19 Recommendations

By: Mark M. Trapp and Aaron R. Gelb

Recently, the Chicago City Council approved for immediate implementation a new ordinance prohibiting employers from taking adverse action against an employee obeying orders related to COVID-19 issued by the Mayor of Chicago, Governor of Illinois or Chicago Department of Public Health. The ordinance also encompasses employees staying at home to minimize transmission or while experiencing symptoms of the virus.Picture1

The ordinance applies to “Covered Employees,” who perform at least two hours of work in a two-week period for an employer while physically present in the geographic boundaries of the City of Chicago.

In addition to employees complying with governmental orders, the ordinance prohibits adverse action by an employer against any “covered employee” who, in compliance with the directive of a treating healthcare provider, remains at home while experiencing COVID-19 symptoms or obeys an isolation or quarantine order. The ordinance also Continue reading

Bargaining in a Time of Crisis

The COVID-19 pandemic, and the unprecedented response thereto by various layers of government has caused many, if not most businesses to rearrange their hours or operations, lay off employees or even to cease doing business altogether. Given this seemingly unprecedented situation, many unionized employers may wonder what duty they have to bargain over specific changes to their ways of doing business.NLRB Memo

General Counsel Peter Robb recently provided some helpful guidance summarizing prior NLRB case law on this timely topic. The first portion of Robb’s memo (GC Memo 20-04) summarizes various Board decisions touching on an employer’s duty to bargain during public emergency situations, such as hurricanes, 9/11 and other emergencies.

By way of background, because an employer’s decision to lay off bargaining unit employees is a mandatory subject of bargaining, an employer is generally obligated to bargain with an incumbent union with respect to both the decision to lay off and the effects of that decision. However, an exception to that rule exists if an employer can demonstrate that economic exigencies compel prompt action. Although the Board has consistently maintained a narrow view of this exception, unforeseen extraordinary events which have a major economic effect may fit within it.

For example, in Port Printing & Specialties, 351 NLRB 1269 (2007), the Board ruled Continue reading

The PBGC Acts to Level Withdrawal Liability’s Procedural Playing Field

shutterstock_pensionThe recent action by the Pension Benefit Guaranty Corporation (“PBGC”) to rein in run-away filing fees imposed by the American Arbitration Association (“AAA”) brings to mind Homer Simpson’s declaration that alcohol was “the cause of, and solution to, all of life’s problems.” In a like manner, the PBGC can be seen as the cause of, and now (happily) the solution to, the very steep filing fees previously imposed by the AAA on withdrawn employers.

By way of background, for many years, employers assessed withdrawal liability faced a Hobson’s choice: either pay the fees demanded by the AAA to initiate arbitration, or forego any chance to challenge the assessment. Of course, by failing to initiate arbitration, the amounts demanded by the pension fund become, in the words of the statute, “due and owing on the schedule set forth by the plan sponsor.”

This unpleasant situation for employers – pay up, or else – was set in motion by a PBGC regulation that allows pension funds to impose the AAA rules (and the required filing fees) on withdrawn employers. That regulation purports to allow Continue reading

Third Circuit Rebuffs Pension Fund’s Attempt to Assess Partial Withdrawal Liability

Under the Multiemployer Pension Plan Amendments Act (“MPPAA”), an employer can be liable to a multiemployer pension fund if it partially withdraws from that fund either by reducing its contributions by 70 percent over a three-year period, or where “there is a partial cessation of the employer’s contribution obligation.” 29 U.S.C. § 1385(a).

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A “partial cessation” can occur in two different ways. The first is through a so-called “CBA take-out,” where the employer ceases to have an obligation to contribute under one or more, but fewer than all, of its collective bargaining agreements (“CBA”)s. The second is a “facility take-out,” where the employer ceases its obligation to contribute with respect to work performed at one or more, but fewer than all, of its facilities. In either case, the employer must continue to perform the work for which contributions were previously required. See 29 U.S.C. § 1385(b)(2)(A).

In a recent case, the Third Circuit Court of Appeals rebuffed a multiemployer plan’s attempt to broaden the application of the CBA take-out provision. Instead, in Caesar’s Entertainment Corp. v. International Union of Operating Engineers Local 68 Pension Fund, Case No. 18-2465 (3d Cir. Aug. 1, 2019), the Court Continue reading

Seventh Circuit Hits the Brakes on Pension Fund’s “Deceleration” Attempt

In a rare win for employers, the Seventh Circuit recently held that ERISA’s six-year statute of limitations barred a multiemployer pension fund’s claim for withdrawal liability against the withdrawn employer.

The case, Bauwens v. Revcon Tech. Group, Inc., No. 18-3306 (7th Cir. 2019), involved an increasingly common scenario, namely, where a pension fund holds a withdrawn employer in “default” for missing an installment payment of its withdrawal liability and failing to cure for sixty days after notice.

Bauwens

In such an instance, the Multiemployer Pension Plan Amendment Act (“MPPAA”) allows the fund to “require immediate payment of the outstanding amount” of the employer’s withdrawal liability. See 29 U.S.C. § 1399(c)(5).

In Bauwens, the company fell into default five separate times over the course of twelve years; but each time entered into a settlement agreement with the fund to resume installment payments in exchange for the fund dropping its collection suit seeking the entire accelerated amount. Finally, on the sixth such default, the fund again brought a collection suit, to which the employer asserted ERISA’s six-year statute of limitations. The court held Continue reading

NLRB General Counsel’s Comment Indicates Expected Restoration of Pro-Employer Precedent

During a recent conference at New York University, NLRB General Counsel, Peter Robb, hinted at the forthcoming restoration of more than fifty years of precedent allowing employers to cease withholding union dues after the expiration of the collective bargaining agreement containing the so-called “dues check-off” provision.

shutterstock_gavel.jpgAs reported by Law360, Robb referred to the 2015 Obama-era decision overturning that precedent as “misguided,” and stated further: “I think unless there’s clear language that the dues check-off should continue, it shouldn’t.” Prior to that 2015 decision, the Board had, since 1962, consistently held that dues check-off provisions, which implement union security provisions by providing for the automatic deduction of union dues, could be cancelled by employers upon contract expiration. See Bethlehem Steel Co., 136 NLRB 1500 (1962).

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