Recent Arbitration Decision on the “Construction Industry Exemption” Serves as a Good Reminder for All Employers Contributing to Multiemployer Funds

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.

Working,Men,Creating,Business,GrowthTo 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 Continue reading

Alternatives For Employers Considering Workforce Reduction

By Andrew J. Sommer and Megan S. Shaked

This article addresses alternatives to reductions in force, or RIFs.[1] An RIF is an involuntary termination of employment, usually due to budgetary constraints, changes in business priorities or organizational reorganization, where positions are eliminated with no intention of replacing them.

Because RIFs can be costly to implement, increase the potential for employment lawsuits and lower morale of the remaining employees, employers may consider alternatives such as furloughs, voluntary separation programs, or VSPs, and early retirement incentive plans, or ERIPs.

Such alternatives can help reduce employers’ labor costs or workforce while avoiding or minimizing adverse consequences associated with a RIF.

This article discusses each of these alternatives to RIFs in detail to help you and your employer client decide which alternative is best under the circumstances:

Furloughs

One alternative to a RIF is a furlough.

Furloughs are temporary layoffs or some other modification of normal working hours without pay for a specified duration. The structure of furloughs can vary. For instance, in some furloughs employees have consecutive days of nonduty — for example, taking the first two weeks of each month off — or take off a designated day each week.

In another example, the employee may take a certain number of days off each month, but which days those are may vary from month to month. Some employers may allow employees to choose which days to take off on their furlough. A furlough may also be a temporary layoff, where the employee remains employed with a predeterminated return date, which may be extended depending on the circumstances.

Furloughs can eliminate the need for a RIF in some cases by reducing the employer’s payroll costs. However, even on unpaid days, furloughed employees do cost the employer something, because employees on a furlough usually receive employment benefits. In a unionized workforce, employers must negotiate the furlough terms and schedule with the union.

Key Pros and Cons of Furloughs Versus RIFs

There are several pros and cons to consider when determining whether a furlough is a good alternative to a RIF. The advantages of furloughs over RIFs include:

Employers avoid employment terminations and the attendant potential legal liability.

Employees don’t lose their jobs.

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“Pay Now, Dispute Later” Rule Bares Its Teeth

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:

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District Court Allows Pension Fund to Exercise “Nuclear Option”

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