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Despite union’s decertification, employer must contribute to welfare funds until CBA expires

By Marjorie Johnson, J.D.

An employer was obligated to continue making contributions to welfare and pension funds until the expiration of the applicable collective bargaining agreement and it violated ERISA by halting such payments following the union’s decertification, the Seventh Circuit ruled, affirming summary judgment in favor of the funds. Though the CBA became unenforceable by the union when it was decertified, the funds were still entitled to the agreed upon contributions and thus entitled to relief under ERISA (Midwest Operating Engineers Welfare Fund v. Cleveland Quarry, December 20, 2016, Posner, R.).

Welfare funds sue separate divisions of same company. In three separate actions, employee welfare and pension funds sued three divisions of RiverStone, Inc., for unpaid contributions following a union decertification. The district court judges presiding over the claims treated them each separately, perhaps confused by the fact that each division had a separate CBA. But since the proper defendant was the company itself, the Seventh Circuit addressed the appeal as involving a single case against RiverStone.

Contributions stop after union decertified. RiverStone’s latest CBA with the union, which expired in 2015, required the company to contribute a specified dollar amount to certain welfare and pension funds “for each hour for which an employee receives wages under the terms of this Agreement.” The CBA further stated that “the Employer’s responsibility to make contributions to the Welfare Plan[s] shall terminate upon expiration of this agreement.”

In 2013, employees in RiverStone’s three divisions separately voted to decertify the union. As a consequence, RiverStone decided to stop contributing to the welfare and pension funds. The funds then filed the underlying lawsuits under the ERISA provision added by the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA), which creates a right to sue to collect delinquent employer contributions. The district courts granted summary judgment in favor of the funds, ruling that RiverStone was obligated to make the specified contributions until the CBA expired.

Funds can sue for delinquent contributions. Affirming, the Seventh Circuit explained that a CBA can continue to impose a contribution obligation after the union’s decertification, which merely eliminates the union’s right to enforce the CBA (including provisions relating to contributions to employee welfare plans). Indeed, the Seventh Circuit has explicitly held that “the union is not the only party with standing to enforce” an employer’s obligation to contribute to an employee welfare plan, noting that the MPPAA “authorizes multiemployer plans to sue for delinquent contributions owed ‘under the terms of the plan or under the terms of a collectively bargained agreement.”

The “delinquent contributions” in the instant action were the contributions that RiverStone had failed to make in the interim between the decertification of the union and the expiration of the CBA. “That an employer could cease making contributions to a plan once its employees’ union is decertified is no defense.” Indeed, the Seventh Circuit had previously held that “once [multiemployer plans] promise a level of benefits to employees, they must pay even if the contributions they expected to receive do not materialize.” In short, “nothing in ERISA makes the obligations to contribute depend on the existence of a valid collective bargaining agreement.”

When did agreement “expire”? At issue was the effect of the provision of the CBA that “the employer’s responsibility to make contributions to the Welfare Plan shall terminate upon expirations of this agreement.” The meaning of that clause depended on whether “expiration” meant the date on which the agreement became unenforceable or the date on which it lapsed by passage of time.

Unenforceable by union but not funds. The CBA became unenforceable by the union when it was decertified, at which time RiverStone was no longer bound to the promises it had made to the union. However, the CBA did not cease to exist, and therefore did not expire, until its five-year term ended. By prematurely ceasing to contribute to the welfare funds, RiverStone became liable under ERISA to make delinquent contributions, which was the relief sought by the funds and ordered by the three district courts. RiverStone might have negotiated a CBA that obligated it to contribute to the funds only unless and until the union was decertified, but it did not do so.

Another way to look at it was that the welfare funds were third-party beneficiaries of the CBA and therefore entitled to enforce it even if another enforcer—the union—no longer could do so. The CBA established a five-year obligation for RiverStone to contribute to the funds for each employee in the bargaining unit. The funds budgeted accordingly, and the CBA did not allow RiverStone to stop contributing as soon as its employees’ union was decertified.