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Companies may be subject to double-dipping in ERISA benefit fund contribution cases

As a federal court in Ohio recently confirmed, companies that are obligated to make benefit contributions pursuant to union collective bargaining agreements may find themselves liable for twice what they bargained for under some circumstances.

In Trustees of the Northwestern Ohio Plumbers and Pipefitters Pension Plan v. Helm & Associates.pdf, the court held that it would take a full-blown trial to decide whether the company had unwittingly obligated itself to pay benefit fund contributions not only for the workers who actually performed its work but also for the workers who claim that the work should have been assigned to them.  In particular, the company assigned certain work to members of a local Laborers’ union and made contributions to the benefit plans maintained by the Laborers.  Later, when the Plumbers and Pipefitters’ benefit plans audited the company, they claimed that some of the work assigned to the Laborers members should have been assigned to members of the Plumbers and Pipefitters.  The benefit funds further claimed that, because the work was incorrectly assigned, the company was obligated to make contributions to the Plumbers and Pipefitters funds notwithstanding the fact that the company had already made contributions on behalf of the Laborers members who actually performed the work.

In accord with prior Sixth Circuit cases, the court held that, if the Plumbers and Pipefitters’ funds could show (i) that the work performed by the Laborers was within the scope of work covered by the collective bargaining agreement between the Plumbers and Pipefitters and the company and (ii) that the workers who performed the work fell within the group of individuals covered by that collective bargaining agreement, the company could be forced to make additional contributions to the Plumbers and Pipefitters’ benefit funds.

Such double-payment situations typically arise when a contractor relies on workers from different trade unions, and there is an after-the-fact dispute about whether the contractor correctly assigned work pursuant to each trade union’s so-called jurisdiction.  When these disputes are raised by trade union benefit funds, they often occur well after the work has been completed in the context of a benefit audit and, in many cases, arise even though the actual trade union did not complain at the time the work was being performed about the allegedly incorrect jurisdictional call.  Add to these circumstances the fact that ERISA is very protective of benefit funds’ ability to collect contributions, and many companies find themselves facing double payment situations.

Not all hope is lost, though.  In the Sixth Circuit, benefit funds attempting to collect such double payments are required to show that the collective bargaining agreement “created an unambiguous contractual obligation for the defendants to make contributions.”  In addition, companies may save themselves headaches by maintaining complete, accurate and detailed records of work assignments and benefit fund contributions so that they are prepared to refute such after-the-fact claims to work long since completed.