Union Pension Withdrawal Liability Attaches to Parking Lot Owner for Free Parking

Every company I represent that has a union pension plan is concerned about withdrawal liability.

In a nutshell, withdrawal liability occurs when an employer exits a pension plan and must pay its “proportionate share” of the underfunded plan.

Exiting generally occurs when: 1) employers negotiate out of the plan, 2) a company is sold and the new employer does not elect to be in the plan, or 3) when employees decertify the union.

Depending on the number of employees and years spent paying into the plan, withdrawal liability could be a massive, crippling amount.

Withdrawal liability can attach to personal assets of the company’s owner regardless of the corporate structure or taxing entities. It can also attach – as we see below – to companies other than the one paying into the pension plan.

The Seventh Circuit recently ruled that a Teamsters pension fund (Teamsters have the most notoriously underfunded pension plan) could seek $312,252 in withdrawal liability and related amounts from the owners of an Illinois trucking company that operated rent-free on the owner’s property.

Anthony and Pat Pitello could be held personally liable for the pension obligation of Gradei’s Express Co. simply because the Pitellos allowed Gradei’s to operate rent-free on land the Pitellos owned.

This was enough of a connection to find the Pitellos were engaged in a trade or business under common control with the Gradei’s for purposes of pension liability.

“Land owned by a firm’s equity investors and used by that firm in its business is itself a form of equity investment in the firm. Logically, that means that the land should be treated as part of the business,” the court said.

I try really hard to find creative solutions for my clients. My success is dependent on finding ways for companies to achieve their objectives. When it comes to union pension plans and withdrawal liability, there is rarely any room for creativity.

Business owners who have multiple businesses with different FEINs and who are used to having one of their businesses do business with another one of their businesses must remember to do business at an arms length.

Labor law – more so than other areas of the law – requires verifiable arms-length business transactions. I know this often defeats the purpose of the different FEINs. While there are some creative ways around this, they are heavily fact-specific and cannot be applied to all businesses.

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