Unionized Companies Mistakenly Believe No More Union Means No More Pension Plan

Employers often assume that when their employees decertify a union, that every obligation an employer had under the collective bargaining agreement disappears. They are wrong.

In 2013, employees in three separate bargaining units (all with the International Union of Operating Engineers) of one Company voted to decertify. At that time, the Union and Company were party to a five-year collective bargaining agreement that expired in 2015. The Company assumed that the decertification of the union ended its obligation to pay into the union’s multi-employer welfare and pension fund. As a result, the Company stopped paying into the Pension Funds.

On appeal, the Seventh Circuit held that the collective bargaining agreements were unenforceable as to the Union, but found that the pension fund had a right under ERISA to bring a suit for delinquent contributions. This is because when the Funds promised to provide a level of benefits to the employees (presumably by allowing the employer to participate in the funds under the terms of the CBA), that created a binding contractual promise. The Court also recognized that the Funds were third-party beneficiaries to the CBAs and thus entitled to enforce them even if the Union could no longer do so.

But there is a competing view. The Ninth Circuit has recognized that when a bargaining unit ceases to exist, be it by decertification or contract repudiation of a one person bargaining unit, any existing contract becomes void, not voidable, ending the employer’s obligation to continue to pay into employee benefit plans. Oddly, the Seventh Circuit did not discuss the Ninth Circuit’s precedence.

The takeaways are: 1) Employers whose employees decertify prior to the contract expiration cannot assume their obligations to the funds end at that time; and because of this split, I expect a petition to the United States Supreme Court will be filed so that it can provide clarity to the rest of the country on whether pension fund obligations survive the elimination of a union.

Matt Austin owns Austin Legal, LLC, a boutique law firm based in Ohio that limits its representation to employers dealing with labor, employment, and OSHA matters. You can call Matt at (614) 285-5342 or email him at Matt@MattAustinLaborLaw.com.