The U.S. Court of Appeals for the Sixth Circuit has held that a provision in a collective bargaining agreement (CBA) requiring the union to indemnify the employer for any withdrawal liability resulting from the employer withdrawing from a multiemployer plan was enforceable.
During collective bargaining negotiations, the union in question disclaimed further representation of the employer’s employees. As a result, the employer withdrew from the multiemployer plan, participation in which had been required under the CBA. The pension fund, following the employer’s withdrawal, imposed withdrawal liability against the employer and assessed $57,291.50, for which the employer sought indemnification from the union.
The union argued that the subject provision in the CBA violated a prohibition in the Employee Retirement Income Security Act of 1974 (ERISA) against an agreement relieving a fiduciary from liability for a breach of his fiduciary. The Sixth Circuit disagreed. It noted that nothing in the CBA relieved the employer of the withdrawal liability. Instead, the indemnification provision was akin to a fiduciary contracting for insurance, which is expressly permitted under ERISA. Accordingly, the Sixth Circuit held that the union was required to indemnify the employer for the $57,291.50 withdrawal liability amount. (Shelter Distrib., Inc. v. Gen. Drivers, Warehousemen & Helpers Local Union No. 89, 6th Cir. 2012)