Recently, the U.S. District Court for the Northern District of Illinois found a construction company liable for delinquent contributions, liquidated damages, interest and reasonable attorney's fees. The Plaintiffs Trustees of the Chicago Regional Council of Carpenters Pension Fund, the Chicago Regional Council of Carpenters Welfare Fund and the Chicago Regional Council of Carpenters Apprentice and Trainee Program Fund (collectively "Trust Funds") filed an action under ERISA seeking to collect the delinquent contributions and other damages pursuant to the terms of the collective bargaining agreement entered into with the defendant McGreal Construction Company ("McGreal").
Beginning in July 1985, McGreal had entered into an agreement with the union binding itself to several collective bargaining agreements. These agreements required McGreal to pay to the Trust Funds contributions for covered work and dues that were withheld from each covered employee's wages. These agreements also provided that if McGreal failed to pay the contributions in a timely manner (on or before the 15th day of the month), the company would be held liable for the unpaid contributions, reasonable attorney's fees and liquidated damages in the amount of 1.5% per month on the accounts receivable balance. In filing their claim under ERISA, the Trust Funds alleged that for the period May 2009 through March 2011, McGreal sporadically failed to make contributions on or before the 15th day of the month, resulting in McGreal owing the Trust Funds liquidated damages of approximately $11,888.00. And, for the period November 2010 through March 2011, the Trust Funds alleged McGreal owed delinquent contributions. In total, the Trust Funds were seeking approximately $35,301.00, exclusive of attorney's fees.
In granting summary judgment in favor of the Trust Funds, the Court quickly dismissed McGreal's three arguments. First, McGreal argued that the complaint failed to state a claim for delinquent contributions for the period November 2012 through March 2011 because the Trust Funds did not expressly allege that McGreal failed to pay the contributions. The Court found that the allegations and the prayer for relief were sufficient to state a claim. Second, McGreal argued that the Trust Funds could not assert a claim for unpaid contributions under the welfare trust fund agreement because the trustees denied McGreal's employees benefits beginning in 2011. As a result, McGreal maintained that the trustees' denial of benefits to its employees terminated its obligations to pay contributions under the welfare trust agreement. However, because McGreal failed to cite to any legal authority for this proposition, the Court dismissed this argument. Finally, McGreal argued that the Trust Funds had no right to liquidated damages for the period May 2009 through October 2010 because McGreal actually paid those contributions. However, the Court found that McGreal missed the point. The Trust Funds were not disputing whether the contributions were made, but whether they were made on a timely basis.
When entering into collective bargaining agreements, it is important to understand the terms, conditions, obligations and potential remedies of the parties. Based on our experience with several small business clients, we often find that the client has entered into the collective bargaining agreement without fully understanding its terms and without a legal review. Because these agreements can impose various remedies (liquidated damages, interest and reasonable attorney's fees), we recommend that all agreements be reviewed prior to execution.