The defendant and contributing employer, Park-Mark, Inc. (“Park-Mark”), was contractually bound to contribute to a number of multiemployer funds. During an audit conducted in 2010, the funds notified Park-Mark that it had overpaid the funds by $548,257.39 during the period from April 1, 2004, through September 30, 2009, because Park-Mark had mistakenly contributed for work performed outside the jurisdiction of its collective bargaining agreement (“CBA”).

Park-Mark refused to make payments for a period of three months because the Funds refused to provide a credit for the prior overpayments. The funds brought an action to collect delinquent contributions. Park-Mark raised an affirmative defense that the amount of its overpayment should be used as a setoff to any amounts owed and asserted a counterclaim for restitution of its overpayments.

The Eighth Circuit noted that an exception to ERISA’s anti-inurement provision exists where a “contribution or payment is made by an employer to a multiemployer plan by a mistake of fact or law” and that, in such cases, the anti-inurement provision “shall not prohibit the return of such contribution or payment to the employer within 6 months after the plan administrator determines that the contribution was made by such a mistake.” ERISA § 403(c)(2)(A)(ii), 29 U.S.C. § 1103(c)(2)(A)(ii). The Court also noted its prior precedent that “an employer has a federal common law action for restitution of mistakenly made payments to an ERISA plan.” Young Am., Inc. v. Union Cent. Life Ins. Co., 101 F.3d 546, 548 (8th Cir. 1996). The Court further acknowledged that the evidence suggested that Park-Mark’s overpayments had been the result of “an erroneous legal or factual understanding” with respect to the scope of the work for which Park-Mark was obligated to contribute to the Funds.

Nonetheless, the Court held that even where overpayments had been the result of a mistake, “a refund is not automatic.” Citing to its past precedent, the Court held the following were non-exclusive factors to be considered in deciding whether to order restitution:

(1) are unauthorized contributions the sort of mistaken payments that equity demands be refunded? (2) has the Union delayed bringing this action for so long that laches, or some other equitable defense, bars recovery? (3) in the same vein, has the Union, by continuing the payments for years without apparent question, somehow ratified past payments? and (4) since the Fund has agreed that it is not entitled to keep the disputed amount in any event, can the Union demonstrate that the party from whom it seeks payment would be unjustly enriched if recovery were denied?

UIU Severance Pay Trust Fund v. Local Union No. 18-U, 998 F.2d 509, 513 (7th Cir. 1993). The Court further held that a fund’s policies, including the decision whether to refund mistaken overpayments, could not be arbitrary and capricious.

Taking these factors into account, the Court first held that the overpayments were not of the type for which equity demanded a refund. Specifically, the funds had presented evidence establishing that Park-Mark’s employees had received insurance coverage and pension credits based upon those overpayments. The Court noted that although such benefits are contingent and deferred, the receipt of these benefits may reduce employees’ demands for higher wages. Thus, the Court held that Park-Mark’s employees would be adversely affected by issuing a refund. In this regard, the Court held that the factor regarding unjust enrichment did not weigh in favor of restitution because there had been no unjust enrichment as Park-Mark’s employees had received the benefit of the overpayment.

Turning to the question of the delay in bringing the claim, the Court held that the CBA unambiguously defined the scope of its jurisdiction. Thus, Park-Mark had no excuse for delaying its claim for restitution when it had begun overpaying in 2004. The Court found the issue of “ratification” did not favor either party.

Finally, the Court rejected Park-Mark’s argument that the funds’ position was arbitrary and capricious. The Court credited the funds’ conclusion that refunding the overpayments would negatively impact the pension credits that Park-Mark’s employees had accrued.

Weighing the factors listed above, the Eighth Circuit affirmed the district court’s conclusion that equity did not favor a refund to Park-Mark.

This case should serve as a cautionary tale to employers to ensure that they are highly cautious when making contributions to multiemployer funds because it is possible that there would be no recourse for an overpayment, even though refunds are permissible by law. If there is a question as to the scope of contributions, an employer may wish to seek the advice of counsel and/or the opinion of the funds’ administrator prior to potentially making an overpayment that it may not be able to recover.

The case is Greater St. Louis Construction Laborers Welfare Fund, et al. v. Park-Mark, Inc., No. 11-3746 (8th Cir. Nov. 23, 2012).