Because construction workers tend to change jobs frequently, many contractors contribute to multiemployer pension plans connected with specific collective bargaining agreements. As projects are completed and contractors move on to other work, they may withdraw from one multiemployer pension plan and join another. Any contractor who is thinking of withdrawing from a multiemployer pension plan should be aware of all procedural requirements and the effect of such a withdrawal.

One employer, Able Contracting Group, Inc., learned a tough lesson about withdrawing in Trustees of the Laborers’ Local 310 Pension Fund v. Able Contracting Group, Inc., 2007 U.S. Dist. LEXIS 55949 (N.D. Ohio Aug. 1, 2007).

Able withdrew from the Local 310 pension plan “because the work scope specified by the agreement did not cover fence or guardrail construction, which is the type of work Able performs.” After Able’s withdrawal from the pension plan, the Trustees of the plan informed Able of its withdrawal liability: $228,546. Asserting that it was not an “employer” under the plan, Able denied that it was liable for the withdrawal liability payments. The Trustees responded by filing a lawsuit to collect the plan’s money.

According to federal law (29 U.S.C. § 1401(a)(1)) covering a pension plan of this type, “any dispute between an employer and the plan sponsor of a multiemployer plan concerning [a withdrawal] shall be resolved through arbitration.” Able’s argument was that it was no longer an employer and, therefore, was not required to make withdrawal payments or to arbitrate. The Trustees disagreed; they thought it was an arbitrable issue whether or not Able was an “employer.”

Why hadn’t Able initiated arbitration in a timely manner? First, the contractor relied on an exception that would allow a company to bypass the arbitration process for the “limited purpose of determining whether it is an ‘employer’ for purposes of section 1401(a)(1).” Second, it also argued that “the type of work it performed was not covered by the Collective Bargaining Agreement with Local 310, and, therefore, it [was] exempt from withdrawal liability under § 1383.”

The court rejected both arguments, citing prior case law. These earlier cases distinguished between two questions: whether a party remains an employer on the date of withdrawal and whether the party ever became an employer. Whether or not a party remains an employer is an arbitrable issue. Whether or not the party ever became an employer is an issue for the court to determine.

Which question was Able asking? The court determined that Able’s claim more closely resembled whether the contractor remained an employer on the date of withdrawal. Therefore, Able should have filed for arbitration.

In short, Able’s unilateral decision to withdraw from the multiemployer pension plan held $228,546 in risk that it probably did not anticipate.