Two recent federal court cases illustrate the caution and care needed in handling situations involving union-negotiated multiemployer plans. In one case, 30 years of apparent consent and waiver of explicit collective bargaining provisions did not protect a separate but related company from an obligation to make contributions to several collectively bargained multiemployer plans. In a second case, a company that purchased assets from another corporation that had delinquent multiemployer plan contributions may be forced to go to trial on the issue of whether the asset-purchase constituted a “substantial continuity of business” of the seller of assets. A trial finding of substantial continuity could obligate the purchaser to unwillingly assume liability for the unpaid plan contributions.

The first case involved double-breasted (i.e., one unionized and one non-union) construction businesses that shared offices, managing officers, employees, and supervisors; had similar owners; and at times worked on the same jobs. These arrangements had continued for 30 years with no issues between the non-union employer and the multiemployer benefit plans, to which the union company contributed on behalf of its union workers.

The 30-year honeymoon ended when the multiemployer plans began a process to collect plan contributions from the non-union employer on behalf of its employees who were performing union work. The plans and bargaining agreements require contributions on behalf of all employees performing covered employment and employed by the signatory (union) company or any related company. The employers did not have a material dispute regarding the relationship between the two companies. Their defense was based on the fact that the double-breasted operations had continued for 30 years with the union’s full knowledge and with no objection or attempt to collect plan contributions for the non-union workers. In rejecting this defense, the court concluded that the 30 years of non-collection did not preclude the plan under its clear language and the clear language of the collective bargaining agreement from collecting contributions from the non-union company. (Local Union 825 v. McRand Contracting Co., Inc., DNJ 2011)

The court in the second case rejected a motion for summary judgment and thus set the case for trial. At issue will be whether the purchaser “substantially continued” the seller’s business to the extent that the purchaser could be treated as stepping into the shoes of the seller with respect to the bargained-for-but-unpaid multiemployer plan contributions.

A purchaser of assets can be held liable for plan contributions it never bargained for if there are substantial similarities between the businesses conducted by the seller and the purchaser. A careful examination of the facts of a particular transaction, as well as the case law, is important for any purchaser of business assets involving union-negotiated pension or health and welfare funds. (Reed v. Envirotech Remediation Services, Inc., D. Minn. 2011)