Seyfarth Synopsis: Seventh Circuit finds employer still obligated to contribute to benefit funds for the life of the CBA even though the employees decertified the union.

Employers often assume that when their employees decertify a union, that any obligations an employer had under the operative collective bargaining agreement would disappear. No union, no contract. Right?

Wrong! In Midwest Operating Engineers Welfare Fund v. Cleveland Quarry, Case Nos. 15-2628, -3221, -3861, 16-1870 (7th Cir. Dec. 20, 2016), employees in three separate IUOE bargaining units of the Company voted to decertify in 2013. At the time, the Union and the Company were party to five year collective bargaining agreements expiring in 2015. The Company assumed the decertification of the Union, which allowed it to set its own terms and conditions of employment, ended any contractual obligation to contribute to the multiemployer welfare and pension funds (“Funds”).

The Funds sued, and after they were successful in district court the Company appealed. The Seventh Circuit recognized that the collective bargaining agreements were unenforceable as to the Union, but found nevertheless that the Funds had the right under ERISA to bring a suit for delinquent contributions under 29 U.S.C. § 1145. The Court based its decision on the idea that when the Funds promised to provide a level of benefits to the employees (presumably by allowing the employer to participate in the Funds under the terms of the CBAs), that created a binding contractual promise. The Court also recognized that the Funds were third-party beneficiaries to the CBAs and thus entitled to enforce them even if the Union could no longer do so. “[S]o far as benefit law is concerned the employees were still working ‘under the terms of’ the collective bargaining agreement.”

The Seventh Circuit is not alone in finding that an employer’s contractual obligations to participate in multiemployer funds can survive decertification, withdrawals of recognition, and disclaimers of interest. But there is a competing view. The Ninth Circuit has recognized that when a bargaining unit ceases to exist, be it by decertification or contract repudiation given the existence of a one person bargaining unit, any existing contract becomes void, not voidable, ending the employer’s obligation to contribute to employee benefit plans. Laborers Health & Welfare Trust Fund v. Westlake Development, 53 F.3d 979 (9th Cir. 1995) (contract repudiation); Sheet Metal Workers’ Int’l Ass’n v. West Coast Sheet Metal Co., 954 F.2d 1506 (9th Cir. 1992) (decertification case were the court held “that the renewal contract became void prospectively as of the decertification of the Union”). Notably, the Seventh Circuit did not address the Circuit split.

Employers lucky enough to have employees decertify prior to contract expiration cannot assume their obligations to the funds necessarily end. Consult counsel before making any rash moves you may live to regret.