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CCH® PENSION — 04/06/12

Employer barred from modifying CBA to evade duty to contribute to pension fund

Unambiguous language in a collective bargaining agreement (CBA) and its related documents barred an employer from executing a new CBA with a union that would have eliminated the employer's duty to contribute to a multiemployer pension fund for the remaining term of the original CBA, the U.S. Court of Appeals in Chicago (CA-7) has ruled.

An employer entered into a CBA with a union, obligating the employer to make pension contributions to a multiemployer plan for the duration of the CBA. At that time the employer also entered into a Trust Agreement and Participation Agreement.

Four years later, and six weeks before the termination of the CBA, the employer and the union agreed to a new CBA that no longer obligated the employer to make contributions to the fund. The pension fund filed suit under ERISA §515, claiming the employer breached its agreement to make pension contributions to the fund. The district court granted the fund's motion for summary judgment.

CBA interpretation

On appeal, the employer argued that both the Participation Agreement and the original CBA were ambiguous. Although the Participation Agreement stated that any agreement "that purports to prospectively reduce the contribution rate" payable to the fund by the employer would be invalid, the employer argued the word "prospectively" is ambiguous because it could reasonably be interpreted to allow for immediate action. In other words, the new CBA did not eliminate the duty to contribute prospectively; it did so immediately. This, the court ruled, was not a reasonable interpretation of the participation agreement, and indeed it defied "common sense and logic."

The employer also argued that an opt-out provision in the original CBA permitted either party to unilaterally cancel the agreement at any time during the four-year period of the agreement, so long as 60 days' notice was provided. The court rejected this reading. The opt-out provision unambiguously applied to a provision allowing for automatic renewal of the agreement, and not to the CBA itself.

Discovery request

The district court did not abuse its discretion when it denied the employer's request for further discovery regarding its assertion that the fund did not enforce similar contractual rights with respect to other employers. Even if the fund had waived contractual rights in the past, the fund is still entitled to enforce its rights with respect to this employer.

Source: Central States, Southeast and Southwest Areas Pension Fund v. Waste Management of Michigan, Inc. (CA-7)

For more information, visit http://www.wolterskluwerlb.com/rbcs.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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