An Employer that withdraws from a Pension Plan must “Pay Now, Dispute Later”

A federal appeals court ruled that an employer that withdraws from a pension plan must pay its withdrawal liability first and dispute its withdrawal liability later.  Generally, if an employer participates in a multiemployer pension plan and then stops contributing to the pension fund, that employer will have to pay to the fund a portion of any unfunded liability. If an employer disputes its withdrawal liability, the dispute must be submitted to arbitration. The Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”) sets forth the rules for withdrawal liability.

In Findlay Truck Line, Inc. v. Central States, Southeast & Southwest Areas Pension Fund, the Sixth Circuit had to address whether it was proper to let an employer stop making its withdrawal liability payments pending the outcome of the dispute through arbitration. The Sixth Circuit found that the employer must “Pay Now, Dispute Later.”

In Findlay, the employer and Union were involved in a labor dispute, the employer stopped making contributions to the pension fund and the Union notified the employer that it disclaimed interest in the Union-represented employees of the employer. An employer has to pay its withdrawal liability regardless of whether the employer or the Union terminates the collective bargaining relationship.

The employer filed an unfair labor practice charge with the National Labor Relations Board (“NLRB”), but the charge was dismissed.  The employer did not appeal.  The pension fund determined that the employer withdrew from the pension fund because the employer’s obligation to make pension contributions under the collective bargaining agreement had ceased because of the Union’s disclaimer of interest in the employer’s employees.  Pursuant to MPPAA, the pension fund sent the employer a notice of its $10.1 million withdrawal liability and demanded payment.

The employer filed a lawsuit in federal court disputing withdrawal liability.  The employer claimed that making the withdrawal liability payments would cause irreparable harm and requested an injunction to stop the pension fund from collecting withdrawal liability payments.  The lower court granted the injunction, but the Sixth Circuit reversed the lower court’s ruling.

The Sixth Circuit reasoned that MPPAA requires an employer to: (1) pays its withdrawal liability pursuant to the payment schedule set by the fund; and (2) make its withdrawal liability payments until an arbitrator issues a final decision.  The Sixth Circuit also ruled that the lower court did not have the authority to issue an injunction to prohibit the pension fund from collecting withdrawal liability payments.  The Sixth Circuit agreed that the parties should proceed to arbitration.

For more information about withdrawal liability and MPPAA, please contact your Trust Fund counsel.

By Linda Baldwin Jones | September 17, 2013

Legal Developments