Cheating Employers Beware! Doublebreasting May Lead to Criminal Charges Under ERISA

A recent Massachusetts case stunningly shows the current attorneys at the US Department of Labor are willing to bring criminal (!) charges against employers who fail to contribute to employee benefit funds. This stunning development deserves our close attention.  In United States v. Thompson the government charged a husband and wife who operated two asbestos abatement companies with mail fraud, theft from an employment benefit plan, and making false ERISA statements to a multiemployer plan.  The indictment alleges that the couple had failed to make contributions required under collective bargaining agreements by concealing the hours worked by their employees. The couple is accused of operating an unlawful “double-breasted shop” arrangement.  A double-breasted business is a business scheme that includes jointly owned union and non-union companies. The non-union company bids for contracts that do not require a union, and the union company bids on jobs that require union contracts.  These types of arrangements are common and not necessarily unlawful, unless the companies are jointly owned and operated, with insufficient separation between the two. The indictment in this case accuses the Thompsons of operating a single company but using the illusion of having two companies to evade their responsibility to make contributions to ERISA benefit funds. The government argues that the Thompsons paid employees performing work covered by a collective bargaining agreement from the payroll account of their non-union company. The indictment alleges this scheme was intended to trick the ERISA funds into believing that contributions were not due for the Thompson’s employees performing what was actually Union work.

Double-breasted arrangements are usually not the basis for criminal liability.  Instead, these schemes are usually just the subject of collection suits to recover unpaid contributions.  But the possibility of criminal charges for unlawfully managed arrangements creates new pressure on employers contributing to ERISA benefits funds to remain above board.  The message to employers is clear: you must ensure that your representations and contributions to ERISA funds are in strict accordance with the law or else you may risk criminal liability.

For more information please contact your Trust Fund counsel.      

By Ryan Kadevari | October 11, 2016

Legal Developments