ERISA-Fourth Circuit Holds That The Employer Must Make Contributions For New Employees To A Multiemployer Plan In Critical Status

In Bakery & Confectionary Union & Industry International Pension Fund v. Just Born II, Incorporated, No. 17-1369 (4th Cir. 2018), Just Born II, Inc. (“Just Born”), a candy manufacturer, appeals the district court’s judgment requiring it to pay delinquent contributions into the Bakery and Confectionary Union and Industry International Pension Fund (the “Pension Fund”), as well as interest, statutory damages, and attorneys’ fees.  It contends, first, that the district court misapplied the federal statute governing multiemployer pension funds in critical status and, second, that the court erred in holding that it had failed to plead adequately its affirmative defenses.  Upon reviewing the case, the Fourth Circuit Court of Appeals (the “Court”) affirmed the district court’s rulings.

As to the ruling which requires Just Born to pay the delinquent contributions and more, the case developed as follows:

Just Born and the Bakery, Confectionary and Tobacco Workers International Union, Local Union 6 (the “Union”) were parties to a collective bargaining agreement (the “CBA”) governing employment at Just Born’s Philadelphia, Pennsylvania, confectionary plant from March 1, 2012, to February 28, 2015.  The CBA required Just Born to contribute to the Pension Fund, a multiemployer pension plan.  According to the CBA, these contributions were to be paid from the first day the employee begins working in a job classification covered by the CBA.  While the CBA was still in effect, the Pension Fund’s actuaries certified it to be in critical status, a designation which, under ERISA, requires the plan sponsor to adopt and implement a rehabilitation plan designed to restore the plan’s financial stability and bring it out of critical status.

Like the CBA, the rehabilitation plan so adopted by the plan sponsor required Just Born to contribute for every hour or portion of an hour, beginning on the first day of employment, that a person works in a job classification that is covered by the CBA.  Also, the rehabilitation plan required JustBorn to increase its contributions to the Pension Fund by 5% each year.  Just Born contributed to the Pension Fund in accordance with the rehabilitation plan without incident until negotiations for a new CBA with the Union fell through.  As part of these negotiations, Just Born demanded that the new CBA not require it to contribute to the Pension Fund for newly hired employees, but proposed to instead to contribute to a separate 401(k) plan for the new employees.  Also, it would continue to make contributions under the rehabilitation plan for existing employees.

The Union would not accept this proposal.  The Pension Fund later filed a complaint in the district court seeking to compel Just Born to contribute to it under the rehabilitation plan for all employees, including any new hires, in accordance with 29 U.S.C. § 1085(e)(3)(C)(ii) (governing subsequent contributions schedules for plans in critical status) (the “Provision”), coupled with the terms of the expired CBA and the rehabilitation plan.  The district court held in favor of the Pension Fund, concluding that Just Born was liable for contributions to the Pension Fund for its newly hired employees.  JustBorn appealed.

In analyzing the case, the Court noted that Just Born argues that the district court erred in concluding that the Provision required it to contribute to the Pension Fund for employees hired after the expiration of the CBA.  In essence, Just Born contends that the Provision does not apply to it because the company is not a “bargaining party” with respect to newly hired employees in the absence of an operative CBA.  The Pension Fund responds that Just Born falls squarely within the Provision because it was a bargaining party to the expired CBA.  The Court held that the district court properly interpreted the statute and, accordingly, did not err in concluding that Just Born remained a “bargaining party” required to contribute to the Pension Fund under the rehabilitation plan schedule in effect, even after the CBA expired.