April 17, 2007 / Issue No. 2-07
 
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Extraterritorial Clause in Mass. CBA Binds Contractor to Subcontracting and Pension Fund Provisions in Fla. CBA
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  Extraterritorial Clause in Mass. CBA Binds Contractor to Subcontracting and Pension Fund Provisions in Fla. CBA

The U.S. Court of Appeals for the District of Columbia Circuit has held that a multiemployer pension fund can pursue its claims for contributions from a general contractor that subcontracted work on a project in violation of collective bargaining agreement (CBA) to which it was not signatory.

Dick Corporation is signatory to two area-wide CBAs with local affiliates of the Bricklayers and Allied Crafts (BAC) in Massachusetts.  Both agreements contain a “traveling contractor’s clause” that provides:

When the Employer has any work specified in…this Agreement to be performed outside of the geographic area covered by this Agreement and within the geographic area covered by an Agreement with another affiliate of [the BAC], the Employer agrees to abide by the full terms and conditions of the Agreement in effect in the job site area.

The company became the general contractor on two construction projects in Florida, where it is not signatory to a local CBA.  It subcontracted craftwork ordinarily performed by its own employees from the BAC in Massachusetts to subcontractors that did not employ members of the BAC.  The Bricklayers & Trowel Trades International Pension Fund (the Fund) sued the company under the Employee Retirement Income Security Act (ERISA) for failure to make pension fund contributions consistent with the terms of a Florida CBA between the local BAC and local employers of BAC members in the area of Dick Corporation’s Florida project, based on the argument that the traveling contractor’s clause in the Massachusetts CBAs bound Dick Corporation to the Florida CBA. 

The court noted that district courts in other cases have issued conflicting interpretations of traveling contractor’s (also known as “extraterritorial”) clauses with identical language.  The court here found that the phrase “within the geographic area covered by an Agreement with another affiliate of [the BAC]” is ambiguous, because it could refer to an agreement between the employer in question and the BAC affiliate or to an agreement between any employer and the BAC affiliate.  However, after considering the intent of the parties, the court concluded that the phrase must be interpreted to refer to an agreement between the local BAC affiliate and any employer.  Consequently, the court concluded that the traveling contractor’s clause in the Massachusetts CBAs “binds Dick Corporation to a CBA in force at a ‘foreign’ jobsite even if the Company is not a signatory thereto.” 

The court further held that payment of the requested contributions would not violate Section 302 of the Labor Management Relations Act and that, as both third-party beneficiaries of the Florida CBA’s trust fund provisions and trustees of an employee benefit fund, the Fund is entitled to file suit for delinquent contributions without first complying with the CBA's arbitration provisions.  The Fund may not, however, bring suit on behalf of the CBA's to recover union dues without first arbitrating the claim. 

The court remanded the case to address the company’s motion that the Fund violated discovery sanctions and to determine a question of fact as to whether a valid CBA existed at the time of, and covering the location of, Dick Corporation’s subcontracting on the Florida projects.

Flynn v. Dick Corp., Case No. 05-7187 (D.C. Cir., 3/20/07).

Click here to read an article in Human Resource & Labor News, Issue No. 7-03, about a prior lawsuit by the same fund enforcing an extraterritorial clause. [ return to top ]