Benefit Funds Can Seek Contributions from Independent Contractor that Signed “Me-Too” Agreement 17 Years Earlier
A contractor signatory to an old “me-too” agreement with an “evergreen” clause could be responsible for benefit and other fund contributions required by a later multiemployer collective bargaining agreement (a “CBA”) even though the contractor was not a member of the multiemployer group and did not grant continuous bargaining rights to the group, the U.S. Court of Appeals for the Third Circuit (DE, NJ, PA) has held.
The contractor in the case, Management Resource Systems (“MRS”), signed a letter of assent in 1997 binding it to the 1997-2001 CBA between the Interior Finish Contractors Association (“IFCA”), and Metropolitan Regional Council of Carpenters. It did not sign a subsequent letter of assent or other agreement with the union, and it stopped making fund contributions after the CBA expired. The funds sued MRS in 2014, claiming that MRS improperly failed to make contributions required under the 2012-2015 CBA between the IFCA and Carpenters. The funds argued that MRS was bound to the successor CBA because the 1997 me-too agreement contained an evergreen clause stating that the agreement would remain in effect “for the duration of the collective bargaining agreement between the [union] and [IFCA] that is effective on the date of this Agreement and for the duration of any addition, modification or renewal thereof until one party shall provide to the other written notice…to terminate,” and MRS (undisputedly) never provided such notice.
The district court dismissed the funds’ complaint. The court relied on the National Labor Relations Board’s 1994 Luterbach ruling. In Luterbach, the Board held that a nonsignatory 8(f) employer will be bound by multiemployer bargaining only if the employer (1) was "part of the multiemployer unit prior to the dispute" and (2) "has, by a distinct affirmative action, recommitted to the union that it will be bound. Because neither element was satisfied here, the court held that MRS could not be bound by the 2012-2015 CBA.
The circuit court reversed the district court’s decision and revived the complaint. The court found that the Luterbach test does not apply here because Luterbach did not involve an evergreen clause and because the test only applies to resolve ambiguity about the employer's commitment to be bound. The circuit court noted that the Board in Luterbach recognized that “there can be cases where an employer has expressly given continuing consent to bargain a successor contract on a multiemployer basis.” Here, the evergreen clause in the “me-too” agreement constitutes such consent. “Luterbach is limited to cases that do not involve evergreen clauses or other continuing grants of bargaining authority,” the circuit court held.
Instead of applying Luterbach, the circuit court relied on the Board’s 1995 Baker Electric decision. Baker Electric held that an employer was bound to a successor CBA pursuant to a me-too agreement with an evergreen clause. The court rejected MRS’s argument that Baker Electric is distinguishable because it involved a broader delegation of bargaining authority than in the present case. The court found no significant difference between the contract clauses granting authority in the two cases. The court further noted that its decision to apply Baker Electric, and to enforce an evergreen clause in the absence of termination notice, is consistent with decisions of the Fifth (LA, MS, TX), Sixth (KY, MI, OH, TN), Eighth (AR, IA, MN, MO, NE, ND, SD), and Ninth (AK, AZ, CA, ID, MT, NV, OR, WA, HI) Circuits.
The court also rejected a policy argument by MRS about the importance of protecting employers’ rights to bargain on their own behalf. “Nothing here suggests that MRS was somehow coerced or duped into entering into the me-too agreement clearly binding it to future CBAs,” stated the court. “The agreement was voluntarily executed, and MRS does not argue to the contrary. MRS failed to terminate or properly repudiate the agreement according to its express terms. We are therefore confident that enforcement of the me-too agreement in no way vitiates MRS’ rights.”
This case serves as an important reminder that contractors should be cognizant of the terms they’ve agreed to their labor agreements, including less formal letter agreements. A contractor that leaves an area where it has been signatory to a labor agreement other than a project labor agreement may find itself still bound by the agreement’s contribution requirements, wage provisions, subcontracting restrictions, and other terms if it returns to the area in the future without first terminating the agreement in accordance with the contract terms. Contractors seeking to end their labor obligations should pay careful attention to the provisions of evergreen and termination clauses. They should also consider the potential for withdrawal liability. Furthermore, those with 9(a) agreements may have a continuing duty to recognize the union even after contract termination. (For information on the distinction between 8(f) and 9(a) agreements, visit AGC’s online Labor & HR Topical Resources library. Select the main category “Collective Bargaining” and the subcategory “Collective Bargaining Agreements: 8(f) vs. 9(a).” AGC-member login is required to access most resources.) Consultation with a construction labor lawyer is well-advised. (Click here for a directory of AGC Labor and Employment Law Council members.)
Carpenters Health & Welfare Fund of Phil. & Vicinity v. Management Resource Systems, Inc., Case No. 15-2508 (3rd Cir., 9/13/16).
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