Employer Unlawfully Reduced Pension Contributions

By Margaret M. Clark, J.D., SHRM-SCP September 22, 2020
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​The 9th U.S. Circuit Court of Appeals ruled that an employer committed an unfair labor practice when it decreased its contribution rate to the pension fund without first notifying or bargaining with the union.

Section 8(a)(5) of the National Labor Relations Act makes it unlawful "for an employer … to refuse to bargain collectively with the representatives of his employees." When a collective bargaining agreement (CBA) expires, its terms remain in effect, defining the status quo as to wages and working conditions. An employer must maintain the status quo until the parties agree on a new contract or reach a good-faith impasse. Because contributions to an employee pension trust fund are a mandatory bargaining subject, an employer may not make unilateral changes in them.

Section 302(c)(5)(B) of the Labor Management Relations Act prohibits payments by employers to unions. However, there is an exception to that prohibition for pension contributions as specified in "a written agreement with the employer."

The dispute in this case arose in March 2016, when the employer stopped paying pension contributions at the rate specified in a certain Schedule A and reduced its monthly contribution rate to $1.95 per hour. The CBA between the parties had expired two years previously.

In response to the employer's action, the union filed an unfair labor practice. The employer argued that Section 302 prohibited the employer from contributing at the Schedule A rate.

Without considering the legality of the pension contribution rates under Section 302, an administrative law judge (ALJ) concluded that the employer's unilateral reduction—made without giving the union notice or an opportunity to bargain—was an unfair labor practice.

The National Labor Relations Board adopted the ALJ's conclusion that the employer's unilateral rate reduction was an unfair labor practice, but also considered and rejected the employer's defense that payment of pension contributions according to Schedule A was unlawful. The board found that Schedule A had been incorporated into the CBA and that, at the time of its expiration, the CBA obligated the employer to make pension contributions at a rate of $9.78 per hour. As such, it met Section 302's "written agreement" requirement.

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On appeal, the employer argued that the board's finding that the CBA incorporated Schedule A was not based upon substantial evidence. Rather, the employer said, a different document, which provided a rate of $1.95 per hour, was the last-agreed pension contribution schedule. Moreover, even if Schedule A was part of the CBA, it did not satisfy Section 302, the employer said.

Substantial evidence in the record supported the board's finding that Schedule A was incorporated into the CBA, the appeals court held. The ALJ had neither ruled on the legality of the employer's payment of the higher rates, nor made any findings concerning Schedule A's incorporation into the CBA.

The court also affirmed the board's conclusion that the CBA met Section 302's requirements. The parties agreed that the expired CBA obligated the employer to contribute to the pension fund, and the board properly found that the CBA incorporated the Schedule A rates. Accordingly, the court agreed that the CBA met the requirements of Section 302.

Finally, the court of appeals upheld the board's finding that the employer committed an unfair labor practice. Because it was undisputed that the employer had reduced its pension contribution rate to $1.95 without notifying or bargaining with the union, the employer had acted unlawfully.

Delta Sandblasting Co. Inc. v. National Labor Relations Board, 9th Cir., No. 18-73097 (Aug. 11, 2020).

Professional Pointer: Protracted litigation—in this case, occupying more than four years since the dispute arose—is rarely worth the tangible and intangible costs to either party. All parties' interests usually can be better served through negotiation—with or without the assistance of a neutral party—at earlier stages of the process.

Margaret M. Clark, J.D., SHRM-SCP, is a freelance writer in Arlington, Va.

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