The Hazards of Collective Bargaining Agreements

By Los Angeles Litigation Lawyer Robert Klein

Employers who sign Collective Bargaining Agreements with labor unions may find it difficult to cancel those agreements according to the terms of the agreement and may also find it difficult to defend themselves if the labor union sues to collect money owed for unpaid fringe benefit contributions.

In one particular case in point, the trustees of a labor union sued to collect unpaid fringe benefit contributions from an employer under a collective bargaining agreement. The issue in the case was whether the 1998-2003 Master Labor Agreement between the parties was either terminated effective June 1, 2005 or modified and replaced by the Labor Union with the 2003-2008 Master Labor Agreement where the Employer could not terminate the agreement before June 1, 2008.

The 1998-2003 Master Agreement contained the following language:

“This Agreement shall be effective as of July 1, 1998 and shall remain in full force and effect to and including June 30, 2003, and continue in full force and effect from year to year thereafter unless either party to the agreement shall give written notice to the other of a desire to change, modify, or terminate the Agreement not more than ninety (90) days nor less than sixty (60) days prior to June 30, 2003, or June 30 of any succeeding year.

Clauses such as this require strict adherence to the termination provisions. What happens most often is that an Employer who wants to terminate a Collective Bargaining Agreement neglects to provide the notice of termination in the short window required by the agreement. The result is that the Collective Bargaining Agreement is automatically extend for an additional period of time, often years as in this case.

If the Labor Union decides to sue for unpaid fringe benefits there are few defenses available for the Employer. The Labor Union, through its trustee of fiduciary can obtain an award of the unpaid contributions, interest on the unpaid contributions, an amount equal to the greater of (I) interest on the unpaid contributions, or (ii) liquidated damages provided for under the plan in an amount not in excess of 20 percent of the amount determined by the court on the amount of unpaid contributions, reasonable attorney’s fees and costs of the action, to be paid by the Employer, and such other legal or equitable relief as the court deems appropriate. Without many defenses to a lawsuit seeking to collect unpaid fringe benefits, an action by a Labor Union under a collective bargaining agreement can be devastate for the Employer.

However, in Roofers Local Union No. 81 v. Wedge Roofing, Inc. (9th Cir. 1992) 811 F. Supp. 1398 the court held that liquidated damages provided in 29 U.S.C.§1132(g)(2)(c) are mandatory when: a) there is a judgment in favor of the benefit plan; b) contributions remain unpaid at the time the suit is filed; and

c) liquidated damages are provided in the benefit plan. [also see Idaho Plumbers and Pipefitters Health and Welfare Fund v. United Mechanical Contractors (9th Cir. 1989) 875 F.2nd 212, 215].

In determining whether the liquidated damages would apply it is important to analyze the benefit plan to determine if the plan provides for liquidated damages. If the plan is silent, the Employer could avoid an award of liquidation damages.

Before you decide to enter into a collective bargaining agreement you should consult an attorney. You may not know what you are getting into and should be advised on your options.