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Unions CAN Indemnify Employers If It’s In the Contract

Posted in Court Cases, Retirement Plans, Welfare Plans

Back in 2009, we looked at a Third Circuit case called Pittsburgh Mack Sales v. IUOE, Local No. 66 that found that it was not against public policy to require a union to reimburse an employer for withdrawal liability.  Well, the Sixth Circuit agrees.  In Shelter Distribution v. General Drivers, Warehousemen & Helpers Local Union No. 86, the Sixth Circuit Court of Appeals considered a situation where an employer was assessed withdrawal liability because of a termination of a collective bargaining agreement.

The collective bargaining agreement that expired contained the following provision: "The Union and the members of the Bargaining Unit have agreed that only the liability of the Company to the Pension Benefit Plan are, have been and shall be limited to the actual contributions it makes during the course of the past, present and future Contracts and the Company shall not be liable for any other obligation or contingent obligation of any kind or nature whatsoever.  The Union shall indemnify the Company for any contingent liability which may be imposed under MEPPAA."  Sure enough, it happened and the company went looking for indemnification from the union.

The union argued that it was against public policy because it shifts the liability Congress imposed on employers and would defeat the statute.  But the Court disagreed, noting that since ERISA allows fiduciaries to insure against risk, there must be a way to shift potential liability, including indemnification contracts.  So it was not a frustration of the statute and not against public policy.

So when undertaking future bargaining with your unions, consider adding this indemnification language that has now been twice confirmed.  Of course, it will be part of collective bargaining and it may cost you something, but it might be worth it in the long run.  If you need assistance in dealing with multiemployer plans, or in collective bargaining, please contact your attorney at Fox Rothschild.