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The U.S. District Court for the Western District of Washington has held that underfunded union pension plans cannot fund their rehabilitation Plan by withholding funds from traveling workers. This ruling will help many union traveling workers across the nation, stated Rich Birmingham of Davis Wright Tremaine LLP, in Seattle, attorney for the traveling union members.
The lead plaintiff in this class action, Richard Lehman, is a member of the Puget Sound Electrical Workers Pension Trust—which is not on the U.S. Department of Labor’s list of endangered or critically funded plans. Like many traveling union members, Mr. Lehman frequently performs work for employers outside the jurisdiction of his “Home Fund.” In the latter half of 2008 alone, he worked over 1000 hours within the jurisdiction of the IBEW Pacific Coast Pension Fund, a fund that was considered to be in Critical status by the government.
The IBEW Pacific Coast Pension Fund contained a common “reciprocity” provision, under which all pension contributions that Mr. Lehman received in the outside jurisdiction were to be transferred back to his Home Fund. However, the IBEW Pacific Coast Pension Fund did not transfer all the pension contributions to Mr. Lehman’s Home Fund. Instead, relying on its own interpretation of federal law, the IBEW fund withheld one dollar per hour contributed to help subsidize the IBEW Pacific Coast Pension Fund. The dollar amount withheld has also increased over time and some funds now withhold $2 to $4 per hour worked. Mr. Lehman received no pension accrual for the amounts withheld, as such amounts were utilized solely to help the underfunding of the IBEW Pacific Coast Pension Fund.
Granting summary judgment to Mr. Lehman, Judge Ricardo Martinez of the U.S. District Court, Western District of Washington, ruled that the IBEW fund had no right to withhold the contributions. If Mr. Lehman’s Home Fund were also in critical status, his transferred funds would be penalized twice – once by the transferring fund and again by the receiving fund, clearly an inequitable result. Only the fund under which the worker is actually accruing a pension benefit may subject such contributions to its rehabilitation Plan. The effect of the ruling is that Mr. Lehman, and other travelers, will receive the full pension that they deserve from their Home Fund.
The case has a wide impact to traveling workers who perform work in the jurisdiction of multiemployer plans that are in rehabilitation. So far this year, more than 100 multiemployer union pension plans have filed “Critical” or “Endangered” status notices with the DOL. If such funds have withheld reciprocity contributions from traveling union members, such union members may be entitled to have such contributions, and the earnings thereon, transferred to their Home Fund. As a consequence, the traveling worker will receive an increased pension benefit from his Home Fund.
About Davis Wright Tremaine
Davis Wright Tremaine LLP is a national law firm with approximately 500 lawyers representing clients based throughout the United States and around the world. For more information, visit www.dwt.com.