Opinion ID: 698718
Heading Depth: 2
Heading Rank: 1

Heading: Effect of the NLRB's Invalidation of the CBAs

Text: 8 Lowe's argues that it has no obligation to the Plans by virtue of invalid collective bargaining agreements. The trustees argue that under ERISA Lowe's obligations remain even if the CBAs are invalid for not meeting the uncoerced majority requirement of the labor laws. The district court has awarded to the Plans those contributions due from Lowe's up to the date of the ALJ's ruling on February 24, 1993. We do not have before us any question of contributions due thereafter. 9 The key statute here is ERISA section 515, 29 U.S.C. Sec. 1145, which was added to ERISA in 1980 and states: 10 Every employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or under the terms of a collectively bargained agreement shall, to the extent not inconsistent with law, make such contributions in accordance with the terms and conditions of such plan or such agreement. 11 Several circuits including our own have analyzed this provision and its legislative history. They have concluded that in circumstances such as those presented here, section 515 mandates that employers are responsible for ERISA plan contributions regardless of defenses challenging the validity of the underlying CBA. 12 In Southwest Administrators, Inc. v. Rozay's Transfer, 791 F.2d 769 (9th Cir.1986), cert. denied, 479 U.S. 1065, 107 S.Ct. 951, 93 L.Ed.2d 999 (1987), we explained: 13 For reasons of public policy, traditional contract law does not apply with full force in actions brought under [ERISA] to collect delinquent trust fund contributions. In recognition of the fact that millions of workers depend upon employee benefit trust funds for their retirement security, Congress and the courts have acted to simplify trust fund collection actions by restricting the availability of contract defenses, which make collection actions unnecessarily cumbersome and costly. 14 Id. at 773 (citation omitted). We held that the defense of fraudulent inducement was not available in ERISA trust fund collection actions against employers. We drew a distinction between defenses which make an agreement voidable and those that render it void ab initio, and held that only the latter defenses, such as fraud in the execution, are available in such actions. Id. at 773-775. 15 In Benson v. Brower's Moving & Storage, Inc., 907 F.2d 310 (2d Cir.1990), cert. denied, 498 U.S. 982, 111 S.Ct. 511, 112 L.Ed.2d 524 (1990), the Second Circuit affirmed a summary judgment in favor of the trustees of multiemployer pension plans suing an employer for unpaid contributions. The employer argued that it had no liability to the plans because no valid CBA existed. Specifically, the employer raised the defenses of lack of majority representation and abandonment of the CBA. The court rejected these defenses, concluding that the purpose of section 515 was to insulate benefit plans from exactly these defenses. Id. at 313. The court reasoned that this section of ERISA severely limits defenses the employer might raise to the underlying CBA when benefit plans sue to recover employer contributions. It relied on congressional intent that benefit plans must be able to rely on the contribution promises of employers because plans must pay out to beneficiaries whether or not employers live up to their obligations. For this reason, Congress placed employee benefit plans in a position superior to the original promisee, analogous to a holder in due course. Id. at 314 (citation omitted). The court noted that the only valid defenses by an employer it could find were in cases where (1) the pension contributions themselves are illegal, or (2) the CBA is void rather than voidable. The example given of the latter exception is fraud in the execution, as where the employer was not even aware it was signing a CBA. Id. The court further found unmistakably clear legislative intent that one purpose of section 515 was to abolish the employer defense of lack of majority status. Id. at 316. It cited legislative history that section 515 was specifically aimed at overruling two pre-hire agreement cases. Id. In these cases, 1 an employer had signed a pre-hire agreement promising to abide by the terms of a CBA as soon as he hired his employees. The employers in these cases later escaped liability to benefit plans by arguing that the pre-hire agreements were invalid because the unions had failed to attain majority status. 16 The Eighth Circuit reached the same result in Berry v. Garza, 919 F.2d 87 (8th Cir.1990). It held that because the employer knowingly entered into a facially valid collective bargaining agreement with the Union, he is now estopped from raising the defense of lack of majority status to avoid his obligation to the [ERISA] Fund. Id. at 90. 17 The Third Circuit followed a similar approach in Agathos v. Starlite Motel, 977 F.2d 1500 (3d Cir.1992). Plan trustees sued an employer for unpaid contributions. The employer argued that the collective bargaining agreement was invalid because it was induced by a threat to picket and because the Union did not represent a majority of [employer's] employees at the time the agreement was executed. Id. at 1504. The court held that section 515 barred this defense, and that the defense of lack of majority support for the union would not have been available to [employer] even prior to the enactment of section 515. Id. at 1506. 18 Further support for the Plans' position is found in Central States, Southeast and Southwest Areas Pension Fund v. Gerber Truck Serv., Inc., 870 F.2d 1148 (7th Cir.1989) (en banc). That case did not involve the defense of lack of majority status, but in discussing the legislative history of section 515, it noted the congressional intent to overrule the pre-hire agreement cases discussed above. It found that nothing in ERISA makes the obligation to contribute depend on the existence of a valid collective bargaining agreement; the repudiation of cases such as McDowell and Overhead Door shows the opposite. Id. at 1153. Hence, the court concluded that if the employer simply points to a defect in the formation of the CBA such as ... lack of majority support for the union ... it must still keep its promise to the pension plans. Id. 19 We find compelling the reasoning of these cases, and therefore conclude that an employer's assertion that the CBA is invalid due to lack of majority status is not a defense in an action brought by an ERISA plan or its trustees to collect employer contributions. Indeed, we conclude that Congress intended to abolish this very defense with the passage of section 515. 20 Lowe's points to language in a footnote of the NLRB decision affirming the ALJ, which states that [f]or purposes of the Act, we view the collective-bargaining agreements as never having had legal effect. Lowe's argues that this language proves that the CBAs were void ab initio. We are unpersuaded by this argument. First, the NLRB's reference to the Act is a reference to the NLRA. Lowe's liability here, however, flows from section 515 of ERISA, where the legislative purpose was to preclude CBA defenses from being used as a defense to the ERISA obligation of employers to fund multiemployer benefit plans. Second, while cases such as Benson and Agathos recognize that section 515 does not mandate employer contributions where the CBA is void ab initio, 2 they nevertheless hold that the very defense raised here, lack of majority status, is not a valid defense to the employer's obligation to an ERISA plan. Third, the NLRB decision makes clear, in the notice to employees it required Lowe's to post after the decision, that [n]othing, however, shall require us to vary or abandon any wage, hour, seniority, or other substantive feature of our relations with you which has been established in the performance of these agreements with the Union, nor will you be prejudiced in the assertion of any rights you may have under the agreements. 21 Three recent Ninth Circuit opinions bear on our analysis. In Sheet Metal Workers' Int'l Ass'n v. West Coast Sheet Metal Co., 954 F.2d 1506 (9th Cir.1992), we held that an employer's obligations to make contributions to employee benefit plans as provided in a CBA ceased when the employees of the union voted to decertify the union. In effect we granted relief prospectively from the date of the event which terminated the CBA. In contrast, the employer here, through unilateral conduct, simply ceased making contributions to the Plans upon the filing of the NLRB action. The Plan trustees only sought, and the district court only allowed in its judgments, contributions up to the date of the ALJ's ruling that the CBAs were unenforceable. 22 In Carpenters Health & Welfare Trust Fund v. Bla-Delco Constr., Inc., 8 F.3d 1365 (9th Cir.1993), ERISA benefit plans also sought unpaid contributions from an employer. The employer had entered into agreements with a union agreeing to be bound by a master collective bargaining agreement, and providing that either party could withdraw from the agreement upon giving notice. The employer and the union disputed whether proper notice had been given. We held that the CBA was not void but merely voidable upon the giving of proper notice, and that this defense did not apply in the action by the ERISA plans to recover benefits from the employer. We concluded that the employer could have pursued its dispute with the Union under the grievance and arbitration procedures of the CBA.... [T]he Trust Funds were not required to follow those procedures. It would contravene the policy to simplify and expedite trust fund collection actions to require the Trust Funds' in this case to litigate the termination dispute between [the employer] and the Union. Id. at 1369. 23 Most recently, in Laborers Health and Welfare Trust Fund v. Westlake Dev. Co., 53 F.3d 979 (9th Cir.1995), ERISA benefit plans again sought recovery of contributions from an employer. The employer had signed a pre-hire collective bargaining agreement under section 8(f) of the NLRA, 29 U.S.C. Sec. 158(f). Section 8(f) covers certain pre-hire agreements in the building and construction industry. The employer's defense was that the agreement was unenforceable based on the  'one-employee unit rule,' which provides that employers need not participate in collective bargaining if they have only a single employee who falls within the collective bargaining unit. Id. 53 F.3d at 981. The employer had purported to unilaterally terminate the agreement based on this rule. We recognized that, as a matter of labor law, pre-hire collective bargaining agreements ordinarily cannot be terminated by the employer's unilateral repudiation of the agreement, but that the  'unique circumstances of a single-employee bargaining unit in the construction industry'  made it appropriate to treat repudiation under the one-employee unit rule as  'equivalent to a repudiation resulting from decertification of the bargaining representative.'  Id. at 982 (quoting Operating Eng'rs Pension Trust v. Beck Eng'g & Surveying Co., 746 F.2d 557, 565 (9th Cir.1984) and district court). We held that the exception to the general rule allowing unilateral repudiation of a CBA based on the one-employee unit situation meant that the repudiation was lawful and rendered the CBA void rather that voidable. We distinguished Bla-Delco on this basis. Id. at 984. 24 We believe that these cases can be reconciled with each other and with our decision today. Although Rozay's Transfer recognized that section 515 limited the availability of contract defenses in collection actions brought on behalf of ERISA benefit plans, it also recognized that [f]or an employer to be obligated to make employee benefit contributions to a trust fund, there must exist a binding collective bargaining agreement. 791 F.2d at 773. The issue we face is when a binding collective bargaining agreement ceases to exist. Sheet Metal Workers' holds that the voluntary decertification of a union by its employees ends the collective bargaining agreement, and employer obligations to the ERISA plans cease upon that event. 954 F.2d at 1509. Westlake holds that, in the unique circumstance of a section 8(f) pre-hire collective bargaining agreement, an employer's unilateral repudiation of such agreement under the one-employee unit rule renders the agreement void, and the obligation to the ERISA benefit plan also ceases upon repudiation. 53 F.3d at 984. As a general proposition, however, unilateral action of an employer will not render a CBA void and unenforceable, nor will the mere assertion by the employer that the union lacks majority status. Sheet Metal Workers', for example, distinguished an employer's after-the-fact attempt to extricate itself through unilateral action from trust fund obligations that it knowingly accepted, and noted that [a]t the time the 1986 [CBA] was imposed, [the employer] had no way of being certain that the union would lose its majority status. 954 F.2d at 1510. Where there are grievance and arbitration procedures under the CBA, as in Bla-Delco, the obligation to make contributions to the ERISA plans continues until those procedures are followed and the CBA is ruled to be terminated by the appropriate authority. See Bla-Delco, 8 F.3d at 1369. Similarly, in our case, where an NLRB action had been initiated to determine whether the CBA was invalid for lack of majority status, the employer's obligations to the Plans continued until the NLRB ruled that the CBA had no force and effect.