Protecting Employers Since 1985

Be Careful About Those Old Construction Industry Union Contracts

We see the same fact pattern time after time. A construction company signed a union contract (or perhaps several union contracts) years ago to finish a job under threat of union pickets. The company assumed that the dormant contracts were a dead issue years later because they had not been used for many years. Perhaps the union even told them it was for that job only. Then came the lightning bolt! The union benefits trust fund wants to audit. They say that the contracts continued to roll over year after year. The auditor finds numerous instances of non-union subcontractors and company non-union employees doing work that was covered by the old contract. The audit report is issued, and the trust fund demands close to a million dollars in unpaid benefit fund contributions. Added on to this are liquidated damages and interest. Then the situation gets even worse. A collection action under ERISA is filed in federal court. The company quickly learns that ERISA provides that if the company is wrong, they must pay the trust fund’s legal fees. Be careful of this! These old contracts can be repudiated, but the notice given to the union must be carefully drafted. Repudiation will cut off the ability of the trust funds to audit. If you have any of these old contracts you thought were not renewed, give us a call. I can be reached here at our St. Charles office at 630 377-1554 or via email at riwessels@wesselssherman.com.

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