BUILDERS, CONTRACTORS AND EMPLOYEES RETIREMENT TRUST AND PENSION PLAN, WAB Case No. 90-28 (WAB Mar. 1, 1991)
CCASE:
BULDRS, CONTR. & EMPLOYEES RETIREMENT TRUST
DDATE:
19910301
TTEXT:
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[1] WAGE APPEALS BOARD
UNITED STATES DEPARTMENT OF LABOR
WASHINGTON, D. C.
BUILDERS, CONTRACTORS AND WAB Case No. 90-28
EMPLOYEES RETIREMENT TRUST
AND PENSION PLAN
BEFORE: Ruth E. Peters, Presiding Member
Stuart Rothman, Senior Member
Patrick J. O'Brien, Member
DATED: March 1, 1991
DECISION OF THE WAGE APPEALS BOARD
This case is before the Wage Appeals Board on the petition of
the Laborers' International Union of North America, AFL-CIO
("Laborers" or "Petitioner") seeking review of an April 26, 1990
letter issued by the Deputy Assistant Administrator of the Wage and
Hour Division. The letter stated that the question of the bona
fides of the Builders, Contractors and Employees Retirement Trust
and Pension Plan ("Builders Trust") had been rendered moot by the
January 1, 1989 termination of the plan. The Solicitor, on behalf
of the Acting Administrator, has requested that the petition for
review be dismissed as moot; in the alternative, the Solicitor
requests that the Board exercise its discretion to decline review.
For the reasons stated below, the Board remands this matter for
further proceedings consistent with this decision.
Opinion of Presiding Member Peters, writing for the majority
In the ruling under review, the Deputy Assistant Administrator
determined that the question of the bona fides of the Builders
Trust plan "was rendered moot by the January 1, 1989 termination of
the plan." As more fully discussed by Member O'Brien in his
concurring opinion (page 6, infra), this matter has not been
rendered moot by termination of the plan, although the matter will
become moot once the plan's assets are distributed. The ruling
under review is [1]
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[2] undeniably terse, and the basis of the ruling is not entirely clear.
If the April 26 letter of the Deputy Assistant Administrator was intended
solely as a ruling on mootness, then -- given the determination of
the Board majority that the matter currently is not moot -- the
matter must be remanded to the Wage and Hour Division for further proceedings.
On the other hand, it may be that the ruling on "mootness" is
in fact an expression of the Wage and Hour Division's enforcement
policy. Thus, as noted by the Solicitor (Statement of the Acting
Administrator, at p. 8 n.4), the Wage and Hour Division has
indicated that "the bona fides of a pension plan should be
considered only in the context of an existing plan." If the April
26 letter had spelled out that -- as a consequence of the fact that
the plan in question has been terminated and is no longer accepting
contributions from Davis-Bacon contractors, and in anticipation of
the eventual distribution of the plan's assets -- the Wage and Hour
Division had determined not to reconsider its 1980 opinion on the
bona fides of the plan, the Board would see no basis for disturbing
that determination. However, the April 26 letter does not
expressly reference enforcement policy as a basis for the ruling,
and we are unwilling to supply the rationale for the ruling on
review. Therefore, the Board remands this matter to the Wage and
Hour Division for clarification of the April 26 ruling, and for
such further proceedings as are warranted and are consistent with
this decision.
Concurring Opinion of Member O'Brien
I concur in Presiding Member Peters' majority opinion
remanding this matter to Wage and Hour. The determination that
this matter is "moot" because the plan was technically "terminated"
is clearly wrong. However, I would add that the voluminous
petition filed by the Laborers is deficient as well. All of the
allegations therein do not, in my view, amount to anything
approaching a Davis- Bacon claim. Had Wage and Hour approached
this matter differently, I would have voted to dismiss the petition
pursuant to 29 C.F.R. 7.9(b), and for failure to state facts
sufficient to make out a claim upon which relief could be granted.
This case represents the first opportunity for the Wage
Appeals Board to consider the relationship between enforcement
under the Employee Retirement Income Security Act ("ERISA") and
enforcement of employee rights under the Davis-Bacon Act ("DBA").
It arises as a result of multi-year proceedings culminating in a
petition for review by the Laborers of an April 26, 1990 letter
from the Wage and Hour Division. In that letter, the Deputy
Assistant Administrator announced that the question of the bona
fides of the Builders Trust was rendered moot by the filing of a
termination by the plan. The Laborers contend that the question is
not moot, that the plan violates the DBA because it is no longer
bona fide, that certain management practices violate DBA, and that
possible but unspecified relationships between the employers
contributing to the [2]
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[3] plan and trade associations possibly assisting in the marketing
of the plan somehow amount to a violation of the DBA.
I.
In the late 1970's the National Western Life Insurance Company
("NWL") conceived of a plan to market pension programs to nonunion
contractors. The NWL program consisted of series of identical
defined contribution plans whereby a specific employer made a
specific contribution to the pension trust accounts of specific
employees. Under this arrangement, NWL would receive management
fees, the employer would receive tax deductions akin to those
available to unionized contractors, and the employees would receive
specific contributions which vested immediately.
It seems that commercial acceptance of this idea was
widespread, for the Laborers attacked it on many fronts. Despite
the fact that Builders Trust had been approved by the Internal
Revenue Service; had been deemed acceptable by the Pension and
Welfare Benefits Administration ("PWBA") of the Department of
Labor; and had been ruled bona fide by the Wage and Hour Division;
the Laborers eventually filed suit under ERISA in the United States
District Court for the District of Columbia; filed complaints with
PWBA; and attacked the bona fides of the plan before Wage and Hour.
In September 1980, Wage and Hour ruled that Builders Trust was bona
fide, and that therefore contributions would be creditable towards
meeting prevailing wage payment obligations under the DBA. This
followed an analogous determination by the IRS in 1979.
Nevertheless, in 1983, the Building and Construction Trades
Department, AFL-CIO ("Building Trades") challenged the Wage and
Hour bona fide determination. Upon rejection of the Building
Trades' arguments before Wage and Hour, an appeal was taken to the
Wage Appeals Board.
In Builders, Contractors and Employees Retirement Trust and
Pension Plan, WAB Case No. 85-06 (December 17, 1986), ("Builders
Trust I"), the Board, in view of the pendency of Arakelian, et al.
v. National Western Life Insurance Co., No. 84-1953 (D.D.C.,
complaint filed June 26, 1984), and in view in of the determination
of then Office of Pension and Welfare Benefits Programs that the
Builders Trust plan did not violate ERISA, declined to exercise
jurisdiction. The Board also declined to review objections to the
bona fides of the plan, given the previous approval of Wage and
Hour and the implied approval of PWBA, and rejected the complaints
of the Building Trades regarding the voluntariness of employee
contributions because the plan was entirely funded by employer
contributions. Furthermore, the Board stated that it would only
consider issues "aris[ing] in connection with a disputed contract
award among competitive bidders or by an aggrieved employee or his
representatives on such [3]
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[4] project. " Id. at p. 7, n.2. In light of the opinion, the matter
was remanded to Wage and Hour for further consideration.
Meanwhile, in Arakelian, et al. v. National Western Life
Insurance Co., 680 F.Supp. 400 (D.D.C. 1987), several individuals
and the Laborers subjected the plan to judicial scrutiny. The
court ruled that certain management practices violated the
fiduciary rules of ERISA, and held the fiduciaries liable.
Significantly, these findings went solely to the management of the
plan, rather than to its structure. In short, there is nothing in
the opinion which would bring the bona fides of the structure of
the plan into question.
In the course of the Arakelian proceedings, the plan was
"terminated"; i.e., it ceased to accept additional contributions
and prepared to distribute plan assets to individual beneficiaries.
The plan agreed not to make final distributions pending an order of
the court.
After learning that the plan had "terminated", Wage and Hour
notified the Laborers that it considered the original remand
"moot". The Laborers now appeal on the numerous grounds described
at the outset of this opinion.
II.
For purposes of future proceedings, it would be useful to
consider the relationship between ERISA and the Davis-Bacon Act
insofar as they both relate to fringe benefit contributions and
trust funds. The overall DBA statutory scheme contemplates a total
compensation package of wages and fringe benefits equivalent to
those prevailing in the relevant geographic area. See generally,
29 C.F.R. 5.20 to 5.32. With regard to employer contributions to
pension and/or welfare benefit plans, the DBA requires an
irrevocable contribution to a beneficiary or a trustee. 29 C.F.R.
5.26. Any pension plan artifice which, at the time of the
contribution to the plan, reduces the total compensation to a level
below that prevailing in the relevant area would violate the DBA.
A violation would also occur if Davis-Bacon related fund
contributions were used to satisfy non-Davis-Bacon related pension
obligations (thereby effectively reducing the net benefit under the
Davis-Bacon contribution).
It goes without saying that a contribution into a defective
trust fund would not effectuate the Congressional interest embodied
in the Davis-Bacon Act; accordingly, the Department of Labor makes
an initial evaluation of the bona fides of a plan. This
determination, like that made by the Internal Revenue Service, goes
to the validity of the structure of the plan -- not to its
performance or management. The determination that Builders Trust
was bona fide was made [4]
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[5] in 1980. That determination was never revoked, even though the
plan was amended to eliminate the ERISA objections raised by the
Arakelian decision.
In summary, the Davis-Bacon Act contemplates a total
compensation package equivalent to prevailing area compensation.
The pension and/or welfare benefit portion of that wage package
must be paid into a bona fide plan. The Board could speculate that
some pension fund management device which effectively reduced
benefit contributions from specific employers to specific employees
could violate the DBA; however, those facts are not presented here.
The Davis-Bacon Act and ERISA are not mutually exclusive: the
DBA is silent with regard to other federal pension laws, whereas
Title I of ERISA by its own terms does not "alter, amend, modify,
invalidate, impair, or supersede any law of the United States. . .
or any rule or regulations issued under any such law." 29 U.S.C.
[sec] 514(d). Nonetheless, ERISA embodies a comprehensive
statutory scheme governing all aspects of pension and welfare
plans: reporting and disclosure; participation and vesting;
funding; management and fiduciary obligations; administration and
enforcement; and plan terminations and resultant liabilities. The
enforcement of ERISA is entrusted to three distinguishable
regulatory entities: the Department of Labor (specifically, the
Pension and Welfare Benefits Administration); the Internal Revenue
Service of the Treasury Department; and the Pension Benefit
Guaranty Corporation. The regulations and rulings issued by the
agencies are, to say the least, encyclopedic. They amount to a
comprehensive governance of every aspect of the pension and welfare
plan life cycle from creation through operation to termination and
liquidation.
ERISA also creates a private cause of action for beneficiaries
injured by virtue of violations of its fiduciary standards. The
elements of the Laborers' petition under review are essentially
similar to those pursued in the Arakelian litigation and those
presented to (but not substantially pursued by) the PWBA and Wage
and Hour.
III.
With the foregoing considerations in mind, let us now turn to
the allegations in the Laborers' petition. The Laborers claim that
the plan is not bona fide because nonunion employers receive the
same tax benefits available to unionized employers; hence, it is
argued, the plan does not benefit employees. I note that Builders
Trust is technically a "defined contribution" plan: a specific
employer payment is made in the name of and for the benefit of a
specific employee. That payment irrevocably vests to the benefit
of the named beneficiary at the time of the contribution. Hence,
the claim that the plan does not exist for the benefit of the
employee because of marginal tax benefit to the contributing [5]
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[6]
employer is specious. I wonder if the Laborers would make the same
claim regarding the pension plan of a signatory employer.
To the extent that certain plan management fees are allegedly
"unconscionable", a Davis-Bacon issue is not presented. These very
claims are being litigated in federal court and have been presented
to PWBA. The DBA governs payments between specific employers and
specific employees; it does not govern investment or management
practices of plan trustees in the abstract.
The Laborers allege some unspecified but untoward relationship
between Builders Trust and unnamed employer trade associations. To
the extent employers individually or collectively receive payments
from a pension fund, a Davis-Bacon Act violation is possible.
However, the petition neither claims nor makes any factual showing
that a specific employer or employer group received a rebate or
kickback attributable to plan contributions or corresponding to a
reduction in benefits to specific employees. Neither has been
shown on the record before the Board or presented to the Arakelian
court. In short, this assertion has no apparent basis in fact.
At this point the petition could be dismissed; however, I
cannot agree with the Wage and Hour position that the case is
"moot" merely because Builders Trust has terminated normal
operations. A plan terminates within the meaning of ERISA by
ceasing or limiting its usual activity as a prelude to the
distribution of trust assets. A plan termination could be
analogized to the filing of a bankruptcy petition by a business as
a necessary predicate to liquidation or reorganization. Merely
because a plan has "terminated" within the meaning of ERISA does
not mean the trust fund has ceased to exist. I cannot state as an
absolute matter that a plan is beyond the scope of the DBA until
its assets are distributed in their entirety.
In summary, while the Laborers have not raised facts amounting
to a violation of the Davis-Bacon Act, I cannot agree that the
matter is necessarily moot. I would, however, vote to dismiss a
similar petition because it fails to state any facts sufficient to
raise a Davis-Bacon claim; furthermore, in the future I would deny
review as a matter of discretion where the claim primarily sounds
in ERISA, or where adequate remedies are available thereunder and
the beneficiaries are capable of their pursuit.
Senior Member Rothman, writing separately, dissenting from decision
of majority that the petition be remanded.
I consider the separate opinions of Members O'Brien and Peters
to remand the Laborers' petition to constitute a majority decision.
I find myself unable to agree with the decision reached by my
colleagues. As I read the [6]
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[7] majority decision, the remand in this case is but one step removed
from the dismissal of the case, a step to be made by the Administrator
when, as planned, the assets of the Builders, Contractors and Employees
Retirement Trust and Pension Plan are distributed. I would not remand
this case with such instructions. I would accept the Laborers' petition
and issue a decision apropos the identifiable issues as the case now stands.
This matter was first heard by the Board September 9, 1986,
WAB Case No. 85~6, decided December 17, 1986. The Board dealt with
three primary issues.
1. Whether the plan violated the Copeland Anti-Kickback Act.
The Board, Member Dunn dissenting, concluded that it did not.
2. Whether an employer not subject to negotiated labor
agreements containing pension or other trust plans could establish
its own plan and pay into it solely on behalf of employees engaged
on Davis-Bacon projects. The Board concluded that such an employer
could have such a plan.
3. Whether the petition and the case then pending was
fact-specific enough for an informed judgment to be made that the
overall plan nationwide was bona fide within the Davis-Bacon
requirements. The Board concluded that a presentation on such
issue could not be fact-specific enough absent a project-by-
project approach.
The petitioner currently, Builders Plan 11, refers to a few
anecdotal instances in which individual employees at different
sites were allegedly deprived of monies which should have been paid
in wages but were paid into the Builders Plan. This is not the
fact-specific presentation tied to an identified Davis-Bacon wage
and fringe predetermination that the Board referred to in its
December 17, 1986 decision. However, petitioner presents some
additional information. I would add the following to the Board's
decision of December 17, 1986, WAB Case No. 85-06:
1. A pension plan may meet ERISA requirements as passed upon
by ERISA review agencies but implementation at a particular project
site may run afoul of Davis-Bacon requirements. For Davis-Bacon
Act purposes, the focus is not on the validity of the plan as a
general proposition or as approved by ERISA agencies but how the
individual employer uses and pays into that plan on each particular
Davis-Bacon project. It is not the plan fiduciary that becomes
liable for a Davis-Bacon Act violation. It is the individual
employer that has obligated itself in accepting a Davis-Bacon
award. [7]
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[8] 2. Sufficient information has been presented in this case to
caution that an employer at a particular Davis-Bacon project site
who will pay or who has paid into a plan like the Builders Plan
should recognize that it may be at risk of violating the
Davis-Bacon Act. This depends on the particularized way in which
the plan has been used at the project site. The Board should use
the earliest opportunity to say this to the employing industry.
3. Basic Davis-Bacon Act interpretations of the bona fides of
payments into pension and trust plans will be developed on a
case-by-case basis. By remanding this case with direction to
dismiss it if the plan assets are distributed and the plan
terminated, the majority will be sending the wrong message to the
employing industry. Total dissolution and winding up of the plan
does not answer the question whether, at any project where this
plan has been used, the Davis-Bacon and Davis-Bacon Related Acts
have been violated. However, in this dissenting opinion, no view is
taken whether in any particular case in which this pension and
trust plan has been used the employer has been in or out of
conformity with the requirements of the Davis-Bacon Act or whether
a future petition would be timely.
BY ORDER OF THE BOARD:
Ruth E. Peters, Presiding Member
Stuart Rothman, Senior Member
Patrick J. O'Brien, Member
Gerald F. Krizan, Esq.
Executive Secretary [8]
