Resilient Floor Covering Pension Trust Fund Bd. of Trs. v. Michael's Floor Covering, No. 12-17675 (9th Cir. 2015)
Annotate this CaseAfter a bench trial, the district court held that Michael's was not liable as a successor employer by weighing continuity of the workforce as the most important factor. At issue was: (1) whether a successor employer, both generally and in the construction industry in particular, can be subject to withdrawal liability under the Multiemployer Pension Plan Amendments Act (MPPAA), 29 U.S.C. 1381–1453, amendments to the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001 et seq.; and (2) if so, what factors are most relevant to determining whether a construction industry employer is a successor for purposes of imposing MPPAA withdrawal liability. The court concluded that a construction industry successor employer can be subject to MPPAA withdrawal liability, so long as the successor took over the business with notice of the liability; that the most important factor in assessing whether an employer is a successor for purposes of imposing MPPAA withdrawal liability is whether there is substantial continuity in the business operations between the predecessor and the successor, as determined in large part by whether the new employer has taken over the economically critical bulk of the prior employer’s customer base; and, in this case, the district court erred in weighing continuity of the workforce as the most important factor and applying an incorrect test to determine whether there was continuity of the workforce. Accordingly, the court reversed and remanded for further proceedings.
Court Description: Labor Law. The panel reversed the district court’s judgment, after a bench trial, holding that a construction industry employer was not subject to “withdrawal liability” under the Multiemployer Pension Plan Amendments Act. The MPPAA amendments to the Employee Retirement Income Security Act provide that if an employer withdraws from a multiemployer pension plan, then it is liable to the plan for “withdrawal liability.” There is an exception to withdrawal liability for a construction industry employer that ceases operations entirely for at least five years. Agreeing with the Seventh Circuit, the panel held that a bona fide successor employer in general, and a construction industry successor employer in particular, can be subject to MPPAA withdrawal liability, so long as the successor took over the business with notice of the liability. The panel held that the most important factor in assessing whether an employer is a successor for purposes of withdrawal liability is whether there was substantial continuity in the business operations between the predecessor and the successor, as determined in large part by whether the new employer has taken over the economically critical bulk of the prior employer’s customer base. RESILIENT FLOOR COVERING TRUST FUND BD. OF TRS. 3 V. MICHAEL’S FLOOR COVERING The panel held that the district court erred in weighing continuity of the workforce as the most important factor, and, moreover, applied an incorrect test to determine whether there was continuity of the workforce. The panel reversed and remanded for further proceedings applying the correct standards.
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