Not clear that building contractor had to contribute to fringe benefit fund when contracting with nonunion subcontractors

A building contractor that subcontracted work to nonunion businesses did not necessarily violate its duty to pay contributions to a carpenters’ union’s fringe-benefit funds, the Seventh Circuit Court of Appeals (CA-7) ruled. With regard to cabinetry work, the nonunion business that was awarded the subcontract appeared to be a “single employer” with a union signatory that ultimately performed the work, so the work was effectively done by a union business. Also, stainless steel kitchen equipment installation work appeared to be within the jurisdiction of a sheet-metal workers’ union, thus excusing the payment of fringe benefits to the carpenters’ funds.

Dispute over fringe-benefit contributions. Under the carpenters’ CBA, the building contractor could not subcontract carpenters’ work, which the parties referred to as “jurisdictional work,” to any business that had not signed the CBA. If the building contractor did so, it had to keep track of the hours worked by the subcontractor and pay fringe benefit contributions to the carpenters’ funds for those hours.

The basic dispute here was whether the building contractor was required to make fringe-benefit contributions to the carpenters’ funds for certain work it had subcontracted. The district court had granted summary judgment to the funds as to four claims in their suit under the LMRA and ERISA to recover fringe-benefit contributions. On appeal, the building contractor challenged summary judgment as to two of these claims.

Cabinetry subcontract. The building contractor admitted it had subcontracted cabinetry installation to a nonunion company, Canac, but contended that Canac used its sister company, Qualifit Kitchens, which had used union labor. Thus, the building contractor insisted, the single-employer doctrine protected it from liability for failure to contribute to the carpenters’ funds. The Seventh Circuit agreed. “This is a clear case of the single-employer doctrine,” the appeals court declared. Canac and Qualifit Kitchens were owned by the same parent company, did business out of the same office, held themselves out to be the same company, and had a merged management chain, among other things, according to evidence in the summary judgment record.

Objecting to the application of the single-employer doctrine, the funds maintained that the doctrine could only be used by plaintiffs “as a sword,” not by defendants as a shield against liability. But there was “nothing in the doctrine that mandates this limitation,” and “such a limitation would be fundamentally unfair,” the appeals court wrote, in concluding that the district court erred in granting summary judgment for the funds on the claim relating to the cabinetry work.

Kitchen equipment installation subcontract. According to the funds, the building contractor also owed fringe benefits for subcontracting installation of stainless steel kitchen equipment, including hoods and ventilation systems, to RB Hoods, a union signatory with the sheet metal workers union. This work was covered by the carpenters’ CBA and therefore fringe-benefit contributions were owed to the funds because RB Hoods was not a signatory to the carpenters’ CBA, the funds argued. The appeals court once again agreed with the building contractor, reversing summary judgment for the funds on this claim.

“Existing practice” of different union. The carpenters’ CBA contained a clause that addressed this issue, stating: “the Union agrees that it will not interfere with existing practices of other unions affiliated with the Building Trades.” The purpose of such clauses, the appeals court explained, is to alleviate employers’ concern that by assigning work to one union, they might violate their CBA with another. Otherwise, an employer “needing to choose between two different unions with overlapping jurisdictions” will find itself “caught between the devil and the deep blue.” The district court had treated the clause as ambiguous, but it was not, the appeals court found.

The building contractor presented ample evidence that installing stainless steel kitchen equipment was within the jurisdiction of the sheet metal workers union. “It does not even matter whether the work is exclusively the work of the Sheet Metal Workers,” the appeals court emphasized. “What matters is whether it is the existing practice of the Sheet Metal Workers to install stainless steel kitchen equipment”—and this was undisputed. Consequently, there appeared to be no basis to require the building contractor to pay fringe benefit contributions to the carpenters’ funds for the installation of the stainless steel kitchen equipment. Consequently, the district court’s summary judgment ruling was reversed, and the case was remanded for further proceedings.

SOURCE: Chicago Regional Council of Carpenters Pension Fund v. Schal Bovis, Inc., (CA-7), Nos. 14-3413 and 14-3336, June 10, 2016.

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