By:  Ronald Kramer and Seong Kim

Seyfarth Synopsis:  Contributing employers to multiemployer pension plans have seen some big developments in July.  The PBGC released its new Final Rule on Special Financial Assistance on July 8, 2022, which will help financially troubled plans avoid insolvency, but will now also subject contributing employers to higher withdrawal liability assessments compared to the Interim Final Rule.  On the same day that the Final Rule was issued, the D.C. Circuit rejected a plan’s use of a risk-free discount rate for calculating withdrawal liability, placing into dispute withdrawal liability discount rates used by many plan actuaries that differ considerably from their funding rate assumptions.  Finally, the pending PBGC regulations on prescribed discount rate assumptions are coming soon.  Employer beware.

For employers who participate in multiemployer pension plans, July has been a busy month.  The PBGC published its Final Rule (FR) on the Special Financial Assistance (SFA) Program for financially troubled plans that was established as part of the American Rescue Plan Act of 2021 (ARPA), and the D.C. Circuit Court of Appeals issued its long awaited decision in United Mine Workers of America, 1974 Pension Plan v. Energy West Mining Company, Case No. 20-7054 (D.C. Cir., decided July 8, 2022).  Employers, when monitoring their multiemployer plan participation, should review these developments and the pending PBGC withdrawal liability assumption regulations.

PBGC Final Rule

Earlier this month we published a summary of the key changes under the Final Rule from the Interim Final Rule (IFR) (click here).  While we encourage you to read it, three changes in the Final Rule should be of considerable important to participating employers.

First, the PBGC revised the interest rate assumptions plans must use for purposes of calculating the total SFA amounts to be received.  Under the IFR, plans were required to use the same interest rate assumption for both SFA and non-SFA assets, even though SFA assets were also required to be segregated and invested much more conservatively than non-SFA assets.  By using the same investment assumptions for both, this meant that the amount of SFA provided likely would not be sufficient to pay all benefits due through the plan year ending 2051, given plans would have to invest the SFA in investments with lower returns.  To address this, under the FR there is a separate interest rate assumption for non-SFA plan assets, and a more conservative interest rate assumption for SFA assets.  This should increase the total amount of SFA plans receive, making it more likely that plans will have sufficient assets to avoid insolvency through 2051.

Second, the FR gives plans greater flexibility to invest SFA assets more aggressively.  Under the IFR, 100% of SFA assets were required to be invested in investment grade fixed income securities.  The Final Rule, however, allows plans to invest up to 33% of SFA assets in return seeking investments (e.g., publicly traded common stock, equity funds that invest primarily in public shares, bonds, etc.), with the remaining 67% restricted to investment grade fixed income securities. This development provides plans with an important element of flexibility in the investment of SFA assets, and it could significantly increase the likelihood that plans will be able to avoid insolvency through 2051.

Third, the FR switched course on how SFA funds must be recognized for purposes of determining total unfunded vested benefits and, hence, withdrawal liability.  The IFR previously required all SFA funds to be counted immediately when calculating unfunded vested benefits.  As a result, the infusion of SFA assets into a financially troubled plan would generally reduce its overall underfunding percentage and, hence, reduce withdrawal liability assessed on withdrawing employers.  To balance that, however, and to discourage participating employers from subsidizing their withdrawals with SFA funds, any plans receiving SFA funds are required to calculate and assess withdrawal liability using PBGC plan termination rates as the applicable discount rate — in other words, plans must use basically a risk-free discount rate.  Mandatory use of this artificially low discount rate was designed to inflate the underfunded status of a plan, in order to increase the amounts of withdrawal liability assessed, and thus prevent withdrawing employers from directly benefiting from the SFA.  Whether a withdrawing employer would benefit or be harmed from that “asset increase/discount rate reduction” tradeoff would depend upon the specific plan, its financial status, and the discount rates it traditionally uses for withdrawal liability.

In a departure from the IFR, the FR institutes a “phase-in” feature for crediting SFA funds for purposes of determining unfunded vested benefits, and in turn, withdrawal liability. The phase-in period begins the first plan year in which the plan receives SFA and extends through the end of the plan year in which the plan expects SFA to be exhausted. How long the phase-in period can last will depend upon when the plan anticipates to have spent all of the SFA it receives.  To determine the amount of SFA assets excluded each year, the plan multiplies the total amount of SFA by a fraction, the numerator of which is the number of years remaining in the phase-in period, and the denominator is the total number or years in the phase-in period. The phased recognition of SFA assets does not apply to plans that received SFA funds under the terms of the IFR unless a supplemental application is filed.

While individual employer experiences may vary depending upon the plan, phase-in period, and when they withdraw, among other things, what this means is an employer withdrawing from a plan that receives SFA will automatically be assessed withdrawal liability using PBGC plan termination rates (which as of the date of this publication are currently running at 2.81% for the first 20 years and 2.94% thereafter), when many plans use 6.5% to 7.5% funding rate of return assumptions for that purpose.  Yet, that same employer may only see very little of the SFA assets credited toward the plan assets for calculating withdrawal liability under the FR.

Instead of preventing withdrawing employers from receiving a windfall, the FR phase-in will end up subjecting many employers that withdraw during the phase-in period to higher withdrawal liability assessments (than had plans received no SFA).  As seen from Energy West below, the difference in discount rates (absent any offsetting SFA) can lead to significant increases in withdrawal liability.  Depending upon the plan, this phase-in “penalty” could last for a few or many years.  Participating employers need to understand this risk, the phase-in period, and the potential costs of remaining in a plan that intends to seek SFA.

Energy West Mining Company

On July 8, 2022, the same day the PBGC issued its FR, the D.C. Circuit Court issued its long-awaited decision in Energy West.  At issue in Energy West was whether a plan could use the PBGC plan termination rate as the discount rate for purposes of determining an employer’s withdrawal liability. When Energy West withdrew in 2015, the United Mine Workers Plan actuary applied the risk-free PBGC plan termination rate — 2.71% for the first 20 years and then 2.78% thereafter — as the discount rate to calculate withdrawal liability.  That resulted in an assessment of over $115 million.  Had the actuary used the 7.5% discount rate assumption he had set for plan funding purposes based on the plan’s historic investment performance, the assessment would only have been about $40 million.  The actuary chose the PBGC rates as his best estimate for withdrawal liability purposes because an employer withdrawing from a plan no longer bears any risk if the plan investments do not perform as anticipated.

While an arbitrator and district court ruled for the plan, the Circuit Court reversed.  The Court found that the Multiemployer Pension Plan Amendments Act provision that the actuary use assumptions “which, in combination, offer the actuary’s best estimate of anticipated experience under the plan,” required that the actuary not only choose the discount rate, but that that rate be based on the plan’s actual investments.  As the actuary’s assumption in this instance was not chosen on the plan’s past or projected investment returns, by definition it was not the actuary’s best estimate.

The Court reversed the decision, but did not mandate that the plan use the actuary’s 7.5% funding rate of return assumption.  The Court recognized that the funding rate of return and the withdrawal liability discount rate assumptions need not be identical.  There is some acceptable range of reasonableness based on a plan’s characteristics:  “The assumed discount rates must be similar, even if not always the same.”  The Court directed the district court to vacate the arbitration award and have the actuary recalculate withdrawal liability using a discount rate assumption based on the plan’s actual characteristics.

Energy West is now the second appellate court in the past year (the Sixth Circuit issued a similar ruling last year) to reject withdrawal liability discount rates that are not based solely on plan characteristics (i.e., on the actuary’s best estimate of anticipated experience under the plan).  While not every employer will see a possible $75M reduction in withdrawal liability, many employers in plans that have differing funding and withdrawal liability rates, in theory, will see their estimated and actual withdrawal liability drop to the extent plan actuaries adopt withdrawal liability discount rates similar to plan funding interest rate assumptions.

How will actuaries respond to Energy West?  It is highly possible that other appellate courts will disagree with Energy West, leading to a circuit split that may have to be decided by the Supreme Court.  Hundreds of millions of dollars, if not billions, are at stake.  Moreover, it remains to be seen how “similar” discount rates need to be to the funding rates of return.

But Wait, There’s More

Last and certainly not least, the PBGC is still drafting regulations that will prescribe actuarial assumptions which may be used by a plan actuary in determining withdrawal liability.  It is anticipated the PBGC will bless some methods — perhaps even the use of the risk-free PBGC plan termination rates — that will permit the application of considerably lower discount rates than what would otherwise be assumed based solely on plan experience.  Such regulations, which are imminent, may moot this issue — at least for employers that have not withdrawn before the regulations become final.

Given the FR, Energy West and similar cases, and of course the pending PBGC regulations on actuarial assumptions, participating employers need to keep their eyes open on the latest developments to avoid possible surprises.

By: Jamie R. Rich and Abigail D. Skinner

Seyfarth Synopsis: On February 24, 2022, the National Labor Relations Board, Equal Employment Opportunity Commission, and Department of Labor hosted a webinar identifying their intent to ramp up prosecution of employers. The federal agencies are working together to specifically target employer retaliation against employees in an effort to address racial and economic injustice. Referring to labor issues as a “civil rights issue,” and a “human rights issue,” the agency leaders described the tools they are utilizing — such as early injunctive relief, cross-agency training, and resource sharing — to incentivize workers to speak out about employer misconduct. Employers should be prepared to face fast and forceful scrutiny of any alleged misconduct.

The National Labor Relations Board (NLRB), the Equal Employment Opportunity Commission (EEOC), and the Department of Labor (DOL) have joined forces in an effort to target workplace retaliation. This multi-agency initiative was launched in November 2021 to build on memoranda of understanding (MOUs) that allow these federal agencies to coordinate investigations and litigation, reduce resource expenditures, and jointly pursue remedial relief. Before the initiative, MOUs existed between the DOL and EEOC and between the NLRB and EEOC. On January 6, 2022, the DOL’s Wage and Hour Division and the NLRB also announced an MOU. The three agencies held a virtual discussion on February 24, 2022, to inform the public of joint efforts to ramp up enforcement.

During the discussion, several of the agency leaders argued that, in their view, when one worker protection statute has been violated, it is likely that other worker protection statutes have been violated as well. For example, while a wage theft case is often categorized as strictly a wage and hour issue, it may also implicate Title VII if workers were denied wages because of their national origin. DOL Solicitor Seema Nanda emphasized the agencies’ efforts to act as “one government,” utilizing cross training, joint settlements, and information sharing between agencies. EEOC Regional Attorney Mary O’Neill added that the EEOC is “very interested” in cases that present multi-agency issues.

Retaliation is a Key Enforcement Priority

The priority of the multi-agency initiative is to address the impact that workplace retaliation has on workers in low income and diverse populations.  Charlotte Burrows, EEOC Chair, shared her view that retaliation has a greater impact on workers of color, and discussed the “deep inequality” that was exposed by the death of George Floyd and the COVID-19 pandemic. The agencies decided to focus their efforts in this area because of their concern that workplace retaliation often deters vulnerable workers from coming forward. O’Neil pointed out that employees who experience workplace retaliation and lose their jobs may suffer other consequences, such as trouble feeding their families. Throughout the webinar, the agency leaders were emphatic that these are civil rights issues, not just labor issues.

While the agencies are aiming to broadly address racial and economic injustice, they focused a substantial portion of their discussion on protection of immigrant workers specifically. The agencies have a close eye on industries that often employ high percentages of immigrant workers, such as agriculture, garment, hospitality, casino, and care facility workers. The agency leaders gave examples of cases in which employers retaliated against workers by threatening their immigration status. Nanda argued that the agencies can only be effective when workers feel safe speaking out.

Worker Protection Strategies and Enforcement Tools

The agency leaders discussed the various ways that they are addressing workplace retaliation using individualized and coordinated efforts.

The DOL’s Wage and Hour Division indicated that it is vigorously responding to both subtle and overt retaliation. Fisher discussed the success she has had in the last year using temporary restraining orders and preliminary injunctions as primary tools to stop employer retaliation “early and often.”

The NLRB representatives described the work the agency has been doing to protect workers of color. NLRB General Counsel Jennifer Abruzzo stated “I believe that racial and economic justice advocacy, where there is a direct link to the workplace, is protected….” She said that if workers are retaliated against for coming together to raise bias issues in the workplace, “we are going to prosecute.” She stated that the NLRB has already issued a number of complaints in this area since she was named General Counsel and intends to continue doing so.

NLRB Regional Director Lisa Henderson highlighted an NLRB General Counsel Memo published in November 2021, which lays out the NLRB’s policies and procedures for protecting immigrant workers who file charges or act as witnesses in NLRB proceedings. The NLRB is committed to pursuing U and T visa petitions for workers who come forward. The DOL also protects worker witnesses and gives them incentives to speak with investigators. DOL Regional Solicitor Maia Fisher added that it is “standard practice” for the DOL to seek injunctive relief when employers threaten their employees’ work authorization status, saying “we do not tolerate that.”

O’Neil described the EEOC’s efforts to educate workers about their rights, for example, by building relationships with nonprofits and community groups. The agency leaders also suggested that they “meet people where they are,” by speaking in the workers’ native languages and using social media and other websites that workers typically use when sharing information.

In her closing remarks, Abruzzo encouraged workers to exercise their right to “band together,” further stating, “We are here to help you, educate you, and remedy violations of your rights…I hope this webinar empowers you to raise your voices.”

Takeaways

Employers should be aware that federal worker protection agencies are taking an active stance against workplace retaliation and incentivizing workers to speak out against their employers. Increased litigation can be expected as these agencies continue to prioritize and coordinate enforcement efforts in this area. Employers should also be prepared to face requests for injunctive relief and expanded remedies for alleged violations of worker protection laws.

As these federal agencies move forward with this racial and economic justice initiative, companies should reach out to their Seyfarth contact for recommendations on preventing or addressing retaliation and other workplace misconduct. Please contact your Seyfarth attorney or one of the authors if you have questions regarding the initiative.

By:  John Phillips and Vanessa Rogers

Seyfarth Synopsis:  The City of Houston is raising the minimum wage for employers with covered contracts, subcontracts, and concession agreements at George Bush Intercontinental Airport, William P. Hobby Airport, and Ellington Airport.  Under Mayor Sylvester Turner’s new executive order, the minimum wage will increase to $13.00/hour on April 1, 2022, $14.00/hour on October 1, 2022, and $15.00/hour on October 1, 2023.

On February 17, 2022, Houston Mayor Sylvester Turner signed an executive order to raise the wages for Houston airport workers to $15.00 per hour by October 1, 2023.  Mayor Turner previously signed a similar executive order in 2019 to raise the minimum wage to $12.00 per hour, and this new executive order replaces the prior one.

The new executive order applies to contractors, subcontractors, and concession agreements involving any city aviation facility, which includes George Bush Intercontinental Airport (IAH), William P. Hobby Airport (HOU), and Ellington Airport (EFD).  Unlike many minimum wage ordinances, the new executive order applies to employees of carriers and employees of concessionaires.  And although not specifically mentioned by name in the order, the executive order’s broad reach means that it also covers janitorial contractor employees and employees covered by collective bargaining agreements.  The executive order will not interfere with the right of an air carrier or a concessionaire, or one of their subcontractors to enter into or adhere to an agreement with a collective bargaining organization, but it will require covered contractors and subcontractors to incorporate the new minimum wage requirements into their city contracts.

As the executive order’s requirements are incorporated into city contracts, covered contractors and subcontractors will be required to pay their employees increased minimum wages, as follows:

  • Currently: $12.00 per hour
  • April 1, 2022: $13.00 per hour
  • October 1, 2022: $14.00 per hour
  • October 1, 2023: $15.00 per hour
  • 2024: As determined by applicable wage rate increase

For tipped employees, these new minimum wages must also be accounted for when applying the tip credit.

Accordingly, employers with city contracts or subcontracts at Houston area airports should review the new executive order and their pay practices, to ensure that they are planning for the new wage increases in the near future.

 

By: Ashley Cano

On February 4, 2022, President Biden signed an Executive Order that mandates the use of project labor agreements (“PLAs”) on federal construction projects valued at or above $35 million.  PLAs are pre-hire collective bargaining agreements between contractors and labor unions that set the terms and conditions of employment for a specific construction project, such as wages, hours, working conditions, worker qualifications, and dispute resolution processes.  Thus, under a PLA, the government or a general contractor negotiates with one or more unions to set the terms of the project before the project starts.

And while the Order does not require construction companies to unionize, it does require federal construction contractors to adhere to the terms of PLAs.  Under the Order, PLAs must include guarantees against strikes and lockouts, prompt and mutually binding procedures for resolving labor disputes, and mechanisms for labor-management cooperation on matters of mutual interest and concern, including productivity, quality of work, safety, and health.

In announcing the Order, the White House said the PLA requirement will benefit taxpayers, contractors, and workers because it will: (1) alleviate coordination challenges on large, complex projects; (2) raise quality standards for contractors bidding on federal projects; (3) reduce uncertainty in the contracting process by standardizing the work rules, compensation costs, and dispute settlement processes on construction projects; and (4) increase training for the federal contracting workforce.  Proponents of the Order say it will boost wages on federal construction projects, guarantee work for unions, and prevent labor disputes and worker shortages.  Critics say it will reduce competition among contractors and raise construction costs.

Over the last several years, union membership in the construction industry has steadily declined.  Indeed, according to the Bureau of Labor Statistics, only 12.6% of workers in the construction industry were union members in 2021, compared to 14% in 2011.  This has forced organized labor to look for different ways to improve their market share of total construction projects, and pushing the Administration to mandate the adoption of PLAs is one way to do so.  The White House claims it is keeping a promise made to deliver a shot in the arm to unions.

Biden’s Order only applies to direct federal procurement, meaning that it does not apply to projects funded by federal grants to non-federal entities, such as state and local governments.  As a result, the bulk of the projects funded under the $1.2 trillion Infrastructure Investment and Jobs Act will not be covered.  Nonetheless, based on FY2021 figures, the Order could affect $262 billion in federal government construction contracting and nearly 200,000 workers on federal construction contracts.  The Order directs the Federal Acquisition Regulatory Council to propose regulations implementing the provisions of the Order within 120 days, to consider and evaluate public comments on the proposed regulations, and to promptly issue a final rule.

President Biden has stated he will be the most pro-union president ever, and it remains to be seen what the Administration will attempt next to advance labor union membership.  In the meantime, employers should stay tuned for further developments on this front.  For more information on the Executive Order or any other related topic, please do not hesitate to reach out to your favorite Seyfarth attorney or any member of Seyfarth’s Labor & Employment Team.

By: Molly Gabel and Kyllan Kershaw

Democrats face ethics déjà vu at NLRB- POLITICONLRB General Counsel Jennifer Abruzzo broadened the type of cases in which the NLRB will seek federal injunction proceedings through her General Counsel Memorandum 22-02 (Feb. 1, 2022), which issued earlier today.  Section 10(j) of the NLRA, 29 U.S.C. § 160(j), enables the General Counsel to seek injunctive relief in federal district court when the General Counsel can show normal NLRB processes will take too long to effectively remedy the unfair labor practice.  To receive such an injunction, the General Counsel must show that it is likely an unfair labor practice has occurred and that any NLRB remedial order will be null.  The NLRB has historically sought 10(j) relief in organizing cases only in those matters involving “serious, if not massive, unfair labor practices,” typically including improper grants of benefits and/or unlawful discharges.  See NLRB Section 10(j) Manual at 2.1.1.

In her memo, Abruzzo instructed Regional Offices to begin seeking injunctive relief in broader circumstances.  “Regions should promptly investigate alleged Section 8(a)(1) threats or coercion made during an organizing drive and immediately submit those cases for consideration of injunctive relief even in the absence of discharges or other Section 8(a)(3) violations or during the pendency of discharge or other Section 8(a)(3) investigations.”  Abruzzo reasons that such action is necessary to avoid “threats often escalat[ing] into action,” assuming that allegations of such threats “often” translate to unlawful discharges, job elimination, etc.

The memo further directs Regions and the NLRB’s Injunction Litigation Branch to “consider all contextual circumstances to determine whether it may be appropriate to recommend pursuit of an injunction in cases involving threats or other coercion, such as inherent impact on employees and union support; nature, frequency, severity and dissemination; hierarchal rank of the actor(s); local labor market; and recidivism, to name a few.”

Abruzzo’s directive will sweep in Section 8(a)(1) charges involving much lower level allegations.  Many such charges involve statutory supervisors’ alleged statements that require credibility determinations from a fact finder—an NLRB Administrative Law Judge.  Yet, it appears that Abruzzo is poised to seek injunctive relief in such cases well before any fact-finder renders a decision.  If injunctive relief is granted, employers may be barred from making necessary, legitimate, and otherwise lawful business decisions.  Moreover, employers will have to contend with negative press coverage and legal expenses associated with injunction litigation.  Employers with organizing activity should prepare accordingly, including by training supervisors on the nuances of an organizing campaign.

By: Ashley Ehman and Paul Galligan

On August 18, 2021, Local Law 2021/087 was enacted to require City human services contractors and subcontractors to enter into labor peace agreements prior to the award or renewal of a City service contract. The Local Law, which serves as an amendment to the Administrative Code of the City of New York, is likely to have a significant impact on covered employers.

The Local Law applies to any contractor or subcontractor that bids on a City human services contract or seeks a renewal of such a contract. Human services contracts include those concerning day care, foster care, home care, health or medical services, housing and shelter assistance, preventative services, youth services, the operation of senior centers, employment training and assistance, vocational and educational programs, legal services and recreational programs. However, the Local Law carves out an exception for building service employees and subcontractors whose primary task is the care or upkeep of a building or property.  Such employees may instead be covered the City’s prevailing wage law.

The centerpiece and most critical component of this Local Law is the labor peace agreement requirement. Covered employers engaging in City human services contracts must enter into labor peace agreements with labor organizations in which both the union and the employer agree to ensure the continuous delivery of services under the contract. According to the Local Law, covered employers must submit an attestation no later than 90 days after the award or renewal of a City service contract to confirm its compliance with the labor peace agreement requirement. The attestation shall state that either: (i) the covered employer has joined one or more labor peace agreements with a labor organization; or (ii) the covered employer’s employees are not represented by a labor organization and no labor organization has sought to represent them. If the covered employer has entered into one or more labor peace agreements, the employer is required to identify the classes of employees covered by the labor peace agreements, the classes of employees not represented by a labor organization, and the classes of employees currently undergoing labor peace agreement negotiations. This attestation must be updated on a yearly basis.  City agencies will be required in the future to include a provision in future City services contracts to the effect that failure to comply with the Local Law may constitute material breach.  The City Comptroller may also provide for additional remedies after investigation.

Labor peace agreements make it significantly easier for unions to organize employers, because in exchange for the union party’s commitment to ensure labor peace (i.e. no strikes or picketing), the union party typically insists on the employer party’s neutrality in any organizing campaign and requires employers to forego rights afforded to them by the National Labor Relations Act of 1935 (the “Act”), replacing the secret ballot election with a card check and providing union access to the employer’s facilities and employee information, with all disputes subject to arbitration. It should be noted that labor peace agreements typically do not dictate provisions in collective bargaining agreements that have to be negotiated after the union has organized a covered employer’s employees.

Unless the covered employer is already unionized, the labor peace agreement requirement of Local Law 2021/087 presents many new challenges for covered employers. However, further changes may be in store as a result of Prevailing Wage Bill 2137. If enacted, covered employers will be required to pay its City-contracted human services employees no less than the prevailing wage as established by the Comptroller.  Given the current political make-up of the City Council, this bill is likely to pass and be signed into law by the Mayor who recently issued an Executive Order requiring all large retail or food service employers operating on the premises of a City development project to sign labor peace agreements.

By: Jennifer L. Mora

As previously reported here, on August 12, 2021, the National Labor Relations Board’s top lawyer, General Counsel Jennifer Abruzzo, issued a memorandum instructing regional offices to send cases relating to certain issues to her office for consideration. The GC’s memorandum highlighted more than 40 Trump-era decisions that are up for reconsideration, based on Abruzzo’s view that they overruled legal precedent and are not consistent with the basic purpose of the National Labor Relations Act to foster unionization.

Making good on President Biden’s promise to become the “strongest labor President you have ever had,” on September 8, 2021, the GC issued yet another memorandum advising regional offices to seek a variety of remedies to address alleged violations of the Act. The list is not exhaustive — “Regions should request from the Board the full panoply of remedies available to ensure that victims of unlawful conduct are made whole for losses suffered as a result of unfair labor practices.”

  • In cases involving unlawful terminations, the memorandum advises regions to seek compensation for consequential damages, front pay, and liquidated backpay.
  • If the aggrieved employee is an undocumented worker, the memorandum recommends that regions seek compensation for work performed under unlawfully imposed terms, employer sponsorship of work authorizations, and other remedies designed to prevent unjust enrichment.
  • If the matter involves unlawful conduct during a union organizing drive, the memorandum suggests that regions seek a wide range of remedies. They include, among others:

(a) granting unions contact information for and access to employees, including bulletin boards and equal time to address employees during an employer’s “captive audience” meeting about union representation;

(b) requiring employers to reimburse unions for costs incurred as part of their organizing effort, including costs associated with any re-run election;

(c) requiring an employer to read (with the union present) the “Notice to Employees and Explanation of Rights” (“Notice”) to employees, supervisors and managers, or possibly a video recording of the reading of the Notice, with the recording being distributed to employees by electronic means or by mail;

(d) requiring an employer to publish the Notice in newspapers and other news media (including social media) at the employer’s expense; and

(e) requiring employers to provide management and supervisor training on the NLRA.

Remarkably, the memorandum also suggests that regions consider instatement (hiring) of a qualified applicant of the union’s choice in the event a discharged employee is unable to return to work.

  • In unlawful failure to bargain cases, the GC advises regions to seek remedies that include requiring the respondent to submit to a bargaining schedule, submit status and progress reports to the NLRB, reimburse the other party’s collective-bargaining expenses, reinstate unlawfully withdrawn proposals, and submit to other broad cease-and-desist orders.

In her announcement, the GC advised that she plans to issue another memorandum relating to remedies that regional offices should include in settlement agreements.

Since being sworn in on July 22, 2021, the GC has lived up to President Biden’s commitment to “a cabinet-level working group that will solely focus on promoting union organizing and collective bargaining.” All of her suggested remedies reflect a major change in the remedies typically available under the NLRA. While the memorandum cites to Board decisions that have awarded some of these unusual remedies, they involved extremely egregious violations of the Act. Despite that, the GC suggests that these harsh remedies be the rule rather than the exception. As the GC’s various memoranda reflect an intent to act immediately in pursuit of her pro-labor agenda, employers would be well-advised to take notice of and plan for the GC’s aggressive stance.

By: Jennifer L. Mora and Jeffrey A. Berman

With a new President comes a shift in the balance of power at the National Labor Relations Board. To start, shortly after President Biden took office in January, the NLRB’s sole Democrat, Chairman McFerran, issued several dissents that provided a window into what the future would look like under a Biden Board. Those dissents addressed confidentiality in arbitration agreements (here), implementation of employee handbooks (here), investigative confidentiality rules (here), standards for determining whether a party has engaged in bad faith bargaining (here), and policies prohibiting recordings in the workplace (here).

On August 12, 2021, the NLRB’s top lawyer, General Counsel Jennifer Abruzzo, issued a memorandum instructing regional offices to send cases relating to certain issues to her office for consideration. Nobody should be surprised at Abruzzo’s desire to overturn several important Trump Board decisions, as this happens each time a new NLRB majority is established.  However, the memorandum, which includes all of the issues flagged by Chairman McFerran in her dissents, goes much further.

The GC’s memorandum highlighted more than 40 Trump-era decisions that are up for reconsideration, based on Abruzzo’s view that they overruled legal precedent and are not consistent with the basic purpose of the National Labor Relations Act to foster unionization. They include, among many others:

  • The Boeing Co. (2017) and the appropriate standard for determining the legality of workplace/employee handbook rules. This will include any Trump Board decision that analyzed a rule or handbook provision under the Boeing standard. As we previously reported, Chairman McFerran espouses a return to the analytical framework in Lutheran Heritage Village-Livonia — the mere maintenance of a neutral work rule will violate the Act if employees would reasonably construe the rule to prohibit union and other protected concerted activity.
  • Baylor University Medical Center (2020), which found lawful separation agreements containing confidentiality and non-disparagement provisions, in addition to Trump-era decisions addressing confidentiality rules relating to workplace investigations and confidentiality provisions in arbitration agreements. In recent dissents, McFerran has been highly critical of any confidentiality provisions, opining that they require employees to “suffer in silence at work.”
  • Various decisions discussing the appropriate standard for determining whether an employee has engaged in Section 7 protected activity. Importantly for employers, a desire to return to Purple Communications will likely mean protecting more than just communications in emails, but also other electronic communications and videoconferencing platforms.
  • Decisions addressing the standard to prove violations of the Act under Wright Line.
  • Tobin Center for the Performing Arts (2019) — the extent to which property owners can deny access to third parties seeking to engage in Section 7 activity.
  • Valley Hospital Medical Center (2019) — the right of an employer to cease deducting union dues upon expiration of a labor agreement.
  • MV Transportation (2019), which abandoned the clear and unmistakable waiver standard to determine whether an employer’s unilateral action was permitted, and instead adopting a “contract coverage” standard, under which unilateral action is permitted if it falls within the compass or scope of certain contractual language in the labor agreement.
  • SuperShuttle DFW, Inc. (2019) — the standard for determining whether an individual is an independent contractor. The memorandum also suggests that the simple act of misclassifying a worker as an independent contractor can be an unfair labor practice. A shift in precedent relating to this issue ups the ante for companies operating in the gig economy.

But the memorandum goes beyond evincing an intent to overturn the Trump Board’s precedent – it also “identifies other initiatives and areas that, while not necessarily the subject of a more recent Board decision, are nevertheless ones I would like to carefully examine.” Those include:

  • Two issues relating to Weingarten rights: their application to non-union workforces and whether an employer must provide the union with its interview questions in advance of the interview.
  • Information requests when an employer intends to relocate its operations.
  • The right of an employer to withdraw recognition after the third year of a contract of longer duration.

Abruzzo’s memorandum also signals a critical modification to the existing card check rules- requiring regional offices to send to her office cases where an employer refuses to recognize and bargain with a union if the employer has either engaged in unfair labor practices or cannot “explain its reason for doubting majority status in rejecting the union’s demand.” If adopted, this standard would make it more difficult for an employer to insist on an election rather than bargain with a union in the face of a showing of majority support.

The fact that the new General Counsel has requested that regional offices forward cases raising certain issues to her does not automatically mean that the Board will either reverse a decision of the Trump Board or extend the protections of the NLRA further than they currently exist.  However, given the makeup of the newly-constituted Biden Board, there is little question what the future holds.

Friday, July 30, 2021
2:00 p.m. to 3:30 p.m. Eastern
1:00 p.m. to 2:30 p.m. Central
12:00 p.m. to 1:30 p.m. Mountain
11:00 a.m. to 12:30 p.m. Pacific

On July 9, 2021, the PBGC issued its interim final rule on ARPA’s Special Financial Assistance (“SFA”) Program for financially troubled multiemployer pension plans.  The new regulations provide guidance on the application process for Special Financial Assistance and the related restrictions and requirements, including the priority in which applications will be reviewed.  The guidance also sets forth special rules regarding employer withdrawals and withdrawal liability settlements for plans receiving Special Financial Assistance.

In this webinar, Seyfarth attorneys review the interim final rule, address what it means for multiemployer plans, and discuss what it means for employers participating in those plans.

Topics will include:

  • Plan eligibility;
  • The amount of SFA;
  • The application process;
  • Conditions and restrictions on receipt of SFA, including limitations on reductions in contributions and increases in benefits, and investment restrictions;
  • Withdrawal liability considerations; and
  • What’s Next

Register Here

By: Seong Kim, Ronald Kramer, and Alan Cabral

Seyfarth Synopsis:  On July 9, 2021, the PBGC issued its interim final rule on ARPA’s Special Financial Assistance Program for troubled multiemployer pension plans. This rule governs the application and administration of SFA, and includes special rules regarding employer withdrawals and withdrawal liability settlements for plans receiving SFA. Please see our companion Legal Update on the Pension and Executive Compensation Provisions in the American Rescue Plan Act here.

On July 9, 2021, the Pension Benefit Guaranty Corporation (PBGC) announced its interim final rule implementing the American Recue Plan Act’s Special Financial Assistance (SFA) Program for financially troubled multiemployer defined benefit pension plans. The rule provides guidance to plan sponsors on the SFA application process, including what plans need to file to demonstrate eligibility for relief; calculating the amount of SFA; actuarial assumption requirements; the PBGC’s review of SFA applications; and other restrictions and conditions.  The PBGC also sets forth in the regulations the order of priority in which applications will be reviewed.  Among other things, the regulations provide much anticipated clarification on the calculation of withdrawal liability, and the assumptions to be used for SFA.  There will be a thirty day public comment period from the rule’s publication in the Federal Register on July 12, 2021.

Seyfarth has issued a detailed Legal Update summarizing the interim final rule which can be accessed here.  It is recommended reading.  (Our earlier Legal Update on the Pension and Executive Compensation Provisions in the American Rescue Plan Act can be accessed here.)  In addition, Seyfarth will hold a webinar on Friday, July 30, 2021, at 1:00 central to review the regulations in more detail, as well as any considerations for plan sponsors and contributing employers.  Stay tuned to this site for more details.

For those that have been solely concerned about the possible impact SFA may have on withdrawal liability, below are the four key takeaways from the final interim rule as to withdrawal liability.

1.      The PBGC Rejected Disregarding SFA in the Withdrawal Liability Calculation

Given that earlier drafts of ARPA provided that SFA would not be counted when calculating withdrawal liability, many interested parties expected that restriction to be included in the regulation.  Nevertheless, the PBGC considered and then apparently rejected a requirement that SFA assets be disregarded in the determination of unfunded vested benefits for the assessment of withdrawal liability.  Despite acknowledging the benefits of such a restriction, the PBGC simply stated:  “This alternative was determined to be more administratively complex and therefore less desirable.”  Instead, at least for now, it adopted two other conditions: a restriction on withdrawal liability interest assumptions, and a requirement for PBGC approval of certain withdrawal liability settlements.

2.      Withdrawal Liability Interest Assumptions

The interest assumptions used to determine unfunded vested benefits and calculate withdrawal liability must be the PBGC’s mass withdrawal interest assumptions that approximate the market price that insurance companies charge to assume a similar pension-benefit like liability.  Plans receiving SFA must use those interest assumptions for withdrawal liability calculations until the later of 10 years after the end of the plan year in which the plan receives payment of SFA or the last day of the plan year in which the plan no longer holds SFA or any earnings thereon in a segregated account.  Given plan termination interest rates are generally much lower than rates most plans use to calculate withdrawal liability, this will likely increase a withdrawing employer’s liability — although whether that increase will necessarily offset the impact of the SFA may depend upon the employer and the plan.

The PBGC determined that without the interest assumption change “the receipt of SFA could substantially reduce withdrawal liability owed by a withdrawing employer,” and “could cause more withdrawals in the near future than if the plan did not receive SFA.”  Payment of SFA “was not intended to reduce withdrawal liability or to make it easier for employers to withdraw.”

3.      PBGC Approval of Certain Withdrawal Liability Settlements

Any settlement of withdrawal liability during the SFA coverage period (generally, the date of application through 2051) is subject to PBGC approval if the present value of the liability settled is greater than $50 million.  The PBGC will only approve such a settlement if it determines that: (1) it is in the best interests of the participants in the plan; and (2) does not create an unreasonable risk of loss to PBGC.  The information the PBGC will require in order to review a proposed settlement includes: the proposed settlement agreement; the facts leading to the settlement; the withdrawn employer’s most recent 3 years of audited financials and a 5-year cash flow projection; a copy of the plan’s most recent actuarial evaluation; and a statement certifying the trustees have determined that the proposed settlement is in the best interest of the plan, its participants and beneficiaries.

4.      Promise of Additional PBGC Regulations as to Assumptions for All Plans

Last but not least, in its explanation of the final interim rule the PBGC noted that it plans to use its authority under Section 4213(a) of ERISA to propose a separate rule of general applicability setting forth actuarial assumptions which “may” be used to determine an employer’s withdrawal liability.  Presumably, this general rule would be applicable to all plans, not simply those that receive SFA.  This could have a significant impact on how withdrawal liability is calculated in the future.

Mark your calendars for the webinar on Friday, July 30, 2021, at 1:00 central, and stay tuned to this site for more details about the webinar.