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Home > Blog > Blog > Pension Plans > Third Circuit Follows Sister Circuits in Defining “Employer” under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA)

Third Circuit Follows Sister Circuits in Defining “Employer” under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA)

In Supor & Son Trucking & Rigging Co. v. Trucking Emps. of N. Jersey Welfare Fund, No. 20-3286, 2022 WL 1010057 (3d Cir. Apr. 5, 2022), involving a matter of first impression, the Third Circuit joined its sister circuits in defining “employer” under the Multiemployer Pension Plan Amendments Act of 1980 (the MPPAA) to mean any entity “obligated to contribute to a plan either as a direct employer or in the interest of an employer of the plan’s participants.”

Plaintiff-Appellant J. Supor & Son Trucking & Rigging Company is a construction contractor who agreed to use truck drivers exclusively from one union chapter for its job on New Jersey’s American Dream Project. It agreed to contribute to the union drivers’ multiemployer pension fund, the Defendant Trucking Employees of North Jersey Welfare Fund, Inc. – Pension Fund. When the Dream Project stalled, J. Supor stopped working with the union drivers and pulled out of the Fund. The Fund then demanded over $766,000 for payment of a withdrawal penalty for J. Supor ending its pension payments. The Fund alleged that the union promised it would not have to pay any penalty and sought relief in federal district court. The Fund argued that J. Supor was an employer that is required to arbitrate the dispute under the MPPAA. See 29 U.S.C. § 1401(a)(1). J. Supor took the position that it was not an employer under the MPPAA. The district court determined that J. Supor was an employer and is required to arbitrate the dispute. J. Supor appealed.

The Third Circuit noted that the MPPAA does not define employer and that the dictionary meaning of “employer” as “one who employs servants, workmen, etc. for wages” does not necessarily apply to J. Supor who may have employed the drivers only indirectly. The court declined to follow the dictionary definition because “[i]t would cripple a core feature of the MPPAA: withdrawal liability for employers who exit multiemployer pension plans without covering their share.” The court decided to follow seven of its sister circuits in adopting a more technical definition of employer, which draws on the definition of employer from Title I of ERISA, that is, employer in relation to an employee benefit plan. The court noted that Congress routinely defines “employer” more expansively than direct employment and “in relation” to something else. Defining employer as an entity obligated to contribute to a plan either as a direct employer or in the interest of an employer of the plan’s participants also fits with the MPPAA’s statement of purpose to avoid “free-riders” who could avoid a withdrawal penalty by simply outsourcing pension contributions to third parties.

Lastly, the court determined that as an employer J. Supor must arbitrate its dispute. The court rejected J. Supor’s argument that the union orally committed to not hold it liable for withdrawal fees because arbitrability does not hinge on liability. J. Supor’s suggestion that it was fraudulently induced to sign the agreement that makes it an employer does not let it off the hook. Fraudulent inducement would make the agreement voidable, but J. Supor never rejected the agreement. The court affirmed the district court.

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