2017 LAW UPDATE HESSEMARTONE, P.C.

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1 2017 LAW UPDATE PRESENTED BY ANDREW J. MARTONE HESSEMARTONE, P.C. OFFICES: ST. LOUIS, MO SPRINGFIELD, IL PHOENIX, A Z

2 SS#2 SB 19 Missouri s New Right to Work Law PRESENTED BY ANDREW J. MARTONE HESSEMARTONE, P.C. OFFICES: ST. LOUIS, MO SPRINGFIELD, IL PHOENIX, A Z

3 SS#2 SB 19 Missouri s New Right to Work Law How Right to Work became the law in Missouri: December 1, 2016: SB 19, a right to work bill, filed in Missouri Senate January 25-25, 2017: Six amendments proposed, all six amendments fail January : SB19 substituted for SS#2 SB19, now includes a grandfather clause January 26, 2017: Passed by Senate, referred to House February 2, 2017: Three amendments proposed, all three amendments fail February 2, 2017: Passed by House, delivered to Governor February 6, 2017: Signed by Governor Greitens

4 SS#2 SB 19 Missouri s New Right to Work Law What Might have Been: HesseMartone tracked several other right to work bills introduced in the Missouri House. HB91, another right to work bill, did not include a grandfather clause for contracts if it had been adopted the union security sections of existing CBAs would have become void and unenforceable. HB91 stalled while SB19 continued. HB42, another right to work bill, stalled and was replaced by HB91.

5 SS#2 SB 19 Missouri s New Right to Work Law What the Right to Work law says: Chapter 290, RSMo, is amended by adding thereto one new section, to be known as section , to read as follows:

6 SS#2 SB 19 Missouri s New Right to Work Law 1. As used in this section, the following terms shall mean: (1) Employer, any individual, organization, partnership, state agency, political subdivision, corporation, or other legal entity which employs or has employed one or more individuals performing services for the entity within this state; and (2) Labor organization, any organization of any kind or agency, or employee representation committee or union which exists for the purpose in whole or in part of dealing with employers concerning wages, rates of pay, hours of work, other conditions of employment, or other forms of compensation.

7 SS#2 SB 19 Missouri s New Right to Work Law 2. No person shall be required as a condition or continuation of employment to: (1) Become, remain, or refrain from becoming a member of a labor organization; (2) Pay any dues, fees, assessments, or other similar charges however denominated of any kind or amount to a labor organization; (3) In lieu of the payments listed under subdivision (2) of this subsection, pay to any charity or other third party any amount equivalent to, or on a pro rata basis, any dues, fees, assessments, or other charges required of members of a labor organization.

8 SS#2 SB 19 Missouri s New Right to Work Law 3. Any agreement, understanding, or practice, written or oral, implied or expressed, between any labor organization and employer that violates the rights of employees as guaranteed under this section is unlawful, null and void, and of no legal effect.

9 SS#2 SB 19 Missouri s New Right to Work Law 4. Any person who violates or directs another to violate any provision of this section shall be guilty of a class C misdemeanor.

10 SS#2 SB 19 Missouri s New Right to Work Law 5. (1) Any person injured as a result of any violation or threatened violation of this section shall be entitled to injunctive relief against any and all violators or persons threatening sanctions. (2) Any person injured as a result of any violation or threatened violation of this section may recover any and all all damages of any character resulting from such violation or threatened violation including costs and reasonable attorney fees. Such remedies shall be independent of and in addition to the other penalties and remedies prescribed under this section.

11 SS#2 SB 19 Missouri s New Right to Work Law 6. The prosecuting attorney or circuit attorney with jurisdiction over the location where a violation or threatened violation of this section occurs or the attorney general of the state shall investigate complaints of violation or threatened violation of this section, prosecute any person violating this section, and use all means at their command to ensure the effective enforcement of this section.

12 SS#2 SB 19 Missouri s New Right to Work Law 7. This section shall not apply: (1) To employers and employee covered by the federal Railway Labor Act; (2) To federal employers and employees (3) To employers and employees on exclusive federal enclaves (4) Where this section conflicts with or is preempted by federal law (5) To any agreement between an employer and a labor organization entered into before the effective date of this section but shall apply to any such agreement upon its renewal, extension, amendment, or modification in any respect after the effective date of this section.

13 SB20 Prevailing Wage to be repealed in Missouri? PRESENTED BY ANDREW J. MARTONE HESSEMARTONE, P.C. OFFICES: ST. LOUIS, MO SPRINGFIELD, IL PHOENIX, A Z

14 SB20 Prevailing Wage to be repealed in Missouri? SB20 is An Act to repeal sections , , , , , , , , , , , , , , , , , , and , RSMo, relating to public contracts. These are the sections of the Missouri code that establish the requirement that workers employed by or on behalf of a public body be paid the prevailing wage.

15 SB20 Prevailing Wage to be repealed in Missouri? What has already happened December 1, 2016 SB20 filed January 5, 2017 SB20 read and referred to General Laws Committee January 18, 2017 General Laws Committee hearing on SB20 January 25, 2017 SB20 reported do pass from the General Laws Committee February 2, 2017 SB20 reported from General Laws Committee February 14, 2017 SB20 calendared for perfection

16 SB20 Prevailing Wage to be repealed in Missouri? What happens next The Senate will vote on SB20. If it passes, it will be sent to the House where it will be referred to committee and voted on. If it passes the House Committee it will be voted on by the House. If it passes the House without amendment(s) it will go to Governor Grietens. If it passes the House with amendment(s) it will go to conference committee where differences between the House and Senate bills will be reconciled; the House and Senate will vote again and, if the bill passes, it will go to Governor Greitens.

17 SB20 Prevailing Wage to be repealed in Missouri? If SB20 becomes law and prevailing wage is repealed, what next? SB20 does not revise the prevailing wage statute, it repeals it. It deletes existing law. HesseMartone has been tracking ten other prevailing wage bills that revise existing law and may appear in one form or another down the road: SB29 - modifies the definition of "construction" and the definition of "maintenance work" to include repairs that restore existing facilities; HB44 - prohibits the Missouri Housing Development Commission from requiring a prevailing hourly wage to be paid to a contractor on a project for a housing tax credit if it is in a Governor-declared disaster area; HB78 & HB132 - Allows public bodies to opt out of prevailing wage laws for the construction of public works projects that are $750,000 or less;

18 Continued HB79 & HB133 - Establishes the School Construction Act, which exempts construction and maintenance work done for certain school districts from the prevailing wage requirement upon the school board's approval; HB104 - Repeals provisions relating to prevailing wages on public works; HB475 - Exempts counties of the third and fourth classification from prevailing wage laws for the construction of public works projects that are less than $500,000; HB476 - Exempts counties of the third and fourth classification from the prevailing wage laws.

19 AGCMO opposes SB20 and full repeal The Missouri State Senate is planning debate in the coming days on a bill that would totally repeal Missouri s current prevailing wage statute without creating any system to replace the functions currently served by the prevailing wage statute. We believe this would be devastating for working families across the state as well as detrimental to our industry. From AGCMO Press Release

20 Withdrawal Liability 101 PRESENTED BY ANDREW J. MARTONE HESSEMARTONE, P.C. OFFICES: ST. LOUIS, MO SPRINGFIELD, IL PHOENIX, A Z

21 Overview Under the Multiemployer Pension Plan Amendments Act of 1980, when an employer withdraws from a multi-employer pension plan which has unfunded vested benefits, it generally is liable to the fund for a share of the unfunded vested benefits in an amount to be determined under the Act. In plain English, the amount of an employer s withdrawal liability is based upon both the amount it has contributed to a fund and the amount that the fund is in the red.

22 Withdrawal Complete withdrawal occurs when an employer: Permanently ceases to have an obligation to contribute under the plan, or permanently ceases all covered operations under the plan. A complete withdrawal is either the date of the cessation of the obligation to contribute or the cessation of covered operations.

23 Withdrawal ctd. Partial Withdrawal occurs on the last day of the pension plan s plan year in which there is either: a seventy percent (70%) decline in contribution base units ( CBUs ) the decline must occur in the current plan year and the two prior plan years the decline is measured by the average of the 2 highest years of CBUs in the preceding 5-year period a partial cessation of the employer s contribution obligation either by a takeaway of a union contract or a union facility; or contracting out of a bargaining unit to a company controlled by the employer may also result in a partial withdrawal.

24 Liability Who is liable? Common Control. All trades are businesses under common control are linked for withdrawal liability purposes.

25 Who is Liable for Withdrawal Liability? Successor Liability A party can be liable for the withdrawal liability of a predecessor business if: the party had prior notice of the withdrawal liability; and there has been substantial continuity in the business operations of the predecessor and the successor.

26 How does a withdrawal liability matter proceed? Initial Steps Estimate. Every employer contributing to a multiemployer pension fund should request an estimate in writing every year. Assessment. After an employer withdraws, the Fund is obligated to issue a withdrawal assessment. However there is no set deadline for the Fund to issue an assessment. The statute states the Fund must do so as soon as practicable. Courts have not ruled uniformly on this issue, but at least one court has held that a Fund has as much as six years to issue an assessment.

27 How does a withdrawal liability matter proceed? ctd. Payment Payment Schedule vs. Lump Sum Payment. Generally a pension fund will demand either payment of the entire assessed amount in a lump-sum or payments under a payment schedule. Many Funds will not offer a payment schedule if the employer has ceased business or if the Fund otherwise feels it is at risk of not being paid and there is language in ERISA that permits this. Payments must begin within 60 days after the pension plan s demand for payment. Central States requires monthly payments. Payments must be made even if the employer challenges the assessment of withdrawal liability. Default. Upon a default in making a payment, which is not cured within 60 days of written notice from the plan, the plan may accelerate the debt plus interest accrued to date. Collection. Withdrawal liability is treated like a delinquent contribution and can be collected by litigation brought in the federal courts. This includes liquidated damages, interest, attorneys fees and costs.

28 How does a withdrawal liability matter proceed? ctd. Contesting Withdrawal Liability Assessment Request Review. The employer must request review within 90 days of receipt of notice of the Fund s assessment of withdrawal liability. The Fund will respond by modifying the assessment, denying the request, or doing nothing.

29 How does a withdrawal liability matter proceed? ctd. Arbitration. It is the employer s obligation to demand arbitration in a timely manner. The time limit depends on whether the plan responds to the request for review, so it is critical to keep track of these deadlines, but the longest time limit is approximately 6 months from the date the employer s request for review is filed. All of the procedural requirements for the arbitration process must be followed. The plan s determinations are presumed correct and the burden is on the employer to overcome that presumption by a preponderance of the evidence. Court Appeal. Arbitration decisions are enforceable in federal court and the factual findings of the arbitrator are presumed correct.

30 How does a withdrawal liability matter proceed? ctd. Payment to the Fund Must Continue. An employer must continue to make withdrawal liability payments while the dispute and arbitration are pending.

31 Exemptions, Limitations, and Special Issues The Construction Industry Exemption Withdrawal. For qualifying construction industry employers the definitions of complete withdrawal and partial withdrawal are modified. A complete withdrawal only occurs when an employer ceases to have an obligation to contribute under the plan, and the employer either: continues to perform work in the jurisdiction of the collective bargaining agreement of the type for which contributions were previously required, or resumes such work within 5 years after the date on which the obligation to contribute under the plan ceases, and does not renew the obligation at the time of the resumption.

32 Exemptions, Limitations, and Special Issues The Construction Industry Exemption Complete Withdrawal Required A qualifying employer who completely ceases business does not incur a withdrawal Ceasing only the work covered by the Union s collective bargaining agreement may suffice. However, shifting the work to other employees or subcontracting the work likely will result in an assessment from the pension fund, claiming the employer did not cease the work.

33 Exemptions, Limitations, and Special Issues To Qualify for the Exemption the Company must meet these three requirements: The pension plan must either primarily cover employees in the building and construction industry or must be amended to provide for this exception for employees in the building and construction industry. The employer must have an obligation to contribute under the pension plan for work performed in the building and construction industry; and, Substantially all of the employees for whom the employer has an obligation to contribute under the plan perform(ed) work in the building and construction industry.

34 Exemptions, Limitations, and Special Issues The Construction Industry Exemption, ctd. The phrase building and construction industry is not defined in ERISA, but courts generally require that employers establish that on-site work was a substantial part of both the employees work and of the employer s business. The Company must establish that substantially all of its covered employees work in the building and construction industry. Courts have held that substantially all means 85% or more. Keep in mind that the employer is the entire group of businesses under common control, not just the one company.

35 Legislative Fixes: THE MPRA The Multiemployer Pension Reform Act of 2014 was enacted in December The MPRA made major changes to the law of multiemployer pension funds. The MPRA permits the merger and partition of multiemployer plans The Pension Benefit Guaranty Corporation s (PBGC) may give financial and other assistance to facilitate the merger of multiemployer plans if in the best interest of at least one of the plans and not adverse to the beneficiaries of the other plan.

36 Legislative Fixes: THE MPRA Partition. Upon application by a plan sponsor, the PBGC may order the partition of a multiemployer plan in critical and declining status if: the PBGC determines all reasonable measures have been taken to avoid insolvency (including the maximum benefit suspensions set forth elsewhere in the statute); it reasonably expects partition of the plan will reduce the PBGC s expected long-term loss with respect to the plan; partition is necessary for the plan to remain solvent; and the PBGC certifies to Congress that its abilities to meet existing financial assistance obligations to other plans will not be impaired by such partition.

37 Legislative Fixes: THE MPRA Allows the suspension or reduction of benefits prior to insolvency if a pension fund is in critical and declining status it can amend or suspend benefits. A plan is in critical and declining status if it is projected to become insolvent during the current plan year or any of the 14 succeeding plan years. A retiree representative must be selected to advocate for the interests of the retired members of the plan in plans with 10,000 or more participants.

38 Legislative Fixes: THE MPRA Conditions for reductions or suspensions: the plan actuary certifies the plan is projected to avoid insolvency, taking into account the proposed changes, and the sponsor determines the plan is still projected to become insolvent unless benefits are reduced or suspended although all reasonable measures to avoid insolvency have been taken.

39 Legislative Fixes: THE MPRA Approval of suspensions: The plan sponsor must submit an application to the Secretary of the Treasury. The Secretary of the Treasury, in consultation with the PBGC and Secretary of Labor shall approve the application upon finding the plan is eligible for the suspensions and has satisfied the criteria from the statute. An application will be deemed approved unless within 225 days the Secretary of Treasury notifies the plan sponsor that it has failed to satisfy a particular criteria from the statute.

40 Legislative Fixes: THE MPRA Approval of suspensions (continued): No suspension of benefits can take effect prior to a vote of the participants of the plan, and the suspension shall take effect following the vote unless a majority of plan participants and beneficiaries vote to reject the suspension. However, if the Secretary of the Treasury determines the plan is systemically important, the Secretary can permit the proposed benefits suspensions despite the rejection vote. A plan is considered systemically important if the PBGC projects the present value of projected financial assistance payments exceeds 1 billion dollars if suspensions are not implemented.

41 Thank you for listening. Questions? Comments?