Payment Of Benefit Contributions To Union Fund Does Not Bind Employer To CBA

The Third Circuit Court of Appeals recently affirmed a decision from the New Jersey District Court, finding that a construction company was not bound by a collective bargaining agreement simply by submitting remittance forms for its union employees.

Jayeff Construction Corporation ("Jayeff") is a general commercial contractor. Jayeff is an open shop, meaning that is does not require its employees to join or financially support a union. Jayeff did not sign a statewide collective bargaining agreement ("CBA"), although it has employed several members of the New Jersey Regional Council of Carpenters ("Carpenters' Union"). From 2003 though 2009, Jayeff voluntarily remitted benefit contributions to the New Jersey Carpenters Funds ("Funds") for five employees who were union members. Jayeff used remittance forms provided by the Funds to document the benefit contributions. The remittance forms contained the following statement in fine print – "[t]he Employer hereby acknowledges his or its agreement to the Collective Bargaining Agreement which requires the payment of the fringe benefits forwarded herewith."

Following an audit, the Funds issued a report that Jayeff owed almost $250,000 in back benefit contributions for other employees. Jayeff responded that it had no obligation to contribute on behalf of those employees because it was not a signatory to the CBA. The Carpenters' Union filed for arbitration. Jayeff refused to participate in the arbitration. In December 2010, an arbitrator concluded that Jayeff was bound by the CBA with the Carpenters' Union and ordered Jayeff to pay $392,000 to the Funds. When Jayeff refused to pay the money, the Carpenters' Union and the Funds filed a lawsuit in the United States District Court requesting that the Court confirm the arbitration award. Jayeff responded by requesting that the Court vacate the arbitration award.

The Third Circuit affirmed the decision of the District Court, holding that Jayeff was not a signatory to the CBA and thus was not responsible for paying the arbitration award.

Although it was undisputed that Jayeff did not sign a CBA, the Third Circuit noted that Jayeff may be bound by the CBA, and its agreement to arbitrate disputes, under certain circumstances. Specifically, Jayeff would bound if it signed a document that clearly referred to the CBA and if the circumstances show that Jayeff intended to be bound by a CBA, despite its failure to sign it.

The Court concluded that Jayeff's signing and submission of the remittance forms did not evidence an intent to be bound by the CBA. Additionally, the Carpenters' Union never attempted to enforce the CBA against Jayeff until seven years after Jayeff signed the remittance notices.

In today's age of declining private sector unionization, unions are looking for creative ways to bind employers to burdensome collective bargaining agreements. As this case illustrates, employers may be bound by a collective bargaining agreement and all its corresponding obligations without signing the agreement. Employers should seek legal advice before signing agreements or remitting contributions to a union.

Originally published on the Employer's Law Blog

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