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Monday, February 24, 2020

Appellate court: Union trustees entitled to attorney fees when they had to sue an employer to force a payroll audit

State Court

By D.M. Herra | Nov 6, 2019

Dirksen flamingo federal

Trusts that manage health, pension and other benefits for unionized electrical workers may go after a company for legal costs they incurred when they had to sue the company to obtain payroll information needed to disburse the funds, a federal appeals panel has ruled.

The five trust funds manage the benefits guaranteed by a collective bargaining agreement between the International Brotherhood of Electrical Workers Local 494 and the Electrical Contractors Association Milwaukee Chapter, N.E.C.A. Inc. 

Under the Employee Retirement Income Security Act, such funds have the authority to audit the payroll records of companies subject to the agreement.

In 2017, trustees attempted a payroll audit at N.E.C.A. member Veterans Electric LLC. The company provided records for its union employees, but not for nonunion workers. Because the records they received only accounted for about half the company’s total reported payroll, the funds asked for payroll information of nonunion employees. Veterans refused.

The company later changed its mind and provided trustees with all the information, but only after the funds filed a lawsuit to allow them to complete the audit. Because the funds got what they wanted while the case was still in discovery, Veterans argued that the issue was moot. The district court granted summary judgment to Veterans. 

The union funds appealed to the U.S. Seventh Circuit Court of Appeals. 

There, Seventh Circuit judges Diane Wood, William J. Bauer and David Hamilton overturned the lower court.

“Rather than being moot, there exists a live dispute between the parties over attorney’s fees,” Bauer wrote in the court’s opinion.

By law, a fee award requires “at least some degree of success on the merits,” Bauer wrote. The district court found the merits of the case had not been tried because Veterans complied with the funds’ request and the trustees dismissed the original charges. But the circumstances of the compliance keep the issue in play, according to the appellate court.

“Veterans complied with the funds’ request for pertinent audit information after not only the threat, but the reality of litigation,” Bauer wrote. “Because the funds’ right to pursue attorney’s fees remains cognizable, this appeal remains ripe for adjudication.”

The Supreme Court has held that union trustees have the right to audit personnel records of employers to police companies’ reports of their liability. The collective bargaining agreement between N.E.C.A. and IBEW specifically gives trustees authority to seek whatever information they deem necessary.

“As part of a multiemployer association, Veterans became a signatory employer and bound to these trust agreements,” Bauer wrote. “Certain sections of these agreements explicitly bind the employer to provide relevant information in connection with administering the funds.”

Because the funds were authorized to perform the audit, request the information and file litigation when their request was denied, they may return to the lower court to seek their attorney’s fees, the court wrote. Veterans’ cross-appeal seeking its own attorney’s fees was denied.

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Organizations in this Story

U.S. Court of Appeals for the Seventh CircuitNational Electrical Contractors AssociationIBEW LOCAL 494

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