A federal appeals court ruled that candy company Just Born, which has been looking to end pension contributions for new employees, could not block workers from its pension plan without paying a penalty.
The ruling by the US 4th Circuit Court of Appeals affects several hundred Just Born production employees, who are members of the Bakery, Confectionary and Tobacco Workers International Union, Local Union 6.
Just Born was appealing a district court’s ruling that required the company to pay delinquent contributions into the Bakery and Confectionary Union and Industry International Pension Fund, as well as interest, statutory damages, and attorneys’ fees. The company argued that the district court misapplied the federal statute governing multiemployer pension funds in critical status.
Just Born and the union had signed a collective bargaining agreement (CBA) governing employment at its Philadelphia confectionary plant from March 1, 2012, to February 28, 2015. The CBA required Just Born to contribute to the pension fund, which is an employee benefit plan and multiemployer pension fund governed by the Employee Retirement Income Security Act of 1974 (ERISA). The contributions were to be paid from the first day an employee starts work, according to the CBA.
However, while the CBA was still in effect, the pension fund’s actuaries certified it to be in critical status, indicating the fund’s assets and expected contributions wouldn’t be enough to meet its projected future obligations. As a result, the fund’s board of trustees developed a rehabilitation plan as legally required for multiemployer plans in critical status.
Just Born and the union agreed on a revised contribution schedule that also required Just Born to begin making contributions on an employee’s first day of work. The revised schedule also required Just Born to increase its pension fund contributions by 5% annually.
The company had been contributing to the fund under the revised schedule as promised— until negotiations for a new CBA with the union faltered. As part of the negotiations for a new agreement, Just Born insisted that it shouldn’t be required to contribute to the fund for new employees.
The appeals court upheld the district court’s ruling that “Just Born seems to be trying to walk the line” between avoiding the contributions required under rehabilitation plan schedules, while avoiding withdrawal liability by removing itself from the fund by attrition, “making each new hire an effective withdrawal without acknowledging withdrawal in a way that would trigger the withdrawal penalty.”
The appeals court ruled that “Just Born can either withdraw and pay the penalty for doing so, or remain and make the required payments under the Provision; it cannot avoid both obligations.”
Just Born CEO Ross Born said the company was disappointed with the ruling, but will explore its options and next steps, according to the Allentown Morning Call.