Labor & Employment – No punitive damages for tardy contributions to fund

Where unions sued a construction company for liquidated damages after it made a series of tardy payments to an employee health and welfare fund, the court joined three other circuits in holding that punitive damages are not recoverable in cases for late contribution payments under section 301 of the Labor Management Relations Act, or LMRA.

Background

A group of labor unions and the West Virginia Pipe Trades Health and Welfare Fund sued Nitro Construction for liquidated damages after Nitro made a series of tardy payments to the fund. The district court granted summary judgment to Nitro, holding that the liquidated damages constituted penalties and were therefore unrecoverable.

Analysis

The fund does not challenge the district court’s characterization of the liquidated damages provisions as penalties. Instead, it argues that such penal liquidated damages provisions should be enforceable here despite the general rule against them. It points to § 502(g)(2) of ERISA, which makes explicit provision for liquidated damages up to 20% in the case of companies with unpaid obligations to welfare and benefit funds like this one.

The court finds that position unpersuasive. ERISA § 502(g)(2) by its very terms does not support the fund’s position in this case. That section of ERISA only applies to “unpaid contributions.” All agree that Nitro’s contribution payments were tardy, but they were paid in full before this suit was commenced. And § 502(g)(2) does not reach such late—but paid—contributions. This court is in accord with other circuits in making this distinction and recognizing that § 502(g)(2) only applies to unpaid contributions.

The fund nevertheless argues that § 502(g)(2) provides evidence of a federal labor policy generally favoring punitive damages against companies in labor disputes. The court disagrees. ERISA does not speak to cases of tardy contributions. Congress deliberately chose not to include within § 502(g)(2)’s ambit contributions that were tardy but fully paid. Thus, while Congress displaced the common law rule against punitive damages for cases of unpaid contributions covered by § 502(g)(2), it did not similarly displace the common law rule in cases of tardy contributions. The common-law rule against punitive damages stands.

Nor can ERISA be read to evince an overarching federal policy favoring punitive damages in all labor disputes. Congress was very precise in detailing what ERISA’s liquidated damages provision covers and what it does not; it does not establish a general policy. The court accordingly joins the Sixth, Eighth and Ninth Circuits in holding that punitive damages are not recoverable in LMRA § 301 cases for late contribution payments.

The fund was not without opportunity for redress here. It could have pressed its suit for lost interest, a measure of actual damages for Nitro’s late payments. Moreover, if the fund does not like the application of the common law rule here and desires punitive damages for late payments, it may press that case before Congress.

Affirmed.

Dissent

(Wynn, J.): Federal labor law permits parties to agree under a collective bargaining agreement that liquidated damages may be recovered against an employer that is delinquent in making contributions to multiemployer plans. In this instance, where Nitro was late making its contributions in at least 17 instances over a 15-month period before the fund brought this lawsuit under § 301, the district court’s order granting summary judgment in favor of Nitro and against the fund should be reversed. Accordingly, I respectfully dissent from the contrary view of my good colleagues.

Plumbers & Pipefitters Local 625 v. Nitro Construction Services Inc. (Lawyers Weekly No. 001-041-22, 26 pp.) (J. Harvie Wilkinson III, J.) (James A. Wynn Jr., J., dissenting) Case No. 20-2080. Feb. 23, 2022. From S.D. W.Va. at Charleston (John T. Copenhaver, S.J.) Avrum Levicoff for Appellants. R. Booth Goodwin II for Appellee. 4th Cir.