Trustees of the Chicago Regional Council of Carpenters Pension Fund et al v. Union Payroll Agency, Inc.
Filing
48
MEMORANDUM Opinion and Order Signed by the Honorable Michael T. Mason on 8/15/2011.(rbf, )
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
TRUSTEES OF THE CHICAGO REGIONAL
COUNCIL OF CARPENTERS PENSION FUND,
CHICAGO REGIONAL COUNCIL OF CARPENTERS
WELFARE FUND, and CHICAGO REGIONAL
COUNCIL OF CARPENTERS APPRENTICE &
TRAINEE PROGRAM FUND,
Plaintiffs,
v.
UNION PAYROLL AGENCY, INC.,
Defendant.
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No. 09 CV 6029
Magistrate Judge
Michael T. Mason
MEMORANDUM OPINION AND ORDER
Michael T. Mason, United States Magistrate Judge.
Plaintiffs, Trustees of the Chicago Regional Council of Carpenters Pension Fund,
Chicago Regional Council of Carpenters Welfare Fund, and Chicago Regional Council
of Carpenters Apprentice & Trainee Program (“plaintiffs”), filed this action under Section
502 of the Employee Retirement Income Security Act (“ERISA”), 29 U.S.C. §1132, and
Section 301 of the Labor Management Relations Act (“LMRA”), 29 U.S.C. §185.
Plaintiffs contend that defendant Union Payroll Agency, Inc. (“UPA” or “defendant”)
owes plaintiffs $35,417.80 in additional benefit contributions on behalf of one individual,
Christopher J. Rademacher, covering the period of December 2003 through March
2007. (Pls.’ Mot. for Summ. J. at 2 [27].) Specifically, plaintiffs contend that, based on
his salary and supervisory functions, Rademacher fell under certain “160 hour rule”
provisions in the applicable Commercial Area Agreement, and thus defendant should
have reported him at the minimum monthly amount of 160 hours for that time period.
Plaintiffs also seek to recover $12,711.01 in interest and $7,083.56 in liquidated
damages, and request an award of their reasonable fees and costs. (Id.)
In September 2010, the parties consented to the jurisdiction of the undersigned
judge for all future proceedings in this matter pursuant to 28 U.S.C. §636(c) [14]. This
matter is currently before the Court on the parties’ motions for summary judgment. For
the reasons set forth below, plaintiffs’ motion [27] is granted and defendant’s crossmotion [25] is denied.
BACKGROUND1
To state that this is “not a typical ERISA case” is an understatement. (See Def.’s
Reply at 3 [45].) Here, defendant is not a construction contractor directly employing
individual union members such as carpenters. (Id.) In fact, defendant provides payroll
services to businesses employing union labor in the entertainment, tradeshow, and
sporting events industries nationwide. Those services include processing weekly
payroll and, in certain situations, submitting monthly benefit report forms and
contributions to union fringe benefit funds based on hours reported directly by clients via
telephone or recorded on weekly time sheets. In exchange for defendant’s services,
defendant’s clients agree to pay defendant an administrative fee along with payment for
certain employees’ wages, benefits, state and federal taxes, and insurance necessary
to cover the clients’ payroll.
The Chicago Regional Council of Carpenters (the “Union”) negotiated a collective
bargaining agreement (the “Commercial Area Agreement”) with the Mid-America
1
Unless otherwise noted, the facts set forth in this opinion are undisputed.
2
Regional Bargaining Association that was in effect from June 1, 2005 through May 31,
2008. (Pls.’ Ex. 10 [30-11].) Among other things, that agreement states that it is
“effective ... for and on behalf of the present and future members, together with such
other employers who become signatory to this Agreement (referred to herein as
“Employer or Employers”) ....” (Id. at 1.)
In October 1998, defendant signed a Memorandum of Agreement with the Union,
wherein defendant agreed to be bound by the Commercial Area Agreement. (Pls.’ Ex.
13 [30-14].)2 The Memorandum of Agreement defines defendant as the “EMPLOYER.”
(Id. at 1.) Under that agreement, defendant agreed, among other things, “to make
prompt payments for the per hour contributions with respect to each Trust Fund for all
Employees performing bargaining unit work and/or covered by the Agreement including
nonbonded and nonsignatory subcontractors as required by the applicable provisions of
each agreement.” (Id. ¶ 3.)
In December 2003, defendant and Performance Tradeshow Group (“PTG”), a
non-party in this case, entered into an agreement whereby defendant agreed to process
payroll and union benefit contributions for PTG. PTG operated out of Las Vegas,
Nevada, in the business of installing and dismantling tradeshow exhibits. From
December 2003 through April 2007, Rademacher was president and 50% shareholder
of PTG. Defendant and PTG’s contract consisted of a one-page form, signed on behalf
2
While the Memorandum of Agreement predates the effective dates of the applicable
Commercial Area Agreement, the parties do not dispute that defendant agreed to be bound by
the applicable Commercial Area Agreement. Indeed, the Memorandum of Agreement states
that defendant would be bound by certain Area Agreements then in effect, and that the
Memorandum of Agreement “shall continue in full force and effect through the full term and
duration of all subsequent agreement(s).” (Id. ¶¶ 2, 4.)
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of PTG by Rademacher with the surname “John,” with PTG named as the “Client.”
(Pls.’ Ex. 4 [30-5].) Directly above that signature, the contract states: “Client agrees to
abide by all terms and conditions of Union Bargaining Agreement.” (Id.) PTG has
never been signatory to a collective bargaining agreement with the Union. Rademacher
first held a Union membership card in 1986 and was reported as a journeyman
carpenter by signatory employers before December 2003. During periods relevant to
this lawsuit, Rademacher was a member of the Union, Local 10.
The parties do not dispute that the Commercial Area Agreement required
defendant to pay monthly fringe benefit contributions to plaintiffs on behalf of covered
employees. Defendant expressly states as much in its cross-motion, and cites pages
14-22 of the Commercial Area Agreement as support. The parties also agree that the
Commercial Area Agreement required defendant to make contributions measured by
the hours worked by subcontractors that are not signatory to an agreement with the
Union. Further, the parties do not dispute that defendant reported hours on behalf of
Rademacher at the consistent rate of 80 and 100 hours per month from December 2003
through March 2007; that defendant paid benefit contributions to plaintiffs on behalf of
Rademacher during that time period; and that by reporting at or around the minimum
quarterly eligibility requirement of 250 hours, defendant enabled Rademacher to
maintain health and welfare benefits through the Trust Funds on a weekly basis for
approximately three years.3 Finally, the parties agree that, by way of state wage
reports, payroll checks, W-2 statements, and Trust Fund contribution reports, defendant
3
Defendant based its payroll reports on hours submitted by Rademacher by facsimile.
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represented to plaintiffs, among others, that Rademacher was defendant’s employee.
(Pls.’ Ex. 9 [30-10]; Pls.’ Ex. 7 ¶11 [30-8].)4
At the heart of this case is the parties’ disagreement regarding whether three
particular provisions of the Commercial Area Agreement, each embodying the so-called
“160 hour rule,” require defendant to make additional contributions on Rademacher’s
behalf. The first such section states:
The EMPLOYER may make contributions for all hours worked by
Superintendents and other management personnel for whom contributions
to the Health and Welfare Fund were heretofore made when such
individuals were employed as journeymen Carpenters. Such contributions
shall be made in a monthly amount equal to at least 160 times the hourly
contribution rate specified in this Article.
(Pls.’ Ex. 10 §12.8.) Sections 13.6 and 14.6 contain identical reporting and payment
requirements relative to plaintiffs’ Pension Fund and Training Fund, respectively. (Id.
§§13.6, 14.6.) According to the parties, "[t]he purpose of the ‘160 hour rule' is to allow
employees who previously participated in the Trust Funds to continue to participate in
the Plaintiffs' Health and Welfare Plans after they become supervisory or management
employees of a signatory Employer and no longer perform bargaining unit work." (Pls.’
Ex. 6 - J. Libby Decl. ¶ 7 [30-7]; Pls.’ LR 56.1(b)(3) Resp. to Def.’s LR 56.1 Statement of
Material Facts ¶ 31 [34].)
Additionally, the parties disagree in their characterizations of Rademacher’s job
4
Notwithstanding those representations, defendant’s president Gary Wright testified at his
deposition that the individuals listed on defendant’s contribution reports were “not what we
[defendant] consider our direct employees, no. They are employees that we have payroll for on
behalf of our individual clients.” (Pls.’ Ex. 3 - G. Wright Dep. at 37-38 [30-4].) However, Wright
later testified that, given defendant’s submissions to various tax authorities, “in the eyes of the
state and federal government, yes,” “[t]hey would consider Mr. Rademacher an employee of
UPA,” [b]ecause that’s what we did. We payrolled Mr. Rademacher. Yeah, we employed him.”
(Id. at 44.)
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responsibilities during the relevant time period. However, after reviewing the evidence
submitted on that issue, we find no material issue of disputed fact. As a result, rather
than parse the parties’ submissions under Local Rule 56.1, this Court will summarize
the pertinent evidence in the record before it.5 During his deposition, when asked about
his “personal responsibilities with” PTG (without any time period specified), Rademacher
testified as follows:
A.
Q.
A.
Q.
A.
Q.
A.
Q.
A.
Q.
A.
I had a variety of duties, Dave, sometimes I would be on the floor
checking the labor in, making sure the guys were setting up the
exhibits correctly.
What do you mean by making sure they set up the exhibits
correctly?
Well, we would give the guys a blueprint at 8:00 o’clock in the
morning.
Are these carpenters?
Not carpenters, in Las Vegas they’re Teamsters, that’s who has the
jurisdiction at the convention center is Teamsters. So I would line
the guys up, we might have a 30-man call, and I’d say, Manny, Mo,
and Jack, here’s a set of blueprints, go over to Booth 907, get
started on it, verify your booth, verify your electrical layouts, and I’ll
come by in an hour, make sure you’re on the right program.
Okay, did you ever assist in the installation work?
No.
Never?
No.
Okay.
Because I was not part of the local Teamsters union out there.
(Pls.’ Ex. 5 - Rademacher Dep. at 7-8 [30-6].) At no point during that portion of his
testimony did Rademacher – or the attorney questioning him – use the word “supervise”
to describe what Rademacher did at PTG’s job sites. Subsequently, Rademacher
testified as follows:
5
Each side also requests that the Court strike portions or the entirety of some of the other
side’s statements of facts as supposedly unsupported by the evidence cited. Given our ruling
herein, it is unnecessary for us to separately resolve those requests.
6
Q.
Q.
A.
Q.
A.
Last question, because I think we need some clarity.
When you were supervising Teamsters on the job sites, were you
ever working with the tools?
No.
You never once worked with tools?
Dave, I worked with tools back in 1984. By the time I started this
company, my tools were so rusty and my knees were so bad – no, I
don’t carry my tools anymore.
(Id. at 19-20.)6 While here again, Rademacher did not use the word “supervise” to
describe his responsibilities, he did not object to plaintiffs’ counsel’s use of the word in
describing those responsibilities.
Additionally, when asked about his understanding of the relationship between
PTG and defendant, Rademacher testified as follows:
The understanding was that I hired them to do our payroll for all of our
guys which they would do the union benefits, take out the taxes, make
sure benefits were paid to Southwest Administrators which was way over
my head – or I should also say over my head, but I didn’t have the time to
try and get into that, because I also ran the business, the banking, getting
the insurance liability, keeping up with our – just trying to keep up with
everything else to keep the company running, whether it was our
American Express bills, our cell phone bills, you know, the whole gambit
that it takes to run a business.
(Pls.’ Ex. 5 at 8-9.) Rademacher also testified that, during the period of December 2003
through March 2007, he was never a corporate shareholder, an officer, or a supervisor
of defendant. (Id. at 16.) The parties agree that during that time period, Rademacher
paid himself, as co-owner of PTG, a yearly salary of approximately $50,000.00.
LEGAL STANDARD
Summary judgment is appropriate when the “pleadings, the discovery and
6
While defendant contends that Rademacher never testified that he supervised at the job site,
defendant does not dispute that Rademacher testified that he never assisted in the installation
work and that he never worked with tools while working on the job site.
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disclosure materials on file, and any affidavits show that there is no genuine issue as to
any material fact and that the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(c). The moving party bears the initial burden of demonstrating there is no
genuine issue of material fact, and judgment as a matter of law should be granted in
their favor. Id. Once the moving party has met the initial burden, the non-moving party
must offer more than a mere scintilla of evidence to survive summary judgment. Roger
Whitmore's Auto. Servs. v. Lake County, Ill., 424 F.3d 659, 667 (7th Cir. 2005). The
non-moving party must produce specific facts showing there is a genuine issue of
material fact, and that the moving party is not entitled to judgment as a matter of law.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986). All evidence and inferences
must be viewed in the light most favorable to the non-moving party. Id. at 255.
DISCUSSION
In this case, there is no dispute over the material facts. The issue presented is
solely one of contract interpretation – a question of law. Murphy v. Keystone Steel &
Wire Co., 61 F.3d 560, 564-65 (7th Cir.1995). Resolution at the summary judgment
stage is therefore appropriate. Id.; accord LaSalle Nat'l Bank v. General Mills
Restaurant Group, Inc., 854 F.2d 1050, 1052 (7th Cir. 1988) (“If a judge can make
sense of a contract without hearing testimony, his duty is to construe the contract
without letting the parties introduce any evidence other than the contract itself.”).
Because this case was brought pursuant to ERISA and the LMRA, federal
common law principles govern. GCIU Employer Retirement Fund v. Chicago Tribune
Co., 66 F.3d 862, 864-65 (7th Cir 1995); Dexter Axle Co. v. International Ass’n of
Machinists & Aerospace Workers, Dist. 90, Lodge 1315, 418 F.3d 762, 766 n.1 (7th Cir.
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2005). When interpreting contracts under those principles, “terms are given their
ordinary and popular meaning, the document is read as a whole with all its parts given
effect, and related documents are read together.” Temme v. Bemis Co., Inc.
622 F.3d 730, 734 (7th Cir. 2010) (citations and internal quotations omitted). Contract
language is ambiguous “if there is more than one reasonable interpretation of it, and
only if the ambiguity is not clarified elsewhere in the document will a court resort to
extrinsic evidence of the parties' intent.” Id. at 734-35.
While both parties contend that §§ 12.8, 13.6, and 14.6 are unambiguous, they
dispute whether those provisions require defendant to make additional contributions on
Rademacher’s behalf. Again, those provisions state:
The EMPLOYER may make contributions for all hours worked by
Superintendents and other management personnel for whom contributions
to the [Health and Welfare Fund, Pension Fund and Training Fund] were
heretofore made when such individuals were employed as journeymen
Carpenters. Such contributions shall be made in a monthly amount equal
to at least 160 times the hourly contribution rate specified in this Article.
For their part, plaintiffs argue that because Rademacher was a former
journeyman carpenter who had previously been reported to plaintiffs, and because he
worked in a managerial position during the period defendant reported and made
contributions on his behalf, defendant’s contributions should have been at the minimum
rate of 160 hours per month. For its part, defendant maintains that because it –
defendant Union Payroll Agency – never employed Rademacher as a superintendent or
manager, defendant is not obligated to make any further contributions on his behalf.
Defendant relies heavily on the fact that John Libby, the Audit & Collections
Manager of plaintiffs’ Employer Contributions Department, stated in a declaration that
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the purpose of the 160 hour rule is to allow certain employees to “continue to participate
in the Welfare and Pension Funds after they become supervisory or management
employees of a signatory Employer and no longer perform bargaining unit work.” (Pls.’
Ex. 6 - John Libby Decl. ¶ 7 - emphasis supplied.) Defendant contends that the
emphasized language “clearly expresses the parties’ intent that an employee does not
fall within the scope of sections 12.8, 13.6 and 14.6 unless the employee becomes a
supervisory or management employee of a signatory Employer.”
Putting aside the unsupported mind-reading implicit in defendant’s argument, this
Court need not delve into what the parties may have intended with respect to the 160hour rule provisions. Indeed, “post-formation interpretations say nothing about what
was intended at the time in which the parties entered into the agreement.” Ooley v.
Schwitzer Div., Household Mfg. Inc., 961 F.2d 1293, 1299 (7th Cir. 1992). Here, the
plain language of the provisions at issue, and consideration of other provisions in the
Commercial Area Agreement, require the conclusion that the provisions in fact required
defendant to make additional contributions on Rademacher’s behalf.
First, notwithstanding Mr. Libby’s declaration, the provisions at issue do not
expressly refer to the entity employing “the Superintendents and other management
personnel” involved. The provisions refer simply to “Employer” making certain
contributions on certain individuals’ behalf. As for the definition of “Employer,” the
Commercial Area Agreement states that it is “effective ... for and on behalf of the
present and future members, together with such other employers who become signatory
to this Agreement,” and collectively defines those entities as “Employer or Employers.”
(Pls.’ Ex. 10 at 1.) Further, the parties’ Memorandum of Agreement, wherein defendant
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agreed to be bound by the Commercial Area Agreement, expressly defines defendant
as “Employer.” (Pls.’ Ex. 13 at 1, ¶¶ 2, 4.) Thus, the requirement that defendant must
itself employ Rademacher in a managerial capacity simply does not exist based on a
plain reading of the provisions at issue.
Second, defendant’s argument fails to account for the fact that defendant
considered itself to be an “Employer” vis a vis Rademacher for purposes of other
provisions of the Commercial Area Agreement. In defendant’s own words, “[t]he
Commercial Area Agreement required UPA to pay monthly fringe benefit contributions
to the plaintiffs on behalf of covered employees,” and “pursuant to the Commercial Area
Agreement, UPA submitted monthly benefit contributions to the Plaintiffs on behalf of
Rademacher.” (Def.’s Mem. at 4, 5 [26].) Thus, defendant clearly considered itself to
be an “Employer” for purposes of making benefit contributions under various sections of
the Commercial Area Agreement other than the 160-hour rule provisions disputed here.
However, the Agreement contains only one definition of “Employer.” Defendant has
provided no explanation to this Court – and we cannot fathom one – wherein defendant
should be considered the “Employer” for purposes of some of the Agreement’s
provisions but not others. “[I]t is well established that we are to read collective
bargaining agreements as a whole.” International Bhd. of Elec. Workers, Local 176 v.
Balmoral Racing Club, Inc., 293 F.3d 402, 406 (7th Cir. 2002) (citation omitted). Thus,
defendant, as “Employer,” must fulfill all of the applicable obligations under the
Commercial Area Agreement, not just those of defendant’s picking and choosing.7
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While not necessary to our holding or discussed by either party, ERISA provides that: "The
term ‘employer' means any person acting directly as an employer, or indirectly in the interest of
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Notably, defendant’s argument also has ridiculous implications. Taken to its
“logical” conclusion, the disputed provisions would only apply to defendant when a
journeyman carpenter quits working for a construction contractor or subcontractor and
becomes employed as a manager for a payroll company. The record before us
provides no support for such a career move to trigger applicability of the disputed
provisions. And what to make of the word “Superintendents” under such an
interpretation? We cannot conceive – and again, defendant fails to explain – what sort
of work payroll companies engage in that might require employment of a
superintendent. We decline to endorse such a reading of those provisions. Ooley, 961
F.2d at 1301.
In sum, we conclude that defendant is an “Employer” under Commercial Area
Agreement for purposes of §§ 12.8, 13.6, and 14.6 and must comply with those
provisions. However, that conclusion does not end the matter. As the parties note,
those provisions are “permissive” – that is, it is only if an Employer makes contributions
for certain “Superintendents or other management personnel” that it must make those
contributions in a monthly amount equal to at least 160 times the specified hourly
an employer, in relation to an employee benefit plan; and includes a group or association of
employers acting for an employer in such capacity." 29 U.S.C.A. § 1002(5). Here, defendant
does not appear to have acted directly as Rademacher's employer, i.e., by directly employing
him, as that phrase is conventionally, such as by interviewing, hiring, and sending him to job
sites as a journeyman carpenter or in any other capacity. Instead, the relationship defendant
had with Rademacher was by virtue of defendant's assuming responsibility for PTG's payroll
and fund contributions. But in voluntarily undertaking those responsibilities, defendant agreed
to represent itself to plaintiffs as the employer of the individuals on behalf of whom it reported.
ERISA's definition of "Employer" appears to specifically account for such a relationship, as it
includes "any person acting ... indirectly in the interest of an employer." As a result, whether or
not defendant "employed" Rademacher in the direct sense – as a manager or otherwise – does
not affect its obligations under the disputed provisions of the Commercial Area Agreement.
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contribution rate. While the parties have dueling characterizations of Rademacher’s job
responsibilities, the substance of his testimony went uncontradicted. Rademacher
testified that his duties included “checking the labor in,” “making sure the guys were
setting up exhibits correctly,” “distributing blue prints and directing employees to
commence work,” and verifying that employees were “on the right program.” He also
responded “no” when asked “[w]hen you were supervising Teamsters on the job sites,
were you ever working with tools?” That evidence squarely supports the conclusion that
Rademacher acted in a managerial capacity. As a result, because defendant opted to
make contributions on Rademacher’s behalf, §§ 12.8, 13.6, and 14.6 required
defendant to make those contributions in a monthly amount equal to at least 160 times
the specified hourly contribution rate. Thus, plaintiffs are entitled to summary judgment
as to defendant’s liability under the Commercial Area Agreement for the difference
between the amount defendant contributed on Rademacher’s behalf and the amount
defendant should have contributed pursuant to §§ 12.8, 13.6, and 14.6 of that
Agreement.
As for the amount owed by defendant, the parties do not appear to dispute the
amount of unpaid contributions, $35,417.80. While the parties’ LR 56.1 statements
make no reference to that amount, counsel agreed that was the approximate amount at
issue during a November 10, 2010 status hearing before this Court. Further, in
connection with their summary judgment motion, plaintiffs’ accountant submitted a
sworn itemization of the amounts due for unpaid contributions ($35,417.80), as well as
liquidated damages ($7,083.56), and interest ($12,711.01). (See Pls.’ Ex. 6(b) [30-7].)
Having no reason to doubt the accuracy of those calculations, we hold that plaintiffs are
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entitled to judgment against defendant in the amount of $52,212.37.
CONCLUSION
For the foregoing reasons, plaintiffs' motion for summary judgment [27] is
granted and defendant's cross-motion for summary judgment [25] is denied. Pursuant
to Fed. R. Civ. P. 58, the Clerk is directed to enter judgment in this matter in favor of
plaintiffs and against defendant in the amount of $52,212.37 (for $35,417.80 in unpaid
contributions, $7,083.56 in liquidated damages, and $12,711.01 in interest). Pursuant
to 29 U.S.C. §1132 (g)(2)(D), plaintiffs are entitled to their reasonable attorney's fees
and costs of the action. With respect to attorney’s fees, the parties shall proceed in
accordance with Local Rule 54.3. With respect to costs, plaintiffs shall file their bill of
costs by 8/29/11. Any objections by defendant shall be filed by 9/12/11. The parties
are very strongly encouraged to reach agreement on fees and costs.
It is so ordered.
ENTERED:
__________________________
MICHAEL T. MASON
United States Magistrate Judge
Dated: August 15, 2011
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