GE wins arbitration vacating $228 million in withdrawal liability based on ERISA's building and construction exemption
Client(s) General Electric Company
In an important case involving the application of the building and construction industry exemption to pension withdrawal liability, Jones Day secured a victory for General Electric Company in two related arbitrations involving $228 million in liability sought by the Boilermakers Blacksmith National Pension Fund. The Fund alleged GE incurred a 70% decline partial withdrawal and, thereafter, a bargaining out partial withdrawal. GE challenged the assessments on the ground that it was exempt from withdrawal liability under ERISA's building and construction industry exemption set forth in 29 U S.C. §§ 1383(b)(1).
The Exemption excuses an employer from withdrawal if "substantially all the employees with respect to whom the employer has an obligation to contribute . . . perform work in the construction industry." GE was a mixed employer contributor to the Fund – it employed substantial numbers of unionized boilermakers in its field operations but also maintained a fabrication shop to support those operations. It made pension contributions on behalf of both its field and shop boilermakers. Arbitrator Richard McNeill, Jr., in an Opinion & Award issued December 11, 2023, found that the "substantially all" statutory language meant the Exemption applied not only to contributing employers with a workforce performing construction at a site but also to those employers with both a workforce performing construction at a site and with a non-construction shop or manufacturing contingent. As to the method to count employees for purposes of the "substantially all" test, he agreed with GE that the Exemption required a cumulative headcount test of 85% or more employees over an eight-year period. And he specifically rejected the Fund's assertion that the appropriate test was a monthly headcount test over eight years, finding that such narrow test would undermine the purposes of ERISA and lead to anomalous results. Based on the parties stipulation that 97% of GE's unionized boilermakers worked in field construction on a cumulative basis, Arbitrator McNeill granted GE's motions for summary judgment seeking vacatur of both assessments.
In The Matter of General Electric Company & Boilermakers-Blacksmiths National Pension Trust, Arbitrator Richard C. McNeill, Jr. (Dec. 11, 2023)
