Olms interpretative Manual

PAYMENTS EXCEPTED UNDER TAFT-HARTLEY:PAYMENTSTOWELFAREANDPENSIONTRUST

253.701LMRA,SECTION302(c)(5)

. . . with respect to money or other thing of value paid to a trust fund established by suchrepresentative, for the sole and exclusive benefit of the employees of such employer, and theirfamilies and dependents (or of such employees, families, and dependents jointly with theemployees of other employers making similar payments, and their families and dependents):Provided, That (A) such payments are held in trust for the purpose of paying, either fromprincipal or income or both, for the benefit of employees, their families and dependents, formedical or hospital care, pensions on retirement or death of employees compensation for injuriesor illness resulting from occupational activity or insurance to provide any of the foregoing, orunemploymentbenefitsorlifeinsurance,disabilityandsicknessinsurance,oraccidentinsurance; (B) the detailed basis on which such payments are to be made is specified in a writtenagreement with the employer, and employees and employers are equally represented in theadministration of such fund, together with such neutral persons as the representatives of theemployersandtherepresentativesofemployeesmayagreeuponandintheeventoftheemployer and employee groups deadlock on the administration of such fund and there are noneutral persons empowered to break such deadlock, such agreement provides that the two groupsshall agree on an impartial umpire to decide such dispute, or in event of their failure to agreewithin a reasonable length of time, am impartial umpire to decide such dispute shall, on petitionof either group, be appointed by the district court of the United States for the district where thetrust fund has its principal office, and shall also contain provisions for an annual audit of the trustfund, a statement of the results of which shall be available for inspection by interested persons attheprincipleofficeofthetrustfundandatsuchotherplacesasmaybedesignatedinsuchwritten agreement; and (c) such payments as are intended to be used for the purpose of providingpensions or annuities for employees are made to a separate trust which provides that the fundsheldthereincannotbeusedforanypurposeotherthan paying suchpensions or annuities . ..

253.705SCOPEOFPROVISION

Section505oftheLMRDA,1959,amendssection302(c) ofthe LMRA,1947, asamended,

to provide in part, the conditions under which contributions by an employer to a union health andwelfare fund can be made.Included are requirements that the payments into the fund be held intrust forthebenefitof employeesandtheirfamilies; thatthedetailedbasis onwhichthepayments are to be made is specified in a written agreement between the employee representativeand the employer; and that employees and employers are equally represented, together withneutral persons selected by them in administration of the fund.The Secretary of Labor does nothave the authority to enforce (nor normally to investigate) those sections of the Act which areamendments to the LMRA, 1947, as amended.

253.706PAYMENTSTOPLANSNOTMEETINGSTATUTORYCONDITIONS

Where an employer makes payments to a union or jointly administer pension, vacation, orwelfare plan created subsequent to the enactment of the Taft-Hartley Act which does notmeetthe conditions set forth in section 302(c)(5) and (6) of that Act, such payments are consideredpayments to a “labor organization or officer, agent, shop steward or other representative, oremployee of any labor organization” and must be reported on Schedule B of form LM-10, theEmployerReportingForm,pursuanttosection203(a)(1) oftheLMRDA.

253.710TRUSTEESSELECTEDBYUNIONSANDEMPLOYERASSOCIATIONS

In a situation where unions and employer associations, in the building trades industry,establish a trust fund pursuant to a collective bargaining agreement which is administered bytrustees selected by the unions and the employer associations in accordance with section302(c)(5) of LMRA, a question was raised as to the reportability (under section 203 of LMRDA)of payments made to such fund by an independent employer who enters into a similar agreementwith the same unions under which his contributions are accepted by the trustees and administeredfor his employees without such employer having any voice in the selection of the managementtrusteesorcontroloverthetrustees’actions.

The point in question was answered in a case brought under the LMRA.In the case ofUnited Marine Div., I. L. A., Local 333, A. F. of L. v.Essex Transp. Co., 216 F.2d. 410, 35LRRM 2049 (3d Cir. 1954), the U.S. Court of Appeals for the Third Circuit rendered a decisionwhichinsubstancewasasfollows:

Where a welfare fund, established by agreement between a union and an employer’sassociation, is operated by trustees chosen by the contracting parties, a promise, if any, by anemployer, who is not a member of the employers’ association, to make payments to trusteesof the fund is not a promise to make payment to representatives of any of the employer’semployees within the meaning of the statute prohibiting employers from making suchpayments.

Id. at 412-13.

The unionbroughtsuit intheDistrictcourt tocompelthe EssexTransportationCompanytomake payments, per oral agreement, to trustees of a welfare fund for employees.The defendantcontended that if the agreement was made, it was insufficient to hold them liable for paymentsbecause of the provisions of section 302, LMRA.In reversing the District Court’s judgmentwhichhadbeeninfavorofthedefendant,theCourtofAppealssaid,“Thepromiseallegedwasto pay these trustees.These trustees were not, in our judgment, representatives of the employees.Theywere trustees of awelfarefund.” Id.At412.

In view of the Third Circuit decision, it would appear that no reports are required under sectionin203oftheLMRDAwherepaymentshavebeenmadetotrustfundsundersimilarconditions.

(Revised:Dec.2016)

253.720DIRECTPAYMENTSTOUNION

A group of independent retail stores joined together as an informal organization ofemployers.These employers individually make payments to a local representing theiremployees for employee health and welfare benefits.Part of this money is used to pay thepremium on an insurance policy for employee benefits and the remainder is retained by the localtodefray the expense of administering the program.

The payments in question are payment to a labor organization and are therefore within thescope of section 203(a) (1) unlessthey are the kind referred to in section 302(c) of the LMRA.While it is true that section 302(c) (5) of LMRA exempts money paid to a trust fund establishedunder certain conditions for the purpose of providing employee health and welfare benefits, thepayments in question are not being made to a trust fund, but are paid directly to the local whichusespart of the money to pay the cost ofan insurancepolicy for employee benefits.
Under such circumstances, each employermaking payments to the local must report thesepayments.The amount to be reported is the entire amount which each employer pays the localandnotjustthedifferencewhichthelocalusestodefraythecostofadministeringtheprogram.

253.730PURPOSEOFEMPLOYER’SPAYMENTS

Section 302(c) (5) and (6) require that the employer’s payments must be used exclusively forcertain specified purposes.It is not sufficient that the disbursements be, “directly related to thewelfare of the union membership”; they must have one of the particular purposes specified in thestatute.

253.750PAYMENTTOUNIONOFFICERBYEMPLOYERFORPENSIONFUND

When a union officer is paid by the employer for services rendered in the capacity of aSecretary to a pension fund, both the union officer and the employer are required to report thetransaction.

253.760PAYMENTTOTRUSTFORLOSTTIME

FormLM-10 statesthat paymentsto a trustfund forperiods of “losttime” arenotrequiredtobe reported if they are either required by law or a bona fide collective bargaining agreement, ormadepursuant to a custom orpractice undersuchacollectivebargainingagreement.

253.770USEOFWELFAREFUNDMONEY

On appeal by the trustees of a jointly administered trust from an injunction granted by theDistrict Court to the Kroger Company to prevent the trustees from making certain expendituresof fund monies, the Court of Appeals reversed the District Court insofar as the lower court heldthat coverage under a section 302(c)(5) trust could not be extended to allow retired employees ofemployers, employees of the trust, and officers and employees of the union to participate asbeneficiaries under the trust.The Court held that persons within these categories may participateas beneficiaries under the trust: Provided, That (1) the retired employees were covered by thetrust while actively employed; and (2) the union (whose officers and employees may participateonly if the union contributes to the fund for them as an employer) may not participate in theselectionofemployertrustees.

Inregardtoemployeesofthetrust itself,theCourt heldthattheir coverageisnotimproper
even though the expense of their participation is effected by an internal book transfer fromsurplussinceitdoesnotinfringeonothercontributingemployers’ contributions“anymorethana cash wage and does not make the trust any less a contributor.”The Court also excluded thetrustfromparticipationintheselectionof employertrustees.Blassiev.KrogerCo., 345F.2d58,71,59LRRM2034(8thCir.1965),reversinginpart,Krogerv.Blassie,225F.Supp.300,55
LRRM2224 (E.D.Mo.1964).

NOTE:
The Court of Appeals sustained the District Court’s holding that (1) the acquisition anddevelopmentoflandtobeusedprimarilyforrecreationpurposesand(2)theoperationofapharmacy where drugs and medicines were available at discount prices to persons notcoveredunderthetrust,werenotproperpurposesonwhichtoexpend trustfunds.

(TechnicalRevisions:Dec.2016)