Obligation to Make Local Fund Contributions on General Presidents Maintenance Agreement Projects Turns on Whether Contractor Signed Local Agreements

May 18, 2009
The U.S. Court of Appeals for the Sixth Circuit (KY, MI, OH, TN) has issued two opinions in recent months addressing whether contractors signatory to the General President's Project Maintenance Agreement (GPPMA) were liable for contributions to certain local funds. In Mechanical Contractors' Association Industry Promotion Fund v. GEM Industrial, Inc., the court found that the contractor was liable for contributions to the funds.  GEM Industrial was signatory to two local agreements with Pipefitters Local 636, one negotiated by the Metropolitan Detroit Plumbing and Mechanical Contractors Association and one negotiated by the Association of Service and Mechanical Contractors of Southeastern Michigan.  The Metropolitan Detroit agreement provides that the employer will make certain contributions either to the signatory association's industry fund or, at its election, to the Pipefitters Local 636 Insurance Fund instead.  The Southeastern Michigan agreement provides that the employer will contribute a certain amount to the signatory association's industry fund.  GEM and the United Association (the international union with which Pipefitters 636 is affiliated) were also signatory to the GPPMA.  GEM was hired to perform maintenance work on a power plant covered by the GPPMA.  The GPPMA states that signatory contractors are not required to become signatory to a local collective bargaining agreement.  It further states, "Only bona fide fringe benefits which accrue to the direct benefit of the individual craft employee are required...Construction industry promotional funds are not applicable under terms of this agreement."  GEM conceded that there was no express waiver of the contribution requirements set forth in the local agreements, but argued that the terms of a national agreement like the GPPMA supersede the terms of a local CBA if the two conflict.  The court rejected the argument.  Extrinsic evidence of contract parties' intent should only be considered when the contract language is ambitious, the court explained, but the language of the local agreements here is "entirely clear" that a contractor such as GEM must contribute the agreed-upon sum to the industry fund.  The court further found that there is no conflict between local and national agreements here because the GPPMA states only that fund contributions are not required; it does not say that they are not permitted.  "GEM cannot use a separate, non-conflicting contract to attempt to evade its obligations under the first contract," the court said.  A party cannot unilaterally relieve itself of contractual obligations simply by entering into a separate contract with a separate entity.  Moreover, GEM is unable to show that the parties intended for the GPPMA to supersede.  Even assuming that the labor parties to the local and national agreements are the same, the GPPMA's language does not indicate that it was intended to override or supersede other agreements between the parties.  Had the national agreement stated that it supersedes other agreements between the parties or had GEM not been a signatory to the local agreements, indicated the court, the result might be different.  The court faced the latter situation in the second case, Joint Administrative Committee of the Plumbing and Pipefitting Industry in the Detroit Area v. Washington Group Int'l, Inc., and found that the contractor was not liable for contributions.  Washington Group had been signatory to the GPPMA for over twenty years but was not signatory to the local agreements involved.  One of the local agreements required contractors to either contribute to the industry fund or to make like-kind contributions to the local apprenticeship fund.  The other local agreement required contributions to the industry fund or to the local insurance fund.  When Washington Group failed to make payments to the industry funds or to make like-kind contributions to the benefit funds above the normal benefit-fund payment obligations, the funds and their administrator sued. The fact that the local agreements give the contractor a choice between making contributions to the industry fund or to the insurance or apprenticeship funds "has no bearing on the responsibility of a contractor that did not sign the agreements," said the court.  If Washington Group has any liability in this case, it cannot arise from the local agreements alone.  But it cannot arise from the national agreement either, the court found, because the GPPMA expressly disclaims any obligation for contractor contributions to the industry funds.  In addition, the GPPMA provides that the administration and interpretation of the GPPMA lie exclusively with the General Presidents' Committee on Contract Maintenance. The committee has addressed this question twice before and twice concluded that a local agreement may not require a contractor to make like-kind benefit fund contributions in lieu of industry fund contributions.  The court observed that Washington Group signed the national agreement with the expectation that the committee would resolve any disputes over the meaning of the contractual language, and the court found the committee's interpretation is reasonable and deserving of respect.  Finally, the court noted that a different result might be warranted if the national agreement did not limit the obligation to pay locally negotiated benefits to bona fide fringe benefits that accrue to the direct benefit of the individual employee or if the governing authority interpreted the contract language differently.
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