Wyatt Employment Law Report


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PBGC Releases Annual Report: Multiemployer Program Deficit Overshadows Single-Employer Improvement

By Rachel K. Mulloy

The Pension Benefit Guaranty Corp. (PBGC) issued its annual report on Monday, November 17, 2014, presenting a mixed bag of good and (mostly) bad news. The PBGC was created in 1974 as a government insurance program for traditional employer-paid defined benefit pension plans. If an employer can no longer support its pension plan, the agency takes over the assets and liabilities and pays promised benefits to retirees up to certain limits. The federal agency, which insures pensions for about 41 million Americans, saw its deficit nearly double from $36 billion to about $62 billion in the latest fiscal year. The agency has run deficits for twelve straight years but this is the widest deficit in its 40-year history. The gap grew wider in recent years because of the weak economy, which triggered more corporate bankruptcies and failed pension plans. The PBGC’s pension obligations grew by $30.9 billion in 2014, to $151.5 billion, while assets used to cover those obligations only increased by $4.9 billion, to $89.8 billion. The agency stated the increased deficit is largely due to the worsening finances of some multiemployer pension plans.

The report projected the deficit in the multiemployer pension insurance program rose more than five-fold over the past year, from $8.3 billion in 2013 to $42.4 billion this past year. A multiemployer plan is one in which groups of businesses join with unions to provide pension coverage for workers. There are currently a total of approximately 1,400 multiemployer pension plans covering about 10 million workers. The increase in the program’s deficit is due in part to the estimate that several large pension plans will become insolvent over the next decade. The PBGC’s report further predicted that, unless Congress makes some changes, the multiemployer insurance program faces a greater than 50% chance of collapsing within the next eight years. That likelihood increases to 90% by 2025. If these projections prove true, millions of workers could be left without pensions and with only a fraction of the insurance payouts they had anticipated.

The PBGC’s maximum insurance benefit for retirees in multiemployer plans is less than $13,000.00 a year compared to the more than $59,000.00 for those in single-employer plans. The agency has said this means that workers with a $20,000.00-per-year pension and thirty years of service would lose more than $7,000.00 in annual benefits if the plan fails. And if the PBGC becomes insolvent, the agency would be left with only incoming premiums, causing payments to be just a fraction of previous levels. John Kline (R-Miss), Chairman of the House Education and Workforce Committee, has called the multiemployer pension system “a ticking time bomb that will inflict a lot of pain on workers, employers, taxpayers, and retirees if Congress fails to act.”

Policymakers have been debating fixes to the nation’s growing retirement security problem for the past several years. The Obama administration proposed in its latest budget to raise the insurance premiums, which are set by Congress, and tailor them to the size of companies and their level of financial risk. Congress has not yet acted on this proposal. The PBGC acknowledged that some of the multiemployer plans that are critically underfunded have taken steps on their own to help avoid insolvency, but such action is not enough. The PBGC urges Congress and stakeholders to work together to “provide solutions and additional tools to help preserve these critically important multiemployer plans.” One risk of Congress delaying to take action is that employers may simply leave the pension plans before the system collapses. While federal law requires employers that leave the system to make an exit contribution, the loss of employers weakens the system for those who remain.

Apart from this dire news about multiemployer pension plans, the PBGC report noted finances have improved for its other pension insurance program, which is offered by individual companies, as a result of the surging stock market, higher insurance premiums, and an improving economy. The long-term deficit for this program, which insures 22,300 pension plans covering 31 million Americans, sank by nearly one-third over the past year, from $27.4 billion to $19.3 billion.


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House Committee Conducts Hearing on NLRB’s Proposed Changes to Election Rules

By Edwin S. Hopson

On March 5, 2014, the House Committee on Education and the Workforce conducted a hearing entitled, “Culture of Union Favoritism: The Return of the NLRB’s Ambush Election Rule.” During the hearing, chaired by Representative John Kline (R-MN), some members of the committee claimed that the recently proposed changes to union representation election rules by the National Labor Relations Board would undermine long-standing rights of workers, employers, and unions.

In opening remarks, Kline stated, in part: “For many of my colleagues, this hearing might evoke a sense of déjà vu. Not too long ago we debated a nearly identical ambush election rule proposed by the National Labor Relations Board that would stifle employers’ free speech and cripple workers’ free choice. In 2011 the House passed with bipartisan support a bill that would have protected the rights of workers, employers, and unions by reining in this radical proposal.”

The rule changes were first proposed in 2011, but were struck down by a federal judge on procedural grounds.  They were then revived last month.  According to Kline, the NLRB’s proposed rule changes would (1) significantly shorten the time between the filing of a union election petition and the actual election, (2) provide employers just 7 days to find legal counsel and prepare for a representation election hearing before the NLRB,  (3) force employers to raise all issues before the hearing or lose the right to raise those issues during the hearing; and (4) delay answers to important legal questions until after employees have voted. Additionally, Kline claimed that the proposed rule changes would jeopardize workers’ privacy by divulging sensitive information, such as email addresses, to union organizers. Continue reading


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Would the WARN Act Apply in the Event of a Federal Budget Sequestration?

By Edwin S. Hopson

On July 30, 2012, an Assistant Secretary of the U.S. Department of Labor issued an advisory and guidance to federal contractors concerning the applicability of the Worker Adjustment and Retraining Notification Act (WARN Act) to possible layoffs occasioned by federal government sequestration on January 2, 2013, under the Balanced Budget and Emergency Deficit Control Act of 1985, and the Budget Control Act of 2011, should the Congress and President not come to agreement on a federal budget.  That guidance was “no” — the WARN Act would not be triggered by such action and affected, covered federal contractors would not be in violation of the WARN Act for NOT providing 60 days’ notice of mass layoffs or a plant closing affecting at least 50 employees.

The issuance of this guidance has been criticized by the Republican House Education and Workforce Chairman, John Kline, and the Subcommittee on Workforce Protections Chairman, Tim Walberg, in a letter to Secretary of Labor Hilda Solis.  They argue that the Department of Labor’s guidance has no legal effect and may be misleading employers into not following the WARN Act’s requirements.

With the recent agreement on a short-term budget extension, this issue has now been pushed off for several months.

The Labor Department’s guidance can be found at: 

http://wdr.doleta.gov/directives/attach/TEGL/TEGL_3a_12.pdf

The Kline/Walberg letter may be found at:

http://edworkforce.house.gov/UploadedFiles/08-02-12_Letter_WARN_Act_Sequestration.pdf


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President Makes Recess Appointments to NLRB

On January 4, 2012, President Obama announced three recess appointments to the National Labor Relations Board:  Terrence Flynn, a Republican, who had earlier been nominated by the President about a year ago, but whose nomination had not been acted upon by the Democratically-controlled Senate; and Democrats Sharon Block, a Department of Labor official, and Richard Griffin, the General Counsel of the International Union of Operating Engineers.

This action was immediately challenged by various Republicans including House Education and the Workforce Committee Chairman JohnKline(R-MN) and Health, Employment, Labor, and Pensions Subcommittee Chairman Phil Roe (R-TN) who have formally asked the National Labor Relations Board and the White House Counsel to provide documents and information concerning the appointments. The information request sought details of the qualifications of the appointees, and president’s legal authority to grant recess appointments while the Senate is in pro forma session.

Kline, in his press release, predicted that the process followed by the President will lead to legal challenges to any decisions issued by the new Members of the Board.


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NLRB Member Hayes Accuses Colleagues of Misleading House Committee on New Election Rule

By Edwin S. Hopson

In an unusual move, Member Brian Hayes, the only Republican on the National Labor Relations Board, has written a letter to the Chairman of the U.S. House Education and Workforce Committee criticizing the other two Democratic Members of the Board for scheduling a meeting on November 30, 2011, at which they will make a decision on the Board’s proposed new rule aimed at speeding the union representation election process.  Hayes claims that the meeting will violate Board rules and practice involving its deliberative process.  He also asserts that he has been left out of that process and has, for instance, not seen any summary of the some 65,000 comments received by the NLRB concerning the proposed new rule, nor been given adequate time to prepare a dissent regarding the new rule.  

Hayes also seems to accuse the majority on the Board of misleading the House Committee in a letter dated November 10, 2011, responding to a request from the Committee for a status report and timeline on the proposed new election rule. 

In a letter dated October 27, 2011, Committee Chairman John Kline had requested a number of items of information from the Board in order “[t]o better understand the process and timeline for the issuance of the new rule….”  In its November 10 response, the Board advised the Committee:

“The following is a timeline of past and anticipated actions on the rulemaking:

June 22, 2011 – Publication of proposed rule.

July 18-19, 2011 – Public meeting on proposed rule. 66 witnesses testified before the Board.

August 22, 2011 – Deadline for filing initial public comments.

Sept. 6, 2011 – Deadline for filing reply comments.

Unknown – Board vote on how to proceed on final rule.

Unknown – Draft of final rule circulated to Board Members.

Unknown – Publication of final rule in Federal Register.”

Hayes in his November 18 correspondence to the Committee states:

“The central fact omitted from the November 10 response letter is that there is a timeline for anticipated actions.  My colleagues are committed to issuing a final R Case Rule before Member Becker’s recess appointment expires at the end of the current Congressional session.  Indeed, I was advised of this fact by the Board’s Chairman on the very day that the response letter was forwarded to your office.” [Emphasis in the original].

On November 18, 2011, Board Chairman Pearce announced the scheduling of the November 30 meeting at which a decision on the new rule will be made.  See prior post below dated November 18, 2011.

Also on November 18, 2011, Committee Chairman Kline wrote another letter to Board Chairman Pearce seeking information not supplied in the NLRB’s November 10 response and also stating:

“Needless to say, Member Hayes’ assertions are extremely troubling, as they would suggest you deliberately withheld information from the committee, if not knowingly provided the committee with misleading information.”

Kline requested a response from Board Chairman Pearce by November 29, 2011.

 The letters in question may be found on the Committee’s website at:

http://edworkforce.house.gov/News/DocumentSingle.aspx?DocumentID=269877


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Legislation Proposed to Curb/Roll Back Recent NLRB Actions

By Edwin S. Hopson

On October 5, 2011,Congressman John Kline(R-MN), the Chairman of the U.S. House Committee on Education and the Workforce, announced that he had introduced H.R. 3094 entitled, the “Workforce Democracy and Fairness Act.”  The proposed legislation is meant to curb/roll back some recent decisions and actions of the National Labor Relations Board including its proposal to speed up the representation election process.  According to a press release issued October 5, 2011, the proposed legislation would:

 ●Provide employers at least 14 days to prepare their case to present before a NLRB election hearing officer and an opportunity to raise additional concerns throughout the hearing process up to the close of the hearing.

 ●Provide that no NLRB representation election will be held in less than 35 days after filing of the petition.

 ●Reinstates the traditional standard for determining which employees will be eligible to vote in the union election.

 ●Provides that once an election is directed, eligible voters in the election must select in writing what sort of personal contact information they want released to the petitioning union in addition to their name, i.e., telephone number, email address, or mailing address.

Original cosponsors of H.R. 3094 include: Representatives Howard “Buck” McKeon (R-CA), Joe Wilson (R-SC), Virginia Foxx (R-NC), Duncan Hunter (R-CA), Phil Roe (R-TN), Glenn Thompson (R-PA), Tim Walberg (R-MI), Scott DesJarlais (R-TN), Todd Rokita (R-IN), Larry Bucshon (R-IN), Trey Gowdy (R-SC), Martha Roby (R-AL), Dennis Ross (R-FL), and Mike Kelly (R-PA).

A hearing by the committee on the measure will take place on October 12, 2011.