United States District Court, E.D. Missouri, Eastern Division
IRON WORKERS ST. LOUIS DISTRICT COUNCIL ANNUITY TRUST, et a., Plaintiffs,
UNITED IRONWORKERS, INC., Defendant.
MEMORANDUM AND ORDER
G. FLEISSIG UNITED STATES DISTRICT JUDGE.
matter is before the Court on cross motions for summary
judgment in this action under the Employee Retirement Income
Security Act (“ERISA”), 29 U.S.C. § 1145, to
recover delinquent fringe benefit contributions. Plaintiffs,
three multiemployer fringe benefit funds and their
fiduciaries, move for summary judgment against Defendant in
the amount of $795, 701.01, which they assert is the amount
owed by Defendant in delinquent contributions, liquidated
damages, interest, and audit costs following
auditsof Defendant's records for the periods
of January 1, 2010 through June 30, 2013, and July 1, 2013
through June 30, 2014. (Doc. No. 45.) Plaintiffs also seek an
order compelling a further audit for the period of July 1,
2014 to the present.
United Ironworkers, Inc., moves for partial summary judgment
on Plaintiffs' claims for delinquent contributions, and
associated penalties and interest, with respect to the
following categories of discrepancies found by the audits:
(1) alleged bonus payments, which Defendant asserts were not
paid for hours worked; (2) hours allegedly worked on
something other than ironworking, such as office or
maintenance work; (3) hours allegedly worked by brothers
Eugene Edwards and Gerry Edwards (together, the
“Edwards Brothers”), whom Defendant asserts it
did not employ as union ironworkers during the relevant
period; and (4) hours worked by ironworkers in Indiana whom
Defendant asserts were covered by a different union and fund,
outside of Plaintiffs' jurisdictions. (Doc. No. 42).
Defendant asserts that these categories of discrepancies were
based on inaccurate assumptions made by the auditor, and that
the parties' agreements do not require contributions with
respect to these categories.
reasons set forth below, the Court will grant Defendant's
motion in part, to the extent it relates to alleged
delinquent contributions based on bonuses, hours worked by
the Edwards Brothers, and hours worked by ironworkers in
Indiana; will deny Plaintiffs' motion to this extent; and
will otherwise grant Plaintiffs' motion.
is a party to various participation agreements with
Plaintiffs under which it is required to make fringe benefit
contributions to Plaintiffs on behalf of each union
ironworker employed by Defendant, in the amount and according
to the terms of the collective bargaining agreement
(“CBA”) of the local ironworkers union within
whose jurisdiction work was performed. The CBAs, in turn,
require Defendant to remit contributions to Plaintiffs at a
per-hour rate for every hour worked by covered ironworkers
and to remit monthly reports reflecting those hours. The
participation agreements also require Defendant to be bound
by certain trust documents permitting Plaintiffs to audit
Defendant's records to determine if the required
contributions were made. The trust documents require
Defendant to pay Plaintiffs' audit costs, attorneys'
fees, and litigation costs, as well as interest and 10%
liquidated damages on delinquent contributions.
performed audits of Defendant's records for the periods
of January 1, 2010 through June 30, 2013, and July 1, 2013
through June 30, 2014. Auditor Brad Soderstrom testified by
deposition that he interacted with Defendant's corporate
secretary, Paul Dickey, in completing the audits; that
Defendant cooperated with him during the audits; and that
Defendant provided him all of the information he needed to
complete his audits accurately. Soderstrom's audit
reports contained the following disclaimer:
We were not engaged to, and did not perform an audit, the
objective of which would be the expression of an opinion on
the fringe benefit contributions submitted by the Employer.
Accordingly, we do not express such an opinion. Had we
performed additional procedures, other matters might have
come to our attention that would have been reported to you.
(Doc. Nos. 44-14 at 2, 44-15 at 2 & 44-16 at 2.) Rather
than express a professional opinion as to how much Defendant
actually owed Plaintiffs in contributions, the audit reports
simply reflected what Defendant might owe Plaintiffs given
the application of various assumptions to Defendant's
payroll records, as explained below.
these assumptions, Soderstrom found that Defendant owed
Plaintiffs $491, 664.87 in delinquent contributions, $49,
225.31 in liquidated damages, and $213, 403.08 in interest.
In an affidavit submitted with Plaintiffs' motion for
summary judgment, Soderstrom attested that his firm will bill
Plaintiffs $41, 407.75 for performing the audits.
Related to Bonuses
all of the delinquent contributions-$394, 973.78 of the $491,
664.87- reported in the audits were amounts due on alleged
bonuses Defendant paid to its ironworkers. Defendant did not
pay contributions to Plaintiffs based on payments that
Defendant characterized as bonuses. These payments were
labeled as various types of bonuses in Defendant's
payroll records, including flat bonuses, lump sum bonuses,
Christmas bonuses, and forgiven loans to employees. The audit
reports state that Defendant explained to Soderstrom that
Defendant paid bonuses in addition to payment for hours
worked, and that its bonus system was used to reward
exceptional service, was not mandatory, and could be
discontinued at any time. Other than the payroll records
labeling the bonuses as such, Defendant did not produce
records to Soderstrom describing the bonus program or
identifying the purpose of the bonuses.
further testified that, in his experience performing these
types of audits, there are cases in which employers might
disguise hours worked as bonuses to avoid making required
contributions, and there are also cases in which employers
legitimately pay bonuses to workers, in addition to payment
for hours worked, and are therefore not required to make
contributions based on those bonuses. Soderstrom testified
that his standard audit procedure is to identify bonus
amounts, try to determine the purpose for the bonuses, and
unless he can verify otherwise, assume that they reflect
additional hours worked. Soderstrom testified that he could not
verify the purpose for the bonuses here from the records
Defendant provided, but that he did not find any evidence
that the bonuses were in fact a subterfuge for hours worked,
and he had no reason to disbelieve Defendant's verbal
representations that the bonuses were paid in addition to
(rather than in lieu of) payment for hours worked. Soderstrom
also testified that he received direction from
Plaintiffs' counsel to include the bonuses as hours
worked in his reports.
therefore, assumed the bonuses were paid in lieu of payments
for hours worked and calculated the number of hours worked by
dividing the bonus amount by the average wage rate in effect
for the year; Soderstrom then multiplied this number by the
fringe benefit rate. Applying this assumption and formula,
Soderstrom found that Defendant owed $394, 973.78 in
contributions in connection with the alleged bonuses.
owner, Kim Rasnick, testified in his deposition that, during
the relevant periods, he paid union ironworkers the rate set
by the CBAs for all hours worked but also paid his
“topnotch” workers additional amounts as bonuses.
He testified that approximately 20% of his employees received
such bonuses and that his decision to pay bonuses was
discretionary and in all cases made by verbal agreement.
Rasnick further testified that he sometimes loaned his good
workers money to cover personal expenses and if the money was
not paid back, he treated the loan as a bonus that the worker
would have otherwise received for good work and did not give
the worker any further bonus. Finally, Rasnick testified that
he gave Christmas bonuses to most or all employees in years
that his company was profitable. (Doc. No. 44-9 at 3-6.) All
of Defendant's union ironworkers who were deposed by
Plaintiffs also testified that Defendant paid them per-job,
lump-sum, Christmas, and other types of bonuses from time to
time, and that these bonuses were paid in addition to their
regular payment for hours worked.
their depositions, Plaintiffs' board members testified
that they had no evidence, other than the audits, that
Defendant paid bonuses in lieu of payment for hours worked by
Related to Hours Worked on Something Other Than
Workers Local 392's CBA requires that Defendant make
contributions to Plaintiffs “for each hour worked for
each employee covered by this agreement.” (Doc. No.
45-20 at 44-45.) The CBA covered “Iron Workers and
Apprentices who are employed by [Defendant] performing work
described in Article 2 hereof, within the territorial
jurisdiction” of the CBA; Article 2, in turn, listed
various types of work related to ironworking. Id. at
paid contributions to Plaintiffs for 29 hours worked per week
by each of the following union ironworkers covered by Local
392's CBA: Jason Dagner, Michael Thornton, Christopher
Wills, and David Wills. Defendant paid contributions for up to
29 hours per week, regardless of the type of work performed
by these ironworkers. The four ironworkers each worked more
than 29 hours per week, but Defendant did not pay
contributions to Plaintiffs for hours worked over the 29-hour
limit. In his affidavit, Soderstrom attests that he could not
determine from Defendant's records what type of work
these ironworkers performed during the additional hours
worked. Soderstrom assumed that contributions were owed for
hours worked by the four ironworkers over 29 hours per week.
Applying this assumption, Soderstrom found that Defendant
owed $49, 738.23 in contributions in connection with the
additional hours worked by Dagner, Thornton, Christopher
Wills, and David Wills.
their depositions and in declarations submitted with
Defendant's motion for summary judgment, these
ironworkers testified and declared under penalty of perjury
that any additional hours they worked for which contributions
were not paid were hours spent on something other than
ironworking, such as office work.
also included in his report hours worked by Local 392
ironworker Moises Sanchez. Defendant did not pay
contributions to Plaintiff on behalf of Sanchez for these
hours. It is undisputed that Sanchez did not perform
ironworking during these hours but instead performed
maintenance work in Defendant's warehouse. Soderstrom
assumed that contributions were owed for these hours worked
by Sanchez, in the amount of $7, 737.05.
Related to Edwards Brothers
included the Edwards Brothers in his report because steward
reports from Local 392 showed that the brothers were on one
of Defendant's jobsites for 294 hours each for the period
of March through May 2013. Defendant informed Soderstrom
during the audit that the Edwards Brothers had never been
employed by Defendant, and that the brothers may have been on
Defendant's jobsites to visit their relative and
Defendant's employee, Chris Edwards. Soderstrom did not
talk to the Edwards Brothers or Chris Edwards before making
his report. Defendant did not pay any contributions to
Plaintiffs on behalf of the Edwards Brothers.
assumed that the Edwards Brothers were covered ironworkers
who worked for Defendant during the hours they were present
on Defendant's jobsites, and he therefore found that
Defendant owed $21, 694.74 in contributions for the Edwards
Edwards Brothers have submitted declarations in connection
with Defendant's motion for summary judgment, in which
they declare under penalty of perjury that they are both
retired ironworkers; that they have never been employed or
paid by Defendant; that their relative, Chris Edwards, was
employed by Defendant; that, on various occasions, they
visited Defendant's jobsites where Chris Edwards was
working “for [their] own purposes, ” including to
check on Chris's progress in the ironworking trade; and
that they did not perform any work for Defendant during these
visits. (Doc. Nos. 44-11 & 44-12.) Soderstrom submitted a
supplemental affidavit, in connection with Plaintiffs'
response to Defendant's motion, attesting that, according
to Defendant's records, Chris Edwards was not present on
Defendant's jobsites for slightly more than half of the
time the Edwards Brothers spent there.
Related to Hours Worked by ...