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Challenges in Interpreting CBA Language--What Does This Really Mean?

The collective bargaining agreement (CBA) is the enforceable contractual agreement between an employer and a labor union governing wages, hours, benefits and working conditions for employees. The provisions of a CBA are negotiated by parties during collective bargaining and are documented in the contract language. In the course of testing, payroll compliance auditors reference specific CBA provisions to determine benefit plan contribution requirements. 

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Generally, CBAs effectively define trust fund requirements, specifying the types of hours used to determine contributions (every hour worked [or paid], flat rate based on a minimum number of hours during the month). Occasionally, contract language does not clearly define contribution requirements, or the requirements may not be documented at all. When these situations arise, the trust fund’s payroll compliance auditor must work directly with the bargaining parties in order to gain an understanding of the intent of specific contract language.

Certain CBA provisions tend to create employer confusion and can result in incorrect reporting of benefit contributions. Examples include new employee probationary periods and/or language defining benefits “eligibility.” These provisions may defer the contribution requirement, and it is important that the auditor understand plan rules to properly interpret the contract language. For example, a CBA may state that an employee is eligible for benefits after 90 days, but plan rules may require receipt of three months of premium before the participant is eligible for benefits. In this situation, contributions are due from the date of hire in order to meet the eligibility requirements of the CBA. Other examples include lack of specific language regarding timing of final reporting to the plan for terminations or retirements. 

Contract interpretation is a difficult task, and it is not the payroll compliance auditor’s function to determine the bargaining parties’ intent. Under these circumstances, the auditor must contact the Trust and bargaining parties in order to clarify contract interpretation. Unfortunately, this is a timely process that can be costly to a Trust.

Negotiating parties should be aware of plan rules in the Trust documents and/or Summary Plan Description during the negotiation process. The CBA language should specifically state when contributions begin, rather than using only benefits “eligibility” language. This will help reduce the risk of participant eligibility delay due to missing contributions and employer inability to recover improper contributions.

Clear, concise contract language is important to the efficient administration of the collective bargaining agreement for employers, unions, administrators and other third parties to ensure CBA provisions are properly interpreted as intended by the bargaining parties.

Janet Dominguez is a payroll compliance senior manager in Lindquist LLP’s San Ramon, California, office. She supervises and reviews the work of the senior and staff compliance auditors assigned to the seven families of trust funds that she manages. Janet interacts with trust representatives, employers, union representatives and attorneys on a daily basis. She earned a Bachelor of Arts degree in Spanish from San Francisco State University and continued her education at Farleigh Dickinson University and U.C. Berkeley with an emphasis in accounting.    

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