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Crafting Quality Fringe Benefit Language in Your CBA

It’s just after 8:00 in the morning and the phone rings. John from Acme Builders is calling to complain about a trust fund auditor in his conference room who is telling him that he owes some enormous amount of money.

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John jumps right into the heart of his rant: “I thought we had this figured out, Jack. My union guys don’t get their bennies until after they’ve been on board 3 months and this guy is telling me I have to pay for their first month here. He says it’s ‘in the contract and trust agreement’, but this isn’t what we agreed to and I didn’t sign any trust agreement. This is ridiculous.” You’re caught off guard and thinking “What’s the auditor doing out there? I know we agreed to a 3-month waiting period.” Perhaps Jack is correct, or maybe he is misled, so you tell Jack you will check with the auditor and review the agreements.

In doing so, you learn the problem isn’t Jack, you, or the auditor. The problem is the collective bargaining agreement (CBA). It doesn’t clearly translate the Plan rule requiring 3 months of premium payments before members can use their benefits. You realize the employer is on the hook for this and the question turns to one of diplomacy and de-escalation. All of this because of a costly but avoidable misunderstanding.

About the CBA

Developing clear, consistent and concise CBA language aligned with Plan rules is critical to minimizing legal and audit costs, safeguarding member benefits and preserving bargaining party relationships. The bargaining process is a complex beast, and opposite sides of the table may have different objectives. The first step in getting the language right is finding common ground.

Finding Common Ground

Bargaining parties should start on common ground and work together towards a suitable fringe package that meets member/employee needs as well as a balance of business and union needs. This is easier said than done depending largely on two factors:

  1. The economic context;
  2. The diversity of the parties represented.

For example, a 22-year-old single apprentice has different needs from the union than that of his/her journeyman colleague who is trying to support a family. For the association, a “mom and pop” contractor working out of a pickup truck has different needs than the capitalized industry giant.

In all cases, this is critical for the representatives of both parties to meet member needs and to continue to attract new business. The mutual objective (the common ground) is to develop fringe benefit language that is a clearly defined win-win.

Developing the Language

The give and take in collective bargaining can lead to confusion if written in vague terms. Contract ambiguity can lead to unexpected interpretation, especially as time passes and the lead negotiators retire or move on to other things. Keep the future ramifications in mind.

The bargaining parties also need to be careful when the language is clear, because it may contradict what is already set forth in other areas of the agreement. A classic example of this can be found when a contract defines an employee probationary period in the seniority section of the agreement that is not aligned with the fringe benefit section. This presents sort of a whack-a-mole problem that the authors need to be wary of. Bargaining parties should not be put in such a position where they can select sections to enforce.

For these reasons, the requirements and benefits should be spelled out in black and white terms and in proper alignment with all other agreement sections. Define any of the following terms clearly:

  • Hours worked
  • Hours paid
  • Probationary periods
  • Extended coverage for welfare

The authors must also be realistic in terms of the actual execution of the requirements—language may look a lot better on paper than in actual application. Consider the practicality of requirements, especially for probationary periods and hours caps, which can be made excessively complex. Ask yourself the following questions:

  • Is this something that the payroll or HR person at the employer can do in a realistic and efficient manner?
  • Does the outcome of this language result in something the administrator can effectively process?

It’s also a great idea to include example scenarios in the agreement that the company can use as a practical guide.

Language Review

Once the language is drafted, it’s important to review it thoroughly. This means starting the negotiations early enough that the enforceability of the language can be vetted by all stakeholders.

Let’s go over some best practices in contract review. If you head up an employer association, be sure to supply red-line copies of the agreement to association members for review and comment. Contractors large and small should be involved in the review. Labor unions should have their executive boards review the red-lined copies as well as a cross-section of members and shop stewards.

The language should then be juxtaposed with plan documents to ensure alignment with Plan rules. This includes summary Plan descriptions, trust agreements, policy letters, and subscriber’s agreements. As a finishing touch, it is also important to incorporate language in the CBA that clearly binds the employer to applicable trust agreements and subscriber’s agreements. In some cases, it may be worth including the Trust delinquency policy as well as the Trust authority to audit records.

The Fund attorney should be consulted frequently through this process to ensure both legal and policy compliance. If possible, run contract language by the Fund auditors.

Conclusion

There is a lot at stake for members, fiduciaries, and the bargaining parties when crafting fringe benefit language in a CBA. While each stakeholder may have a somewhat different objective, there is common ground for each. Starting on common ground to develop clear and practical language that is consistent with Plan rules will almost always pay off in the long run. You won’t have so many calls from John and the time invested will make your day-to-day duties easier to navigate (and less costly, too). Bargaining relationships will thrive and fund assets won’t be tied up in as many legal or audit pursuits. But perhaps most importantly, Plan participants will better understand their entitlements and have their benefits safeguarded.

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