News

On Monday, May 1, 2023, Hesse Martone President and CEO Andy Martone presented a webinar for SIBA members on the “Illinois Paid Leave for all Workers Act,” the new Illinois law which goes into effect on January 1, 2024 and requires employers to offer paid leave to employees to use for any reason.

The Southern Illinois Builders Association’s primary purpose is to advance the construction industries through the strengthening of its members by enabling them to do collectively what they cannot accomplish on their own. SIBA orders a full range of services and programs to provide value to its members and is the voice of the construction industry in Southern Illinois. 

Andy Martone serves as counsel for the SIBA and provides training and legal services to its members.

On Tuesday, April 11, 2023, Hesse Martone’s President and CEO Andy Martone presented information, advice and guidance on issues facing the construction industry as a result of the legalization of recreational cannabis and employment protections created for cannabis users by Missouri’s Constitutional Amendment 3 to the Sheet Metal and Air Conditioning Contractor’s National Association.  Andy’s talk covered updated scientific information concerning cannabis exposure in testing, legal issues facing employers as a result of this sea change in Missouri law and practical advice relating to addressing the issue of cannabis use in a construction workforce in the context of collective bargaining. 

Andy is a frequent presenter on issues related to cannabis and regularly counsels employers with regard to both legal issues and practical solutions when facing increased use of cannabis products.

St. Louis University School of Law students Kateri Busiek and Treston Marshall will be joining Hesse Martone as summer associates (although their work with the Firm will actually begin in the winter of 2022!).

Kateri Busiek is a candidate for juris doctor in May 2024 and has a bachelor of arts in political science and a bachelor of arts in criminology & law studies, cum laude from Marquette University in Milwaukee, Wisconsin.

Treston Marshall is also a candidate for a juris doctorate in May of 2024, and has a bachelor of arts in Islamic studies with a minor in Arabic from the University of Texas in Austin, Texas. Treston was previously a police officer with the San Antonio Police Department in San Antonio, Texas.

Hesse Martone is pleased and proud that Kateri and Treston will be working with the Firm!

The Teamsters Central States Pension Fund is finally on track to receive $36 billion in Special Financial Assistance, a taxpayer-funded bailout under the American Rescue Plan Act of 2021 that will prevent Central States from becoming insolvent in the near future.

This raises many issues for employers who participate in Central States and who have been closely watching their withdrawal liability as it skyrockets.

On January 11th, 2023, HesseMartone President & CEO Andy Martone and The Associated General Contractors of America’s Senior Director, Congressional Relations, HR, Labor and Safety, Jim Young, will present a webinar to the Southern Illinois Builders Association on the Central States bailout and the effect of the PBGC’s rulemaking on employers.

Amendment 3 was officially added to Missouri’s Constitution on Thursday, December 8, legalizing recreational marijuana for adults 21 years of age or older and simultaneously creating legal protections for people who hold medical marijuana cards and test positive for marijuana.  This amendment does not limit these protections exclusively to people who hold Missouri medical cards—it also recognizes qualifying medical cards from other states.

Under the language of Amendment 3, a positive test result alone is not sufficient proof that someone who holds a medical card was “under the influence” of marijuana.

Unless an exception applies, the holder of a valid medical card cannot be discriminated against in hiring, termination, or any other term or condition of employment, or otherwise penalized, if the only basis for the employer’s action is a positive drug test.

As indicated above, however, there are exceptions to such protections. According to Amendment 3, these protections do not apply if:

1. The person in question used, possessed, or was under the influence of medical marijuana at their place of employment or on the employer’s premises.
2. The person used, possessed, or was under the influence of medical marijuana during the hours of employment.
3. The person’s legal use of marijuana would affect their ability to perform a job-related responsibility.
4. The person’s legal use of marijuana would impact the safety of others.
5. The person’s legal use of marijuana would conflict with a legitimate occupational qualification related to the person’s employment.
6. The person used, possessed, or was under the influence of recreational marijuana without holding a valid, state-issued medical marijuana card.
7. The employer would be subject to the loss of a monetary or licensing-related benefit under federal law if it did not act on positive test results.

In addition, Amendment 3 states that it “shall have no effect upon any valid contract” in place before December 9, 2022.  Because collective bargaining agreements (and other agreements between unions and employers) are contracts, Amendment 3 does not affect, or limit drug-testing policies contained in collective bargaining agreements that existed prior to December 9, 2022.

As with any new law, it will take considerable time for regulatory agencies and courts to interpret the scope of the protections outlined in Amendment 3.

Therefore, the safest path for employers moving forward should include:

1. Reviewing existing collective bargaining agreements and other related documents to determine if there are binding policies that will remain in effect.
2. Documenting the employee’s behaviors that led, following any marijuana-related drug testing, to the conclusion that they might be “under the influence” as part of the testing protocol.  (Note: This documentation should explicitly describe the employee’s behavior that supports the finding that the employee was under the influence).
3. Identifying positions that fall within the exceptions.  (Note: Examples would include jobs governed by the United States Department of Transportation regulations, safety-sensitive positions whereby the employer can establish the need for a higher level of protection, and other similar positions.  These decisions should be made on a case-by-case basis.

Although the movement to legalize marijuana in Missouri has been underway for a while, the ink on Amendment 3 is still wet, and it will take substantial time to completely understand its implications. 

In the meantime, employers should review their policies and procedures to identify exempt positions. They should also systematize the gathering and retention of evidence related to the determination that employees subject to testing were “under the influence” at the time of such tests. In addition, employers should determine if their current policies and procedures require any necessary changes, bearing in mind that marijuana is still not a legal substance under federal law and, therefore, that marijuana use is not protected by or given a reasonable accommodation under the Americans with Disabilities Act of 1990.

For some time, several multi-employer defined benefit pension plans have been in a state of crisis, with a substantial number facing imminent insolvency. While one can argue about the cause of this crisis – and there is plenty of blame to go around – one thing is certain: employers that paid their required pension contributions are not at fault. Nevertheless, for years employers have paid the price of pension fund failings in the form of withdrawal liability.

There was initially some hope that this situation would be resolved by the American Rescue Plan Act of 2021, which provided for a taxpayer-funded bailout of the worst of the failing pension funds. However, whether employers would get any real relief as a result of these bailouts was largely left in the hands of the Pension Benefit Guaranty Corporation (“PBGC”).

On August 8, 2022 the PBGC answered this question in the negative. While employers contributing to pension funds facing imminent insolvency can breathe a sigh of (temporary) relief, for the next decade or two, these employers will not get relief from their withdrawal liability.

The PBGC’s Final Rule regarding Funds that receive a bailout (termed “Special Financial Assistance,” or “SFA” – the pension world’s rough equivalent to a “special military operation”) allows plans receiving a bailout to invest up to 33% of their SFA funds in return-seeking assets (RSA), with the remaining 67% restricted to high-quality fixed-income investments and will better enable plans to remain solvent through 2051 following their receipt of SFA.

However, when calculating a plan’s withdrawal liability, the Final Rule requires that plans use mass withdrawal interest rate assumptions when calculating an employer’s withdrawal liability until the later of 10 years after the end of the year in which the plan receives SFA or the time at which the plan no longer holds SFA monies. Because the interest rateassumptions applied to plans terminated by mass withdrawalare significantly lower than the interest rates used by many plans for purposes of projecting the estimated rate of return on plan investments, the potential withdrawal liability for employers withdrawing from a plan that has received SFA will dramatically increase. 

The PBGC’s Final Rules also requires plans to phase in the amount of SFA that is counted as a plan asset when calculating the plan’s unfunded vested benefits for purposes of calculating withdrawal liability. This begins from the first plan year in which the plan receives payment of SFA and continues through the end of the plan year in which, according to the plan’s projections, it will exhaust any SFA assets. This condition applies for withdrawals occurring after the plan year in which the plan receives payment of SFA. For example, if an employer withdraws in the first plan year in which the plan receives payment of SFA and the plan is projected to exhaust its SFA assets in 20 years, then only one-twentieth of the assets received by the plan in SFA will be counted as plan assets when calculating the plan’s unfunded vested benefits for withdrawal liability purposes. This means that it will take a substantial amount of time for SFA bailout monies to potentially reduce withdrawal liability.

On Friday, October 14, 2022, the PBGC added insult to injury when it issued a Notice of a Proposed Rule that would essentially breathe new life into the method behind the Segal Blend and allow pension funds to use different interest rates for purposes of projecting the expected financial performance of the fund as opposed to assessing withdrawing employers for withdrawal liability.

The use of the methodology behind the “Segal Blend” was being successfully challenged in court, and 3 federal courts of appeal invalidated the use of the conceptual methodology behind the Segal Blend based on the plain language of ERISA, which the courts found directs that the fund use the actuary’s “best estimate of anticipated experience under the plan” for purposes of calculating withdrawal liability.  The Segal Blend and similar methodologies did not do so, and instead chose to blend the actuary’s best estimate of the plan’s anticipated experience with the PBGC’s much lower interest rate used for purposes of calculating mass withdrawal liability, creating a fictitious, lower interest rate to prevent employer withdrawals. 

A fund using a blend methodology could be well into the green zone (and have assets with a market value of its of over 100% of its vested benefits) and still assess withdrawing employers millions of dollars in withdrawal liability.

Such an incongruous result has led to these blended methodologies being repeatedly invalidated by the courts. The United States Court of Appeals for the District of Columbia Circuit, the United States Court of Appeals for the Sixth Circuit, the United States District Court for the Southern District of New York, and the United States District Court of Appeals for the Ninth Circuit have all invalidated the use of these methodologies based on the plain language of ERISA.

Unfortunately, the story does not end here. The PBGC’s proposed Rule would breathe new life into these blended methodologies through fiat, essentially declaring that they are acceptable because the PBGC has passed a rule declaring that they are acceptable. The PBGC’s motive for doing so – purportedly, that it believes that withdrawing employers are somehow obtaining a benefit by withdrawing from the funds without having to face future uncertain investment returns – is suspect at best.

This is because an actuary’s projected interest rate for a fund is supposed to be “expected returns on the plan’s funds as currently invested” – in other words, the actuary’s projected interest rate for a plan is already supposed to predict and account for the plans uncertain investment returns. Because the actuary’s interest rate is already supposed to account for the uncertainty of future returns on the plan’s investments, there is no need to “blend” the actuary’s interest rate with a lower interest rate in order to account for future market uncertainties – the actuary’s normal interest rate is supposed to have taken these uncertainties into account.

The purpose of withdrawal liability is to make sure that employers who withdraw from the plan pay their fair share of the plan’s unfunded vested benefits. However, if a plan does not have any unfunded vested benefits (based on the interest rate that the plan’s actuary represents takes into account the expected returns on the plan’s funds as currently invested, then there should be no withdrawal liability because the withdrawing employer’s fair share of the plan’s unfunded vested benefits of zero should be zero.

The purpose of withdrawal liability is not to prevent employers from withdrawing from pension funds. However, ERISA may provide the PBGC with a loophole that enables it to change the rules of withdrawal liability. Under 29. U.S.C. § 1393(a), withdrawal liability may be determined either by reasonable actuarial assumptions offering the actuary’s best estimate of anticipated experience under the plan or by actuarial assumptions and methods set forth within the corporation’s regulations. Thus, the wording of the statute may give the PBGC the legal power to breathe new life into the blend methodology, to the detriment of employers who want to withdraw from a multi-employer pension plan.

There are many legitimate reasons for employers to withdraw from pension plans, including the sale of a business, the closing of a business, the relocation of a business or other changes in business operations. The purpose of withdrawal liability is not to punish employers for withdrawing from plans in order to deter withdrawals and/or create windfall income for the funds. Unfortunately, the PBGC seems to believe otherwise, and there is no immediate relief on the regulatory horizon for employers.

On September 6, 2022, the NLRB issued a proposed series of new rules on “joint employer” status that will make it easier for the Board and labor unions to have two separate employers classified as “joint employers.”

The actual document (scheduled to be published in the Federal Register on September 7) is 70 pages long, counting the dissent.

Contained in the proposed rules are two key changes to existing law that expand the definition of who would be considered a “joint employer:”

1. The NLRB proposes to return to an “indirect control” test where one employer can be considered a joint employer with another employer if they share or codetermine the essential terms and conditions of employment for one of the employer’s employees.  These essential terms and conditions of employment include, but are not limited to: wages, benefits, and other compensation; hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rules and directions governing the manner, means, or methods of work performance.
2. Under the NLRB’s proposed new rule, one employer would not have to actually exercise control over the terms and conditions of employment of another employer for them to be considered “joint employers” — if an employer possesses either the authority to control (whether directly or indirectly) or the power to control (whether directly or indirectly) even a single essential term or and condition of employment of another employer’s employees, they will be considered “joint employers” under the NLRB’s proposed test.

Public comments on these proposed rules are due on or before November 7, 2022.  The actual rule making process will probably not be completed this year, but we should expect that these new rules will initially take effect, subject to modification and court challenge.

Trustees on multi-employer benefit funds owe their Funds a fiduciary duty to act exclusively to the benefit of their Fund and its participants.  Fiduciaries who violate this duty can be liable for significant damages, and it is important that all trustees be aware of these duties.

Hesse Martone provides trustee training to the management trustees appointed contractors associations who sit on multi-employer, Taft Hartley funds.  The purpose of this training is to both provide a refresher on trustee fiduciary duties and to update employer trustees on recent developments in the law and in federal regulations. 

Andy Martone provides this crucial training for the employer trustees appointed by the Associated General Contractors of Illinois, the Associated General Contractors of Michigan, the Associated General Contractors of Missouri and the Southern Illinois Builders Association. 

The Davis Bacon Act of 1931 requires that workers on federally funded public works projects be paid the prevailing area wage rates.  On March 18, 2022, the Department of Labor announced a substantial overhaul of the Davis Bacon Act that will be the most significant expansion in the history of Davis Bacon. 

Hesse Martone President and CEO Andy Martone presented an update on the proposed rule changes to the Davis Bacon Act to the Illinois Road and Transportation Builders Association, the Associated General Contractors of Illinois, the Associated General Contractors of Missouri, The Associated General Contractors of Michigan and the Southern Illinois Builders Association.  

The Department of Labor’s proposed rules are still pending and have not yet been issued in final.

Hesse Martone trial paralegal Marney Cullen was elected as the First Vice President – Chair of the Professional Standards and Ethics Committee for the Missouri Paralegal Association. 

In this important role, Marney will be responsible for creating, promoting and interpreting the Association’s Code of Ethics and Professional Responsibility and providing education on ethical issues.