Ending Service Agreement not Interference with Benefits

January 4, 2006 (PLANSPONSOR.com) - The US District Court for the Western District of Pennsylvania has ruled that Independence Management Company did not interfere with the benefits of nine union members by not renewing a contract with their employer.

On claims from the union members that Independence engaged in “prohibited employer conduct” under Section 510 of the Employee Retirement Income Security Act (ERISA) and that they interfered with a collective bargaining agreement in violation of the Labor Relations Management Act (LRMA), the court granted summary judgment to Independence, according to the opinion.

The nine union members were employed by a company that was contracted by Independence to perform cleaning services.   At the end of the service contract, Independence did not renew with the union members employer and hired a non-union corporation to provide the service instead.   As a result of losing the contract, the union members were laid off by their employer.

The union members filed a lawsuit claiming that Independence’s choice not to renew the contract intentionally interfered with their health care benefits in violation of ERISA and their collective bargaining agreement in violation of LMRA.

The court noted that Independence was not the employer of the union members so they failed to show “prohibited employer conduct.”   In addition, the court said that regardless of whether they proved that claim, the union members failed to offer evidence that the decision not to renew the contract was for the purpose of interfering with their benefits.   The decision not to renew the service agreement was due to Independence’s dissatisfaction with the service and lower bids by other companies, according to the opinion.

The court also ruled that it was also not proven that Independence intended to interfere with the collective bargaining agreement.   The contract had simply expired and Independence’s decision not to renew it was not intended to result in the union members being laid off, according to the opinion.

The case isService Employees International Union, Local 3 v. Independence Management Co., W.D. Pa., No. 04-0067, 12/20/05.