Lack of Records Shifts Burden of Proof to Plan Sponsor

September 21, 2012 ( A federal appellate court has ruled that an employer’s failure to keep adequate records shifts the burden of proof to the employer that it does not owe contributions to a multi-employer pension plan. 

The 1st U.S. Circuit Court of Appeals vacated a district court’s judgment that Ray Haluch Gravel Co. only owed contributions for one employee because that was the only employee for which the Central Pension Fund of the International Union of Operating Engineers and Participating Employers could show records that he was covered under the collective bargaining agreement (CBA).  

The court decided the only reasonable interpretation of the CBA is that an employer must remit benefit payments for each hour of work covered by the CBA. The pension fund claimed payments were missing for unidentified employees.   

The court noted that under the Employee Retirement Income Security Act (ERISA), “every employer shall .. maintain records with respect to each of his employees sufficient to determine the benefits due or which may become due to such employees.” The statute further provides that “[t]he employer shall furnish to the plan administrator the information necessary for the administrator to make the [required] reports.”

According to the court opinion, the evidence presented indicates clearly that some covered work was done by unidentified employees, since the district court determined that the employer’s records showed 75% of the work performed by the one employee, for which it ruled payments were due, was covered by the CBA. The court said it can be presumed that one or more employees performed that employee’s work after he left, that those employees worked each year the same total number of hours as the former employee, and that 75% of that work was covered by the CBA. Accordingly, Ray Haluch Gravel is presumptively liable for the same number of hours of covered work for each successive year through the last date encompassed by the pension fund’s claim.  

“In a case like this one, in which ERISA-protected benefit plans seek to enforce remittance requirements, burden-shifting occurs only when a fiduciary seeking remittance of unpaid benefit contributions shows both that some employees performed covered work that was not reported to the benefit plan and that the employer neglected to maintain adequate records,” the court said. The employer, despite its recordkeeping lapses, may offer evidence in an effort either to overcome the presumption of its liability or to limit its effect. In the absence of such evidence, however, the presumption controls.  

The 1st Circuit’s opinion is here.