A recent decision from the National Labor Relations Board (NLRB) involving a nursing home and rehabilitation center, reveals that an employer in a unionized setting can have back-pay liability for not maintaining existing terms and conditions of employment throughout the term of a collective-bargaining agreement (CBA). In this case, a unionized facility was sold. In anticipation of the sale, the new owner signed a “Status Quo Agreement” with the existing union.
The CBA had a provision which provided for a 401(k) plan to be in place wherein the employer matched 50% of each employee’s contribution up to a certain wage level. Upon the sale of the facility, the 401(k) plan was terminated and not reinstated for approximately 9 months. The NLRB found that the new owner violated the National Labor Relations Act by failing to immediately secure a replacement 401(k) plan. The back-pay remedy fashioned by the NLRB sought to restore the status quo without providing a “windfall” for employees. In this regard, the NLRB ordered the employer to make the employees “whole for the delinquent 401(k) matching contributions” which the employer failed to make on behalf of the employees. The NLRB overruled, however, its judge’s determination that the employer should also pay those amounts that the employees were unable to contribute due to no plan being in place. The NLRB found that since the employer actually paid the employees this money, rather than withholding such sums, to make the employer pay these amounts again would be punitive and would amount to a windfall for employees.
Interestingly, however, the NRLB did order the employer to compensate the employees for the investment growth they lost on their 401(k) contributions due to the employer’s failure to deduct and remit those funds to a 401(k) plan.