Ninth Circuit Clarifies the Scope of the “Building and Construction Industry” Exemption for Withdrawal Liability

In Walker Specialty Construction Inc. v. Board of Trustees of the Construction Industry and Laborers Joint Pension Trust for Southern Nevada, the court held that asbestos abatement work qualifies as “building and construction industry” work under the Multiemployer Pension Plan Amendments Act of 1980 (“MPPAA”). 

The decision clarifies what constitutes “building and construction industry” work for purposes of the MPPAA’s special withdrawal liability rules. In doing so, the court rejected the idea that only new construction qualifies. Instead, the court adopted a well-established definition of construction that includes work necessary to make a building usable, including “maintenance, repair and alterations that are essential to a building or structure’s usability.”

Under the MPPAA, an employer that withdraws from a multiemployer pension plan is generally required to pay its share of the plan’s unfunded vested benefits. This can result in substantial withdrawal liability.

Congress, however, created a special rule for employers in the “building and construction industry.” If certain conditions are met, construction employers are not automatically treated as having withdrawn merely because they stop operating in a particular geographic area.

The Ninth Circuit explained the policy rationale for this exception: “Congress created this exception because of ‘the transitory nature of contracts and employment in the building and construction industry.’” 

As the court explained, when a contractor leaves a market, that does not necessarily mean the pension plan is harmed:

The construction industry as a whole does not necessarily shrink when a contributing contractor leaves the industry; employees are often dispatched to another ... contractor in the area that contributes to the multiemployer pension plan on their behalf. Thus, as long as the base of construction projects in the area covered by the plan is funding the plan’s obligations, the plan is not threatened when an individual employer withdraws. 

This reflects the real-world nature of construction: projects are temporary, contractors move in and out of jurisdictions, and workers often continue covered employment with other signatory employers.

Because the term “building and construction industry” had a settled meaning prior to the MPPAA’s enactment, we infer that Congress was aware of and intended to incorporate this definition when it enacted the “building and construction industry” exception in the MPPAA. 

In other words, Congress did not intend to invent a new definition. It intended to use the same one that already existed under federal labor law.

The NLRB’s definition of the “building and construction industry” is not limited to new buildings. The Ninth Circuit quoted prior NLRB decisions describing construction as: “the erection, maintenance and repair . . . of immobile structures and utilities . . . which become integral parts of structures and are essential to their use for any general purpose.” The court also noted that the NLRB had previously concluded that “construction” includes “new work, additions, alterations and repairs.” 

The pension fund attempted to characterize asbestos abatement as superficial or cosmetic. The Ninth Circuit rejected that view.

Disclaimer: This article is for informational purposes only. If you have questions or need guidance, consult your local labor attorney or labor relations department.