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As part of its effort to increase oversight and disclosure of independent expenditures, the New York State legislature recently passed Bill Number A10742/S08160, a copy of which can be found on the New York State Senate website. The bill amends the New York State Election Law by clarifying what will be considered “coordination” between a candidate and an independent expenditure committee, such as would render the expenditure to be non-independent, making the amount of the expenditure a contribution to the candidate. These new requirements apply to elections regulated by the New York State Board of Elections, and do not impact Federal or New York City races, which are governed by the Federal Election Commission (“FEC”) and the New York City Campaign Finance Board (“CFB”), respectively.

In the aftermath of the Citizens United decision by the United States Supreme Court, the ability of outside groups to spend unlimited sums of money advocating for and against candidates and ballot proposals has been limited mainly by the requirement that those expenditures be independent of the candidate. Thus, a candidate could not direct or control the expenditure, or coordinate their campaign strategy with a supposedly outside group that has the ability to raise and spend money far beyond that of the candidate. While the concept is simple, there has been very little clear guidance on what exactly will be considered coordinated activity. By this bill, introduced at the request of Governor Cuomo, the Legislature both defined coordinated activity, and changed the application of the regulations to focus them squarely on independent expenditure committees. The Bill passed both houses of the New York State Legislature before the end of the session in June, and was signed by Governor Cuomo on August 24, 2016. The bill provides for an immediate effective date upon adoption.

Here are some examples of conduct that will render a communication coordinated:

-       If the candidate, their committee or their agents, participated in the formation of the independent expenditure committee within two years of the election and the payment or expenditure is made to benefit that candidate;

-       The candidate appears at a fundraising event hosted by the independent expenditure committee within two years of the election in which the candidate is involved;

-       The independent expenditure committee employs a former employee of the candidate, or one that held a policy-making non-administrative role for the candidate within two years of the election in which the expenditure is made to benefit the candidate;

-       The independent expenditure committee or its agent is a member of the candidate’s immediate family or is managed or directed by a member of the candidate’s immediate family;

-       The independent expenditure committee re-publishes campaign materials from the candidate that are not publicly available;

-       The candidate, its agents or committee, shares or rents space with the independent expenditure committee;

-       After the committee is formed, if the committee has strategic discussions with the candidate within two years of the election;

-       The independent expenditure committee and the candidate retain the same professional campaign services firm (i.e. Red Horse), unless the firm executes a confidentiality agreement expressly stating that it will not disclose strategic information regarding each party with the other party;

-       The independent expenditure committee utilizes strategic information related to the candidate that is not otherwise available by subscription, from a person previously employed by the candidate as a consultant, vendor or contractor.

The bill then specifically states that the following conduct is not coordination:

-       A candidate responding to an inquiry regarding their position on various issues;

-       A public communication showing the candidate as a business owner in the same manner as before the election, while not supporting or opposing the candidate;

Notably, the proviso that directly impacts labor unions’ ability to communicate with their members lies elsewhere, and is untouched. This is significant because it preserves the ability of labor organizations to communicate with their members regarding election issues and candidates, without the need to report what is spent, and the communications themselves, to the New York State Board of Elections.

The bill also touched on a number of related matters. For instance, there is a new requirement that Political Action Committees (“PACs”) disclose the name and occupation of individuals that exert “operational control” over the PAC, as well as a prohibition on PACs making independent expenditures and independent expenditure committees contributing to PACs. The statute also decreased the reporting threshold for lobbyists, while also requiring disclosure of funding sources above $2,500, excluding funding by dues. Finally, there are changes to disclosure requirements for 501(c)(4) lobbyist entities that file “Source of Funding” reports with the Joint Commission on Public Ethics.

The new independent expenditure disclosure rules bring New York State’s regulation of this area more in line with the systems already in place at the Federal level through the FEC, and at the New York City level through the CFB. This has been a brief summary of the pertinent portions of the legislation, so please do not hesitate to contact our office with any specific questions or concerns.

By: Steven C. Farkas, Esq.

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DEPARTMENT OF LABOR’S NEW OVERTIME REGULATIONS   On May 18, 2016, the U.S. Department of Labor published the new overtime regulations that will go into effect on December 1, 2016. Previously, an employee was considered exempt from overtime pay if their salary level exceeded $455 per week ($23,660 per year) and they held a “white collar” position that was classified as either “executive, administrative, or professional.1” The new regulation sets the threshold at $913 per week ($47,476 per year) which means an employee whose fixed salary is below this threshold and whose position is classified as “white collar” must be paid time and a half after 40 hours. This federal standard will exceed New York’s current minimum salary threshold of $35,100. For this reason, the DOL urges employers to review current salary levels and determine which employees will now be overtime eligible and should either revise hourly rates or prepare to compensate for the overtime hours worked. With this in mind, employers may also need to update their timekeeping programs in order to effectively track the hours worked by these newly eligible employees. NEW YORK’S NEW FAMILY LEAVE ACT  Once in effect, the Act will mandate up to 12 weeks of paid leave to bond with a child2, take care of an immediate family member who is gravely ill, or spend time with a family member who is called into military duty. It will apply to both full-time and part-time employees who have worked for at least 6 months and have been paying into the program through their payroll deductions beginning in 20183. Moreover, small businesses will also be included and are no longer exempt. This is in comparison to the federal Family and Medical Leave Act which allows for unpaid leave, applies only to employers with more than 50 employees, requires the employee to have worked for 12 months, and only includes full-time workers.    Starting January 1, 2018, employees will be eligible for up to 8 weeks of paid leave per year with 50% of their weekly salary. In 2019 and 2020 there will be eligibility for up to 10 weeks of paid leave with 55% and 60% of their weekly salary. Finally, in 2021, there will be eligibility for the full 12 weeks of paid leave to be used and the maximum pay permitted will be two-thirds of New York’s average weekly wage (the 2015 average was $1,296.48). NEW YORK’S $15 MINIMUM WAGE  Beginning December 31, 2016, the minimum wage throughout the State of New York will begin its progressive increase plan to reach $15 an hour. In New York City, the wage will rise to $11 at the end of this year and increase $2 each year thereafter, reaching $15 on December 31, 2018. For workers in Nassau, Suffolk, and Westchester County, the wage will rise to $10 at the end of this year and increase $1 every year until December 31, 2021. For the rest of New York State, the increase will be more gradual. By the end of this year, the wage will increase to $9.70 and will rise at 70-cents per hour yearly increments until December 31, 2020 when the wage will peak at $12.50 per hour. Thereafter, the minimum wage will increase on an indexed schedule to be set by the Director of Budget in consultation with the New York State Commissioner of Labor.

  1 See https://www.dol.gov/whd/overtime/fs17a_overview.htm.

2 The child may be biological, adopted, or fostered.

3 The Act is funded on an insurance model where roughly a dollar per week will be deducted from employee paychecks.

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By Nicholas Graziano

            Under Board law, there are two distinct types of labor strikes, granting strikers different rights when they wish to return to work at the end of a strike period.[1]  If the object of a strike is to obtain economic concession such as higher wages, shorter hours, or better working conditions, the strike is considered economic.[2]  In contrast, an unfair labor practice strike is defined as a work stoppage “initiated or prolonged, in whole or in part, in response to unfair labor practices committed by the employer.”[3]

Whether or not the Board finds an economic strike to have converted to an unfair labor strike is critical when striking employees are ready to return to work.  Unfair labor practice strikers cannot lose their jobs from striking, and have a right to “displace” replacement employees, possibly resulting in the termination of the replacements.[4]  In contrast to the protections enjoyed by unfair labor practice strikers, economic strikers have no “displacement rights” and are not required to be immediately reinstated.[5] The economic striker who desires to return to work after the strike has ended is only entitled to be recalled to work when an opening in such a job occurs, after his or her bargaining representative has made an unconditional request for reinstatement.[6]  However, a strike which begins as an economic strike can be converted to an unfair labor practice strike, guaranteeing to an economic striker the additional rights of displacement.[7]  When determining whether to characterize an economic strike as an unfair labor practice strike, the Board looks for a “casual connection . . . between the unlawful conduct and the prolongation of the strike.”[8]  If the Board finds the employees, in deciding whether to remain on strike, are motivated in part by the employer’s unfair labor practices, the strike will be converted.[9]

The National Labor Relations Board has recently re-interpreted its longstanding precedent, developing the new “independent unlawful purpose” standard in American Baptist Homes as an additional means for conversion.[10]  The phrase was originally used by the Board in Hot Shoppes, where the ALJ found the employer acted pursuant to a “contrived scheme” with “careful planning in advance of the strike” to punish striking employees in violation of both § 8(a)(1) and (3) of the NLRA.[11]  Though the Hot Shoppes Board disagreed with the administrative law judge’s findings of an “independent unlawful purpose”, upon re-interpretation in American Baptist Homes, an employer may not hire replacements when “motivated by purposes otherwise proscribed by the Act.”[12]  The Board expressly defined an “independent unlawful purpose” to include an employer’s intent to discriminate, encourage, or discourage union membership during a strike.[13]

To justify this finding, the Board looked to a third decision, Avery Heights, the only post Hot Shoppes case to consider the “independent unlawful purpose” language.[14]  Though the Board did not find an independent unlawful purpose in Avery Heights, the Board noted that the “desire to punish strikers” would establish such a purpose in violation of the Act.[15]  Because the employer in American Baptist Homes “wanted to teach the strikers and union a lesson . . . and avoid future strikes”, this was evidence of an independent unlawful purpose; a desire to punish the striking employees for engaging in protected conduct.[16]  Therefore, under American Baptist Homes, hiring replacement employees “to teach [] strikers a lesson” is now an independent unlawful purpose in violation of both Section 8(a)(3) and (1) of the NLRA.[17]  If an independent unlawful purpose can be demonstrated, an otherwise economic strike will be converted to an unfair labor practice strike, guaranteeing reinstatement rights to the striking employees.

[1] Gen. Indus. Emps. Union, Local 42 v. N.L.R.B., 951 F.2d 1308, 1311 (D.C. Cir. 1991).

[2] The Right to Strike, N.L.R.B., (last accessed May 5, 2016), https://www.nlrb.gov/strikes.

[3] Teamsters Local Union No. 515 v. N.L.R.B., 906 F.2d 719, 723 (D.C. Cir. 1990).

[4] Pirelli Cable Corp. v. N.L.R.B., 141 F.3d 505, 515 (4th Cir. 1998); N.L.R.B. v. Int’l Van Lines, 409 U.S. 48 (1971) (holding employees who honored picket lines during organizational campaign were entitled to back-pay after employer informed them they were permanently replaced).

[5] Winn-Dixie Stores, Inc. v. N.L.R.B., 448 F.2d 8, 11 (4th Cir. 1971).

[6] See SDBC Holdings, Inc. v. N.L.R.B., 711 F.3d 281, 295 (2d Cir. 2013) (citing N.L.R.B. v. Koenig Iron Works, Inc., 681 F.2d 130 (2d Cir. 1981).

[7] Rose Printing Co., 289 N.L.R.B. 252, 275 (1989) (finding conversion to occur “notwithstanding the continuation of the economic issues that constitute[] the original basis for the strike” even where economic issues are the more important issue).

[8] Robbins Co., 233 N.L.R.B. 549, 549 (1977).

[9] Northern Wire Corp. v. N.L.R.B., 887 F.2d 1313, 1319-20 (7th Cir. 1989).

[11] 29 U.S.C. §§ 185(a)(1)-(3); Hot Shoppes, Inc., 146 NLRB 802, 835 (1964).

[12] 364 N.L.R.B. No. 13 at 15; See American Optical Co., 138 N.L.R.B. 681 (1962) (dissenting that evidence showed employer’s sole motive for replacing economic strikers was to compel the union to accept its bargaining proposals).

[13] 364 N.L.R.B. No. 13, 19-20 (finding “[i]t [to be] axiomatic that an employer violates the Act when it retaliates against employees for engaging in union or other protected activity” as the right to strike is fundamental).

[14] 343 N.L.R.B. 1301 (2004).

[15] Id.

[16] Id. at 29.

[17] Id. at 30.

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By: Nicholas Graziano

The United States Supreme Court recently affirmed the Ninth Circuit Court of Appeals, holding agency fees paid to the California Teachers’ Association (“CTA”) by non-union members in place of membership dues does not violate the non-union members’ free speech rights under the First Amendment.  This decision affirms the Court’s decades-old precedent set forth in Abood v. Detroit Bd. of Educ., 431 U.S. 209 (1977).  Under Abood, a union cannot require non-members to contribute financially to a union’s non-core causes, but may charge non-members an agency fee to support a union’s efforts in core activity such as collective bargaining.  Non-members argued these fees forced them to support the union’s political activities as collective bargaining by a public-sector union is inherently political.  The CTA contends that non-members must financially contribute to support of the union’s negotiating efforts on behalf of all teachers, as non-members still benefit from the collective bargaining efforts spent by the Teacher’s union to avoid the spread of “free-riders”.

In June 2014, the Supreme Court held in Harris v. Quinn, 134 S. Ct. 2618 (2014), that the State of Illinois could not treat its Medicaid-paid home health aides as government employees for the purposes of subjecting them to the state’s compulsory union dues requirements.  The Court distinguished public employees covered by Abood from quasi-public employees or partial public employees, like the home health aides whose customers (private individuals) have the final say and decision-making power in their hiring, firing, scheduling, and duties rather than the state or government making these decisions.  In reaching its holding, the majority criticized Abood for failing to take into account the “conceptual difficulty” of distinguishing between union expenditures for collective bargaining and those for political and other non-core activities in the public sectors. The Court also criticized the administrative difficulty in distinguishing between “chargeable” and “non-chargeable” expenses in the public sector as well as noting a heavy burden on the non-member in showing that the chargeable item is not “germane to collective bargaining” and, therefore, non-chargeable under Abood’s agency fee.

Prior to Harris, in Knox v. SEIU Local No. 1000, 132 S. Ct. 2277 (2012), the conservative majority of the Supreme Court called the collection of dues from non-members an “anomaly” that must be “carefully tailored to minimize the infringement of free speech rights.”  However, unlike in Friedrichs, where the non-member’s central argument is that as a public sector union all bargaining is inherently political, in Knox the non-members had already opted out of political spending which was subsequently reassessed with increased agency fees to the non-members. Though the Knox court did not address the constitutional rights invoked in Friedrichs, Justice Alito invited a future challenge to Abood, suggesting that an opt-in procedure would be less restrictive to speech than the current opt-out framework.

Despite strong criticism from the Court’s right wing, the 4-4 verdict issued from the Court on March 29, 2016, due to the recent passing of Justice Scalia, reaffirms the Ninth Circuit’s holding and has ensured that, at least for now, public sector unions will continue to collect agency fees.  However, because political interest groups such as the Center for Individual Rights (the group responsible for organizing Rebecca Friedrichs and the other plaintiffs) had nearly achieved its goal in overturning Abood, a similar case will certainly be presented to Court in the near future.  Unless the majority of Supreme Court justices can be led to understand the importance of, and state interest in, strong public sector unions, there is no certainty that agency fees will continue to be permitted under the Constitution as further challenges to the agency fee are likely to be litigated.

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A recent NLRB decision, Browning-Ferris Industries of California, Inc. dramatically expanded the joint employer standard and overturned over thirty years of case law.[1] The Board eliminated the requirement that an alleged joint employer must actually exercise direct control over workers and instead made the mere right to control such employees sufficient to establish a joint employer relationship even if that right to control is actually never exercised. Under the Browning-Ferris standardpotential control of employees is now just as probative of joint employer status as the actual control and the control need not be “direct or immediate.” Instead, the control may be “limited or routine” or even exercised through the authority of a third party.

Though the new standard has had a tremendous effect on the Occupational Safety and Health Act and the Fair Labor Standards Act, the new standard has a minimum impact on the New York City and State Human Rights Laws.  A recent 2016 New York case, Jackson v. Abrams, Fensterman, Fensterman, Flowers, Greenberg & Eisman, LLP[2] held that a second employer was not the plaintiff’s actual employer granting the defendant summary judgment on the NYC and NYS Human Rights Laws. The New York State Human Rights Law does not define the term “employer” and the courts use a four-pronged test to determine whether a defendant falls within the ambit of the State Human Rights Law by considering whether the proposed employer: (1) had the power of selection and engagement of the employee, (2) paid the salary or wages to the employee, (3) had the power to dismiss the employee, and (4) had the power to control the employee’s conduct. Thus, the Human Rights Laws do not examine joint employers with a “potential control” standard.

The new NLRB’s Browning-Ferris standard is a significant win for the working people in unions because they are the ones who want to bargain with their employers over improvements in the workplace. Without this ruling, employers can avoid bargaining by hiring temporary employees or contract employees. The new standard may provide a notice for businesses to review their own agreements such as the ones with temporary staff, subcontractors, and any other contractual agreements that may involve the interrelationship of one employer to another for potential exposure to joint employer claims.

 

 



[1] Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (Aug. 27, 2015).

[2] Jackson v. Abrams, Fensterman, Fensterman, Flowers, Greenberg & Eisman, LLP, 29 N.Y.S.3d 91

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In 1977, the Supreme Court approved in Abood v. Detroit Board of Education, the agency fee arrangement which requires that non-union members to pay their “share” of the costs of bargaining and contract administration due to a union’s duty to fairly represent all of the workers at a “shop”, not just its dues-paying members.  This arrangement prevents “free-riding” by non-union employees without implicating non-union members’ First Amendment rights because agency fee-payees can opt-out of contributing towards the union’s other activities such as political or social advocacy.

However, in June 2014, the Supreme Court held in Harris v. Quinn, that the State of Illinois could not treat its Medicaid-paid home health aides as government employees for the purposes of subjecting them to the state’s compulsory union dues requirements.  This decision has stifled the efforts of unions to replace dwindling numbers of private union membership with a new class of quasistate/quasi-government employees that can be unionized via state compulsory union laws.  The Court distinguished public employees covered by Abood, from quasi-public employees or partial public employees, like the home health aides in Harris, whose customers (private individuals) have the final say and decision-making power in their hiring, firing, scheduling, and duties rather than state or government making these decisions.  The Court furthered reasoned that there is very little that unions can do to adequately represent the individual interests of these home health aides because their interests vary.

Notwithstanding the ruling in Harris v. Quinn, full-fledged public employees such as public school teachers, firefighters, police and other civil service employees continue to be subject to the compulsory dues in the twenty-six non-Right-to-Work states.  These public employees may choose to either join the union and pay full membership dues, or opt-out of union membership and only pay the requisite agency core fee in order for the union to be financially able to represent and bargain for all of its employees in a given bargaining unit.

With that being said, unions are rightfully fearful of what the aftermath of Harris v. Quinn could mean for labor in the future. In fact, Freidrichs v. California Teachers Association (CTA) is a pending case from the Ninth Circuit Court of Appeals, which may reach the Supreme Court during its next term.1  The case concerns a group of public school teachers from California who are challenging the compulsory union dues on First Amendment grounds. These teachers are asking the Supreme Court to overrule the longstanding rule of Abood which requires public employees to pay their share of the agency fee to the unions that represent their bargaining interests.   If Abood is overruled and compulsory agency fees are no longer required, unions could suffer major losses in its membership, financially, and in its overall bargaining powers.  A favorable outcome for the California Teachers Association is likely to change the face of the labor movement for public employees.
1 Petition for writ of certiorari is currently pending before the Supreme Court.

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This memo is intended to serve as a summary of the recent legislative change to the definition of an “independent expenditure”, as found in the New York City Charter. The bill was meant to counteract an overly-broad interpretation of the law by the New York City Campaign Finance Board (“CFB”), the entity charged with regulating reporting and disclosure of expenditures in New York City elections. The definition of an independent expenditure is found in Section 1052(15)(a)(i):
A monetary or in-kind expenditure made, or liability incurred, in support of or in opposition to a candidate in a covered election or municipal ballot proposal or referendum, where no candidate, nor any agent or political committee authorized by a candidate, has authorized, requested, suggested, fostered or cooperated in any such activity.
Historically, under the CFB’s rules, expenditures that are non-independent are called coordinated expenditures. Coordinated expenditures count against a candidate’s spending limits, and will be counted as an in-kind contribution to the candidate by the one making the expenditure. The CFB interprets coordination to mean that the “candidate cooperates with the independent spender concerning an independent expenditure.” The CFB’s guide on the issue, a copy of which can be obtained on their website, gives this example: “Discussing the content or distribution of a leaflet with the candidate, or having someone with a connection to the candidate plan an advertisement, are examples of factors that would make an expenditure not independent and therefore not covered by the independent expenditure rules.”
In Advisory Opinion 2009-7, the CFB stated that “the critical question in every case is whether, in light of the facts and indicia of non-independent activity, the campaign authorized, requested, suggested, fostered or otherwise cooperated in a third party’s activity on the campaign’s behalf, and if so, whether such activity was properly accounted for.” A few years later, the CFB released Advisory Opinion 2012-1, which contained a vague footnote that implied that the following communication can be seen as non-independent:

  1. Discussions of logistics such as date, time, and location in arranging for a candidate’s appearance at a non-fundraising event;
  2. Communications directly related to an entity’s endorsement process; or
  3. Requesting, obtaining, and/or republishing a candidate’s photograph, biography, position papers, press releases, or other similar materials available to the general public.

Many labor organizations and good government groups argued that this type of activity was a necessary part of their endorsement process, and that the CFB’s interpretation effectively caught up internal member-to-member communications. Thos groups were able to secure a change in the law through the introduction of INT 0978-2012, a Local Law to amend the New York City Charter in relation to the Campaign Finance Board. This bill was meant to remove member-to-member communications from the independent expenditure reporting requirements, as interpreted by the CFB in Advisory Opinion 2012-1.
The Bill was overwhelmingly approved by the Council (47-1), but then vetoed by Mayor Bloomberg on February 22, 2013. The Council then voted to override the veto on March 13, 2013. In response to the legislation, the CFB released Advisory Opinion 2013-1. There, the CFB clarified that discussions of logistics between a candidate and an entity regarding a non-fundraising event, and obtaining information as part of an entity’s endorsement process, are not automatically considered coordinated activity. The same holds true for photographs, biographies, position papers, press releases, and other similar materials. Thus, absent “indicia of cooperation”, the CFB essentially held that the majority of the actions taken by labor organizations during their endorsement processes will not lead to a finding of coordination.
As a result of this new law, all those involved in this effort were able to push back against the overly-zealous CFB, and with the help of the Speaker and the City Council, were able to ensure the basic freedom of labor unions to communicate with their members without fear of interference or unwanted oversight. As a result, the definition of independent expenditures now does not include any communication by a labor or other membership organization aimed at its members. This includes incidental communication by a labor or other membership organization or corporation with non-members or non-stockholders, as long as the group uses reasonable efforts to restrict the communication to its members.
As always, each organization’s situation and questions related to individual member communications must be viewed in light of its own specific set of facts, and they are encouraged to contact their own principal officers or legal counsel with any questions concerning the matters described above.

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ERISA SECTION 408(b)(2)
DISCLOSURE OBLIGATIONS FOR SERVICE PROVIDERS

On July 1, 2012, the United States Department of Labor’s (“DOL”) final regulation on ERISA Section 408(b)(2)(found at 29 C.F.R. Section 2550.408b-2) went into effect. The regulation requires organizations that provide services to ERISA-covered defined benefit and contribution plans to disclose to plan fiduciaries the compensation they receive, both direct and indirect, for work performed for the plan. 29 C.F.R. Section 2550.408b-2(a)(3).
In implementing this final regulation, the Department of Labor reasoned that an increased level of disclosure from service providers will allow plan fiduciaries to better assess whether or not the charges are reasonable for the work performed, as required by the prohibited transaction exemption found at 29 C.F.R. 2550.408b-2(a)(3), and whether or not any conflicts of interest exist. According to the DOL, the regulation does not apply to simplified welfare plans, employee pension plans (SEPs), SIMPLE retirement accounts, IRAs, and certain annuity contracts and custodial accounts described in Internal Revenue Code section 403(b).
Covered service providers are those who receive compensation of at least one-thousand dollars ($1,000.00) in compensation for work performed during the plan year, and who serve in capacities such as record-keepers or brokers, registered investment advisors, and fiduciary service providers. Accountants, auditors, actuaries, bankers, insurance brokers, attorneys and others, are only considered to be covered service providers if they receive indirect compensation in connection with services they provide to the plan. Indirect compensation is monetary and non-monetary payment from sources other than the plan in connection with services rendered to the plan, and generally includes commissions, service fees, maintenance fees, 12b-1 fees, and finder fees. Non-monetary compensation generally includes meals, travel, gifts, and tickets to sporting and entertainment events.
Upon request from the plan, service providers must take a position on whether or not they consider themselves to be a service provider covered by the regulation. Where a provider does not consider itself to be a covered service provider, the plan must be provided a written explanation supporting that position. Where a provider is covered, they must provide a written response describing the services they provide to the Plan, as well as all direct and indirect compensation they receive for services provided to the plan. Where indirect compensation is received, the provider must describe the arrangement pursuant to which that compensation is paid.
Where a service provider fails to respond to a request, the plan fiduciary can notify the DOL of the non-compliance. Non-compliance by a service provider can result in the arrangement being classified as a prohibited transaction under ERISA, with the possible penalties that follow that classification. Once a service provider has made the required disclosures, service providers must provide this information when requested by a plan fiduciary, and must inform the plan within sixty (60) days of a change in the information previously provided.

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In the never-ending battle between construction industry employee benefits funds and delinquent employers, every possible avenue must be explored to assist Trustees in fulfilling their fiduciary duties to collect unpaid contributions. Employers are obligated, pursuant to their respective collective bargaining agreements, to remit payments (usually on a weekly basis) to employee benefit funds for hours of covered work performed by members. Unfortunately, there are a myriad of employers that chronically fail to make timely benefit contributions for their employees. Generally, delinquencies arise when the contractor who hired the signatory employer (whether it be a general contractor or subcontractor) fails to timely pay the lower tier subcontractor. If collections efforts against a signatory employer prove fruitless, whether because of bankruptcy or otherwise, Article 3-A of the Lien Law can provide a useful alternative.
Article 3-A of the Lien Law provides a statutory method for collecting delinquent wages and benefits due to workers on construction projects in New York State. In short, Article 3-A seeks to ensure that all work performed on a construction project is properly compensated. It does so by creating “trustees” out of owners, general contractors, and subcontractors who have received money for labor or materials. As trustees, these owners and contractors must hold such money in a constructive “trust account” for the sole purpose of reimbursing workers and suppliers. For example, if a subcontractor received $10,000 from a general contractor for labor and materials, Article 3-A would require that subcontractor to reserve those funds, in trust, for the purpose of compensating its retained workforce. Once the subcontractor has fully paid its workers from the trust account, any remaining funds can be used at the subcontractor’s discretion. However, if the subcontractor uses any of that $10,000 instead of fully compensating its workers, then it has diverted trust assets and violated Article 3-A, potentially incurring personal and criminal liability.
In addition to requiring the creation of trust accounts, Article 3-A also places strict recordkeeping obligations on these statutory trustees to prevent trust diversions. Specifically, Section 75 of the Lien Law obligates all trustees to maintain careful and accurate books and records of all transactions from the constructive trust. Further, Section 76 establishes that a trust beneficiary, such as a worker or pension fund, has the right to examine the books and records of the trustee. This examination can be a powerful tool, especially when failure to maintain proper records creates a legal presumption that the trust laws have been violated.
Advising the contractor that you intend to assert your rights under Article 3-A can be useful in collecting delinquent contributions. In many instances, the mere mention of such a request to examine the contractor’s books and records can be enough to collect. Finally, if there is sufficient evidence that monies were misdirected, there is case law to support the proposition that the funds can sue under Article 3-A for the benefits. Significant issues relating to the preemption and the nature of the benefits in dispute must be examined before employing Article 3-A. Consult with a capable and qualified attorney prior to taking any such action.