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Tuesday, 15 November 2011 14:27 |
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Written By Larry Beebe
Bond Beebe
P: 301.272.6025 E:
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In an article entitled “Fiduciary Duties Created by Project Labor Agreements” in the International Foundation of Benefit Plans’ August 2011 Benefits Magazine, Paul Moorhead of Laquer, Urban, Clifford & Hodge, LLP provides useful guidance for Trustees whose participants work under a project labor agreement. On the specific nuances of payroll auditing issues involved when nonunion contractors are bound to a Collective Bargaining Agreement, Moorhead states:
The courts have held that trustees may rely on certified payroll records (CPRs) to determine the amount of fringe benefit contributions owed by a contractor. In Trs. Of the S. Cal. IBEW-NECA Pension Plan v. Tri Signal Integration, trustees audited three years’ worth of the contractors CPRs on construction projects covered by the Los Angeles United School District’s Protection Stabilization Agreement. The audit resulted in a claim for over $230,000 in unpaid contributions. The contractor disputed the audit by claiming that the CPRs inaccurately classified the work performed by the employees. The court rejected this claim, ruling that a contractor cannot escape the admissions made in contemporaneously prepared records by simply denying, after the fact, the accuracy of the CPRs.
To read the full article, click here. |
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Tuesday, 08 November 2011 12:41 |
Written By Larry Beebe
Bond Beebe
P: 301.272.6025 E:
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In Trustees of the Sheet Metal Workers’ Local Union No. 33 Profit Sharing Annuity Funds v. Beckley Mechanical Inc., an employer argued that it had agreed to execute Collective Bargaining Agreements (CBAs) in exchange for several promises, including a promise by a union agent to withdraw a criminal action against one of the employer’s executives. The employer said it was not contractually bound to make contributions to the funds because the contract was illegal or void.
The court stated that the union agent’s withdrawal of his criminal complaints did not render the agreement void or illegal as the agent did not have the authority to dismiss the criminal charges. The promise to withdraw changes was only one of seven promises made in the agreement and the court ruled that the criminal action was not “essential or indivisible consideration” that voided the entire agreement.
The court ruled that the trustees could proceed with their case and that other issues remained in dispute. Click here for the full court opinion.
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Monday, 31 October 2011 10:35 |
Written by Andrew Staab
Felhaber, Larson, Fenlon & Vogt
P: 651.312.6023 E:
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As an attorney working to enforce contractual contribution obligations on behalf of Taft-Hartley benefit fund fiduciaries, I know that I cannot do my job without effective payroll auditors. These professionals are the messengers of liability, sentinels of successorship, and interpreters of delinquency gobbledygook. How do I express my thanks to payroll auditors? I demand more from them. Is that inappropriate? To ask a payroll auditor for more is to validate and honor the work that they perform. So, we should all ask for more! It is one thing to get a sheet of paper from a payroll auditor stating the amount of unpaid and underpaid fringe benefit contributions. It is quite another thing to sit through a deposition of a payroll auditor during which he/she shares information about the comprehensive process that was undertaken to make that sheet of paper a reality.
With Taft-Hartley Funds selecting from an expanded menu for collections, the payroll auditor’s input is the necessary ingredient for success. Let’s say a pension fund has an opportunity to pursue mechanic’s lien or public payment bond remedies in addition to the routine collections litigation. The payroll auditor must verify the amount due for each project, as well as the last date of work performed on each project. Without this information, the Fund’s remedy is lost.
Let’s say the audit shows more 1099s than W-2s, and we recognize the 1099 recipients as Fund participants. The payroll auditor calculates the amount of the 1099 and divides it by the appropriate pay scale to determine the hourly liability of the delinquent employer. Let’s say there are no records of hours. The payroll auditor will be asked to analyze hour estimates from unsuccessful bidders on the same project to determine the delinquency amount. Let’s say that all the delinquent employer has is a shoebox of receipts. The payroll auditor is asked to make a spreadsheet showing the employer’s obligation.
The payroll auditor is asked to calculate, recalculate, and then calculate some more to get to the right answer. So go ahead Fund Counsel and Trustees, acknowledge your payroll auditors and give them the respect they deserve and ask for more. Oh, you may pay more as a result, but the results will certainly be worth it. The payroll auditor is your foot soldier in the battle against delinquency.
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Monday, 17 October 2011 11:38 |
Written by Phil Vivirito
Bond Beebe
P: 301.272.6090 E:
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In this series, I will explain several fundamental payroll auditing principles. This post discusses guidelines for determining how much of the employer’s population a payroll auditor should test.
The payroll auditor should test one hundred percent of the employer’s population to ensure all eligible employees are being reported. Larger employers that have departmentalized payrolls can be tested and eliminated rather quickly. For organizations with a non-departmentalized payroll, the auditor can compare names on W-2s to those being reported; employees not being reported can be further researched.
When testing new hires and recent terminations, the auditor should request a listing of all new hires and terminations from the employer. If there are only a few employees on the list, they can all be tested; if this list is long (more than 25 employees), the auditor can randomly choose five percent to test.
The auditor does not even need to look at the payroll reports when initially performing this test. The auditor can compare the hire date to the contribution report. If there is no waiting period, the employee should appear on the contribution report in the month hired. If the hire date matches the contribution report, the next step is to go to the payroll and determine if indeed the hire date provided is correct and if the units reported the first month for that employee are correct. If this test discovers findings, such as employees appearing on payroll prior to the hire date provided by the employer, then the auditor should expand the testing to the full list of new hires.
When performing the horizontal test for units and pay periods, where the auditor tests an employee each week for each year of the audit period, the amount of testing depends on the type of payroll and the employer’s industry. If the same payroll is in place for the entire audit period, a small sample of three to four employees per year will be sufficient. In an industry in which employees come and go, or if an employer has many employees with gaps in months worked or low hours, an additional sample of four or five employees should be selected. The need for expanded testing would be based on where errors are discovered in the initial test.
For example, in the construction industry, where the workforce may be seasonal or employees come and go based on the length of the job, a larger sample should be chosen. The auditor should ensure that employees working less than a full year are selected. The procedures would differ in a manufacturing industry, in which the workforce is usually steady.
While the population to be tested can change based on the industry and the type of testing being performed, these principles are helpful guidelines for designing efficient, effective payroll audits. |
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Payroll Auditing: A Guide for Multi-Employer Plans