Written by Andrew Staab
Rosene, Haugrud & Staab, Chartered
P: 651.227.6621 E: This e-mail address is being protected from spambots. You need JavaScript enabled to view it

With Funds facing all kinds of financial pressures, the focus on collections and verifying employer reporting and payment is sharpening.  What can the Funds do to maximize recovery?  Aside from the standard litigation of a Summons and Complaint to be filed in the U.S. District Court, Funds are exploring additional means of collection, many of which involve state law remedies.  Ten years ago, the majority of U.S. Courts of Appeal (collectively “Circuits”) believed that state law remedies such as mechanic’s liens and mini-Miller Act (public project payment bond recovery) were preempted by ERISA.  Not so today.

Without going into detail about why the Circuits have allowed for Funds to use these state law remedies, I want to use this opportunity to remind the “players in the game” about the importance of communications.  With mechanic’s lien and state law public project payment bond cases, there are time deadlines that generate panic among lawyers.  A typical deadline is for a mechanic’s lien statement to be filed with the county recorder within 120 days after the date of the last improvement.  Fund collections counsel may first learn of an “actionable” delinquency two or three months after it is clear there is a need to act.  That leaves a small window to process information.  Fund auditors are often frustrated by being “stood up” by employers, who say they will be available for audit but who really are not.  The delay tactic by delinquent employers and Fund auditors creates friction between Fund counsel and Fund auditors.

Another layer of complication on using state law mechanic’s lien or public project payment bond remedies is the fact that Fund counsel must have specific hour information on a single project.  Auditors do not generally produce audits on a “per job” basis, unless Fund counsel requests that to be done.  Sometimes that “special request” adds time to the completion date…thus straining relations between Fund counsel and Fund auditors.

I have seen it and experienced it, and I think it is time to step back and assess the situation.  Sometimes it is impossible for Fund counsel and the Fund auditor to have the information necessary to meet an initial deadline of 120 days after the date of first improvement.  That has to be communicated to the Trustees.  Delinquent employers and suspicious general contractors can get in the way of the Funds’ efforts.  The general contractors are reluctant to get involved, especially in a payment bond context, because it might come back around to haunt them when the bond’s surety is looking for payment.

Fund counsel and Fund auditors should coordinate early in the process whether the payroll audit will be done for purposes of mechanic’s lien or payment bond remedies.  This would give the auditors the context to request job-specific information.  If the payroll auditor is not informed of this need, then an extra step is necessary to go back and do the job-specific audit.  Fund counsel has to inquire from employers and union officials regarding the location of work performed by delinquent employer employees.

The regular Delinquency Committee meeting is the place to summarize the Funds’ potential for mechanic’s lien or public project bond remedies.  Fund counsel and Fund auditor should work together to anticipate the need to dissect an employer’s records to maximize the possibilities of delinquency recovery.  After all, if the Fund’s service providers can facilitate the trustees’ exercise of their fiduciary duty to collect, then the Fund service providers are doing their jobs.

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