MEMORANDUM
To: MITA OE 324 Contractors
From: Mike Nystrom, Executive Vice President/Secretary
RE: Stalemate Continues
Date: August 16, 2018
WHAT HAPPENED AND WHY THINGS ARE BOUNCING BACK AND FORTH
Late last week, MITA took a dramatic shift in strategy when it notified Operating Engineers, Local 324 (OE 324) that it had rescinded the Power of Attorney (POA) for all companies working under the recently expired MITA Utility Distribution and Road Agreements. This decision came after significant thought and discussion with the MITA Labor Relations Committee. The goal was that by making this decision, all fringe checks would be accepted, cashed and credited by the Fringe Funds, thus relieving the significant sense of concern that the employees, who are caught in the middle during this contract stalemate, are feeling.
OE 324 had consistently said that it would not negotiate directly with MITA and would only accept and credit fringes from all non-MITA POA contractors, and so the decision was made to remove the obstacle that was supposedly MITA. There was hope that the union leadership would be true to its word and would begin to work with industry towards some sort of resolution.
However, at a special called meeting of the Operating Engineers (OE) Local 324 Fringe Funds Board of Trustees, a resolution was offered up by the union trustees and supported by two other management trustees to return all contributions received by the Fringe Funds to MITA POA contractors for all work hours following the expiration of the MITA Utility Distribution Agreement (May 1st) and the MITA Road Agreement (June 1st). Each MITA trustee and several other management trustees opposed the move, but were outvoted.
Early this week, several contractors began to receive their submitted contributions back from the OE 324 Fringe Fund Office, even though each of these contractors had all independently pulled their POA from MITA. In other words, OE 324 moved the goal posts and continues to attempt to manipulate the negotiations process.
PUT VACATION FRINGE PAY BACK INTO PAYCHECKS
Last week, MITA told you to reverse course and start sending in the Vacation fringe contribution with your August payment and to stop paying it directly to the employee. However, that is when we believed that the OE 324 Fringe Funds would now accept and credit all rescinded MITA POA contractor contributions. We are sorry for the confusion on this subject, but it is now suggested to include the Vacation fringe (Vacation and Supplemental Vacation) in the paycheck each week for all OE employees and to not put that amount into any qualified fringe benefit plan (as referenced below).
You should let your employees know that this fringe is now included in their paychecks and will continue until further notice. It is expected that any retroactivity of any fringe contributions, including the Vacation fringe, will be a significant point of any negotiations that might take place.
HEALTH CARE COVERAGE
The OE 324 continues to agree with MITA that all OE 324 employees should have access to their Hour Bank, their Medical Reimbursement Accounts and their Self-Payment Options. Therefore, during this contract stalemate, most, but not all employees should have access to continued healthcare coverage. The Vacation fringe payment, which is paid directly to the employees, will go a long way in helping to cover that burden. However, in no way should you, as an employer, in any way direct how any employee should spend their own money. If employees decide to use the extra money that is now in their paycheck to take advantage of the Self-Payment Option, that is their sole prerogative.
HOW TO HANDLE YOUR FRINGES NOW
If you are one of those contractors who have now received your fringe contributions back from the OE 324 Fringe Funds, you are likely concerned with how to handle your fringes at this point. Since you are working under an expired contract, there are a couple of options laid out below for you.
For all Utility Distribution Contractors and for those Road Contractors who are working on private projects or on state/locally funded projects, where no prevailing wage requirements apply, the answer and solution is simple. The suggestion for these companies is to simply put all of the fringes for each month (including those that were returned) into a segregated escrow account (separate from your other corporate funds) until some sort of resolution is reached.
For all other Road Contractors working on federally funded projects, your primary employer obligation is to be compliant with the federal Davis-Bacon prevailing wage law, therefore, the answer and solution is a little more challenging.
The suggestion is for each company to now pay a base wage that includes the Vacation & Holiday fringe ($4.19) and Supplemental Vacation ($0.05) for a total Area 1/Group 1 operating engineer rate of $32.21 per hour. If you are working in different areas of the state and/or are classifying employees in different groups, the same concept applies, but may include different rates.
For the balance of the prevailing wage package, fringes must now be credited to the employee in order to be compliant with Davis-Bacon. The suggested manner for accomplishing this is for each company to deposit the balance owed to the employee (Area 1/Group 1 operating engineer is $23.30 per hour) into a company 401(k) plan (or similar qualified fringe benefit plan). By following this strategy and adding it to the “base wage plus vacation” referenced above, you will satisfy the current prevailing wage total package requirement.
Again, since you are working under an expired contract, you have no obligation to include the Labor Management Education Committee contribution ($0.16) in the monies deposited in your company 401(k) plan (or a qualified fringe benefit plan) for your OE 324 employees. The Industry Advancement Fund (IAF) ($0.12) can be paid directly to MITA with the attached form(s) on a monthly basis from now on and should not be considered part of your prevailing wage payment.
We do acknowledge and understand that some contractors may have a small number of OE 324 employees who may be without health care because they haven’t accumulated sufficient work hours (520 hours) to earn an hour bank, nor are they eligible to make self-payments to the OE 324 Healthcare Fund. For these employees it is acceptable under the Davis Bacon law for the company to pay the premium for a separate health care plan. To compute the company’s allowable hourly cost for this health care plan for credit toward meeting the prevailing wage obligation, you divide the total annual cost for that health care plan by the total number of hours the OE 324 employee works in a year (including work on both federal Davis-Bacon prevailing wage covered and non-covered work). When you have computed this allowable hourly health care plan cost you can deduct it from the hourly amount you are depositing into a company 401(k) (or a qualified fringe benefit plan) to satisfy the prevailing wage total package requirement.
MITA continues to work on and search for qualified alternative fringe benefit plans so that companies might have other viable options in how they satisfy the federal Davis-Bacon prevailing wage requirements. Please stay tuned, as MITA will be forwarding these other options out to the industry in future bulletins.
It is MITA’s understanding that companies may receive a letter from MDOT indicating that they have reason to believe there may be a prevailing wage compliance situation as it relates to the payment of fringe benefits to operating engineer employees. MDOT’s intended purpose with this letter is to put the company on notice of a potential situation and request that the company respond and/or rectify the cited situation in a given period of time (typically 30 days). Although MDOT’s past practice has been that the letter does not immediately assess penalties to the company, MDOT does have the authority to withhold future payments for the company’s failure to respond and/or rectify the cited situation. It is MITA’s hope that a company who receives this letter could rectify a cited operating engineer fringe benefit non-payment claim during this 30-day time period by making the fringe benefit payments into a qualified fringe benefit plan as described above.
Therefore, to summarize the information presented above, no company is required to rush into a “qualified plan solution” because of the 30-day flexibility, which does not even start until your receipt of a letter from MDOT, so take your time and find the right plan to fit your company’s needs. Secondly, keep in mind that if your company (Road) fits into both categories of Davis-Bacon and non-prevailing wage work, you can use a mix of the options listed above by using the escrow concept along with a qualified plan. And lastly, by being patient, other options may become available to you once MITA is able to bring those ideas to bear.
THREATS AND COERCION BY OE 324 REPRESENTATIVES
We have received numerous reports that employees have been threatened and/or coerced by OE 324 representatives with the loss of pension and healthcare benefits. If this has happened, it is a violation of the National Labor Relations Act. We are prepared to investigate these threats and pursue them with the National Labor Relations Board. In order to do that, we need to have employees come forward to be interviewed about what they know about these threats. These interviews are completely voluntary. The employees must know that their answers to the questions will not affect their job; that there will be no reprisals; and that they can terminate the interview at any time. You can interview employees as long as you follow the instructions in the attached guidance document. This document is specifically for employee information gathering and should be used if you feel that any of your employees have been threatened or coerced.
WITHDRAWAL LIABILITY INFORMATION REQUEST
Legal counsel has suggested that all contractors who have received the Withdrawal Liability Information Request, from the OE 324 Fringe Funds, should respond to OE 324 with the following statement at this point:
Be advised that this Company continues to have an obligation to contribute to the Local 324 Pension Fund. This company is a Contributing Employer under Section 1.4 of the Pension Plan, which defines a “Contributing Employer” as “any other Employer engaged in work coming within the jurisdiction of the Union which contributes to the Trust Fund or which is obligated by … any other written agreement to make contributions to the Trust Fund.…”
In addition, we are also subject to the “labor dispute” exemption of ERISA.
QUESTIONS
If you have any questions about this ongoing labor dispute, please contact Mike Nystrom, MITA’s Executive Vice President, at (517) 896-1493. If you have questions specific to Davis-Bacon application, please contact Glenn Bukoski, MITA’s Vice President of Engineering Services at (517) 256-0741.
