Quick Hits
- The D.C. Circuit’s July 2026 ruling in Trustees of the IAM National Pension Fund v. M&K Employee Solutions affirmed most of an $11.4 million withdrawal liability judgment against affiliated employee-leasing entities while reversing a $1.6 million delinquent contributions judgment because the pension fund failed to establish the full four-factor single-employer test beyond common ownership.
- Business owners participating in multiemployer pension plans face potential personal liability under the MPPAA’s controlled group provisions, though courts may exclude casual investment activity from the definition of a qualifying “trade or business,” and successor entities acquiring withdrawing employers’ operations may inherit withdrawal liability regardless of corporate restructuring.
- Employers withdrawing from multiemployer pension plans may want to carefully document applicable interest rates at the time of withdrawal, seek express written agreements on how partial payments will be allocated, and maintain genuine operational separateness among affiliated entities to reduce overall liability exposure and defend against single-employer claims.
Background
M&K Truck Centers operates twenty-eight truck dealerships through affiliated companies, each structured with a “Sales” entity to run the dealership and a separate “Employee Solutions” (ES) entity to hire workers and lease them back to the sales company. Three ES entities signed collective-bargaining agreements requiring contributions to the IAM National Pension Fund. When ES Alsip withdrew from the IAM National Pension Fund at the end of 2018, the pension fund assessed approximately $6.1 million in withdrawal liability. ES Alsip disputed the assessment and, contrary to the MPPAA’s “pay first, dispute later” rule, failed to make interim payments, prompting the IAM National Pension Fund to accelerate the payment schedule and sue. The pension fund also claimed that ES Summit owed approximately $1.6 million in delinquent contributions for work performed at a separate Northern Illinois dealership. The district court granted summary judgment for the pension fund on all claims and entered a $13 million judgment—comprising $11.4 million arising from ES Alsip’s withdrawal liability (including accrued interest and liquidated damages) and $1.6 million for ES Summit’s delinquent contributions. The court held multiple affiliated entities and individuals jointly and severally liable. On appeal, the D.C. Circuit affirmed in part and reversed in part, upholding the ES Alsip withdrawal liability but reversing the $1.6 million judgment against ES Summit.
(This matter is unrelated to the recent Supreme Court of the United States decision in M&K Employee Solutions, LLC v. Trustees of the IAM National Pension Fund, holding that, under ERISA, an actuary for an underfunded multiemployer pension plan may calculate an employer’s withdrawal liability based on actuarial assumptions adopted after the relevant measurement date for withdrawal liability.)
Key Takeaways
Personal Liability for Owners Hinges on ‘Trade or Business’ Analysis
Business owners and individuals with ownership interests in companies that participate in multiemployer pension plans may face potential personal liability. Under MPPAA’s control-group provisions, individuals engaged in a “trade or business” under common control with the withdrawing employer may be held personally liable for withdrawal liability. However, this case offers some reassurance: the court found that casual investment activity, such as occasional house-flipping treated on tax returns as personal transactions, may not constitute a “trade or business” sufficient to trigger personal liability. Owners may want to carefully document the nature of their outside business activities, and maintain a clear separation between personal investments and trade or business activities before withdrawal to assess personal liability exposure.
Controlled Group Liability Applies Automatically to Commonly Controlled Entities
For withdrawal liability, the MPPAA’s controlled group rule under 29 U.S.C. § 1301(b)(1) automatically treats all commonly controlled trades or businesses as a single employer. Common control (determined based upon level of ownership and/or voting interests for corporations) alone is sufficient. The pension fund need not prove interrelated operations, common management, or centralized control of labor relations. In this case, the court confirmed that the ES entities were commonly controlled and thus jointly and severally liable for ES Alsip’s withdrawal liability. The court also found “overwhelming evidence” that each employee-leasing entity was a single employer with its corresponding operating company, resulting in joint liability for pension obligations.
Successor Liability May Attach to Acquiring Entities
Successor companies that acquire operations from a withdrawing employer may inherit the withdrawing employer’s withdrawal liability. The court imposed vicarious liability on Laborforce, LLC, and Employee Services, Inc. (ESI) as successors to the ES entities. Employers considering acquisitions, reorganizations, or new corporate structures may want to conduct thorough due diligence on potential pension liabilities and structure transactions to minimize exposure to unintended liability.
Structuring Relationships With Unrelated Affiliated Entities
Employers using unrelated affiliated entities, such as staffing companies or employee-leasing arrangements, will want to consider how courts assess whether to treat separate entities as a “single employer” for pension purposes. For delinquent contribution claims (as opposed to withdrawal liability), some courts apply the National Labor Relations Board (NLRB) four-factor test, which considers interrelated operations, common management, centralized control of labor relations, and common ownership. Here, the appellate court reversed a $1.6 million judgment for delinquent contributions on summary judgment because the IAM National Pension Fund’s complaint alleged only common ownership between ES Summit and ES Northern Illinois, without demonstrating the other three factors. An employer may defend against single-employer claims by maintaining genuine operational separateness, separate management, distinct labor relations practices, and independent day-to-day operations. Conversely, courts will look beyond corporate formalities to the substance of the relationship.
Withdrawal Liability Interest Rates May Be Locked at Termination
This case provides employers withdrawing from a multiemployer pension plan an argument against increased interest rates imposed after the withdrawal. The court held that when an employer terminates its collective-bargaining agreement and withdraws from the fund, subsequent trust amendments raising interest rates cannot be applied to that employer’s withdrawal liability unless the original agreement expressly authorized such changes. This ruling benefits employers by providing potential certainty around withdrawal costs: once an employer withdraws, the financial terms in effect at that time may govern. Employers contemplating withdrawal may want to carefully document the applicable interest rate provisions and be prepared to challenge any retroactive increases.
Application of Partial Payments
Employers making partial payments on withdrawal liability may want to note that, absent an explicit agreement otherwise, a pension fund will typically apply those payments first to accrued interest rather than to the principal balance. This approach, known as the “United States Rule,” can significantly increase the total amount an employer ultimately pays. Employers negotiating payment terms with a pension fund may want to seek express written agreements specifying how payments will be allocated. A clear allocation agreement, applying payments to principal first or on a pro-rata basis, can reduce overall interest costs and provide greater certainty in financial planning.
Bottom Line for Employers
This decision reinforces several critical practices for employers to consider prior to withdrawing from a multiemployer pension plan. Because the structure of business operations can significantly impact how withdrawal liability is assessed and collected, individual owners can carefully evaluate whether their outside activities could be characterized as a “trade or business” that would expose them to personal liability under the controlled group rules. Employers considering acquisitions or business reorganizations can conduct thorough pension liability due diligence with a clear understanding of how the withdrawal liability rules operate and successor liability risks. Employers using unrelated affiliated entities can maintain genuine operational separateness to defend against single-employer claims. Prior to withdrawal, an employer can document applicable interest rates and be prepared to challenge any retroactive increases. When negotiating partial payment terms, employers can seek express agreements with the multiemployer pension fund specifying how payments will be applied to minimize total costs.
Ogletree Deakins’ Employee Benefits and Executive Compensation Practice Group and ERISA Litigation Practice Group will continue to monitor developments and will post updates on the Employee Benefits and Executive Compensation and Traditional Labor Relations blogs as additional information becomes available.
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