UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
December 1, 1982
CHARLES J. SCHAFFER, JR., RICHARD W. CUTAIAR, WILLIAM LEMON, VINCENT DAGEN, MAURICE R. SCHURR, WILLIAM J. GORMLEY, JOSEPH CIMINO, TEAMSTERS PENSION TRUST FUND OF PHILADELPHIA AND VICINITY, HIGHWAY TRUCK DRIVERS & HELPERS LOCAL NO. 107, INTERNATIONAL BROTHERHOOD OF TEAMSTERS, CHAUFFEURS, WAREHOUSEMEN & HELPERS OF AMERICA 1
The opinion of the court was delivered by: LUONGO
SUR PLEADINGS AND PROOF
This is an action brought under § 302(c) (5) of the Labor Management Relations Act, 29 U.S.C. § 186(c) (5). Plaintiff, Walter Dudo, is a former member of the Highway Truck Drivers and Helpers Union, Local 107 of the International Brotherhood of Teamsters (Local 107). He was denied pension benefits from the Teamsters Pension Trust Fund of Philadelphia and Vicinity on the ground that he had a break in service with employers participating in the union pension plan. Dudo claims that the break-in-service rule constitutes a structural defect in the pension plan in that it arbitrarily excludes employees from benefits. By way of relief, Dudo seeks to enjoin defendants from applying the break-in-service rule.
Following the completion of a non-jury trial held on October 21-22, 1982, the parties submitted requests for findings of fact and conclusions of law. On pleadings, proof, and the written submissions of the parties, I make the following
FINDINGS OF FACT
1. Plaintiff, Walter Dudo, is a former member of the Highway Truck Drivers and Helpers Union, Local No. 107, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America. (P-4, pp. 5-7).
2. Defendant Teamsters Pension Trust Fund of Philadelphia and Vicinity (the Fund) was established by agreement and declaration of trust dated December 30, 1957. (P-8, para. 3).
3. Defendant Charles J. Schaffer, Jr. is the administrator of the Fund. (P-8, para. 1).
4. Defendants William Lemon, Vincent Dagen, Maurice R. Schurr, William J. Gormley and Joseph Cimino are Trustees of the Fund. Defendant Richard Cutaiar ceased to be an employer-designated Trustee of the Fund as of January 31, 1978. (P-8, para. 2).
5. Defendant Highway Truck Drivers and Helpers Union, Local No. 107, International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (Local 107) is a labor union with its office at 107 Spring Garden Street, Philadelphia, Pennsylvania. Local 107 is subject to the constitution of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen and Helpers of America (Teamsters). (P-8, para. 4).
The Fund and The Plan
6. The Fund was established pursuant to § 302(c) (5) of the Labor Management Relations Act (LMRA), 29 U.S.C. § 186(c) (5), to administer the Teamsters Pension Plan of Philadelphia and Vicinity (the Plan).
7. The agreement and declaration of trust, as amended, provides that the Fund and the Plan shall be administered and operated by six trustees (three union-designated trustees and three employer-designated trustees). (Answer of the Fund, Exh. 1).
8. Under the agreement and declaration of trust establishing the Fund, the Trustees are empowered, inter alia:
* * *
(b) To formulate, adopt, amend and administer a PENSION PLAN for the benefit of covered and eligible employes in order to provide retirement benefits for such employes;
(c) In connection with the administration and operation of the PENSION PLAN and in order to effectuate the purpose thereof, to formulate and establish the conditions of eligibility with respect to age and length of service; to formulate provisions for the amount and payment of benefits; . . .
* * *
(Answer of the Fund, Exh. 1, article IV).
9. The Fund is funded by employer contributions in amounts fixed by collective bargaining. (Id., article VI).
10. Under the Plan formulated by the Trustees, an individual is automatically a Plan member if:
(a) he or she is an active employee in a collective bargaining unit represented by a union that is a party to the Fund; and
(b) contributions to the Fund are made by the employer on the employee's behalf. (P-6, Part I, at p. 7).
11. Local 107 is a party to the Fund. (P-2, article I, section E).
12. Eligibility for retirement benefits under the Plan is defined in terms of: (1) age; (2) number of "covered days" of contributions paid into the Fund on a member's behalf by a "covered employer"; and (3) years of "continuous service."
(See id., article II).
13. A "covered employer" is defined to mean an employer who is obligated to make contributions to the Fund in accordance with the provisions of a collective bargaining agreement. (Id., article I, section G).
14. A "covered day" is defined to mean a day of employment of an employee with respect to which an employer contribution is paid on the employee's behalf into the Fund. A year of covered service is credited to the employee if 175 covered days are accumulated in a calendar year, and a half-year if more than 100 but less than 175 covered days are accumulated. (Id., article I, sections N & S).
15. "Continuous service" is defined by the Plan as the sum of "continuous past employment" and "continuous covered employment".
(a) As it pertains to this action, "continuous past employment" means employment in the industry prior to March 1, 1957 (i.e., before covered employers began making contributions to the Fund).
(b) "Continuous covered employment" means the number of completed covered years and half-years accumulated since the later of the employee's (i) first covered day, or (ii) most recent "break in service." (Id., article I, sections O-Q).
16. The break-in-service rule in effect when Dudo applied for retirement benefits provided that an employee was considered to have a break in service if he or she was not in covered employment (i.e., no contributions were made to the Fund on the employee's behalf) for a period of 156 consecutive calendar weeks (hereinafter referred to as the "3-year break-in-service rule"). (Id., article I, section R).
17. The consequence of a break in service was a loss of all continuous service credit earned prior to the break. (P-6, Part II, at p. 16).
18. An employee is considered to be in covered employment (hence no time toward break in service is counted) during the period the employee is a union officer or in the armed forces. (P-2, article I, sections G & R).
19. Break-in-service time is computed during the period an employee is on strike, self-employed, unemployed, in a supervisory position, or otherwise not covered by a collective bargaining agreement which obligates his employer to make contributions to the Fund on his behalf. (Testimony of C. Schaffer).
20. Article V, section A of the Plan provides, in part:
It is hereby declared as the policy of the Trustees that consideration will be given in any individual case or cases to extenuating circumstances not recited above; such as strikes, lockouts, reduced business activity, etc., for the purpose of liberalizing the conditions which must be met by individuals in order to have their Continuous Service remain unbroken or to be considered as in retirement from Covered Employment, or to be considered as disabled. Any such liberalization shall be on a basis uniformly applicable to all individuals similarly situated.
Except in the case of total disability, the break-in-service rule has never been liberalized by the Trustees to account for extenuating circumstances. (Testimony of C. Schaffer).
21. An employee is eligible for normal retirement benefits once he or she reaches 57 years of age and completes 20 years of continuous service.
(P-2, article II, section A).
22. An employee is eligible for early retirement benefits once he or she either (a) completes 30 years of continuous service or (b) reaches 50 years of age and completes 20 years of continuous service.
(Id., article II, section B).
Dudo's Employment History
23. Walter Dudo was born on March 29, 1917, and received no more than a sixth-grade education. (P-4, pp. 10-11).
24. In 1940, Dudo began driving for Local 107. Since the "union books were frozen," Dudo did not become a member of Local 107 until 1945. (Id., pp. 6-7).
25. On March 1, 1957, when the Plan became operative, Dudo became a member of the Plan and was credited with 16 years of past continuous employment (See P-1).
26. From March 1, 1957, until he suffered a work-related injury to his back in July 1960, Dudo was in covered employment with Elliott Brothers Trucking Company. (P-4, at p. 12; D-21).
27. As a result of the work-related injury to his back, Dudo received workers' compensation for approximately five months. (P-4, at p. 12).
28. In or about December 1960, Dudo attempted to return to work with Elliott Brothers, but could not perform the lifting and bending required for the job. (Id.).
29. As of the end of calendar year 1960, Dudo was credited with 16 years of past continuous employment (Finding 25) plus 3.5 years of continuous covered employment (Finding 26) for a total of 19.5 years of continuous employment. (P-1).
30. Shortly after returning to work following his back injury, Dudo inquired of Local 107 officials about the availability of "over-the-road" work and was told that none was available.
(P-4, pp. 36-37 & 42).
31. Although Dudo did not work in covered employment in 1961, he did work 3 days in covered employment in the first quarter of 1962. (P-1; D-21).
32. From the first quarter of 1962, until the fourth quarter of 1966, Dudo did not work a single day in covered employment, a hiatus of over four years. Thus, under the 3-year break-in-service rule, Dudo had suffered a break in service and lost all credit for the 19.5 years of continuous service earned previous to the break. (P-1).
33. In 1964, Dudo again inquired of Local 107 officials about the availability of road work, and was again told that none was available. (P-4, pp. 16-17).
34. Unsuccessful in obtaining road work, Dudo accepted employment with Charles Benjamin, Inc. as a watchman, a position which he held from 1964 until 1967. (Id. at pp. 17, 30-36; D-21). Dudo's position as a watchman was not covered by collective bargaining. Hence, no contributions to the Fund were made on his behalf. (Testimony of Sidney Benjamin).
35. Although Dudo believed that Charles Benjamin, Inc. was making contributions to the Fund on his behalf, no one from either the Fund or Local 107 contributed to that misconception. (P-4, pp. 17, 34-45).
36. Dudo's break in service was not involuntary or otherwise due to circumstances beyond his control.
37. From the time Dudo returned to covered employment in 1966 until his retirement in 1975, Dudo accumulated 2 years of continuous service credit.
38. On July 22, 1971, Dudo applied to the Fund for retirement benefits. Because of his break in service, Dudo's application for benefits was denied. (P-8, para. 8; D-19).
39. Had Dudo not suffered the break in service, he would have been eligible for early retirement benefits on March 29, 1967, the date of his 50th birthday. (P-8, para. 27).
40. On April 14, 1976, Dudo again applied for retirement benefits. His application was again denied because of his break in service. (Id., P 9; D-20).
41. Had Dudo not suffered the break in service, he would have been eligible for normal retirement on or after March 29, 1974, the date of his 57th birthday. (P-8, para. 26).
Evolution of the Break-in-Service Rule
42. Under the Plan as originally formulated in 1957, a break in service was considered to have occurred if a member worked fewer than 200 covered days in a period of two consecutive calendar years. (P-5, article I, section R).
43. The original break-in-service rule had been adopted by the Trustees on the advice of the Fund's actuary who helped draft the provision. (Testimony of C. Schaffer).
44. Since the Fund is required to record a contingent liability for each active Plan member, the break-in-service rule enabled the Trustees to more easily determine the number of active members and hence reduce the cost of the Plan. (Testimony of S. Kurash).
45. In 1963, the Trustees amended the break-in-service rule to provide that a break in service was considered to have occurred if a member were not in covered employment (i.e., no contributions were made to the Fund on the employee's behalf) for a period of 104 consecutive calendar weeks (hereinafter referred to as "the 2-year break-in-service rule"). (D-4).
46. In 1966, the Trustees began considering whether to enter into a reciprocal agreement with other Teamsters pension funds. The purpose of these proposed agreements was to provide pro rata pensions to employees who otherwise would be ineligible for retirement benefits because their years of covered employment had been divided between employers who contributed to two or more pension funds. (D-9; Testimony of C. Schaffer).
47. Among the many proposals considered by the Trustees was a reciprocal agreement, prepared by the International union, which contained a 5-year break-in-service provision. The Trustees were especially concerned about the actuarial implications of becoming a signatory to an agreement which would entail a substantial amendment to the Plan and its then existing 2-year break-in-service rule. (Id.)
48. In 1968, after months of study, the Trustees accepted the recommendation of the Fund's actuary and rejected the reciprocal agreement proposed by the International because the agreement's 5-year break-in-service provision was unacceptable. (D-8; D-9; Testimony of C. Schaffer).
49. Although the Trustees could not accept a 5-year break-in-service provision, they did consider other possible liberalizations of the rule. Specifically, in June 1968, they requested the Fund's actuary to study the cost to the Fund of a "graduated break-in-service provision" that would provide as follows:
Credited service in Period of non-covered
plan at time employment which
break occurs will cause a break in service
5 years or less 2 years
more than 5 but less than 10 yrs. 3 years
10 but less than 15 yrs. 4 years
15 but less than 20 yrs. 5 years
20 years or more unlimited
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