On September 2, 2015, in Michels Corp. v. Central States, Southeast, and Southwest Areas Pension Fund, the US Court of Appeals for the Seventh Circuit held that a series of short-term agreements that had the effect of extending a collective bargaining agreement's (CBA's) terms properly eliminated the contributing employer's duty to contribute to a multiemployer pension plan under the terms of the plan (Nos. 14-3726, 14-3737, , at *1 (7th Cir. Sept. 2, 2015)).

Michels Corporation (Michels) was a part of a multiemployer group that entered into a 2006 CBA with a union which required, among other things, that the contributing employers would contribute to a multiemployer pension plan (plan) on behalf of the union members. The CBA provided that it would remain in effect until January 31, 2011 and then year to year unless it was terminated by either party. In 2010, Michels notified the union that it intended to terminate the CBA and the parties entered into negotiations for a new CBA. After the CBA's termination deadline, the parties entered into a series of short-term agreements that had the effect of extending the CBA's terms for certain designated periods while the parties negotiated.

Before the last extension expired in November 2011, the parties signed another short-term extension agreement that eliminated Michels's requirement to contribute to the plan (November Extension Agreement). Michels then sent a letter to the plan notifying it that it was terminating its contributions pursuant to the November Extension Agreement. The plan disputed that the November Extension Agreement effectively terminated Michels's obligation to continue contributions under the Employee Retirement Income Security Act of 1974 (ERISA) and Michels subsequently initiated a lawsuit seeking a declaratory judgment that its duty to contribute to the plan ended in November 2011 pursuant to the terms of the November Extension Agreement.

The district court ruled in favor of the plan holding that the terms of the CBA remained in effect (including Michels obligation to contribute to the plan) by virtue of the numerous extension agreements. Michels appealed.

ERISA Section 515 provides that an employer who is obligated to make contributions to a multiemployer plan under the terms of the plan or a CBA must make those contributions in accordance with the terms and conditions of the plan or CBA (29 U.S.C. § 1145 and Practice Note, Multiemployer Pension Plans). The Seventh Circuit reasoned that under ERISA Section 515, pursuant to the terms of the CBA, Michels:

Although the parties executed a series of brief extensions that had the effect of carrying forward the terms of the CBA, they were under no obligation to do so. Instead, the Seventh Circuit found that the 2006 CBA terminated on its January 31, 2011 expiration date based on Michels' timely and unrevoked termination notice and each extension agreement served as an individual agreement standing on its own. The court noted that this interpretation was consistent with how the National Labor Relations Board (NLRB) has understood interim agreements. The November Extension Agreement, then, served two purposes: it extended the terms of the 2006 CBA and modified those terms by eliminating Michels' obligation to contribute to the plan.

However, the court stated that even if Michels' obligation to contribute was tied instead to the terms of the plan (and the trust agreement underlying the plan) the same outcome would be reached. The trust agreement provided that Michels was required to make contributions until the fund received a "signed contract" eliminating that duty. Considering the language of the trust agreement, the court found that "signed contract" did not necessarily mean a new CBA and determined that the November Extension Agreement was sufficient to eliminate Michels' duty to contribute to the plan. As a result, the court held that even if the trust agreement controlled, Michels' obligation to contribute ceased in November 2011.

Employers that have entered into a CBA providing for contributions to a multiemployer pension plan should be aware that courts may consider an extension agreement a stand-alone, interim CBA and allow for a modification or elimination of the terms of the original CBA.