The Ninth Circuit recently held that ERISA does not preempt a Nevada state law that curtailed the ability of multiemployer plans to recover unpaid employer contributions. Under Nevada law SB 223, general contractors can be held vicariously liable for the labor debts of their subcontractors, including contributions owed by subcontractors pursuant to a collective bargaining agreement, provided that they receive certain notices. The state law also provides for a one-year statute of limitations. The Ninth Circuit explained that SB 223 was enacted because general contractors too often found themselves liable for the unpaid labor debts of their subcontractors.
The case reached the Ninth Circuit following entry of a declaratory judgment by the district court in favor of a multiemployer plan, finding that SB 223 was preempted by ERISA’s comprehensive regulatory framework. The Ninth Circuit reversed and explained that ERISA only provides a cause of action for delinquent contributions against the delinquent contributing employer, and that the right to recover unpaid contributions from general contractors was a result of Nevada’s vicarious liability law. Therefore, SB 223 trimmed only rights available under state law and not those guaranteed by ERISA. Additionally, the Ninth Circuit observed that SB 223 applied equally to any individual or entity seeking to recover labor debts from a general contractor, which foreclosed the argument that the law impermissibly targeted ERISA plans. The case is Bd. of Trustees of Glazing Health & Welfare Tr. v. Chambers, No. 16-cv-15588, 2018 WL 4200961 (9th Cir. Sept. 4, 2018).