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Sixth Circuit Holds that a Union?ÇÖs Indemnification of an Employer?ÇÖs Withdrawal Liability Does Not Violate Public Policy

March 30, 2012
In a case of first impression, the U.S. Court of Appeals for the Sixth Circuit held that a union?ÇÖs agreement in a collective bargaining agreement to indemnify an employer for its withdrawal liability under a multiemployer plan does not violate public policy and is therefore enforceable. In this case, the General Drivers, Warehousemen and Helpers Local Union No. 89 specifically agreed in its collective bargaining agreement with Shelter Distribution, Inc. that the union ?Ç£shall indemnify [Shelter] for any contingent liability which may be imposed under the Multiemployer Pension Plan Amendment Acts of 1980.?Ç¥ The court reasoned that (i) the indemnity was analogous to obtaining a policy from an insurance company to cover any potential liability for fiduciary breaches as described in Section 1110(b) of the Multiemployer Pension Plan Amendments Act; (ii) the indemnity is not a violation of any ?Ç£well defined and dominant?Ç¥ public policy; and (iii) the goals of the Multiemployer Pension Plan Amendments Act and ERISA are served even if the indemnification agreements between employers and third parties are allowed, as long as the employer remains primarily liable. Shelter Distrib., Inc. v. Gen?ÇÖl Drivers, Warehousemen & Helpers Local Union No.89, No. 11-5450 (6th Cir. March 16, 2012).
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