In a decision that bodes poorly for unionized employers, the U.S. Court of Appeals for the Second Circuit recently held that a union benefit fund was contractually entitled to conduct an audit whose scope far exceeded the bargaining unit for whom fund contributions were required. Since the employer did not produce evidence that the fund trustees’ conduct of the audit breached their ERISA fiduciary duties, the court held that the fund was entitled to conduct the requested audit. New York State Nurses Association Benefits Fund v. Nyack Hospital, Case No. 20-378 (2nd Cir. August 19, 2022.)
Factual Background
The facts in Nyack Hospital are not unusual. Nyack Hospital (the Hospital) had about 1,400 employees, one-third of whom were registered nurses. Most of these nurses were covered by a collective bargaining agreement (CBA) between the Hospital and the New York State Nurses Association (NYSNA). Of the Hospital’s 900 or so non-nurse employees, about 700 were represented by three other unions.
The NYSNA Benefits Fund (the Fund) is a multiemployer fringe benefit fund that provides health and welfare benefits to eligible employees of hospitals who are parties to CBAs with NYSNA. Under the Hospital’s CBA, regular full-time and part-time employees are covered employees eligible for coverage under the Fund for whom Hospital contributions are required; per diem employees and temporary employees are not eligible. The only employees for whom Fund contributions could therefore possibly...
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