The Change in Collecting Union Benefits

Back in April, contract negotiators narrowly averted a strike by the union that represents some 32,000 of the city’s doormen, porters, supers, and janitors. Since then, the Service Employees International Union’s local 32BJ has not only been changing the way union benefits are collected, but it has been aggressively enforcing penalties for late payments in a way that one property manager calls “a heartbeat shy of usury.”

All co-ops, condos, and rental landlords – commonly lumped together as “employers” – have traditionally made quarterly payments into the union’s health, pension, training, and legal 401-K benefit fund, which is jointly administered by trustees from labor and management.

“Over the past year,” says union spokeswoman Lynsey Kryzwick, “32BJ benefit funds have been moving from a system which required employers to pay for employee benefits three months in advance to a system that bills employers for the previous month’s benefits.”

The interest rate on late payments is 0.5 percent per month – or 6 percent per year – a rate determined by the joint board of trustees in 2003. In addition, the union tacks on a 24 percent annual penalty known as “liquidated damages.” In order to remain in compliance with the federal Employee Retirement Income Security Act (ERISA), the benefit fund is required to charge both the interest on late payments and the liquidated damages.

“Overall,” says Kryzwick, “the change [from quarterly to monthly collection of benefit payments] has been well received by employers who are spending less time reconciling staff and benefit changes.”

What has been less well received in some quarters is the union’s pursuit of liquidated damages. “It’s a heartbeat shy of usury,” says a senior management executive. “It used to be they would come to us and tell us what we owed and give us 10 days to pay, then waive the liquidated damages. But about six months ago, they started assessing the liquidated damages. It has happened in half a dozen of our buildings, but we discovered they’re going after everybody. It’s industry-wide.”

Kryzwick denies the charge. “Standard late fees and ‘liquidated damage’ assessments, which include federally mandated interest payments, have not changed,” she says. “The only change to the 32BJ benefit fund collection process has been the adjustment from a three-month pre-payment program to a one-month post-payment program.”

What we appear to have here is a case of he said/she said.

Mitch Gelberg, management director with Rose Associates, served as a special advisor to the Realty Advisory Board (RAB) team that represented employers in the recent contract negotiations. He describes the contract as “fair for both sides” and agrees that the union is being more aggressive in collecting what unionized co-ops, condos, and rental buildings owe to 32BJ’s benefit fund. He thinks the tactics might be driven by rising costs and the sour economy.

“The union is being more aggressive in collecting what’s due to them,” Gelberg says. “Health and pension costs have spiralled, and the union wants to make sure it’s properly serving its members.”

RAB president Howard Rothschild, an attorney who is also a trustee of the union’s benefit fund, agrees that while the letter of the law hasn’t changed, something else has. “I think the benefit fund is doing audits with greater frequency than they did in previous years, and that’s what’s causing some of the concern,” he says. “Under ERISA, they have to collect 100 percent of the principal and interest, but they have some discretion on the liquidated damages. Generally, if they see an odd mistake, they cut those employers some slack. If they see recidivists, they’re less amenable to being lenient.”

Under the new four-year contract, unionized workers got a 2.99 percent annual pay increase, but benefits were held in line. A co-op or condo board’s contributions for unionized employees are as follows: $12,246.64 to the health fund per year for every employee who works more than two days a week; $78.75 to the pension fund per year for every employee who works 20 or more hours per week; $169.60 per year to the training fund for every employee; $20 per year to the 401-K fund for supers, $10 for other employees; and $199.60 per year to the Legal fund for all employees.

Rothschild adds that the increasing frequency of audits is both good and bad for co-ops and condos. “If an employer owes money,” he says, “the interest and liquidated damages will be reduced if it gets settled on a prompt basis.”

Gelberg, of Rose Associates, offers a simple piece of advice on how to avoid audits, penalties, and liquidated damages: “Co-op and condo boards should be diligent in making sure that their managing agents are making timely payments of the money that’s owed to the union.”