Ninth Circuit Clarifies Withdrawal Liability Industry Rules

Key Takeaways

• Asbestos removal qualifies as building‑construction work under the exemption
• Entertainment exemption requires only a majority of employees to perform any entertainment work
• Withdrawal liability only arises if contributions permanently cease and work resumes non‑contributory
• Ninth Circuit decisions provide uniform definitions, limiting arbitration uncertainty

Pulse Analysis

Withdrawal liability has long been a thorny issue for employers participating in multi‑employer pension plans, especially those whose work is project‑driven. Under federal law, a complete withdrawal occurs when an employer stops contributing permanently, while a partial withdrawal can be triggered by a 70% contribution drop or the closure of a facility. To prevent these rules from discouraging participation, Congress carved out industry‑specific exemptions for building‑construction and entertainment sectors, allowing employers to continue project work without automatically incurring liability. However, the statutes left key terms—such as what constitutes "building and construction" work or a plan that "primarily" covers entertainment employees—ambiguous, leading to costly disputes.

The Walker Specialty decision settled the first ambiguity by adopting the broader, historically settled definition of the building‑construction industry. The Ninth Circuit affirmed that work involving demolition, alteration, repair, or improvement of structures—including asbestos abatement—fits within the exemption. This interpretation aligns with Taft‑Hartley guidance and expands the range of activities that qualify, meaning firms engaged in demolition or remediation can now claim the exemption and avoid the near‑$3 million liability previously assessed. The ruling underscores the importance of reviewing contract language and contribution histories to ensure eligibility before the five‑year monitoring window expires.

In JB Viva Vegas, the court clarified the entertainment‑industry exemption, rejecting the arbitrator’s quantitative threshold. By focusing on the plain meaning of "employees in the entertainment industry," the court held that a plan merely needs a majority of its covered workers to perform any entertainment‑related duties, regardless of the proportion of their earnings. This lowers the evidentiary burden for employers and plan trustees, making it easier to demonstrate exemption eligibility and potentially saving hundreds of thousands of dollars in withdrawal assessments. Both decisions signal a judicial trend toward broader, more predictable exemptions, prompting employers and pension plan sponsors to reassess their contribution strategies and documentation practices to mitigate future liability.