Las Vegas case changes how you assess withdrawal exposure for multiemployer pension plans
A federal appeals court ruled employers cannot impose minimum work thresholds when determining which employees qualify for a pension withdrawal liability exemption.
The Ninth Circuit issued the decision on January 6 in Nevada Resort Association-International Alliance of Theatrical Stage Employees and Moving Picture Machine Operators of the United States and Canada Local 720 Pension Trust v. JB Viva Vegas, LP, reversing a lower court ruling and potentially affecting how benefits administrators assess withdrawal liability for multiemployer pension plans across the western United States.
The case began when JB Viva Vegas closed its Las Vegas production of the Broadway musical Jersey Boys in 2016. Shortly after, the Nevada Resort Association-International Alliance of Theatrical Stage Employees Local 720 Pension Trust sent the company a $913,315 bill for withdrawal liability. JB had contributed to the multiemployer pension plan that covered the show's stagehands from 2008 to 2016.
JB challenged the assessment, arguing it qualified for an exemption in federal pension law that excuses entertainment industry employers from withdrawal liability. The trust disagreed, and the dispute came down to a question nobody had definitively answered before: How much entertainment work does someone need to do to count as an entertainment industry employee?
The pension trust argued that workers needed to earn more than half their wages from entertainment work to qualify. That interpretation mattered because of how the Las Vegas labor market had changed. Hotels and venues that once focused on theatrical productions shifted to hosting far more conventions and trade shows than traditional entertainment productions. Employees covered by the plan started earning more of their wages through convention work, even while continuing to perform some entertainment work.
By 2016, the majority of plan employees earned some wages through entertainment work, but only 35 percent earned more than half of their wages from entertainment work. Under the trust's proposed standard, JB would owe the full amount.
The appeals court rejected that interpretation entirely. The court said the law contains no minimum threshold whatsoever. If someone performs any entertainment work at all, they count as an entertainment industry employee under the statute.
The ruling came down to statutory language. The Multiemployer Pension Plan Amendments Act exempts employers from withdrawal liability if the pension plan primarily covers employees in the entertainment industry. But the law never says those employees must primarily work in entertainment. The exception requires that a plan primarily cover employees in the entertainment industry, but it does not require that employees primarily work in the entertainment industry, the court explained.
The court pointed out that Congress knows how to write minimum thresholds into law. Other sections of the same statute use phrases like substantially all or primarily to limit who qualifies for various exemptions. The entertainment provision contains no such language, which the court read as intentional. The existence of limiting language elsewhere in the statute indicates that Congress intentionally excluded it here, the opinion stated.
The trust argued this interpretation would produce absurd results. It makes little sense to classify someone as an entertainment industry employee when the person performs a minimal amount of entertainment work, the trust contended.
The court disagreed. Entertainment work tends to be temporary and project-based by nature. Congress likely understood this reality when drafting the law. It is possible that Congress intended employees in the entertainment industry to include individuals who work multiple jobs or projects, some of which involve entertainment work and some of which do not, the opinion stated.
The court also clarified limits to its ruling. The decision does not throw open the gates for every employer to claim the entertainment exemption. Companies still must show that their contributions to the plan were for work performed in the entertainment industry. Employers that contribute to a plan on behalf of employees performing non-entertainment work are unable to claim the entertainment exception, and that remains unchanged, the court noted.
The practical impact for benefits directors is clear. When assessing withdrawal liability from multiemployer pension plans, the analysis should focus on whether covered employees perform any entertainment work, not whether entertainment represents the majority of their work.
The court held that the trust's plan primarily covers employees in the entertainment industry because there is no minimum entertainment work requirement and the majority of employees covered by the plan perform some entertainment work. The Ninth Circuit reversed the district court's grant of summary judgment and remanded the case for further proceedings.
