Glen M. Connor
Whatley Drake & Kallas, L.L.C.
505 20th Street North
1100 Financial Center
Birmingham, Alabama 35203
(205) 328-9576
(205) 328-9669 (Fax)
e-mail gconnor@whatleydrake.com

I. INTRODUCTION¹

Apprenticeship Trusts are governed by several laws. The most important are ERISA (Employment Retirement Income Security Act) and the Labor Management Relations Act.² The National Apprenticeship Act (the Fitzgerald Act) provides the basis for Department of Labor, Bureau of Apprenticeship Training (BAT) supervision. Various federal anti-discrimination statutes also apply to the Trusts, such as Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act, the Age Discrimination and Employment Act, and the Civil Rights Act, among others. In addition, Apprenticeship Trusts are subject to other Federal Law and may be subject to state law.

This memorandum is a very brief overview of the legal requirements for apprenticeship training programs and the legal environment in which they operate. Each fund is unique, and faces different problems. If you have any questions regarding these issues, you should discuss them with the attorney for the apprenticeship fund.

II. BASIC LEGAL DOCUMENTS

There are two documents which govern jointly administered apprenticeship plans, the "trust" and the "plan." Both the trust and the plan must be in writing. The trust is the legal document which establishes the fund and governs the internal operation such as number of trustees, appointment of trustees, quorum, etc. The Trust is prepared by a lawyer. The plan is the document that describes the benefits or in the case of apprenticeship funds, the training program. The Plan is normally prepared by the apprentice committee in conjunction with BAT. These documents must be in writing.

III. THE LABOR MANAGEMENT RELATIONS ACT (TAFT-HARTLEY)

The Labor Management Relations Act governs relationships between Unions and employers. As a general proposition, it is illegal for an employer to make contributions to unions. The Act provides an exception which allows the creation of apprenticeship funds, health and welfare funds and pensions funds. In order to fall within this exception, the trust must have an equal number of employer and employee (i.e., union) representatives. The contribution must be used for the sole and exclusive benefit of employees or their families and dependants, and the contributions must be held in trust. There must be a dispute resolution system in the event of a deadlock between the trustees and there must be a detailed basis on which the payments are to be made to the fund. The "detailed basis" for contributions is normally the collective bargaining agreement or a letter of assent or similar document.

IV. ERISA

Apprenticeship training programs which are administered by joint apprenticeship training committee are almost always subject to ERISA. Any apprenticeship program which is financed employer contributions to trust funds are ERISA plans. The ERISA plan requirements which generally apply to Pension Plans and Health and Welfare Plans are therefore applicable to apprenticeship plans. There are a few exceptions to this rule. For example, apprenticeship plans are not required to have a claims procedure and they are generally exempt from the reporting and disclosure requirements such as annual reports, form 5500, summary annual reports, and summary Plan descriptions.

A. Consequences of ERISA regulation
ERISA makes the Trustees of employee benefit plans fiduciaries. In addition to Trustees, any person who exercises any discretionary authority or control with respect to the management or disposition of assets of the trust, renders investment advice, or has discretionary authority or responsibility for the administration of the plan is a fiduciary.

1. Fiduciary Duties
Fiduciary duties include the following:

2. Prohibited transactions
ERISA prohibits a fiduciary from engaging in prohibited transactions with parties in interest. Parties in interest include Administrators, Officers, Trustees, Custodians, Counsel or Employees of the Plan; any person providing services to the Plan; an employer, any of whose employees are covered by the plan; an employee organization (that is, the Union) any of whose members are covered by the plan; persons with significant ownership interest in corporations which are employers or employee organizations; relatives of all of the foregoing.

The plan may not engage in the following transactions with parties in interest:

The failure of an apprenticeship committee to enforce employer contribution may be considered a prohibited transaction because it may be considered a loan between the trust fund and the employer.

ERISA exempts some transactions from the prohibited transaction realm. It is not unlawful, for example, to make reasonable arrangements with a Union or Employer for office space or other services necessary for the establishment of the Plan. Similarly, the Plan may share a school and office space with the union, employer or party in interest if the transaction is reasonable. Only reasonable compensation may be paid without violating the prohibited transaction.

3. Consequences of breach fiduciary duty.
If a fiduciary breaches responsibilities or obligations imposed by ERISA, the trustee or fiduciary is personally liable to make good to the plan any losses which occur.

Trustees may (and should) obtain fiduciary liability insurance. It is important to carefully review and analyze any proposed insurance policy in order to determine what is covered, whether penalties are covered, and whether the cost of legal defense is a part of the specific dollar amount of coverage. In addition, because ERISA prohibits trust from paying for insurance to protect the individual trustee, the fiduciary or trustee must purchase his or her own insurance to cover liability. This may be paid by an employee or an employee organization, and is sometimes referred to as "non recourse" rider.

V. OTHER LAWS APPLICABLE TO THE APPRENTICESHIP TRUST

Apprenticeship training trusts are covered by numerous laws in their actual operation. One of the most important is the Fitzgerald Act, 29 U.S.C. §50, which gives the Department of Labor the authority to formulate and promote labor standards necessary to safeguard the welfare of apprentices. This is accomplished by the Bureau of Apprenticeship Training (BAT) of the Department of Labor. In addition, the following acts apply to an regulate the operation of the Trust:

Except for the Immigration Reform and Control Act, these Acts generally prohibit discrimination in the recruitment and selection of apprentices. Apprenticeship committees may not discriminate in selection, recruitment, discipline, or termination of apprentices based upon race, color, religion, sex, political affiliation, or national origin. Certain limitations apply with regard to recruitment and selection of apprentices with disabilities. The Age Discrimination in Employment Act prohibits discrimination against those over forty (40) years of age. Pregnant women may not be discriminated against.

Department of Labor Regulations require non discrimination in selection, recruitment, employment and training and also provide that funds will take "affirmative action" to provide equal opportunity in the recruitment, selection, employment, and training of apprentices. The non-discrimination and "affirmative action" provision of the Department of Labor require careful record keeping and careful attention to the selection and screening process. Accordingly, trust funds should carefully draft their applications for admission to the program, making certain that the interview/application process has been reviewed by fund counsel in order to make certain that prohibited questions are omitted. Similarly, the interview process should have a list of questions so that there is a written record of your interview and only appropriate questions are asked.

1. Specific problem areas:
a. Americans with Disabilities Act. The ADA is intended to insure that individuals with disabilities are fairly treated in the work place. A "disability" is a mental or physical condition that substantially impairs a major life activity. Because the ADA only prohibits discrimination against persons who are "otherwise qualified," it is important that the Trust define the qualifications of work before a disabled applicant apples. The standards and rules of the essential job functions should be in writing, specific, and as closely related to actual job requirements as is applicable.

b. The ADA may require an apprenticeship committee to make reasonable accommodations to a disabled person under certain circumstances.

2. Sexual harassment
Sexual harassment is a serious issue in today's work place. Sexual harassment includes, but is not limited to, sexual advances, requests for sexual favors, and verbal or physical contact of a sexual nature. Sexual harassment may consist of sexually oriented conduct, whether intended or not, that has the effect of creating a hostile, offensive, intimidating, or humiliating environment to mail or female workers. This includes jokes.

The apprenticeship committee has a duty to investigate complaints of sexual harassment just as it has a duty to investigate complaints of racial discrimination.

VI. REPORTING REQUIREMENTS

Most joint apprenticeship and training funds are considered tax exempt by the Internal Revenue Service under Section 501(c)(3). An application for this exemption must be made, and is usually accomplished early in the existence of the Plan. This is an important document which should be kept handy. It is one the first documents that the Department of Labor requests in any investigation.

Trust funds must file form Internal Revenue Service Form 990 (or 990-EZ) each year. Penalties apply for failure to file.

The DOL has generally exempted apprenticeship training employee benefit plans from establishing claims procedures and other filing requirements such as form 5500 and summary plan descriptions. This is an exemption which must be requested before it becomes applicable.

VII. RECORDING KEEPING

Accurate record keeping is required of apprenticeship training programs. The record keeping task of the apprenticeship fund is similar to the record keeping obligations of health and welfare or pension funds. Generally, these records must be kept for six (6) years after the date they were filed. Some documents, such as trust documents, minutes, written acceptance and resignations of trustees, form 990's, 5500's (if filed) should be kept indefinitely. The fund should have a written record retention policy. The following should be kept by the trust and updated as they are the first items requested by the Department of Labor in the event of an audit: