On December 13, 2016, members of Dentons' US Government Contracts practice filed an amicus brief with the US Court of Appeals for the Federal Circuit on behalf of our client, the Professional Services Council (PSC), in Call Henry, Inc. v. United States, Case No. 16-1732. At issue in Call Henry is whether the Service Contract Act (SCA) and its implementing regulations entitle a contractor performing a fixed-price government contract to a price adjustment for increased costs of providing a defined benefit pension resulting from the assessment of withdrawal liability pursuant to the Multiemployer Pension Protection Amendments Act of 1980 (MPPAA). Withdrawal liability is an additional contribution to a multiemployer pension plan that represents the withdrawing employer’s share of any unfunded, vested liabilities owed to its employees for benefits accrued under the pension plan.

Whether withdrawal liability is recoverable under the SCA is of great importance to PSC and its members because PSC members are often required by collective bargaining agreements to contribute to multiemployer defined benefit pension plans and would be subject to withdrawal liability under the MPPAA. In its amicus brief, PSC urges the Federal Circuit to side with the appellant, Call Henry, and to find that contractors are entitled to a price adjustment because withdrawal liability is a cost of funding a pension benefit through a multiemployer defined benefit pension plan and, therefore, recoverable pursuant to the SCA’s Price Adjustment Clause.

Call Henry’s contract with NASA was subject to the SCA and its employees worked under a collective bargaining agreement that required Call Henry to provide certain fringe benefits, including pension benefits provided through employer contributions to a multiemployer defined benefit pension plan. When Call Henry’s employees decertified their union in favor of representation by another union, Call Henry discontinued its contributions to the multiemployer pension plan, which trigged withdrawal liability under the MPPAA. Accordingly, Call Henry sought a price adjustment under its contract for the increased cost of providing the pension benefits to its employees as required by the collective bargaining agreement. NASA denied Call Henry’s certified claim for the increased costs, and Call Henry appealed the contracting officer’s final decision to the Court of Federal Claims (COFC).

The COFC dismissed Call Henry’s appeal based on the its view that pension costs incurred in the form of withdrawal liability pursuant to the MPPAA do not constitute costs of a fringe benefit. Call Henry appealed this decision to the Federal Circuit. PSC's amicus brief asserts that, consistent with relevant Supreme Court and Federal Circuit precedent, the MPPAA modifies the terms of a collective bargaining agreement to require payment of additional costs to fund a multiemployer defined benefit pension plan when an employer exits the plan and that such increased costs are the costs of providing a fringe benefit under the SCA.

The case is scheduled for oral argument on January 11, 2017.