In the case of J.W. Bateson Co., Inc. v. United States ex rel. Board of Trustees of the National Automatic Sprinkler Industry Pension Fund, 1977, the Supreme Court ruled that subcontractors could not be held liable for a prime contractor's failure to pay into union pension funds under the Miller Act (a federal law requiring contractors on government projects to post bonds guaranteeing payment). The court found that while subcontractors are responsible for their own employees' wages and benefits, they cannot be held accountable for a prime contractor's obligations unless explicitly stated in their contract with them.

In the dissenting opinion for J. W. Bateson Co., Inc., et al. v United States ex rel. Board of Trustees of the National Automatic Sprinkler Industry Pension Fund et al, Justice Rehnquist disagreed with the majority's interpretation that a subcontractor could be held liable under Miller Act surety bonds for pension fund contributions owed by an insolvent sub-subcontractor to its employees' union trust funds, even though such payments were not "labor" or "material" furnished in carrying out work provided for in a contract as required by statute language and precedent cases interpreting it. He argued that this broadened interpretation was inconsistent with Congress’s intent when passing the Miller Act and would lead to unintended consequences including increased costs on public works projects due to higher premiums on payment bonds if they are now deemed responsible for these types of obligations.