Labor & Employment Law

Employees and retirees covered by a health insurance plan must be advised of changes

Employees and retirees covered by a health insurance plan must be advised of changes

Orth v Wisconsin State Employees Union Council 24 et al, USCA 7^th Circuit, Docket # 07-2778.

A collective bargaining agreement between the employer (Council 24 of the Wisconsin State Employees Union) and the union that represented Mr. Orth prior to his retirement provided for certain changes to the health insurance plan available to employees and retirees. Although the case involved alleged violations of the Taft-Hartley Act and ERISA, it may be instructive to those entities and individuals not subject to these federal acts.

According to the decision, there was a ?secret side deal between the union and the employer in this case? regarding certain changes in the health insurance plan. This, said the court, constituted a breach of the plan managers? fiduciary duty to the plan participants and beneficiaries.

Further, said the Circuit Court, "The plan fiduciaries are to the plan participants and beneficiaries as the union is to the workers it represents;" the union too is a fiduciary, and its duty of fair representation is simply another name for ?fiduciary duty? and ?just as in the collective bargaining setting, it is a breach of fiduciary duty to change the plan without notice to those affected by the change.?

Without knowledge of their rights under the plan, participants cannot make intelligent decisions with regard to the purchase of private health insurance to replace or supplement their plan benefits. The secret side deal between the union and the employer in this case, said the court, was a breach of the plan managers? fiduciary duty to the plan participants and beneficiaries.

The full text of the decision is posted on the Internet at:

http://www.ca7.uscourts.gov/tmp/HW1FFQKO.pdf

Full post as published by New York Public Personnel Law on October 29, 2008 (boomark / email).