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6th Issues Major Decision Holding CBA Promise of Retiree Lifetime Benefits Is Enforceable And Binding Many Years After Employees Retire

6th Issues Major Decision Holding CBA Promise of Retiree Lifetime Benefits Is Enforceable And Binding Many Years After Employees Retire
Source: Administrative Law Professor Blog. Reproduced with permission. Copyright © 2009, All rights reserved http://lawprofessors.typepad.com/adminlaw/

Cole v. ArvinMeritor, Inc., ___F.3d___(6th Cir. Dec. 16, 2008), is a major employee benefits/labor law case concerning lifetime health insurance benefits for retirees. For years, a CBA essentially promised lifetime health benefits. Over the years, the employer made some minor changes and then unilaterally substantially decreased benefits that prompted this lawsuit. The court stated that it was brought pursuant to Section 301 of the NLRA and ERISA, but the decision did not contain much discussion of ERISA.Instead, the court adopted the Yardman theory of vested rights and analyzed whether the parties intended that retirees benefits should best for life. After undertaking a lengthy analysis, the court held that the health insurance benefits were intended to vest and therefore, they could not be unilaterally altered. As the court stated:

Because this court?s precedents under the Golden-Meridian line of cases, along with Yolton, Noe, and other similar decisions, hold that the language of the CBAs creates an unambiguous promise for lifetime healthcare benefits, we need not consider extrinsic evidence of the parties? intentions. But we note that such evidence, had we considered it, weighs heavily in the favor of the plaintiffs and indicates the defendants? intention to provide lifetime retiree healthcare benefits.

This is a major issue in labor, employment and employee benefits law today. Those labor lawyers who shun away from employee benefits issues should really review this case and become familiar with this issue because it is likely to come up in other industries.

Mitchell H. Rubinstein

NYPPL Comment: Cases involving health insurance benefits in retirement have been before New York courts. In McDonald PBA v City of Geneva, 92 N.Y.2d 326, the Court of Appeals concluded that "there is no legal impediment to the municipality's unilateral alteration of the past practice" regarding its providing health insurance benefits to its retirees and their dependents where there was neither a Taylor Law agreement nor some other contract or provision of law granting retirees a vested right to such a benefit [emphasis supplied]. The court held that in the absence of a Taylor Law contract providing otherwise, a municipality's past practice does not demonstrate any right to compel the municipality to continue providing the same level of health benefits to its retirees as it has in the past.

The Court of Appeals pointed out that under the Taylor Law [Sections 200-214, Civil Service Law] a public employer is statutorily obligated to negotiate in good faith with the bargaining representative of its current employees regarding the "terms and conditions of employment." As health benefits for current employees can be a form of compensation, and thus a term of employment, that is a mandatory subject of negotiation. Further, the employer also would have a duty to negotiate with the bargaining representative of current employees regarding any change in a past practice affecting their own retirement health benefits.

In contrast, in two cases involving City of Schenectady retired police and firefighters, in Della Rocco v City of Schenectady and Andriano v City of Schenectady [252 A.D.2d 82, motion for leave to appeal dismissed, 93 N.Y.2d 999] the court held that health insurance benefits and employer contributions for police and fire retirees were protected by the terms of collective bargaining agreements negotiated many years prior to their retirement and could not be unilaterally changed by the City. According to the rulings, the language providing such a benefit had been continued in the successor agreements and thus protected all those who had retired while its provisions continued in effect.

Full post as published by New York Public Personnel Law on January 05, 2009 (boomark / email).