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Employer's responsibility for the payment of health insurance premiums upon retirement

Employer's responsibility for the payment of health insurance premiums upon retirement
Gary T. Winnett, Et Al. V Caterpillar, Inc., USCA, Sixth Circuit, #07-6275, Decided January 27, 2009

The plaintiffs in this action are retired Caterpillar employees. When Caterpillar commenced charging these retirees for a portion of their health insurance premiums, they sued contending that Caterpillar breached its promise to provide lifetime retiree medical benefits at no cost to the retiree as set out in a 1998 collective bargaining agreement.

The basic issue: Did a 1998 collective labor agreement provided workers covered by that agreement a right to no-cost retiree medical benefits that vested when the worker became eligible for retirement or a pension?

The Sixth Circuit held that it did not.

Pointing out the several plaintiffs retired after the 1988 Central Labor Agreement had expired, the court said that unless the controlling document language demonstrated the parties? intent for retiree medical benefits to vest before workers retired Caterpillar could not have breached the 1988 agreement with respect to workers who retired after its expiration.

The 1988 Plan provided that ?Retired Employees who satisfy the requirements hereinafter ? shall be entitled to the same benefits provided in this Section V as if they were Employees?. Coverage ? shall be provided without cost to any such retired Employee . . . [and] will be provided after his retirement from active service ? Coverage shall take effect on his retirement date.?

The Circuit Court said ?This language cannot be reasonably interpreted to explicitly state that benefits vested as soon as a worker became eligible for a pension or to retire? as the phrase ?shall be provided? in the Plan refers to ?retired employees,? rather than to current employees who might retire in the future.

There have been a number of cases addressing the continuation of health insurance coverage upon retirement decided by New York courts.

In McDonald v City of Geneva, 92 NY2d 326, the Court of Appeals ruled that the City of Geneva had a right to reduce the level of health insurance benefits it had provided over a number of years to retired members of its police force as these benefits were provided by a resolution of the City Council and not through the collective bargaining process.

In contrast, in Myers v City of Schenectady, 244 A.D.2d 845, the Appellate Division ruled that certain City of Schenectady retirees were entitled to health insurance benefits flowing from collective bargaining agreements that had expired. The ruling is consistent the holdings in Della Rocco v City of Schenectady and Andriano v City of Schenectady, decided together and reported in 252 A.D.2d 82, motion for leave to appeal dismissed, 93 N.Y.2d 999.

The full text of the Winnett decision is posted on the Internet at:
http://www.ca6.uscourts.gov/opinions.pdf/09a0027p-06.pdf

Full post as published by New York Public Personnel Law on February 06, 2009 (boomark / email).