• Supreme Court Rules Against Union Retirees in Health Benefits Case
  • March 23, 2015
  • Law Firm: Norris McLaughlin Marcus P.A. A Professional Corporation - Bridgewater Office
  • The United States Supreme Court recently ruled that silence in a collective bargaining agreement (“CBA”) regarding the duration of retiree healthcare benefits does not automatically mean that such benefits vest for life. The Court’s decision in M&G Polymers USA, LLC v. Tackett is welcome news for employers with CBAs that include such benefits.

    In 2000, M&G Polymers (“M&G”) entered into a CBA and pension agreement with the union representing the employees at its West Virginia plant. The CBA, which had a three-year term, provided that retirees would receive a “full company contribution” towards the cost of their healthcare benefits but did not address the duration of these benefits. After the CBA expired, M&G announced that the retirees would have to contribute toward the cost of their healthcare benefits. The retirees sued, claiming that the language in the previous CBA gave them a vested lifetime right to contribution-free healthcare benefits, which could not be changed.

    The appeals court agreed. Its reasoning was based on a prior decision where it resolved an ambiguous CBA provision regarding the duration of retiree healthcare benefits. In that case, the court, relying on the context of negotiations, inferred that the parties intended for the benefits to vest for life because such benefits are not required to be included in a CBA, are seen as a form of delayed compensation for past services, and were tied to eligibility for pension benefits. Using that presumption, the appeals court found that M&G and the union intended for the benefits at issue to vest for life by including them in a CBA linking eligibility to pension benefits.

    The Supreme Court unanimously rejected the appeals court’s decision, ruling that the presumption improperly placed “a thumb on the scale in favor of vested retiree benefits” in all CBAs. The Court noted that ambiguous contracts should not be construed to create lifetime promises and added that retiree healthcare benefits are not deferred compensation for past services akin to pension benefits. It then instructed the appeals court to revisit its prior decision and use ordinary contract interpretation principles to determine whether the CBA at issue granted the retirees free healthcare benefits for life.

    The Court’s M&G Polymers decision highlights the importance of removing ambiguities from CBAs, which can be achieved through the use of experienced legal counsel.