United States: Supreme Court Grants Certiorari To Review Sixth Circuit’s Pro-Union Inference In Retiree Health Insurance Benefits Cases

The Supreme Court of the United States has agreed to resolve a circuit split about how courts should interpret collective bargaining agreements that provide for health insurance benefits for retired employees in M&G Polymers USA, LLC v. Tackett.  The U.S. Court of Appeals for the Sixth Circuit says that such retiree health insurance benefits carry with them an inference that they are vested, or guaranteed to continue for life, while the majority of the other federal appellate courts require specific durational language to find that benefits are vested. Given the high cost of retiree health insurance on many employers' balance sheets, M&G Polymers USA could represent a game changer for employers' ability to modify retiree benefits going forward.

In a surprising development, the Supreme Court of the United States granted certiorari on May 5, 2014, in M&G Polymers USA, LLC v. Tackett, an appeal that should resolve a split among the federal appellate courts over how to interpret the duration of retiree health insurance benefits provided under collective bargaining agreements. 

Coupled with the recent changes in health insurance markets, the decision in M&G Polymers USA, LLC v. Tackett (expected in the spring of 2015) could be a game changer for companies currently providing retiree health insurance benefits to their union employees and retirees, especially for operations in Michigan, Ohio, Kentucky and Tennessee.

The U.S. Court of Appeals for the Sixth Circuit has held since 1983 that retiree health insurance benefits provided in collective bargaining agreements carry an inference that they are vested or guaranteed to continue for life where the agreement is silent as to their duration.  The majority of the other federal appellate courts have consistently held that retiree health insurance benefits are not vested or lifetime unless there is specific durational language saying that the benefits will continue beyond the term of a collective bargaining agreement. 

The practical effect of the circuit split has been that identical collective bargaining agreements are interpreted in contradictory ways depending on where plan participants, their union and the employer end up in court.  For example, a federal district court sitting in Ohio would more likely find that a collective bargaining agreement stating that retiree benefits "will continue" provides for lifetime health insurance benefits.  However, courts interpreting identical contract language one state to the east in Pennsylvania (in the Third Circuit) or one state to the west in Indiana (in the Seventh Circuit) would more likely find that those retiree health insurance benefits are not vested and could be unilaterally changed by the employer at the end of the collective bargaining agreement if not renewed.  Given the actuarial costs of and accounting requirements for lifetime retiree health insurance benefits, this difference in legal analysis can have a significant effect on a company's balance sheet.

The Supreme Court has repeatedly denied similar petitions for certiorari urging the Supreme Court to address this circuit split about collectively bargained retiree health insurance benefits.  Yesterday's grant of certiorari comes as a surprising (and welcome) development.  While one can only speculate as to why the Supreme Court chose to address this issue at this particular time, recent changes in the legal landscape for health insurance may be a factor.  Courts deciding retiree health insurance cases have often commented on the potential hardship to retirees from a change in employer-provided retiree health insurance benefits.  Recent improvements in Medicare, implementation of the Affordable Care Act and changes in the individual health insurance market in general may alleviate this hardship concern and undercut the "status benefit" logic of the Yard-Man inference.  Regardless of the reason behind the court accepting this appeal, M&G Polymers USA, LLC v. Tackett provides the Supreme Court with a unique opportunity to provide certainty and uniformity on the important topic of the proper interpretation of collectively bargained retiree health insurance benefits.

The legal issue the Supreme Court will decide can be traced back to the enactment of ERISA in 1974.  In passing ERISA, Congress made the conscious decision to provide that pension benefits were vested (i.e. once provided to employees, the benefits were unchangeable by the company), but that health insurance benefits were not.  As a result, retiree health insurance benefits were only vested if provided for in an agreement with the company; in cases involving collective bargaining agreements, the Labor Management Relations Act also applied.  However, federal appellate courts split over how to interpret collective bargaining agreements that provided for retiree health insurance benefits but did not explicitly include language on the duration of those benefits.  The circuit split over how to interpret the provision of retiree health insurance benefits in collective bargaining agreements first arose in UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983).  In Yard-Man, the Sixth Circuit found that retiree benefits were "status benefits" for retired employees that carry an inference that they continue for as long as the beneficiary remains retired.  While the Sixth Circuit has attempted to restrain the language of the Yard-Man inference in recent years, the continuing practical effect of this decision is that, absent language explicitly limiting the benefits to the term of the collective bargaining agreement, district courts within the Sixth Circuit (i.e., Michigan, Ohio, Kentucky and Tennessee) frequently find that retiree health insurance benefits are vested or provided for the life of the retirees.

The Yard-Man approach stands in stark contrast to the decisions of other federal appellate courts, which generally hold that retiree benefits are not vested and can be changed at the expiration of the collective bargaining agreement, absent language explicitly providing for lifetime benefits.  For example, the Third Circuit forcefully disagreed with Yard-Man in UAW v. Skinner Engine Co., 188 F.3d 130 (3d Cir. 1990), a case decided by a panel including now-Justice Samuel Alito, holding that benefits are not vested absent clear and unambiguous language to that effect.  The Second and Seventh Circuits also have required language in collective bargaining agreements that can reasonably support a finding of lifetime health insurance benefits.  The Supreme Court hopefully will resolve which approach the lower courts should follow—a decision that will affect how employers should approach collective bargaining about health benefits and any analysis about eliminating or changing retiree health benefits.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions