United States: Supreme Court Dispenses With The "Yard-Man" Inferences

In a decision watched closely by both employers and unions, a unanimous Supreme Court has resolved a thirty-plus year split among the circuit courts on the standards governing claims for retiree health-care benefits arising from collective bargaining agreements. M&G Polymers USA, LLC v. Tackett, No. 13-1010, 2015 WL 303218 (U.S. Jan. 26, 2015). In Tackett, the Supreme Court rejected the longstanding Sixth Circuit inferences, known as the Yard-Man inferences, that parties to a collective bargaining agreement intend to vest retirees with lifetime health benefits in the absence of a specific contractual provision or extrinsic evidence to the contrary. In an opinion authored by Justice Clarence Thomas, the Supreme Court held that the inferences were inconsistent with ordinary contract principles, which should govern the interpretation of a collective bargaining agreement.

The Impact of Yard-Man and its Progeny

The Yard-Man inference developed over thirty years ago from the Sixth Circuit's 1983 ruling in International Union, United Auto, Aerospace, & Agricultural Implement Workers of Am. v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), which was one of the earliest decisions to consider collectively-bargained retiree medical benefits. The facts of Yard-Man are common:  The company told the union that it was shutting down a factory and would end the payment of retiree medical benefits on the last day of the collective bargaining agreement. The union sued, claiming that the retiree medical benefits were lifetime benefits that could not be terminated. The company responded that retiree benefits did not outlive the termination of the union contract. The key provisions of the contract stated that "[w]hen the former employee has obtained the age of 65 years then . . . [t]he [c]ompany will provide insurance benefits equal to the active group benefits . . . for the former employee and his spouse." 

The Sixth Circuit found this language ambiguous as to whether it established a durational limitation on the availability of the benefits. To resolve this ambiguity, the court looked to other provisions of the agreement, including provisions for terminating both active employees' insurance benefits and a retiree's spouse and dependent benefits in certain circumstances. Because there was no corresponding termination provision specifically addressing retiree benefits, the court inferred an intent to vest lifetime retiree benefits. The Yard-Man court also reasoned that, if construed to terminate with the expiration of the agreement, the promise of retiree benefits would be "completely illusory for many early retirees" who would not reach retirement age before the contract expired. Lastly, the court relied on the "context" of labor negotiations to resolve the contract's ambiguity in favor of the union. The Sixth Circuit opined that "parties to collective bargaining would intend retiree benefits to vest for life because such benefits are 'not mandatory' or required to be included in collective bargaining agreements," and are "typically understood as a form of delayed compensation or reward for past services and are keyed to the acquisition of retirement status." The Yard-Man court accordingly characterized these benefits as "status" benefits, which carry with them an inference that they will continue so long as the prerequisite "status" is maintained. The Yard-Man court concluded that these contextual clues "outweigh[ed] any contrary implications derived from a routine duration clause." 

In Tackett, the Supreme Court noted that the Sixth Circuit subsequently extended its reasoning in Yard-Man even further by holding that "absent specific durational language referring to retiree benefits themselves, a general durational clause says nothing about the vesting of retiree benefits," and a provision that "ties eligibility for retirement-health benefits to eligibility for a pension . . . [leaves] little room for debate that retirees' health benefits ves[t] upon retirement." The Supreme Court also noted that despite the Sixth Circuit's "repeated[] caution[s] that Yard-Man does not create a presumption of vesting, [it] ha[s] gone on to apply just such a presumption." 

The Sixth Circuit's Yard-Man inferences conflict with the overwhelming majority of decisions in other circuits that hold that there is no right to lifetime benefits unless the language of the collective bargaining agreement manifests a clear intent that they be nonforfeitable. As a result, for employers operating in multiple jurisdictions, disputes over the employers' right to alter the benefits of union retirees have often been less about the relative merits of the legal positions of the parties than about which circuit's precedents would control.

The Tackett Litigation

The plaintiffs in Tackett are retirees who had worked for Point Pleasant Polyester Plant in West Virginia. M&G Polymers USA, LLC purchased the plant in 2000, at which point M&G entered into a collective bargaining agreement and a Pension, Insurance, and Service Award Agreement (P & I Agreement) with the union. In relevant part, the P & I Agreement provided that M&G would pay all of the health costs for retirees who met certain criteria. The P & I Agreement provided for renegotiation of its terms in three years. There was no specific provision regarding the duration of the provisions governing retiree benefits.

In December 2006, M&G announced that it would begin requiring retirees to contribute to the cost of their health-care benefits. The retirees sued, arguing that the agreements created a "vested right" to lifetime health benefits for themselves and their families at no cost, which extended beyond the expiration of the agreement, and that the new requirement thus violated both the Labor Management Relations Act (LMRA) and the Employee Retirement Income Security Act (ERISA). The district court dismissed the case for failure to state a claim. Applying the Yard-Man inferences, the Sixth Circuit reversed, concluding that the retirees had stated a claim, and finding it "unlikely" that the union would agree to language that provides for a full company contribution if the company could unilaterally change the level of contribution. On remand, the district court conducted a bench trial and ruled in favor of the retirees. The district court declined to revisit the question of whether the P & I Agreement created a vested right to retiree benefits, finding that the Court of Appeals had definitively resolved that issue. The district court issued a permanent injunction requiring M&G to reinstate contribution-free health benefits. The Sixth Circuit affirmed, holding that although the district court erred in finding that the Court of Appeals' reversal conclusively resolved the meaning of the P & I Agreement, it had not erred in "presum[ing]" that "in the absence of extrinsic evidence to the contrary, the agreements indicated an intent to vest lifetime contribution-free benefits."

The Supreme Court Rejects the Yard-Man Inferences

The Supreme Court granted certiorari for the purpose of addressing, among other things, whether, when construing collective bargaining agreements in LMRA cases, courts should presume that silence concerning the duration of retiree health-care benefits means the parties intended those benefits to vest (and therefore continue indefinitely). In a unanimous opinion, the Supreme Court rejected the Sixth Circuit's use of the Yard-Man inferences, finding that they are "inconsistent with ordinary principles of contract law," insofar as they "plac[e] a thumb on the scale in favor of vested retiree benefits in all collective bargaining agreements."

The Court found that the Sixth Circuit's reasoning for applying the inferences was flawed in multiple respects. Among other things, it found that the Sixth Circuit had failed to apply two "traditional principles" that should govern the construction of ambiguous contracts: first, "courts should not construe ambiguous writings to create lifetime promises"; and second, "contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement." To that end, the Supreme Court held that "when a contract is silent as to the duration of retiree benefits a court may not infer that the parties intended those benefits to vest for life." 

Furthermore, while the Supreme Court conceded that courts "may look to known customs or usages in a particular industry to determine the meaning of a contract," as Yard-Man purported to do in construing the durational provisions of the collective bargaining agreement, it held that "the parties must prove those customs or usages using affirmative evidentiary support in a given case," and noted that the Sixth Circuit did not ground its Yard-Man inferences in any record evidence. The Supreme Court further rejected two of the premises on which the Yard-Man inferences were based, namely, the Court of Appeals' incorrect assertion that retiree health-care benefits are a form of deferred compensation and its supposition – incorrect in this case – that retiree health-care benefits are not subjects of mandatory collective bargaining.

The Supreme Court also took issue with the Sixth Circuit's refusal to apply a general durational clause to provisions governing retiree benefits, stating that this approach "distort[s] the text of the agreement and conflict[s] with the principle of contract law that the written agreement is presumed to encompass the whole agreement of the parties." Additionally, the Supreme Court noted that the Sixth Circuit misapplied the illusory promises doctrine, which instructs courts to avoid constructions of contracts that would render promises illusory, insofar as it construed provisions that benefited some class of retirees as "illusory" merely because they did not benefit all retirees. As the Court explained, "a promise that is 'partly' illusory is by definition not illusory."

Because application of the Yard-Man inferences affected the outcome in the rulings below, the Supreme Court vacated and remanded the case to the Sixth Circuit to review the agreements at issue under ordinary principles of contract law.

Justice Ginsburg filed a concurring opinion, joined by Justices Breyer, Sotomayor, and Kagan. In her concurrence, Justice Ginsburg agreed with Justice Thomas's emphasis on the rules of contract interpretation, but stated that these rules required consideration of all extrinsic evidence that could have a bearing on the construction of an ambiguous contract. She also identified contractual provisions that, she felt, could lead to a construction of the agreement so as to vest the retirees in their benefits.  

View from Proskauer

Employers with unionized workforces in the Sixth Circuit can breathe a little easier knowing that when a court looks to extrinsic evidence to interpret ambiguous contracts, it will be without a thumb on the scale in either direction. The Supreme Court's opinion rejects the three rationales most commonly employed in support of claims for lifetime retiree health benefits – that the benefits are deferred compensation, that to prevent vesting the agreement must explicitly curtail the duration of the benefits, and that the duration of the health benefit is tied to the lifetime payment of pension benefits. This does not mean that employers will always prevail, but it should lessen the concerns by employers about litigating retiree benefit claims in the Sixth Circuit, as well as the inconsistency multi-jurisdictional employers faced by having different outcomes in different circuits.

Given the skyrocketing costs of healthcare, it is certain that, even post-Tackett, contractual vesting claims will continue to pose a substantial risk to employers seeking to cut back on retiree benefits. The risk is heightened by the fact that the Court did not provide clear guidance as to the role of extrinsic evidence in adjudicating these cases, particularly given that four justices – but not a majority – opined that such evidence must always be considered. Therefore, as we have previously espoused, employers should do their best when negotiating collective bargaining agreements to draft contractual language that will clearly protect their rights to reduce or eliminate retiree welfare benefits.

Supreme Court Dispenses With The "Yard-Man" Inferences

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.

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
Font Size:
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
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
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.


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.


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