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Tuesday, May 20, 2014

Old Woman ShhhhThe Supreme Court has granted review in a case that will resolve a long-standing circuit split concerning the vesting of retiree health care benefits.  On May 5th, the Supreme Court granted certiorari in the case of M&G Polymers USA, LLC v. Tackett. In reviewing Tackett, the Supreme Court will have the opportunity to decide whether silence concerning the duration of retiree health-care benefits in collective bargaining agreements means the parties intended those benefit to vest and therefore continue indefinitely or whether such benefits are vested only where there is a clear statement that health care benefit are intended to survive the expiration of the collective bargaining agreement.

There has long been a split among the circuit courts regarding the requirement for vesting of retiree health care benefits providing through a collective bargaining agreement.  The Sixth Circuit’s decision in Tackett represented the circuit’s long-standing view that such silence is evidence that the parties’ intended the health-care benefits to vest and continue for the retiree’s life (known as the “Yard-Man presumption,” named for an early retiree health care decision, UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983)).  On the other end of the spectrum, the Third Circuit requires a clear statement that health-care benefits are intended to survive the termination of the collective bargaining agreement in order to to find that such benefits are vested. The Second and Seventh Circuits occupy a middle ground, requiring some language in the collective bargaining agreement that can reasonably support an interpretation that health-care benefits should continue indefinitely.

Tackett was filed by certain retirees and dependents of retirees from an M&G Polymers’ plant in Ohio (the “Apple Grove” plant) and the union that represented Apple Grove employees.  The suit followed M&G Polymers’ announcement that retirees would be required to make  contributions to obtain health care benefits.  .  The parties were subject to a series of labor agreements entered into between the present and prior owners and the union representing the Apple Grove employees, including various collectively bargaining agreements (both “master” agreements directly with the employer and local agreements with the Apple Grove plant), pension, insurance and service award agreements (or “P & I Agreements”), and side letter agreements.

The P & I Agreements, once reached, were printed as booklets and provided to local union members, unlike the side letter agreements, which were not distributed and generally not ratified as part of a local union’s agreement with the employers.  Each of the P & I Agreements contained language stating that employees who reached a certain level of seniority points before retiring would receive a “full Company contribution towards the cost of [health-care] benefits”.  Employees that did not reach the requisite point level would receive reduced of contributions from the employer and would be required to pay in advance the annual balance of the health care contributions.  The side letters (also referred to as “cap letters”) provided for “capped” an employer’s contribution towards the cost of retiree health care benefits and specified coverage maximums and dates when required contributions would begin.  The plaintiffs contention was that the promise of a “full Company contribution towards the cost of [health care] benefits” provided them with a vested right to receive health care benefits in retirement without making any contributions.

Following a bench trial, the district court determined that the “cap letters” were not part of the collective bargain agreements and that the intent of the collective bargaining agreements and P & I Agreements was to have retiree health-benefits vest and continue indefinitely.  The Sixth Circuit affirmed the district court’s decision, agreeing that the “full Company contribution” language, in the absence of extrinsic evidence to the contrary, evidenced an intent to vest the benefits and have them be contribution-free for the lifetime of the retirees.  Given this determination, the Sixth Circuit rejected M&G Polymers argument that the local union’s recent agreement with it that retirees must make medical contributions invalidated the right to such benefits, stating that “if benefits are vested, then subsequent concessions by the union cannot modify them without retirees’ permission.”

Application of the Yard-Man presumption to collective bargaining agreements has resulted in uncertainty for employers and retirees, inconsistent outcomes for collective bargaining agreements covering employees in different circuits, and forum-shopping by retirees seeking application of Sixth Circuit precedent.  A Supreme Court opinion should resolve the uncertainty for employers and retirees alike and eliminate the jurisdictional gamesmanship that has long plagued these cases.

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