Do Collective Bargaining Agreements that are Silent on the Issue Guarantee Lifetime Healthcare Benefits to Retirees?

M&G Polymers USA has operated a chemical plant in West Virginia since 2000. In 2006, the Company informed its retirees that they would have to contribute to their health care costs. Displeased with this, the retirees and their union, the Steelworkers, filed a class action against M&G. On appeal, the Sixth Circuit relied heavily on the 1983 Yard-Man decision when ruling that retirement benefits obtained through a collective bargaining pact are presumed to vest, and the retirees are entitled to free health care for life.

The case is now before the U.S. Supreme Court. M&G has urged the Court to find that one of the following three options governs retiree healthcare:

  1. Courts should presume that silence in a CBA about duration of retiree health benefits meant the parties intended them to continue indefinitely;
  2. CBAs should require an explicit statement on the issue; or
  3. Labor contracts need at least some language supporting indefinite heath care benefits for that to be the case as various appellate courts have previously held.

The retirees argue there is a fourth option: whether a company’s obligation to provide health care benefits to retirees extends beyond the termination of a collective bargaining agreement should be guided by traditional contract interpretation principles, i.e. what was the intent of the parties when they drafted the contract.

The ruling by the Supreme Court is eagerly anticipated by labor contract negotiators like me who welcome the Court’s guidance. The ruling will provide direction in what language must be included in collective bargaining agreements to provide companies with the flexibility to modify retiree health care in the future. Inserting the specific language is achievable when negotiating first contracts. However, for companies that do not have the magic language in their collective bargaining agreements regarding retiree health care, the Court’s decision could have significant financial and logistical implications.