Court Finds Employer Owes Lifetime Health Benefits

In affirming a district court ruling, the 6^th U.S. Circuit Court of Appeals found the lower court did not err in interpreting the pre-2005 CBAs between M&G Polymers and its employees as vesting a right to lifetime contribution-free benefits to the pre-August 9, 2005 retirees. According to the court, the agreements indicated an intent to vest lifetime contribution-free benefits with language promising a “full contribution” to qualifying employees, and by linking health care benefits to pension benefits.

The major issue in the case was whether side letters, attempting to place a cap or limit on the amount of health care costs paid by the employer, were part of the CBAs. Again, the appellate court found the district court did not err in finding the cap agreements inapplicable. The court pointed to testimony of a union representative that, despite “search[ing] extensively,” he could not find “any document indicating [the letters] had been adopted or ratified by the local.”

The court reached the conclusion that retirees had a vested right to health care benefits and, in the absence of evidence to the contrary, a vested right to contribution-free health care benefits. Those benefits could not be bargained away without retiree permission.

The district court’s decision reinstated retirees to the health plan bargained for in 2007 (see “Court Moves Forward Retirees’ Case for Lifetime Benefits”), but they argued that the 2007 CBA illegally increased their copays and deductibles. The court denied the retirees request to be reinstated into the pre-2007 plan finding that the changes were “reasonable in light of changes in health care.”

The 6^th Circuit’s opinion is here.