Blogging Employee Benefits

February 8, 2006

Retiree Health Care and Life after CBA

Filed under: Collective Bargaining, Healthcare, Litigation — Fuguerre @ 10:13 pm

[G]eneral contract law still applies, and in the event of a patent or latent ambiguity, a plaintiff may be entitled to a trial where extrinsic evidence may be introduced to establish the true intent of the agreement.

Finding no legally sufficient agreement to support retirees’ claims of entitlement to life-time retiree benefits, the 7th Circuit Court of Appeals has affirmed a district court ruling granting summary judgment for the employer, permitting the employer to unilaterally require retirees to pay a portion of premiums for future health care. [Barnett v. Ameren, CA7, 05-1496, 2/8/06]

If a collective bargaining agreement that provides for retiree health benefits is silent regarding the permanence of those benefits, then the 7th Circuit presumes that the benefits expire with the CBA. But general contract law remains applicable, the court observes, leaving the door open for litigation on the true intent of an agreement if a patent or latent ambiguity exists.

In this case, retirees claimed such ambiguities in both of the employer’s two pre-merger CBAs: (1) The first referred to “vesting service”; while (2) In the second, the employer and union actually documented their opposing positions regarding retiree health benefits, the employer claiming the right to amend or terminate while the union expressed the position that benefits of currently retired employees could not be terminated. The court found the references to “vested service” unambiguous in the context of a CBA that elsewhere explicitly reserved the right to revoke the benefits. As to the documented agreement to disagree, the court reminded plaintiffs that an ambiguity is “something that makes it possible to interpret a document reasonably in more than one way.” Here, the court found “that it is not reasonable to read this stark agreement to disagree as actually resulting in an agreement on [the employer]’s part to provide vested health-care benefits to retirees.” The court further found no latent ambiguities in the employer’s continuation of other benefits provided under the same CBA while imposing retiree premiums for health benefits. Absent ambiguities, the court was left with its basic presumption, that absent explicit CBA language to the contrary, the promise of retiree health benefits had no guaranteed life beyond that of the CBA.

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1 Comment »

  1. The district court judge whose ruling here was affirmed was “familiar”: G. Patrick Murphy, of IBM cash balance plan age discrimination fame.

    Comment by Fuguerre — February 8, 2006 @ 10:17 pm


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