Employment Benefits After Retirement

Most employees in the United States are considered to be at-will employees. At-will employment status means that an employee can be terminated at any time, for any or no reason, as long as the reason is not discriminatory. It also allows employers the freedom to decide the terms of employment without specifying any benefits, if any, the employer plans on giving an employee. On the other hand, employees who are in a union are generally covered under a contractual agreement stipulating the conditions of employment such as when he or she can be fired and any benefits he or she is entitled to, such as health care benefits and retiree benefits.

On February 20, 2018, the United States Supreme Court settled the question of whether a union contract, that did not explicitly specify the termination date of health care benefits, entitled a group of retirees to lifetime health care benefits.

In CNH Industrial N.V. v. Reese, a group of retirees, had a collective-bargaining agreement (“CBA”) that expired in 2004. The agreement contained a provision providing health care benefits to “[e]mployees who retire under the . . . Pension Plan.” Although this provision did not specify when, if at all, this entitlement expired, the CBA contained another clause stating that “[a]ll other coverages” ended after retirement. The CBA also specified that the group benefit plan “r[an] concurrently” with the agreement and in fact, contained a “general durational clause” specifying that the agreement terminated in May 2004.

The lower court initially ruled in favor of the employer based on a 2015 Supreme Court decision, M&G Polymers USA, LLC v. Tackett, deciding that collective-bargaining agreements must be interpreted according to contract law principles. But after reconsideration, the district court ruled in favor of the retirees. On appeal, the Sixth Circuit Court of Appeals, agreed with the district court’s reconsideration opinion because of the ambiguousness of the CBA. Thus the Sixth Circuit relied on “Yard-Man inferences,” stemming from a 1983 Supreme Court decision, allowing the Court to presume that in certain circumstances, “collective-bargaining agreements vested retiree benefits for life.”

Disagreeing with the Sixth Circuit, the Supreme Court acknowledged the importance of its ruling in Tackett. In fact, the Supreme Court noted that no other Circuit Court would agree with the Sixth Circuit’s decision. Specifically, the Court reminded the Sixth Circuit that Tackett rejected the Yard-Man inferences as inconsistent with basic contract law principles. Furthermore, the Court held that a “contract is not ambiguous unless it is subject to more than one reasonable interpretation” which was not the case here. In sum, the Court saw this as an “easy” case and ultimately found that “the only reasonable interpretation of the [CBA] is that the health care benefits expired when the [CBA] expired in May 2004.”

While the Court found this to be an “easy” case, employment contracts such as a CBA, are not always easy to interpret. To avoid possible litigation, employers should try to make their contracts as specific as possible. On the other hand, employee’s should carefully read their employment contracts to ensure he or she is receiving the maximum amount of benefits allowed under the contract’s terms.

Famighetti & Weinick, PLLC are employment discrimination lawyers on Long Island, New York. If you have questions about unions, collective bargaining agreements, or employment benefits, drafting an employment contract, contact one of our Long Island employment lawyers at 631-352-0050 or on the internet at https://www.linycemploymentlaw.com.

Today’s Long Island employment law blog was written by Hofstra Law School student and Famighetti & Weinick intern, Thalia Olaya.