The United States Supreme
Court recently considered a case that directly questioned whether
retiree health benefits vest under a collective bargaining agreement.
In M&G Polymer U.S.A. v. Tackett, the plaintiffs, a group
of retirees, claimed that their right to receive free retiree medical
benefits vested as of the date of their retirement because the
applicable collective bargaining agreement was silent as to the
duration of these benefits. The Court ruled that ordinary contract
principles, as opposed to special judicial inferences, control
whether collective bargaining agreements provide vested lifetime
medical benefits for union retirees.
Background. In 2006, the defendant-employer announced that
it would begin to require retirees to contribute to the cost of their
health benefits. In response, a group of retirees filed a lawsuit
alleging that the collective bargaining agreement between the
employer and their union guaranteed them free lifetime health
The plaintiffs prevailed in
the district court, and the judge reinstated the original benefits.
In response, the employer appealed to the Sixth Circuit Court of
On appeal, the Sixth Circuit
agreed with the lower court, finding that silence in a collective
bargaining agreement regarding the duration of bargained-for retiree
health benefits should be construed as evidence of the parties'
intention that those benefits vest and continue indefinitely for
current retirees. (In reaching this determination, the Sixth Circuit
applied its "Yard-Man" inference, a retiree-friendly
judicial inference that retiree health benefits are vested for life
in the absence of specific language to the contrary in the plan
document or collective bargaining agreement.) In turn, the employer
appealed to the Supreme Court.
Supreme Court. The Court limited its review to the question of
whether courts construing collective bargaining agreements in Labor
Management Relations Act cases should presume that silence concerning
the duration of retiree medical benefits means that the parties
intended those benefits to vest for life.
A unanimous Court disagreed
with the Sixth Circuit's opinion, ruling that courts should apply
ordinary contract principles, not special judicial preferences such
as the Yard-Man inference, when determining whether union
retirees have vested lifetime health benefits. Rather than determine
whether the plaintiffs were entitled to lifetime benefits, the Court
remanded the case to the Sixth Circuit for further consideration
using ordinary principles of contract interpretation.
In reaching this decision,
the Court took issue with the Sixth Circuit's conclusion that parties
negotiating post-retirement benefits "likely intended those
benefits to continue as long as the beneficiary remains a retiree."
The Court noted that the Sixth Circuit "derived its assessment
of likely behavior not from the record evidence, but instead from its
own suppositions about the intentions of the employees, unions, and
employers negotiating retiree benefits."