United States Supreme Court: Retiree Health Benefits Not a Vested Right if Not Clearly Stated in Contract
The United States Supreme Court has ordered the Sixth Circuit
United States Court of Appeals to retry a case after opining that
ambiguous provisions in union contracts should not automatically
be interpreted in favor of workers.
Collective bargaining contracts for employees of M&G Polymers USA provided health care benefits to their employees who received pension benefits from the company; however, while the contracts clearly defined vesting provisions for pensions, they did not explicitly apply those terms to the retiree health benefits component. In 2006, M&G announced their intention to have current retirees being contributing to their health care costs; those retirees filed suit, alleging that those benefits were intended to be fully covered for the lifetime of the retiree.
In the Supreme Court’s unanimous decision held by Justice Clarence Thomas, it was opined that the Employee Retirement Income Security of 1974 (ERISA) treats pension benefits, which must be funded and vested, differently than other post-employment benefits as they are not a form of deferred compensation. The Supreme Court directed the Sixth Circuit to retry the case under “correct legal principles.” You may view the opinion here.