Supreme Court knocks down promised health benefits for union retirees
By David G. Savage
January 26, 2015 - Los Angeles Times
The Supreme Court cast doubt Monday on the future of old union contracts that
had promised lifetime health benefits for retired workers and their
families.
In a case seen as a victory for corporate America, the justices ruled these
promises should not be treated as gvested rightsh unless they are spelled out in
the contract.
gWhen a contract is silent as to the duration of retiree benefits, a court
may not infer that the parties intended those benefits to vest for life,h wrote
Justice Clarence Thomas.
In the unanimous opinion, Thomas chided lower-court judges who upheld the
retiree benefits, citing "traditional principle that courts should not construe
ambiguous writings to create lifetime promises."
In decades past, union contracts often included a promise from the employer
to pay for healthcare, even after the worker's retirement. But as healthcare
costs rose and companies changed hands, new owners objected to paying the
benefits far into the future. They argued that the contracts applied only to the
term of the agreements and not beyond.
The U.S. Chamber of Commerce and the National Assn. of Manufacturers backed
an appeal from the owners of a West Virginia polyester plant who objected to
paying benefits to workers who had retired in 1996.
Their contract, negotiated by the United Steelworkers Union, promised a "full
company contribution" to their health benefits. But in 2006, M&G Polymers,
the new owners of the plant, said the retirees must contribute to the cost of
their health benefits.
A group of retirees sued and won before the U.S. 6th Circuit Court of Appeals
in Cincinnati. Its judges said the negotiated benefits were a "form of delayed
compensation."
The Supreme Court agreed to hear the company's appeal, and on Monday set
aside the lower-court ruling that favored the retired workers.
Thomas told the lower court to take another look at the contract and to do so
without "placing a thumb on the scale in favor of vested retired benefits." He
noted that federal law protects promised pensions, but it does not require
employers to provide future benefits for healthcare.
In a concurring opinion, Justice Ruth Bader Ginsburg agreed that
"ordinary contract principles" apply in such disputes, but she left open the
prospect that the old agreement could be read to promise benefits in the future.
Justices Stephen G. Breyer, Sonia Sotomayor and Elena Kagan signed the
concurring opinion.