Monday, September 9, 2019

Michigan Supreme Court Rules County Retirees Not Entitled to Lifetime Benefits

In a case that has wound its way through the Michigan court system for several years, the state supreme court there recently ruled that retired unionized county employees could not rely on the terms of the collective bargaining agreement to claim lifetime health insurance benefits.

Plaintiffs were approximately 1600 retirees who were previously unionized employees for the county under various CBAs dating back to 1989. They sued the county after it reduced their healthcare benefits in 2009 and 2010, arguing that the CBAs, which were generally three-year contracts, contained provisions expressly granting a right to lifetime and unalterable retirement healthcare benefits. The parties have taken a roller coaster ride through the court system for almost a decade, with the trial court apparently attempting to split the baby by concluding that retirees were entitled to lifetime healthcare benefits, but the county could make reasonable modifications to those benefits. The Court of Appeals held entirely in favor of plaintiffs, finding that retirees were entitled to lifetime benefits which could only be modified by agreement.

The Michigan Supreme Court took a fresh look at the issue of whether CBA’s could grant vested, lifetime benefits. It applied the 2015 U. S. Supreme Court case of M & G Polymers USA, LLC v. Tackett, in which it overruled a history of cases that resulted in, according to the U.S. Supreme Court, “placing a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements” holding that the “basic principles of contract interpretation instruct that ‘courts should not construe ambiguous writings to create lifetime promises’ and, absent a contrary intent, that ‘contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.’”

The Michigan court found that the provisions granting lifetime retiree benefits in the CBAs did not nullify or supersede the durational clauses of the CBA’s (expressly limiting the agreements to three year durations), finding that they were not necessarily in conflict with each other, therefore concluding that the language of the agreements did not reflect an intent for retiree benefit guarantees to outlast the overall duration of the agreements.

If this seems a bit of tortured logic, blame it on the law of contract interpretation, but be happy to know that another state joins in the conclusion that CBA language alone does not always guarantee lifetime healthcare benefits to retirees.