The US Supreme Court recently made a decision that may have a significant impact on the obligation of employers to pay retirement health care benefits under collective bargaining agreements. While underfunded public employee pensions capture most of the media attention, health insurance benefits for retired workers is also a huge expense. This is especially true since the cost of healthcare services is dramatically increasing and the retired worker is simply living longer.
In the case of M&G Polymers v Tackett (click here for full decision) the Court held that the express terms of the collective bargaining agreement (CBA) can be used to interpret the contract and, therefor retirement healthcare benefits are only valid for the duration of the contract and not to be continued after the contract has expired. The Union in this case had challenged the employer arguing that the healthcare benefits vested for life, regardless of expiration or subsequent amendment to the collective bargaining agreement.
Two principals in M&G Polymers v Tackett may prove to be especially relevant.
First, the Court held that it would not construe ambiguous or vague language in a CBA to create some sort of vested lifetime promise. And Secondly, that contractual obligations under a CBA will cease in the ordinary course upon termination or expiration of the collective bargaining agreement. M&G Polymers v Tackett arose from the private sector. But the Supreme Court’s decision may be significant for the public sector in that their holding is that the collective bargaining agreement must have explicit language that the employer intended to be bound by a long-term commitment past the incumbencies of the public officials that approved and signed the agreement.
This is important because as we all know, many elected officials trade increased benefits in the future for some type of wage or benefit concession. By doing so, they avoid having to take responsibility for the current cutback in services and concession to the employee. By the time those deferred benefits come to fruition, that local official is long gone. So the Supreme Court ruling on M&G Polymers v Tackett makes it harder for current elected official to make promises that bind officials in the future.
From the employee association perspective, it is now more important than ever to get clear language in the CBA that describes precisely what the terms of the agreement are, both presently and in the future.