M & G Polymers v. Tackett (Supreme
Court Jan. 2015) Strikes Down
Yard-Man
Inference for Collectively Bargained Retiree Health Benefits
to Continue for
Life; Court Holds Ordinary Contract Provisions Apply
·
Since
the early 1990s there has been a push by employers to cut back or terminate
retiree health plans.
·
In
contrast to pension (qualified plan) benefits, welfare benefits do not vest by
operation of law, but an employer can contractually obligate to vest benefits.
·
There
may be statements or communication implying lifetime benefits, but the plan
documents and communication often reserve the right to modify or discontinue
the benefits (so that there be no issue of a contractual lifetime obligation).
·
Where
retiree health benefits were the subject of collectively bargained negotiations,
the Sixth Court in International Union, United Auto, Aerospace and Agr.
Implement Workers of Am. (UAW) v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983),
held that there is an inference that the intent was for these bargained-for benefits
to continue throughout retirement even after the expiration of the term of the
collective bargaining agreement.
·
The
First and Eleventh Circuits have followed this Sixth Circuit view of the Yard-Man inference. The Third, Fifth and Eighth Circuits have
rejected it. (The Seventh Circuit first adopted
the Yard-Man view, but then rejected
it.)
·
The
Sixth Circuit itself also cut back on the Yard-Man
inference, limiting it to retiree health, to actual retirees, to cases where
union contract evidences an intent to vest benefit and to where retiree health was
specifically bargained for.
·
In
a January 2015 decision, M & G Polymers USA, LLC v. Tackett, 135 S.Ct. 926
(January 26, 2015), the Supreme Court reversed a Sixth Circuit 2013 decision
which had ruled in favor of retirees with respect to lifetime retiree health
benefits that were bargained for based on the Yard-Man inference that bargained-for benefits are presumed to
continue through retirement. The Supreme
Court struck down the Yard-Man
inference and held that collective bargaining agreements are subject to
ordinary principles of contract law. The
collective bargaining agreement in M & G Polymers did not promise the retiree
benefits for life, and in fact the agreement stated that the benefits would be
provided for the duration of the agreement and would be subject to renegotiation
in three years. The Court stated that traditional
contract rules would dictate that ambiguous writings in collective bargaining
agreements do not created lifetime promises, and contractual obligations will
cease in the ordinary course on termination of the bargaining agreement. Therefore the Supreme Court vacated the Sixth
Circuit ruling in this case, and this case was remanded to the lower court to
make a finding without the Yard-Man
inference.
·
Details
of the Case: M & G Polymers USA, LLC v. Tackett, 135 S.Ct. 926 (Jan. 26,
2015) (predecessor employer, Point Pleasant Polyester Plant, had provided to
union employees (who were eligible for a pension benefit) employer-paid retiree
health benefits, and this was negotiated in the pension & insurance agreement
attached to the collective-bargaining agreement; the agreement provided for the
benefits to be provided for the duration of the labor agreement (three-year
term until next negotiation); these provisions were also included in the
collective bargaining agreement negotiated by M & G Polymer USA, LLC, which
purchased the plant in 2000; in 2006 M & G Polymers announced that it would
begin requiring retirees to contribute to the cost of the retiree health
benefits; retirees sued arguing that they were promised lifetime employer-paid
benefits; the Sixth Circuit in 2009, 561 F.3d 478, held that, based on the Yard-Man Sixth Circuit 1983 decision,
there was an inference that bargained-for retiree benefits would vest for life,
and the district court then found for the retirees; the Sixth Circuit affirmed
this decision in 2013, 733 F.3d 586; the Supreme Court granted certiorari and reversed
the decision; the Court noted that welfare benefits do not vest under ERISA but
can be vested by contract, and that collective bargaining agreements are to be analyzed
according to ordinary principals of contract law, in contrast to the Yard-Man decision; the Court disagreed
with the Yard-Man inference, as
collective bargaining agreements should be governed by ordinary contract law,
and any inferences as to intent should be drawn from the specific facts;
without specific evidence there should be no presumption that the parties intended
to continue the benefits throughout retirement; durational clauses in
collective bargaining agreements should govern and contractual obligations
should generally cease on termination of the collective bargaining agreement;
ambiguous writings should not be construed to create lifetime promises; the
Court therefore rejected the Yard-Man
inference, and this case was remanded for the lower court to apply ordinary
principals of contract law to the facts; the decision, which was unanimous, was
written by Justice Thomas, but there was a concurrence by Justice Ginsburg noting
that in determining whether the parties intended to vest retiree health
benefits implied terms of the agreement, e.g., whether the retiree health benefits
were equated to pension benefits, should be examined, as should extrinsic
evidence).
