SPECIAL  EMPLOYMENT  EDITION

May 22, 2017
Volume XXIX, No. 11

 

Nicholas T. Draugelis is a Shareholder in our Detroit Office. He can be reached at 313.446.1530 or ndraugelis@garanlucow.com

DURATION OF HEALTH INSURANCE BENEFITS FOR
RETIREES IN THE POST-TACKETT LANDSCAPE

 By Nicholas T. Draugelis and Megan Cavanagh

In the 2015 case of M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926, the United States Supreme Court overruled the Sixth Circuit Court of Appeals decision in UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983). The Yard-Man case required courts to place a metaphorical “thumb on the scale” in favor of employees in the context of evaluating the meaning of collective bargaining agreements (CBAs). The Yard-Man inference provided that silence as to the duration of healthcare benefits implied lifetime duration. Under Tackett, which expressly overruled the use of this employee-favorable inference, analysis of healthcare duration provisions must be assessed using traditional contract law.

On April 20, 2017, the 6th Circuit Court of Appeals issued three opinions which apply post-Tackett analysis to CBAs. While the three opinions have differing results, the application of Tackett principles remained consistent and can provide guidance to future drafters of CBAs.

In UAW, et. al., v. Kelsey-Hayes Corp., et. al. (Docket No. 15-2285), the CBA in question contained a “general-duration” provision which provided that the CBA, signed in 1998, would continue until 2002 but that, subject to modification, could continue thereafter on a year-to-year basis. This section favored a finding of a limited-duration healthcare benefit. In contrast, a supplement to the CBA contained language suggesting a “continuance” of healthcare coverage for surviving spouses. This provision suggested that the parties intended healthcare to be a lifetime benefit. The court ultimately reasoned these separate provisions (and a third section not mentioned here) created ambiguity in the CBA. The court, applying principles of traditional contract law under Tackett, noted that, where ambiguity is found in a contract, extrinsic evidence should be assessed to identify the intent of the parties.

In the Kelsey-Hayes case, extrinsic evidence included documents which guaranteed employees lifetime healthcare benefits. No documents were discussed which suggested that retirees’ healthcare benefits were intended to be for a limited period of time. Therefore, the court concluded that the parties intended healthcare benefits to be lifetime benefits and affirmed a lower court’s ruling of summary judgment in favor of retirees.

In Cole, et. al. v. Meritor, Inc., et. al. (Docket No. 06-2224), the issue presented was, again, how to interpret a CBA which was silent as to duration of healthcare benefits. The original opinion in Cole was issued in 2008 and the Court held that the retired employees had a vested right to lifetime healthcare benefits. Meritor filed a petition for rehearing which remained pending for eight years while the parties attempted to resolve the case. In the meantime, the Supreme Court decided Tackett and abrogated Yard-Man. When the parties could not reach a resolution, the petition for rehearing was placed back on the docket and the Court issued a superseding opinion, relying on Tackett and Gallo v. Moen, Inc., 813 F.3d 265 (6th Cir. 2016), and holding that the CBA in question did not provide lifetime benefits. In its discussion, the court found no ambiguity within the four corners of the CBA. Like in Kelsey-Hayes, the CBA contained a “general-duration” clause but, unlike Kelsey-Hayes, there were no supplements attached to the CBA with different length-related terms. Since there was no ambiguity in the CBA, the court did not consider extrinsic evidence on the issue and found that no specific term suggested lifetime benefits were bargained-for benefits of the agreement. Resultantly, the court ruled in favor of the employer.

Lastly, in Reese, et. al. ,v. CNH Industrial, et. al. (Docket No. 15-2382), the CBA contained a “general-duration” clause but carved out certain benefits, including healthcare, from the clause and stated that those benefits ceased at a different time. Finding that these two temporal clauses created ambiguity, the court relied on this case’s prior history which concluded that extrinsic evidence supported a finding of lifetime coverage.

However, after finding that the CBA required lifetime coverage, the court then went on to analyze whether the employer could make reasonable adjustments to coverage. With respect to this issue, the appellate court remanded the case to the federal district court for consideration of several factors pertaining to the reasonableness of the proposed changes including use of Medicare by retirees, similarities between proposed changes to modern healthcare plans, and out-of-pocket costs imposed on retirees, among others.

The common theme between these cases is obvious: where ambiguity exists, extrinsic evidence will be considered to determine the intended duration of benefits in the face of contractual silence. Based on these decision, it is clear that in the post-Tackett world of CBA interpretation, parties should clearly define the intended duration of certain benefits or risk an ambiguity analysis of their CBA.

 

Megan Cavanagh is a Shareholder in our Detroit Office. She can be reached at 313.446.1530 or mcavanagh@garanlucow.com

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For inquires, upcoming seminars, or in-house seminar requests please contact Eileen Carty at ecarty@garanlucow.com

Sarah Nadeau, Editor of the Law Fax Publication,

is a Shareholder in our Detroit Office.

Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com

 

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