By Amanda Sonneborn, Sam Schwartz-Fenwick and Megan Troy
On August 5, 2011, in Tackett v. M&G Polymers USA, LLC (Case No. 2:07-cv-216), following a remand from the Sixth Circuit and a subsequent bench trial, the U.S. District Court for the Southern District of Ohio held that retirees were entitled to vested healthcare benefits.
Retirees from the defendant-employer’s plant in West Virginia brought suit under Labor Management Relations Act § 301 and ERISA §§ 502(a)(1)(B) and (a)(3), claiming their former employer acted contrary to a collective bargaining agreement and welfare benefit plan when it required them to contribute to the cost of their healthcare benefits. Based on a reading of the CBA, which stated eligible employees “will receive a full Company contribution towards the cost of [health-care] benefits,” the court concluded retirees had a vested right to lifetime health care benefits.
The Court went on to examine whether the employer could cap its healthcare costs by requiring retirees to pay monthly premiums—a question which depended on whether certain side agreements permitting the capping of retiree healthcare benefits, signed contemporaneously with the CBAs, applied to retirees at the plant at issue. Based on extrinsic evidence introduced at trial, the Court found that, prior to August 5, 2005, the side agreements did not apply and thus, the health care benefits were uncapped, meaning that retirees were not required to pay premiums. After August 5, 2005, the Court determined that the side agreement applied and benefits were capped, so the employer could require retirees to share in the premium costs.
Retiree health care continues to be a hot topic for litigation. The trial in this case and the ultimate decision further confirms the importance of drafting clear language in collect bargaining agreements relating to complex retiree health care issues.