From Greg Viviani via our Global Compensation Insights blog:
In M&G Polymers USA, LLC v. Tackett, the U.S. Supreme Court has opened the door for many employers to re-examine their ability to alter or amend retiree benefit plans.
The Court rejected a long-standing presumption in the Sixth Circuit of the U.S. Court of Appeals (Michigan, Kentucky, Ohio, and Tennessee) that retiree benefits in collective bargaining agreements are vested lifetime benefits that cannot be changed. In doing so, the court stated that the Sixth Circuit erred because it had erroneously “placed a thumb on the scale” in favor of the retirees. Instead, ordinary contract interpretation principles should apply.
Since a collective bargaining agreement will inevitably have a durational clause (e.g. often, three years), this ruling by the court would seem to effectively lead to a 180 degree turn in the applicable presumption. Now, it would appear that the initial presumption is that retiree benefits were only promised only for the duration of the contract.
If that is so, the positions of the parties in litigation over this type of issue will have dramatically shifted. To overcome that presumption, retirees will have to introduce legal arguments based on other language in the contract and/or extrinsic evidence to show that the parties intended the benefits to be lifetime benefits.
For example, a concurring opinion joined by four justices indicated that evidence of a lifetime promise of benefits might be derived from commonly seen bargaining agreement provisions that tie receipt of retiree medical benefits to entitlement to a company pension, or that provide lifetime benefits for surviving spouses. Both the majority and concurring opinions also pointed to “industry practice” as being potentially relevant extrinsic evidence.
Nevertheless, in an instance where the relevant negotiations may have occurred many years ago (e.g. 20 – 30 years), it may be very difficult for a plaintiff to demonstrate an intention to provide lifetime benefits. Thus, many U.S. employers may be re-examining whether they can later or amend their retiree benefit plans.