30 July 2015

The Supreme Court Opens the Door for Employers to Reduce Union Retiree Health Benefits

In a significant win for employers, the United States Supreme Court invalidated a judicial inference that union retiree health insurance benefits are vested for life in the absence of specific language to the contrary. The Supreme Court’s unanimous opinion in M&G Polymers USA, LLC v. Tackett, issued on January 26, 2015, gives employers more freedom to alter, reduce, or eliminate retiree insurance benefits for employees who were represented by a union before they retired.

In M&G, the Supreme Court invalidated what had been known as the Yard-Man inference, which arose out of a case decided in 1983 by the United States Court of Appeals for the Sixth Circuit. In the three decades that Yard-Man was the rule in the states covered by the Sixth Circuit—Michigan, Ohio, Kentucky, and Tennessee—union retirees won nearly every single challenge they raised to employers’ attempts to modify or eliminate retiree insurance benefits.

The unanimous Supreme Court decision in M&G eliminates the Yard-Man inference favoring union retirees, making it easier for employers to modify or eliminate retiree health benefits. The Supreme Court ruled that union retiree health benefit disputes should be analyzed under ordinary principles of contract interpretation instead of court-made inferences.

For employers who provide health benefits for retirees who were represented by a union, the Supreme Court’s decision creates the possibility for significant cost savings by modifying, or eliminating, union retiree health benefits. Analyzing whether an employer may modify or eliminate union retiree health benefits requires careful consideration of collective bargaining agreements, bargaining records, summary plan descriptions, and communications with retirees, among other potentially relevant considerations.

Miller Johnson employment and labor attorneys have substantial experience advising employers on union retiree health insurance matters. For any questions or assistance, please contact Tony Comden or your Miller Johnson attorney.