The Sixth Circuit Finds that Retirees Were Not Vested in Lifetime Medical Benefits

March 31, 2016

The Sixth Circuit recently reversed a lower court’s ruling granting summary judgment in favor of the retirees. The Sixth Circuit sided with the employer and permitted the firm to cease delivering health care benefits to some unionized retirees. Until recently, courts had a practice of interpreting benefit arrangements in collective bargaining agreements “CBAs” to ensure lifetime coverage. However, the Sixth Circuit defied this trend by issuing a sweeping decision finding that the ordinary principles of contract law will rarely require a company to freeze outdated benefits in place.

 

Through close examination, the Court found no evidence in the CBA that the parties had agreed to a lifetime benefit. The Court reviewed the language of the CBA under the ordinary principals of contract interpretation and found that the use of the phrases “continued,” “will be covered” and “will be provided” did not indicate an intention to vest retiree medical benefits for the life of the participants.

 

As a result of this ruling, many companies who have previously assumed that legacy benefit obligations were required may reevaluate the applicable agreement and press ahead with changes.

 

Gallo et al. v. Moen Inc., No. 1:13-cv-02440 (6th Cir. Feb. 8, 2016)

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