By: Amanda Sonneborn and Chris Busey
Instead of following the proverb promise little and do much, in , the Sixth Circuit Court of Appeals determined that M&G Polymers had done the opposite — promised a lot and done little.
Plaintiffs, retirees of M&G Polymers, who had been represented by a local union, brought suit alleging violations of LMRA § 301, ERISA §§ 502(a)(1)(B) and 502(a)(3). Their allegations stemmed from M&G’s 2006 announcement that it would require retirees to make health care contributions. M&G also made a number of other changes to the plan, including increasing deductibles, co-pays, and participants’ maximum out of pocket expenses. Plaintiffs saw this as M&G breaching a promise made through collective bargaining to provide retiree health benefits without employee contributions. After a bench trial, the Southern District of Ohio found for the plaintiffs on the remaining claims and granted a permanent injunction reinstating plaintiffs to their lifetime contribution-free health care benefits under the post-2007 version of the plan, including the additional participant costs..
Defendants appealed the district court ruling on the grounds that (1) certain “cap” letters that required employee contributions were part of the parties’ labor agreement; and (2) the district court erred in finding that plaintiffs’ right to lifetime healthcare vested at retirement under the terms of the plan. Plaintiffs cross-appealed, arguing that they should be entitled to benefits under the pre-2007 version of the plan.
Judge R. Guy Cole, Jr., writing for the court, first held that it was not clear error for the district court to find that “cap” letters did not apply to the retirees’ local union. M&G (and predecessor employers) had negotiated various collective bargaining agreements with the plaintiffs’ union. It also negotiated “cap” letters that placed a cap on M&G’s health care contributions. It was not erroneous to find that these cap letters did not apply to plaintiffs’ union, even though they may have been part of some master agreements with other locals. The ratification of the cap letters presented a factual question that the district court resolved in the plaintiffs’ favor.
Having concluded that the cap letters did not apply, the court then turned to the contracts themselves. Using standard contract interpretation principles, Judge Cole affirmed the lower court’s finding that the parties intended for plaintiffs’ retiree health benefits to vest under the various agreements. These vested benefits could not be bargained away without the retiree’s permission.
Finally, the court denied plaintiffs’ cross-appeal. Although the benefits under the post-2007 plan were less generous than under earlier plans, the reductions “were not unreasonable.”
The takeaways from this case should be familiar to employers with unionized workforces. Make your intentions clear in negotiations and document those negotiations meticulously in clear and unambiguous contract language.