Yard-Man is Dead, Long Live Yard-Man!
January 28, 2015 by Teague Paterson
In M&G Polymers v. Tackett a unanimous Supreme Court overturned the Sixth Circuit Court of Appeals’ seminal Yard-Man decision, but a concurring opinion by four justices has widened the door for retirees in other circuits who seek to safeguard their retiree health benefits. Unlike pension benefits, ERISA does not prohibit cutbacks to retiree health benefits, but “vesting” of these benefits may occur under a contract, including a collective bargaining agreement. M&G Polymers involves the elimination of retiree health benefits provided by a collective bargaining agreement governed by the law of the Sixth Circuit. The cutback of pensions and health benefits have become increasingly contentious and concerning to labor unions and employees as businesses look for ways to save money and increase profits. The Court’s decision was seen mostly as business friendly rather than retiree friendly [Bloomberg – Supreme Court Paves Way for Employers to Reduce Union Retiree Benefits]. However, we at Beeson, Tayer and Bodine (BT&B) did find some possible support for labor and collective bargaining in the concurring opinion of Justice Ginsburg joined by three other justices.
In the 1982 case, UAW v. Yard-Man, Inc., 716 F.2d 1476, the Sixth Circuit ruled that, due to the nature of collective bargaining, if unions and employers negotiated retiree health benefits into a collective bargaining agreement, a presumption should apply that they intended the benefits to last beyond the term of the CBA and become vested.
Over the decades following Yard-Man, as companies increasingly sought to eliminate retiree health benefits, other Circuits considered the “Yard-Man doctrine” but generally rejected it, and a number of approaches developed. The Second Circuit’s approach was influenced by Yard-Man, while the First, Seventh, Eighth, Ninth and Eleventh Circuits rejected Yard-Man’s vesting presumption, instead applying general contract principles. However, the Third, Fourth, Fifth, and Tenth Circuits’ adopted a negative presumption, that is, retiree health benefits are presumed not to be vested absent a “clear and explicit” statement within the contract that they survive its expiration or are permanent. Under M&G Polymer, this negative presumption may no longer apply.
In M&G Polymer the Court rejected the Yard-Man presumption and its underlying policy basis. The Court noted that under Litton Financial v. NLRB, 501 U. S. 190 (1991), it had held that ordinarily benefits cease upon termination of the contract, however the Court neglected to consider that Litton also recognized that rights that accrued or vested under a CBA will generally survive termination of the agreement.
Most importantly, in a concurring opinion, Justice Ginsburg, joined by Justices Breyer, Sotomayor and Kagan, clarified their understanding of the Court’s opinion, rejecting the employer’s argument that vesting of retiree health benefits requires a “clear and express” statement, and reiterating that vesting can arise from implied terms. The concurring opinion also noted that provisions that tie retiree health benefits with pension eligibility, or provide survivorship benefits to retirees “until death,” are indicative of intent to vest the benefits.
Although collectively-bargained retiree health benefits are increasingly rare, the M&G Polymers decision indicates that where such benefits are provided by an employer under an obligation founded on a collective bargaining agreement, any elimination of such benefits will be followed by a detailed factual inquiry. BT&B is an experienced California law firm with offices in Oakland and Sacramento available to assist unions and retirees in understanding this Court ruling and other labor law related to pension and health benefits.
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