Claims to lifetime retiree health insurance benefits ended with expiration of CBA

The Sixth Circuit affirmed a district court’s dismissal of a suit by retirees of Honeywell claiming the employer promised, in a collective bargaining agreement, to pay lifetime health insurance. The appeals court found that the general-durational clause in the CBA applied to the employer’s promise to provide health care. Specifically, the language of the CBA unambiguously promised health care benefits until October 31, 2011-the “duration” of the agreement. None of the retirees’ evidence showed that the duration of the agreement contained a patent ambiguity that clearly appeared on the face of a document arising from the language itself.

For almost 40 years, Honeywell (or its predecessors) operated a manufacturing facility staffed with employees represented by the UAW. For decades, Honeywell and the UAW engaged in collective bargaining and memorialized those negotiations in successive CBAs. The retirees in this instance retired at a time when Honeywell promised that it would pay for their health insurance. According to the retirees, Honeywell wrote to them that their health care “will continue during your retirement” and is “for your lifetime.” However, the language of the last CBA was less generous; it spelled out that the duration of the insurance program extended to the end of the CBA.

When the final CBA expired in 2011, Honeywell did not renew the agreement. It sold the facility that same year. Nevertheless, Honeywell continued to underwrite retirees’ health care benefits for a few years. In late 2015, the employer notified retirees that it would terminate health care contributions in 2017. Two employees who retired in 2004 sued on behalf of a proposed class of nearly 1,000 retirees and their spouses and dependents seeking to require Honeywell to continue to pay.

Lifetime retiree benefits.

According to the retirees, the CBA promised lifetime health care coverage and benefits for retirees and their spouses, eligible dependents, and surviving spouses, and that Honeywell breached this agreement by ending its health care contributions. In arguing that Honeywell had promised vested health care benefits, the retirees pointed to caps on medical payments for retirees imposed in 2001 that only went into effect in 2010. They also alleged other indicia showed that Honeywell had planned to provide health care benefits for the duration of the retirees’ lives.

Honeywell moved to dismiss the complaint, while the retirees moved for summary judgment and sought to enjoin Honeywell from ending its payments for their health care. The district court granted Honeywell’s motion to dismiss; the retirees appealed.

Contract interpretation.

Noting that it interprets contracts according to their plain meaning, the Sixth Circuit said it will not look at extrinsic evidence unless the contract is ambiguous. In M & G Polymers USA, LLC v. Tackett, the Supreme Court said that a CBA is first and foremost a contract, which should be interpreted “according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy.”

Since Tackett, the Sixth Circuit has spoken at least five times on general-durational clauses and promises to provide health care. Where an agreement’s general-durational clause unambiguously applied to the promise to provide health care benefits, it does not promise benefits for life. On the other hand, an ambiguity exists about whether a general-durational clause applies to the promise to provide health care where the parties had “carved out certain benefits” from the general-durational clause and stated those coverages ceased at a different time than other provisions of the agreement.

General-durational clause.

In this instance, the Sixth Circuit found that the agreement’s general-durational clause limited Honeywell’s promise to provide health care “for as long as the agreement lasts,” and in turn provided that the agreement “shall continue in full force and effect until 11:59 PM, October 31, 2011.” The court found this language even more specific than the language considered in prior decisions. Unlike any prior cases, this contract expressly stated that the general-durational clause applied to the promise to provide health care. Accordingly, the appeals court affirmed the judgment of the district court.

SOURCE: Watkins v. Honeywell International Inc., (CA-6), No. 17-3032, November 8, 2017.
Visit our News Library to read more news stories.