Honeywell retirees did not have vested lifetime health care benefits

Collective bargaining agreements did not vest Honeywell International retirees with lifetime health care benefits because the CBAs contained general durational clauses, held a federal district court in Michigan. Without an express clause in the CBA vesting lifetime benefits, the right to benefits terminates with the CBA. However, the court rejected the employer’s argument that it could require retirees to pay a portion of the premiums, finding instead that the language of the CBA did not place a ceiling on the employer’s required contributions, but was merely a floor. Summary judgment on that point was granted in the retirees’ favor.

Background.

A union and retired workers filed an action against Honeywell alleging ERISA violations and an anticipatory breach of the CBA entered into by the union and employer-specifically, as to the scope and duration of health benefits to which the retirees were entitled. The union and employer had a series of CBAs and master negotiations (including 2003 and 2007 agreements) which contained provisions stating that the limit on the employer’s contribution to retiree health benefits will be a subject of bargaining for the 2007 CBA, and that the employer’s contribution for health care coverage after 2007 shall be not less than the greater of (1) the actual amount of the employer’s retiree contribution in 2007, or (2) the employer’s actuary’s 2003 estimate of the employer’s retiree contribution in 2007. In 2011, the employer notified retirees of its intent to limit health care contributions beginning in 2012. Ultimately, it did not do so until 2014. The retirees objected on the grounds that the CBA did not contain a cap.

Caps on premium contributions.

The plaintiffs moved for summary judgment and an injunction regarding the employer’s plan to collect monthly premium contributions from post-2003 retirees. The retirees argued that the language in the 2003 and 2007 CBAs created a floor, not a ceiling; the employer countered that the language created a cap, based on the fact that elsewhere in the document, it referred to the clause as a limit on contributions. The court sided with the retirees, holding that the “shall not be less than” language created a floor and that the parties had agreed to bargain on the issue but had not agreed on a cap. The word limit can mean a maximum or a minimum, therefore, there was no evidence to support a finding that the CBAs provided for a cap on the employer’s retiree health care contributions. Partial summary judgment for the retirees on this point was granted and the court enjoined the employer from paying anything less than the full premium amount for health care coverage for retirees under the CBAs that contained that language.

Vesting of lifetime benefits.

The employer moved for summary judgment on the grounds that the CBA does not created lifetime vested retiree health care contributions to pre-2003 retirees and contribution caps apply to those retirees. Based on recent precedent, including the Supreme Court’s 2015 decision in M & G Polymers USA, LLC v. Tackett, when the general durational clause is for the term of the CBA, the CBA does not vest retirees with lifetime health care benefits, unless there is an express clause providing that retirees are entitled to vested lifetime health care benefits. In this case, the CBA contained a general durational clause, and the CBAs did expire on the specific termination dates included in the contracts. In addition, the CBAs had a durational clause regarding health care insurance that stated that the CBA would remain in effect until a specified termination date. Therefore, the retirees were not entitled to lifetime health care benefits. Summary judgment was granted for the employer with respect to the claim that it breached the CBA by concluding that the retirees were not entitled to vested lifetime retiree health care benefits.

Breach of implied warranty of authority.

The employer filed a counterclaim arguing that the union breached an implied warranty of authority by misrepresenting its authority to negotiate on behalf of retirees. The court denied the union’s motion for summary judgment on this claim, finding a genuine dispute of fact on the issue. The parties disagreed as to the identity of the union’s chief negotiator and there was a dispute as to whether the employer believed that the union had authority to negotiate on behalf of the retirees.

The union also argued that the claim was time-barred, but the court rejected that argument. The claim was based on fraudulent concealment. The statute of limitations was potentially tolled because there was a dispute as to whether the union concealed that it lacked authority to negotiate on behalf of the retirees and a dispute as to whether the employer exercised due diligence. The union also argued that the counterclaim was barred by the LMRA, but the court rejected that argument as well. In order to analyze the breach of warranty claims, the court said, it would need to examine the conduct of the parties during contract negotiations, but not the CBAs themselves.

SOURCE: United Auto Workers v. Honeywell International, Inc. (E.D. Mich.), No. 2:11-cv-14036-DPH-DRG, March 29, 2018.
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