ERISA-Fourth Circuit Rules That The Retirees’ Health Benefits Are Not Vested, And May Be Changed Unilaterally By Their Former Employer

In Barton v. Constellium Rolled Products-Ravenswood, LLC, No. 16-1103 (4th Cir. 2017), a class of retirees and their union filed this action after their former employer unilaterally altered its retiree health benefits program.  After reviewing the case, the Fourth Circuit Court of Appeals (the “Court”) ruled that, because the governing collective bargaining agreement (the “CBA”) does not provide for vested retiree health benefits, the Court must affirm the district court’s grant of summary judgment to the employer.

In analyzing the case, the Court noted that the Supreme Court has recently held courts must interpret collective-bargaining agreements, including those establishing ERISA plans, according to ordinary principles of contract law, at least when those principles are not inconsistent with federal labor policy, and where the words of a contract in writing are clear and unambiguous, its meaning is to be ascertained in accordance with its plainly expressed intent. Thus, said the Court, we must interpret the CBA’s provision governing the retiree health, namely its Article 15, using ordinary contract principles. And in doing so, we must recognize that these principles foreclose holding that the retiree health benefits have vested unless unambiguous evidence indicates that the parties intended that outcome.

Article 15 of the CBA states that the retiree health benefits “shall remain in effect for the term of this . . . Labor Agreement.” Article 15 also provides that the parameters of the retiree health benefits programs “shall be set forth in [the] booklet[] entitled . . . Retired Employees’ Group Insurance Program.” That booklet, which serves as the SPD for these benefits, similarly states that these benefits would last “for the term of the Labor Agreement.” It is undisputed that the term of the 2010 CBA, the most recent one relevant, ended in 2012. As such, the plain language of the CBA and SPD clearly indicates that the retiree health benefits did not vest. First, Article 15 contains explicit durational language stating that the retiree health benefits continue “for the term of” the governing CBA. Furthermore, the SPD echoes this language, reiterating the benefits continue “for the term of the” CBA. The retirees cannot overcome the clear language of Article 15 of the CBA and the SPD. Given this language, the retirees cannot demonstrate that their health benefits had vested.