ERISA-Sixth Circuit Rules That CBAs Create Vested Right To Lifetime Health Benefits, Which Employer Cannot Unilaterally Change

In United Steel, Paper and Forestry, Rubber, Manufacturing Energy, Allied Industrial And Service Workers International Union, AFL-CIO-CLC v. Kelsey-Hayes Company, No. 13-1717 (6th Cir. 2014), the defendants are Kelsey-Hayes Company and its parent company, TRW Automotive. The plaintiffs are a class of 400 retired union workers from the now-closed Kelsey-Hayes automobile-manufacturing plant in Jackson, Michigan. The defendants appeal the district court’s grant of summary judgment, injunctive relief, and attorney fees in favor of plaintiffs.

In this case, the plaintiffs worked at the Jackson plant until July 2006, when it shut down. All plaintiffs retired under one of three collective bargaining agreements (“CBAs”) that were negotiated in 1995, 1999, and 2003; each of those CBAs contained identical language with regard to the issues pertinent to this case . Under the CBAs, Kelsey-Hayes agreed to include certain medical services in their employees’ health care coverages. Article III, Section 5(a) of the CBAs provided that, once an employee retired, Kelsey-Hayes promised the now-retiree the “continuance” of “[t]he healthcare coverages [that he or she] ha[d]. . . at the time of retirement.” And, Kelsey-Hayes agreed to pay the “full premium or subscription charge for health care coverages continued in accordance with Article III, Section 5” for retirees.

Until late 2011, consistent with the commitments set forth in the CBAs, Kelsey-Hayes provided health care for plaintiffs and their families both before and after the Jackson plant closed. In late 2011, however, TRW (which had purchased Kelsey-Hayes) sent a letter to plaintiffs indicating that it would be discontinuing group health care coverages beginning in 2012. Instead of group coverages, defendants would be providing plaintiffs with “Health Reimbursement Accounts” (“HRA”s). TRW would make a one-time contribution into the HRAs of $15,000 for each eligible retiree and his or her eligible spouse in 2012, and for 2013, TRW would provide a $4,800 credit into the HRAs for each eligible retiree and eligible spouse. No commitment was made by TRW past 2013. The plaintiffs wanted their group health care coverage to continue, and this suit ensued. The plaintiffs claimed that the health plan change to HRAs breached the CBAs, in violation of Section 301 of the LMRA and ERISA.

In analyzing the case, the Sixth Circuit Court of Appeals (the “Court”) said that the key issue is what the parties intended in the CBAs with regard to health care benefits. The Court held that the pertinent language in the CBAs (set out above) is unambiguous and that this CBA language alone, when construed in light of the Sixth Circuit’s Yard-Man inference in favor of vesting , created a vested lifetime right to health care benefits. The unilateral implementation of the HRAs breached the CBAs, not because HRAs are “unreasonable” under Sixth Circuit case law, but because the HRAs are simply not what the parties bargained for in the first instance, as the HRAs shift risk and possibly costs from the defendants to the plaintiffs. As such, the Court affirmed the district court’s summary judgment.

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