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In the News: Collective Bargaining Agreements Provide Employers with the Power to Unilaterally Cut Retiree Benefits

At Kozloff Stoudt Attorneys, our team of seasoned legal professionals recognizes the importance of keeping clients informed about the latest legal developments and how these changes can impact their business and day-to-day livelihood. Beyond our provision of skilled legal services, Kozloff Stoudt’s Berks County lawyers strive to impart relevant and timely information to inform and educate the public.

The focus for this month’s “In the News” segment is whether an employer can use a bargained-for contractual privilege to impose lifetime limitations on retiree health benefits plans unilaterally.

After obtaining class certification in Federal District Court, a group of Johnson Controls Inc. retirees filed a class action lawsuit against the automobile parts manufacturer, challenging their employer’s 2009 decision to unilaterally reduce health benefits by imposing a lifetime cap of $50,000 on benefits received by retirees after age 65.  The class of employees alleged that such a decision was at odds with the employer’s long history of providing uncapped coverage to retirees and the collective bargaining agreement’s provision requiring coverage of retirees’ healthcare costs “until death.”

U.S. District Judge Sylvia H. Rambo rejected the employees’ arguments, finding that each successive collective bargaining agreement between labor and management and the group insurance plan booklets contained language which reserved to management its right to unilaterally reduce or terminate health benefits plans.  Such a managerial prerogative was consistent with the established custom and practice of the parties in which healthcare benefits were negotiated for each successive CBA.  The District Court’s analysis also rejected the treatment of the healthcare benefits as a vested benefit of the retirees, in which case the employer would have to engage in impact bargaining with the employee union prior to the implementation of a unilateral change in coverage.

Similar attempts by classes of retirees from companies such as Weyerhaeuser Co., Honeywell International Inc., Moen Inc. and Raytheon Co. have produced similar results.  The plaintiffs in each action have been unable to identify specific language in their respective collective bargaining agreements which clearly and expressly provides a vested right to unlimited retiree healthcare benefits. Without such “clear and express” language evidencing the parties’ intent to provide for the vesting of lifetime benefits, there is a presumption against vested rights.

Kozloff Stoudt Attorneys, respected as one of most experienced labor and employment law firms in the Reading, PA region, provides general counsel to public and private sector clients in the areas of collective bargaining, grievance and interest arbitration, worker’s rights, employee benefits and municipal law. Employees and employers alike can seek dependable representation from the skilled legal team at Kozloff Stoudt.  Interested persons can learn more about the labor and employment litigation practice at Kozloff Stoudt by calling our Wyomissing Office at 610-370-6700 or by filling out the contact form on our website.

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