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“Lifetime” Retiree Health Benefits Ended When CBA Expired

On Behalf of | Dec 14, 2017 |

The Sixth Circuit Court of Appeals, in Watkins vs. Honeywell International Inc., determined that an employer’s promise to provide healthcare benefits for its retirees expired when the collective bargaining agreement (“CBA”) containing the commitment expired. In particular, the court found that the CBA’s general-duration clause applied to the employer’s promise to provide retiree healthcare benefits.

Facts. The employer operated a manufacturing facility at which many union employees, including the plaintiffs, spent their entire careers. The plaintiffs retired at a time when the CBA between the employer and the plaintiffs’ union obligated the employer to provide retiree healthcare benefits. According to the plaintiffs, when they retired, the employer sent them a letter to explain that their “healthcare will continue during your retirement” and is “for your lifetime.” However, the final CBA provided that the duration of the employer’s retiree healthcare program was limited to the to the end of the agreement.

When the CBA expired in 2011, the employer did not renew the agreement, and shortly thereafter sold the facility at which the plaintiffs had worked before retiring. Nonetheless, the employer continued to provide retiree healthcare benefits for the plaintiffs until late 2015. After the employer stopped paying for its retirees’ healthcare, the plaintiffs filed suit seeking to require the employer to continue to pay for their healthcare.

District Court. At trial, the plaintiffs claimed that the employer had breached the CBA when it stopped paying for their healthcare. The employer responded by asking the court to dismiss the claim on the basis that the CBA clearly provided that its retiree health program would end when the agreement expired. After reviewing the CBA, the district court agreed with the employer, finding that the CBA’s general-duration clause applied to the obligation to provide retiree healthcare benefits, and dismissed the plaintiffs’ claim. In turn, the plaintiffs’ appealed to the Sixth Circuit.

Sixth Circuit. Upon reviewing the matter, the Sixth Circuit explained that it would not consider evidence outside of the collective bargaining agreement unless its terms were ambiguous. The court noted that the Supreme Court (in M & G Polymers USA, LLC v. Tackett) had previously held that CBAs are contracts that should be interpreted in accordance with “ordinary principles of contract law”, so long as such an interpretation is “not inconsistent with federal labor policy.”

In the instant case, the Sixth Circuit determined that the CBA’s general-duration clause unambiguously applied to its retiree healthcare program. Unlike previous cases that the court had reviewed where the parties had carved out certain benefits from being subject to the CBAs’ general-duration clauses, the CBA at issue in Watkins expressly stated that its general-duration clause applied to the employer’s obligation to provide retiree health benefits. In particular, the court found that the general-duration clause limited the employer’s promise to pay retiree health benefits “for the duration of this Agreement.”  Accordingly, the Sixth Circuit refused to consider the plaintiffs’ extrinsic evidence and affirmed the lower court’s decision, finding that the employer’s obligation to pay retiree health benefits ended when the CBA expired.

Watkins v. Honeywell International Inc. can be accessed at: