Sixth Circuit Rejects Union Bid for Lifetime Retiree Benefits

CINCINNATI (CN) – Handing a loss to the United Auto Workers, the Sixth Circuit on Friday upheld a Michigan judge’s decision that over 4,700 retired Honeywell International employees are not entitled to lifetime health benefits from the company. 

The UAW claimed that employees of the technology and manufacturing conglomerate who retired before May 1, 2016, are eligible for “safety net” minimum payments for life, even after the 2018 expiration of the last collective bargaining agreement to include the employees’ longtime healthcare plan.

The Potter Stewart U.S. Courthouse in Cincinnati, home of the Sixth Circuit Court of Appeals. (AP Photo/Dan Sewell)

U.S. Circuit Judge John Nalbandian, a Donald Trump appointee, penned the Sixth Circuit’s opinion Friday agreeing with a Michigan federal judge’s decision to dismiss the union’s lawsuit, while reversing her finding that Honeywell was still obligated to pay benefits up to the expiration of each agreement. 

The ruling is the latest in a series of defeats for retirees relying on the security provided by agreements signed in the golden age of organized labor, starting in 2015 with the U.S. Supreme Court’s decision in M&G Polymers USA v. Tackett. In that case, the high court decided that presumptions that collective-bargaining agreements vested retiree benefits for life, known as Yard-man inferences, went against “ordinary principles of contract law.” 

“Since [Tackett], we have almost always concluded that a CBA with a general durational clause unambiguously does not vest healthcare benefits for retirees beyond the life of the agreement,” Nalbandian wrote for the majority of the three-judge panel.

He noted that two other cases in which the Sixth Circuit found that such contracts were ambiguous were overturned shortly thereafter by the Supreme Court. 

The UAW had argued that CBAs signed before 2003, when Honeywell began scaling back its payments on premiums for retirees, guaranteed full premium payment to preexisting retirees, and that those who retired between a 2003 agreement and the 2016 expiration of a 2011 agreement were entitled to partial payments.

But with no language specifically guaranteeing lifetime benefits, Nalbandian and Senior U.S. Circuit Judge Ronald Gilman, a Bill Clinton appointee, found that Tackett did not allow them to interpret the contract as the union suggested.

U.S. Circuit Judge Jane Stranch, a Barack Obama appointee, thought differently. She wrote a partial dissent finding that the retirees covered under agreements signed in 2003, 2007 and 2011 were guaranteed lifetime “floor-level” benefits, saying that her colleagues had been too extreme in their reaction to Tackett.

“In our eagerness to run far away from the Yard-man inferences that twice rankled the Supreme Court, we have forgotten what Tackett and Reese actually said,” she wrote, referring to another high court decision. “The court did not instruct our circuit to canvass CBAs in search of reasons to deny healthcare benefits to retirees, however divorced those reasons might be from ordinary principles of contract law.”

Ordinary contract law principles, Stranch continued, did not mean the Sixth Circuit should presume that a CBA does not extend health benefits. 

Bill Gould, a professor of law at Stanford University specializing in labor and employment law, said he found Stranch’s dissent much more compelling than the majority opinion, and that the Sixth Circuit had created a test for Tackett compliance from whole cloth.

“I think her opinion is a brilliant analysis of ordinary contract principles of law, and rejects this newfound test that the court is using to deny workers their health care and pension benefits,” Gould said. “The Sixth Circuit has made this test up itself. They are gun shy, because they’ve been reversed so frequently by the Supreme Court.”

He warned that the case could spell danger for many more retirees relying on similar CBAs. 

“More companies want to get out from under what they perceive to be expensive fringe benefit obligations which go beyond the contracts and go beyond the duration of the collective bargaining agreement itself. And they’re going to be encouraged by this decision today to shed their obligations,” he said. “I would say that hundreds of thousands of workers are covered by it, at a minimum. The UAW has a lot of these contracts, as do other industrial unions.” 

Attorneys and spokespeople for both the UAW did not return requests for comment Friday afternoon. A spokesman for Honeywell declined to comment. 

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