Moen terminated the lifetime health care benefits of workers who retired from its Elyria, Ohio plant, along with the benefits for their spouses and eligible dependents. The U.S. District Court for the Northern District of Ohio called this case an “easy” decision and found that the parties intended for the retirees’ benefits to be vested for life as demonstrated by: 1) the terms of the collective bargaining agreement, 2) statements made during the bargaining process, and 3) the company’s “long history of not changing retiree health insurance benefits even while reducing current employee benefits.”
The court looked to Steelworkers v. Kelsey-Hayes Co., a Sixth Circuit (Ohio) case for guidance. In Kelsey-Hayes, the Sixth Circuit rebuffed a company’s attempt to replace a fully-funded retiree health plan with individual health reimbursement accounts based in part on CBA language providing that the company “shall contribute” to the cost of retiree health care, which “shall be continued” in accordance with the CBA. The Moen CBA and the plant shutdown agreement used similar language, referring to the “continuance” of benefits and benefits that “will” be provided. Furthermore, both companies left past retiree health benefits unaltered even while decreasing the health benefits of future retirees through the bargaining process.
Retiree health care costs are a significant expense for companies and an easy target to modify (or eliminate) to save money or meet budget projections. However, courts do not look favorably on companies that change retiree benefits and seem to bend over backwards to maintain the status quo. Companies looking to modify retiree benefits should tread carefully and seek competent legal advice before doing so.