In 2005, Volvo Group North America LLC negotiated a specific provision relating to the retiree health benefits in a collective bargaining agreement. The negotiated agreement provided that Volvo would “continue coverage…. for the duration of this agreement,” which ran from 2005 to 2008. The collective bargaining agreement also had provisions which limited Volvo’s financial obligation to provide retiree medical insurance. The provision dealt with funding of a Voluntary Employee Benefit Association (VEBA) trust and a mechanism for Volvo and the Union to negotiate how to reduce health care costs if the VEBA became depleted. In 2008, when the collective bargaining agreement expired, Volvo announced that it would modify the retiree health benefits provided to those individuals who retired under that agreement. The employees sued, arguing that it was improper for Volvo to limit the retiree health coverage for the duration of the agreement. The Court of Appeals for the Fourth Circuit affirmed a lower federal court decision, ruling that Volvo was not permitted to make the unilateral changes. The Fourth Circuit found that while there was a durational clause, the provisions regarding funding and a mechanism for negotiation of future health care reductions clearly indicated that those procedures needed to be followed even after the expiration of the term of the agreement, and that it was improper for Volvo to unilaterally terminate coverage at the end of term of the agreement.
This case illustrates how important it is to review the total terms negotiated in a collective bargaining agreement. While the durational clause will be upheld in many situations, the courts will look at the complete agreement and may find that other terms of the collective bargaining agreement indicate that coverage was to be provided beyond the duration of the collective bargaining agreement. (Quesenberry v. Volvo Trucks North America Retiree Healthcare Benefit Plan, 4th Cir. 2011)