In an opinion released yesterday, the Supreme Court reaffirmed that collective bargaining agreements (CBAs) must be interpreted according to "ordinary principles of contract law." CNH Industrial N.V. v. Reese, No. 17-515, 2018 WL 942419 (U.S. Feb. 20, 2018). In so ruling, the Court again rejected the Sixth Circuit's inference from silence that CBAs vested retiree benefits for life.
Three years ago, the Supreme Court decided M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 926 (2015). In that decision, the Court unanimously held that CBAs must be interpreted according to ordinary principles of contract law, and the Court rejected the Sixth Circuit's so-called "Yard-Man" inference that if a CBA did not specify that retiree medical and other welfare benefits had a limited duration, the benefits were presumed to be vested. The Court held that the Yard-Man inference was inconsistent with the application of ordinary principles of contract law and that the inference improperly placed a thumb on the scale in favor of vested retiree rights.
The present dispute arose between retirees and their former employer about whether an expired CBA created a vested right to lifetime health care benefits. In 1998, the Company agreed in a CBA to provide health care benefits to certain "[e]mployees who retire under the . . . Pension Plan." Under the CBA, " [a]ll other coverages," such as life insurance, ceased upon retirement. The health care benefit was "made part of" the CBA and "r[an] concurrently" with it. The CBA contained a general durational clause stating that it would terminate in May 2004. The CBA also stated that it "dispose[d] of any and all bargaining issues, whether or not presented during negotiations."