The Sixth Circuit has dealt with a slew of cases in recent years related to an employer’s ability to alter or discontinue retiree benefits available through collective bargaining agreements (“CBAs”). Historically, the Sixth Circuit limited this ability, interpreting employee retirement benefits as “vested” – meaning largely unchangeable and permanent. The court’s practice was enshrined in a case called Yard‑Man, and the “Yard-Man inference” meant that, when determining whether a retiree benefit within a CBA was vested, courts could not use the general end-date of the CBA to decide whether the benefit was vested. In other words, if an employer wanted to be able to discontinue or alter a benefit when the CBA ended, it needed to explicitly provide a clause in the CBA that described when the benefit vested.
In its 2015 decision in Tackett, the Supreme Court of the United States held that the Yard‑Man inference was bad law moving forward because it violated contract principles. Given that Tackett upended longstanding Sixth Circuit precedent, the opinion sent the Sixth Circuit into a tailspin. At first, the Sixth Circuit appeared to follow the Supreme Court’s directive without much of a problem. In Gallo, it found that the general end‑date of the CBA controlled whether retiree benefits were vested or not. Basically, the Gallo court said that if a CBA does not contain a specific timeline for retiree benefits, then those benefits end when the CBA itself ends.
Gallo should have settled the law, but on April 20, 2017, the Sixth Circuit again muddied the waters with the release of three opinions: Cole, Kelsey‑Hayes, and Reese. While Cole followed Gallo’s rationale, the other two cases featured Sixth Circuit panels that found reasons to decide the general end‑date of the CBA didn’t foreclose the vesting of retiree benefits. The Supreme Court, again stepping in to correct the Sixth Circuit, reversed Reese and sent Kelsey‑Hayes back down to be revisited in light of Reese’s reversal. In March 2018, the Sixth Circuit issued an opinion in Cooper, which followed the rationale of Gallo and Cole. Thus, the message is clear: Tackett, Gallo, Cole, and Cooper are the prevailing law; Yard‑Man, Kelsey‑Hayes, and Reese have no effect in the future.
If you’re a public‑school employee or administrator, you may be asking yourself why this matters to you. That’s a valid concern – to some extent, these decisions have limited influence in Michigan’s public‑school arena, given that retiree benefits for public employees in Michigan are largely subject to statute rather than CBAs. But, in some cases, a school may provide staff – union or non‑union – with additional benefits beyond those prescribed by the Legislature. In those situations, these cases might impact those benefits, including when, how, and to what extent they may be altered.
We will continue to watch the Sixth Circuit’s rulings in this area, and we encourage our readers to stay tuned.