Courts weighing whether union retirees have vested lifetime health-care benefits should apply ordinary contract principles, rather than special inferences or presumptions, the U.S. Supreme Court ruled.

The unanimous January 26 opinion means that employers may now have more freedom to alter, reduce, or eliminate the health care benefits they provide to retired union workers. The Court invalidated what has become known as the Yard-Man inference, a judicial inference applied by the retiree-friendly U.S. Court of Appeals for the Sixth Circuit to find that retiree health-care benefits are vested for life in the absence of specific language to the contrary in a plan document or collective bargaining agreement.

“This came down exactly as expected,” Steven W. Suflas, managing partner of Ballard Spahr LLP's New Jersey office, told Bloomberg BNA on Jan. 26. “When you looked at oral arguments, it was pretty clear that this was where it was going.”

Mr. Suflas said the opinion “makes very clear that union collective bargaining agreements are supposed to be interpreted according to ordinary contract principles. That's a broad proposition which could have wider connotations and bring some additional clarity.”

In particular, Mr. Suflas said he could envision this ruling being of particular importance to the National Labor Relations Board, which he said is “sometimes very quick to craft presumptions as to what collective bargaining agreements mean.”

Related Practices

Labor and Employment