Companies Sue Retirees to Avoid Honoring Retiree Health Care Obligations
A recent front page article in the Wall Street Journal (Wednesday, November 10 - registration required), reported recent attempts by companies to avoid their obligations to provide retiree health coverage. While this concept is nothing new, the article described new, unique and troubling lengths that companies will go to in order to avoid paying for retiree health benefits, seemingly leaving retirees in the dust.
The article describes employers, such as Rexam, Inc., which had previously agreed in labor contracts to provide retirees with lifetime health benefits. The company has taken the affirmative step of suing retirees in court to avoid continuing to provide benefits. By pre-emptively suing retirees, rather than cutting off benefits and waiting for retirees to sue, the company has the opportunity to choose a forum it believes is most favorable to it. They, and other employers, have alleged that "lifetime" benefits really doesn't mean the life of the employee. Instead, they assert, it means the life of the contract, which probably expired years ago. According to the article, retirees who have gone to the Department of Labor have found little help as the Department does not view them as their constituents. The unions' only recourse is to file suits in court on behalf of retirees, as they are prohibited from filing unfair labor practice charges and cannot strike on behalf of retirees. This leaves the retirees with canceled health benefits and a long wait on the court house steps for a remedy which may never come.
It seems that the Circuit courts are split on this issue often choosing one of two options - to favor the language in the collective bargaining agreement (and interpreting it to favor the employee), or to favor the language in the plan document which generally allows an employer to modify a plan under certain circumstances. Only time will tell what the outcome of all of this will be, but for many of these retirees, it may be too late by then. One can only imagine what present employees of these companies are thinking and the effect on morale.