Reply #51: Companies Sue Union Retirees To Cut Promised Health Benefits (WSJ) [View All]

[54anickel]

Saw the title at Prudent Bear, so went digging for the article. Hellaburnin did this to Dresser retirees. The F-i-L recently got a letter from them about it. Her retired over 20 years ago from Dresser, long before Cheney bought and sold them.

Summary from the abstract:
Creative Strategies

Companies that cut retiree health benefits promised in writing may use one
or more arguments or tactics:

-- Escape Clause: Insert sentence in benefit plan saying company "reserves
the right to change benefits.

-- Life Line: Argue that "lifetime coverage refers to life of the
contract, not lives of retirees.

-- Fine Print: Say that retirees signing health-plan enrollment forms
waived prior agreements.

-- Trip to Court: Sue retirees, ask court to declare company has right to
cut benefits.

snip>

When a deputy sheriff came to his door with a court summons, George Kneifel, a retiree in Union Mills, Ind., was mystified. His former employer was suing him.

The employer, beverage-can maker Rexam Inc., had agreed in labor contracts to provide retirees with health-care coverage. But now the company was asking a federal judge to rule that it could reduce or eliminate the benefit.

Many companies have already cut back company-paid health-care coverage for retirees from their salaried staffs. But until recently, employers generally were barred from touching unionized retirees' benefits because they are spelled out in labor contracts. Now, some are taking aggressive steps to pare those benefits as well, including going to court.

In the past two years, employers have sued union retirees across the country. In the suits, they ask judges to rule that no matter what labor contracts say, they have a right to change the benefits. Some companies also argue that contract references to "lifetime" coverage don't mean the lifetime of the retirees, but the life of the labor contract. Since the contracts expired many years ago, the promises, they say, have expired too.

The companies taking such steps remain a minority. Most big employers continue to provide the retiree health coverage spelled out in labor contracts. But the number of employers using the courts to attempt to reduce benefits for union retirees is rising, and some have been successful. "There's absolutely no doubt that there's been an increasing number of cases over the past three years," says Richard Brean, associate general counsel of the United Steelworkers of America.

snip>

Employers that want to cut union retirees' health coverage or make retirees pay a larger portion could just impose changes and wait to be sued. But by suing first, they stand a chance of choosing the jurisdiction. This is important, because federal circuits' appellate courts tend to take differing positions in these disputes. Indeed, the unsettled nature of the law on these issues -- with employers' arguments sometimes succeeding and sometimes not -- may be a factor prompting some companies to have a go at gaining the legal right to change benefits.