Last week the U.S. Supreme Court reversed and remanded a Sixth Circuit’s long held principal that ruled a lifetime vesting of a benefit could be presumed using a “Yard-Man” inference. What is the Yard-Man inference? It is a legal inference stating that because the collective bargaining agreement (CBA) in question did not specifically address the duration of retiree benefits, it can be inferred that the CBA was meant to bestow lifetime vesting of the benefit and cannot be changed.

In the case of CNH Industrial, N.V. v. Reese (2/20/2018), SCOTUS held that a labor “contract is not ambiguous unless after applying the established rules of interpretation, it remains reasonably susceptible to at least two reasonable but conflicting meanings.” In the case at hand, retirees of the company and CNH argued over whether their 1998 CBA allowed for vesting of benefits upon its expiration that occurred in May of 2004. Specifically, union members did not want to begin contributing to the cost of health insurance. The employer’s argument for implementation of this new retiree health insurance cost rested upon the assertion that a CBA that does not specifically address vesting the benefits, and therefore, does not infer vesting of benefits beyond the duration of the contract.

The Sixth Circuit Court of Appeals that covers Michigan, Kentucky, Tennessee, and Ohio affirmed a lower court’s decision holding that the vesting of the retiree’s benefits after contract termination did not address vesting.  Therefore, the benefits should continue after the contract terminated. The Sixth Circuit continued to rely upon application of its Yard-Man rule. The Sixth Circuit is the only federal appeals court to use this legal principal upholding continuation of collective bargaining unit benefits outside of the CBA. SCOTUS stated, “hold on” Sixth Circuit, Courts cannot create a reasonable interpretation of vesting based on the silence to this term in the contract. “Had the parties meant to vest health care for life, they could easily have said so in the text.”

Since the CBA expired, the retiree health care benefits expired with it. The appropriate principal to apply SCOTUS stated, is ordinary contract principals, and if a different term is not stated in the contract, the CBA’s termination date applied to all terms within the contract, including retiree health care benefits.

Source:  Sixth Circuit can’t create ambiguity in CBA to find vested lifetime healthcare benefits, High Court says — U.S. SUPREME COURT DOCKE, (Feb. 23, 2018)