March 28, 2023

Volume XIII, Number 87

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March 28, 2023

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March 27, 2023

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Sixth Circuit Issues Trilogy on Retiree Health Benefits

In three decisions issued on the same day, the Sixth Circuit held that Meritor retirees were not entitled to lifetime health benefits, while retirees at Kelsey-Hayes and CNH Industries were entitled to contractually vested health benefits. In the first case, a group of former Meritor employees filed suit after the company reduced their healthcare benefits. The CBAs provided that retiree healthcare coverage “shall be continued,” but also set forth a general durational clause terminating the CBAs after three years and provided that healthcare benefits would remain in effect until the termination of the CBAs. The CBAs also stated that pension benefits were vested and did not say anything similar for retiree health benefits. Taking into account all of these terms, the Sixth Circuit held that the CBAs were unambiguous and that retirees were guaranteed benefits for only the three-year term of the CBAs. Cole v. Meritor, Inc., No. 06-2224, 2017 WL 1404188 (6th Cir. 2017). 

However, in cases against Kelsey-Hayes Co. and CNH Industrial N.V., the Sixth Circuit ruled against the employers. The principal difference in UAW v. Kelsey-Hayes was that the CBA contained a general durational clause that required mutual action to terminate the agreement. The Court determined that there was ambiguity when applying the general durational clause and, after looking at extrinsic evidence, concluded that the CBA vested employees with lifetime healthcare benefits. UAW v. Kelsey-Hayes Co., No. 15-2285, 2017 WL 1404189 (6th Cir. 2017). Similarly, in CNH Industrial, the Sixth Circuit found the CBA to be ambiguous because it was silent on the duration of health care coverage and the general durational clause carved out other benefits. Furthermore, the Court observed that eligibility for healthcare benefits was tied to pension eligibility. After looking at extrinsic evidence, the Court determined that the parties intended for retiree healthcare benefits to vest. Reese v. CNH Indus. N.V., No. 15-2382, 2017 WL 1404390 (6th Cir. 2017).

© 2023 Proskauer Rose LLP. National Law Review, Volume VII, Number 122
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The complexity and heightened scrutiny surrounding executive compensation arrangements and employee benefits plans and their assets continue to grow. Proskauer’s Employee Benefits, Executive Compensation & ERISA Litigation Practice Center is at the forefront of addressing the unfolding legal and business developments affecting these arrangements and plans, and is formulating innovative, practical and proactive legal strategies.

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