Negotiating for health insurance benefits in retirement

Negotiating for health insurance benefits in retirement
McDonald PBA v City of Geneva, Ct. of Appeals, 92 N.Y.2d 326

The Court of Appeals, in a ruling that could significantly affect a retiree’s participation in a municipality’s health insurance program, concluded that “there is no legal impediment to the municipality’s unilateral alteration of the past practice” regarding its providing health insurance benefits to its retirees and their dependents where there was neither a Taylor Law agreement nor some other contract or provision of law granting retirees a vested right to such a benefit.

In 1972, the City Council of the City of Geneva adopted a resolution, Resolution No. 33, authorizing the city to furnish health benefits to all retired city employees through the Genesee Valley Medical Health Care Plan. The city subsequently designated other providers but never amended Resolution 33. In 1996, the city advised its retirees that commencing January 1, 1997, their health insurance coverage would be changed to the Blue Choice Extended Plan from the Blue Cross-Blue Shield Preferred Blue Million.

According to the ruling, Blue Choice Extended Plan “indisputably affords inferior coverage to that provided in previous years.”

The Aeneas McDonald Police Benevolent Association, Inc. [PBA] sued the city, claiming that the change constituted a unilateral change of a “past practice.” The PBA contended that the city did not have any right to reduce the level of health insurance benefits that it had provided retired members of the Geneva Police Department since 1973. The PBA, however, conceded that none of the relevant collective bargaining agreements between the city and the PBA addressed the issue of health benefits for retirees.

A State Supreme Court justice granted the PBA’s petition and directed the city to continue to pay for the more liberal (and expensive) health plan. First, the Supreme Court held that the PBA has standing to bring the proceeding. Second, it ruled that the city’s 24-year practice of providing a certain level of benefits to its retirees pursuant to Resolution No. 33 created an enforceable contract right. The city appealed and a majority of an Appellate Division panel reversed and dismissed the petition. A three-judge majority determined that there was no vested contractual right at issue and that, because health benefits for retirees are a nonmandatory subject of negotiation, the city was free to alter the benefits unilaterally. Two dissenting judges agreed that Resolution 33 did not confer any binding entitlement in favor of retirees, but said that the city’s past practice constituted “a vested right that was enforceable by the retired police officers.”

On appeal, the Court of Appeals -- New York State’s highest court -- made two significant determinations:

1. The PBA met the “three part test” for establishing associational or organizational standing and thus could sue the city. This test requires that (a) that one or more of the organization’s members has standing to sue; (b) that the interests advanced satisfy the court that organization is an appropriate representative of those interests; and (c) that the participation of the individual members is not required to assert this claim or to afford the petitioner complete relief.

2. In the absence of a Taylor Law contract providing otherwise, a municipality’s past practice does not demonstrate any right to compel the municipality to continue providing the same level of health benefits to its retirees as it has in the past.

The Court of Appeals pointed out that under the Taylor Law [Sections 200-214, Civil Service Law] a public employer is statutorily obligated to negotiate in good faith with the bargaining representative of its current employees regarding the “terms and conditions of employment.” As health benefits for current employees can be a form of compensation, and thus a term of employment, that is a mandatory subject of negotiation.

The employer also would have a duty to negotiate with the bargaining representative of current employees regarding any change in a past practice affecting their own retirement health benefits.

The Court of Appeals rejected the PBA’s contention that a past practice concerning retirement health benefits that was in place when an individual retired prevents the city from unilaterally reducing those benefits for such person after cessation of public service. While it is true that a mandatory subject of negotiation gives rise to a statutory bargaining right on behalf of active employees in the negotiating unit, PBA’s retired members, upon whose behalf this proceeding was brought, cannot claim such a right “because a public employer’s statutory duty to bargain does not extend to retirees.”

As to PBA’s reliance on Resolution No. 33 as evidence that a negotiated labor agreement pertaining to these health benefits was reached, the Court of Appeals said that a municipal resolution is, in general, a unilateral action that is temporary in nature and, thus, it does not create any vested contractual rights. Here the court concluded that there was no contractual or legal bar to Geneva’s unilateral alteration of the health benefits that it provides to PBA’s retiree members and sustained the Appellate Division’s determination.

In contrast, in two cases involving City of Schenectady retired police and firefighters, a state Supreme Court justice ruled that health insurance benefits and employer contributions for police and fire retirees were protected by the terms of collective bargaining agreements negotiated many years prior to their retirement and could not be unilaterally changed by the City. According to that ruling, the language providing such a benefit had been continued in the successor agreements and thus protected all those who had retired while its provisions continued in effect.

The question of negotiating “health insurance benefits for retirees,” was addressed by PERB in City of Cohoes and Cohoes PBA. The case concerned the Cohoes PBA’s demand that the City of Cohoes pay the entire cost of health insurance premiums for unit members who retire after the effective date of the new agreement. Departing from its ruling in the Lynbrook case [Lynbrook v PERB, 12 PERB 7021] PERB decided that the Cohoes PBA’s demand was a mandatory subject of negotiations under the Taylor Law.

PERB, however, cautioned that, in its view, the provisions of such an agreement would only apply to person retiring during the life of the agreement. It expressed its doubt as to an employee organization’s authority to negotiate on behalf of individuals already retired. Such persons are not covered by the Taylor Law as they are no longer “employees.”

The full text of the decision is posted at:

http://nypublicpersonnellawarchives.blogspot.com/2008/01/health-insurance-benefits-in-retirement.html