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August 20, 2010

Retiree rights under an expired collective bargaining agreement

Retiree rights under an expired collective bargaining agreement
Myers v City of Schenectady, 244 A.D.2d 845, Motion for leave to appeal denied, 91 N.Y.2d 812

In Myers the Appellate Division ruled that under certain circumstances retirees may be entitled to benefits flowing from collective bargaining agreements that have expired.

The case arose after the City of Schenectady decided to change its reimbursement of Medicare premiums policy. For many years the city had encouraged its retirees to enroll in Medicare as their primary health insurance carrier upon attaining age 65. Part B of Medicare required enrollees to pay a premium for coverage.

The city promised in collective bargaining agreements to reimburse the retirees the full cost of any Medicare premium. If a retiree declined to enroll in Medicare, the city would provide him or her with “the same fully paid health insurance coverage as it provided its eligible employees.”

In March 1994 the city announced that it would only pay 50 percent of the cost of Medicare Part B to those who had enrolled in Medicare. Then the city advised retirees that effective June 1994 it would cease all reimbursements for Medicare.

A number of retirees sued, contending that they had a vested contract benefit to “fully paid health insurance” and the City could not unilaterally discontinue its reimbursement of their Medicare premiums. They contended that under the terms of the several collective bargaining agreements in effect when they retired, they were entitled to “the same fully paid Health Insurance coverage” as was available to “all eligible employees.”

The Appellate Division sustained a lower court’s ruling that the city had a contractual obligation to provide the retirees with fully paid health insurance, rejecting Schenectady’s argument that “the agreements themselves had very clear durational limits.”

The court gave considerable weight to “past practice” in determining the rights of individuals claiming benefits or rights flowing from an expired agreement. The city had continued to pay benefits under expired agreements for 19 years, the court noted.

This made it difficult for the city to argue it only intended to give retirees the Medicare benefit for the duration of the contract. “[T]here is no surer way to find out what parties meant than to see what they have done,” the court said.

Schenectady’s “own 19-year practice of continuing to provide fully paid health insurance coverage to [its retirees], even after the expiration of the various collective bargaining agreements ... [constitutes] very substantial evidence that the provisions [of the expired agreements] in question were intended to provide benefits to retirees for the entire period of their retirement,” the court said.

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