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Friday, December 13, 2013

Retirees had vested health insurance rights that could not be abrogated by successor collective bargaining agreement

Retirees had vested health insurance rights that could not be abrogated by successor collective bargaining agreement
Kolbe v Tibbetts, 22 NY3d 344

Four former non-instructional employees of the Newfane Central School District retired between 2003 and 2008. One of the employees retired while the 1999-2003 collective bargaining agreement [CBA] was in effect; the other three retired under the 2003-2007 CBA.* In January 2010, well after the four employees had retired, the CSEA and the District executed a successor CBA, which was retroactively effective to 2007 and set to expire in 2012. 

By letters dated December 30, 2009, the District informed the four retired employees that their co-pays would now be governed by the three-tier system under the terms of the 2007-2012 CBA, resulting in an increase from their previous co-pay charges.The retirees sued, alleging breach of contract in that by increasing their co-pays, Newfane had violated the terms of the CBAs in effect when they had retired.

In the words of the Court of Appeals, “This case calls on us to decide whether certain collective bargaining agreements conferred upon plaintiff-retirees a vested right to the same health insurance coverage they had when they retired and, if so, whether unilateral modifications to that coverage are nonetheless permissible under either the contract terms or the New York Insurance Moratorium Law.”

The court indicated that "As a general rule, contractual obligations do not survive beyond the termination of a collective bargaining agreement. However, '[r]ights which accrued or vested under the agreement will, as a general rule, survive termination of the agreement' , and we must look to well established principles of contract interpretation to determine whether the parties intended that the contract give rise to a vested right. '[A] written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms'. The language upon which plaintiffs base their claim reads as follows: '[t]he coverage provided shall be the coverage which is in effect for the unit at such time as the employee retires.' {citations omitted]" 

Essentially the court held that:

1. The collective bargaining agreements conferred upon plaintiff-retirees a vested right to the same health insurance coverage they had when they retired

2. Unilateral modifications to that coverage are not permissible under either the contract terms or the New York Insurance Moratorium Law.

3. Newfane's interpretation of the New York Insurance Moratorium Law relies on the erroneous conclusion that the Legislature's silence regarding contracted-for health coverage should be read as an intention to abrogate contractual rights.

4. Unions and employers are free to negotiate the terms of such provisions as they see fit and the terms of active employees' health insurance coverage during retirement are properly subjects for collective bargaining.*

The Court of Appeals' observed that "the Insurance Moratorium Law's [relied on by Newfane] primary purpose was to prevent school districts from eliminating or reducing retiree health insurance benefits that were voluntarily conferred as a matter of school district policy, not rights negotiated in the collective bargaining context.”

The court then noted that “The 1994 final report of the Temporary Task Force on Health Insurance for Retired Educational Employees, which originally recommended the legislation, proposed amending the then-temporary law to apply to contractually vested rights. Significantly, said the Court of Appeals, “the Legislature never adopted this proposal ….”

The court then remitted the case to Supreme Court, explaining that "Because an issue of fact remains as to whether the parties intended for the right to the "same coverage" to preclude any modifications to the benefits or their attendant costs, including prescription co-pays, it is necessary to remit the case to Supreme Court for a hearing on this issue" 

* The Court of Appeals, in a Footnote, stated “Despite the fact that the successor CBA was retroactively effective to 2007, it is undisputed that even those plaintiffs who retired in 2007 and 2008 effectively retired under the 2003-2007 CBA, since the subsequent CBA was not executed until 2010. This stipulation accords with the reality that these plaintiffs were not represented by the CSEA in the portion of the negotiations that took place after their retirement, and that the bargains struck in the 2007-2012 agreement would thus not be enforceable by them.”

** This implies that unions and employers are not free to negotiate the terms of such provisions with respect of the health insurance coverage then available to those already retired and such changes and modifications are not properly subjects for collective bargaining.

The decision is posted on the Internet at:

Handbooks focusing on State and Municipal Public Personnel Law continue to be available for purchase via the links provided below:

The Discipline Book at

A Reasonable Penalty Under The Circumstances at

The Disability Benefits E-book: at

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