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February 13, 2019

Reimbursement of retiree Medicare premiums found to be a form of deferred compensation may not be unilaterally discontinued by the employer

Reimbursement of  retiree Medicare premiums found to be a form of deferred compensation may not be unilaterally discontinued by the employer
Holloway v City of Albany, 2019 NY Slip Op 00940, Appellate Division, Third Department

In 2012 the Firefighters' Union [Union] filed a contract grievance and demanded arbitration when the City of Albany [Albany] said that it was ending its longstanding practice of reimbursing retired firefighters for their Medicare Part B premiums with respect to those who enrolled in the program on or after January 1, 2010.  The Union alleged that Albany's action violated §27.1 of the Collective Bargaining Agreement [CBA].* 

An arbitrator ruled that the Medicare Part B premium reimbursement was a component of "the existing health insurance plan" and that it could not be ended absent compliance with the provisions set out in §27.1 of the CBA. Subsequently the same arbitrator conducted an expedited proceedings to determine whether a health insurance plan without the reimbursement of Medicare Part B premiums provided coverage "substantially equivalent" to one with such reimbursements. The arbitrator decided that it did not and directed Albany to make whole "all individuals affected by [the reimbursement's] elimination." The arbitrator's awards were confirmed in an action taken pursuant to CPLR Article 75.

However, the Union determined that firefighters either enrolled in Medicare Part B after January 1, 2010 or will be doing so and, notwithstanding the 2012 arbitration award, had not been and would not be reimbursed by the City for their Medicare Part B premiums. Accordingly, in 2015 the Union initiated the instant action contending that Albany [1] had breached whichever CBA was in effect at each such firefighter's retirement and [2] was collaterally estopped** by the 2012 arbitration award from arguing to the contrary.

Supreme Court, however, determined that the Doctrine of Collateral Estoppel did not apply, found ambiguities in the language of §27.1 of the CBA and denied the Union's motion for summary judgment. The Union appealed. 

Acknowledging that §27.1 of the CBA, as written, is ambiguous, the Union argued that the proceedings culminating in the 2012 arbitration award resolved, with preclusive effect, that ambiguity in its favor. The Appellate Division agreed, explaining that arbitration awards are entitled to collateral estoppel effect and, citing Guard-Life Corp. v Parker Hardware Mfg. Corp., 50 NY2d 183, said such an award "will bar a party from relitigating a material issue or claim resolved in the arbitration proceeding after a full and fair opportunity to litigate."

Observing that it was undisputed that the arbitration proceeding afforded Albany  a "full and fair opportunity to litigate the issues therein," the Appellate Division said that the only question is whether the firefighters in this action, as the parties seeking to invoke collateral estoppel, satisfied their burden of showing the identity of the issues  "between those resolved in the arbitration awards and those in play here."

In the 2010 arbitration award, said the court, the arbitrator observed that Albany had reimbursed retired firefighters for their Medicare Part B premiums since the 1960's and did so for decades after it was no longer required, leading her to conclude that the reimbursement constituted part of the "existing health insurance plan" that could not be discontinued absent compliance with the provision set out in §27.1 of the CBA.

Albany had also contended that §27.1 had no applicability because retired firefighters were not "members of the bargaining unit" protected by that contract provision. The arbitrator also rejected this argument, holding that the reimbursement was a form of deferred compensation and was one of the health insurance benefits afforded to current employees.  In the words of the Appellate Division, although retirees are no longer part of the collective bargaining unit upon their retirement "the arbitrator determined that §27.1 applied because the reimbursement entitlement was earned by the retirees while they were working."

Noting that the 2010 and 2012 arbitration awards were never vacated and are binding and the firefighters  retired during the period that the reimbursement was provided to retirees under CBAs containing §27.1, the Appellate Division held that Albany "is obligated to reimburse retired firefighters for these payments under the CBA"

This, said the Appellate Division, Justice Mulvey dissenting, "is dispositive of the claims raised here" and thus the firefighters have met their burden of showing identity of issue, and their motion for summary judgment should have been granted by Supreme Court.

* §27.1 of the collective bargaining agreements at issue required the City to "present proposals to the [firefighters'] [u]nion for discussion and possible agreement" if it "wishe[d] to change the existing health insurance plan." In the absence of agreement, an arbitrator would be tasked with determining "whether the new . . . proposal grants substantially equivalent coverage to members of the bargaining unit" so as to be permissible.

** The Doctrine of Collateral Estoppel bars an issue that has already been litigated by the  parties from being later relitgated by those same parties..

The decision is posted on the Internet at:

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