Supreme Court Update

SHRM Amicus Brief Arguments Echoed in Supreme Court Benefits Decision

Jan 30, 2015

On January 26, the U.S. Supreme Court issued a 9-0 decision in M&G Polymers USA, LLC v. Tackett; a case SHRM filed an amicus brief in support of the petitioners. In this case, M&G Polymers Inc. had entered into a collective bargaining agreement with employees in 2000. The contract was silent on whether lifetime, contribution-free benefits would extend beyond the term of the collective bargaining agreement itself, leading to a dispute with company retirees.

Because the contract was silent on the matter, the 6th U.S. Circuit Court of Appeals was faced with the question of how to decide whether health care benefits had “vested,” requiring the employer to pay them for the life of the retired employee. In its decision, the 6th Circuit relied on a line of cases known as “Yard-Man” to interpret ambiguous contract language in favor of employees—in this case, in favor of lifetime vesting of contribution-free benefits.

The Supreme Court’s opinion, however, aligned with SHRM’s amicus brief arguments and ruled that the 6th Circuit’s decision rested on principles that are incompatible with ordinary principles of contract law. The Supreme Court therefore remanded the case.

Importantly, the Court’s decision ends the 6th Circuit’s presumption in favor of vesting: “The inferences applied in Yard-Man and its progeny do not rep¬resent ordinary principles of contract law. Yard-Man distorts the at¬tempt to ascertain the intention of the parties by placing a thumb on the scale in favor of vested retiree benefits in all collective-bargaining agreements.”

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