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Q: Can a Corporation Legally Cut Health Benefits for Retired Union Members Without Negotiating?

A: Probably not, but....

If the question concerned union members currently on the corporation's payroll, the answer would be an unequivocal "no": Section 8(d) of the National Labor Relations Act requires private sector employers to bargain in good faith over the terms and conditions of employment. Healthcare benefits are clearly among the "mandatory" issues an employer is legally required to negotiate for current employees.

But there's the rub: since retirees are not current employees, their healthcare benefits may not be regarded as a mandatory subject of bargaining. The Supreme Court has in fact ruled that pension and healthcare benefits for retired workers are "permissive" rather than mandatory subjects of bargaining and employers are not legally required to negotiate benefit cuts.

It gets murky, though, because Section 301 of the National Labor Relations Act stipulates that the union and the employer can bring suit in federal court for violations of the collective bargaining agreement. Citing Section 301, some retirees from unionized companies have successfully sued their former employer on the grounds that unilateral changes in their benefits violated vested contract rights. Others have also brought successful suits under the Employee Retirement Security Act. (See Bruce Feldacker, Labor Guide to Labor Law, Fourth Edition, p. 209).

Professor Ellen Dannin of Wayne State University's Law School makes a strong case for the contractual rights of UAW-GM retirees threatened with cuts in their negotiated healthcare benefits:

" GM's hourly retirees are receiving these benefits because they already paid for them. They received less in pay or other benefits while they were employees— and current employees are receiving less— as a trade-off for health insurance as retirees. Had they known that GM would renege on them, they would have negotiated and received higher wages in the past. So GM paid lower wages and now wants to shirk when its time to pay."

GM can get away with this when it cuts healthcare benefits for its retired salaried workers because they have no collective bargaining agreement protecting their benefits. GM unilaterally gave its salaried retirees healthcare as a gift, and it can now unilaterally renege on that promise. But UAW retirees have more than a promise: they have a collective bargaining agreement.

If GM tries to violate that contract, it is likely that the law will favor the retired union members who bring suit— though federal judges appointed by pro-corporate presidents can interpret the law to suit their anti-labor bias. "The one thing anyone can predict accurately," as Professor Dannin says of the legal ambiguities in the case, "is that this litigation will be a lawyer's delight."

(See Professor Dannin's full review of the issues, Kick Retirees Off Their Health Plans? at Portside.)

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Home Programs & Classes for Individuals Labor Studies Major Educational Programs for Unions Joint Labor- Management Programs Consulting & Technical Assistance for Unions Research Tools & Information You Can Use About the Center Our staff Contact us Map of campus Wayne State University links	Your Employee Rights Click here for archived questions Q: Can a Corporation Legally Cut Health Benefits for Retired Union Members Without Negotiating? A: Probably not, but.... If the question concerned union members currently on the corporation's payroll, the answer would be an unequivocal "no": Section 8(d) of the National Labor Relations Act requires private sector employers to bargain in good faith over the terms and conditions of employment. Healthcare benefits are clearly among the "mandatory" issues an employer is legally required to negotiate for current employees. But there's the rub: since retirees are not current employees, their healthcare benefits may not be regarded as a mandatory subject of bargaining. The Supreme Court has in fact ruled that pension and healthcare benefits for retired workers are "permissive" rather than mandatory subjects of bargaining and employers are not legally required to negotiate benefit cuts. It gets murky, though, because Section 301 of the National Labor Relations Act stipulates that the union and the employer can bring suit in federal court for violations of the collective bargaining agreement. Citing Section 301, some retirees from unionized companies have successfully sued their former employer on the grounds that unilateral changes in their benefits violated vested contract rights. Others have also brought successful suits under the Employee Retirement Security Act. (See Bruce Feldacker, Labor Guide to Labor Law, Fourth Edition, p. 209). Professor Ellen Dannin of Wayne State University's Law School makes a strong case for the contractual rights of UAW-GM retirees threatened with cuts in their negotiated healthcare benefits: " GM's hourly retirees are receiving these benefits because they already paid for them. They received less in pay or other benefits while they were employees— and current employees are receiving less— as a trade-off for health insurance as retirees. Had they known that GM would renege on them, they would have negotiated and received higher wages in the past. So GM paid lower wages and now wants to shirk when its time to pay." GM can get away with this when it cuts healthcare benefits for its retired salaried workers because they have no collective bargaining agreement protecting their benefits. GM unilaterally gave its salaried retirees healthcare as a gift, and it can now unilaterally renege on that promise. But UAW retirees have more than a promise: they have a collective bargaining agreement. If GM tries to violate that contract, it is likely that the law will favor the retired union members who bring suit— though federal judges appointed by pro-corporate presidents can interpret the law to suit their anti-labor bias. "The one thing anyone can predict accurately," as Professor Dannin says of the legal ambiguities in the case, "is that this litigation will be a lawyer's delight." (See Professor Dannin's full review of the issues, Kick Retirees Off Their Health Plans? at Portside.)	Family & Medical Leave Act Workplace Health & Safety Employee Rights Employee Rights Q&A Researching Your Employer Guide to Union Member Surveys Collective Bargaining Article of the month feature Privatization Websites for Union Activism Helpful Labor-Related Web Sites Books, Manuals, & Videos Available from the Center American Rights@Work American Sociological Assoc. Labor Pages