In its 1998 collective-bargaining agreement, Caterpillar promised to provide retiree health benefits to its workers at no cost to them.
By 2005, Caterpillar recognized it could no longer provide the health benefits without the retirees chipping in. When labor and sat down at the table to hammer out a new agreement, retiree health costs was one of the sticking points.
In the meantime, some Caterpillar workers continued to retire believing they would receive free health care because that’s what the old collective-bargaining agreement called for.
But the company said otherwise. It maintained the health care benefits vested upon retirement, not when the worker became eligible for retirement.
Caterpillar maintained that, since the contract that determined when the benefits vested was no longer in effect, workers who retired after the 1998 agreement ended would have to pay for their health benefits.
The union filed suit claiming the company kept workers from retiring by promising them free health care.
A federal district court agreed with the union. Caterpillar appealed, and the 6th Circuit Court of Appeals, which includes Michigan, overturned the decision. The Appeals Court ruled that retirement and eligibility for retirement are two distinct points in time, which were clearly delineated in the earlier union contract, and later ones as well.
As a result, workers who retired between agreements must pay for their health care.