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Review contract language before changing benefits

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in Human Resources

If your organization has a collective-bargaining agreement with a union, you must make sure you check with counsel before you make any changes to benefits. In some cases, promises made in past contracts—such as a promise to provide retiree health benefits—may be a binding, vested promise that cannot be undone, at least for those who have already qualified.

Recent case: Rockwell International announced in 2005 that, with the expiration of the union contract then in place, it would stop providing retiree health benefits. The benefits had been part of previous contracts for many years.

Retirees sued, alleging that the earlier contract provisions were permanent and amounted to vested benefits similar to a pension. The 6th Circuit Court of Appeals looked at the language and agreed. It said the company had to continue the health benefits. (Cole, et al., v. Rockwell International, No. 06-2224, 6th Cir., 2008)

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