Under Contract Law, Court Says Retirees Have No Vested Right to Lifetime Benefits
The 6th U.S. Circuit Court of Appeals has issued a sweeping decision that confirms that “ordinary principles of contract law” rarely will require a company to freeze outdated lifetime health coverage benefits in place, write Nancy G. Ross and Brian D. Netter, partners in Mayer Brown.
“Until recently, courts had a practice of interpreting benefits arrangements in collective-bargaining agreements (‘CBAs’) to ensure lifetime coverage—often defying the company’s expectations in the process,” they write. “But the legal environment has changed. Now is the time for companies to press ahead in reducing legacy costs on their balance sheets.”
They discuss the case of Gallo v. Moen Inc., in which a class of retirees who had worked at a shuttered Ohio factory alleged that they had been promised lifetime health benefits.
