June 11, 2019

Collective Bargaining and Employment Benefits

Plaintiffs in the recent case of Kendzierski v. Macomb County believed they were entitled to a guaranteed level of health care benefits for life following retirement. They believed the terms of a collective bargaining agreement (“CBA”) reached with Macomb County said so. In an opinion applicable to public employees in Michigan, the Michigan Supreme Court did not agree. It said that because there was no specific language in the agreement stating that the health care benefits payable at age 65 were meant to be paid after the CBA expired, the benefits expired with the CBA. Kendzierski technically applies only to employees of governmental employers in Michigan but is consistent with federal law applicable to private employers.

A guiding principal for interpreting contracts in Michigan is that, unless a contract is ambiguous, a court cannot consider evidence or documents outside of the language of the contract.

The Michigan Supreme Court determined that the lower courts had erred in considering anything other than the plain language of the CBA, such as statements by the County that money was set aside to fund lifetime benefits. The Court reversed the lower courts and remanded the matter for entry of an order stating that, based on the terms of the CBA alone, the county did NOT need to provide lifetime health care benefits to the retirees.

There is little doubt that the class of retirees bringing the action in Kendzierski feel an injustice has occurred. Review of the extrinsic evidence suggests that all parties believed the CBAs required the county to provide lifetime benefits. However, as the Court points out “If the parties meant to vest healthcare benefits for life, they easily could have said so in the CBA… but they did not.”

The lesson from Kendzierski is that parties to a contract need to make certain that substantive terms are explicit and that the contract cannot be read in more than one way. The devil is in the details, or the absence of details, and can mean the difference between a lifetime of benefits or something much, much less.

For more information on the impact of this ruling, contact Liam K. Healy at (313) 961-0200 or lhealy@kerr-russell.com.