Supreme Court: Union contracts governed by contract law principles

By Linda H. Evans,
Senior Associate.


Earlier this week, the U.S. Supreme Court ruled that vague provisions in union contracts should not automatically be interpreted to favor workers. A chemical plant in W. Virginia had a contract with the steelworkers from the 1990’s which provided lifetime health care benefits to retirees at no cost. In 2006, the company tried to make retirees contribute to health care costs, but the retirees filed suit. The 6th Circuit Court of Appeals agreed with the retirees and held the company had reneged on the contract and the union would not have agreed to the contract if the company could have unilaterally changed the level of contribution.


But the Supremes disagreed with the lower court and are giving the chemical company another chance to terminate lifetime health care benefits for retirees. The Court noted that ERISA benefits, such as pensions, have more controls and are adhered to more strictly than health care benefits, which do not have the same protections. The case is being sent back to the lower court to reconsider the issues under the correct legal standards, which are just the ordinary principles of contract law. The union says it will show that the parties did not intend for the health care benefits to last for just a couple of years. The company applauded the Supreme Court’s decision saying it sends a strong message that restores a level playing field.


Stay tuned to see how this story ends!