This is a story about a union and a private sector employer who repeatedly negotiated collective bargaining agreements which referenced side contracts which provided retirees with post-employment healthcare benefits. In the early decades of their relationship neither the union nor the employer appear to have given any thought to whether or not these retiree health benefits in fact vested—i.e. were promised to retirees at no cost for the remainder of their lives. By the 1980s and certainly the 1990s however, as health care costs soared and life expectancy expanded, both parties continued to regularly re-negotiate agreements that were silent as to this critical term. With time, predictably enough, the employer decided to eliminate this increasingly expensive benefit; the union objected vigorously on the ground that the benefit was promised to current retirees “for life” and could not be unilaterally terminated. Recently, in M & G Polymers v. Tackett, the Supreme Court considered the effect of this silence and unanimously concluded that courts should not construe ambiguous contract provisions in order to create lifetime promises especially in the context of labor contracts where obligations typically cease when the agreement terminates.
This paper attempts to assess the Court’s decision and to understand why both parties, in the face of increasing cost pressure, came to the same strategic conclusion during the course of bargaining over many years—i.e. that silence was preferable to an explicit commitment.
Recommended CitationMaria O'Brien Hylton, After Tackett: Incomplete Contracts for Post-Employment Healthcare, 36 Pace L. Rev. 317 (2016)
Available at: http://digitalcommons.pace.edu/plr/vol36/iss2/1