Honeywell’s Retiree Health Cuts Divide Federal Judges

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

Honeywell International Inc.'s plan to cut retiree health benefits at the end of the year was approved by a federal judge in Ohio ( Watkins v. Honeywell Int’l, Inc. , 2016 BL 419276, N.D. Ohio, No. 3:16-cv-01925, 12/16/16 ).

The planned benefit cuts have spawned at least four proposed class actions by retirees from Honeywell plants in Connecticut, Michigan and Ohio. In ruling on Dec. 16 that the cuts didn’t violate the retirees’ collective bargaining agreements, Judge James G. Carr of the U.S. District Court for the Northern District of Ohio broke from both of the other judges who have ruled on these cases.

A federal judge in Michigan on Dec. 14 entered a preliminary injunction barring Honeywell from cutting health benefits for retirees who had worked at the company’s Boyne City, Mich., plant. In November, another federal judge allowed people who retired from a Honeywell plant in Greenville, Ohio, to move forward with their lawsuit against the company.

Carr’s decision approving the benefit cuts centered on the fact that the retirees’ bargaining agreement contained a three-year durational clause. According to Carr, this unambiguously meant that the retirees’ health benefits weren’t vested for life and could be changed by Honeywell.

This was true even though the bargaining agreement didn’t contain a reservation-of-rights clause giving Honeywell the authority to make changes, Carr said. In other cases, including the U.S. Court of Appeals for the Sixth Circuit’s recent decision in favor of Moen Inc., a reservation-of-rights clause was central to the court’s conclusion that retiree health benefits weren’t vested for life.

The final word on Honeywell’s proposed benefit cuts is likely to turn on how judges interpret the U.S. Supreme Court’s 2015 decision in M&G Polymers USA, LLC v. Tackett. In Tackett, the court held that disputes over collectively bargained retiree health benefits should be resolved through ordinary principles of contract interpretation, without the “thumb on the scale” in favor of retirees that some courts had used.

Many judges have read Tackett as favoring employers, giving wins to companies including BorgWarner Inc., Weyerhaeuser Co. and Johnson Controls Inc. in lawsuits over retiree health benefit cuts. Companies including FreightCar America Inc. and Kelsey-Hayes Co. have been less successful post- Tackett.

Honeywell was represented by Kirkland & Ellis and Faruki Ireland & Cox. The retirees were represented by Legghio & Israel.

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bna.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

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