Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...
Kraft Heinz Foods Co. defeated another lawsuit by retirees at an Oscar Mayer processing plant who said the company tried to move them off its health insurance plan in violation of union bargaining agreements.
Each relevant bargaining agreement contained an unambiguous “reservation-of-rights” clause allowing Kraft to modify or terminate its benefit plans at any time, an Iowa-based federal judge said March 28. The retirees therefore had no vested right to lifetime health coverage, and Kraft was within its rights to move them to a less generous benefit plan, the judge said.
The decision comes six months after a federal judge in Wisconsin denied lifetime benefits to another group of Kraft retirees. In both cases, the judges said a lack of ambiguity in the relevant bargaining agreements defeated the retirees’ claims for lifetime benefits.
This focus on contractual ambiguity stems from two recent U.S. Supreme Court decisions governing how courts consider disputes over union retiree health benefits. In February, the court reiterated its 2015 ruling that these disputes should be decided based on ordinary principles of contract law—and in particular, the rule that outside evidence is considered only when a contract is ambiguous.
The Supreme Court decisions are likely to make it harder for retirees to prevail in court. The first appeals court decision relying on the cases resulted in a loss for Honeywell International retirees seeking lifetime benefits.
Here, Judge Stephanie M. Rose of the U.S. District Court for the Southern District of Iowa said that because the relevant bargaining agreements contained a clear reservation-of-rights clause and no affirmative indication that benefits would be vested, the retirees’ lawsuit seeking lifetime benefits failed.
The retirees were represented by Law Offices of Kurt C. Kobelt and McCarthy Callas & Feeney PC. Kraft Heinz was represented by Ogletree Deakins Nash Smoak & Stewart PC.
The case is Beale v. Kraft Heinz Foods Co., S.D. Iowa, No. 3:16-cv-00119-SMR-HCA, order granting summary judgment to defendant 3/27/18.
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