The Supreme Court on Monday rejected a prior court’s ruling over whether a chemical company has the authority to cut the health benefits for retired workers.
Disagreeing with how the previous ruling was made, the Supreme Court returned the case to the Sixth U.S. Circuit Court of Appeals in Cincinnati, which handled the case prior. The New York Times reports that the ruling was rejected by the Supreme Court because ordinary principles of contract interpretation were not considered.
The case arises out of a disagreement between a group of retired employees and their former employer over the meaning of an expired collective-bargaining agreement. The retirees, along with their former union, argue that their contract created a right to lifetime healthcare benefits. Additionally they argue that the contract said they did not have to contribute to the healthcare plan.
The employer, M&G Polymers, argued that those provisions terminated when the agreements expired.
When M&G Polymers USA bought the plant in 2000, it announced that retired workers would have to contribute to the cost of their health care benefits. In response, several retirees sued, saying they had been promised free health care for life.
The appeals court at the time argued, “We find it unlikely that Plaintiff USW would agree to language that ensures its members a ‘full Company contribution,’ if the company could unilaterally change the level of contribution.”
The Supreme Court disagreed with this reason and thus returned the case to the appeals court.
Justice Clarence Thomas argued in his opinion, “We granted certiorari and now conclude that such reasoning is incompatible with ordinary principles of contract law. We therefore vacate the judgment of the Court of Appeals and remand for it to apply ordinary principles of contract law in the first instance.”
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