Page 1 New York State Association of Management Advocates for School Labor Affairs (MASLA) 37 th Annual Summer Conference Retiree Health Insurance Coverage Case law and Update Presented by Douglas Gerhardt, Esq. Harris Beach, PLLC July 22, 2014 I. Statutory Framework Basic Parameters A. Education Law 1709: Boards of education are authorized to provide health insurance for school district employees. B. General Municipal Law 92-a: Authorizes municipalities including school districts to pay all or a part of the cost of health insurance for retired employees. C. Health Care Moratorium Law 1. Chapter 504 of the Law of 2009 From on or after June 30, 1994 a school district, board of cooperative educational services, vocational education and extension board or a school district as enumerated in section 1 of chapter 566 of the laws of 1967, as amended, shall be prohibited from diminishing the health insurance benefits provided to retirees and their dependents or the contributions such board or district makes for such health insurance coverage below the level of such benefits or contributions made on behalf of such retirees and their dependents by such district or board unless a corresponding diminution of benefits or contributions is effected from the present level during this period by such district or board from the corresponding group of active employees for such retirees. 2. Chapter 504Error! Bookmark not defined. Part B, Section 14 of the Laws of 2009 made permanent Chapter 729 of the Laws of 1994. In doing so Chapter 504 made permanent the prohibition on diminution by a school district or BOCES health insurance benefits provided to retirees and their dependent without a corresponding diminution of benefits for active employees. [Bill Jacket Chapter 504 of the Laws of 2009 at 00001]. D. Under the Taylor Law, it is an improper practice to unilaterally change a mandatory subject of bargaining for collective bargaining unit members [NYS Civ. Serv. Law 204]
Page 2 II. Notable case law related to retiree health benefits A. The court of appeals has held that health benefits are not part of retirement pension benefits protected under Article V, Section 7 of the New York State Constitution. (Matter of Lippman v. Board of Education of Sewanhaka Central High School District, 66 NY2d 313 [1985]). B. Reimbursing retirees for costs of Medicare Part B premiums is not an unconstitutional gift of funds they are deemed reimbursement for services rendered as an employee. (Chenango Forks CSD v PERB, 21 NY3d 255 [2013]). C. The law permits reductions of health benefits to retirees when the same reduction is made for current employees. (Matter of Jones v. Board of Education of Watertown City School District, 30 AD3d 967 [4 th Dept., 2006]). And, at least one court has found that school districts may terminate the reimbursement of Medicare Part B premiums as long as a corresponding reduction in benefits was negotiated for active employees. (Matter of Application of Theodora Q. Bryant v BOE of Chenango Forks CSD, 907 NYS2d 415 [Sup. Ct. Broome County, 2010]). In Bryant the court noted that the law does not contemplate a complete freeze in retirees health benefits, but rather a reduction for retirees may only follow a reduction for current employees. See also Matter of Baker v BOE, 29 AD3d 574 [2 nd Dept., 2006]. D. Retired public employees have no right to enforce a benefit which had been provided under a past practice which is not expressly conferred through a collective bargaining agreement. (Aeneas McDonald Police Benevolent Assn., Inc. v City of Geneva, 92 NY2d [1998]). E. Generally, contract rights do not survive beyond the termination of a collective bargaining agreement (Litton Financial Printing Div., Litton Business Systems, Inc. v NLRB, 501 US 190, 207 [1991]). But, as referenced by the Court of Appeals in Kolbe, "[r]ights which accrued or vested under the agreement will, as a general rule, survive termination of the agreement." Kolbe v. Tibbetts (22 NY 3d at 349 [2013]) F. Retirees might have enforceable rights under CBAs if some policies are adopted giving an expectation of such rights (Emerling v. Village of Hamburg, 255 AD2d 960 [4 th Dept., 1998]). This will lead to a factual inquiry in terms of what the practice has been and what rights may be enforced. G. Where collective bargaining agreements specifically set forth the rate of contribution in retirement, retirees receive that percentage even if a change is negotiated for active employees. (Warner v. Cobleskill-Richmondville CSD, 108 AD3d 835 [3 rd Dept., 2013]).
Page 3 III. Court of Appeals weighs in on Retiree Health Coverage Kolbe v. Tibbetts A. Lower Court: Kolbe v. Tibbetts (101 AD2d 1623 [4 th Dept., 2012]). 1. FACTS: (facts derived from Court of Appeals decision at 22 NY 3d 344 [2013]). This case involved a change in prescription drug coverage (not Medicare Part B) negotiated for active employees and a corresponding change implemented for retirees. The plaintiffs were former employees who retired between 2003 and 2009 from the Newfane CSD. They were all members of a collective bargaining unit and parties to an agreement which provided health benefits in retirement. The CBAs set out the co-pay amounts under the various prescription drug plans. In 2010, a new CBA was executed (retroactive to 2007) which implemented changes to the health insurance including changes to co-pays for prescription drug coverage. The District negotiated a new CBA with active employees. Through it, healthcare benefits were modified such that prescription co-pays were increased. The District s contributions to the flexible spending accounts also increased. Those changes were applied to the plaintiffs. They sued claiming the contract benefits of the prescription drug coverage could not be changed after they retired essentially saying the contract guaranteed a level of benefits that must remain unchanged in retirement. Plaintiffs received written notice from the District that their co-pays would be governed by the newly negotiated terms of the new CBA. The plaintiffs sued claiming breach of contract. The District argued in part that the change in copays was permitted under the health insurance moratorium law because these were corresponding changes to health care. 2. HELD: The Appellate Division granted the district s motion for summary judgment and dismissed the complaint. In doing so, the court held that the collective bargaining agreements relied on by the plaintiffs did not guarantee fixed prescription co-pays in retirement. 3. The case was supportive and helpful to those negotiating health coverage in retirement and applying the moratorium law. B. Court of Appeals Reversal - Kolbe v. Tibbetts (22 NY 3d 344 [2013]) 1. CORE ISSUE: whether certain collective bargaining agreements conferred upon plaintiff retirees a vested right to the same health insurance coverage they had when they retired and, if so, whether unilateral modifications to that coverage are nonetheless permissible under either the contract terms or the New York Insurance Moratorium Law Id.at 349
Page 4 2. HELD: The language upon which plaintiffs base their claim reads as follows: "[t]he coverage provided shall be the coverage which is in effect for the unit at such time as the employee retires. Contrary to the Appellate Division majority's conclusion, the plain meaning of this provision unambiguously establishes that plaintiffs have a vested right to the "coverage which [was] in effect for the unit at such time as [they] retire[d]," until they reach age 70. 3. RATIONALE: a. The Court found this a mandatory obligation and one which could not be changed through imposition of the moratorium law. b. The Court rejected the argument that the moratorium law applied. They found: The District's interpretation of the statute relies on the erroneous conclusion that the legislature's silence regarding contracted-for health coverage should be read as an intention to abrogate contractual rights. However, the Insurance Moratorium Law's primary purpose was to prevent school districts from eliminating or reducing retiree health insurance benefits that were voluntarily conferred as a matter of school district policy, not rights negotiated in the collective bargaining context. (citing Assembly Mem. in Support, Bill Jacket, L 1996, ch 83 at 6, 1996 McKinney's Session Laws of NY at 2049-2050). (Id.at 358. ) IV. Legal Impact of the Court of Appeals Decision Agor et. al. v Northeastern Clinton CSD A. FACTS: Plaintiffs are a group of retired teachers from the Northeastern Clinton CSD. They retired under one of three collective bargaining agreements the 1996 agreement, the 2002 agreement and the 2006 agreement. The 1996 CBA had no provision for reimbursement of Medicare part B premiums for retirees. The 2002 and 2006 CBAs did include such a provision. In 2010, a new agreement was reached between the teachers unit and the District. In it, reimbursement for Medicare Part B was removed for anyone retiring on or after the effective date of the agreement. Following that, the Board adopted a resolution through which any retiree who retired, but was not yet receiving Medicare Part B coverage and reimbursement, would not receive reimbursement upon age eligibility. In doing this, the Board treated retirees exactly the same as current employees. Only those who were not yet receiving Medicare Part B benefits as retirees would not now receive them when attaining age 65 exactly as current employees negotiated. In doing this, the Board implemented the health care moratorium law. The retirees sued. They claimed a breach of contract that their benefits in retirement vested when they retired and those could not be changed subsequently. They brought a contract action against the District. The District moved to dismiss.
Page 5 B. LOWER COURT: Supreme Court Clinton County granted the motion to dismiss. In an unreported case, the Court determined the moratorium law as properly implemented by the Board and that the retirees had no claim upon which relief could be granted. The court also indicated that had the retiree benefit intended to be continued, it should have so noted in the subsequently negotiated CBAs. It was not so the benefit did not continue. C. APPELLATE DIVISION REVERSED: (2014 NY Slip Op 1496 - NY: Appellate Div., [3rd Dept., 2014]): The appeal in this case was heard one month after the decision in Kolbe v. Tibbetts. The Appellate Division cited Kolbe and determined that the moratorium law could not be applied to this case since the health insurance benefits were provided through a collective bargaining agreement, not policy. The Court remanded the case back to the Clinton County Supreme Court for further deliberations and fact finding on the issues of whether the retirees under the 1996 agreement should receive the Medicare Part B benefit as to the intent of the parties, and for the other retirees, how long such benefits should be provided. V. Status of the Law on Retiree Health Insurance A. Health Care in retirement 1. Costs are rising faster for this than they are for current employees. 2. Beneficial in the short and long term to curtail this increase in costs and to do so through negotiations with all employees and employee organizations. B. Practical Elements Following Kolbe & Agor 1. The health care moratorium law is silent in distinguishing between benefits provided by contract versus through policy. 2. The Court of Appeals has said the moratorium law applies only when health benefits are provided through policy, not contract. 3. Agor suggests courts will defer to Kolbe regarding who is eligible for retiree health benefits. 4. Negotiations of health benefits including those which will affect retired unit members is a critical element which should be brought to the table. 5. The Moratorium Law remains in place and effective for making commensurate changes to retiree benefits. It should be employed whenever applicable consistent with its wording and applicable case law.