After Tackett: Incomplete Contracts for Post-Employment Healthcare
44 Pages Posted: 5 Aug 2015
Date Written: August 4, 2015
This paper examines the recent U.S. Supreme Court retiree health care decision in Tackett v. M & G Polymers and focuses, in particular, on the ostensibly odd silence with respect to a critical contract term — whether the parties in fact agreed that these benefits were vested. Although the union in Tackett insisted these welfare benefits were clearly intended to vest and the employer now asserts they can be modified at any time, the collective bargaining agreement and supporting documents are ambiguous on this question. This paper examines how and why this “silence” persisted for so many decades and concludes that, at least for a while, conscious ambiguity was maintained because it was in the best interests of both parties. Only when the cost of providing the benefits became unbearable did the employer finally take advantage of the long standing silence and assert its right to modify the retiree health plan. Tackett sidelines the Sixth Circuit’s well known decision in Yard-Man as the Court insists upon the importance of applying traditional contract principles in these cases. This paper concludes that even without the favorable inference Yard-Man supplied, it is still possible (although not guaranteed) that the plaintiffs will meet their burden of proof on remand and hold onto their health benefits in retirement.
Keywords: contracts, retiree health care, health insurance, incomplete contracts, employee benefits
JEL Classification: K19, K23, K39, K49
Suggested Citation: Suggested Citation