BILL NUMBER: S9347

SPONSOR: JACKSON
 
TITLE OF BILL:

An act to amend the civil service law and the labor law, in relation to
clarifying the vesting of retiree health insurance within collective
bargaining agreements

 
PURPOSE:

The purpose of this bill is to allow extrinsic evidence to be admitted
by the court for determining whether the parties to a contract intended
for the retiree to have health insurance vest beyond the time limits of
a collective bargaining agreement.

 
SUMMARY OF PROVISIONS:

Section 1 adds a new Section 157-A to the Civil Service Law to allow
employee organizations to use extrinsic evidence to determine intent for
retiree health insurance during contract negotiations.

              

Section 2 adds a new Section 702-C to the Labor Law to allow employee
organizations to use extrinsic evidence to determine intent for retiree
health insurance during contract negotiations.

Section 3 is the effective date.

 
JUSTIFICATION:

For over 30 years, the federal courts considered retiree health insur-
ance in the context of ongoing collective bargaining relationships and
would infer that the parties intended to vest retiree health insurance
on retirees for life, especially when eligibility for retiree health
insurance was associated with eligibility for pension benefits, reason-
ing that otherwise, if the benefit lasted only for the durational term
of the collective bargaining agreement, typically three years, the reti-
ree health insurance benefit would be illusory. This standard is best
known from the case of Yard-Man and became known as a Yard-Man infer-
ence.  International Union, UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th
Cir.  1983).

In 2015, however, in the case of Tackett, the United States Supreme
Court abrogated Yard-Man, holding that the courts could not make such
inferences, and that a collective bargaining, like any other contract,
needed to be explicit about the duration and scope of retiree health
insurance benefits and the federal courts could not infer from the ongo-
ing collective bargaining relationship that retiree health insurance
benefits vested on retirees beyond the durational term of the collective
bargaining agreements and, further, that courts could only consider
extrinsic evidence of the parties' intent if the agreement was on its
face ambiguous. M & G Polymers USA, LLC v. Tackett, 574 U.S. 427 (2015).
Moreover, extrinsic evidence, according to the court, could not be used
to show that the agreement was ambiguous as to whether retiree health
insurance vested for life. Id.

In 2014, the New York State Court of Appeals had declined to address the
issue in the case of Kolbe v Tibbetts, 22 N.Y.3d 344 (2013), holding
that the collective bargaining agreement under review in that case, in
fact, contained explicit terms showing that the retiree health insurance
benefit was to vest on retirees beyond the durational term of the agree-
ment.

But the issue was put squarely before the New York Court of Appeals by
certified question of the United States Court of Appeals for the Second
Circuit in Donohue v. Cuomo, 980 F.3d 53 (2020).

In answering the question, the New York Court of Appeals agreed with the
United States Supreme Court in Tackett and rejected the use of Yard-Man
inferences, holding that collective bargaining agreements must be
explicit in making retiree health insurance vest for life, or be suffi-
ciently ambiguous on their face to allow for the consideration of
extrinsic evidence on that point, but that extrinsic evidence was not
admissible to show that the agreement was ambiguous.  Donohue v Cuomo,
---- N.E.3d---- (February 10, 2022).  Based on the New York Court of
Appeals' answer to its certified question, the United States Court of
Appeals for the Second Circuit, which includes New York, held that held
that CSEA's collective bargaining agreements with the State did not vest
retiree health insurance beyond the duration of the CBAs, even though
the CBA's use of terms such as: "Employees covered by the State Health
Insurance Plan have the right to retain health insurance after retire-
ment upon completion of ten years of service;" "An employee who is
eligible to continue health insurance coverage upon retirement is enti-
tled to a sick leave credit to be used to defray any employee contrib-
ution toward the cost of the premium (with the calculation based on 'the
actuarial equivalent in monthly installments for the remaining life
expectancy of such retired employee' under Civil Service Law § 167);"
"The State has the right to make prospective changes to the percentage
of credit to be available under this alternative method for future reti-
rees . . . ;" and "An employee retiring from State service may delay
commencement or suspend his/her retiree health coverage and the use of
the employee's sick leave conversion credits indefinitely." Donohue v.
Hochul, No. 18-3193-cv (April 27, 2022). According to the courts, none
of these terms, or others like them in the agreements, either singly or
in combination were enough to make the terms ambiguous, let alone clear-
ly establish that the retiree health benefit vested for life, notwith-
standing that the State, in fact, paid the benefit for life.

As a result of this upending of established law, decades' worth of
collective bargaining agreements in New York, agreements negotiated when
Yard-Man inferences were the rule, are now open to question by employ-
ers, notwithstanding that at the time they negotiated the agreements,
the intent on both sides of the negotiating table was that the benefit
vested for life. The parties' intent has not changed, rather the law of
evidence has changed, opening a legal loophole that might be used to
deny labor and employee organizations the benefit of their bargain,
leave retiree health insurance in a state of uncertainty, and strip
retirees of the health insurance benefits they relied upon.

This bill simply would address the holdings in the Donohue cases and put
the parties back exactly where they were before the Donohue decisions
and allow extrinsic evidence to be admitted by the court or other forum
to determine whether the parties intended retiree health insurance to
vest beyond the durational limits of the CBA and to what extent and
scope. Otherwise, the benefit would be illusory and employee organiza-
tions and labor organizations would not get the benefit of their
bargains.
 
LEGISLATIVE HISTORY:

New bill.

 
STATE AND LOCAL FISCAL IMPLICATIONS:

To be determined.

 
EFFECTIVE DATE:
This act shall take effect immediately.