Supreme Court Rejects Sixth Circuit’s Yard-Man Inferences In M&G Polymers USA, LLC v. Tackett

In M&G Polymers USA, LLC v. Tackett, 135 S. Ct. 935 (2015), the Supreme Court of the United States addressed the interpretation of collective bargaining agreements (CBAs) that include post-retirement welfare benefits, such as retiree health or life insurance benefits. The Supreme Court ruled that the U.S. Court of Appeals for the Sixth Circuit's long-standing inference of vested retiree welfare benefits, termed the Yard-Man inference, is inconsistent with ordinary principles of contract law governing CBAs. The Yard-Man inference arose in a 1983 Sixth Circuit case, UAW v. Yard-Man, Inc., 716 F.2d 1476 (6th Cir. 1983), which held that courts should presume that retiree welfare benefits provided in CBAs were vested or guaranteed for the life of any employee who retired under a CBA. The Supreme Court struck down the Yard-Man inference, holding that the inference was inconsistent with ordinary principles under contract law, the Employee Retirement Income Security Act of 1974 (ERISA), and the Labor Management Relations Act of 1947 (LMRA).

Background

Prior to Tackett, a circuit split existed regarding the interpretation of CBAs that provide retiree welfare benefits. Federal courts generally interpret these agreements pursuant to ERISA (which governs employee benefit plans) and the LMRA (which governs labor agreements). Under ERISA, benefits provided to retired employees under a pension plan vest upon receipt of the benefit. In contrast, while employers may agree to provide retired employees with vested or unalterable health or life insurance benefits, neither ERISA nor the LMRA require such vesting. The federal circuits have disagreed over how to interpret CBAs that are silent as to the duration of retiree welfare benefits or that contain only general durational clauses.

Under the Yard-Man inference and its progeny, courts in the Sixth Circuit held that, absent specific language to the contrary, the parties to a CBA intended union retiree benefits to vest upon an employee's retirement. Most other circuits, however, rejected the Yard-Man inference and instead required some affirmative contract language to vest union retiree welfare benefits.

The facts in Tackett are similar to those in many other cases that address union retiree welfare benefits. M&G Polymers and a union entered into a series of CBAs, and each CBA included language that retirees "will receive a full Company contribution towards the cost of" health benefits. Each CBA also included a...