U.S. Supreme Court Rejects The Yard-Man Inference Vesting Lifetime Benefits For Union Retirees

In M&G Polymers USA, LLC v. Tackett,1 the U.S. Supreme Court overturned three decades of precedent by the U.S. Court of Appeals for the Sixth Circuit, unanimously ruling that, when no specific provision in a collective-bargaining agreement (CBA) addresses the duration of retiree benefits, reviewing courts may not infer that the parties intended those benefits to vest for life. All nine justices agreed that courts must apply "ordinary principles of contract law" to determine the parties' intent.

The Court split sharply, however, regarding which of those principles are salient. Five justices emphasized principles that weigh against a finding of lifetime benefits, including the principle that courts should not construe ambiguous writings to create lifetime promises and that general durational clauses apply to provisions governing retiree benefits. Four concurring justices, by contrast, emphasized principles that weigh for a finding of lifetime benefits, including the observations that survivor-benefits clauses and provisions that retirees "will receive" healthcare benefits may suggest an intent to provide lifetime benefits. Thus, although it is clear that M&G Polymers is an employer-friendly decision, the decision unsettles the law concerning retiree benefits for all Circuits, including those that have traditionally been more employer-friendly. The full impact of the decision will only be understood as lower courts address which "ordinary principles of contract law" are most critical.

Since 1983, the rule in the Sixth Circuit has been that retiree benefits vest for life unless there is specific plan or CBA language to the contrary.2 Known as the "Yard-Man inference," this presumption had been extended throughout the years to find lifetime vesting of retiree benefits—even in cases where employers negotiated contract language arguably intended to prevent vesting. Although Yard-Man was binding only in the Sixth Circuit, the Yard-Man inference has also influenced the law in other jurisdictions.

The series of events that would overturn Yard-Man began in 2000, when M&G entered into a CBA with the Union3 representing bargaining-unit employees at the plant. M&G and the Union also entered a Pension, Insurance, and Service Award Agreement (P&I Agreement) that provided for retiree health care benefits subject to renegotiation after three years. The parties returned to the bargaining table and, in 2005, incorporated into their CBA a Letter of...