Retired police officers brought an action to stop the City of Geneva from reducing their health insurance benefits. After reciting the procedural history of the case (a holding for the petitioner at trial, a reversal on appeal), the court affirmed the Appellate Division's determination that the city had no duty to maintain its past level of benefits to retired municipal employees. The retired police officers argued that the City of Geneva could not reduce the health care benefits they had received under past practice without a statutorily required negotiation. The court ruled that the employer was free to alter past practice and give lesser benefits to retirees without negotiation because the duty to negotiate prior to changing a past practice extends only to current employees.
There was no term in the retiree's collective bargaining agreement which would bind the city to provide a certain level of health benefits. The court considered the petitioners' argument that labor arbitration principles and parol evidence rules allow the imposition of a duty to the retired employees despite the absence of a textual basis for their assertions. Petitioners could not avail themselves of arbitration principles but were limited on appeal to whether the city's past practice gave rise to a duty under general contract rules. The court found no underlying textual basis of an agreement to provide a certain level of health benefits to retirees. Therefore, the court found that a municipal resolution could not create a contractual right absent a textual basis. There was no legal impediment to the City of Geneva's unilateral reduction of the health benefits of former employees.
Whether a public employer may unilaterally modify an established past employment practice, which is not covered in a collective bargaining agreement, where such modification effects former rather than current employees.
Yes. A public employer may unilaterally modify an established past practice as long as the affected parties are former rather than current employees. An employer owes a statutory duty to negotiate prior to changing a past practice to current but not former employees.
The Taylor Law specifically excludes benefits under a public retirement system from otherwise required negotiation. See §201(4) ("The term 'terms and conditions of employment' . . . shall not include . . .any benefits provided by or to be provided by a public retirement system, or payments to a fund or insurer to provide an income for retirees, or payment to retirees or their beneficiaries. No such retirement benefits shall be negotiated pursuant to this article, and any benefits so negotiated shall be void.")
Although past practice can be used to determine the rights of current employees or parties to arbitration, parties to civil litigation can use it only to illuminate ambiguous language in their agreement. See Slatt v. Slatt, 64 N.Y.2d 966 (N.Y. 1985) (examining the conduct of parties in intervening years between formation of a contract and dispute to ascertain their intent "might be appropriate in the instance of an ambiguity or where the contract is of 'doubtful meaning.'") The court concluded that municipal resolutions, like Resolution No. 33 under which Petitioner claims to have obtained a contractual right to benefits, do not create vested contract rights. The court cited as authority for this conclusion Jewett v. Luau Nyack Corp., 31 N.Y.2d 298 (N.Y. 1972). In contrasting lesser formal of resolutions with ordinances the Jewett court had found that "a resolution deals with matters of a temporary or special nature, where the action taken generally involves findings of fact and may be characterized as administrative." Id. at 306.
After Aeneas McDonald, there is no legal impediment to a public employer's unilateral alteration of the health benefits it provides to its retired employees. Creating a duty to negotiate with retired employees with respect to their retirement benefits would have overly broadened the scope of public employment relations. The court in Aeneas McDonald prevented such a broadening of the scope of public employment relations. The effect of this case is limited to issues concerning retirees who attempt to enforce their retirement benefits based on past practice unsupported by an express agreement. This case turned on two facts: (1) Resolution 33 was the sole evidence of a labor agreement concerning health benefits to retirees, and (2) Petitioner represented retired employees not current employees. The court looked to New York's "Taylor Law" and recognized that the city was statutorily obligated to negotiate the terms and conditions of employment with a bargaining representative. This duty to negotiate requires that an employer cannot unilaterally modify a past practice concerning health benefits since such benefits are a form of compensation, and therefore are a mandatory subject of negotiation. Even though this duty extends to a modification of a past practice concerning the retirement health benefits of current employees, it does not extend the retirement health benefits of retired employees.
The court also limited the right to assert an employer's past practice to general contract principles by deciding that arbitrations principles did not apply. Arbitration may allow past practice to establish an agreement, but courts may look only to past practice to clarify ambiguity as to a term of an agreement. Past practice is a form of parol evidence and "cannot be used to create a contractual right independent of some express source in the underlying agreement." Aeneas at para. 11 (citing Franklin Cent. Sch. Dist. v. Franklin Teachers Ass'n, 238 A.D.2d 848, 849 (N.Y. App. Div. 1997); Hunsinger v. Minns, 197 A.D.2d 871 (N.Y. App. Div. 1993)). Resolution 33 is the sole evidence of an express source, but being temporary, a resolution does not create any vested contractual rights. Aeneas at para. 12 (citing Jewett v. Luau Nyack Corp., 31 N.Y.2d 298, 306 (N.Y. 1972)). Thus, retirees have no means to enforce their retirement benefits unless their right to receive such benefits derives not only from a resolution and past practice, but also from some textual basis.
Absent a textual basis in an existing collective bargaining agreement from which external resolutions can clarify a contractual right to provide benefits, may public employees renegotiate benefits at some point in the future, incorporating such retirement benefits in some sort of written instrument which would compel their former employer to negotiate prior to any further modification of retirement benefits? Even if such an agreement were effective, as a practical matter retired public employees likely lack the power necessary to embody their current level of retirement benefits in any written instrument negotiated with their former employer and therefore likely lack the power to ensure that they will continue to receive their current level of retirement benefits.
Had the independent textual source of the retirement health benefits been found in an instrument (such as an ordinance) of a more permanent nature than a resolution, would contractual rights have been created despite the fact that the existing collective bargaining agreement failed to mention such benefits?
Are there other benefits important to retired public employees, besides the health benefits at issue in this case, that may now be unilaterally reduced by the former public employer.
Similar to the Aeneas court, other jurisdictions have held that retirement health benefits that were not incorporated in a contract, can be unilaterally altered by the employer. In Milwaukee District Council 48, AFSCME, AFL-CIO v. City of Milwaukee, 407 N.W.2d 567 (Wisc. App. 1987), although the court recognized that past practices could be incorporated into a negotiated collective bargaining agreement (United Steelworkers v. Warrior & Gulf Navigation Co., 363 U.S. 574, 578-81(1960)), the court nevertheless ruled that the retirement health benefits at issue were not incorporated in the collective bargaining agreement, and thus could be unilaterally altered by the employer.
Similarly, the Colorado Supreme Court ruled, in Colorado Springs Fire Fighters Association, Local 5 v. City of Colorado Springs, 784 P.2d 766 (Colo. 1989), that retirement health benefits at issue in that case were not protected from alteration, stating that the 1966 city ordinance that provided health insurance premiums for retired city employees created neither a pension-type benefit nor a vested contractual obligation, and thus could be unilaterally altered by the City of Colorado Springs.
However, in Minnesota, specific legislation protects health insurance benefits of retirees from being altered by the employer by defining it as a term of employment that is contractually bargained for. See Minn. Stat. § 179A.03 (19). In Law Enforcement Labor Services, Inc. v. County of Mower, 483 N.W.2d 696 (Minn. 1992) the court ruled that employees who retired under a collective bargaining agreement that provided full payment of retiree health insurance premiums have a vested right to such coverage, so that such benefits cannot be altered without express consent.