July 2013 • Volume 101 • Number 7 • Page 336
Illinois Law Update:
Illinois Appellate Court Cases
Presumption of vesting of health benefits under collective bargaining agreement
On May 2, 2013, the Illinois Appellate Court, Third District, held that a city's decision to reduce retired employees' health benefits promised under a collective bargaining agreement should be analyzed as a matter of contract, subject to a presumption in favor of the vesting of these benefits.
The plaintiffs in this case were three retired firefighters and one police officer who were employed by the City of Joliet until approximately July 2008. While employed, the plaintiffs were union members whose employment was governed by collective bargaining agreements with Joliet that included health insurance retirement benefits.
The plaintiffs sued Joliet after the city decided to alter the plaintiffs' retirement and health benefits; the city had negotiated a new agreement with the unions for changes in benefits after the plaintiffs retired, and had applied some of the reductions to retirees as well as current union members. The plaintiffs motioned for summary judgment, arguing that copay increases and added deductibles "diminished or impaired" their healthcare benefits, and were unconstitutional under the pension protection clause of the Illinois Constitution. Id. at *3. The circuit court granted the motion, requiring Joliet to reinstate the healthcare benefits that the plaintiffs agreed to in the prior collective bargaining agreement.
On appeal, the third district stated that questions should not be answered on constitutional grounds if it is possible to answer them on non-constitutional grounds. The court analyzed whether Joliet was contractually obligated "to continue to provide the retirement health insurance benefits that it promised each plaintiff at the time of his retirement." Id. The court conceded that the issue had not been raised at trial, but noted the authority it possessed to correct the trial court when it makes an error in its proceedings.
To decide the contractual question, the court explored whether health care benefits should be presumed to have vested when agreed to in a collective bargaining agreement. Relying on a decision from the Supreme Court of Wisconsin, Roth v. City of Glendale, 237 Wis.2d 173, the court ruled that healthcare benefits agreed to under a collective bargaining agreement cannot be diminished after they are earned by the employee and the employee has retired, "[u]nless the contractual language or extrinsic evidence clearly shows otherwise." Id. at *8.
Therefore, the court held, an employee's right to their retirement healthcare benefits vests after they have been earned and the employee retires. The court rejected Joliet's argument that this holding conflicted with sections 367f and 367g of the Illinois Insurance Code, finding that those statutes only require that retired policemen and firefighters be offered the same insurance coverage as current employees, not that they have the same coverage.
Regarding the issue of whether the retirement health benefits of these plaintiffs had vested, the court held that the record was insufficient to answer that question, and remanded the issue to the circuit court.