Glimpses – Three Recent Sixth Circuit Employment Decisions

The unpublished decisions I'll mention here do not warrant separate (or much) discussion so I'll just summarize the important parts.

One decision, Stimpson v. United Parcel Service, upheld UPS' firing of an employee over the employee's FMLA objections. The employee had been in a bike/car accident and had phoned UPS. The court held the employee had given adequate initial notice of his condition but ultimately rejected the argument that the employee's firing violated the FMLA. The court concluded that the employee had not shown he had a "serious health condition." The employee's medical records showed he had "suffered only contusions and mild to moderate back pain." The return to work forms the employee presented simply said he could not work "for medical reasons." This fell "far short" the court held, of establishing "(1) the date on which the serious health condition began, (2) the probable duration of the condition, (3) the appropriate medical facts within the health care provider's knowledge, and (4) a statement that the employee is unable to perform [his] job duties" as required by prior court decisions. Because the employee failed to show that "his back pain significantly limited his movement or lifting ability, particularly when treated with the prescription [the employee] refused to take", the employee could not establish he had a serious health condition.

The second decision, Johnson v. Interstate Brands Corp., upheld the firing of an employee for fighting. Fighting, of course, requires two (or more) employees and employers often draw pretty fine distinctions in the discipline imposed depending on who started the fight, who escalated it, whether blows were thrown (or made contact) and even the consequences of the fight. This decision is no different. Two female employees fought in the break room. The facts as to who did what were disputed including among the witnesses. One employee (who was not fired) threw water on the fired employee. The fired employee raised her arm to block the water and made contact with the other employee's arm. The employer decided to fire her because she made physical contact but its past disciplinary practices (these were union employees) would not have justified firing the employee who "merely" threw the water on the fired employee. The court upheld this distinction. Flinging water was not, the court said, the same as physically striking someone.

The final one, Harps v. TRW Automotive U.S. LLC, concerns an employer's change to retiree health care benefits. A lot could be written about this area of employment law. It is enough to say generally that when an employer agrees in a collective bargaining agreement to pay health care benefits to retirees, it must do so very carefully. Sixth Circuit law all but creates an irrefutable presumption that the retiree benefits (when established in a CBA) cannot be cancelled after the term of the CBA. Oddly, ERISA does not require retiree health benefits to be "vested." Employers, however, can do so by agreement and that is where the litigation battle occurs. Sixth Circuit caselaw on when language in a CBA will "vest" retiree health benefits is extremely favorable to retirees. So much so that unions and retirees file these kind of lawsuits in the Sixth Circuit even if none of the work was performed within Ohio, Tennessee, Kentucky or Michigan, the States that comprise the Sixth Circuit. These kind of lawsuits can be won, however. In this case, the Sixth Circuit held that the CBA unambiguously disclaimed the employer's obligation to provide retiree medical benefits beyond the term of the CBA. The CBA provision which governed the payment of retiree medical benefits concluded by saying "[t]his clause shall not be construed to convey any rights to those beyond the term of this agreement." I will caution that this level of contract drafting is not for the inexperienced. The costs of providing vested retiree medical benefits can be enormous and there are subtle wording issues that have cost employers significant amounts of money. I mention the Harps case simply because it is relatively rare when the employer wins one of these cases.

ERISA, Bargaining Agreements, Health Plans and Oral Modifications

One cost of doing business for most employers is health care for employees and retirees. The Sixth Circuit is the retiree health care forum of choice because of rulings from that court which impose a very strong but rebuttable "inference," UAW v. Yard-Man, Inc., 716 F.2d 1476, 1482 (6th Cir. 1983), that retiree medical benefits are vested if established by a bargaining agreement.

To vest makes a benefit forever unalterable, or at least, unforfeitable, a difference that comes into play because ERISA does not require vesting of non-retirement benefits. So employers have a choice whether or not to impose on itself the cost of providing lifetime retriee health benefits.

A recent Seventh Circuit decision was interesting not so much because it addressed the vesting issue, it didn't, but because it dealt with a retiree health care plan the employer could alter, but didn't do so validly.

The facts are not terribly important. You only need to know that the employer used unused sick leave to pay, partially, for retiree medical benefits by agreement with the union. The employer, with the knowledge, apparently, of the union, didn't observe the allocation in the plan so it overcharged the retirees, in effect, by drawing too much from the sick leave fund. The overcharged retiree sued, claiming the employer didn't comply with the terms of the CBA.

The employer argued the union had orally approved of the arrangement and that made it legal even if the CBA said otherwise. In the ordinary employer/union bargaining context, this argument might have had strength, for subsequent oral modifications to a CBA are not outright prohibited, just foolish, but in any event, there are strings attached. (The string in this case was to give notice to the affected employees.)

ERISA, however, requires benefits plans be "maintained pursuant to a written instrument,” and this, the court said, included modifications. That hosed the employer's argument that the oral agreement with the union defeated the retiree's claim.

Now comes the important point. Courts have increasingly recognized an exception to the "written instrument" requirement in the case where an employer representative promises something to an employee that the plan does not thus causing the empoyee to rely on the misbegotten promise. Lawyers call this "promisory estoppel", an overused and largely misunderstood legal term that prevents someone from promising something the person knows (or is charged with knowing) won't happen or can't be delivered.

How, then, the court asked, is its holding consistent with promissory estoppel claims? It isn't. Rather, the court announced, promissory estoppel claims (at least the ones that would vary the terms of a benefit plan) must themselves be based upon a written promise. It is true, as the court said, most promissory estoppel claims (or misrepresentation claims) in the ERISA context are based upon something said in writing. After all, for years, we employment lawyers have drilled into employers' heads that they must document, document and document. (Writing, of course, is interpreted liberally in this electronic age - where a sufficiently clear video can be irrefutable evidence.)

But there are decisions, at least one in the Sixth Circuit, where the writing requirement was, at least by outward appearances, no impediment to the imposition of a vested (and costly) retiree health care plan. One example is James v. Pirelli Armstrong Tire Corp., 305 F.3d 439, 449 (6th Cir. 2002), where the court's decision did not mention whether or not the promise that altered the written plan was in writing but it seems not to have been. The Sixth Circuit decisions do not seem to acknowledge the writing requirement / oral modification conflict even exists. So the employer was bound by the HR representative's inaccurate promise of lifetime retirement benefits to employees who were contemplating and later took eary retirement. The employer probably got what it deserved here by (1) not training the HR representative or (2) not answering all questions in writing.

The Seventh Circuit decision hints at some protection even though, ironically, it was the employer who wanted to rely on the oral modification. That protection requires some common sense. Statements about benefits, including possible future benefit, are not to be made by the untrained or unknowing. They should always be made in writing after careful review by ERISA counsel or benefits personnel to ensure the writing is consistent with the terms of the plan.