Employers may be allowed to end lifetime health-carebenefits for retirees under a U.S. Supreme Court decision thatsuggested unclear union contracts shouldnot automatically be interpreted in favor of workers.

Retirees at the M&G Polymers USA plant in Apple Grove,W.Va., were provided health-care benefits as part of theirpensions. But the company, a unit of Mossi Ghisolfi Group inItaly, sought in 2006 to make retirees contribute to health-carecosts.

The Sixth U.S. Circuit Court of Appeals in Cincinnati ruledthe company had reneged on the contract, saying it was “unlikelythat [the union] would agree” to such a deal “if the company couldunilaterally change the level of contribution.”

But the Supreme Court unanimously disagreed. JusticeClarence Thomas, who wrote the opinion, said that, absentspecific federal labor policy, union contracts should beinterpreted according to “ordinary principles of contractlaw.”

Thomas also wrote that “when a contract is silent as to theduration of retiree benefits, a court may not infer that theparties intended those benefits to vest for life.”

He noted the Employee Retirement Income Security Act of1974 treats pensions, which must be funded and vested, morefavorably than “welfare benefits,” such as retiree health care,which lack such requirements. The aim was to give employers leewayin designing such benefit plans, he said.

Allyson Ho, the company's lawyer, said the Supreme Court'sruling “sends a strong message that restores a level playing fieldin benefits litigation nationwide.”

The case will now head back to the Sixth Circuit for it toreconsider the issues “under the correct legal principles.”

The court’s four liberal justices joined Justice Thomas, butthey added a separate opinion suggesting the retirees had a solidcase and potentially could prevail, even under the tougher standardthey endorsed.

Jason Brown, an attorney with Fisher& Phillips LLP, advised employers to check theircollective bargaining agreement to determine whether lifetimevesting is explicitly and unambiguously addressed in theagreement.

“While silence or ambiguity as to this term will not create apresumption of lifetime vesting ... a court could stillrule that the parties intended lifetime vesting after engaging in atraditional contract interpretation analysis,” Brown said in ablog.

While the court's decision appeared favorable toemployers, “in actuality, it is an affirmation of the neutralprinciples of contract interpretation, which favor neither employeenor employer,” he wrote.

“The entire case should be used as a cautionary tale about usingclear language when drafting contracts to make sure that the termsof a contract are those decided by the parties, and not by thecourts.”