Retiree health benefits vested

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A retired city of Milwaukee employee is entitled to full health care benefits, even though the city lowered its health care benefits for retirees before he retired, the Wisconsin Court of Appeals held on Dec. 27.

Albert Loth, born in 1945, was hired as an accountant by the city in 1984. At the time, the city provided free medical benefits to retirees between the ages of 60 and 65, who had been employed at least 15 years.

In 2002, the city adopted Resolution 020479, eliminating the free health insurance benefits.

Loth retired shortly after turning 60 in 2005. Thereafter, the city deducted health insurance premiums from his retirement checks, pursuant to the resolution.

Loth sued, but Milwaukee County Circuit Court Judge Patricia D. Mc-Mahon granted summary judgment in favor of the city.

Loth appealed, and the court of appeals reversed, in a decision written by Judge Joan F. Kessler, and joined by Judge Ralph Adam Fine. Judge Patricia S. Curley dissented.

Relying on several precedents, the court concluded that, once Loth worked 15 years, the right to free medical benefits on retirement had vested, and could not be unilaterally withdrawn by a city resolution.

In Schlosser v. Allis-Chalmers Corp., 86 Wis. 2d 226, 271 N.W.2d 879 (1978), the Supreme Court enforced a promise of employer-paid life insurance for salaried employees at retirement after age 65 against a company claim that it had the right to change the insurance benefit for those who had retired, and that employees who retired before age 65 were not eligible for the benefit.

The Supreme Court concluded that the rights vested upon the employee having performed the work, and reaching age 65 was merely a condition precedent.

Later, in Roth v. City of Glendale, 2000 WI 100, 237 Wis.2d 173, 614 N.W.2d 467, the court held that, as to employees represented by a union, free health care benefits for retired employees could not be eliminated under a new collective bargaining agreement which eliminated that benefit.

More recently, the court held that a class of non-union employees of Milwaukee County were entitled to accrued sick leave, which was repealed before they retired. Champine v. Milwaukee County, 2005 WI App 75, 280 Wis. 2d 603, 696 N.W.2d 245, review denied, 2005 WI 134, 282 Wis. 2d 722, 700 N.W.2d 273.

The court in Champine held that benefits granted in 2000 could not be changed retroactively in 2002, even to those employees who did not retire before the change, reasoning, “Once work is performed while a contract or unilateral promise is in effect, permitting retroactive revocation of that promise would be unjust and inequitable.”

In the case at bar, the court concluded that Champine could not be distinguished.

The city argued that it could withdraw the benefit at any time before Loth reached the age of 60, even if he had worked for 15 years, but the court disagreed.

The court concluded that, if it permitted the city to withdraw the promise of free health insurance, the promise would be illusory. Accordingly, the court reversed, and remanded with instructions that Loth receive the total health insurance benefits that have been deducted from his retirement benefits, plus interest.

Judge Curly dissented, concluding that although Loth worked for the city for more than 15 years, the city could eliminate the free health care benefit at any time prior to Loth reaching the age of 60.

Case analysis

The effect of the decision on its face is identical to that in Roth — retirees with more than 15 years of service with the municipality get to keep their free health care benefits.

However, the decision is actually a marked expansion of Roth in several respects.

First, the employees in Roth had already retired before the change in benefits. Roth, 614 N.W.2d at 468.

In the case at bar, the county did not seek to change the benefits of any retiree who had reached age 60 and was already receiving the benefit; it sought only to apply the reduced benefit to those who had worked 15 years, but not yet reached 60.

Second, the employees in Roth were unionized, while the employees in the case at bar were non-union.

Much of the rationale in Roth was based on the fact that the plaintiffs were unionized. The court’s rationale was the need to “protect the voiceless.”

In a union, retirees have no vote; only current employees can vote to approve or reject a collective bargaining agreement. Thus, retirees must be protected from current employees who have the ability to bargain away the expectations of the retirees, who have no say. Id., at 473.

In the case at bar, concerning non-union employees, that is not a concern. The result, however, is the same, and the decision in the case at bar thus extends Roth to all government employees, whether unionized or not.

Third, the Supreme Court in Roth only adopted a rebuttable presumption in favor of vesting retirement benefits; the court remanded the case for application of that presumption to the collective bargaining agreements at issue.

In the case at bar, the court makes no mention of any presumption; the court merely held that it would be unfair, unjust, and contrary to precedent, to permit unilateral withdrawal of the benefit after the 15 years of service had been performed by the employee.

Arguably, therefore, for non-union employees, the decision goes beyond even the presumption in Roth, to create an iron-clad rule that health benefits granted by ordinance cannot be taken away from an employee who has performed the minimum term of service set forth in he ordinance.

If that is what the court intended, such an approach has its merits. Public employees in a union have much more say in the terms of their contracts than non-unionized employees.

The municipality cannot unilaterally change anything vis-à-vis union employees, but must bargain with the union for any change.

With non-union employees, as in the case at bar, the municipality need only enact a resolution, with no direct influence on the part of the affected em-ployees.

Thus, the extension of Roth to non-union employees, and the adoption of a rule, as opposed to a mere presumption, are both logical extensions of Roth.

The extension of Roth from those employees who have already retired, to employees still working at the time of the change, however, does not necessarily follow from the logic of Roth. However, that extension does logically flow from the opinion in Champine.