Port of Seattle Must Pay Health Care Obligations from Ended Contract

October 21, 2008 (PLANSPONSOR.com) - The Washington state Supreme Court ruled 5-4 Tuesday that the Port of Seattle owes retired union workers health care benefits agreed to during collective bargaining in 1997, even though the contract ended in 2003.

According to the Seattle Post-Intelligencer, the court said when employers give retirees health care through a collective bargaining agreement, they create a vested right to those benefits, absent contract language that specifically names when they will end. In the majority opinion, Justice Susan Owens said that if the port did not want to pay the retirees’ welfare benefits for some members of International Longshore & Warehouse Union Local 9, it could have insisted on it when negotiating the contract.

“Collective bargaining creates a relationship through which the employee who negotiates for retirement benefits forgoes the full present value of his or her service with the expectation of receiving that value after he or she completes the service,” the opinion said, according to the news report. Owens added that counting on the agreement “prevented these employees from finding alternative ways to prepare for retirement, either by finding other employment with greater benefits or by negotiating with the port for higher wages in exchange for the lack of retirement benefits so that they could start their own personal retirement accounts.”

In her dissenting opinion, Justice Barbara Madsen accused the majority of “overstepping its constitutional role” and of “usurping the parties’ right to address retirees’ coverage by private contract.” Madsen expressed concern that the majority opinion would result in many employers ceasing to provide any health care benefits “in order to avoid the possibility of incurring an obligation to provide benefits for life — at the least they will cease providing retiree health care benefits.”

The Association of Washington Business is studying whether the ruling is applicable to the private sector, the news report said.