Ruderman & Glickman Wins on Appeal in Landmark Case Regarding Employers’ Ability to Change Health Care Plans of Unionized Employees After Retirement

February 9, 2011: On behalf of Defendant Township of Raritan, Littie E. Rau has obtained a landmark decision from the Appellate Division in Petersen v. Township of Raritan, 418 N.J. Super. 125 (App. Div. 2011), regarding the ability of municipal employers to change health care plans of their unionized retirees.

The case concerned the ability of the Township to change the health insurance plan provided to its retirees after the date of their retirement. The plaintiff in this case had retired from his position of employment with the Township in 1999. At that time, the plaintiff received traditional health insurance coverage via the Collective Bargaining Agreement in effect between the Township and the plaintiff’s Union. Nearly ten (10) years after plaintiff’s retirement, the Township and the Union agreed to eliminate the so-called Traditional Plan, but retain the pre-existing POS [point-of-service or network] Plan. Pre-existing enrollees — like plaintiff — were given the opportunity to remain enrolled in the Traditional Plan no longer provided by the Township, provided that they agree to pay the excess in premium cost between the Traditional Plan and the prepaid POS Plan. The plaintiff contested this change.

The Township was represented by Littie E. Rau throughout the entirety of the litigation. At the summary judgment stage of the case, the trial court ruled in favor of the Township and upheld the changes as lawful under the collective bargaining agreement. On appeal by plaintiff, the Appellate Division’s three-judge panel upheld the trial court’s grant of summary judgment. In a decision written by Appellate Judge Lihotz, the panel held that absent a specific promise made by the employer to plaintiff that he would retain a specific type of health insurance plan post-retirement (e.g., the Traditional Plan), the collective bargaining agreement did not prohibit the employer from change the type of healthcare plan it provid3ed with its concomitant financial obligations where benefit levels were not significantly altered. In short, plaintiff’s retirement did not freeze his retiree health benefits or render them immutable as to the kind or type of insurance plan that the employer provided to plaintiff or other retirees.

This is a major decision that provides for municipal flexibility in changing current retirees’ health insurance program benefits.