Wednesday, March 18, 2015

Can Benefits Be Reduced through Negotiation?

A few years ago General Motors got into financial difficulties. Historically, some characterized GM as "the most important industrial company in the history of the United States." Several people were quoted in the 2000s as saying GM and others were "too big to fail." GM was seen as a bell-weather of this country. According to The Cutting Edge, "in 1953, at the peak its dominance, its President Charles Wilson declared before Congress that what was good for the country was good for GM and vice versa,"

In the economic situation in which the U.S. found itself towards the end of the first decade of this century, there was doubt about whether GM could survive. There are car enthusiasts who insist that GM as we know it did not survive, citing the elimination of Pontiac and Saturn from the corporate structure, and the sale of the Hummer division. GM survived, but there has been critique of the form in which it emerged. 

I learned a long time ago that bankruptcy is an intriguing process. It seems that trustees and Bankruptcy Judges are faced with very difficult decisions affecting a company, and those who invested therein, loaned thereto, and labored therefore. I have never done any real bankruptcy work, though the subject has intruded on my professional life a few times. From my distant vantage point, what appears to be a real frustration endemic to the process is that there will always be too little, sought by too many, and as a result a parade of difficult or impossible choices. 

In the uncertain recent financial times, GM and the United Auto Workers (UAW) attempted to renegotiate a variety of issues affecting the company and those who labored there. One of the issues was a renegotiation of of the rights of some retirees under a collective bargaining agreement. This negotiation was tied to workers' compensation benefits for some retirees.

MichiganLive reported recently on litigation following some specific renegotiation. GM was sued by the estate of Clifton Arbuckle, a GM retiree. His workers' compensation benefits were reduced pursuant to that contract. At the outset, that idea itself may be a curiosity to the workers' compensation community. When you understand the process, it becomes a quite interesting story.

In 1980, Michigan's workers' compensation law allowed some adjustment of benefits based on receipt of other parallel benefits. Similarly, the Florida law may allow such a reduction or "offset" when an injured worker receives both social security disability benefits and workers' compensation indemnity benefits. It is a somewhat complex calculation in some cases, but the law allows it. The Michigan law afforded General Motors a statutory right to reduce benefits, that is apply an "offset" when both workers' compensation and certain other company benefits. 

There are a variety of rights which we all enjoy as a result of our existence. The U.S. Constitution and various state constitutions recognize and memorialize these individual rights. The founders of this country did not believe that those rights were granted to people by governments, but that these rights are inherent in our existence. A distinction worth remembering. 

The law can grant other rights, or benefits. The right to workers' compensation benefits is granted by various state laws. In many instances, those rights come at some expense. In other words, to earn entitlement to some statutory rights, we may give up other statutory rights, or even constitutional rights. Thus the "grand bargain" explanation for workers' compensation. 

American television spent decades enthralled with the Miranda decision, and shows incessantly intoned "you have the right to remain silent, if you give up that right . . . ." Every police show and lawyer show loved to feature that phrase. We should have learned from that. Rights can be given up. Having rights is one thing. Enforcing or protecting rights is something else. 

Though GM had every right to reduce workers compensation benefits based on the concurrent receipt of disability retirement benefits beginning in 1980, it chose not to do so. Essentially, it had a right, but it elected not to enforce that right. What reason? Well, as with so much else in the world, a decision like this is in all likelihood a compromise. 

similarly, why would GM pay its employees $24.00 per hour when the Michigan minimum wage is $8.15? It is a business decision. They pay what the market demands for the skills, employee continuity, and other tangibles or intangibles in which it sees value. In a similar vein, GM agreed not to reduce workers' compensation benefits as a result of some employee receiving other forms of benefits, that is it waived its statutory right. It agree to that in a collective bargaining agreement with the UAW. 

Then the economy took a turn in the first decade of the new century, and GM began to experience financial issues. GM thought one way to change the financial situation would be to exercise the right to offset those other benefits. In other words, having agreed to not enforce its legal rights for a period, GM sought to enforce. They raised the issue with the UAW, and an agreement was reached. As a result, GM decreased the workers' compensation benefits for about 1,800 retirees.

However, by that time Clifton Arbuckle was no longer an employee of GM, but a retiree instead. He contended that as he was not an employee, and that therefore the UAW had no authority to negotiate on his behalf, or to agree that he would receive less benefits. 

The litigation has been a bit of a roller coaster. The Magistrate (similar to the Florida JCC) concluded the reduction was improper. The Michigan Workers' Compensation Appellate Commission disagreed and upheld GM's authority. The Michigan Appellate Court last month reversed the Commission and held the reduction was improper. According to Michigan Live the Appellate Court found "no evidence that plaintiff authorized the UAW to act as his representative to modify the 1990 agreement under which he retired." GM vows to appeal the case further. If the Michigan Supreme Court hears the case, they could side with the Magistrate and appellate court of the Commission.

It is an interesting reminder of the way that statutes work. Rights and benefits can be codified, but they can also be waived. When there is an issue of such waiver, a good question to ask may be whether the person doing the talking has the authority of the person who will suffer the detriment being offered. There is no way to know from the published material whether there was any discussion between GM and UAW regarding the question, "does the UAW currently have authority to speak for retirees?" 

Perhaps they discussed it fully and reached a thoughtful conclusion. If so, and the courts later disagreed, that is something that happens in the world of disputes. However, if it was not discussed, and everyone involved just presumed that authority existed, it might be a lesson to others for future negotiations. Might this story lead others to discuss authority when entertaining negotiations?

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