GE Labor Unions to Join Brawl Over Retiree Health Care
The backlash from General Electric (GE) - Get Report retirees over cuts to their insurance benefits is mounting, with the company's largest unions planning a lawsuit after the collapse of negotiations with management, said three people familiar with the matter.
The organized labor case would follow an earlier lawsuit from a broader group of retirees after GE booked $4.7 billion in savings by ending its traditional health and life insurance plans and sending retirees to health-care exchanges with a $1,000-per-year subsidy.
In that case, two former GE employees claim the company, which traces its roots to Thomas Edison's invention of the light bulb, broke an implied agreement to maintain its traditional insurance plans. Dennis Rocheleau, former chief labor negotiator, and retired benefits counselor Evelyn Kaufman filed a motion in U.S. District Court in Milwaukee to obtain class-action status for their case in August, essentially allowing them to serve as representatives for a broader group of plaintiffs.
The retirees' claim turns on whether GE violated the Employee Retirement Income Security Act of 1974, known as ERISA, by changing its policy after a statement in an employee handbook that it expected to continue existing insurance plans indefinitely. The company also noted in the handbook that it reserved the right to end the policies at any time.
GE Employee Handbook
Source: GE employee handbook, issued in July 2012
Source: GE employee handbook, effective January 2015
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GE "remains confident that the company acted properly and lawfully in making changes to retiree health benefits consistent with trends among other large companies," the Fairfield, Conn.-based company said in a statement. GE reported $3.3 billion of savings in its second-quarter filing this year, along with $832 million in 2012 and $586 million in 2014.
GE's unions, represented collectively by a coordinated bargaining committee, can take a different tack than the earlier plaintiffs, relying on the clout of bargaining agreements, said the people familiar with that case, speaking on condition of anonymity because the matter isn't yet public. The labor organizations may file their suit as soon as Monday in U.S. District Court for northern Ohio, they said.
A GE spokesman declined to comment on pending litigation. The stock climbed less than 1%, to $29.70, in Friday afternoon trading. GE has gained 18% this year, outpacing both the Standard & Poor's 500 and Dow Jones Industrial Average.
Labor organizations involved include the IUE-CWA, United Electrical Workers and the International Brotherhood of Electrical Workers, the people said. They believe some of the benefit commitments in their contracts were intended to be lifetime in nature, one of the people said.
Moving union retirees to exchanges not only breaks "the collective bargaining agreement, but it violates the moral obligations of this company to fulfill their promises of decent lifetime health care for long-service retirees," Gene Elk, chief spokesman for the United Electrical Workers, said in a phone interview.
Negotiations between the unions and GE on the matter collapsed some months ago, he said. Other union representatives didn't immediately respond to requests for comment.
GE's changes are in line with those at several other companies, including Time Warner, IBM and Walgreens, who began shifting retirees to insurance exchanges after the 2010 passage of Obamacare. So is the frustration of former employees, many of whom built careers with a company because of the health care benefits and pensions they expected when they were no longer working.
This week, the IUE-CWA filed a complaint against General Motors (GM) - Get Report , claiming 5,000 younger-than-65 retirees were shortchanged on their medical coverage. The suit is in the Southern District of New York Federal Bankruptcy Court before Judge Robert Gerber, who was instrumental in establishing GM's health insurance plan during the company's 2009 restructuring, according to the union's Web site.