Ninth Circuit Resurrects Case For "Implied" Retiree Healthcare Benefits
In the case, the Sonoma County Association of Retired Employees (Association) argued that Sonoma County had implicitly promised to provide retiree healthcare benefits in perpetuity.
The Ninth Circuit agreed the Association should be able to continue with its claims to the next step in the legal process.
Although Sonoma County had not expressly promised to provide the benefits, a California Supreme Court decision from 2011, Retired Employees Association of Orange County, Inc. v. County of Orange, recognized that a county may form a contract with implied terms--under certain circumstances.
Sonoma County had subsidized retiree healthcare benefits since at least 1964, but, in 2008, it limited its retiree healthcare benefit contribution to $500 per month with a five-year phase-in period. The Association argued that beginning in 1964, Sonoma County had promised to pay all or substantially all of the costs of post-retirement healthcare benefits for its retirees and their dependents. The Association also argued that Sonoma County had entered into a "tie agreement," which promised that the County would treat retirees and their dependents the same as it treated the active management employees with respect to healthcare benefits and the County's payment of costs.
The Ninth Circuit held that the Association's amended complaint plausibly alleged that Sonoma County intended its retiree healthcare benefits to vest for perpetuity. Although the Association had failed to point to a resolution or ordinance that created the contract implying these benefits, the Ninth Circuit permitted the Association to file an amended complaint indicating the resolution or ordinance that created the implied contract.
By Russell Naymark