Spring 2008 SBH Quarterly Newsletter
PDF FormatState Employment Update: Oregon Courts
Caution: Benefits promised to employees may become burdens in the future.
In 1956, Eugene Water and Electric Board began giving employees who worked for 10+ years the same health benefits in retirement that active employees would receive. Then, in 1975, to recruit new workers, employer threw out the years of service requirement and promised employees equal and free benefits upon retirement, with low monthly fees to extend the coverage to dependants ($3.00 - $7.50 per month). In 1990, employer created a wholly new, three-tiered plan that created a monthly contribution for employees retiring after 1990 (approximately $30 per month). As time passed, increased costs were passed on to retirees in tiers two and three, while benefits offered decreased as compared to active employees. A group of employees spanning all three tiers sued for breach of contract in 2004. Employer’s main argument was that its promises about health benefits did not vest those benefits and it reserved the ability to change the plans at any time. The court disagreed. As to employees retiring before 1990, the court held they were entitled to free and equal health benefits. However, the court found that employees working after the 1990 plan had bargained for and accepted that new plan as a substitute for a disputed agreement. While this allowed the new monthly contribution to be assessed, the court held that any later increases in that amount or decrease in benefits offered did breach the contractual agreement forged. Lauderdale v. Eugene Water and Elec. Bd., 217 Or App 551 (2008).
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