Wisconsin Court of Appeals Upholds School District’s Post-Act 10 Reduction of Retirement Benefits
October 28, 2016

By Hugo P. Rojas

A recent unpublished opinion of the Wisconsin Court of Appeals affirms the principle that Wisconsin school districts are authorized to unilaterally determine the amount of retiree benefits offered in the post-Act 10 era.

The Court’s August 2016 ruling in Townsend v. Neenah Joint School District brought closure to a series of related cases arising from a class-action lawsuit brought by current and former teachers of the Neenah Joint School District (the District). The teachers unsuccessfully sought reinstatement of certain supplemental retirement benefits that were reduced following the expiration of a collective bargaining agreement (CBA) in place between teachers and the Neenah Joint School District.

Background

The District had previously provided a supplemental retirement plan to its teachers under a series of two-year CBAs between the District and the Neenah Education Association (NEA). The final CBA was effective from July 1, 2009 through June 30, 2011, and described both a monetary stipend and a post-retirement health insurance benefit available for teachers who retired after having met certain age and service requirements.

The CBA also included a so-called evergreen clause, which provided that “should the parties fail to reach agreement on a new” CBA, “this Agreement shall continue in full force and effect until such time that the terms and conditions of the new Agreement are fully resolved.” Both the NEA and the District recognized that the evergreen clause prevented the District from unilaterally terminating or changing the supplemental retirement plan after a CBA expired.

In 2011, the Wisconsin Legislature passed 2011 Wisconsin Act 10, specifically prohibiting public sector employees from bargaining collectively on issues other than base wages.

Following the expiration of the CBA, the District drafted an employee handbook to describe the terms and conditions of employment (including benefits) that had previously been addressed in the CBA. Any teacher retiring by June 2012 was permitted to receive the benefits provided for in the final CBA.

Effective October 2012, the District changed its retiree benefit program in a way that prospectively reduced the amount of supplemental benefits available as compared to the benefits under the final CBA.

Legal Arguments

In a final appeal of the Winnebago County Circuit Court’s dismissal of the case, the teachers claimed that retirement benefits must be reinstated under legal theories including promissory estoppel and unjust enrichment.

The Court of Appeals observed, however, that promissory estoppel and unjust enrichment are equitable remedies intended to restore an individual who has relied on a promise (or provided significant services) in the absence of written agreement. Here, in contrast, the terms of agreement had been carefully negotiated and committed to writing. Legal theories requiring the absence of a written agreement cannot prevail where there is a written agreement. What the plaintiffs were actually requesting, the Court asserted, was for the District to continue to observe a negotiable and expired contract term that can no longer exist in light of the bargaining prohibitions under Act 10.

While the Court affirmed that the CBA had been a valid and bargained-for employment contract, such contract did not include any terms that caused the retirement benefits to vest after the CBA’s expiration. Because, as the parties agreed, Act 10 effectively voided the protective evergreen clause, the District was fully empowered to exercise its discretion in setting the amount of retirement benefits after the CBA expired following the passage of Act 10.

Having repeatedly bargained for two-year contracts which set forth all material terms of the bargain, the plaintiffs could not now replace their contract claims with legal claims applicable only absent a written contract.

“Act 10 changed the game for everyone,” the Court noted. The District “is not liable for acting within the confines of the law.”

If you have any questions about this article, please contact your Davis & Kuelthau attorney or the employee benefits attorney, Hugo P. Rojas at 414.225.1413 / hrojas@dkattorneys.com.

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