Arbitrator Allowed To Modify Post-Retirement Medical Insurance For Current Employees

When the Fraternal Order of Police (FOP) and the City of Pittsburgh, Pennsylvania could not resolve their negotiations disputes in 1996, the bargaining ended up in binding arbitration. One of the issues before the arbitration panel was that of post-retirement health insurance.

In the past, the City had paid the full contribution to the health insurance premium for retirees. The Arbitration Panel, awarding the City’s proposal, capped the City’s post-retirement premium obligation at the premiums in effect on the date that an individual retired.

A series of appeals followed, with the core issue being whether the arbitration decision violated the so-called “contracts clause” of the Pennsylvania Constitution. The “contracts clause,” like similar provisions in the United States Constitution and other state Constitutions, prohibits a governmental body from impairing an existing contract. Since the Arbitration Panel acted under the auspices of a statewide collective bargaining law, it is considered to be a governmental body for purposes of the contracts clause.

The Pennsylvania Commonwealth Court (Pennsylvania’s Court of Appeals) held that post-retirement health insurance benefits were not protected by the contracts clause. The Court found that post-retirement health insurance stood on a different footing than pensions, which were protected by the contracts clause. In the eyes of the Court, “post-retirement insurance is not part of the rights or privileges any present municipal employee had in his or her pension or retirement system, as they were conferred through the collective bargaining contract or interest award for the term of that contract or award.”

City of Pittsburgh v. Fraternal Order of Police, 2006 WL 3371749 (Pa.Cmwlth. 2006).

This article appears in the January 2007 issue