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LACEY & JONES

MEMORANDUM
TO: FROM: DATE: RE: All Jerry Marcinkoski April 16, 2012 Federal General Motors Pension Coordination Case (Garbinski, et al. v General Motors LLC)

_____________________________________________________________________________ The district court for the Eastern District of Michigan issued a decision in a case brought by General Motors pensioners against General Motors holding that General Motors current bargaining agreement allowing for coordination of disability pensions with weekly workers compensation payments is legitimate. The case is Garbinski, et al. v General Motors LLC, Eastern District Case No. 11-cv-11503. FACTUAL BACKGROUND Michigans workers compensation statute allows employers to coordinate weekly workers compensation benefits with company pension benefits, including disability pension benefits. But, the statute permits employers and employees to opt out of such coordination if they so agree under MCL 418.354(14).1 Years ago, General Motors had agreed to opt out and not coordinate disability pensions. In 2007, General Motors and the United Auto Workers [UAW] collectively bargained that for those employees who retire on or after October 1, 2007, the coordination would be permitted. And, in 2009, General Motors and the UAW further bargained that as of January 1, 2010 all retirees are subject to such coordination. The plaintiffs in Garbinski took disability retirements and had been receiving weekly workers compensation benefits and uncoordinated disability pension benefits under the original collective bargaining agreement described above, i.e., the one that did not permit coordination. When these retirees were later subject to coordination as of January 1, 2010, they contested the coordination, as did many other similarly situated retirees. Most such retirees filed claims in the state workers compensation system. Besides doing that, Garbinski and her co-plaintiff filed this federal action claiming that the new coordination agreement violates both federal law (the Labor Management Relations Act [LMRA]) as well as Michigan law. Plaintiffs and General Motors both moved the federal trial court for summary judgment. The federal district court agreed with General Motors and summarily dismissed the plaintiffs claims.
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MCL 418.354(14) provides: This section does not apply to any payments received or to be received under a disability pension plan provided by the same employer which plan is in existence on March 31, 1982. Any disability pension plan entered into or renewed after March 31, 1982 may provide that the payments under that disability pension plan provided by the employer shall not be coordinated pursuant to this section.

Analysis The plaintiffs first argued that their rights to uncoordinated benefits were vested and, therefore, could not later be collectively bargained away. The Court rejected this claim by examining the original collective bargaining agreement and its subsequent amendments to note the limiting language of each. The Court said that, while it is possible to vest benefits if the parties so intend, the collective bargaining agreements here provided durational language limiting the scope of benefits and repeatedly said continuing coordination of uncoordinated benefits is, in effect, subject to change. The Court ruled in this regard: Accordingly, Plaintiffs benefit did not vest by operation of the letters amending the CBAs [collective bargaining agreements] because the plain language used cannot be reconciled with an intent to vest. Second, plaintiffs argued that General Motors did not properly amend the original collective bargaining agreement, but the Court rejected this argument as well saying that plaintiffs argument hinged on a selective reading of the CBAs text. When read in full, the court said the amendments to the collective bargaining agreements were properly executed. Third, the Court rejected plaintiffs argument that the amendments were retroactive, rather than prospective, in nature. The Court said that the amendments were prospective because they did not seek to recapture or recalculate previously paid benefits but instead described the payment of benefits moving forward from January 1, 2010 onward. The Court also pointed out if one accepted the retirees argument, then it would not be compatible with the fact that retirees enjoy increases in their pension benefits under subsequent amendments to their original collective bargaining agreement. The Court next addressed the claims made by plaintiffs under state law. The Court first ruled that plaintiffs argument that General Motors is violating MCL 418.354(14)2 of the Michigan Workers Disability Compensation Act is an argument preempted by federal law because it requires an interpretation of a collective bargaining agreement, a matter of federal law. Finally, the Court rejected plaintiffs other state law claim to the effect that General Motors was considering social security disability benefits in an improper way in calculating the coordination of disability pensions. The Court said the plaintiffs seize on the word consider in MCL 418.354(11)3 in an improper way. The Court said that under the formula being used by General Motors, General Motors does reference receipt of social security disability benefits but is not considering social security disability insurance benefits within the meaning of 354(11) by so doing. The Court explained that: While retirees social security disability benefits play a

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See, n 1. MCL 418.354(11) provides: Disability insurance benefit payments under the social security act shall be considered to be payments from funds provided by the employer and to be primary payments on the employers obligation under section 351, 361, or 835 as old-age benefit payments under the social security act are considered pursuant to this section. The coordination of social security disability benefits shall commence on the date of the award certificate of the social security disability benefits. Any accrued social security disability benefits shall not be coordinated. However, social security disability insurance benefits shall only be so considered if section 224 of the social security act, 42 U.S.C. 424a, is revised so that a reduction of social security disability insurance benefits is not made because of the receipt of workers compensation benefits by the employee.

role in the overall calculation, it cannot be said that these benefits are being considered as that term is used in 418.354(11). COMMENT This decision is likely to have an effect on the many cases on the same issue pending before Michigans Board of Magistrates. In particular, the federal courts language that federal law preempts state law arguments relating to the state coordination of benefits provision should be of interest to Michigans Board of Magistrates and the Michigan Compensation Appellate Commission.