Minnesota Supreme Court Gives Public Sector Employers a Reason to Give Thanks.
On Wednesday, November 23, 2011, the Minnesota Supreme Court issued a decision in Savela v. City of Duluth, A09-2093. In a 4-3 split decision, with two lengthy dissenting opinions, the Supreme Court affirmed the lower courts’ determination regarding the phrase “to the same extent as active employees” used by the City in approximately sixty (60) collective bargaining agreement (CBAs) between 1983 and 2006. This language was dubbed the “active-employee clause.”
The controversy focused upon the meaning of “active.” Did “active” refer to the employees that were active employees at the time a person retired? In other words, upon retirement, was an individual’s coverage fixed such that it could never change? Or, did “active” refer to the employees that are active employees? In other words, would the retirees be entitled to the coverage made available to current employees, which could change over time?
Note: It is important to note that the City did not dispute whether it was obligated to provide coverage for the retiree’s life. It also appeared that the City’s obligation to pay for the coverage was not in dispute. What was in dispute were the terms and conditions of the coverage itself; the coverage to be provided and paid by the City for the retiree’s life.
The parties stipulated to converting the lawsuit initially filed by three retirees, including Savela, into a class action. The stipulation narrowed the issue to be reviewed to contractual interpretation of the active-employee clause.
Important to Note: As part of the stipulation, the class members agreed not to pursue other claims of an individual nature, “such as promissory estoppel.” This fact was flagged to some degree in the majority opinion.
Addressing only the narrow issue placed before it, the majority held that the active-employee clause was not ambiguous and, therefore, should be accorded its plain meaning. Listing several dictionaries’ definitions and usages of the word “active,” the majority concluded that the word, and thus the active-employee clause, referred to current employees of the City. In other words, as the coverage for current employees changed over time, the coverage for the retirees could also change.. The opinion further noted that Savela’s proposed interpretation requires us to change the phrase “active employees” to “active employees at the time of retirement” or “then-active employees.” This would require going beyond the plain meaning of the phrase, something the majority was not prepared to do.
The dissents reached a different conclusion. Finding the phrase to be subject to more than one reasonable interpretation and, therefore, ambiguous, the dissents held that remand to the District Court for further proceedings was the appropriate course of action.
Note: Neither of the dissents disagreed with the result that followed from the majority’s affirmation. Rather, they disagreed that the phrase that had been stipulated by the parties for review was not ambiguous.
So what does this decision mean?
For the City of Duluth, it is an extra reason to give thanks during this holiday season. At least with respect to the obligations of the City for those CBAs during that period of time, the decision represents closure.
For public sector employers in Minnesota in general, the decision reaffirms a couple of things: (1) you want unambiguous contract language, and (2) you want representations made by the employer, including the employer’s personnel, to be consistent with that unambiguous language. But the decision should not necessarily be considered a “get out of jail free card” for employers with the same or similar language in their CBAs. The fact that the issue to be reviewed was stipulated by the parties as a very narrow issue of contract interpretation should not be overlooked. The majority opinion, and to some extent the dissents, suggests that promissory estoppel could be a viable claim even where the contract language is not ambiguous. Care should be taken by an employer to not undercut its ability to rely on unambiguous contract language where outside representations and promises may give rise to promissory estoppels claims.
Please contact us if you have questions.
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The information contained in this ALERT is intended for general information purposes only and does not constitute legal advice relative to a specific situation.