Now you have it, now you don't? Can an employer suddenly cancel its workers' health care benefits? Probably, at least for now, and you can bet workers will fight it tooth-and-nail.

Coca-Cola Unbottles Trouble

In April 2010, Soda giant Coca-Cola (Coke) began negotiating a new labor contract or collective bargaining agreement (CBA) with hundreds of workers at its plant near Seattle. Negotiations didn't go too well, and 500 workers went on strike - they stopped working. They claimed Coke violated the federal law that's designed to make sure employers and unions treat each other fairly.

The day after the strike began, Coke canceled the striking employees' health care benefits. The workers responded by filing a class action lawsuit claiming Coke violated the Employee Retirement Income Security Act (ERISA).

ERISA

ERISA is a federal law that governs retirement and health care plans provided by private employers like Coke. ERISA doesn't require employers to provide these benefits. Rather, if employers choose to create a benefit plan, they have to follow certain rules. It's a complicated law, but some of the rules include:

  • Having the plan in writing
  • Making the benefits available to all employees
  • Keeping proper records and reporting specifics about the plan, including changes in the plan, to the employees and the federal government
  • Having a grievance and appeals process for workers to get benefits or challenge the denial of plan benefits

Among other things, ERISA makes it illegal for employers to interfere with employees' rights to benefits under the plan. Details of the Coke suit are sketchy, but according to news reports, the workers claim Coke unlawfully denied them rights under the benefits plan. Specifically, they claim Coke cut-off their rights to file claims and appeals over the denial of benefits and Coke's decision to terminate their benefits.

Coke's argument is that because of the strike, the workers weren't "employees" under the benefit plan and had no rights to the plan's benefits.

According to one union involved in the case, the workers planned to return to work in early September, about one week after Coke terminated their health care benefits. That doesn't end the lawsuit, though. Both sides are raising valid and interesting claims under ERISA that the courts may need to settle. In any event, it appears Coke still has to deal with the unions' claims under federal labor laws.

What's It All Mean To You?

Employers need to be careful to follow the rules set out in their benefit plans and in ERISA, especially the rules requiring reporting or notification of changes to covered employees. Employers may also want to consider if it should terminate benefits and not so much whether it can.

For instance, one Coke worker who lost his benefits also lost the ability to get essential prescription medication for his wife. Events like these don't foster healthy, productive employee-employer relationships.

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Tagged as: Labor and Employment, Employee Benefits, coca cola, erisa lawsuit