Court Opinion

ID: 6472492
Source: CourtListenerOpinion
Date Created: 2022-06-26 14:23:46.872509+00
Date Added: 2024-06-11T09:11:37.304687
License: Public Domain

VIGIL, Judge (dissenting). {34} The majority opinion allows a government employer who clearly and unambiguously contractually obligates itself to provide a retirement benefit to its employees to renege on its contract under the guise that when it made the promise, it was merely establishing a public policy that was subject to subsequent legislative revision. This relegates government employees to second class status who, unlike employees of private employers, cannot rely on a contractual obligation of the government as an employer to provide an employment benefit. I do not agree and therefore dissent. {35} When the City Council adopted Section 629, it clearly and unambiguously expressed its intent to be contractually obligated to provide Retirees with group health insurance coverage. An express contract was created when the City offered each Retiree group health insurance coverage, each Retiree accepted the City’s offer, and each party provided consideration. The City could not then unilaterally terminate the group health insurance coverage which each Retiree had a contractual and vested right to continue receiving. Further, the majority’s reliance on Section 1402 is misplaced because the issue in this case is whether the City could completely terminate, rather than amend, Retirees’ group health insurance coverage. {36} Whitely clearly states that contractual rights between a legislative body and employees may be established if “the language of the statute and the circumstances ... manifest a legislative intent to create private rights of a contractual nature.” 115 N.M. at 312, 850 P.2d at 1015 (internal quotations marks and citation omitted); see Hammond v. Temp. Comp. Review Bd., 473 A.2d 1267, 1272 (Me.1984) (explaining that although public employees, generally, do not have contractual rights, contractual rights may develop based on the “agency’s words, actions, rules, or ‘mutually explicit understandings’ ” (citations omitted)). The majority concludes, and I agree, that while this case involves a municipal ordinance rather than a state statute, the analysis is the same. {37} A plain reading of Section 629 clearly reflects the City Council’s intent to make a binding contractual offer. Section 629 is unambiguously phrased in contractual language: “The City of Portales shall offer employees upon their retirement the option of continuing their group health and life insurance coverage through the City’s group plan, provided they are enrolled in the group health plan at least one year prior to retirement.” (Emphasis added.) “The plain language of [an ordinance] is the primary indicator of legislative intent.” Orcutt v. S & L Paint Contractors, Ltd., 109 N.M. 796, 798, 791 P.2d 71, 73 (Ct.App.1990). By stating its intent to offer Retirees group health insurance coverage, the City Council expressed its desire to enter into a contract. See Talbott v. Roswell Hosp. Corp., 2005-NMCA-109, ¶ 15, 138 N.M. 189, 118 P.3d 194 (explaining that an offer is an expression of a willingness to enter into a contract). {38} Each Retiree accepted the City’s offer. They did so when they signed up to receive health insurance coverage upon their retirement and began receiving coverage. See Orcutt, 109 N.M. at 798, 791 P.2d at 73 (stating that acceptance illustrates an agreement to the terms of the contract). {39} The parties each provided consideration for the contract. “ ‘Consideration consists of a promise to do something that a party is under no legal obligation to do or to forbear from doing something he has a legal right to do.’” Talbott, 2005-NMCA-109, ¶ 16, 138 N.M. 189, 118 P.3d 194 (quoting Heye v. Am. Golf Corp., 2003-NMCA-138, ¶ 12, 134 N.M. 558, 80 P.3d 495); see Smith v. Village of Ruidoso, 1999-NMCA-151, ¶ 33, 128 N.M. 470, 994 P.2d 50 (“Consideration is the bargained-for exchange between the parties.”); Restatement (Second) of Contracts § 73 (1981). The City’s promise was to provide Retirees group health insurance coverage upon their retirement. See Bender v. Bender, 258 Conn. 733, 785 A.2d 197, 210 (2001) (noting that “employers frequently use lucrative retirement packages in lieu of additional salary to attract and retain desirable employees” (internal quotation marks and citation omitted)). Employers often use the promise of retiree health insurance as an incentive to hire and retain employees or are able to pay employees a lower salary because of the guarantee of health benefits upon retirement. See Poole, 831 A.2d at 223 (“[T]he promise of health insurance benefits at retirement may be a significant inducement in determining employment.”); Cal. League of City Employee Ass’ns v. Palos Verdes Library Dist., 87 Cal.App.3d 135, 150 Cal.Rptr. 739, 742 (Ct.App.1978) (finding salary increases and promised vacation “were important to the employees, had been an inducement to remain employed with the district, and were a form of compensation which had been earned by remaining in employment”). The consideration provided by Retirees was to remain employed with the City until their retirement. The City does not dispute that Retirees continued to work for the City in part based upon the City’s promise to provide group health insurance coverage, and at least two Retirees turned down higher paying jobs and continued to work with the City because of the promised health insurance coverage benefit upon retirement. {40} Finally, the parties expressed “an objective manifestation of mutual assent ... to the material terms of the contract.” Pope v. Gap, Inc., 1998-NMCA-103, ¶ 11, 125 N.M. 376, 961 P.2d 1283. “The manifestation of mutual assent to an exchange ordinarily takes the form of an offer by one party followed by an acceptance by the other party.” Orcutt, 109 N.M. at 798, 791 P.2d at 73. There was mutual assent when the contract was formed. Both parties understood that the City would provide Retirees health insurance coverage. The Retirees signed up the coverage, and the City provided the coverage and budgeted for it. See id. at 798, 791 P.2d at 73 (explaining that “[acceptance of an offer is a manifestation of assent to the terms [of the offer]”) (citing Restatement of Contracts (Second) § 50 (1981)). {41} The majority acknowledges that if the City Council had wanted to, it could have created a contractual right by using express contractual terms. I respectfully submit that the City Council did just that in this case. The fact that the City Council did not use the contractual language suggested by the majority should make no difference simply because the retirement benefit was promised by a public employer and not a private employer. A city employee should be treated no differently from a private employee who has been clearly and unambiguously offered a contractual right to receive group health insurance coverage upon retirement. I reject any suggestion to the contrary. Retirees have every right to have their contractual agreement enforced by the courts. {42} The majority relies heavily on Pierce, 1996-NMSC-001, 121 N.M. 212, 910 P.2d 288, to support its position that the City Council did not intend to enter a binding contract with Retirees. This case, however, is easily distinguished from Pierce. Unlike Section 629, the state statute in Pierce lacked language expressly creating private contractual rights and, in fact, the statute “expressly stated that [with one exception] it was not granting any contractual rights.” Pierce, 1996-NMSC-001, ¶¶ 31, 39, 121 N.M. 212, 910 P.2d 288; see Colorado Springs Fire Fighters Assoc., Local 5, 784 P.2d at 773 (holding that the ordinance lacked contractual language and did not require city employees’ acceptance to become effective). The Pierce Court therefore concluded the legislature did not intend to create express contractual rights with the plaintiffs. That is not the ease before us because Section 629 contains the requisite contractual language. {43} Furthermore, in Pierce, the legislature repealed the tax exemption for state retirement benefits, but it did not terminate the benefits themselves. 1996-NMSC-001, ¶ 2, 121 N.M. 212, 910 P.2d 288. In the case before us, no ordinance was passed which terminated the group health insurance coverage of Retirees. Significantly, the City Council voted against a resolution in August 2005 stating that the health insurance benefit provided by Section 629 was terminated, canceled, and rescinded. The most that can be said when the City Council deleted Section 629 from the 2005 personnel ordinance in May 2005 is that it eliminated the benefit only for employees who had not yet retired. The City Council action could not eliminate the benefit to Retirees because the City was already contractually bound to provide it. {44} I do not dispute that the City Council like other legislative bodies, has the authority to make policy that can be amended. However, when it adopted Section 629, the City Council did not merely create policy. Instead, it stated a clear legislative intent to enter a contract with City employees to provide group health insurance coverage upon employees’ retirement. By offering retiree health insurance coverage to its employees, the City was able to attract and retain them and partially defer compensating the employees until their retirement. See Int’l Union v. Yard-Man, Inc., 716 F.2d 1476, 1482 (6th Cir.1983) (explaining that retiree insurance benefits “are typically understood as a form of delayed compensation or reward for past services”); Gauer v. Essex County Div. of Welfare, 108 N.J. 140, 528 A.2d 1, 5 (1987) (concluding that “the reimbursement of health insurance premiums to long-standing employees was intended at least in part as compensation for extended tenure”); William J. Holloway & Michael J. Leech, Employment Termination Rights and Remedies 72-73 (2d ed.1993) (stating pensions and insurance “are recognized forms of deferred compensation”). I respectfully submit that legislation which contractually promises to convey an employment benefit is different from other legislation which reflects public policy decisions such as criminal statutes, zoning requirements, and taxes. These are core governmental issues and reflect changing policy decisions. However, contractual obligations of a governmental entity acting as an employer do not stand on the same footing. {45} Finally, I disagree with the majority that Retirees do not have a vested right to the group health insurance coverage. Vesting is “substantially a property right, and may be created either by common law, by statute, or by contract.” Rubalcava, 53 N.M. at 298, 206 P.2d at 1156 (internal quotation marks and citation omitted). When the language is clear and unambiguous in a statute or ordinance, it may confer vested rights. Pierce, 1996-NMSC-001, ¶ 18, 121 N.M. 212, 910 P.2d 288. I have already expressed my view that Section 629 satisfies this requirement. However, the majority concludes that by virtue of Section 1402, which allows amendments, Retirees have no vested right to the group health insurance coverage. I disagree with this conclusion as well. Whether the City could amend the terms of the Personnel ordinance, such as changing the amount of the premium Retirees have to pay, is not before the Court in this case. The City did not amend the terms of Retirees’ group health insurance coverage. Instead, the City altogether eliminated the health insurance coverage. Thus, the issue is whether the City could unilaterally terminate the contract in its entirety. The personnel ordinance does not reserve a right in the City to terminate its contract with Retirees. See Diehl v. Twin Disc, Inc., 102 F.3d 301, 308-09 (7th Cir.1996) (discussing a reservation clause that allowed the company to “change[] or discontinuef ]” coverage; stating that if the employer “were permitted to ‘modify coverage until it became all but nominal, the promise of lifetime benefits would begin to look rather illusory”); Helwig v. Kelsey-Hayes Co., 93 F.3d 243, 246 (6th Cir.1996) (discussing an employee contract that reserved the right to “modify, suspend or terminate” the benefits described in the contract (internal quotation marks and citation omitted)); Emerling v. Village of Hamburg, 255 A.D.2d 960, 680 N.Y.S.2d 37, 38 (App.Div.1998) (“[Wjhile there is elsewhere in the rules and regulations a provision making those rules and regulations subject to amendment, nowhere is the right to terminate the medical benefits of retirees expressly reserved.”). {46} The City’s offer to Retirees, the acceptance of the offer by Retirees, and the mutual consideration created a contract between the City and Retirees. Further, the contract, in the language of Section 629, provides that coverage continues as long as Retirees remain eligible by paying their portion of the insurance premium on a timely basis to avoid a lapse in coverage. Once the contract was formed, the City was bound by the terms of the contract and could not unilaterally terminate the contract. In other words, Retirees have a vested right to the health insurance coverage as provided in Section 629. See Diehl, 102 F.3d at 306-07 (holding that, based on the language of the contract, retirees’ rights had vested and that could not be terminated); Yard-Man, 716 F.2d at 1482 & n. 8 (holding that retiree “benefits are in a sense ‘status’ benefits which, as such, carry with them an inference that they continue so long as the prerequisite status is maintained”; explaining that the union did not have to provide retiree health care benefits, but that once it chose to do so, it could not bargain away rights that had vested upon retirement and had become interminable); Hous. & Redevelopment Auth. of Chisholm v. Norman, 696 N.W.2d 329, 337 (Minn.2005) (holding that a public employer’s promise in a collective bargaining agreement was enforceable, even though the collective bargaining agreement later expired, because the employee’s benefit vested at the time she retired); Cantor v. Berkshire Life Ins. Co., 171 Ohio St. 405, 171 N.E.2d 518, 522 (1960) (holding that “[the retiree] having complied with all the conditions in his contract entitling him to retirement rights and having reached retirement age under the contract, his retirement rights became vested and [the employer] could not terminate his contract so as to divest him of such rights”); Schlosser v. Allis-Chalmers Corp., 86 Wis.2d 226, 271 N.W.2d 879, 889 (1978) (“Clearly, under our present economic system, an employer cannot offer a retirement system as an inducement to employment and, after an employee has accepted employment under such circumstances, withdraw or terminate the program after an employee has complied with all the conditions entitling him to retirement rights thereunder.” (internal quotation marks and citation omitted)). {47} Having created a vested property-interest in group health insurance coverage through Section 629, any action by the City that terminates, diminishes, or alters the value of the benefit must be compensated for by providing an equal or greater benefit. Pierce, 1996-NMSC-001, ¶ 54, 121 N.M. 212, 910 P.2d 288. Otherwise, the City will be taking property from Retirees without just compensation in violation of the New Mexico and United States constitutions. Id.; see N.M. Const. art. II, § 20; U.S. Const. amend. XIV. The effect of the majority opinion is to allow the City to take away the vested property right which Retirees have in their group health insurance coverage without having to pay just compensation. {48} For the foregoing reasons I dissent. I would reverse the summary judgment in favor of the City and remand with instructions to enter summary judgment in favor of Retirees.