NYSHIP LITIGATION

June 17, 2016 NYSHIP LITIGATION

Posted at 20:51h in Client Memos by
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KEEPING YOU INFORMED…

In 2012, NYSHIP issued Policy Memorandum 122r3 (“the NYSHIP memo”) prohibiting its participating employers and agencies from allowing buyouts from a NYSHIP plan for employees who were enrolled in other NYSHIP coverage, e.g., through a spouse’s family NYSHIP plan, during the buyout period.  The NYSHIP memo permitted out of compliance collectively negotiated buyout programs to continue until the first day of the plan year following the ratification of a new CBA and permitted out of compliance administratively established buyout programs to continue until the first day of the plan year following the end of the employer’s budget period that began after May 15, 2012.

Since the memo’s issuance, there has been litigation challenging it without success based upon procedural issues unrelated to the merits of the case.  Recently, the Appellate Division, Third Department, decided the merits and issued two decisions finding that the NYSHIP memo is null and void because New York State failed to file it with the Department of State, a requirement for all rules and regulations.  Since the issuance of those decisions, legislation that would prohibit NYSHIP from issuing similar rules has been making its way through the State Legislature.  We will let you know if that legislation is enacted.

Your next step in response to the Third Department’s decisions depends on what happens with the litigation and the status of the buyout provisions set forth in your collective bargaining agreements, employment agreements and policies, if any.

Litigation Status

As of the date of this memorandum, the NYSHIP memo is unenforceable, null and void.  Before approximately July 18, 2016, NYSHIP or another respondent in the litigation can seek permission to appeal the decisions to the Court of Appeals, the highest court in New York State.  The Court of Appeals is not required to hear either case and may deny any request to appeal.

If the Court of Appeals hears the case, the NYSHIP memo will continue to be unenforceable unless, upon application by NYSHIP or another respondent, the Third Department’s decisions are stayed pending the appeal.  In other words, a stay could be granted that would allow the NYSHIP memo to be enforced until the Court of Appeals makes a final decision.

Next Steps

We will provide you with an update in July regarding whether NYSHIP or another respondent seeks permission to appeal or applies for a stay.  If you would like additional information on what to do next, we have included the below scenarios that depend on the language contained in your buyout provisions.

You should review all health insurance buyout provisions set forth in your collective bargaining agreements, employment agreements and terms and conditions of employment for non-union staff and any applicable policies.

  • If you have agreed to suspend any out of compliance buyout provisions pending a “final resolution” of the NYSHIP litigation, then you should continue that suspension until one of the following events occurs: (a) NYSHIP or the other respondents fail to seek leave to appeal and their time to do so expires; (b) the Court of Appeals denies a request to appeal; or (c) the Court of Appeals hears an appeal and issues a final decision affirming the Third Department’s decisions.  If the Court of Appeals reverses the Third Department, you would continue to suspend the buyout provisions.

 

  • If you have a CBA that: (a) was ratified and approved after May 15, 2012; (b) contains a buyout provision that complies with the NYSHIP memo; and (c) the buyout provision is not suspended pending the “final resolution” of the NYSHIP litigation, then you may continue that provision or negotiate an out of compliance provision.  You may unilaterally implement a new buyout provision for any non-union employee who does not have an employment agreement.

 

If the Court of Appeals reverses the Third Department’s decisions, you would be required to comply with the NYSHIP memo.

  • If you have a CBA that: (a) was ratified and approved after May 15, 2012; (b) contains a buyout provision that does not comply with the NYSHIP memo; and (c) the buyout provision is not suspended pending the “final resolution” of the NYSHIP litigation, then you may continue that provision.  You may unilaterally implement a new buyout provision for any non-union employee who does not have an employment agreement.

 

If the Court of Appeals reverses the Third Department’s decisions, you would be required to comply with the NYSHIP memo.

  • If you have a CBA that was in effect as of May 15, 2012 and a successor agreement has not been ratified and approved, then you can continue or negotiate buyout provisions that are out of compliance with the NYSHIP memo. Again, for non-union employees not covered by an employment agreement, any change can be unilaterally implemented.  If the Court of Appeals reverses the Third Department’s decisions, you would be required to comply with the NYSHIP memo in a successor agreement.

 

Most buyout provisions, as well as NYSHIP’s Rules, require that an employee’s buyout remain in effect for a complete plan year or 12 month period.  Thus, the employee would not be affected by a change to that provision until the next buyout period.

We recommend that you maintain the status quo until we provide you with a further update on this matter in July.

If you have any questions about the Third Department’s recent decisions or your health insurance buyout contract provisions or policies, please contact Lauren Schnitzer or one of our other attorneys by calling (631) 694-2300.

THIS MEMORANDUM IS MEANT TO ASSIST IN GENERAL UNDERSTANDING OF THE CURRENT LAW.  IT IS NOT TO BE REGARDED AS LEGAL ADVICE.  THOSE WITH PARTICULAR QUESTIONS SHOULD SEEK THE ADVICE OF COUNSEL.

© Lamb & Barnosky, LLP 2016