March 22, 2011

Legal question re: contracts

Lectured today on the early Supreme Court decisions that strengthened private property and the sanctity of contracts, and am wondering why state agreements with their employees over pensions or benefits are not considered contracts? Law peeps?


Natalie said...

My best guess is because there is no consideration. The employer offers benefits as precisely that - a benefit, and the employee would have to fulfill her obligation as an employee regardless of any benefits offered. There is nothing above and beyond that exchanged between the parties that would make offering a benefits plan a binding contract. There are fiduciary duties imposed on plan administrators and a duty imposed on actuaries who review the defined benefit plans, but I don't think that would make the plans contracts in the traditional sense.

By the way, have been thinking of Streak in light of your recent posts. Poor guy :(

Streak said...

Thanks, Natalie. He is hanging in there. Not eating well today, but still hanging in there.

Thanks for the explanation, but I am wondering if there is a distinction between benefits as a part of a compensation package and one that is negotiated as part of a union collective bargaining. Wouldn't that be a contract?

Let me put it another way, and I am thinking of Jon Stewart's take on this: is this fundamentally different than the bonuses that were promised to mortgage brokers? Conservatives defended those as contracts that could not be abrogated, but have no problem yanking the benefits away from teachers and union members.

steves said...

It entirely depends on the language of the contract. Without having the collective bargaining agreement in front of me, I would guess that there are provisions that allow one or both parties to nullify the agreement under certain circumstances.

I would also note that there is consideration between both parties in a labor contract. Even if there weren't, I would still make an equitable estoppel argument.

Natalie said...

Ah I see - you were going the CBA route (not sure why I thought you were referring to an Enron situation, considering how public workers' bargaining rights have been such a major issue lately). If I could add on to what steves said, I remember from my labor law class last semester that public sector workers face stricter rules when it comes to bargaining. They usually are prohibited from striking due to public safety concerns, so it wouldn't surprise me if it's easier to strip them of their rights because of budget concerns.

Conservatives will also defend the subsidies that ridiculously profitable companies receive, because, gosh, the government can't breach the contracts they made! Hypocrisy at its best...

steves said...

Good point, Natalie. My state prohibited teachers from striking, thereby removing the only real option teachers have if there is a stalemate. There are some administrative remedies, but most of the time, school boards just have wait out the union and they will eventually cave.

Despite what some believe, the current structure in this country favors the employers over the employees.