IN THE SUPREME COURT OF TENNESSEE
AT NASHVILLE
February 6, 2002 Session
ROBERT TERRY DAVIS, ET AL. v. WILSON COUNTY, TENNESSEE
Appeal by Permission from the Court of Appeals
Chancery Court for Wilson County
No. 98348 John D. Wootten, Jr., Judge, Sitting by Interchange
No. M2000-00785-SC-R11-CV - Filed March 26, 2002
We granted this appeal to determine whether county employees had a vested interest after retirement
in health care benefits provided under resolutions passed by the Wilson County Commission. The
chancellor found that the appellants had a vested interest in health care benefits because they were
county employees who met the requirement of ten years of service and eight years of continuous
service with Wilson County under a 1992 resolution. The Court of Appeals reversed the
chancellor’s judgment, concluding that the health care benefits were welfare benefits in which the
appellants did not have a vested interest. After reviewing the record and applicable authority, we
hold that the health care benefits were welfare benefits that did not vest automatically and that there
was no clear and express language in the resolutions that the health care benefits were intended to
vest or could not be terminated. We therefore affirm the Court of Appeals’ judgment.
Tenn. R. App. P. 11 Appeal by Permission; Judgment of the Court of Appeals Affirmed
E. RILEY ANDERSON, J., delivered the opinion of the court, in which FRANK F. DROWOTA , III, C.J.,
and ADOLPHO A. BIRCH, JR., JANICE M. HOLDER , and WILLIAM M. BARKER , JJ., joined.
Neal Agee, Jr., Lebanon, Tennessee, for the appellants, Robert Terry Davis and Donald Hamblen.
Michael R. Jennings, Lebanon, Tennessee, for the appellee, Wilson County, Tennessee.
OPINION
BACKGROUND
On October 19, 1992, the Wilson County Commission1 enacted Resolution 92-10-19, which
allowed county employees who satisfied certain requirements to retain health care benefits after
retirement. The resolution provided that employees hired before July 1, 1982, who retired before
age 65 with eight years of continuous service, could remain on the health care plan until age 65, and
that employees hired after July 1, 1982, who retired before age 65 with ten years of service and eight
years of consecutive service, could remain on the health care plan until age 65. The resolution also
stated that the county “reserve[d] the right to alter the terms of this agreement and their
corresponding financial contribution at any time provided said change is approved by resolution of
the county legislative body . . . .”
On November 1, 1992, the resolution was amended by the county commission to state that
“[f]or purposes of this policy, an employee is considered retired and eligible to obtain the benefits
contained in this policy when they have provided at least ten (10) years of service with the County,
with the last eight (8) years required to be continuous service.” The provision was referred to as the
“10/8” requirement.
In August of 1998, the Wilson County Commission passed Resolution 98-8-1, which again
amended the requirements for receiving continued health care benefits after retirement. The new
resolution provided that a retired employee was eligible for continued coverage after retirement if
he or she satisfied one of three categories: (1) the employee was age 55 with 20 years of service and
was covered under the plan for one year prior to retirement; (2) the employee was age 60 with ten
years of service and was covered under the plan for three years prior to retirement; or (3) the
employee was under age 65 with 30 years of service. The resolution, which became effective
September 1, 1998, also stated that the eight years of continuous service provision remained
applicable.
In December of 1998, Wilson County enacted Resolution 98-12-5, which again amended the
prior resolutions and created three categories of employees who were eligible for health care benefits
after retirement. Category I consisted of employees who were hired before July 1, 1992 and had ten
years of service with at least eight years of continuous service, i.e., the “10/8” requirement. Category
II consisted of employees who were hired after July 1, 1992 and before September 1, 1998 and were
at least 45 years of age and satisfied the “10/8” requirement. Finally, Category III consisted of
employees who were hired after September 1, 1998 and were at least 55 years of age and satisfied
the “10/8” requirement.2 Unlike the earlier resolutions, Resolution 98-12-5 contained several
“additional stipulations,” one of which stated:
1
The W ilson County C omm ission is the county legislative b ody.
2
Un der C atego ry II, em ploy ees between the ag e of 4 5 and 55 were req uired to pay for the benefits
until reaching age 55. Und er Ca tegory III, an em ployee retiring at any age with 30 years of service was also eligible
for health care be nefits.
2
Anytime the employee goes to work for another employer and
insurance is available the employee shall use that program and
Wilson County shall drop the insurance on said employee. It is the
responsibility of the employee to advise Wilson County that health
insurance is available, either if provided by the employer . . . [or]
provided to the employee at his cost. After the employee advises
Wilson County, Wilson County shall terminate their policy of health
insurance at the end of the next month following being advised that
insurance was available.
The appellants, Robert Davis, age 48, and Donald Hamblen, age 39, were both employees
of the Wilson County Sheriff’s Department who were hired before July 1, 1992 and who had at least
ten years of service and eight continuous years of service. They filed a complaint in Wilson County
Chancery Court in August of 1998, alleging that they were eligible for health care benefits upon
retirement under the terms of Resolution 92-10-19 and Resolution 92-11-1. The complaint asked
for a declaratory judgment declaring that Resolution 98-8-1 was “void and unenforceable as to
persons vested with these rights,” and ordering that “those persons be restored all of the legal rights
that they had earned under prior resolutions.” An amended complaint was later filed alleging that
Resolution 98-12-5, which was passed in December of 1998, after the initial complaint was filed,
was likewise void and unenforceable against them.3 The chancellor granted a temporary restraining
order staying enforcement of the 1998 resolutions.
Following a bench trial, the chancellor found that Wilson County had contracted with its
employees to provide health insurance and that the appellants had a “vested interest” in the health
care benefits when they satisfied the requirement of ten years of service and eight years of continuous
service under the 1992 resolutions. The chancellor also determined that Wilson County was not
permitted to terminate the plan as it pertained to employees whose interest had vested. Wilson
County appealed and the Court of Appeals concluded that health insurance benefits were welfare
benefits in which the appellants did not have a vested interest. The chancellor’s judgment was
therefore reversed.
We granted review to address these issues.
ANALYSIS
The appellants, Davis and Hamblen, contend that the chancellor correctly found that Wilson
County had contracted with its employees to provide retirement benefits upon retirement and that
3
Although C ategory I unde r Resolution 9 8-12-5 appeared to co ver emp loyees in the appellants’
circum stances, i.e., a “grandfather” provision, the appellants maintained that the additional “stipulation” regarding
the potential loss of health care benefits upon attaining later employment rendered the resolution void and
unenforceable.
3
their interests in the health care benefits vested when they met the requirements under the 1992
resolutions. They further argue that Wilson County had the authority to amend, but not terminate
the benefits. Wilson County responds that it was not obligated to provide health care benefits and
that the Court of Appeals correctly ruled that the appellants did not have a vested interest in the
health care benefits.
We begin our review by examining the relevant statutory provisions, which provide in part
that “[c]ounties are . . . expressly authorized to provide group life, hospitalization, disability, or
medical insurance for all county employees and officials.” Tenn. Code Ann. § 8-27-501(a) (Supp.
2001).4 When a county has elected to provide an insurance program under the statutory provisions,
“such program may not be discontinued in its entirety unless two thirds (2/3) of the members of the
county legislative body or other governing body of the county shall so decide by a vote on such
resolution . . . .” Id. § 8-27-506. Accordingly, health care benefits are authorized by statute, but are
not required to be provided to county employees and such coverage, when provided, may be
amended, modified, changed, or terminated. See also id. § 8-27-502(c).
Although this Court has never addressed whether health care benefits may vest in a county
employee, the Court of Appeals relied upon its decision in Hamilton v. Gibson County Utility
District, 845 S.W.2d 218 (Tenn. Ct. App. 1992), which dealt with virtually identical circumstances.
In Hamilton, the county utility district passed a resolution that allowed employees who were at least
60 years of age or had over 25 years of service to remain on the health care plan until age 65.
Although the plaintiff retired at age 63 following 28 years of service, the district terminated his
coverage on the basis that the group health plan did not include coverage following retirement. Id.
at 219-220. The Court of Appeals rejected the plaintiff’s argument that he had a vested contractual
interest in receiving health care benefits under the resolution passed by the utility district:
Insurance coverage provided to employees under a group
health insurance plan are classified as “welfare benefit” plans as
opposed to pension benefit plans, whereby retirement income is
provided for employees. The law is clear that there is no legal
requirement on the part of a governmental entity to provide a welfare
benefit plan to its employees and if it chooses to do so, the plan may
be modified or terminated at any time.
Id. at 223 (citing State ex rel Thompson v. City of Memphis, 147 Tenn. 658, 251 S.W. 46 (1923)).
In our view, the reasoning in Hamilton, which represents the majority view, is persuasive and
fully applicable to the present case for several reasons. First, in arriving at its holding, the appellate
4
See also id. § 8-2 7-401(a) (“N otwithstanding any other provision to the contrary, coun ty
legislative bodies or other governing bodies are authorized to provide group life, hospitalization, disability, or
med ical insurance for county emp loyees.”).
4
court in Hamilton relied upon analogous cases under the Employee Retirement Income Security Act
(ERISA),5 which recognize that pension or retirement benefits vest automatically while welfare
benefits, such as health care coverage, do not. Hamilton, 845 S.W.2d at 223; see also Gable v.
Sweetheart Cup Co., Inc., 35 F.3d 851, 855 (4th Cir. 1994). As a result, the Court of Appeals
correctly determined that welfare benefits may be modified or terminated at any time unless the
employee meets the burden of establishing that the employer expressly provided that the benefits
were intended to vest or were not to be terminated. Hamilton, 845 S.W.2d at 224; see Gable, 35
F.3d at 854-855. As the Sixth Circuit Court of Appeals has said, “vested benefits are forever
unalterable, and because employers are not legally required to vest them, . . . ‘the intent to vest
[welfare benefits] “must be . . . stated in clear and express language.”’” Sengpiel v. B.F. Goodrich
Co., 156 F.3d 660, 667 (6th Cir. 1998) (alteration in original) (citation omitted); see also Joyce v.
Curtiss-Wright Corp., 171 F.3d 130, 135 (2d Cir. 1999) (“We will not infer a binding obligation to
vest benefits absent some language that itself reasonably supports that interpretation.”); Gable, 35
F.3d at 855 (requiring “clear and express language” of intent to vest welfare benefits).
In addition, the distinction between retirement or pension benefits and welfare benefits drawn
in both Hamilton and the analogous ERISA cases is consistent with this Court’s holding in
Blackwell v. Quarterly County Court of Shelby County, 622 S.W.2d 535 (Tenn. 1981), which was
limited to the vesting of an employee’s interest in retirement or pension benefits and did not extend
to the vesting of welfare benefits. This Court stated that because no contractual rights exist “simply
by reason of employment,” a retirement plan may be modified “when necessary to protect or enhance
the actuarial soundness of the plan, provided that no such modification can adversely affect an
employee who has complied with all conditions necessary to be eligible for a retirement allowance.”
Id. at 540, 543.
Applying these principles to the present case, we note that the resolutions passed by the
Wilson County Commission in 1992 extended health care benefits to its employees and that the
resolutions included retired employees who met certain requirements. The resolutions passed in
1998 retained the health care benefits for employees, but amended the requirements for covering
retired employees. In sum, the health care benefits were welfare benefits that did not automatically
vest and could be altered or terminated at any time by Wilson County. See Hamilton, 845 S.W.2d
at 224; see also Tenn. Code Ann. § 8-27-506 (1993) (termination of benefits).
Moreover, the resolutions established requirements for eligibility, but contained no clear and
express language stating that the health care benefits were intended to vest or could never be
amended or terminated. See Sengpiel, 156 F.3d at 668 (finding that language stating that an
employee would receive health care benefits upon retirement did not express clear intent that the
benefits would vest or never be terminated); compare Helwig v. Kelsey-Hayes Co., 93 F.3d 243, 248
(6th Cir. 1996) (finding that written promises of lifetime health care coverage and no provisions
reserving the right to modify or terminate was sufficient to show vested interest). In addition,
although the resolutions did not contain an express termination provision, the initial 1992 resolution
5
29 U .S.C.A . § 10 01, et seq. (West 1999 ).
5
stated that the terms could be altered at any time. See Gable, 35 F.3d at 856 (finding that reserving
the right to “modify or terminate [] benefits is plainly inconsistent with any alleged intent to vest
those benefits.”). Other than the language of the resolutions, no evidence was presented to establish
the county commission’s intent with respect to the vesting of health care benefits. Accordingly, we
agree with the Court of Appeals’ conclusion that the appellants did not have a vested interest in the
health care benefits under the circumstances of this case.
CONCLUSION
After reviewing the record and applicable authority, we agree that the health care benefits
were welfare benefits that did not vest automatically, and we further hold that there was no clear and
express language in the resolutions stating that the benefits were intended to vest or could not be
terminated. We therefore affirm the Court of Appeals’ judgment. Costs of the appeal are taxed to
the appellants for which execution shall issue if necessary.
_________________________________
E. RILEY ANDERSON, JUSTICE
6