St. Clair Intermediate School Dist.t v. Intermediate Educ. Association/Michigan Educ. Ass'n

Decision Date31 July 1998
Docket NumberNo. 9,Docket Nos. 107479,107480,9
Parties, 159 L.R.R.M. (BNA) 2409, 127 Ed. Law Rep. 1048 ST. CLAIR INTERMEDIATE SCHOOL DISTRICT, Charging Party-Appellee, v. INTERMEDIATE EDUCATION ASSOCIATION/MICHIGAN EDUCATION ASSOCIATION, Respondents-Appellants, and Michigan Education Special Services Association, Respondent-Appellant. Calendar
CourtMichigan Supreme Court

Thrun, Maatsch & Nordberg, P.C. (by Donald J. Bonato and Cheryl Takacs Bell), Lansing, for charging party-appellee.

White, Przybylowicz, Schneider & Baird, P.C. (by Arthur R. Przybylowicz and Suzanne Krumholz Clark), Okemos, for respondents-appellants IEA and MEA.

Fraser, Trebilcock, Davis & Foster, P.C. (by Iris K. Linder and Graham K. Crabtree), Lansing, for respondent-appellant MESSA.


BOYLE, Justice.

We are asked to determine whether the Michigan Education Association (MEA) committed an unfair labor practice under MCL 423.210(3)(c); M.S.A. § 17.455(10)(3)(c) and M.C.L. § 423.216; M.S.A. § 17.455(16) of the public employment relations act (PERA) by unilaterally implementing a midterm modification of a collective bargaining agreement.

We affirm the decision of the Court of Appeals, which upheld the conclusion of the Michigan Employment Relations Commission (MERC) that the Michigan Educational Special Services Association (MESSA) was an agent of the MEA and that the increase in the lifetime maximum health care benefit was a violation of the statute.


The Michigan Educational Special Services Association is a Michigan nonprofit, nonstock corporation. Its purpose is to provide various types of insurance benefits to its membership. The MESSA bylaws restrict membership to Michigan Education Association 2 members and certain specified categories of employees with past or present ties to an MEA bargaining unit, including employees of the MESSA itself.

The MESSA is not an insurance company; rather, it is a policyholder that contracts with a qualified insurance company to underwrite its various plans. Blue Cross/Blue Shield of Michigan is currently the underwriter for MESSA health insurance plans. Blue Cross and the MESSA share responsibility for administering the plans. The MESSA qualifies as a third-party administrator under the Insurance Code.

The MESSA is managed by a board of trustees consisting of thirteen persons, all of whom must be MESSA members. Under the bylaws, six trustees must be elected from and by the MEA board of directors, and five must be elected by the MESSA voting members. Voting members of the MESSA consist of the incumbent trustees and officers of the MESSA and incumbent members of the MEA board of directors, who are members of the MESSA. The final two trustees are the president and vice president of the MEA. The same person serves as the executive director of the MEA and the executive secretary of the MESSA. The MESSA has its own executive director.

The MEA "markets" the MESSA insurance by persuading members of its constituent units and local affiliates of the superiority of the MESSA plans and by negotiating these plans into collective bargaining agreements reached with employers. The MEA UniServ directors are largely responsible for bargaining and for successfully negotiating contracts, including MESSA plans. The UniServ directors are evaluated in part by how well they achieve negotiation of the MESSA products into collective bargaining agreements, and the MEA is required to use its best efforts to negotiate MESSA benefits into collective bargaining agreements. The MEA provides the MESSA with legislative, lobbying, and research services. The MESSA currently leases from the MEA the land on which its building sits, and the current MESSA building is adjacent to MEA headquarters. The MEA and the MESSA have a written agreement under which the MESSA compensates the MEA for these services. For the fiscal year 1989-90, the MESSA paid the MEA $1,400,424.

The MEA is the authorized collective bargaining agent for the St. Clair School District's teaching employees. MESSA health coverage for at least some employees has been included in the contract between the MEA and the school district since approximately 1967. Article IX of the parties' collective bargaining agreement for the period ending June 30, 1991, reads:

The District agrees to pay premiums for health insurance for each teacher through a carrier to be determined by the Board. For the (3) year period 1988-89 through 1990-91, the District agrees to provide MESSA Super Med II for 1988-89 and MESSA Super Care II 3 for 1989-90 and 1990-91.

Total health insurance payments for any teacher will not exceed the actual cost of the MESSA plan herein outlined. There will be no supplemental payments by the Board. The payments will be the full premium amounts for the MESSA plan outlined herein for single, two persons, or full family coverage.

Effective July 1, 1990 and until a successor Agreement is reached, the obligation of the Board to pay health insurance premiums shall not exceed the Board's base premium amount for the 1990-91 insurance year, July 1, 1990 to June 30, 1991. If health insurance premiums effective July 1, 1991, exceed the Board's base premium for the 1990-91 insurance year, the excess amounts over the individual employee's premium cost, shall be paid in full by the individual employee by way of payroll deduction.

In addition, the school district signed an "Employer Participation Agreement For Negotiated Group Benefit Programs" with the MESSA in February, 1990. The participation agreement includes the following paragraph:

If accepted for participation, the Employer agrees to be bound by the terms of the Trust, the Equitable group insurance policy(ies) and the BCBSM Group Operating Agreement(s) and certificates issued to MESSA. Copies of the above may be examined by any Participating Employer during the regular business hours at the office of MESSA in East Lansing, Michigan.

In 1985, the MESSA changed its underwriter of health insurance from the Equitable Insurance Company to Blue Cross. The MESSA took the position that, because coverage in each bargaining unit was pursuant to a collective bargaining agreement, each employer and local association would have to negotiate and agree to the change in carriers. The reason for this position was that the MESSA hoped these negotiations would force employers to pass the savings resulting from the change along to employees, rather than permit employers to enjoy the reduced premiums. The MEA and the MESSA asserted that the MESSA hoped such negotiations would lead to purchase of other MESSA insurance products.

Aside from this instance, however, the record indicates that the MESSA, by action of its trustees, made minor plan changes to insurance benefits without giving prior notice or an opportunity to renegotiate the change to employers. One change, other than the increase in the lifetime maximum made unilaterally by the MESSA during the term of the parties' 1989-91 contract, was the addition of a wig benefit for cancer patients.

On March 9, 1990, the MESSA staff presented the trustees with a proposal to raise the lifetime maximum on all MESSA plans to $2,000,000. Reasons cited to the trustees were that several members were then approaching the maximum, the effect of inflation in medical costs, and that competing plans had raised their maximums. Beverly Wolkow, MEA executive director and the executive secretary of the MESSA, argued against the change on the basis that it would make MESSA insurance more difficult to sell to employers at the bargaining table. However, the change was approved by the trustees.

The school district was notified of this change by letter dated May 8, 1990, which also described rate changes to be effective July 1, 1990. 4 The school district did not make a demand to bargain, but filed an unfair labor charge on the basis that the change was an accomplished fact.

After the original hearing referee had heard the case, a request by the school district to reopen the record in order to add the MESSA's affiliation/disaffiliation policy and subsequent testimony to the record was granted by a subsequent hearing referee. The affiliation/disaffiliation policy referenced in the MESSA bylaws and adopted by the board of trustees in March, 1982, provides that individual membership in MESSA health insurance plans terminates for employees eligible for membership in the MEA if the employees affiliate with a labor organization other than the MEA. This information had not been available to the school district before the original hearing because commission procedure does not allow for prehearing discovery. The affiliation/ disaffiliation policy was considered material to the question

whether there was an agency relationship between the MESSA and the MEA. 5


The hearing referee found that the MESSA was an agent of the MEA and that the unilateral change in the benefit maximum was an announced, not proposed, change in the contract, resulting in a midterm modification of the collective bargaining agreement. The hearing referee also held that the charging party, the school district, had waived the right to bargain with respect to benefit changes because under the contract, the employer participation agreement bound the employer to the language of the insurance certificates issued to the MESSA, thus allowing the MESSA to modify or discontinue the group plan. The MERC affirmed the ruling of the hearing referee 6 with the exception that it disagreed that there was a waiver of the right to bargain over a modification or unilateral action by respondents MEA and MESSA. 7

The Court of Appeals affirmed the MERC decision, 218 Mich.App. 734, 555 N.W.2d 267 (1996), holding that, in bargaining for the MESSA Super Care II policy, the Charging Party bargained for the specific contents of the policy when the collective bargaining...

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