Knowledgebase-Reduction of Health Benefits by the Utility Board


Information Product

Title:Reduction of Health Benefits by the Utility Board
Summary:MTAS was asked whether the utility board can reduce the health benefits
of the management team members to the same level it reduces the health
benefits of utility board members.
Original Author:Hemsley, Sid
Co-Author:
Product Create Date:02/20/98
Last Reviewed on::05/30/2017
Subject:Boards; Insurance--Health; Personnel--Fringe benefits; Utilities--Boards
Type:Legal Opinion
Legal Opinion:

Reference Documents:

Text of Document: February 20, 1998

Mr. X had the following question, the answer to which he asked me to send to you: Can the utility board reduce the health benefits of the management team members to the same level it reduces the health benefits of utility board members?

The answer is probably no.

The management team members are employed under an employment contract, four of which Mr. X sent to me. Section 4 of the contract provides that:

The Board agrees to pay Employee’s base salary and other benefits of Employee that are in force on the date of this agreement, (the base salary being $62,760.00 annually as of the date hereof) and may increase compensation and benefits in such amounts and to such an extent as the Board [sic] may determine that it is desirable to do so, but in no event shall salary and benefit increases be less than similar considerations given to other employees generally.

Section 4 of the contract with another company provides that:

The Board agrees to pay Employee’s base salary and other benefits of Employee that are in force on the date of this agreement, and may increase compensation and benefits in such amounts and to such an extent as the Board may determine that is desirable to do so, but in no event shall salary and benefit increases be less than similar consideration that is given other employees generally.

Section 4 of the contracts with 2 more companies provide that:

The Manager agrees to pay Employee’s base salary and other benefits of the Employee that are in force on the date of the is [sic] Agreement, and may increase compensation and benefits in such amounts and to such an extent as the Manager may determine that it is desirable to do so. In any event such salary and benefit increases shall be at least equal to similar considerations given to other Board employees in general and in keeping reasonably in line with the average compensation afforded persons in a like or similar position in the region.

Section 4 in all four contracts appears to expressly lock in a minimum salary and benefit level for management team members, which is the level “in force on the date of this agreement.” Under that section, minimum salary and benefits may be “increased,” but that section contains no provision for a decrease on any basis.

In none of the contracts could I find anything the contradicts Section 4, or makes that reading of Section 4 questionable.

Sincerely,

Sidney D. Hemsley
Senior Law Consultant

SDH/

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