Compensation and Benefit- Navistar International

Added on - 16 Sep 2019

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HUMAN RESOURCEMANAGEMENTCompensation and Benefit
1Table of ContentsIssue............................................................................................................................................................2Recommendation.........................................................................................................................................3Rationale.....................................................................................................................................................3References...................................................................................................................................................5
2IssueNavistar international had been giving health care benefits to its retired employees for years. Thecompany had also announced that all of its active employees would become eligible for healthcare benefits and insurance benefits soon when they retire. The company had been providing freehealth care to all its retired employees without any deductibles, hospital co-payments or requiredcontributions to the amount of insurance premiums.But later in 1980's, it started facing a serious financial crisis due to which it was facing problemsof escalating health care costs. Due to the current financial crisis, it decided upon reducing itshealth care liabilities. Due to the bankruptcy problems face by the company, even the other oldercompanies in the industry were getting affected as they were also having a large number ofretirees and they had also made promises to them for post-retirement health care coverage in theunion contract. Due to such problems, the Navistar in the year 1992, had approached the UnionAuto Workers which was the principal union and told that it was facing issues with regards to thecost of health care of retired employees and there was a threat of company's insolvency. But theproblem got even worse when the Navistar finally filed a suit in Federal District court in order toseek a declaratory judgment as to the fact that it was entitled to modify or terminate itsretirement health care benefits unilaterally. The company explained in the court that its reasonfor seeking such a declaration was mainly related to the efficiency and while seeking thejudgment the company had classified the retirees as an entire class to whom the judgment shallapply. UAW got angry with such a step of the company and had filed a countersuit against thecompany claiming that Navistar had no legal right to unilaterally modify the terms of theretirement benefits as UAW was the principal union. In addition to this, there were various