General Motors Corp. v. Romein

Supreme Court of the United States · 1992 · Federal Courts

Federal CourtsContract ClauseDue ProcessRetroactive legislationContract ClauseDue Process Clauseretroactivityeconomic legislation

Facts

Michigan enacted a 1981 workers' compensation provision allowing employers to coordinate benefits, but the statute did not specify whether it applied to workers injured before its effective date. GM and Ford reduced benefits to previously injured workers, and after the Michigan Supreme Court in Chambers endorsed that interpretation, the Michigan Legislature enacted a 1987 statute repudiating Chambers and requiring employers who had coordinated benefits to reimburse withheld amounts. As a result, petitioners were ordered to refund nearly $25 million and argued that the repayment requirement violated the Contract Clause and the Due Process Clause. The employment contracts at issue predated the 1981 coordination law and did not expressly mention workers' compensation benefits.

Issue

Whether Michigan's 1987 statute, which retroactively required employers to repay workers' compensation benefits they had withheld under their interpretation of the 1981 coordination statute, violated the Contract Clause or the Due Process Clause of the Federal Constitution.

Rule

For Contract Clause analysis, the Court asks whether there is a contractual relationship, whether a change in law impairs that relationship, and whether the impairment is substantial; but there is no impairment where the alleged contractual term was neither assented to by the parties nor incorporated from laws governing the validity, construction, enforcement, or binding force of contracts. Retroactive economic legislation comports with due process if it is supported by a legitimate legislative purpose furthered by rational means.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Ohio, Lakeview Foundry and its union signed a five-year collective bargaining agreement in 2018. The agreement set wages and vacation time but said nothing about state-mandated injury supplements. In 2022, after a state court had interpreted an earlier statute to let employers offset certain injury supplements, the legislature retroactively required employers to repay offsets taken from workers injured before 2020.

Lakeview argues the repayment statute violates the Contract Clause because the earlier offset rule was an implied term of the employment agreement. Which is the strongest response?

Explanation. The majority rejected the idea that every regulation in force becomes an implied contract term. Contract Clause scrutiny requires a contractual relationship and an impairment of that relationship, but there is no impairment where the claimed term was not bargained for and was not incorporated as part of the law governing the contract's validity, construction, enforcement, or binding force. Here, the injury-supplement offset rule looks like a regulation, not a bargained-for term or a rule about enforceability.