503 U.S. 181




CERTIORARI TO THE SUPREME COURT OF MICHIGAN No. 90-1390. Argued December 10, 1991-Decided March 9,1992

In 1980, the Michigan Legislature raised maximum weekly workers' compensation benefits and provided an annual supplemental adjustment to workers injured before 1980. The following year it enacted a statute allowing employers to decrease workers' compensation benefits to those disabled employees eligible to receive wage-loss compensation from other employer-funded sources. Some employers, including petitioners, General Motors Corporation and Ford Motor Company, took the position that the 1981 law's "benefit coordination" provision allowed them to reduce workers' compensation benefits to workers injured before the statute's effective date, who were receiving benefits from other sources. The State Supreme Court ultimately accepted this interpretation. Chambers v. General Motors Corp., 422 Mich. 636,375 N. W. 2d 715. In 1987, the legislature repudiated Chambers and required employers who had coordinated benefits for previously disabled workers under the 1981 law to refund the benefits withheld. The State Supreme Court upheld the 1987 law, rejecting petitioners' arguments that the reimbursement provision was unfairly retroactive and violated the Contract Clause and the Due Process Clause of the Federal Constitution.


1. The 1987 statute did not substantially impair the obligations of petitioners' contracts with their employees in violation of the Contract Clause, because there was no contractual agreement regarding the specific terms allegedly at issue. The contracts were entered into after collective bargaining between the parties before the 1981 law was enacted and make no express mention of workers' compensation benefits. Nor was the workers' compensation law an implied contract term whereby employers promised to pay the amount required by law for each payment period, an obligation that was completed by making payments for any disability period. There was no occasion for the parties to consider in bargaining taking place before the 1981 law's effective date the question whether an unanticipated reduction in benefits could later be restored after the "benefit period" had closed. Petitioners err in arguing that such a term is "incorporated" by law into the employment contracts, regardless of the parties' assent. Michigan law does not explicitly imply a contractual term allowing an employer to depend on the closure of past disability compensation periods; and such a right



does not appear to be so central to the bargained-for exchange between the parties, or to the enforceability of the contract as a whole, that it must be deemed to be a contract term. State regulations are usually implied terms regardless of assent only when those laws affect the validity, construction, and enforcement of contracts. See United States Trust Co. of N. Y. v. New Jersey, 431 U. S. 1, 19, n. 17. While changes in the laws that make a contract legally enforceable may trigger Contract Clause scrutiny if they impair the obligation of pre-existing contracts, even if they do not alter the contracts' bargained-for terms, the 1987 statute did not change the legal enforceability of the contracts here. The parties still have the same ability to enforce the bargained-for terms that they did before the 1987 statute's enactment. Petitioners' suggestion that every workplace regulation should be read into private employment contracts would expand the definition of contract so far that the Contract Clause would lose its purpose of enabling individuals to order their personal and business affairs according to their particular needs and interests; would cause the Clause to protect against all changes in legislation, regardless of those changes' effect on bargainedfor agreements; would severely limit the ability of state legislatures to amend their regulatory legislation; and could render the Clause entirely dependent on state law. pp. 186-191.

2. The 1987 statute did not violate the Due Process Clause. Its retroactive provision was a rational means of furthering the legitimate legislative purpose of correcting the results of the Chambers opinion. Cf. Pension Benefit Guaranty Corporation v. R. A. Gray & Co., 467 U. S. 717, 730. It preserved the legislative compromise that had been struck by the 1980-1981 laws-giving workers injured before 1982 their full benefits without coordination, but not the greater increases made to subsequently injured workers-and equalized the payments made by employers who had relied on Chambers with those who had not, cf. United States v. Sperry Corp., 493 U. S. 52, 64-65. pp. 191-192.

436 Mich. 515, 462 N. W. 2d 555, affirmed.

O'CONNOR, J., delivered the opinion for a unanimous Court.

Kenneth S. Geller argued the cause for petitioners. With him on the briefs were Stephen M. Shapiro, Mark 1. Levy, James D. Holzhauer, Charles A. Rothfeld, Lawrence C. Marshall, John M. Thomas, Theodore Souris, Martha B. Goodloe, and Daniel G. Galant.

Theodore Sachs argued the cause for respondents. With him on the brief for respondents Romein and Gonzalez were

Full Text of Opinion