General Motors Corp. v. Romein

Background

General Motors and Ford challenged a 1987 Michigan law that required them to repay workers’ compensation benefits they had withheld after relying on a 1981 law change. The 1981 law permitted employers to reduce benefits when workers received other wage-loss payments, but it was unclear whether that change applied to workers injured before March 31, 1982. After Michigan courts and the Michigan Supreme Court allowed employers to coordinate benefits, some employers cut payments to long-disabled workers (for example, Romein and Gonzalez). The Legislature then passed a 1987 statute that rejected the court’s interpretation, barred some reimbursement claims, and required employers who had coordinated benefits to refund withheld amounts.

Reasoning

The central question was whether the 1987 repayment rule violated the Constitution by impairing contracts or unreasonably applying retroactivity. The Supreme Court held there was no contractual term giving employers a settled right to past payment periods because the employment contracts were made before the 1981 law and did not expressly incorporate coordination. The Court also found the refund rule satisfied due process: the Legislature had a legitimate purpose—correcting the unexpected court decision and preserving a prior legislative compromise—and the retroactive repayment was a rational way to achieve that goal. The Court therefore affirmed the Michigan Supreme Court’s judgment.

Real world impact

The decision forces employers to return nearly $25 million to disabled workers and confirms that state legislatures may correct court-created changes in statutory programs. It also limits treating workplace regulations as implied private contract terms, preserving legislative power to change regulatory schemes.