However, the company may determine to ask the court for permission to reject our collective bargaining agreements.
Section 1113 of the bankruptcy code lays out the rules an employer must follow if it
determines to seek to reject labor contracts. It ensures that negotiations between a
Chapter 11 employer and a union occur before the company asks the court to allow it to
reject a collective bargaining agreement. It lays out the stringent standard by which a
bankruptcy court must evaluate an application to reject an agreement, and it establishes a
time frame in which the court may make its determination.
A collective bargaining agreement remains in effect, and the collective bargaining
process continues, after the filing of a bankruptcy petition “unless and until†the company
complies with the provisions of Section 1113. Accordingly, before the court may
authorize the rejection of a collective bargaining agreement the company must prove to
the court that the following nine (9) requirements have been met:
1. The company must have made a proposal to the union.
2. The proposal must be based upon the most complete and reliable information available at the time of the proposal.
3. The modifications must be necessary to permit reorganization.
4. The modifications must provide that all affected parties are treated fairly and equitably.
5. The company must provide the union with such relevant information as is necessary to evaluate the proposal.
6. The company must have met with the collective bargaining
representative at reasonable times subsequent to making the proposal.
7. The debtor must have negotiated with the union concerning the proposal in good faith.
8. The union must have refused to accept the proposal without good cause.
9. The balance of the equities must clearly favor rejection of the agreement.
If the court agrees that the company has met these conditions, it may authorize the rejection of the collective bargaining agreement.