If the court does not issue a timely ruling, the debtor may terminate or alter the provisions of the agreement pending court action. A debtor must propose only "those necessary modifications in the employees' benefits and protections that are necessary to permit the reorganization of the debtor ..." §1113(b)(1)(A). The legislative history of §1113 strongly suggests that "necessary" should not be equated with "essential" or bare minimum. When a company seeks to reject or modify a collective bargaining agreement under Chapter 11 of the U. Bankruptcy Code, Bankruptcy Code §1113, entitled Rejection of Collective Bargaining Agreements, clarifies the circumstances under which such agreements may be rejected. 513 (1984) where the Supreme Court concluded that a debtor could reject a collective bargaining agreement without engaging in collective bargaining and that such unilateral alterations by a debtor would not violate the National Labor Relations Act (NLRA) 29 U. The court must schedule a hearing within 14 days following the filing of a motion to reject the collective bargaining agreement, but this may be extended. The court also may authorize the debtor to implement "interim changes in the terms, conditions, wages, benefits or work rules provided by a collective bargaining agreement" if those changes are "essential to the continuation of the debtor's business or in order to avoid irreparable damage to the estate." 11 U. Terms and conditions unaffected by the debtor's §1113 proposal may not be changed unilaterally without exhausting the NLRA's bargaining requirements. Finally, where the debtor's collective bargaining agreement contains a successorship clause and a buyer may be waiting in the wings, the debtor may seek to have the collective bargaining agreement voluntarily modified or rejected before the sale of assets is consummated. § 1113, “Rejection of Collective Bargaining Agreements,” codifies under what circumstances collective bargaining agreements may be rejected in a Chapter 11 Bankruptcy. Once in bankruptcy, a debtor may file a motion to reject the collective bargaining agreement any time, provided that the debtor first fulfills its obligation to make a proposal to the union regarding "necessary" modifications to the collective bargaining agreement, provides the union with relevant information necessary to evaluate the proposal, and makes a good-faith effort to meet and confer with the union regarding the proposal. Even if a bankruptcy court permits the debtor to reject the entire collective bargaining agreement, the debtor may unilaterally implement only those changes in employment contracts contained in its §1113 proposal to modify the agreement. However, even with §1113, rejection of a collective bargaining agreement is allowed under this specific procedure. The debtor's rejection of the collective bargaining agreement does not terminate the debtor's duty to bargain with the union under the NLRA.Until court approval of the rejection of the collective bargaining agreement, the debtor must comply with all of its provisions. Courts have recognized the employees' right to strike in situations where debtors have obtained court orders rejecting collective bargaining agreements under §1113, except that an arbitration agreement may be enforced via injunction where the underlying collective bargaining agreement has a mandatory grievance arbitration procedure and the strike is triggered by issues subject to this mandatory arbitration procedure. Even in bankruptcy, a company will remain bound by the terms of its collective bargaining agreement unless and until it obtains relief pursuant to the procedures set forth above.
The Bankruptcy Code cannot abide such delay, at least according to the Third Circuit and most of the lower courts that have considered the issue. Notably, the National Labor Relations Board filed an amicus brief with the Third Circuit, taking the position that an expired CBA cannot be rejected under section 1113 and that an employer is obligated under the NLRA to abide by the terms of the CBA until an impasse is reached in NLRA-regulated negotiations.The debtor in possession, or the trustee if one has been appointed under the provisions of this chapter, other than a trustee in a case covered by subchapter IV of this chapter and by title I of the Railway Labor Act, may assume or reject a collective bargaining agreement only in accordance with the provisions of this section.Subsequent to filing a petition and prior to filing an application seeking rejection of a collective bargaining agreement, the debtor in possession or trustee (hereinafter in this section “trustee” shall include a debtor in possession), shall— make a proposal to the authorized representative of the employees covered by such agreement, based on the most complete and reliable information available at the time of such proposal, which provides for those necessary modifications in the employees benefits and protections that are necessary to permit the reorganization of the debtor and assures that all creditors, the debtor and all of the affected parties are treated fairly and equitably; and During the period beginning on the date of the making of a proposal provided for in paragraph (1) and ending on the date of the hearing provided for in subsection (d)(1), the trustee shall meet, at reasonable times, with the authorized representative to confer in good faith in attempting to reach mutually satisfactory modifications of such agreement.With no new agreement in place and with TER having served notice in March 2014 to terminate, modify, or amend the existing agreement, the CBA expired on September 14, 2014. Section 1113 meets a gap in the schemes to permit reorganizations when labor obligations will prevent the success of a reorganization. Under § 1113, approval will be granted only if the debtor’s modifications are necessary to permit reorganization.