EMPLOYER SUCCESSFULLY MODIFIES CBA’S IN BANKRUPTCY PROCEEDINGS

The United States Bankruptcy Court for the Eastern District recently granted an employer’s motions which sought to reject two collective bargaining agreements that the employer had with two different unions: Teamsters and Machinists.

Before filing for bankruptcy under Chapter 11, the employer met with each union to propose certain modifications to the CBA that would have potentially enabled the employer to avoid filing for bankruptcy. Under the then-existing agreement, the employer was required to contribute funds to the Teamster Central States Pension Fund, as well as the Machinist’s Pension Fund and to the Health and Welfare Plans, which provided health insurance for union members. The proposed modifications would have provided employees (both union and non-union) with private health insurance, and a 401(k) plan in lieu of benefits provided under the Health and Welfare Plan and the then-existing pension plan.

Even though the employer provided the unions with information that showed that the changes were financially necessary, both unions rejected the proposed changes.

The employer was forced to file for bankruptcy under Chapter 11, and subsequently filed its motions to reject the costly defined benefit pension and insurance plans that were required under the CBA’s.

The United States Code does allow for rejection of a collective bargaining agreement in Chapter 11 bankruptcies, but only if certain requirements are met. Here, because  (1) the employer made a proposal to modify the CBA, (2) the proposal was based on the most complete and reliable information available at the time of the proposal, (3) the proposed modifications were necessary, (4) the proposed modifications were fair, (5) the employer provided the all relevant information to the unions in make its proposals, (6) the employer met with the unions at reasonable times, (7) the employer made good faith efforts to reach an agreement with the unions, (8) the unions refused to accept the proposal without good cause, the Court granted the employer’s motions to reject the existing CBA’s.

The St. Louis employment attorneys at McMahon Berger have been representing employers across the country in labor and employment matters, for sixty years, and are available to discuss these issues and others.  As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation as every situation must be evaluated on its own facts. The choice of a lawyer is an important decision and should not be based solely on advertisements.

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