Date: 1984-03-21
Speaker: SAM B. HALL (democrat)
Chamber: H

Mr. Speaker. the issues raised by the proposed Rodino labor amendment are complex ones. involving the interrelation of national labor policy as expressed in Federal labor laws. and business rehabilitation policy as expressed in the bankruptcy laws. A legitimate question to be addressed in the House debate on the rule is whether or not a policy issue of this complexity should be addressed in hasty fashion. without the benefit of congressional hearings. There is nothing in the Bildisco decision that demands a hurried. eme.gency response from Congress. The issue is important enough. and complex enough. that it should be handled independently and not created as a portion of a compromise package on bankruptcy reform. In NLRB against Bildisco and Bildisco the Supreme Court clarified the law applicable to companies which seek to reject their collectivebargaining agreements in connection with reorganization proceedings under chapter 11 of the Bankruptcy Code. By a vote of 9 to 0 the Supreme Court ruled that the language of section 365(a) of the Bankruptcy Code applies to collectivebargaining agreements. Before the Supreme Court. all of the parties in the Bildisco casethe company. the union. and the NLRB--conceded this point. This decision does not mean that a debtor may treat a collectivebargaining contract as simply any other contract for goods or services. The Supreme Court noted that because of the special nature of collectivebargaining agreeraents. the rejection of such agreements must be judged by a somewhat stricter test than the test applied to the rejection of other contracts by the debtor. The Court unanimously agreed on a "balancing of equities" standard. The Court specifically rejected the unions argument that the debtor be required to show that the reorganization will fail unless rejection is permitted. The Court held that such a strict standard is fundamentally at odds with the flexibility and equity built into the chapter 11 reorganization procedure which seeks to accommodate a variety of competing considerations. In recognizing the basic policies underlying the Bankruptcy Code. the Court was careful not to ignore the importance of the policies which support labor ways. The Court emphasized that the debtor remains under a duty to bargain with the union under section 8(a)(5) of the National Labor Relations Act. Too. the Court noted that national labor polcies of avoiding labor strife and encouraging collective bargaining generally require that employers and unions reach their own II11798 agreements on terms and conditions of employment free from governmental interference. Thus the Court directed. before a bankruptcy court can act on a debtors petition to modify or reject a collectivebargaining agreement. the bankruptcy judge must be persuaded that reasonable efforts to negotiate a voluntary modification have been made and are not likely to produce a prompt and satisfactory solution. Where such efforts at negotiation do not resolve the problem. the bankruptcy judge is to apply the "balancing of equities" standard. The bankruptcy courts approval of a contract rejection does not terininate the bargaining relationship and does not extinguish employee rights. Where a bankruptcy court has weighted the equities and has decided to permit rejection of the union contract. the employees still retain fundamental rights including the right to strike. If the rejected contract contained a "no strike" clause. that provision is no longer applicable. Rejection of the collectivebargaining agreement does not terminate the relationship between the union and the debtorinpossession. The debtor still must recognize the union as the bargaining representative and must negotiate with that union in good failh with respect to the terms and conditions of employment. The contintied existence of these rights serves to deter any business which improperly seeks to use bankruptcy proceedings simply to rid itself of a union. The Court split 5 to 4 on the question of whether or not the debtor commits an unfair labor practice when it unilaterally refects or modifies the collectivebargahiung agreement after filing of a reorganization petition but before the contract rejection has been approved formally by the bankruptcy court. The majority held that unilateral reJection of the contract before a formal ruling by the bankruptcy court Is not an unfair labor practice. It reasoned that from the time chapter 11 petition is filed until the debtor formally accepts the contract. the contract is not an enforceable contract with the meaning of the National Labor Relations Act. Accordinely. the debtor need not comply with section 8(d) of the NLRA prior to seeking bankruptcy court permission to reject the agreement. While a debtor remains obligated to bargain in good faith under NLRA over the terms and conditions of a possible new contract. it is not guilty of an unfar labor practice by unilaterally breaching a collectivebargaining agreement before formal bankruptcy court action. In conclusion. I do not believe this rule should be burdened with the Bildisco case. That case should be discussed only after adequate hearings have been held.