Opinion ID: 507087
Heading Depth: 3
Heading Rank: 1

Heading: Negotiations and the Easier Standard for Necessity

Text: 48 It must be remembered that Section 1113 requires an employer to include only necessary modifications in its proposal. (Hereafter, I use proposal in the technical sense to refer to a proposal made by management to satisfy section 1113(b)(1)). The majority's first alternative holding purports to shift the analysis from the individual contractual modifications that constitute the employer's proposal to the proposal as a whole. However, the total savings generated by a proposal composed of several items cannot be determined without knowing the savings generated by each item. Moreover, in applying its rule, the majority considers only the savings to management from the proposal and ignores the harm to the union. This combined approach overlooks the fact that a particular proposed contract change may harm the union greatly and help the employer economically little, if at all. In addition, the majority's rule incorrectly looks to the Union's negotiating record to determine which definition of necessity to use. 49 The bankruptcy court acknowledged that it was departing from the statutory standard in considering the union's negotiating posture and in not weighing the employer's proposal on its own merits. It stated that Although Code Sec. 1113(c)(1) starts with the debtor's proposal, this court declines to make the debtor's proposal itself the first and foremost topic of consideration as placing such primacy on the proposal inhibits, rather than fosters, ... prehearing negotiations. 62 B.R. at 406-07. This was contrary to Century Brass, 795 F.2d at 273, which tracked the statutory language in setting out the order of the three-part rejection test. 50 The statute gives no indication that the union's negotiating position should govern the definition, or application, of the standard of necessity. Moreover, although section 1113 does require bargaining between employees and financially unsuccessful management, 2 it does not absolutely obligate a union to negotiate regardless of the terms of management's proposal. To the contrary, the point of the requirement that the proposal contain only necessary modifications is to limit when a union can be required to reopen and renegotiate an already signed contract. 51 In contrast, the majority requires unions to negotiate over terms that save nothing--which by no stretch of the imagination can be called necessary--even though those terms mortally wound the union, because refusal to negotiate over a specific term bars the union from objecting to that term at the subsequent rejection hearing. 3 Consider the following hypothetical: a bankrupt company that needs to save $200,000 per year to reorganize successfully proposes the following as necessary modifications to its union contract: (1) reduce the wages of each of its 100 union employees by $2,000 per year; (2) eliminate the contract's last-hired, first-fired provision; and (3) eliminate a union-dues check-off provision that requires management to deduct union dues from employees' pay-checks but does not require management to contribute any funds to the union. Assume that provisions two and three save no money, and the union refuses to negotiate until they are removed from the bargaining table. Under the majority's first alternative approach, the contract could be rejected, since the total savings ($200,000) is necessary and since the union's refusal to negotiate bars it from contesting the details of the plan. The majority's approach is almost as absurd when a management proposal would save little money relative to the amount needed to be saved and the damage to the union is great, as is the case if, for example, eliminating the dues check-off provision might save management only a few dollars in accounting costs, but would substantially harm the union. 52 The majority thus allows individual anti-union modifications that save management little to lurk in court-approved proposals. The majority thereby disrupts the scheme of section 1113, since it effectively eliminates the word necessary from subsection (b)(1)(A) and leaves only the good faith and balance of the equities clauses to protect the union. This was not the result Congress intended when it overruled Bildisco, which said that only balancing the equities was required. The majority's rule also violates Truck Drivers Local 807 v. Carey Transportation, Inc., 816 F.2d 82 (2d Cir.1987), in which we held that a management proposal must be limited to necessary, but not absolutely minimal modifications, since under the majority's rule, even modifications that do not significantly help the reorganization are permitted. The majority suggests that the union could avoid an outrageous modification even if it refuses to negotiate by proving that it was made in bad faith, in an effort to stalemate negotiations. However, this suggestion puts the cart before the horse by ignoring the statutory requirement that a necessary proposal (subsection (b)(1)) precede the good-faith negotiations required by subsection (b)(2). Moreover, management may make a good-faith mistake in thinking its proposal is necessary. The good-faith provisions therefore do not substitute for the necessity requirement. 53 If later cases nonetheless follow the majority's first alternative holding instead of its second, I would hope that they would make the best of a bad rule and interpret negotiation broadly. It should be enough for a union to (1) state the modifications to which it objects, and (2) give a short explanation of its objection. For example, the union might say We object to elimination of dues check-off because it will hurt our independence and financial security, and management hasn't shown that it will save significant amounts of money. Once the union has begun negotiations, the usual Carey Transportation standard for necessary--and not the majority's alternative--would apply.