Court Opinion

ID: 9429509
Source: CourtListenerOpinion
Date Created: 2023-08-02 23:26:57.594525+00
Date Added: 2024-06-11T17:23:20.043129
License: Public Domain

*535Justice Brennan,
with whom Justice White, Justice Marshall, and Justice Blackmun join, concurring in part and dissenting in part.
The Court holds that under § 365 of the Bankruptcy Code1 a Bankruptcy Court should permit a debtor in possession2 to reject a collective-bargaining agreement upon a showing that the agreement “burdens the estate, and that after careful scrutiny, the equities balance in favor of rejecting the labor contract.” Ante, at 526. This test properly accommodates the policies of the National Labor Relations Act (NLRA) and the Bankruptcy Code, and I therefore join Parts I and II of the Court’s opinion. But I cannot agree with the Court’s holding in Part III that a debtor in possession does not commit an unfair labor practice if he unilaterally alters the terms of an existing collective-bargaining agreement after a bankruptcy petition has been filed, but before a Bankruptcy Court has authorized the rejection of that agreement. Ante, at 532. In so holding, the Court has completely ignored important policies that underlie the NLRA, as well as Parts I and II of its own opinion.
I
Two sections of the NLRA govern the alteration of existing collective-bargaining agreements. Section 8(a)(5) makes *536it an unfair labor practice for an employer “to refuse to bargain collectively with the representatives of his employees . . . .”3 Section 8(d) defines the 18(a)(5) duty to “bargain collectively” as “the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment.”4 When a collective-bargaining agreement is “in *537effect,” § 8(d) adds four additional requirements to the duty to bargain collectively: “no party to [a collective-bargaining contract] shall terminate or modify such contract unless” he (1) provides the other party to the contract with timely written notice of the proposed modification, (2) “offers to meet and confer with the other party,” (3) provides timely notice to the Federal Mediation and Conciliation Service and any similar state agencies, and (4) “continues in full force and effect ... all the terms and conditions of the existing contract for a period of sixty days after such notice is given or until the expiration date of such contract, whichever occurs later.”5 Because § 8(d) defines the duty to bargain collectively that is imposed by § 8(a)(5), an employer who terminates or modifies a collective-bargaining agreement without complying with the requirements of § 8(d) violates § 8(a)(5). See NLRB v. Lion Oil Co., 352 U. S. 282, 285 (1957) (employer who violates § 8(d)(4) violates § 8(a)(5)).6 A unilateral modification *538of an existing collective-bargaining agreement is, therefore, a violation of § 8(d) and § 8(a)(5). See Chemical Workers v. Pittsburgh Plate Glass Co., 404 U. S. 157, 159, 185 (1971); Lion Oil, supra, at 285.
In this litigation, the National Labor Relations Board (Board) held that Bildisco had violated § 8(a)(5) of the NLRA by unilaterally altering the terms of its collective-bargaining agreement with Local 408 of the International Brotherhood of Teamsters, Chauffeurs, Warehousemen, and Helpers of America.7 Specifically, the Board found that Bildisco violated the terms of that agreement by its failure to (1) increase wages, (2) make pension, health, and welfare contributions, (3) remit dues to the union that were withheld from employees’ wages, and (4) pay vacation benefits. Some of these activities occurred after Bildisco filed a voluntary petition in bankruptcy under Chapter 11 of the Bankruptcy Code, 11 U. S. C. § 1101 et seq. (1982 ed.), but before the Bankruptcy Court authorized Bildisco to reject its agreement with Local 408. During this period, Bildisco was operating its business as a debtor in possession. This aspect of the cases, therefore, presents the question whether a debtor in possession violates §8(d) and, as a result, § 8(a)(5) if he unilaterally modifies the terms of a collective-bargaining agreement in the interim between the filing of a bankruptcy petition and the rejection of that agreement.
HH HH
The Court today rejects the Board’s finding that Bildisco s unilateral modifications of its collective-bargaining agree*539ment violated § 8(a)(5). The Court supports this conclusion by asserting that enforcement of § 8(d) in the postfiling period “would run directly counter to the express provisions of the Bankruptcy Code.” Ante, at 532. Yet, the Court points to no provision of that Code that purports to render § 8(d) inapplicable, and to no provision of the NLRA that would preclude the application of § 8(d). Indeed, the Court concedes that a debtor in possession generally must comply with the provisions of the NLRA. Ante, at 534.
Accordingly, in order to achieve its desired result, the Court is forced to infer from the Bankruptcy Code’s general treatment of executory contracts, and from the policies that underlie that treatment, that Congress must have intended the filing of a bankruptcy petition to render §8(d) inapplicable. Ante, at 529-532. The Court observes that during the postpetition period, the nondebtor party to an executory contract may not sue the debtor in possession to enforce the contract terms, ante, at 530, but rather can only recover the reasonable value of any benefits conferred on the estate. Ante, at 531.8 By contrast, “[t]hough the Board’s action is *540nominally one to enforce § 8(d). . . the practical effect of the enforcement action would be to require adherence to the terms of the collective-bargaining agreement.” Ante, at 532. Because the Court finds that suspending the enforceability of executory contracts serves the goals of providing the debtor in possession with “flexibility and breathing space,” the Court concludes that Congress could not have intended § 8(d) to remain applicable once a bankruptcy petition has been filed.
This argument is unpersuasive. However correct the Court may be in its description of the manner in which the Bankruptcy Code treats executory contracts generally and the policies that underlie that treatment, there is an unavoid*541able conflict between the Code and the NLRA with which the Court has simply failed to grapple. Permitting a debtor in possession unilaterally to alter a collective-bargaining agreement in order to further the goals of the Bankruptcy Code seriously undermines the goals of the NLRA. We thus have the duty to decide the issue before us in a way that accommodates the policies of both federal statutes. That cannot properly be done, in the Court’s fashion, by concentrating on the Bankruptcy Code alone; under that approach, a holding that § 8(d) is inapplicable once a bankruptcy petition has been filed must obviously follow. One could as easily, and with as little justification, focus on the policies and provisions of the NLRA alone and conclude that Congress must have intended that § 8(d) remain applicable. Rather, it is necessary to examine the policies and provisions of both statutes to answer the question presented to the Court.
The Court’s concentration on the Bankruptcy Code and its refusal to accommodate that statute with the NLRA is particularly incongruous since the analysis in Part II of its opinion rests almost exclusively on the recognition that the two statutes must be accommodated. In that Part, the Court concludes that “because of the special nature of a collective-bargaining contract... a somewhat stricter standard should govern the decision of the Bankruptcy Court to allow rejection of a collective-bargaining agreement.” Ante, at 524. Surely, the “special nature of a collective-bargaining contract” must also be considered when determining whether Congress intended a debtor in possession to be able unilaterally to alter its terms. I can only conclude that the Court does not do so because an examination of the policies and provisions of both statutes inexorably leads to the conclusion that Congress did not intend the filing of a bankruptcy petition to affect the applicability of § 8(d), and that, as a result, a debtor in possession commits an unfair labor practice when he unilaterally alters the terms of an existing collective-*542bargaining agreement after a bankruptcy petition has been filed but prior to rejection of that agreement.9
M I — I H-I
A
Because the issue in this litigation centers on the effect of filing a bankruptcy petition on the obligations of a debtor in possession under NLRA § 8(d), it is appropriate to begin by examining whether that provision would apply even in the absence of the countervailing provisions and policies of the Bankruptcy Code. In undertaking this threshold analysis, we must remember that we have previously recognized that § 8(d) must be construed flexibly to effectuate the purposes of the NLRA. See, e. g., NLRB v. Lion Oil Co., 352 U. S., at 290; Mastro Plastics Corp. v. NLRB, 350 U. S. 270 (1956). As we stated in Lion Oil, a construction that does not serve the goals of the statute “is to be avoided unless the words Congress has chosen clearly compel it.” 352 U. S., at 289. In addition, in resolving this threshold question we must be mindful of the deference to the Board’s construction of the NLRA required by our decisions. See, e. g., NLRB v. Iron *543Workers, 434 U. S. 335, 350 (1978); NLRB v. J. Weingarten, Inc., 420 U. S. 251, 267 (1975); NLRB v. Erie Resistor Corp., 373 U. S. 221, 236 (1963). It is the Board’s position that filing a bankruptcy petition does not affect the applicability of §8(d).10 See, e. g., ISG Extrusion Toolings, Inc., 262 N. L. R. B. 114 (1982) (debtor in possession violates § 8(d) by unilaterally altering terms of collective-bargaining agreement); Airport Limousine Service, Inc., 231 N. L. R. B. 932 (1977) (receiver violates §8(d)). Plainly, the Court’s position that § 8(d) is inapplicable once a bankruptcy petition has been filed is contrary to the goals of the NLRA, and a careful examination of “the words Congress has chosen” reveals that they do not “clearly compel” this result.
By their terms, the notice and cooling-off requirements of §8(d) apply when “there is in effect a collective-bargaining contract” and a “party to such contract” seeks to “terminate or modify” it. The Court of Appeals held that § 8(d) was inapplicable because the “debtor-in-possession is ‘[a] new entity . . . created with its own rights and duties, subject to the supervision of the bankruptcy court.’” In re Bildisco, 682 F. 2d 72, 82 (CA3 1982), quoting Shopmen’s Local Union No. 455 v. Kevin Steel Products, Inc., 519 F. 2d 698, 704 (CA2 1975). As a result, the Court of Appeals concluded that the debtor in possession is not a “party” to a collective-bargaining agreement within the meaning of §8(d).11
*544The Court today properly rejects the “new entity” theory, conceding that the debtor in possession is a party within the meaning of § 8(d). Ante, at 528. The Court nevertheless reaches an equally unsupportable result by concluding that once a bankruptcy petition has been filed, “the collective-*545bargaining agreement is not an enforceable contract within the meaning of NLRA § 8(d).” Ante, at 532. Of course, the phrase “enforceable contract” does not appear in § 8(d), so the Court’s point must be that the collective-bargaining agreement is not “in effect” within the meaning of that section. Surely, the plain language of the statute does not compel this result. Perhaps the Court’s omission of any specific reference to this phrase indicates that it agrees that the language is not dispositive. In any event, it is simply incorrect to suggest that the collective-bargaining agreement does not retain sufficient vitality after a bankruptcy petition has been filed to be reasonably termed “in effect” within the meaning of the statute.
Although enforcement of the contract is suspended during the interim period, the contract clearly has other characteristics that render it “in effect” during the interim period. For example, if the debtor in possession assumes the contract, that assumption relates back to the time that the bankruptcy petition was filed. 2 L. King, K. Klee, R. Levin, H. Miller, & P. Murphy, Collier on Bankruptcy ¶ 365.03, p. 365-24 (15th ed. 1983). As a result, “[a]ny compensation earned by and payable to the employee under the contract” after the petition is filed is a first priority administrative expense. Countryman, Executory Contracts in Bankruptcy: Part II, 58 Minn. L. Rev. 479, 484 (1974). See also Fogel, Executory Contracts and Unexpired Leases in The Bankruptcy Code, 64 Minn. L. Rev. 341, 376 (1980). If the contract is eventually rejected, rejection constitutes a breach effective immediately before the date of the filing of the petition. 11 U. S. C. § 365(g) (1982 ed.). The employees will have general unsecured claims for damages resulting from that breach. 3 L. King, R. Babitt, A. Herzog, & R. Levin, Collier on Bankruptcy, ¶502.07, p. 502-99 (15th ed. 1983); Note, The Bankruptcy Law’s Effect on Collective Bargaining Agreements, 81 Colum. L. Rev. 391 (1981). Some *546of these damages will stem from the employer’s obligations under the contract in the postfiling period. Therefore, whether the contract is accepted or rejected, it will support a claim that arises out of the debtor’s obligations in the post-petition period.12
Additionally, even under the Court’s approach, see ante, at 531, during the interim between filing and rejection or assumption, the estate will be liable to the employees for the reasonable value of any services they perform. The contract rate frequently will be the measure of the reasonable value of those services. See, e. g., In re Chase Commissary, 11 F. Supp. 288 (SDNY 1935) (rental in lease presumed to be reasonable value of use and occupancy); Fogel, supra, at 370 (generally courts presume lease rentals reasonable). For these reasons, it is inaccurate to say that the collective-bargaining agreement may not reasonably be considered “in effect” for purposes of NLRA §8(d).13 Other provisions of the NLRA, as well as the policies underlying that statute, require that such a contract be considered “in effect.”14
*547The definitional sections of the NLRA plainly support the conclusion that Congress did not intend the filing of a bankruptcy petition to affect the applicability of § 8(d). As the Court notes, a debtor in possession is an “employer” within the meaning of the NLRA. Ante, at 534.15 Because § 8(a)(5) imposes the duty to bargain on employers, the Court properly concludes that § 8(a)(5) applies to debtors in possession. Ibid. And because the definition of the duty to bargain includes the notice and “cooling-off” requirements of §8(d), Lion Oil, 352 U. S., at 285, the logical inference is that Congress intended these restrictions of unilateral alterations to apply to debtors in possession as well. It is most unlikely that Congress intended that the obligation to bargain apply to debtors in possession but not the definition of that duty.
B
The policies underlying the NLRA in general, and § 8(d) in particular, also strongly support the application of the notice and cooling-off requirements of § 8(d) in this context. As we explained in First National Maintenance Corp. v. NLRB, *548452 U. S. 666 (1981): “A fundamental aim of the National Labor Relations Act is the establishment and maintenance of industrial peace to preserve the flow of interstate commerce. Central to achievement of this purpose is the promotion of collective bargaining as a method of defusing and chaneling conflict between labor and management.” Id., at 674 (citation omitted). See also NLRA § 1, 29 U. S. C. § 151. Because of the central role played by collective bargaining in achieving the goals of the NLRA, “[enforcement of the obligation to bargain collectively is crucial to the statutory scheme.” NLRB v. American National Insurance Co., 343 U. S. 395, 402 (1952). The notice and cooling-off requirements of § 8(d), which are components of the duty to bargain, are specifically designed to prevent labor strife resulting from unilateral modifications and terminations of collective-bargaining agreements. In Chemical Workers v. Pittsburgh Plate Glass Co., 404 U. S. 157 (1971), we explained: “The purpose of the proscription of unilateral mid-term modifications and terminations in 8(d) cannot be, therefore, simply to assure adherence to contract terms. . . . The conditions for a modification or termination set out in paragraphs (1) through (4) plainly are designed to regulate modifications and terminations so as to facilitate agreement in place of economic warfare. . . . [T]he provision ‘seeks to bring about the termination and modification of collective-bargaining agreements without interrupting the flow of commerce or the production of goods.’” Id., at 187, quoting Mastro Plastics, 350 U. S., at 284.
Plainly, the need to prevent “economic warfare” resulting from unilateral changes in terms and conditions of employment is as great after a bankruptcy petition has been filed as it is prior to that time. I do not think that there is any question that the threat to labor peace stemming from a unilateral modification of a collective-bargaining agreement is as great one day after a bankruptcy petition is filed as it was one day *549before the petition was filed.16 We cannot ignore these realities when construing the reach of the NLRA. Cf. NLRB v. Erie Resistor Corp., 373 U. S., at 236 (citing Board’s function in applying the “general provisions of the Act to the complexities of industrial life” as a reason to defer to its judgment). Nor can we ignore the judgment of the Board that § 8(d) should remain applicable after a bankruptcy petition has been filed, because that judgment stems from the Board’s “special understanding of ‘the actualities of industrial relations,’” ibid,., quoting NLRB v. Steelworkers, 357 U. S. 357, 362-363 (1958).
The basis for § 8(d)’s prohibition against unilateral modifications is a congressional judgment that such modifications would be antithetical to labor peace. As we explained in a somewhat different context in Fibreboard Paper Products Corp. v. NLRB, 379 U. S. 203, 211 (1964), “[t]he Act was framed with an awareness that refusals to confer and negotiate had been one of the most prolific causes of industrial strife.” Permitting unilateral modifications of collective-bargaining agreements, therefore, seriously undermines policies that lie at the very heart of § 8(d) and the NLRA. In sum, were one to consider only the policies and provisions of the NLRA, there could be no question that Congress intended that §8(d) remain applicable after a bankruptcy petition has been filed.
*550C
When we turn to the relevant provisions and policies of the Bankruptcy Code, we find nothing that alters this conclusion. As I have said, swpra, at 539, the Court is unable to point to any provision of the Bankruptcy Code that by its terms renders § 8(d) inapplicable. Nor does the Court argue that there is anything in the Code that would forbid the debtor in possession to comply with the requirements of § 8(d).17 The question then is whether application of § 8(d) would so undermine the goals of the Bankruptcy Code that, despite the deleterious effect on the policies of the NLRA, Congress could not have intended that § 8(d) remain applicable once a bankruptcy petition has been filed.
As the Court correctly points out, the primary goal of Chapter 11 is to enable a debtor to restructure his business so as to be able to continue operating. Ante, at 528. Unquestionably, the option to reject an executory contract is essential to this goal. But the option to violate a collective-bargaining agreement before it is rejected is scarcely vital to insuring successful reorganization. For if a contract is so *551burdensome that even temporary adherence will seriously jeopardize the reorganization, the debtor in possession may seek the Bankruptcy Court’s permission to reject that contract. Under the test announced by the Court today, his request should be granted.18 Indeed, because labor unrest is inimical to the prospects for a successful reorganization, and because unilateral modifications of a collective-bargaining agreement will often lead to labor strife, such unilateral modifications may more likely decrease the prospects for a successful reorganization.
The Court claims that requiring the debtor in possession to adhere to the terms of a collective-bargaining agreement conflicts with the “Code’s overall effort to give a debtor-in-possession some flexibility and breathing space.” Ante, at 532. Again the Court does not explain how enforcement of § 8(d) interferes with these policies; but I assume that the Court expects that the financial pressures created by requiring adherence to the collective-bargaining agreement would put pressure on the debtor in possession to reach a rapid and possibly premature judgment about whether to assume or reject a contract.19 It is apparent, however, that Congress did not believe that providing the debtor in possession with unlimited time to consider his options should outweigh all other *552considerations. For example, although Chapter 11 permits a debtor in possession to accept or reject a contract “at any time before the confirmation of a plan,” the nondebtor party to such a contract is permitted to request that the court order the debtor in possession to assume or reject the contract within a specified period. 11 U. S. C. § 365(d)(2) (1982 ed.). Congress thus clearly concluded that, in certain circumstances, the rights of the nondebtor party would outweigh the need of the debtor in possession for unlimited flexibility and breathing space.
More importantly, I do not believe that the pressure to seek early rejection will frequently impede the reorganization process. As noted above, when a collective-bargaining agreement will seriously impede the reorganization, the debtor in possession should be able to obtain permission to reject the agreement. The major danger to the reorganization that stems from premature rejection of collective-bargaining agreements is that the debtor in possession will reject an agreement he would not have rejected upon further deliberation. If that agreement contains terms more favorable than any that he is later able to obtain through renegotiation the reorganization may be impaired. In the case of a collective-bargaining agreement, however, this danger is largely illusory. Because the union members will lose their jobs if the reorganization fails, it is highly likely that the debtor in possession will be able to negotiate a contract that is at least as favorable as the contract that he has rejected. Cf. First National Maintenance Corp. v. NLRB, 452 U. S., at 681, n. 19 (noting instances in which unions have aided employers to save failing businesses); N. Y. Times, Oct. 9, 1983, section 3, pp. 1, 12 (reporting instances of employees agreeing to wage reductions in response to threatened bankruptcy or plant closings). In addition, because unions have a strong incentive to avoid rejection of contracts, they frequently may be willing to enter into negotiated settlements for the interim period that will at least forestall rejection. Consequently, in *553many cases, requiring the debtor in possession to adhere to the terms of an existing agreement will not lead to early rejection at all. In sum, because the debtor in possession may apply to the bankruptcy court for rejection of executory contracts, holding § 8(d) applicable to the reorganization period will not seriously undermine the chances for a successful reorganization.
IV
My conclusion that Congress intended that a debtor in possession adhere to the terms of a collective-bargaining agreement in the postpetition period, when he is free to disregard all other contracts, is supported by our consistent recognition that collective-bargaining agreements are not like other agreements. What Justice Douglas wrote in 1960 remains true today:
“The collective bargaining agreement... is more than a contract; it is a generalized code to govern a myriad of cases which the draftsmen cannot wholly anticipate. . . .
“A collective bargaining agreement is an effort to erect a system of industrial self-government. When most parties enter into contractual relationship, they do so voluntarily, in the sense that there is no real compulsion to deal with one another, as opposed to dealing with other parties. This is not true of the labor agreement. The choice is generally not between entering or refusing to enter into a relationship, for that in all probability preexists the negotiations. Rather, it is between having that relationship governed by an agreed-upon rule of law or leaving each and every matter subject to a temporary resolution dependent solely upon the relative strength, at any given moment, of the contending forces.” Steelworkers v. Warrior & Gulf Navigation Co., 368 U. S. 574, 578-580 (citations and footnotes omitted).
See also John Wiley & Sons, Inc. v. Livingston, 376 U. S. 543, 550 (1964).
*554The Court’s holding that an employer, without committing an unfair labor practice, may disregard the terms of a collective-bargaining agreement after a bankruptcy petition has been filed deprives the parties to the agreement of their “system of industrial self-government.” Without this system, resolution of the parties’ disputes will indeed be left to “the relative strength ... of the contending forces.” Steelworkers, supra, at 580. Of course, there is some tension between the policies underlying the Bankruptcy Code and a holding that § 8(d) remains applicable after a bankruptcy petition has been filed. Holding § 8(d) inapplicable in these circumstances, however, strikes at the very heart of the policies underlying that section and the NLRA, and will, I believe, spawn precisely the type of industrial strife that § 8(d) was designed to avoid. By contrast, I do not think that the prospects for a successful reorganization will be seriously impaired by holding that § 8(d) continues to apply. For this reason, I conclude that filing a bankruptcy petition does not affect the applicability of § 8(d), and that, as a result, a debtor in possession who unilaterally alters the terms of a collective-bargaining agreement commits an unfair labor practice.

 Section 365 provides in pertinent part: “Except as provided in sections 765 and 766 of this title and in subsections (b), (c), and (d) of this section, the trustee, subject to the court’s approval, may assume or reject any exec-utory contract or unexpired lease of the debtor.” 11 U. S. C. § 365(a) (1982 ed.).

 Under § 1101 of the Bankruptcy Code, 11 U. S. C. § 1101 (1982 ed.), the debtor in possession is the debtor in any case in which “no person has qualified and is serving as a trustee.” 1 A. Herzog & L. King, Bankruptcy Code § 1101, p. 452 (1983). Section 1107 provides that “[sjubject to . . . such limitations or conditions as the court prescribes, a debtor in possession shall have all the rights . . . and powers” of a reorganization trustee other than the right to compensation. These powers include “the power to operate the debtor’s business unless the court orders other*536wise.” 5 L. King, C. Cyr, K. Klee, H. Minkel, & W. Taggart, Collier on Bankruptcy ¶ 1101.01, p. 1101-2 (15th ed. 1983).

 The complete text of § 8(a)(5) reads as follows:
“It shall be an unfair labor practice for an employer—
“(5) to refuse to bargain collectively with the representatives of his employees, subject to the provisions of section 159(a) of this title.” 29 U. S. C. § 158(a).

 The complete text of the relevant portion of § 8(d) provides:
“For the purposes of this section, to bargain collectively is the performance of the mutual obligation of the employer and the representative of the employees to meet at reasonable times and confer in good faith with respect to wages, hours, and other terms and conditions of employment, or the negotiation of an agreement, or any question arising thereunder, and the execution of a written contract incorporating any agreement reached if requested by either party, but such obligation does not compel either party to agree to a proposal or require the making of a concession: Provided, That where there is in effect a collective-bargaining contract covering employees in an industry affecting commerce, the duty to bargain collectively shall also mean that no party to such contract shall terminate or modify such contract, unless the party desiring such termination or modification—
“(1) serves a written notice upon the other party to the contract of the proposed termination or modification sixty days prior to the expiration date thereof, or in the event such contract contains no expiration date, sixty days prior to the time it is proposed to make such termination or modification;
“(2) offers to meet and confer with the other party for the purpose of negotiating a new contract or a contract containing the proposed modifications;
“(3) notifies the Federal Mediation and Conciliation Service within thirty days after such notice of the existence of a dispute, and simultaneously therewith notifies any State or Territorial agency established to mediate and conciliate disputes within the State or Territory where the *537dispute occurred, provided no agreement has been reached by that time; and
“(4) continues in full force and effect, without resorting to strike or lockout, all the terms and conditions of the existing contract for a period of sixty days after such notice is given or until the expiration date of such contract, whichever occurs later:
“The duties imposed upon employers, employees, and labor organizations by paragraphs (2) to (4) of this subsection . . . shall not be construed as requiring either party to discuss or agree to any modification of the terms and conditions contained in a contract for a fixed period, if such modification is to become effective before such terms and conditions can be reopened under the provisions of the contract. Any employee who engages in a strike within any notice period specified in this subsection, or who engages in any strike within the appropriate period specified in subsection (g) of this section, shall lose his status as an employee of the employer engaged in the particular labor dispute, for the purposes of sections 158,159, and 160 of this title, but such loss of status for such employee shall terminate if and when he is reemployed by such employer.” 29 U. S. C. § 158(d).

 See n. 4, supra, for the complete text of this portion of § 8(d).

 Because §8(d) begins by defining the collective bargaining as the “obligation ... to meet. . . and confer . . . with respect to wages, hours and other terms and conditions of employment” (emphasis added), we held that *538notiee and waiting period requirements of § 8(d) are applicable to a modification only when it “changes a term that is a mandatory rather than a permissive subject of bargaining.” Chemical Workers v. Pittsburgh Plate Glass Co., 404 U. S. 157, 185 (1971).

 The Board also held that Bildisco had violated § 8(a)(1). However, because this holding is wholly dependent on the § 8(a)(5) violation, it presents no independent issues. See Chemical Workers, supra, at 163, n. 6. See generally R. Gorman, Basic Text on Labor Law 132 (1976) (conduct that violated § 8(5) also violated § 8(1) derivatively).

 The Court appears to attribute the rule that the debtor in possession is liable only for the reasonable value of benefits conferred, and not for the debtor’s obligations under the contract, to 11 U. S. C. § 365(g)(1) (1982 ed.). Section 365(g)(1) does not, however, serve that function.
In pertinent part, § 365(g)(1) provides that “the rejection of an executory contract or unexpired lease of the debtor constitutes a breach of such contract or lease ... if such lease has not been assumed under this section or under a plan confirmed under chapter 9,11, or 13 of this title, immediately before the date of the filing of the petition.” None of the cases relied upon by the Court, however, refer to § 365(g)(1) or its predecessor under the Bankruptcy Act as the source of the limitation of the estate’s liability to the reasonable value of benefits conferred. In only one case, In re North Atlantic & Gulf S.S. Co., 204 F. Supp. 899, 909 (SDNY 1962), aff’d, 320 F. 2d 628 (CA21963), does the court even arguably relate the principles of retro-activity to the unenforceability of contracts in the interim period. Moreover, the legislative history of § 365(g)(1) makes it clear that the purpose of that provision is to insure that claims stemming from rejection are treated as general unsecured claims. The House and Senate Reports explain that *540“[t]he purpose [of § 365(g)(1)] is to treat rejection claims as prepetition claims.” S. Rep. No. 95-989, p. 60 (1978); H. R. Rep. No. 95-595, p. 349 (1977). See also 2 L. King, K. Klee, R. Levin, H. Miller, & P. Murphy, Collier on Bankruptcy ¶ 365.08, p. 365-41 (15th ed. 1983). The extent to which the claim arising from rejection will be allowed is therefore determined by the rules for the allowance of prepetition claims. See 11 U. S. C. § 502(g) (1982 ed.); 3 L. King, R. Babitt, A. Herzog, & R. Levin, Collier on Bankruptcy ¶ 502.08, p. 502-100 (15th ed. 1983). In addition, the priority, if any, to be accorded such a claim will be determined according to the rules for prepetition claims. 11 U. S. C. §507 (1982 ed.). Were damages stemming from rejection treated as postpetition, rather than prepetition, claims, they would be accorded first priority as administrative expenses. Bordewieck & Countryman, The Rejection of Collective Bargaining Agreements by Chapter 11 Debtors, 57 Am. Bankr. L. J. 293, 331 (1983); 2 Collier on Bankruptcy, supra, ¶ 365.08, at 365-41.
Although the statutory basis for the rule that the debtor in possession is not liable for the debtor’s obligations under the contract until it is assumed is not entirely clear, the leading treatise appears to attribute the rule to the concept that title to an executory contract does not pass to the estate until the contract is assumed. Id., ¶ 365.03, at 365-24. See also Bordewieck & Countryman, supra, at 303. The debtor in possession’s liability for the reasonable value of any benefits conferred stems from § 503(b), which allows administrative expenses for the “actual, necessary costs and expenses of preserving the estate.” 3 Collier on Bankruptcy, supra, ¶ 503.04, at 503-15.

 Despite this conclusion, I agree with the Court that the debtor in possession need not comply with the notice requirements and waiting periods imposed by § 8(d) before seeking rejection. That is, in order to obtain rejection, the debtor in possession need not, for example, demonstrate that he has given notice to the union of his desire to seek rejection and has maintained the contract in “full force and effect” without resorting to a lockout for the period required by §8(d). I also agree that the debtor in possession need not bargain to impasse before he may seek the court’s permission to reject the agreement. As the Board notes, debtors in possession may need expeditious determinations about whether they may reject a collective-bargaining agreement. The notice and waiting periods contained in § 8(d) would make a rapid determination impossible. Brief for NLRB 41. Nor, as the Court notes, should the Bankruptcy Court be required to make determinations that are wholly outside its area of expertise, such as whether the parties have bargained to impasse. Ante, at 526-527, 533-534. Rather, I believe that the test for determining whether rejection should be permitted enunciated in Part II of the Court’s opinion strikes the proper balance between the NLRA and the Bankruptcy Code.

 The Board has held that a trustee was not bound by a pre-existing collective-bargaining agreement when there were drastic changes in the operations of the debtor company immediately after the bankruptcy petition was filed. Blazer Industries, Inc., 236 N. L. R. B. 103, 109-110 (1978). Because these cases involve a debtor in possession, rather than a trustee, and because there is nothing in the opinion of the Court of Appeals for the Third Circuit or the Board suggesting that drastic changes of the significance found in Blazer took place in Bildisco’s operation, Blazer is simply not relevant to the issues before us today.

 In concluding that a debtor in possession does not commit an unfair labor practice if he unilaterally alters the terms of the collective-bargaining agreement, the Court of Appeals also relied on an analogy to the doctrine *544of successorship, as applied by this Court in NLRB v. Burns International Security Services, Inc., 406 U. S. 272 (1972). In my view, this reliance was misplaced.
In Bums, we considered the bargaining obligations of a “successor” employer. The respondent in Bums, Burns International Security Services, Inc., won a contract to provide security services that had been provided by Wackenhut Corp. A majority of the individuals hired by Burns were former Wackenhut employees. We held that Burns was not bound by the terms of the collective-bargaining agreement between Wackenhut and its employees, but that Burns had a duty to bargain with the union that had represented those employees. Our conclusion that Bums was not bound by Wackenhut’s collective-bargaining agreement was based largely on the ground that Congress did not intend to bind an employer to terms to which it had not agreed. This consideration has little relevance to this litigation because the debtor in possession is the same employer who agreed to the collective-bargaining agreement. We also noted in Bums that a potential employer might be reluctant to take over a failing business if he were bound by his predecessor’s labor contract. Given that the debtor is bound by the collective-bargaining agreement before he files his bankruptcy petition, holding that he remains bound after the petition is filed cannot act as a disincentive to filing the petition.
The Court of Appeals also found § 8(d) inapplicable because rejection relates back to the time immediately before the filing under § 365(g)(1). As a result, that court concluded that “no labor contract effectively existed between the union and the debtor-in-possession” after the petition was filed. 682 F. 2d, at 84. As noted above, however, see n. 8, supra, § 365(g)(1) is merely intended to insure that claims for damages stemming from the rejection of a collective-bargaining agreement are treated as prepetition unsecured claims. Although the fiction of relation back under § 365(g)(1) serves a useful function under the Bankruptcy Code, extending this fiction to the NLRA is not helpful in finding the proper accommodation between those two statutes. As should be apparent from the discussion in the text, see infra, at 545-546, for purposes of § 8(d), it is inaccurate to suggest that the collective-bargaining agreement does not exist after the bankruptcy petition is filed.

 In the unlikely event that the contract is neither accepted nor rejected, it will “ride through” the bankruptcy proceeding and be binding on the debtor even after a discharge is granted. Federal’s, Inc. v. Edmonton Investment Co., 555 F. 2d 577, 579 (CA6 1977); 2 Collier on Bankruptcy, ¶ 365.03, p. 365-22. The nondebtor party’s claim will therefore survive the bankruptcy proceeding. Countryman, Executory Contracts in Bankruptcy: Part II, 58 Minn. L. Rev. 479, 487 (1974).

 It is noteworthy that courts considering bankruptcy cases often refer to executory contracts as remaining “in effect” unless or until they are rejected. See, e. g., Federal’s, Inc. v. Edmonton Investment Co., supra, at 579 (executory contracts “remain in effect unless” rejected during the proceedings); Consolidated Gas Electric Light & Power Co. v. United Railways Co., 85 F. 2d 799, 805 (CA4 1936) (executory contract “remains in force . . . until it is rejected”); Smith v. Hill, 317 F. 2d 539, 542, n. 6 (CA9 1963) (executory contracts “continu[e] in effect” unless rejected); In re Guardian Equipment Corp., 18 B. R. 864, 867 (Bkrtcy. Ct. SD Fla. 1982) (lease that has not been assumed or rejected “remains in effect”).

 Even if we could say that the collective-bargaining agreement is not “in effect” and that the notice and waiting period requirements of § 8(d) are inapplicable, it does not necessarily follow that the debtor in possession *547may unilaterally alter terms and conditions of employment. For example, in NLRB v. Katz, 369 U. S. 736, 743 (1962), although the parties had not yet concluded their negotiations for an initial collective-bargaining agreement, we held that “an employer’s unilateral change in conditions of employment under negotiation is ... a violation of § 8(a)(5), for it is a circumvention of the duty to negotiate which frustrates the objectives of § 8(a)(5) much as does a flat refusal [to negotiate].” In addition, it has been widely held that an employer generally may not make unilateral changes in matters that are mandatory subjects of bargaining even after a collective-bargaining agreement has expired. See, e. g., Peerless Roofing Co. v. NLRB, 641 F. 2d 734, 735 (CA9 1981); Clear Pine Mouldings, Inc. v. NLRB, 632 F. 2d 721, 729 (CA9 1980); Hinson v. NLRB, 428 F. 2d 133, 136 (CA8 1970).

 Section 2(2), 29 U. S. C. § 152(2), defines the term “employer” to include “any person acting as an agent of an employer, directly or indirectly.” A trustee or a debtor in possession is a “person” within the meaning of § 2(2) as § 2(1) of the NLRA, 29 U. S. C. § 152(1), defines “person” to include “trustees in cases under Title 11 [which governs bankruptcy], or receivers.”

 Recent events make it clear that the fear of labor unrest resulting from postfiling unilateral modifications is not merely a hypothetical possibility. For example, on September 24, 1983, Continental Airlines filed a Chapter 11 petition. The company immediately instituted wage reductions that ranged from 45 to 50%. N. Y. Times, Sept. 28, 1983, p. D6. On October 3, Continental’s pilots and flight attendants went on strike. N. Y. Times, Oct. 3, 1983, p. B13. Similarly, on April 22, 1983, Wilson Foods Corp. filed a Chapter 11 petition. Three days later, the company reduced wages by 40 to 50%. N. Y. Times, May 3, 1983, p. D2. The wage cut prompted a strike in early June. N. Y. Times, June 11, 1983, p. 31.

 The Court does suggest that § 502(c), which provides for the estimation of contingent and unliquidated claims, and § 507(a)(3), which grants third-priority status to certain claims for compensation earned prior to the filing of the petition, “indicate Congress’ considered judgment regarding the extent to which special provisions should be afforded workers under the Bankruptcy Code.” Ante, at 531, n. 12. If, as I conclude, Congress intended § 8(d) to remain applicable after a bankruptcy petition is filed, it would, however, have been unnecessary to repeat the protections contained by that section in the Bankruptcy Code.
In addition, the Court refers to, and appears to find significance in, the automatic stay provision, 11 U. S. C. § 362(a) (1982 ed.), and the requirement that damages stemming from rejection of an executory contract be recovered through the Code’s claims administration procedures. Ante, at 529-530. However, since the Court does not argue that the automatic stay provision would bar an NLRB proceeding to enforce § 8(d) or that any award in such proceedings would not be recovered through the bankruptcy claims administration procedures, I fail to see why the Court finds these sections relevant to our resolution of the issue before us.

 I therefore fundamentally disagree with the Court’s wholly unsupported statement that application of § 8(d) “would largely, if not completely, undermine whatever benefit the debtor-in-possession otherwise obtains by its authority to request rejection of the agreement.” Ante, at 529.

 This financial pressure is created primarily by the fact that the cost of the debtor in possession’s compliance with § 8(d) would be accorded first priority as an administrative expense. See In re Bel Air Chateau Hospital, Inc., 106 LRRM 2834 (CD Cal. 1980) (Board award for backpay accruing during reorganization given first priority as a cost of administration); Bordewieck & Countryman, 57 Am. Bankr. L. J., at 333. Cf. Reading Co. v. Brown, 391 U. S. 471 (1968) (damages resulting from negligence of receiver administering an estate under Chapter XI of the Bankruptcy Act afforded first priority as an administrative expense).