Rejecting Collective Bargaining Agreements Under Section 1113 of the Bankruptcy Code - Judicial Precision or Economic Reality?

Before a Chapter 11 debtor in possession can reject the collective bargaining agreement, section 1113 of the Bankruptcy Code requires it to bargain with the representative of its employees and then obtain court approval. Because Congress sought to accommodate the interests of both organized labor and the business community, section 1113 contains numerous terms of compromise which ultimately are interpreted by the courts. The authors have reviewed the major litigation, and have suggested trends in the judicial interpretation of section 1113. However, rejection of collective bargaining litigation is counterproductive with respect to Chapter 11 reorganizations. Rather, the authors believe that the debtor and the union should focus on the economical reality of their situation, rather than the strength of their respective legal positions, to reach agreement at the bargaining table and avoid contract rejection litigation