What Happens to My Employer's Union Contract?

An employer's bankruptcy filing does not immediately affect the status of its collective bargaining agreement with the Union.  All of the contract's provisions continue to govern the debtor's post-filing obligations to Union employees, including the applicable grievance procedures.

Under section 1113 of the Bankruptcy Code, the bankruptcy court may authorize an employer to reject—and thus terminate—a collective bargaining agreement if the debtor can prove to the bankruptcy court that

  1. it proposed modifications to the collective bargaining agreement to the union;
  2. the proposed modifications are necessary to permit the debtor's reorganization;
  3. the debtor met with the union and shared information justifying the proposed modifications;
  4. the debtor negotiated in good faith with the union; and
  5. the union refused to accept the proposal modifications without good cause.

What modifications are "necessary" is not defined by the Bankruptcy Code, and courts use varying definitions.  Essentially, however, section 1113 requires your employer to negotiate with the Union in good faith to modify its collective bargaining agreement before seeking authority to reject the contract. 

If your employer successfully rejects its collective bargaining agreement, the Union remains your authorized representative, and the company must comply with applicable labor laws and continue to bargain with the Union in good faith.