New York Bankruptcy Court Refuses to Allow Company to Use Bankruptcy to Undercut Other Union Employers

In spite of language in the law that seems to make modifying or getting rid of collective bargaining agreements difficult, unions know all too well that employers have had great success in convincing bankruptcy courts to overrule union objections.  Over 90 percent of bankruptcy court’s have ruled against unions when companies seek to modify or reject CBAs in recent years.  The recent Western District of New York decision In re MCD Plumbing, Inc. (12-11759) (7/24/13) cut against this trend, with the bankruptcy judge twice denying the company’s request to extract concessions from workers while the blame for the company’s economic ills lay elsewhere.

The United Association of Journeymen and Apprentices of the Plumbing and Steam Fitting Industry of the United States and Canada, Local Union No. 22 was the exclusive representative of a unit of workers employed by MCD through an employer association agreement.  After making a proposal to the union on October 23, 2012, and engaging in short but not fruitful negotiations, the company asked the court for authority to reject the contract on November 19, less than one month after the proposal.  The court denied the initial request, with leave for the company to make another request if circumstances changed. 

When the company again moved recently for authority to reject, the court again denied the request. In issuing the most recent denial, the court noted that the company employed only a few members out of more than 1000 working at a given time under the agreement. Any concessions the company would have received could have undercut the entire market for union plumbers within the jurisdiction.  This reason alone, the court determined, was enough for the union to reject the proposal. The court also determined that the primary reason for the company’s financial problems was poor estimating of a project, not the cost of labor.  In fact, in other years, the company was profitable while paying union wages and benefits. 

The company has indicated it may appeal and seek to have the bankruptcy judge’s ruling reversed.  The company is also permitted to bring another motion – an unlimited number, in fact – if circumstances change.  At this stage the court, in refusing to assign blame to the union for business failures by the company, has handed a rare victory to unions in contract rejection proceedings. 

By Jordan Mazur| July 30, 2013

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