Section 1113 Applies To Expired Collective Bargaining Agreements

Recently, in the case of In re Trump Entertainment Resorts, Bankruptcy No. 14-12103 (Bankr. D. Del. 2014), 2014 Bankr. LEXIS 4439 (Bankr. D. Del. October 20, 2014), the U.S. Bankruptcy Court for the District of Delaware addressed the issue of whether a debtor has the authority to reject an expired collective bargaining agreement pursuant to Section 1113 of the Bankruptcy Code. In Trump, prior to the petition date, a collective bargaining agreement (CBA) had been entered into by and between Trump Taj Mahal Associates LLC, a debtor-in-possession (TTMA or the debtor, and together with the rest of the debtors that had filed, the "debtors"), and Unite Here Local 54. By its own terms, the CBA expired five days after the Chapter 11 cases were filed.

As a preliminary matter, the Trump court had to determine whether it had jurisdiction to address whether the debtor could reject the CBA since it had expired by its own terms. Before addressing this issue, however, the court noted that under the National Labor Relations Act (NLRA), an employer is required to maintain the status quo following the expiration of a collective bargaining agreement so as to permit the employer and the union time to negotiate terms of a new collective bargaining agreement. Typically, the status quo is measured by the terms of the expired collective bargaining agreement and an employer can commit an unfair labor practice if, "without bargaining to impasse," it effects a unilateral change of an existing term or condition of employment, the opinion said, citing Litton Financial Printing Division v. National Labor Relations Board, 501 U.S. 190, 198 (1991).

In Trump, the union argued that the debtors could not reject the CBA since TTMA's obligations thereunder were statutory in nature, as opposed to contractual, because they arose only by virtue of the debtors' status quo obligations under the NLRA. The union contended that because Section 1113 of the Bankruptcy Code governs the rejection of an executory contract (i.e., contractual obligations), the court did not have jurisdiction to authorize the debtors to reject the CBA since the parties' status quo obligations were statutory in nature. Instead, the union argued the National Labor Relations Board had exclusive jurisdiction.

In addressing this issue, the court noted that there was a split of authority as to whether Section 1113 applies when a collective bargaining agreement has expired but the terms of the agreement remain in...