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October 26, 2004
Pro-Corporate Bankruptcy Courts
When people talk about the damage conservatives do to the courts, they are usually thinking of undermining civil liberties or civil rights. But the pro-corporate leanings of specialty courts like bankruptcy means that workers lose out as well.
As the Daily Labor Report article below details, airline workers are being forced into desperate concessionary bargaining because they know if a bankruptcy court makes the decision, they will be shafted even worse:
Arthur Luby, who represented members of the Transport Workers Union during recent concession bargaining with US Airways, said courts have allowed companies to abandon their collective bargaining agreements in more than 90 percent of bankruptcy proceedings across various industries he has reviewed.Bankruptcy courts have become the favorite venue for union-busting in a range of industries.Luby was speaking at a legal seminar organized by the American Law Institute and the American Bar Association on airline and railroad labor law. . .
Luby said labor attorneys and union officials who are used to dealing in a system that encourages arbitration and compromise under the Railway Labor Act must understand that bankruptcy judges more often than not side with the companies.
BNA Daily Labor Report
Tuesday, October 26, 2004 Page A-6
Airlines: Negotiated Settlements Called Preferable
To Court-Imposed Cuts at Bankrupt Firms
Arthur Luby, who represented members of the Transport Workers Union during recent concession bargaining with US Airways, said courts have allowed companies to abandon their collective bargaining agreements in more than 90 percent of bankruptcy proceedings across various industries he has reviewed.
Luby was speaking at a legal seminar organized by the American Law Institute and the American Bar Association on airline and railroad labor law.
Workers at companies facing bankruptcy reorganizations are better off negotiating concessions through collective bargaining rather than waiting for a court to impose cuts in pay and benefits that are likely to be far worse, labor attorneys told a legal seminar Oct. 22.
Luby said labor attorneys and union officials who are used to dealing in a system that encourages arbitration and compromise under the Railway Labor Act must understand that bankruptcy judges more often than not side with the companies.
"They have to understand they're dealing in a different world, and the consequences of not understanding that are that you lose your contract," said Luby, who is with O'Donnell, Schwartz & Anderson in Washington, D.C.
Under Section 1113 of the U.S. Bankruptcy Code, companies that enter bankruptcy proceedings can ask a court to set aside an existing collective bargaining agreement and authorize reductions in pay and benefits. However, the debtor company must first make a proposal to the union, provide the bargaining agent with company financial information, and meet with the union and bargain in good faith.
In the US Airways case, three small groups of TWU-represented workers negotiated consensual cost-cutting agreements with the company, as did the Air Line Pilots Association. The carrier still is trying to reach agreements with other unions.
Daniel Katz, an attorney with Katz & Ranzman in Washington, D.C., who is representing the Communications Workers of America in the US Airways bankruptcy case, also cautioned unions against letting a bankruptcy judge decide the level of pay and benefits.
Even though bankruptcy law was amended in 1984--adding Section 1113 to prevent companies from unilaterally discarding collective bargaining agreements--workers are at a disadvantage when a company enters bankruptcy court, he said.
"It's not a place that's friendly for unions or workers," Katz told the seminar.
Courts Focus on Companies
Bankruptcy judges are more focused on the financial details of a company rather than its workers, although Judge Stephen Mitchell of the U.S. Bankruptcy Court for the Eastern District of Virginia, who is overseeing the US Airways case, showed a great deal of empathy for employees, Katz said.
"By training and the nature of their business, bankruptcy judges essentially view their mission as looking after these failed businesses," he said. "From that perspective, it's a tough place for a union or employee advocate. From that standpoint, there are good reasons why a union would want to settle matters outside the court."
CWA has not agreed to concessions--Katz said the company proposals were "just too onerous for the union to agree to"--although talks are continuing.
US Airways on Oct. 15 obtained approval from Mitchell to impose a temporary 21 percent pay cut and reductions in benefits for all union-represented workers who had not agreed to long-term concessions (200 DLR AA-1, 10/18/04).
Management attorney John J. Gallagher, with Paul, Hastings, Janofsky & Walker in Washington, D.C., pointed out that courts have set standards that debtor companies must meet in obtaining relief from collective bargaining agreements, although courts are not entirely in agreement on those standards.
The U.S. Court of Appeals for the Third Circuit has determined that a debtor firm only could obtain relief that is necessary to avoid liquidation, while other circuits have ruled that companies are entitled to relief that will make them a viable competitor in the industry.
Section 1113 "is not an opportunity for a carrier to cherry pick every provision of a collective bargaining agreement it doesn't like--to say, 'I'm in bankruptcy and I can make an effort to get rid of them,' " Gallagher said.
Trend Is to Negotiate
Katz and other attorneys said in the airline industry the trend has been for carriers and workers to negotiate agreements outside court. Unions are likely to negotiate a better deal, and the carrier has an incentive to avoid the negative publicity generated by public court hearings, as was the case with US Airways, according to Katz.
Gallagher said he is aware of only two cases in the airline industry where carriers have had courts impose contract concessions under Section 1113. In addition to the recent US Airways decision, United Airlines obtained relief from collective bargaining agreements following its 2002 bankruptcy filing, he said.
Regarding the spate of airline bankruptcy filings in recent years, labor and management attorneys disputed the cause of those filings.
Tom A. Jerman, with O'Melveny and Myers in Washington, D.C., said they are a by-product of a new competitive era in the industry. Low-cost carriers have gained a larger market share in the past decade, and the Internet has made airline pricing schemes more transparent, making the industry even more competitive, according to Jerman.
"It is the result of market forces that really are beyond the control of any carrier," he said.
However, labor attorney William Wilder, with Baptiste & Wilder in Washington, D.C., disputed that assertion. Wilder said the problems were "more a result of unimaginative, uncreative management."
He singled out US Airways, which in the 1990s, he said, "had a regime that thought what an effective carrier consisted of was changing its livery colors and changing its name and that's about it, but nonetheless doesn't stop making demands of labor under the guise of this is the reality with which we now have to deal."
Posted by Nathan at October 26, 2004 07:31 AM
