Court Rules Bankrupt Municipality Can Void Union Contracts

In a first which will be watched by states and municipalities around the country which have grossly underfunded their pension and benefit programs for their emloyees, a judge ruled that Vallejo California's bankruptcy permits it to void the contracts it had with its unions. Pamela A. MacLean writes in Law.com:In the first ruling of its kind, a bankruptcy judge held the city of Vallejo, Calif. has the authority to void its existing union contracts in its effort to reorganize, holding public workers do not enjoy the same protections Congress gave union workers at private companies. Municipal bankruptcy is so rare that no judge had yet ruled on whether Congressional reforms in the 1990s that required companies to provide worker protections before attempting to dissolve union contracts also applied to public workers' union contracts U.S. Bankruptcy Judge Michael McManus held March 13 that when Congress enacted 11 U.S.C. sec. 1113 to limit companies from outright rejection of union...(Read Full Post)