Section 1113 of the Bankruptcy Code provides the procedures that must be followed to reject a CBA. 3652 and its companion bill, S. 2092 , were introduced by Representative Conyers and Senator Kennedy and are entitled the "Protecting Employees and Retirees in Business Bankruptcies Act of 2007." This report's analysis of the bill will be limited to the modifications it proposes for Â§ 1113 of the Bankruptcy Code. According to the bill, workers and retirees are being disproportionately burdened in business bankruptcies. 3652 urges "[c]omprehensive reform ... to remedy these fundamental inequities in the bankruptcy process and to recognize the unique firm-specific investment by employees and retirees in their employers' business through their labor." Â§ 1113, which outlines the requirements that must be met before a court can approve rejection of a collective bargaining agreement (CBA) by a debtor company using chapter 11 to reorganize. Overview of Proposed Changes to 11 U.S.C. 3652 proposes a number of changes to existing subsections of 11 U.S.C. Â§ 1113 as well as adding six new subsections. Therefore, limiting the debtor to proposals affecting the labor group for no more than two years would assure labor groups that they would not be confronted with situations in which a CBA's rejection was approved by the court after the labor group had rejected a debtor's proposal for lengthy concessions. One of the changes in the process required for a court to approve rejection of a CBA is a new requirement that the parties have reached an impasse. As noted below, courts have recently enjoined strikes that were threatened in response to rejection of CBAs. Though the bills were not passed by the 109 th Congress, their provisions are included in H.R. Arguably, this could put a court in the position of having little flexibility to make decisions that could result in the debtor company's successful reorganizationâif it allowed incentive pay to retain someone essential to the business, it could be unable to approve rejection of a CBA if the debtor could not rebut the presumption that the labor group was being burdened more than management. This appears to encourage continuing negotiations between the debtor and the authorized representative without a statutory deadline. Â§ 1113(e)

The bill proposes no changes to this sectionâwhile parties continue to negotiate changes to a CBA, courts would continue to be allowed to approve interim modifications to a CBA "if essential to the continuation of the debtor's business, or in order to avoid irreparable damage to the estate." H.R.
Introduced in the 110 th Congress, the Protecting Employees and Retirees in Business Bankruptcies Act of 2007 ( H.R. 3652 ) proposes a number of changes to the U.S. Bankruptcy Code. According to the sponsors, the changes are needed to remedy inequities in the bankruptcy process and to recognize that employees and retirees have a unique investment in their companies through their labor.
The bill contains many proposals for changing the Bankruptcy Code. This report focuses on the amendments and additions to 11 U.S.C. Â§ 1113, which provides the procedures that are to be followed if a debtor in possession wants to reject a collective bargaining agreement (CBA).
The changes proposed for Â§ 1113 may be intended to promote negotiation between the debtor and the authorized representatives of labor groups that have existing CBAs with the debtor company. They also appear to constrain court involvement in the process. This could lead to more agreed-upon modifications and fewer rejections of CBAs. Alternatively, it could prolong the negotiation process and put burdens on the debtor that would make liquidation more feasible than reorganization.
The bill prescribes the parameters of offers that may be made by the debtor in negotiations as well as the requirements that must be met before a court can approve rejection. It attempts to curtail what the sponsors have referred to as "excesses of executive pay" by making rejection of a CBA difficult if executives are to receive incentive pay and by requiring consideration of past concessions by the labor group in determining whether the labor group is being disproportionately burdened by proposed modifications to a CBA.
H.R. 3652 appears to propose changes to Â§ 1113 that would resolve some differences between courts in interpreting the requirements for modification or rejection of a CBA. It also clearly states that rejection of a CBA is a breach of contract, even when approved by the court, and clarifies the damages that are available.
The bill provides an absolute right of all employees to strike if their CBA is modified or rejected. This contrasts with recent court decisions involving unions representing employees of financially distressed airlines in which the employees were enjoined from striking.