Against the constant current of labor-friendly decisions, the Third Circuit Court of Appeals recently provided a win to employers. As most National Labor Relations Board (NLRB) watchers know, the NLRB requires employers to adhere to the terms and conditions of an expired collective bargaining agreement (CBA) either until a new agreement has been reached or the parties achieve impasse. However, the court’s recent decision in In re Trump Entertainment Resorts Inc., held that companies can reject a collective bargaining agreement if it can carry the following criterion:

  1. the distressed company made a proposal to employees which includes modifications to employee benefits and protections which are necessary to permit reorganization;
  2. the employees’ representative refused to accept said proposal without good cause; and
  3. the balance of equities clearly favors rejection of the CBA.

This holding can be a powerful weapon for employers who are navigating the bankruptcy process, yet are impeded by high labor costs. A copy of the complete opinion can be found here.