Law.com - In a First, Bankruptcy Judge Rules Calif. City Can Void 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 contracts it limited it to Chapter 11 bankruptcies. By failing to extend the limits to Chapter 9, which covers municipal bankruptcy, McManus said cities have broader latitude to break existing union pacts, In re City of Vallejo, 08-26813-A-9 (E. Dist. Calif.)"
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This is of interest to all the state and local governments that have been underfunding their public employee pension systems, or have otherwise made commitments to public employees that they now find themselves unwilling to live up to. Last resort: go bankrupt and break the contract.
3 comments:
why should that be the last resort?
several of these union contracts appear to award gross sums on employees who have worked only a few years.
I agree--that's true in some cases. Some public employees, especially the ones with unions, have managed to get themselves some contracts that are unbelievable. There are elementary school superintendents and principals making $400,000 per year and retiring at age 55 or 60 at almost full pay and with health benefits. But I was referring to one specific issue: governments that have refused for years, even decades, to contribute their contracted share to public employee pension funds, and then, when confronted with the need to make that up (in Illinois I was told it is $60 billion) they cry poverty and insolvency and start talking about bankruptcy. There is some speculation that the Vallejo bankruptcy case will be used for that purpose.
Sure, let's void the union contracts that were collectively bargained, but let's uphold ridiculous CID contracts that are forced onto unwilling homebuyers. That makes sense.
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