One benefit of a corporate bankruptcy is that it gives the company an opportunity to restructure its labour agreement and unshackle itself from union-related legacy costs.
But with private sector unions in decline — they’re confined to the old industrial business, mostly, as well as some services — this is probably going to be less and less of an issue.
But unions remain strong in the public sector, and there are plenty of municipalities and states that would love to dissolve their relationships with organizes labour. But it’s not clear if this can be accomplished through bankruptcy. For example, if California had actually gone broke (as opposed to limp along) could they have used that to renegotiate with its uber-powerful prison guards? It’s not clear.
In what may be the first action of its kind, a federal bankruptcy judge dissolved a City of Vallejo labour contract this week.
But the overturning of a public employee labour contract, opposed by labour unions and CalPERS (a top creditor owed $84 million), comes after a long and expensive bankruptcy process.
The City of Vallejo’s legal costs since declaring bankruptcy in May of last year, a widely watched move prompting a labour-backed legislative attempt to control local government bankruptcies, have reportedly reached $5 million.
Overturning the contract of the electrical workers union, a lone holdout after three other unions reached an agreement, saves the city an estimated $860,000 in salary increases during the final two years of the contract. Read the whole thing >
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