LEL Flash | Issue: January 2014

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Issue: January 2014

Comments from the Chair

Section Committee Midwinter Meetings offer excellent opportunities to concentrate on specific areas of labor and employment law. This year's State and Local Bargaining and Employment Law Committee Midwinter Meeting was exceptional in the quality of papers and in a special presentation on the Detroit bankruptcy case. The ability to have a substantial block of time for the subject of that nature demonstrates the real strength of our Midwinter Meeting programs. The Annual Section Conference held each year in November has over 320 speakers and a large number of tracks to be covered. In the Public Sector alone, last year there were four panel presentations and not enough time to concentrate on one particular subject like the Detroit bankruptcy, which is the largest municipal bankruptcy case filed in the history of the United States.

The presentation at this year's State and Local Government Bargaining and Employment Law Committee Midwinter Meeting was by Richard G. Mack, Jr., the lawyer who is representing AFSCME in bankruptcy court. This is a story that he has been living for a couple of years, although he is not a bankruptcy attorney. He used this opportunity, using his own words, to vent about the process, issues and impact this bankruptcy will have on public sector labor relations.

He started his presentation with a historical perspective on the growth of public sector unions and the perceived tension between fiscal budgeting and collective bargaining. He noted that local governments have struggled with financial complications for decades. Indeed, during the Great Depression, more than 4,700 cities defaulted on their debts, and in 1937, Chapter 9 of the Bankruptcy Code was enacted to address this issue. In order for a municipality to file a bankruptcy petition, the state must approve, and the local government leadership retains its autonomy to govern, despite the filing of the bankruptcy petition. Section 904 of the Bankruptcy Code clarifies this autonomy:

Notwithstanding any power of the court, unless the debtor consents or the plan so provides, the court may not, by any stay, order, or decree in the case or otherwise, interfere with (1) any of the political or governmental powers of the debtor; (2) any of the property or revenues of the debtor; or (3) the debtor's use or enjoyment of any income-producing property.

The autonomy of the City of Detroit becomes more complex due to state laws providing for the appointment of emergency financial managers. The litigation involving the bankruptcy petition included a challenge to the ability of the state to file the petition, challenges to the financial manager's ability to impair an existing collective bargaining agreement, and the enactment of a state law allowing the city to terminate the duty to bargaining with the unionized workforce. A statewide referendum was passed to repeal that state law, but within a few months thereafter, a new state law was drafted, in compliance with the state constitution, and was enacted to create similar rights for the city.

Prior to the filing of the bankruptcy petition, a coalition of 33 unions was formed, and it negotiated a tentative agreement with the city that included over $100 million in annual concessions. The state's governor ordered the city council not to ratify the coalition's tentative agreement and threatened to appoint an emergency manager if the agreement was ratified. For that reason, the contract was never executed.

In March 2013, an emergency manager was finally appointed, and this was considered to be a signal to the creditors of the potential of a bankruptcy petition. The emergency manager sought permission of the governor to file the bankruptcy petition, but a state court judge ordered the governor to withdraw the petition. That order was stayed by the Michigan Court of Appeals. On June 14, 2013, the emergency manager presented a comprehensive plan to adjust the $18 billion (mostly long term) debts of the city. In court challenges filed by retirees and unions, claims were made to the bankruptcy judge that the city through its emergency manager was not negotiating in good faith with the majority of its creditors to resolve the debt, which is a requirement for the city prove its eligibility to file the bankruptcy petition.

The bankruptcy court determined that the City of Detroit is eligible for bankruptcy, that it was insolvent and should have filed the bankruptcy petition years ago. The judge noted that the city did not bargain in good faith to try and resolve the debt but that good faith bargaining was "impracticable" because there were far too many creditors and far too much debt. The decision of the bankruptcy court is now on appeal, and the city and its unions are engaged in mediation of the debts. The liability for present and future retiree pensions and healthcare is being negotiated, as well are collective bargaining agreements for active employees of the city.

When asked about the impact of this financial crisis on employees, Mr. Mack noted that morale is at an all-time low and employees are angry and distrustful of the city government. The issues of this bankruptcy will continue to be explored by the State and Local Bargaining and Employment Law Committee in a panel presentation both at the Annual Section Conference in November and at future Midwinter Meetings. These are even further reasons why these meetings are so important.

Upcoming Midwinter Meetings will prove to be just as fascinating and attractive for our members:

Committee on Development of the Law Under the National Labor Relations Act (February 23-26--Miami Beach, Florida)--For the first time in several years all five members of the National Labor Relations Board will attend the Midwinter Meeting and update the attendees on Board developments. In addition, the Board's General Counsel will provide an update. The major topics for consideration in separate panel presentations include the application of Specialty Healthcare to representation cases, the right of access for off-duty employees to employer property in order for employees to engage in protected action, the persuader rules under the Labor-Management Reporting and Disclosure Act and related ethical considerations, neutrality in card-check agreements and the recent Section 302 litigation, and a review by the Associate General Counsels of the NLRB of unfair labor practice cases, enforcement litigation and in representation case review by the Board's former Deputy General Counsel.

Committee on Practice and Procedure Under the NLRA (February 26--March 1--Miami Beach, Florida)--This Midwinter Meeting will include discussions with the Chairman, Members and General Counsel of the National Labor Relations Board, a presentation on the application of Section 7 to non-unionized work places, updates on procedural issues involving representation on unfair labor practice cases, a practice forum with the NLRB, and a presentation on how the Federal Mediation Conciliation Service is working to solve labor-management problems. There also will be panel presentations on undocumented workers, case handling at the regional offices of the NLRB, predictions on how the new Board will handle the challenging cases that are coming before it, and current vexing ethics issues before the Board.

I write about these important Midwinter Meetings in order to encourage more members to attend and dig deeper into the fascinating area of labor and employment law in a way in which we cannot do at the Annual Section Conference due to time limitations.

Joel D'Alba
Chair, ABA Section of Labor and Employment Law


Opening Page

Special Feature

Flash Co-Chairs:
Jeremy J Glenn, Meckler Bulger et al | Monique R. Gougisha, Ogletree Deakins | Amy F. Shulman, Broach & Stulberg LLP | Jennifer R. Spector, National Labor Relations Board

American Bar Association Section of Labor and Employment Law
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