PITTSBURGH — Companies seeking bankruptcy will have more difficulty annulling labor contracts because of a court ruling that financially troubled Wheeling-Pittsburgh Steel should not have been allowed to scrap its agreement with the United Steelworkers, attorneys said Thursday.
Wheeling-Pittsburgh and the United Steelworkers have a new contract that will not be affected by Wednesday's ruling in Philadelphia. But bankruptcy attorneys say other companies could have to meet tougher standards before winning court approval to reject their contracts.
Labor officials were delighted with the prospect that the Wheeling-Pittsburgh case, the first major test of 2-year-old amendments to the U.S. Bankruptcy Code, would set a precedent.
"On the surface, this could be very important if it intimidates even one corporate lawyer who might be thinking of using bankruptcy as a shield for abrogating a union contract," said Rex Hardesty, spokesman for the AFL-CIO.
The U.S. 3rd Circuit Court of Appeals said that a bankruptcy judge erred when he ruled July 17 that rejecting the contract was necessary for Wheeling-Pittsburgh's survival and that the wage and benefit cuts proposed by the company were fair.
The United Steelworkers has since signed a new contract, which both sides agreed to honor regardless of how the contract rejection dispute was resolved by the court.
The largest issue facing U.S. Bankruptcy Judge Warren Bentz, who was ordered by the appeals court to reconsider his decision, appears to be determining how much back pay is owed to plant security guards. Their separate contract required them to continue working after 8,200 USW members went on strike as soon as Wheeling-Pittsburgh used its court-approved power to lower wages, benefits and related costs to $17.50 per hour from $21.40.
The union claims that the guards are owed nearly $150,000.
"That doesn't seem to leave a heck of a lot to decide," considering Wheeling-Pittsburgh entered bankruptcy court in April, 1985, with debts of $530 million, Harvard University law professor Vern Hungerman said Thursday.
"I seem to think the chief precedent of the 3rd Circuit Court decision will be on future bankruptcy cases and not so much on Wheeling-Pitt," said Hungerman, who represents unions in other bankruptcy cases.
No decision has been made to appeal the 3rd Circuit Court decision to the U.S. Supreme Court.