## Facts

- Bildisco & Bildisco, a building-materials distributor, filed a voluntary Chapter 11 petition and continued operating as a debtor-in-possession.
- Some employees were covered by a collective-bargaining agreement (CBA) with Teamsters Local 408, effective through April 1982.
- Before and after the petition, Bildisco failed to make certain contract-required payments, including some health and pension contributions and remittances of employee union dues.
- After filing, Bildisco also refused to pay contract-required wage increases.
- Bildisco moved in bankruptcy court to reject the CBA as an executory contract under 11 U.S.C. § 365(a); the bankruptcy court approved rejection and allowed the union to file a damages claim.
- The union filed unfair labor practice charges; the NLRB found Bildisco violated NLRA §§ 8(a)(1) and 8(a)(5) by unilaterally changing CBA terms and refusing to bargain, and ordered remedial payments.
- On consolidated review, the court of appeals treated the debtor-in-possession as not automatically bound by the prepetition CBA, recognized rejection power under § 365(a) with a heightened “equities” test, and declined to enforce the NLRB’s order.

## Issues

1. Whether a Chapter 11 debtor-in-possession may reject a collective-bargaining agreement under 11 U.S.C. § 365(a), and what standard governs rejection in light of federal labor policy.
2. Whether a debtor-in-possession commits an unfair labor practice by failing to comply with CBA terms before obtaining bankruptcy-court approval to reject the agreement.

## Decision

- The Court held that a CBA is an executory contract that may be rejected under § 365(a) with bankruptcy-court approval.
- The Court required a heightened rejection standard: the debtor-in-possession must show the CBA burdens the estate and, after careful scrutiny, the equities favor rejection.
- The Court rejected the view that NLRA § 8(d) directly prevents rejection under § 365(a).
- The Court declined to treat the debtor-in-possession as a wholly “new entity” free of labor-law obligations, but recognized bankruptcy law permits rejection subject to the judicial standard.
- The Court held that interim unilateral noncompliance with a CBA, before court-approved rejection, is not automatically an unfair labor practice when tied to the bankruptcy rejection process.
- The judgment below was affirmed in part, reversed in part, and remanded.

## Legal Principles

- A collective-bargaining agreement can qualify as an executory contract subject to rejection in Chapter 11 under 11 U.S.C. § 365(a), with court approval.
- Rejection of a CBA requires more than ordinary business judgment; the bankruptcy court must determine the contract burdens the estate and that the equities, assessed with careful scrutiny, favor rejection.
- NLRA § 8(d) does not, by itself, bar or condition a bankruptcy court’s authority to approve rejection under § 365(a).
- A debtor-in-possession generally remains the same employer for NLRA purposes, even though bankruptcy law gives it special powers to deal with executory contracts.
- Pre-approval deviations from a CBA are not per se unfair labor practices where the debtor-in-possession is pursuing rejection through the bankruptcy process.

## Conclusion

The Court allowed Chapter 11 debtors-in-possession to reject collective-bargaining agreements as executory contracts, but only under a heightened, equity-based standard that accounts for labor policy, and it limited unfair labor practice findings based solely on interim noncompliance pending a rejection decision.


NLRB v. Bildisco & Bildisco, 465 U.S. 513 (1984)