By The Star Staff
Puerto Rico Electric Power Authority (PREPA) bankruptcy Judge Laura Taylor Swain has postponed a hearing on a petition to reject PREPA’s collective bargaining agreements (CBAs) with its unions indefinitely.
While a hearing was slated for Jan. 24, Swain said in her recent order that she would consider “the appropriate standards of scrutiny” required to determine whether to reject the contract and the need for a hearing.
“In the interim, the parties are advised to do their utmost to negotiate a consensual resolution to their disputes in conjunction with the mediation team,” Swain ordered.
The Financial Oversight and Management Board, which represents PREPA in its bankruptcy, on January 2 asked Swain to allow it to end the CBAs with PREPA’ unions, arguing the utility could not pay the unaffordable pension and grievance claims.
The FOMB said PREPA has two remaining CBAs – one with UTIER, the Electric Industry and Irrigation Workers Union, with approximately 139 active members staying, and one with the Union de Empleados Profesionales Independientes, with about three active members remaining.
Each of these CBAs requires, among other things, that PREPA’s current pension system continue to operate and be maintained as a fully funded trust.
“PREPA cannot assume its CBAs because it is unable to cure the significant multibillion dollar underfunding of its defined benefit plan, meet future funding obligations to maintain the system as it currently exists and as required by the CBAs, or pay the unions’ grievance claims asserted in excess of $1 billion. Assumption of the CBAs would also be inconsistent with the pension reform measures the Oversight Board has determined are essential to ensure adequate funding for accrued pension benefits. The pension reform measures are the same as those implemented for governmental employees of the Commonwealth and other Title III debtors,” the FOMB said in its petition.
The unions have asked the court to reject the FOMB’s petition.
UTIER said the FOMB had not demonstrated the quantum of proof necessary to justify the rejection of the CBA and has not engaged in good-faith negotiations.
Under the Bankruptcy Code, the assumption or rejection of contracts is based on business judgment. The debtor must show that the proposed action will benefit the estate.
In a separate motion earlier this month, the Puerto Rico Electric Power Authority (PREPA) Retirement System said PREPA couldn’t modify its pension obligations by rejecting its contract with its union.