According to the Vallejo Times Herald, the bankruptcy judge for the City of Vallejo ruled on Friday that the City might be able to void its labor contracts as a way to escape bankruptcy. The ruling by the bankruptcy judge answers a question that has never been answered in California: whether public agencies in California can void labor contracts through Chapter 9 bankruptcy proceedings. Although the judge held that labor contracts may be voided through bankruptcy, the judge declined to rule on whether the City of Vallejo could do so in its situation. Instead, the court urged the parties to continue negotiations.
Based on the court’s decision, it’s obvious the judge is hoping to place pressure on the parties – especially the unions – to reach a settlement so that the court won’t have to take the next step and rule on whether the contracts should be voided. The ball appears to be in the unions’ court, and it will be interesting to see what they do. The eyes of unions and public agencies throughout California will be watching.