Bankruptcy Court OKs Plan to Cut Wages, Benefits : Wheeling to Cancel Its Labor Pact

A federal bankruptcy judge in Pennsylvania on Wednesday granted a controversial request by troubled Wheeling-Pittsburgh Steel to cancel its labor contract with the United Steelworkers, and the firm immediately moved to unilaterally cut the wages and benefits that it pays its unionized workers.

In response, union leaders threatened to call a strike against the firm, which is in the midst of Chapter 11 bankruptcy proceedings, as early as Sunday. Union leaders also said they will seek a stay of the judge’s order and plan an appeal.

As soon as the order from Judge Warren W. Bentz was released late Wednesday, company executives told union officials meeting in Pittsburgh that the company plans to implement a new, six-month labor contract on July 21 that includes a $3.90-per-hour cut in wages and benefits to $17.50 per hour from an average of $21.40 per hour. The company’s new contract includes drastic changes in existing agreements on employee seniority rights, vacation time, supplemental unemployment benefits, grievance procedures and hospitalization benefits, union officials said.

Union leaders immediately rejected the agreement and said the firm’s unionized work force will go on strike as soon as the company tries to put the new contract into effect.

“We don’t have any choice but to strike,” said Andrew Palm, secretary of the union’s Wheeling-Pittsburgh negotiating committee.

Bentz’s ruling is considered to be the first major use of a 1984 amendment to federal bankruptcy laws that allows corporations in bankruptcy proceedings to seek court approval to cancel their existing labor agreements in order to help them reorganize their operations.

In a 39-page opinion, Bentz wrote that he granted the company’s request to cancel its labor contract because the firm’s “labor costs are simply above the company’s ability to pay.” He added that voiding the labor agreement should have “a significant and positive effect on Wheeling-Pittsburgh’s prospects for reorganization.”

Wheeling-Pittsburgh had previously proposed to lower its average labor costs to $15.20 per hour,from $21.40, and the company had warned that it would be forced to liquidate if it wasn’t allowed to reduce its wages and benefits.

Company officials have also warned that they may liquidate the firm if the union goes on strike.

But union leaders claimed Wednesday that Wheeling-Pittsburgh will not go out of business if they call a strike, and they charged that company officials had lied to the judge during hearings in the case when they said the firm needed to reduce its labor costs to $15.20 per hour in order to survive.

“They didn’t need $15.20 per hour, and they don’t need $17.50,” Palm said. “This company is in better financial shape in Chapter 11 than some of the other firms we deal with that are not in Chapter 11.

“They are just using scare tactics by threatening to close down,” he added.