In the 1983 case National Labor Relations Board v. Bildisco & Bildisco, Debtor-in-Possession, et al., the U.S. Supreme Court ruled that a debtor in possession under Chapter 11 of the Bankruptcy Code could reject collective bargaining agreements without first obtaining approval from the National Labor Relations Board (NLRB). The court held that such an agreement is a contract within bankruptcy law and can be rejected if it burdens the estate and hampers efforts to reorganize. However, they also established criteria for rejection: debtors must show that their labor contracts are burdensome; proposed modifications are necessary for reorganization; all other alternatives have been exhausted; fair treatment has been provided to all parties involved; and efforts were made to negotiate voluntary adjustments. This decision was later modified by Congress with passage of Section 1113 of Bankruptcy Code which requires companies seeking bankruptcy protection to meet more stringent requirements before rejecting union contracts.

In the dissenting opinion for National Labor Relations Board v. Bildisco & Bildisco, Justice Brennan, joined by Justices Marshall and Blackmun, argued that a debtor-in-possession should not be allowed to unilaterally reject collective bargaining agreements without first seeking approval from the bankruptcy court. They contended that such unilateral action undermines federal labor policy which encourages collective bargaining and protects employees' rights to organize. The dissenters also disagreed with the majority's assertion that a debtor-in-possession is both an employer under NLRA and a trustee in bankruptcy; they believed this dual role created conflicts of interest detrimental to workers' rights. Furthermore, they criticized the majority's new standard for rejection of contracts as being too lenient towards employers at expense of employees’ interests.