Having a need to reorganize debt usually means that the company's income is much lower than it's expenses. The expenses associated with a workforce, including wages, health care, and other benefits, usually represent the company's highest single expense category. It is not unusual for creditors to demand that management take action to reduce labor costs. Therefore, layoffs during Chapter 11 cases are not unusual. Companies conducting layoffs and job actions must still adhere to all federal and state statutes and regulations.
In fact, some companies that perceive their collective bargaining agreements to be unworkable will file a Chapter 11 case. Provisions in the bankruptcy laws allow companies to reject or renegotiate union contracts under certain circumstances. Please see more below.