OAKLAND, Calif. -- A judge issued a preliminary injunction early Monday evening against AC Transit overturning a new contract that the bus agency imposed on its employees on July 18 after contract negotiations collapsed.

The old contract expired on June 30 after three months of talks failed to result in an agreement.

The board of directors at AC Transit, which serves parts of Alameda and Contra Costa counties, voted to impose a new contract on members of Amalgamated Transit Union Local 192, which represents the bus agency's 1,750 employees, including 1,200 bus drivers.

The new contract took effect July 18.

Monday's ruling by Alameda County Superior Court Judge Judith Ford means the bus agency will have to honor the old contract while the union and management engage in binding arbitration.

On July 16, Alameda County Superior Court Judge Frank Roesch ordered AC Transit to enter into binding arbitration with ATU Local 192 to try to reach an agreement on a new contract. The two sides have agreed on an arbitrator, but no new talks have been scheduled so far.

AC Transit's management said it imposed the contract to save $15.7 million in labor costs to help close a projected $56 million funding gap for the two-year period ending in June 2011.

The district said it has taken other steps to reduce its budget gap in recent years, including raising fares, reducing service and cutting management positions.

After Judge Ford held a hearing on the union's preliminary injunction request last Friday, ATU Local 192 lead negotiator Claudia Hudson said the union believes the terms of the old contract must remain in place until the arbitration is completed.

Margot Rosenberg, an attorney for the union, said Friday that she thinks AC Transit's management "took a calculated risk" when it imposed the new contract after Roesch didn't explicitly state in his July 16 ruling that it couldn't do so.

But Rosenberg said she believes legal precedence prevents management from imposing new contracts on employees while negotiations are continuing.

However, the bus agency's lawyer, Raymond Lynch, argued in legal papers that, "AC Transit had no duty to maintain the terms of the expired contract."

Sam Singer, an outside spokesman for AC Transit, said if AC Transit is forced to revert to the old contract, "It immediately puts the district in the red."

After a Monday night meeting, the AC Transit Board of Directors had not yet decided whether to appeal the injunction, a district spokesman said.

The board met Monday night to discuss the possibility of an appeal but did not reach a conclusion, AC Transit spokesman Clarence Johnson said. They plan to reconvene on Aug. 18.

AC Transit officials allege that bus drivers have been engaging in a "sickout" since the new contract was imposed with 15 to 20 percent of the workforce absent every day.

Hudson has denied that employees are engaging in a sickout.