Assistant Majority Leader Dick Durbin (D-IL) and House Judiciary Committee Ranking Member John Conyers (D-MI) introduced legislation today to curb abuses that deprive employees and retirees of their earnings and retirement savings when businesses collapse. The Protecting Employees and Retirees in Business Bankruptcies Act would make several changes to Chapter 11 bankruptcy law, putting workers' interests near the top when companies file for bankruptcy. Senators Franken (D-MN), Harkin (D-IA), Whitehouse (D-RI) and Brown (D-OH) are the Senate bill's lead cosponsors. The House bill has more than 19 cosponsors.
"American workers and retirees who give their lives to a company are too often treated like strangers when their employer files bankruptcy," Senator Durbin said. "This bill says that if a company goes bankrupt, employees and retirees won't take a back seat to creditors and executive bonuses in getting fair treatment."
"Despite having devoted years of service to their employer, workers and retirees are not on equal footing with the other parties involved in corporate bankruptcy proceedings," said Representative Conyers. "As a result, they often bear the heaviest burdens under corporate restructuring plans. They see their wages cut, pensions slashed, and health benefits reduced while executives and managers are not required to make comparable sacrifices. This bill levels the playing field for workers and retirees by ensuring that the interests of all parties involved in large corporate bankruptcies are equally weighed."
Corporate bankruptcies are nothing new to American workers. In too many instances, workers' claims for compensation and benefits are denied while executives' claims are given preferential treatment. It is time for a more balanced and just approach.
"When a company enters bankruptcy, it's just plain wrong that employees are left to fight for what they are duly owed while executives get to walk off with huge bonuses." said Senator Franken. "We've seen workers lose out too many times when a company reorganizes. Preserving jobs, pensions, and retiree health care benefits must be a priority--especially in this challenging economic climate--which is why I will fight to get this bill passed."
"American workers are already feeling the pressure of this tough economy. If their employer falls into bankruptcy, this can be a one-two punch for those already struggling to make ends meet," said Senator Harkin. "This bill ensures that workers and retirees are treated fairly and their losses are minimized in the event their business declares bankruptcy. These are protections needed now more than ever."
"American workers too often are treated unfairly by a bankruptcy system that places their interests behind those of senior executives and other creditors," said Senator Whitehouse. "This critical piece of legislation will help to level the playing field by giving workers a greater chance to recover lost wages and by making clear that job preservation is a key principle of the bankruptcy process."
"When a company's bankruptcy filing means pink slips for skilled workers and millions for ousted CEOs, something is very wrong," Senator Brown said. "This legislation would ensure that when a company files for bankruptcy, it must place a priority on meeting workers' claims for compensation and retirement benefits."
"For too long workers and retirees have had hard-won promises broken by a bankruptcy system that was tilted against their concerns and that favored banks, hedge funds and others that play recklessly with American jobs," said Leo Gerard, International President of the United Steelworkers. "Congress now has an opportunity to put working families first by reforming the bankruptcy laws to put middle-class families on a more level playing field and encourage companies to reorganize responsibly."
"For too long our bankruptcy laws have been used as a legal sledge hammer to break labor contracts, cut the wages and benefits of workers, and decimate the pensions of retirees--all while allowing corporate executives to enrich themselves. These abuses must be stopped. Corporations cannot be allowed to use our bankruptcy laws as a business strategy to eliminate decades of collective bargaining gains," said R. Thomas Buffenbarger, International President of the International Association of Machinists and Aerospace Workers.
The Protecting Employees and Retirees in Business Bankruptcies Act will protect workers from losing out by:
Improves Recoveries for Employees and Retirees by:
Increasing the amount of worker claims entitled to priority payment for unpaid wages and contributions to employee benefit plans up to $20,000;
Eliminating the difficult to prove restriction in current law that wage and benefit claims must be earned within 180 days of the bankruptcy filing in order to be entitled to priority payment;
Allowing employees to assert claims for losses in certain defined contribution plans when such losses result from employer fraud or breach of fiduciary duty;
Establishing a new priority administrative expense for workers' severance pay; and
Clarifying that back pay awards for WARN Act damages are entitled to the same priority as back pay for other legal violations.
Reduces Employees' and Retirees' Losses by:
Restricting the conditions under which collective bargaining agreements and commitments to fund retiree pensions and health benefits may be eliminated or adversely affected;
Preventing companies from singling out non-management retirees for concessions;
Requiring a court to consider the impact a bidder's offer to purchase a company's assets would have on maintaining existing jobs and preserving retiree pension and health benefits; and
Clarifying that the principal purpose of Chapter 11 bankruptcy is the preservation of jobs to the maximum extent possible
Restricts Excessive Executive Compensation Programs by:
Requiring full disclosure and court approval of executive compensation packages;
Restricting the payment of bonuses and other forms of incentive compensation to senior officers and others; and
Ensuring that insiders cannot receive retiree benefits if workers have lost their retirement or health benefits.
Today's bill is similar to a bill Durbin and Conyers introduced last Congress.