Protecting Employees and Retirees in Business Bankruptcies Act of 2007

PROTECTING EMPLOYEES AND RETIREES IN BUSINESS BANKRUPTCIES ACT OF 2007 (Extensions of Remarks - September 25, 2007)

[Page: E1976]

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SPEECH OF
HON. JOHN CONYERS, JR.
OF MICHIGAN
IN THE HOUSE OF REPRESENTATIVES
TUESDAY, SEPTEMBER 25, 2007

* Mr. CONYERS. Madam Speaker, the ``Protecting Employees and Retirees in Business Bankruptcies Act of 2007,'' addresses the vast inequities in current bankruptcy law with respect to how American workers and retirees are treated, an area long-neglected by Congress.

* The rights of workers and retirees have greatly eroded over the past two decades, particularly in the context of Chapter 11. Let me just cite three reasons.

* First, it is no secret that certain districts in our Nation interpret the law to favor the reorganization of a business over all other priorities, including job preservation, salary protections, and other benefits. Part of the problem is that the law is simply not clear, leading to a split of authority among the circuits.

* This is particularly true with respect to the standards by which collective bargaining agreements can be rejected and retiree benefits can be modified in Chapter 11. Businesses, as a result, take advantage of these venue options and file their Chapter 11 cases in employer-friendly districts. This was one of the main reasons that Delphi, a Michigan-headquartered company, filed for bankruptcy in New York.

* Second, it is clear that at least some businesses use Chapter 11 to bust unions or to at least give themselves unfair leverage in its negotiations with unions. According to a recently released GAO analysis that I requested nearly 2 years ago, 30 percent of companies in the study sought to reject their collective bargaining agreements in bankruptcy. Nearly as many companies took advantage of special provisions in the Bankruptcy Code by employers that can modify retiree benefits.

* Let me be specific here. What we are talking about is terminating retiree health care benefits, medical benefits, prescription drug benefits, disability benefits, and death benefits, among other protections.

* And, remember that these benefits were bargained for in good faith by hardworking Americans who gave their all to their employers and now are in retirement. This is a travesty.

* Third, as a result of Chapter 11's inequitable playing field, employers are able to extract major concessions from workers and retirees, while lining their own pockets. As we learned at a hearing held earlier this year by the Subcommittee on Commercial and Administrative Law, executives of Chapter 11 debtors often receive extravagant multi-million dollar bonuses and stock options, while regular workers are forced to accept drastic pay cuts or even job losses and while retirees lose hard-won pensions and health benefits.

* As many of you know, the Ford Motor Company reported a record $12.7 billion loss for last year. But what many of you may not know is that Ford paid $28 million to its new CEO, Alan Mulally, in his first 4 months on the job. This disclosure comes as companies like Ford, General Motors, and DaimlerChrysler are in the midst of negotiations with unions to obtain concessions and labor cost savings when their current contracts end in this month.

* A factor that will likely be present at the bargaining table is the threat of a potential Chapter 11 filing. As many of you know, the United Auto Workers yesterday announced a strike at General Motors principally because GM wants to shed more than $50 billion in future health care benefits for retirees.

* We need to restore the level playing field that the drafters of Chapter 11 originally envisioned and to ensure that workers and retirees receive fair treatment when their company is in bankruptcy. It is time that we include the interests of working families in the bankruptcy law and consider how we can add a measure of fairness to a playing field that is overwhelmingly tilted against workers.

* My bill addresses these problems by:

* Increasing the amount by which unpaid wage and employee benefit claims would be entitled to payment priority;

* Creating a more level playing field for employees in Chapter 11 cases where employers want to terminate jobs, reduce wages, reject collective bargaining agreements, and terminate medical benefits for retirees;

* Prohibiting companies in bankruptcy from paying lavish performance bonuses and incentive compensation to key management; and

* Ensuring that the bankruptcy judges have clear statutory guidance that the purpose of Chapter 11 is--to the greatest extent possible--maximize assets so as to preserve jobs.

* I will urge prompt consideration of this legislation by the Subcommittee on Commercial and Administrative Law and further proceedings by the House Judiciary Committee.

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