Franken Announces Bill To Change Corporate Bankruptcy Laws To Put Workers, Retirees First

Press Release

Today, U.S. Sen. Al Franken (D-Minn.) joined Assistant Senate Majority Leader Dick Durbin (D-Ill.) and House Judiciary Committee Chairman John Conyers (D-Mich.) in introducing legislation 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.

"It's critical that employees and retirees are protected when the company they've worked for ends up in bankruptcy," said Sen. Franken. "Minnesotans don't want workers to lose out when a company reorganizes. We've seen that happen too many times, especially on the Iron Range. In this tough economic climate, preserving jobs and retiree benefits must be a priority."

"American workers and retirees who give their lives to a company are too often treated like strangers when their employer files bankruptcy," said Sen. Durbin. "This bill says that if a company goes bankrupt, employees and retirees won't take a back seat to creditors and executive bonuses."

The bill is also cosponsored by Senators Tom Harkin (D-Iowa) and Sherrod Brown (D-Ohio).

Under current law, in many corporate bankruptcies, workers' claims for compensation and benefits are denied while executives' claims are given preferential treatment.

The Protecting Employees and Retirees in Business Bankruptcies Act will protect workers from losing out by:

Improving Recoveries for Employees and Retirees

· Doubles the maximum value of wage claims entitled to priority payment for each worker to $20,000
· Allows a second claim of up to $20,000 for contributions to employee benefit plans
· Eliminates the restriction that wage and benefit claims must be earned within 180 days of the bankruptcy filing in order to be entitled to priority payment
· Allows workers to assert claims for losses in certain defined contribution plans when such losses result from employer fraud or breach of fiduciary duty
· Establishes a new priority administrative expense for workers' severance pay
· Clarifies that back pay awarded via WARN Act damages are entitled to the same priority as back pay for other legal violations

Reducing Employees' and Retirees' Losses

· Restricts the situations in which collective bargaining agreements can be rejected, tightens the criteria by which collective bargaining agreements can be amended, and encourages negotiated settlements
· Toughens the procedures through which retiree benefits can be reduced or eliminated, including preventing companies seeking retiree health benefit reductions from singling out non-management retirees for concessions
· Requires the court to consider the impact of a bidder's offer to purchase a company's assets would have on maintaining existing jobs and preserving retiree pension and health benefits
· Clarifies that the principal purpose of Chapter 11 bankruptcy is the preservation of jobs to the maximum extent possible

Restricting Executive Compensation Programs

· Requires disclosure and court approval of executive compensation for firms in bankruptcy
· Prohibits the payment of bonuses and other forms of incentive compensation to senior officers and others
· Ensures that insiders cannot receive retiree benefits if workers have lost their retirement or health benefits

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