Editorial: More protection needed for workers in corporate bankruptcies
Cheers to U.S. Sen. Al Franken for supporting 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 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."
The bill will protect workers from losing out by:
Doubling the maximum value of wage claims entitled to priority payment for each worker to $20,000.
Allowing a second claim of up to $20,000 for contributions to employee benefit plans.
Eliminating 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.
Allowing workers 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.
Clarifying that back pay awarded via WARN Act damages are entitled to the same priority as back pay for other legal violations.
Restricting the situations in which collective bargaining agreements can be rejected, tightening the criteria by which collective bargaining agreements can be amended, and encouraging negotiated settlements.
Toughening 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.
Requiring 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.
Clarifying that the principal purpose of Chapter 11 bankruptcy is the preservation of jobs to the maximum extent possible.
The bill also restricts executive compensation programs by:
Requiring disclosure and court approval of executive compensation for firms in bankruptcy.
Prohibiting the payment of bonuses and other forms of incentive compensation to senior officers and others.
Ensuring that insiders cannot receive retiree benefits if workers have lost their retirement or health benefits.