Senator Dick Durbin (D-IL) and Representative John Conyers (D-MI) have introduced legislation that would strengthen the ability of employees to recover wages and benefits and restrict the awarding of bonuses in the event of their employer’s bankruptcy. According to a press release, the Protecting Employees and Retirees in Business Bankruptcies Act (S. 3033, H.R. 4677) would, among other things, “ensure that back pay awarded through [the Worker Adjustment and Retraining Notification (WARN) Act] damages would be given priority in the bankruptcy claims process.” Specifically, as stated in the release, the bill would do the following:

• Double the maximum value of wage claims entitled to priority payment for each worker to $20,000;
• Allow a second claim of up to $20,000 for contributions to employee benefit plans;
• Eliminate 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;
• Allow workers to assert claims for losses in certain defined contribution plans when such losses result from employer fraud or breach of fiduciary duty;
• Establish a new priority administrative expense for workers’ severance pay;
• Clarify that back pay awarded via WARN Act damages are entitled to the same priority as back pay for other legal violations;
• Restrict the situations in which collective bargaining agreements can be rejected, tighten the criteria by which collective bargaining agreements can be amended, and encourage negotiated settlements;
• Toughen the procedures through which retiree benefits can be reduced or eliminated, including preventing companies seeking retiree health benefit reductions from singling out nonmanagement retirees for concessions;
• Require courts 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;
• Clarify that the principal purpose of Chapter 11 bankruptcy is the preservation of jobs to the maximum extent possible;
• Require disclosure and court approval of executive compensation for firms in bankruptcy;
• Prohibit the payment of bonuses and other forms of incentive compensation to senior officers and others; and
• Ensure that insiders cannot receive retiree benefits if workers have lost their retirement or health benefits.

This Senate bill has been referred to Senate Committee on the Judiciary, and the House version has been referred to House Committee on the Judiciary, which Rep. Conyers chairs.
 

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