Senate Introduces Act to Protect Workers in Business Bankruptcies

New Legislation Aims to Secure Employee Rights in Bankruptcy Cases

The Protecting Employees and Retirees in Business Bankruptcies Act seeks to safeguard workers' pay, benefits, and retirement funds during Chapter 11 proceedings.

December 5, 2024 – In a bipartisan effort, U.S. Senate Majority Whip Dick Durbin (D-IL) and U.S. Senator Josh Hawley (R-MO), both members of the Senate Judiciary Committee, have introduced the Protecting Employees and Retirees in Business Bankruptcies Act. This proposed legislation is designed to address the shortcomings of current bankruptcy laws that often leave employees and retirees at a disadvantage.

The rise in business bankruptcies has placed employees' jobs, pensions, and benefits in jeopardy. Current laws fail to adequately protect workers, prompting the introduction of this new bill which aims to reform Chapter 11 procedures. By expanding claims available to workers and retirees and enhancing their priority status, the Act seeks to ensure that workers are prioritized over excessive executive payouts.

Senator Durbin emphasized, “Employees should not have to panic that they will lose their hard-earned wages, benefits, and retirement savings when their company files for bankruptcy.”

Senator Hawley added, “When companies go bankrupt, workers—and not predatory creditors—should be taken care of first. This legislation would prioritize workers' claims to wages, benefits, and retirement funds in bankruptcy proceedings, protecting compensation earned through years of hard work.”

Sara Nelson, President of the AFA-CWA, stated, "Bankruptcy should not be a “shrewd” business maneuver to slash jobs, dump earned pensions, and cut contracts while executives and Wall Street get rich with court-approved payments and bonuses. The Protecting Employees and Retirees in Business Bankruptcies Act will close loopholes in the bankruptcy process and protect the interests of the workers and retirees who make companies successful."

Key Provisions of the Bill

• Enhancing Employee and Retiree Claims: The Act proposes increasing the priority payment for employee wage claims to $20,000 and allows for an additional $20,000 claim per employee benefit plan. It removes restrictions on the 180-day earning period for priority claims and includes severance pay as a priority.
• Securing Workers’ Rights: The bill aims to strengthen the conditions under which collective bargaining agreements can be terminated and imposes stricter measures on altering retiree benefits.
• Regulating Executive Compensation: The proposed legislation raises the bar for court approval of executive bonuses and other significant payouts, ensuring that company insiders do not benefit disproportionately when rank-and-file workers suffer losses.
• Job Preservation Focus: The Act seeks to realign Chapter 11 bankruptcy objectives to prioritize job retention and economic productivity.

Joining Senators Durbin and Hawley in sponsoring this legislation are Senators Brian Schatz (D-HI), Mazie Hirono (D-HI), Tammy Duckworth (D-IL), Sherrod Brown (D-OH), Jeff Merkley (D-OR), and Amy Klobuchar (D-MN).

The Act has garnered support from various labor organizations, including the Association of Flight Attendants-CWA, Transportation Workers Union, United Mine Workers of America, and more, reflecting a widespread call for reform in bankruptcy practices to protect workers.