Durbin, Conyers Unveil Bill to Change Corporate Bankruptcy Laws to Put Workers, Retirees First

[WASHINGTON, DC] – Assistant Senate Majority Leader Dick Durbin (D-IL) and House Judiciary Committee Chairman John Conyers (D-MI) introduced legislation today, which will 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.

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

Sadly, corporate bankruptcies are nothing new to American workers. In too many corporate bankruptcies, workers’ claims for compensation and benefits are denied while executives’ claims are given preferential treatment. It is time for a more balanced and just approach.

“Workers of distressed companies are frequently asked to save their companies by sacrificing their wages, benefits and right to collective bargaining while executives are rewarded with bonuses and golden parachutes,” said Conyers.  “Our bill establishes that sacrifice should be spread evenly among all employees when companies face bankruptcy.”

The bill is also cosponsored by Senators Tom Harkin (D-IA), Sherrod Brown (D-OH) and Al Franken (D-MN).

“American workers are already feeling the pressure of this tough economy.  If their employer falls into bankruptcy, this can be a one-two punch for those already struggling to make ends meet,” said Harkin.  “This bill ensures that workers and retirees are treated fairly and their losses are minimized in the event their business declares bankruptcy.  These are protections needed now, more than ever.”

“There is a growing disconnect between work and reward that is dangerous for our economy and our society,” Brown said. “When a company’s bankruptcy filing means pink slips for skilled workers and millions for ousted CEOs, something is very wrong. This legislation would ensure that when a company files for bankruptcy, it must place a priority on meeting workers’ claims for compensation and retirement benefits.”  Brown is the author of the Forewarn Act, S. 1374, which would ensure more workers receive advanced notice of mass layoffs or workplace closings. The Protecting Employees and Retirees in Business Bankruptcies Act would ensure that back pay awarded through WARN damages would be given priority in the bankruptcy claims process.

"It's critical that employees and retirees are protected when the company they've worked for ends up in bankruptcy. Minnesotans don't want workers to lose out when a company reorganizes,” Franken said. “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 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

The Durbin-Conyers bill enjoys strong labor support.

 “Workers and retirees throughout American industry have seen hard-won benefits stripped away by a deadly combination of American bankruptcy laws and other governmental policies that have for years been aligned against their interests,” said Leo Gerard, International President of the United Steelworkers. “Congress can now begin to set things right by reforming the bankruptcy laws to level the playing field, respect the bargaining process, and encourage companies to reorganize in a responsible way.”

"Our bankruptcy laws must be changed. Ensuring employers engage in good-faith bargaining when seeking contract modifications must be codified into law. Companies cannot be allowed to use our bankruptcy laws to eliminate decades of collective bargaining gains with the bang of a gavel," said R. Thomas Buffenbarger, International President of the International Association of Machinists and Aerospace Workers.

“Since 2001, pilots have given tens of billions of dollars in concessions, sacrificing enormously to save our airlines and our jobs,” said Capt. John Prater, president of the Air Line Pilots Association, Int’l (ALPA). “This comprehensive reform legislation promotes fairness and shared sacrifice during economic crisis and brings needed transparency to the bankruptcy process to the benefit of all U.S. workers.”

Today’s bill is similar to a bill Durbin and Conyers introduced in the 110th Congress.