Protecting Employees and Retirees in Business Bankruptcies Act of 2020

II 116TH CONGRESS 2D SESSION S. 4089 To amend title 11, United States Code, to improve protections for employees and retirees in business bankruptcies. IN THE SENATE OF THE UNITED STATES JUNE 25, 2020 Mr. DURBIN (for himself, Mr. WHITEHOUSE, Ms. KLOBUCHAR, Ms. HARRIS, Mr. BROWN, Mr. SCHATZ, and Mr. MERKLEY) introduced the following bill; which was read twice and referred to the Committee on the Judiciary A BILL To amend title 11, United States Code, to improve protec- tions for employees and retirees in business bankruptcies. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘Protecting Employees and Retirees in Business Bank- 5 ruptcies Act of 2020’’. 6 (b) TABLE OF CONTENTS.—The table of contents of 7 this Act is as follows: 8 Sec. 1. Short title; table of contents. Sec. 2. Findings. VerDate Sep 11 2014 02:05 Jul 09, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\S4089.IS S4089 kjohnson on DSK79L0C42PROD with BILLS 2 •S 4089 IS TITLE I—IMPROVING RECOVERIES FOR EMPLOYEES AND RETIREES Sec. 101. Increased wage priority. Sec. 102. Claim for stock value losses in defined contribution plans. Sec. 103. Priority for severance pay and contributions to employee benefit plans. Sec. 104. Financial returns for employees and retirees. Sec. 105. Priority for WARN Act damages. TITLE II—REDUCING EMPLOYEES’ AND RETIREES’ LOSSES Sec. 201. Rejection of collective bargaining agreements. Sec. 202. Payment of insurance benefits to retired employees. Sec. 203. Protection of employee benefits in a sale of assets. Sec. 204. Claim for pension losses. Sec. 205. Payments by secured lender. Sec. 206. Preservation of jobs and benefits. Sec. 207. Termination of exclusivity. Sec. 208. Claim for withdrawal liability. TITLE III—RESTRICTING EXECUTIVE COMPENSATION PROGRAMS Sec. 301. Executive compensation upon exit from bankruptcy. Sec. 302. Limitations on executive compensation enhancements. Sec. 303 Prohibition against special compensation payments. Sec. 304. Assumption of executive benefit plans. Sec. 305. Recovery of executive compensation. Sec. 306. Preferential compensation transfer. TITLE IV—OTHER PROVISIONS Sec. 401. Union proof of claim. Sec. 402. Exception from automatic stay. Sec. 403. Effect on collective bargaining agreements under the Railway Labor Act. SEC. 2. FINDINGS. 1 The Congress finds the following: 2 (1) Business bankruptcies have increased 3 sharply in recent years and remain at high levels 4 due to the impact of the COVID–19 pandemic. As 5 the use of bankruptcy has expanded, job preserva- 6 tion and retirement security are placed at greater 7 risk. 8 VerDate Sep 11 2014 02:05 Jul 09, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S4089.IS S4089 kjohnson on DSK79L0C42PROD with BILLS 3 •S 4089 IS (2) Laws enacted to improve recoveries for em- 1 ployees and retirees and limit their losses in bank- 2 ruptcy cases have not kept pace with the increasing 3 and broader use of bankruptcy by businesses in all 4 sectors of the economy. However, while protections 5 for employees and retirees in bankruptcy cases have 6 eroded, management compensation plans devised for 7 those in charge of troubled businesses have become 8 more prevalent and are escaping adequate scrutiny. 9 (3) Changes in the law regarding these matters 10 are urgently needed as bankruptcy is used to ad- 11 dress increasingly more complex and diverse condi- 12 tions affecting troubled businesses and industries. 13 TITLE I—IMPROVING RECOV- 14 ERIES FOR EMPLOYEES AND 15 RETIREES 16 SEC. 101. INCREASED WAGE PRIORITY. 17 Section 507(a) of title 11, United States Code, is 18 amended— 19 (1) in paragraph (4)— 20 (A) by redesignating subparagraphs (A) 21 and (B) as clauses (i) and (ii), respectively; 22 (B) in the matter preceding clause (i), as 23 so redesignated, by inserting ‘‘(A)’’ before 24 ‘‘Fourth’’; 25 VerDate Sep 11 2014 02:05 Jul 09, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S4089.IS S4089 kjohnson on DSK79L0C42PROD with BILLS 4 •S 4089 IS (C) in subparagraph (A), as so designated, 1 in the matter preceding clause (i), as so redes- 2 ignated— 3 (i) by striking ‘‘$10,000’’ and insert- 4 ing ‘‘$20,000’’; 5 (ii) by striking ‘‘within 180 days’’; 6 and 7 (iii) by striking ‘‘or the date of the 8 cessation of the debtor’s business, which- 9 ever occurs first,’’; and 10 (D) by adding at the end the following: 11 ‘‘(B) Severance pay described in subparagraph 12 (A)(i) shall be deemed earned in full upon the layoff 13 or termination of employment of the individual to 14 whom the severance is owed.’’; 15 (2) in paragraph (5)— 16 (A) in subparagraph (A)— 17 (i) by striking ‘‘within 180 days’’; and 18 (ii) by striking ‘‘or the date of the 19 cessation of the debtor’s business, which- 20 ever occurs first’’; and 21 (B) by striking subparagraph (B) and in- 22 serting the following: 23 VerDate Sep 11 2014 02:05 Jul 09, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S4089.IS S4089 kjohnson on DSK79L0C42PROD with BILLS 5 •S 4089 IS ‘‘(B) for each such plan, to the extent of 1 the number of employees covered by each such 2 plan, multiplied by $20,000.’’. 3 SEC. 102. CLAIM FOR STOCK VALUE LOSSES IN DEFINED 4 CONTRIBUTION PLANS. 5 Section 101(5) of title 11, United States Code, is 6 amended— 7 (1) in subparagraph (A), by striking ‘‘or’’ at 8 the end; 9 (2) in subparagraph (B), by striking the period 10 at the end and inserting ‘‘; or’’; and 11 (3) by adding at the end the following: 12 ‘‘(C) right or interest in equity securities 13 of the debtor, or an affiliate of the debtor, if— 14 ‘‘(i) the equity securities are held in a 15 defined contribution plan (within the 16 meaning of section 3(34) of the Employee 17 Retirement Income Security Act of 1974 18 (29 U.S.C. 1002(34))) for the benefit of 19 an individual who is not an insider, a sen- 20 ior executive officer, or any of the 20 high- 21 est compensated employees of the debtor 22 who are not insiders or senior executive of- 23 ficers; 24 VerDate Sep 11 2014 02:05 Jul 09, 2020 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S4089.IS S4089 kjohnson on DSK79L0C42PROD with BILLS 6 •S 4089 IS ‘‘(ii) the equity securities were attrib- 1 utable to either employer contributions by 2 the debtor or an affiliate of the debtor, or 3 elective deferrals (within the meaning of 4 section 402(g) of the Internal Revenue 5 Code of 1986), and any earnings thereon; 6 and 7 ‘‘(iii) an employer or plan sponsor 8 who has commenced a case under this title 9 has committed fraud with respect to such 10 plan or has otherwise breached a duty to 11 the participant that has proximately 12 caused the loss of value.’’. 13 SEC. 103. PRIORITY FOR SEVERANCE PAY AND CONTRIBU- 14 TIONS TO EMPLOYEE BENEFIT PLANS. 15 Section 503(b) of title 11, United States Code, is 16 amended— 17 (1) in paragraph (8)(B), by striking ‘‘and’’ at 18 the end; 19 (2) in paragraph (9), by striking the period and 20 inserting a semicolon; and 21 (3) by adding at the end the following: 22 ‘‘(10) severance pay owed to employees of the 23 debtor (other than to an insider of the debtor, a sen- 24 ior executive officer of the debtor, the 20 highest 25 VerDate Sep 11 2014 02:05 Jul 09, 2020 Jkt 099200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S4089.IS S4089 kjohnson on DSK79L0C42PROD with BILLS 7 •S 4089 IS compensated employees of the debtor who are not in- 1 siders or senior executive officers, any department or 2 division manager of the debtor, or any consultant 3 providing services to the debtor), under a plan, pro- 4 gram, or policy generally applicable to employees of 5 the debtor (but not under an individual contract of 6 employment), or owed pursuant to a collective bar- 7 gaining agreement, for layoff or termination on or 8 after the date of the filing of the petition, which pay 9 shall be deemed earned in full upon such layoff or 10 termination of employment; and 11 ‘‘(11) any contribution to an employee benefit 12 plan that is due on or after the date of the filing of 13 the petition; and’’. 14 SEC. 104. FINANCIAL RETURNS FOR EMPLOYEES AND RE- 15 TIREES. 16 Section 1129(a) of title 11, United States Code is 17 amended— 18 (1) by striking paragraph (13) and inserting 19 the following: 20 ‘‘(13) With respect to retiree benefits, as that 21 term is defined in section 1114(a), the plan— 22 ‘‘(A) provides for the continuation after 23 the effective date of the plan of payment of all 24 retiree benefits at the level established pursuant 25 VerDate Sep 11 2014 02:05 Jul 09, 2020 Jkt 099200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S4089.IS S4089 kjohnson on DSK79L0C42PROD with BILLS 8 •S 4089 IS to subsection (e)(1)(B) or (g) of section 1114 1 at any time before the date of confirmation of 2 the plan, for the duration of the period for 3 which the debtor has obligated itself to provide 4 such benefits, or if no modifications are made 5 before confirmation of the plan, the continu- 6 ation of all such retiree benefits maintained or 7 established in whole or in part by the debtor be- 8 fore the date of the filing of the petition; and 9 ‘‘(B) provides for recovery of claims arising 10 from the modification of retiree benefits or for 11 other financial returns, as negotiated by the 12 debtor and the authorized representative (to the 13 extent that such returns are paid under, rather 14 than outside of, a plan).’’; and 15 (2) by adding at the end the following: 16 ‘‘(17) The plan provides for recovery of dam- 17 ages payable for the rejection of a collective bar- 18 gaining agreement, or for other financial returns as 19 negotiated by the debtor and the authorized rep- 20 resentative under section 1113 (to the extent that 21 such returns are paid under, rather than outside of, 22 a plan).’’. 23 VerDate Sep 11 2014 02:05 Jul 09, 2020 Jkt 099200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S4089.IS S4089 kjohnson on DSK79L0C42PROD with BILLS 9 •S 4089 IS SEC. 105. PRIORITY FOR WARN ACT DAMAGES. 1 Section 503(b)(1)(A)(ii) of title 11, United States 2 Code is amended by inserting ‘‘any back pay, civil penalty, 3 or damages for a violation of any Federal or State labor 4 and employment law, including the Worker Adjustment 5 and Retraining Notification Act (29 U.S.C. 2101 et seq.) 6 and any comparable State law,’’ before ‘‘wages and bene- 7 fits’’. 8 TITLE II—REDUCING EMPLOY- 9 EES’ AND RETIREES’ LOSSES 10 SEC. 201. REJECTION OF COLLECTIVE BARGAINING AGREE- 11 MENTS. 12 Section 1113 of title 11, United States Code, is 13 amended by striking subsections (a) through (f) and in- 14 serting the following: 15 ‘‘(a) The debtor in possession, or the trustee if one 16 has been appointed under this chapter, other than as pro- 17 vided in section 103(m) for collective bargaining agree- 18 ments covered by the Railway Labor Act (45 U.S.C. 151 19 et seq.), may reject a collective bargaining agreement only 20 in accordance with this section. In this section, a reference 21 to the trustee includes the debtor in possession. 22 ‘‘(b) No provision of this title shall be construed to 23 permit the trustee to unilaterally terminate or alter any 24 provision of a collective bargaining agreement before com- 25 plying with this section. The trustee shall timely pay all 26 VerDate Sep 11 2014 02:05 Jul 09, 2020 Jkt 099200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S4089.IS S4089 kjohnson on DSK79L0C42PROD with BILLS 10 •S 4089 IS monetary obligations arising under the terms of the collec- 1 tive bargaining agreement. Any such payment required to 2 be made before a plan confirmed under section 1129 is 3 effective has the status of an allowed administrative ex- 4 pense under section 503. 5 ‘‘(c)(1) If the trustee seeks modification of a collec- 6 tive bargaining agreement, the trustee shall provide notice 7 to the labor organization representing the employees cov- 8 ered by the collective bargaining agreement that modifica- 9 tions are being proposed under this section, and shall 10 promptly provide an initial proposal for modifications to 11 the collective bargaining agreement. Thereafter, the trust- 12 ee shall confer in good faith with the labor organization, 13 at reasonable times and for a reasonable period in light 14 of the complexity of the case, in attempting to reach mutu- 15 ally acceptable modifications of the collective bargaining 16 agreement. 17 ‘‘(2) The initial proposal and subsequent proposals 18 by the trustee for modification of a collective bargaining 19 agreement shall be based upon a business plan for the re- 20 organization of the debtor, and shall reflect the most com- 21 plete and reliable information available. The trustee shall 22 provide to the labor organization all information that is 23 relevant for negotiations. The court may enter a protective 24 order to prevent the disclosure of information if disclosure 25 VerDate Sep 11 2014 02:05 Jul 09, 2020 Jkt 099200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S4089.IS S4089 kjohnson on DSK79L0C42PROD with BILLS 11 •S 4089 IS could compromise the position of the debtor with respect 1 to the competitors in the industry of the debtor, subject 2 to the needs of the labor organization to evaluate the pro- 3 posals of the trustee and any application for rejection of 4 the collective bargaining agreement or for interim relief 5 pursuant to this section. 6 ‘‘(3) In consideration of Federal policy encouraging 7 the practice and process of collective bargaining and in 8 recognition of the bargained-for expectations of the em- 9 ployees covered by the collective bargaining agreement, 10 modifications proposed by the trustee— 11 ‘‘(A) shall be proposed only as part of a pro- 12 gram of workforce and nonworkforce cost savings 13 devised for the reorganization of the debtor, includ- 14 ing savings in management personnel costs; 15 ‘‘(B) shall be limited to modifications designed 16 to achieve a specified aggregate financial contribu- 17 tion for the employees covered by the collective bar- 18 gaining agreement (taking into consideration any 19 labor cost savings negotiated within the 12-month 20 period before the filing of the petition), and shall be 21 not more than the minimum savings essential to per- 22 mit the debtor to exit bankruptcy, such that con- 23 firmation of a plan of reorganization is not likely to 24 be followed by the liquidation, or the need for fur- 25 VerDate Sep 11 2014 02:05 Jul 09, 2020 Jkt 099200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S4089.IS S4089 kjohnson on DSK79L0C42PROD with BILLS 12 •S 4089 IS ther financial reorganization, [Text truncated for display. 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