[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 1381 Introduced in Senate (IS)]
<DOC>
119th CONGRESS
1st Session
S. 1381
To amend title 11, United States Code, to improve protections for
employees and retirees in business bankruptcies.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 9, 2025
Mr. Durbin (for himself, Mr. Hawley, Mr. Schatz, Ms. Duckworth, Ms.
Klobuchar, and Mr. Whitehouse) 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 protections for
employees and retirees in business bankruptcies.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Protecting
Employees and Retirees in Business Bankruptcies Act of 2025''.
(b) Table of Contents.--The table of contents of this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings.
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.
The Congress finds the following:
(1) Business bankruptcies have increased sharply in recent
years and remain at high levels. These bankruptcies include
several of the largest business bankruptcy filings in history.
As the use of bankruptcy has expanded, job preservation and
retirement security are placed at greater risk.
(2) Laws enacted to improve recoveries for employees and
retirees and limit their losses in bankruptcy cases have not
kept pace with the increasing and broader use of bankruptcy by
businesses in all sectors of the economy. However, while
protections for employees and retirees in bankruptcy cases have
eroded, management compensation plans devised for those in
charge of troubled businesses have become more prevalent and
are escaping adequate scrutiny.
(3) Changes in the law regarding these matters are urgently
needed as bankruptcy is used to address increasingly more
complex and diverse conditions affecting troubled businesses
and industries.
TITLE I--IMPROVING RECOVERIES FOR EMPLOYEES AND RETIREES
SEC. 101. INCREASED WAGE PRIORITY.
Section 507(a) of title 11, United States Code, is amended--
(1) in paragraph (4)--
(A) by redesignating subparagraphs (A) and (B) as
clauses (i) and (ii), respectively;
(B) in the matter preceding clause (i), as so
redesignated, by inserting ``(A)'' before ``Fourth'';
(C) in subparagraph (A), as so designated, in the
matter preceding clause (i), as so redesignated--
(i) by striking ``$10,000'' and inserting
``$20,000'';
(ii) by striking ``within 180 days''; and
(iii) by striking ``or the date of the
cessation of the debtor's business, whichever
occurs first,''; and
(D) by adding at the end the following:
``(B) Severance pay described in subparagraph (A)(i) shall
be deemed earned in full upon the layoff or termination of
employment of the individual to whom the severance is owed.'';
and
(2) in paragraph (5)--
(A) in subparagraph (A)--
(i) by striking ``within 180 days''; and
(ii) by striking ``or the date of the
cessation of the debtor's business, whichever
occurs first''; and
(B) by striking subparagraph (B) and inserting the
following:
``(B) for each such plan, to the extent of the
number of employees covered by each such plan,
multiplied by $20,000.''.
SEC. 102. CLAIM FOR STOCK VALUE LOSSES IN DEFINED CONTRIBUTION PLANS.
Section 101(5) of title 11, United States Code, is amended--
(1) in subparagraph (A), by striking ``or'' at the end;
(2) in subparagraph (B), by striking the period at the end
and inserting ``; or''; and
(3) by adding at the end the following:
``(C) right or interest in equity securities of the
debtor, or an affiliate of the debtor, if--
``(i) the equity securities are held in a
defined contribution plan (within the meaning
of section 3(34) of the Employee Retirement
Income Security Act of 1974 (29 U.S.C.
1002(34))) for the benefit of an individual who
is not an insider, a senior executive officer,
or any of the 20 highest compensated employees
of the debtor who are not insiders or senior
executive officers;
``(ii) the equity securities were
attributable to either employer contributions
by the debtor or an affiliate of the debtor, or
elective deferrals (within the meaning of
section 402(g) of the Internal Revenue Code of
1986), and any earnings thereon; and
``(iii) an employer or plan sponsor who has
commenced a case under this title has committed
fraud with respect to such plan or has
otherwise breached a duty to the participant
that has proximately caused the loss of
value.''.
SEC. 103. PRIORITY FOR SEVERANCE PAY AND CONTRIBUTIONS TO EMPLOYEE
BENEFIT PLANS.
Section 503(b) of title 11, United States Code, is amended--
(1) in paragraph (8)(B), by striking ``and'' at the end;
(2) in paragraph (9), by striking the period and inserting
a semicolon; and
(3) by adding at the end the following:
``(10) severance pay owed to employees of the debtor (other
than to an insider of the debtor, a senior executive officer of
the debtor, the 20 highest compensated employees of the debtor
who are not insiders or senior executive officers, any
department or division manager of the debtor, or any consultant
providing services to the debtor), under a plan, program, or
policy generally applicable to employees of the debtor (but not
under an individual contract of employment), or owed pursuant
to a collective bargaining agreement, for layoff or termination
on or after the date of the filing of the petition, which pay
shall be deemed earned in full upon such layoff or termination
of employment; and
``(11) any contribution to an employee benefit plan that is
due on or after the date of the filing of the petition.''.
SEC. 104. FINANCIAL RETURNS FOR EMPLOYEES AND RETIREES.
Section 1129(a) of title 11, United States Code is amended--
(1) by striking paragraph (13) and inserting the following:
``(13) With respect to retiree benefits, as that term is
defined in section 1114(a), the plan--
``(A) provides for the continuation after the
effective date of the plan of payment of all retiree
benefits at the level established pursuant to
subsection (e)(1)(B) or (g) of section 1114 at any time
before the date of confirmation of the plan, for the
duration of the period for which the debtor has
obligated itself to provide such benefits, or if no
modifications are made before confirmation of the plan,
the continuation of all such retiree benefits
maintained or established in whole or in part by the
debtor before the date of the filing of the petition;
and
``(B) provides for recovery of claims arising from
the modification of retiree benefits or for other
financial returns, as negotiated by the debtor and the
authorized representative (to the extent that such
returns are paid under, rather than outside of, a
plan).''; and
(2) by adding at the end the following:
``(17) The plan provides for recovery of damages payable
for the rejection of a collective bargaining agreement, or for
other financial returns as negotiated by the debtor and the
authorized representative under section 1113 (to the extent
that such returns are paid under, rather than outside of, a
plan).''.
SEC. 105. PRIORITY FOR WARN ACT DAMAGES.
Section 503(b)(1)(A)(ii) of title 11, United States Code is amended
by inserting ``any back pay, civil penalty, or damages for a violation
of any Federal or State labor and employment law, including the Worker
Adjustment and Retraining Notification Act (29 U.S.C. 2101 et seq.) and
any comparable State law, and'' before ``wages and benefits'' each
place that term appears.
TITLE II--REDUCING EMPLOYEES' AND RETIREES' LOSSES
SEC. 201. REJECTION OF COLLECTIVE BARGAINING AGREEMENTS.
Section 1113 of title 11, United States Code, is amended by
striking subsections (a) through (f) and inserting the following:
``(a) The debtor in possession, or the trustee if one has been
appointed under this chapter, other than as provided in section 103(m)
for collective bargaining agreements covered by the Railway Labor Act
(45 U.S.C. 151 et seq.), may reject a collective bargaining agreement
only in accordance with this section. In this section, a reference to
the trustee includes the debtor in possession.
``(b) No provision of this title shall be construed to permit the
trustee to unilaterally terminate or alter any provision of a
collective bargaining agreement before complying with this section. The
trustee shall timely pay all monetary obligations arising under the
terms of the collective bargaining agreement. Any such payment required
to be made before a plan confirmed under section 1129 is effective has
the status of an allowed administrative expense under section 503.
``(c)(1) If the trustee seeks modification of a collective
bargaining agreement, the trustee shall provide notice to the labor
organization representing the employees covered by the collective
bargaining agreement that modifications are being proposed under this
section, and shall promptly provide an initial proposal for
modifications to the collective bargaining agreement. Thereafter, the
trustee shall confer in good faith with the labor organization, at
reasonable times and for a reasonable period in light of the complexity
of the case, in attempting to reach mutually acceptable modifications
of the collective bargaining agreement.
``(2) The initial proposal and subsequent proposals by the trustee
for modification of a collective bargaining agreement shall be based
upon a business plan for the reorganization of the debtor, and shall
reflect the most complete and reliable information available. The
trustee shall provide to the labor organization all information that is
relevant for negotiations. The court may enter a protective order to
prevent the disclosure of information if disclosure could compromise
the position of the debtor with respect to the competitors in the
industry of the debtor, subject to the needs of the labor organization
to evaluate the proposals of the trustee and any application for
rejection of the collective bargaining agreement or for interim relief
pursuant to this section.
``(3) In consideration of Federal policy encouraging the practice
and process of collective bargaining and in recognition of the
bargained-for expectations of the employees covered by the collective
bargaining agreement, modifications proposed by the trustee--
``(A) shall be proposed only as part of a program of
workforce and nonworkforce cost savings devised for the
reorganization of the debtor, including savings in management
personnel costs;
``(B) shall be limited to modifications designed to achieve
a specified aggregate financial contribution for the employees
covered by the collective bargaining agreement (taking into
consideration any labor cost savings negotiated within the 12-
month period before the filing of the petition), and shall be
not more than the minimum savings essential to permit the
debtor to exit bankruptcy, such that confirmation of a plan of
reorganization is not likely to be followed by the liquidation,
or the need for further financial reorganization, of the debtor
(or any successor to the debtor) in the short term; and
``(C) shall not be disproportionate or overly burden the
employees covered by the collective bargaining agreement,
either in the amount of the cost savings sought from such
employees or the nature of the modifications.
``(d)(1) If, after a period of negotiations, the trustee and the
labor organization have not reached an agreement over mutually
satisfactory modifications, and further negotiations are not likely to
produce mutually satisfactory modifications, the trustee may file a
motion seeking rejection of the collective bargaining agreement after
notice and a hearing. Absent agreement of the parties, no such hearing
shall be held before the expiration of the 21-day period beginning on
the date on which notice of the hearing is provided to the labor
organization representing the employees covered by the collective
bargaining agreement. Only the debtor and the labor organization may
appear and be heard at such hearing. An application for rejection shall
seek rejection effective upon the entry of an order granting the
relief.
``(2) In consideration of Federal policy encouraging the practice
and process of collective bargaining and in recognition of the
bargained-for expectations of the employees covered by the collective
bargaining agreement, the court may grant a motion seeking rejection of
a collective bargaining agreement only if, based on clear and
convincing evidence--
``(A) the court finds that the trustee has complied with
the requirements of subsection (c);
``(B) the court has considered alternative proposals by the
labor organization and has concluded that such proposals do not
meet the requirements of subsection (c)(3)(B);
``(C) the court finds that further negotiations regarding
the proposal of the trustee or an alternative proposal by the
labor organization are not likely to produce an agreement;
``(D) the court finds that implementation of the proposal
of the trustee shall not--
``(i) cause a material diminution in the purchasing
power of the employees covered by the collective
bargaining agreement;
``(ii) adversely affect the ability of the debtor
to retain an experienced and qualified workforce; or
``(iii) impair the labor relations of the debtor
such that the ability to achieve a feasible
reorganization would be compromised; and
``(E) the court concludes that rejection of the collective
bargaining agreement and immediate implementation of the
proposal of the trustee is essential to permit the debtor to
exit bankruptcy, such that confirmation of a plan of
reorganization is not likely to be followed by liquidation, or
the need for further financial reorganization, of the debtor
(or any successor to the debtor) in the short term.
``(3) If, during the bankruptcy, the trustee has implemented a
program of incentive pay, bonuses, or other financial returns for an
insider of the debtor, a senior executive officer of the debtor, any of
the 20 highest compensated employees of the debtor who are not insiders
or senior executive officers, any department or division manager of the
debtor, or any consultant providing services to the debtor, or such a
program was implemented within 180 days before the date of the filing
of the petition, the court shall presume that the trustee has failed to
satisfy the requirements of subsection (c)(3)(C).
``(4) In no case shall the court enter an order rejecting a
collective bargaining agreement that would result in modifications to a
level lower than the level proposed by the trustee in the proposal
found by the court to have complied with the requirements of this
section.
``(5) At any time after the date on which an order rejecting a
collective bargaining agreement is entered, or in the case of a
collective bargaining agreement entered into between the trustee and
the labor organization providing mutually satisfactory modifications,
at any time after that collective bargaining agreement has been entered
into, the labor organization may apply to the court for an order
seeking an increase in the level of wages or benefits, or relief from
working conditions, based upon changed circumstances. The court shall
grant the request only if the increase or other relief is not
inconsistent with the standard set forth in paragraph (2)(E).
``(e) During a period during which a collective bargaining
agreement at issue under this section continues in effect and a motion
for rejection of the c