Sponsors (6)
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Redesignates existing subparagraphs as clauses, adjusts punctuation/wording, and adds a provision deeming certain severance pay earned in full upon layoff or termination.
Adds a new subparagraph (C) to address rights or interests in equity securities held in defined contribution plans and conditions under which losses are treated.
Adjusts punctuation in existing paragraphs and adds two new priority items: (10) severance pay (with specified exclusions) for layoff/termination on or after the filing date, deemed earned in full upon such event; and (11) contributions to employee benefit plans due on or after the filing date.
Replaces paragraph (13) with a revised retiree-benefits requirement and adds paragraph (17) addressing recovery of damages arising from rejection of collective bargaining agreements or other negotiated financial returns under section 1113.
Amends subsection by inserting specified text 'before each place that term appears' (exact term to be inserted is not specified in the excerpt).
Amends 11 U.S.C. 501(a) by inserting additional text (placement indicated but inserted language not provided in this section).
Adds paragraph (30) to 11 U.S.C. 362(b) to create an exception to the automatic stay for certain collective bargaining dispute-resolution proceedings and for payment or enforcement of awards or settlements from those proceedings.
Adds subsection (m) to 11 U.S.C. 103 specifying that, notwithstanding sections 365, 1113, or 1114, neither the court nor the trustee may change wages, working conditions, or retirement benefits established by a collective bargaining agreement subject to the Railway Labor Act, except in accordance with section 6 of that Act.
Adds a new section 563 to chapter 5/subchapter III of title 11 titled 'Recovery of executive compensation' that: (a) requires the court to determine percentage diminution in obligations when a debtor obtains relief under sections 1113(d) or 1114(g) and includes defined-benefit plan terminations occurring on or after 180 days before case commencement; (b) provides for court determination of percentage diminution where a defined benefit pension plan was terminated on or after 180 days before case commencement even if no 1113/1114 relief was sought; (c) grants the estate a claim for the same percentage of compensation paid to certain officers/directors within the year before case commencement; (d) allows the trustee or an appointed committee to commence recovery actions, and if neither does so by the first date set for the confirmation hearing under section 1129, permits any party in interest to seek authority to recover such claims for the estate; and (e) prohibits awarding postpetition compensation under section 503(c) to persons subject to subsection (c) if there is a reasonable likelihood such compensation is intended to reimburse or replace amounts recovered under this section.
Gives employees, retirees, and union members stronger protections when companies use Chapter 11 reorganizations. The bill raises the priority and timing of certain wage and benefit claims, creates new recovery rights for some retirement-plan losses, restricts special payments to executives and insiders, and narrows when trustees or debtors can alter union contracts or retiree benefits. It also adds rules to favor buyers who preserve jobs and benefits in asset sales and creates new court powers to recover improperly paid executive compensation.
Business bankruptcies have increased sharply in recent years and remain at high levels, including 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.
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. Protections for employees and retirees in bankruptcy cases have eroded, while management compensation plans for those in charge of troubled businesses have become more prevalent and are escaping adequate scrutiny.
Changes in the law regarding these matters are urgently needed because bankruptcy is being used to address increasingly more complex and diverse conditions affecting troubled businesses and industries.
Severance pay described in the relevant subparagraph shall be deemed earned in full upon the layoff or termination of the individual to whom the severance is owed.
For each applicable employee benefit plan, a specified priority amount is established equal to the number of employees covered by the plan multiplied by $20,000.
Who is affected and how:
Employees and hourly/salaried workers: Gain stronger protection and higher priority for unpaid wages, severance, and some benefit claims; they may get faster access to some funds in a bankruptcy. This improves short-term financial security for workers when an employer fails.
Retirees and plan participants: Receive stronger protections for retiree benefits and new recovery paths if plan losses result from employer fraud or breach. Pension and defined-contribution beneficiaries may see improved recoveries, but enforcement will generate additional litigation and administrative steps.
Labor organizations (unions): Obtain tightened limits on when trustees or debtors can alter collective bargaining terms and better access to grievance/arbitration proceedings; unions will have improved leverage and procedural protections in reorganizations.
Employers and plan sponsors (private companies): Face higher restructuring costs and reduced flexibility to cut wages, benefits, and retiree plans. Companies may find reorganizations more expensive or slower and might need to negotiate earlier with workers and unions.
Executives, consultants, and insiders: Face new limits on special payments, retention bonuses, and benefit assumptions; courts will have stronger powers to deny or recover such payments when employee benefits are reduced.
Secured lenders, DIP (debtor-in-possession) lenders, and other creditors: Could see lower recoveries or stricter collateral rules (e.g., collateral covering unpaid post-petition wages/benefit contributions in some cases). Lenders may demand higher pricing or protective covenants in financing distressed firms.
Bankruptcy courts, trustees, and practitioners: Will implement new standards, waiting periods, and judicial findings. This raises procedural complexity and may increase the volume of contested hearings and appeals.
Net effects and trade-offs:
Read twice and referred to the Committee on the Judiciary. (text: CR S2523-2527)
Introduced April 9, 2025 by Richard Joseph Durbin · Last progress April 9, 2025
Expand sections to see detailed analysis
Read twice and referred to the Committee on the Judiciary. (text: CR S2523-2527)
Introduced in Senate