Employment-Related Issues in Bankruptcy (CRS Report for Congress)
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| Release Date |
Nov. 1, 2005 |
| Report Number |
RL33138 |
| Report Type |
Report |
| Authors |
Robin Jeweler, American Law Division |
| Source Agency |
Congressional Research Service |
Summary:
This report provides an overview of the status of employee wages and benefits, including retiree
benefits, when an employer files in bankruptcy, and the amendments made to the U.S. Bankruptcy
Code by the Bankruptcy Abuse Prevention and Consumer Protection Act. Private pensions,
regulated by the Employee Retirement Income Security Act, are generally protected, although
defined benefit pension plan payments may be substantially reduced. Health and life insurance
benefits, which are not required by federal law, are vulnerable to an employer's
bankruptcy-driven
modification or termination. This report examines those provisions in the U.S. Bankruptcy Code
which govern the priority of employee wage and benefit claims, including severance payments;
procedures for a chapter 11 debtor to modify benefits under a collective bargaining agreement; and
procedures for a chapter 11 debtor to modify retiree life and health insurance benefits. It examines
the role of employees on creditor committees and procedures in bankruptcy that facilitate lawsuits
that may be directed at an employer/debtor. Finally, it considers the treatment accorded some aspects
of managerial compensation, such as retention bonuses.
