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The Proposed Bankruptcy Fairness and Employee Benefits Protection Act of 2014: Restrictions on Employers in Bankruptcy

bankruptcy employers filing for bankruptcyLegislation that was recently introduced in the Senate called the Proposed Bankruptcy Fairness and Employee Benefits Protection Act of 2014 would limit the abilities of corporations who are in the midst of bankruptcy to alter the pay rate or benefits that is provided to employees and/or retirees of the company. Senator Jay Rockefeller and the co-sponsor, Senator Elizabeth Warren, introduced the proposed Act. It is currently before the Senate Judiciary Committee. If passed, the proposed Bankruptcy Fairness and Employee Benefits Protection Act of 2014 would place notable restrictions on employers declaring bankruptcy.

The bankruptcy legislation is a proposed amendment to title 11, the Bankruptcy Code, and title 29, the Employee Retirement Income Security Act of 1974, of the United States Code. The proposed legislation would result in:

  • Increased restrictions regarding the amount of reductions in compensation/benefits corporations declaring bankruptcy can enact towards employees or retirees.
  • Required funding of retiree health benefits over and above the minimum requirements set by the bankruptcy court.
  • Increased amount of unpaid wages to be made a priority.
  • Limits on payments/bonuses to insiders.
  • Required continuation of pension plan funding after filing for bankruptcy protection.
  • Increased requirements regarding the need for employers to provide their employees with information and guidance regarding vesting rights and health care benefits.
  • Create grounds for employee health benefits as fully vested at retirement or 20 of employment with the same employer.

The bill proposes many changes in various areas; some of which aren’t addressed here. While the legislation isn’t likely to be passed before the year ends, it is important to be aware of potential changes to come if the legislation passes. For more information on how your employer’s bankruptcy could affect you, contact the southern California bankruptcy attorneys at Westgate Law today.

 

About the Author

Justin Harelik

Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

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