Proposed Bill Would Protect Retirees in Bankruptcies
March 3, 2010
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It wasn’t enough that auto parts maker Delphi declared bankruptcy in 2005, putting the jobs and benefits of thousands of future retirees, including members of Milwaukee, Wis.., Local 663 in jeopardy. One year later, the company fired up workers’ resentments by asking a federal bankruptcy judge to approve $38 million in bonuses to the same Delphi executives who led the company into $5.5 billion in losses. And the judge approved the payments.
Delphi is not alone. Under current bankruptcy law, millions of retirees at companies that have failed have lost all or most of their health care insurance benefits. And hundreds of thousands have seen their pensions reduced or their pension funds taken over by the Pension Benefit Guaranty Corp. But the same laws that allowed their labor contracts to be reopened have given the green light to payments to executives who, the theory goes, might otherwise further hurt companies by bailing out.
These inequities would change under a newly-proposed law, the Protecting Employees and Retirees in Business Bankruptcies Act. Introduced by Assistant Senate Majority Leader Dick Durbin (D-Ill.) and House Judiciary Committee Chairman John Conyers (D-Mich.) and co-sponsored by Sens. Tom Harkin (D-Iowa) and Sherrod Brown (D-Ohio), the bill would prohibit the payment of bonuses or other forms of incentive compensation to senior officers of bankrupt companies.
The bill would also ensure that top executives cannot receive retiree benefits if workers have lost their retirement or health benefits. And it would tighten up the criteria by which collective bargaining agreements can be amended and double the maximum value of wage claims entitled to each worker.
The new law is long overdue, says IBEW Manufacturing Department Director Randy Middleton, who previously served as business manager of Local 663. He says:
Judges often take the attitude that companies must retain their skilled management personnel in bankruptcy. But this disregards the obvious fact that these are the same managers that drove them to bankruptcy in the first place.
Photo used under a Creative Commons License from Flickr user. dustpanalley
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