Unions seek renewed worker
protections in Chapter 11 reform
“If employees are called upon to sac-
rifice in order to resurrect their bankrupt
employer, bankruptcy law must require
that everyone from the break room to
the board room shares the pain,” said
Machinists General Secretary-Treasurer
Robert Roach in testimony to the Amer-
ican Bankruptcy Institute’s Commis-
sion to Study the Reform of Chapter 11.
The American Bankruptcy Institute
is a non-profit organization of bank-
ruptcy professionals, and is dedicated to
research and education about bank-
ruptcy.
“While Chapter 11 bankruptcy can
provide struggling companies an op-
portunity to re-group and avoid liquida-
tion, it is increasingly abused as a
means to get a leg-up on the competi-
tion by placing an undue burden on em-
ployees and retirees. Companies are in-
creasingly using bankruptcy as a means
to take what they can from employees
outside of the normal collective bar-
gaining process, not just what is needed
for a corporation to survive.”
Roach’s sentiments were shared by
executives from the Air Line Pilots As-
sociation, the United Steelworkers and
the Transport Workers Union (TWU)
who also testified at the hearings aimed
at reforming Chapter 11 law.
The hearing was just one in a series
of hearings being held by the American
Bankruptcy Institute focusing on re-
forming Chapter 11.
Roach pointed out that increasingly
unionized employees are bearing the
brunt of the financial burden in com-
pany restructuring.
The discussions focused on Section
1113 of the U.S. code, which gives
debtors the authority to ask a bank-
ruptcy court to reject labor contracts.
A labor-supported bill introduced by
Rep. John Conyers (D-Mich.), H.R.
100, the Protecting Employees and Re-
tirees in Business Bankruptcies Act,
seeks to strengthen the standards the
debtor must meet in order to win ap-
proval for a labor agreement modifica-
tion or termination.
Steelworkers General Counsel
David Jury says the bill would “force a
debtor to justify worker concessions
with a detailed business plan, establish a
presumption against rejecting a CBA
(collective bargaining agreement) when
executives receive incentive pay or
bonuses during or in the six months be-
fore bankruptcy, and require the court
to make a finding that the debtor’s pro-
posal would not cause the purchasing
power of the affected employees to ma-
terially diminish.”
Lack of a business plan was an issue
in the 2011 bankruptcy of American
Airlines, said James Campbell Little,
president of the TWU. “There were not
market-tested projections or a business
model against which all constituents
were being asked to make sacrifices.”
In prepared testimony, retired bank-
ruptcy Judge Steven Mitchell stated,
“authorizing companies to reject a CBA
or terminate retiree benefits were easily
the most difficult decisions I had to
make.”
No one on the panel disagreed that
the current process puts workers’ jobs
and retirement security at greater risk.
The commission plans to issue its
recommendations in April 2014.
Have a
Great
Labor Day!
(Editor’s Note: Steven M. Hedberg,
chief operating officer of Aequitas Cap-
ital in Lake Oswego, Oregon, serves on
American Bankruptcy Institute’s Com-
mission to Study the Reform of Chapter
11. This article appeared in the Label
Letter newsletter of the Union Label &
Service Trades Dept., AFL-CIO. )
NATIONAL ASSOCIATION OF
LETTER CARRIERS BRANCH 82
AUGUST 16, 2013
NORTHWEST LABOR PRESS
PAGE 21