Title II — Reducing Employees’ and Retirees’ Losses

S. 4089 · 116th Congress · Jun 25, 2020 · Lineage

II Reducing Employees’ and Retirees’ Losses

Sec. 201 Rejection of collective bargaining agreements

Section 1113 of title 11, United States Code, is amended by striking subsections (a) through (f) and inserting the following:

“(a) The debtor in possession, or the trustee if one has been appointed under this chapter, other than as provided in section 103(m) for collective bargaining agreements covered by the Railway Labor Act (45 U.S.C. 151 et seq.), may reject a collective bargaining agreement only in accordance with this section. In this section, a reference to the trustee includes the debtor in possession.

“(b) No provision of this title shall be construed to permit the trustee to unilaterally terminate or alter any provision of a collective bargaining agreement before complying with this section. The trustee shall timely pay all monetary obligations arising under the terms of the collective bargaining agreement. Any such payment required to be made before a plan confirmed under section 1129 is effective has the status of an allowed administrative expense under section 503.

“(c)

“(1) If the trustee seeks modification of a collective bargaining agreement, the trustee shall provide notice to the labor organization representing the employees covered by the collective bargaining agreement that modifications are being proposed under this section, and shall promptly provide an initial proposal for modifications to the collective bargaining agreement. Thereafter, the trustee shall confer in good faith with the labor organization, at reasonable times and for a reasonable period in light of the complexity of the case, in attempting to reach mutually acceptable modifications of the collective bargaining agreement.

“(2) The initial proposal and subsequent proposals by the trustee for modification of a collective bargaining agreement shall be based upon a business plan for the reorganization of the debtor, and shall reflect the most complete and reliable information available. The trustee shall provide to the labor organization all information that is relevant for negotiations. The court may enter a protective order to prevent the disclosure of information if disclosure could compromise the position of the debtor with respect to the competitors in the industry of the debtor, subject to the needs of the labor organization to evaluate the proposals of the trustee and any application for rejection of the collective bargaining agreement or for interim relief pursuant to this section.

“(3) In consideration of Federal policy encouraging the practice and process of collective bargaining and in recognition of the bargained-for expectations of the employees covered by the collective bargaining agreement, modifications proposed by the trustee—

“(A) shall be proposed only as part of a program of workforce and nonworkforce cost savings devised for the reorganization of the debtor, including savings in management personnel costs;

“(B) shall be limited to modifications designed to achieve a specified aggregate financial contribution for the employees covered by the collective bargaining agreement (taking into consideration any labor cost savings negotiated within the 12-month period before the filing of the petition), and shall be not more than the minimum savings essential to permit the debtor to exit bankruptcy, such that confirmation of a plan of reorganization is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor (or any successor to the debtor) in the short term; and

“(C) shall not be disproportionate or overly burden the employees covered by the collective bargaining agreement, either in the amount of the cost savings sought from such employees or the nature of the modifications.

“(d)

“(1) If, after a period of negotiations, the trustee and the labor organization have not reached an agreement over mutually satisfactory modifications, and further negotiations are not likely to produce mutually satisfactory modifications, the trustee may file a motion seeking rejection of the collective bargaining agreement after notice and a hearing. Absent agreement of the parties, no such hearing shall be held before the expiration of the 21-day period beginning on the date on which notice of the hearing is provided to the labor organization representing the employees covered by the collective bargaining agreement. Only the debtor and the labor organization may appear and be heard at such hearing. An application for rejection shall seek rejection effective upon the entry of an order granting the relief.

“(2) In consideration of Federal policy encouraging the practice and process of collective bargaining and in recognition of the bargained-for expectations of the employees covered by the collective bargaining agreement, the court may grant a motion seeking rejection of a collective bargaining agreement only if, based on clear and convincing evidence—

“(A) the court finds that the trustee has complied with the requirements of subsection (c);

“(B) the court has considered alternative proposals by the labor organization and has concluded that such proposals do not meet the requirements of subsection (c)(3)(B);

“(C) the court finds that further negotiations regarding the proposal of the trustee or an alternative proposal by the labor organization are not likely to produce an agreement;

“(D) the court finds that implementation of the proposal of the trustee shall not—

“(i) cause a material diminution in the purchasing power of the employees covered by the collective bargaining agreement;

“(ii) adversely affect the ability of the debtor to retain an experienced and qualified workforce; or

“(iii) impair the labor relations of the debtor such that the ability to achieve a feasible reorganization would be compromised; and

“(E) the court concludes that rejection of the collective bargaining agreement and immediate implementation of the proposal of the trustee is essential to permit the debtor to exit bankruptcy, such that confirmation of a plan of reorganization is not likely to be followed by liquidation, or the need for further financial reorganization, of the debtor (or any successor to the debtor) in the short term.

“(3) If, during the bankruptcy, the trustee has implemented a program of incentive pay, bonuses, or other financial returns for an insider of the debtor, a senior executive officer of the debtor, any of the 20 highest compensated employees of the debtor who are not insiders or senior executive officers, any department or division manager of the debtor, or any consultant providing services to the debtor, or such a program was implemented within 180 days before the date of the filing of the petition, the court shall presume that the trustee has failed to satisfy the requirements of subsection (c)(3)(C).

“(4) In no case shall the court enter an order rejecting a collective bargaining agreement that would result in modifications to a level lower than the level proposed by the trustee in the proposal found by the court to have complied with the requirements of this section.

“(5) At any time after the date on which an order rejecting a collective bargaining agreement is entered, or in the case of a collective bargaining agreement entered into between the trustee and the labor organization providing mutually satisfactory modifications, at any time after that collective bargaining agreement has been entered into, the labor organization may apply to the court for an order seeking an increase in the level of wages or benefits, or relief from working conditions, based upon changed circumstances. The court shall grant the request only if the increase or other relief is not inconsistent with the standard set forth in paragraph (2)(E).

“(e) During a period during which a collective bargaining agreement at issue under this section continues in effect and a motion for rejection of the collective bargaining agreement has been filed, if essential to the continuation of the business of the debtor or in order to avoid irreparable damage to the estate, the court, after notice and a hearing, may authorize the trustee to implement interim changes in the terms, conditions, wages, benefits, or work rules provided by the collective bargaining agreement. Any hearing under this subsection shall be scheduled in accordance with the needs of the trustee. The implementation of such interim changes shall not render the application for rejection moot and may be authorized for not more than 14 days in total.

“(f)

“(1) Rejection of a collective bargaining agreement constitutes a breach of the collective bargaining agreement, and shall be effective no earlier than the entry of an order granting such relief.

“(2) Notwithstanding paragraph (1), solely for purposes of determining and allowing a claim arising from the rejection of a collective bargaining agreement, rejection shall be treated as rejection of an executory contract under section 365(g) and shall be allowed or disallowed in accordance with section 502(g)(1). No claim for rejection damages shall be limited by section 502(b)(7). Economic self-help by a labor organization shall be permitted upon a court order granting a motion to reject a collective bargaining agreement under subsection (d) or pursuant to subsection (e), and no provision of this title or of any other provision of Federal or State law may be construed to the contrary.

“(g) The trustee shall provide for the reasonable fees and costs incurred by a labor organization under this section, upon request and after notice and a hearing.

“(h) A collective bargaining agreement that is assumed shall be assumed in accordance with section 365.”

Sec. 202 Payment of insurance benefits to retired employees

Section 1114 of title 11, United States Code, is amended—

(1)

in subsection (a), by inserting “, without regard to whether the debtor asserts a right to unilaterally modify such payments under such plan, fund, or program” before the period at the end;

(2)

in subsection (b)(2), by inserting “, and a labor organization serving as the authorized representative under subsection (c)(1),” after “section”;

(3)

by striking subsection (f) and inserting the following:

“(f)

“(1) If a trustee seeks modification of retiree benefits, the trustee shall provide a notice to the authorized representative that modifications are being proposed pursuant to this section, and shall promptly provide an initial proposal. Thereafter, the trustee shall confer in good faith with the authorized representative at reasonable times and for a reasonable period in light of the complexity of the case in attempting to reach mutually satisfactory modifications.

“(2) The initial proposal and subsequent proposals by the trustee shall be based upon a business plan for the reorganization of the debtor and shall reflect the most complete and reliable information available. The trustee shall provide to the authorized representative all information that is relevant for the negotiations. The court may enter a protective order to prevent the disclosure of information if disclosure could compromise the position of the debtor with respect to the competitors in the industry of the debtor, subject to the needs of the authorized representative to evaluate the proposals of the trustee and an application pursuant to subsection (g) or (h).

“(3) Modifications proposed by the trustee—

“(A) shall be proposed only as part of a program of workforce and nonworkforce cost savings devised for the reorganization of the debtor, including savings in management personnel costs;

“(B) shall be limited to modifications that are designed to achieve a specified aggregate financial contribution for the retiree group represented by the authorized representative (taking into consideration any cost savings implemented within the 12-month period before the date of filing of the petition with respect to the retiree group), and shall be no more than the minimum savings essential to permit the debtor to exit bankruptcy, such that confirmation of a plan of reorganization is not likely to be followed by the liquidation, or the need for further financial reorganization, of the debtor (or any successor to the debtor) in the short term; and

“(C) shall not be disproportionate or overly burden the retiree group, either in the amount of the cost savings sought from such group or the nature of the modifications.”

(4)

in subsection (g)—

(A)

by striking the subsection designation and all that follows through the semicolon at the end of paragraph (3) and inserting the following:

“(g)

“(1) If, after a period of negotiations, the trustee and the authorized representative have not reached agreement over mutually satisfactory modifications and further negotiations are not likely to produce mutually satisfactory modifications, the trustee may file a motion seeking modifications in the payment of retiree benefits after notice and a hearing. Absent agreement of the parties, no such hearing shall be held before the expiration of the 21-day period beginning on the date on which notice of the hearing is provided to the authorized representative. Only the debtor and the authorized representative may appear and be heard at such hearing.

“(2) The court may grant a motion to modify the payment of retiree benefits only if, based on clear and convincing evidence—

“(A) the court finds that the trustee has complied with the requirements of subsection (f);

“(B) the court has considered alternative proposals by the authorized representative and has determined that such proposals do not meet the requirements of subsection (f)(3)(B);

“(C) the court finds that further negotiations regarding the proposal of the trustee or an alternative proposal by the authorized representative are not likely to produce a mutually satisfactory agreement;

“(D) the court finds that implementation of the proposal shall not cause irreparable harm to the affected retirees; and

“(E) the court concludes that an order granting the motion and immediate implementation of the proposal of the trustee is essential to permit the debtor to exit bankruptcy, such that confirmation of a plan of reorganization is not likely to be followed by liquidation, or the need for further financial reorganization, of the debtor (or a successor to the debtor) in the short term.

“(3) If, during the bankruptcy, a trustee has implemented a program of incentive pay, bonuses, or other financial returns for insiders of the debtor, senior executive officers of the debtor, the 20 highest compensated employees of the debtor who are not insiders or senior executive officers, any department or division managers of the debtor, or any consultants providing services to the debtor, or such a program was implemented within 180 days before the date of the filing of the petition, the court shall presume that the trustee has failed to satisfy the requirements of subsection (f)(3)(C).”

(B)

in the matter following paragraph (3)—

(i)

by striking “except that in no case” and inserting the following:

“(4) In no case”

(ii)

by striking “is consistent with the standard set forth in paragraph (3)” and inserting “assures that all creditors, the debtor, and all of the affected parties are treated fairly and equitably, and is clearly favored by the balance of the equities”;

(5)

in subsection (h)(1), by inserting “for a period of not longer than 14 days” before the period; and

(6)

by striking subsection (k) and redesignating subsections (l) and (m) as subsections (k) and (l), respectively.

Sec. 203 Protection of employee benefits in a sale of assets

(a)

Requirement To preserve jobs and maintain terms and conditions of employment— Section 363 of title 11, United States Code, is amended by adding at the end the following:

“(q)

“(1) In approving a sale or lease of property of the estate under this section or a plan under chapter 11, the court shall give substantial weight to the extent to which a prospective purchaser or lessee of the property will—

“(A) preserve the jobs of the employees of the debtor;

“(B) maintain the terms and conditions of employment of the employees of the debtor; and

“(C) assume or match the pension and health benefit obligations of the debtor to the retirees of the debtor.

“(2) If there are two or more offers to purchase or lease property of the estate under this section or a plan under chapter 11, the court shall approve the offer of the prospective purchaser or lessee that will best carry out the actions described in subparagraphs (A) through (C) of paragraph (1).”

(b)

Chapter 11 plans— Section 1129(a) of title 11, United States Code is amended by adding at the end the following:

“(17) If the plan provides for the sale of all or substantially all of the property of the estate, the plan requires the purchaser of the sale to carry out the actions described in subparagraphs (A) through (C) of section 363(q)(1).”

Sec. 204 Claim for pension losses

Section 502 of title 11, United States Code, is amended by adding at the end the following:

“(l) The court shall allow a claim asserted by an active or retired participant, or by a labor organization representing such participants, in a defined benefit plan terminated under section 4041 or 4042 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1341, 1342), for any shortfall in pension benefits accrued as of the effective date of the termination of such pension plan as a result of the termination of the plan and limitations upon the payment of benefits imposed pursuant to section 4022 of that Act (29 U.S.C. 1342), notwithstanding any claim asserted and collected by the Pension Benefit Guaranty Corporation with respect to such termination.

“(m) The court shall allow a claim of a kind described in section 101(5)(C) by an active or retired participant in a defined contribution plan (within the meaning of section 3(34) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002(34))), or by a labor organization representing such participants. The amount of such claim shall be measured by the market value of the stock at the time of contribution to, or purchase by, the plan and the value as of the commencement of the case.”

Sec. 205 Payments by secured lender

Section 506(c) of title 11, United States Code, is amended—

(1)

by adding “(1)” after “(c)”; and

(2)

by adding at the end the following:

“(2) If one or more employees of the debtor have not received wages, accrued vacation, severance, or any other compensation owed under a plan, program, policy or practice of the debtor, or pursuant to the terms of a collective bargaining agreement, for services rendered on or after the date of the commencement of the case, or the debtor has not made a contribution due under an employee benefit plan on or after the date of the commencement of the case, such unpaid obligations shall be deemed reasonable, necessary costs and expenses of preserving, or disposing of, property securing an allowed secured claim and benefitting the holder of the allowed secured claim, and shall be recovered by the trustee for payment to the employees or the employee benefit plan, as applicable, even if the trustee, or a successor or predecessor in interest has otherwise waived the provisions of this subsection under an agreement with the holder of the allowed secured claim or a successor or predecessor in interest.”

Sec. 206 Preservation of jobs and benefits

Chapter 11 of title 11, United States Code, is amended—

(1)

by inserting before section 1101 the following:

“1100. Statement of purpose

“A debtor commencing a case under this chapter shall have as its principal purpose the reorganization of its business to preserve going concern value to the maximum extent possible through the productive use of its assets and the preservation of jobs that will sustain productive economic activity.”

(2)

in section 1129—

(A)

in subsection (a), as amended by section 104, by adding at the end the following:

“(18) The debtor has demonstrated that the reorganization preserves going concern value to the maximum extent possible through the productive use of the assets of the debtor and preserves jobs that sustain productive economic activity.”

(B)

in subsection (c)—

(i)

by inserting “(1)” after “(c)”; and

(ii)

by striking the last sentence and inserting the following:

“(2) If the requirements of subsections (a) and (b) are met with respect to more than 1 plan, the court shall, in determining which plan to confirm—

“(A) consider the extent to which each plan would preserve going concern value through the productive use of the assets of the debtor and the preservation of jobs that sustain productive economic activity; and

“(B) confirm the plan that better serves such interests.

“(3) A plan that incorporates the terms of a settlement with a labor organization representing employees of the debtor shall presumptively constitute the plan that satisfies this subsection.”

(3)

in the table of sections, by inserting before the item relating to section 1101 the following:

Sec. 207 Termination of exclusivity

Section 1121(d) of title 11, United States Code, is amended by adding at the end the following:

“(3) For purposes of this subsection, cause for reducing the 120-day period or the 180-day period includes—

“(A) the filing of a motion pursuant to section 1113 seeking rejection of a collective bargaining agreement if a plan based upon an alternative proposal by the labor organization is reasonably likely to be confirmed within a reasonable time; and

“(B) the proposed filing of a plan by a proponent other than the debtor, which incorporates the terms of a settlement with a labor organization if such plan is reasonably likely to be confirmed within a reasonable time.”

Sec. 208 Claim for withdrawal liability

Section 503(b) of title 11, United States Code, as amended by section 103 of this Act, is amended by adding at the end the following:

“(12) with respect to withdrawal liability owed to a multiemployer pension plan for a complete or partial withdrawal pursuant to section 4201 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1381) where such withdrawal occurs on or after the commencement of the case, an amount equal to the total benefits payable from such pension plan that accrued as a result of employees’ services rendered to the debtor during the period beginning on the date of commencement of the case and ending on the date of the withdrawal from the plan.”