Washington, D.C. – Today, House Judiciary Committee Chairman Jerrold Nadler (D-NY) delivered the following opening remarks, as prepared, during the markup of H.R. 7370, the Protecting Employees and Retirees in Business Bankruptcies Act of 2020:
"H.R. 7370, the 'Protecting Employees and Retirees in Business Bankruptcies Act' would protect the interests of workers and retirees in the Chapter 11 bankruptcy process, and it would put much-needed limits on excessive executive compensation.
"As the COVID-19 pandemic has unleashed a record number of corporate bankruptcies, it is more important than ever that we protect vulnerable workers who have faced enormous challenges through this crisis, and who continue to face extraordinary uncertainty in our struggling economy.
"This crisis has laid bare the deep inequalities in our society. Essential workers are forced to risk their health and safety every day, often for the sake of corporate profits. At the same time, our workforce faces record job losses and grossly inadequate unemployment assistance. And, unfortunately, corporate bankruptcies can serve as another tool to deprive workers and retirees of their hard-won wages and benefits.
"Chapter 11 of the Bankruptcy Code is supposed to reflect an equitable compromise between the interests of workers and creditors when a business ends up in bankruptcy. But history has shown that this balance is not reflected in practice. Instead, big corporations often exploit the Chapter 11 process as a business model to enrich wealthy executives, using the livelihoods of workers and retirees as leverage.
"Funds for wages, benefits, and pensions may be drained, while the top brass walk away with millions—often the same people whose decisions led the business to bankruptcy in the first place.
"Corporate bankruptcies resulting from COVID-19 are following the same familiar pattern. For example, the retailer J.C. Penney has closed hundreds of stores and cut at least 1,000 jobs since declaring bankruptcy—but it still managed to find $4.5 million to pay its CEO. This kind of blatant injustice is happening across the country and across industries—and it will continue unless we act. We must put an end to these abusive practices and ensure that working people get the fair deal that bankruptcy laws were always supposed to provide.
"H.R. 7370, the 'Protecting Employees and Retirees in Business Bankruptcies Act' is a long overdue commitment to that fair deal. It improves recoveries for employees and retirees, providing more favorable priority treatment for wages, benefits, and retiree pensions. It also makes it more difficult for employers to reject collective bargaining agreements and reduce employee benefits during reorganization. And it explicitly clarifies that the purpose of Chapter 11 bankruptcy is to preserve jobs to the maximum extent possible.
"Additionally, H.R. 7370 places a check on executive compensation in bankruptcy, strengthening court requirements for approval of excessive bonuses and other compensation for a business’s most highly compensated employees. And it ensures that wealthy executives cannot maintain their own benefit programs if they slash benefits for workers.
"Over the past several months, we have felt a devastating crisis upend our economy. We have businesses failing at an alarming rate, and workers carrying a disproportionate share of the burden. Unfortunately, the corporate bankruptcies resulting from COVID-19 are just deepening this disparity. H.R. 7370 is a comprehensive set of reforms that will protect American workers from corporate abuse when their employer files for bankruptcy, and it will ensure that reality reflects the balance intended by our bankruptcy laws.
"I thank the Senate sponsor of this bicameral bill, Mr. Durbin, as well as Congressman Norcross, who has been a champion of this legislation, and my colleagues on this Committee who have joined as co-sponsors. I urge all Members to support this important legislation."