I 

111TH CONGRESS 

2D SESSION H. R. 4677 

To amend title 11, United States Code, to improve protections for employees 

and retirees in business bankruptcies. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 24, 2010 

Mr. CONYERS (for himself, Mr. COHEN, Mr. NADLER of New York, Mr. 

HARE, Mr. FILNER, Mr. DELAHUNT, Ms. BALDWIN, Mr. KENNEDY, Mr. 

THOMPSON of Mississippi, Ms. SUTTON, Mr. KILDEE, Ms. CHU, Mr. 

MICHAUD, Mr. JOHNSON of Georgia, Mr. GEORGE MILLER of California, 

Mr. HALL of New York, Mr. SIRES, and Mr. RYAN of Ohio) introduced 

the following bill; which was referred to the Committee on the Judiciary 

A BILL 

To amend title 11, United States Code, to improve protections for employees and retirees in business bankruptcies. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Protecting Employees and Retirees in Business Bank6 ruptcies Act of 2010’’. 

7 (b) TABLE OF CONTENTS.—The table of contents of 

8 this Act is as follows: 


tjames on DSKG8SOYB1PROD with BILLS
2 

•HR 4677 IH

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

TITLE I—IMPROVING RECOVERIES FOR EMPLOYEES AND 

RETIREES 

Sec. 101. Increased wage priority. 

Sec. 102. Claim for stock value losses in defined contribution plans. 

Sec. 103. Priority for severance pay. 

Sec. 104. Financial returns for employees and retirees. 

Sec. 105. Priority for WARN Act damages. 

TITLE II—REDUCING EMPLOYEES’ AND RETIREES’ LOSSES 

Sec. 201. Rejection of collective bargaining agreements. 

Sec. 202. Payment of insurance benefits to retired employees. 

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

Sec. 204. Claim for pension losses. 

Sec. 205. Payments by secured lender. 

Sec. 206. Preservation of jobs and benefits. 

Sec. 207. Termination of exclusivity. 

TITLE III—RESTRICTING EXECUTIVE COMPENSATION PROGRAMS 

Sec. 301. Executive compensation upon exit from bankruptcy. 

Sec. 302. Limitations on executive compensation enhancements. 

Sec. 303. Assumption of executive benefit plans. 

Sec. 304. Recovery of executive compensation. 

Sec. 305. Preferential compensation transfer. 

TITLE IV—OTHER PROVISIONS 

Sec. 401. Union proof of claim. 

Sec. 402. Exception from automatic stay. 

1 SEC. 2. FINDINGS. 

2 The Congress finds the following: 

3 (1) Business bankruptcies have increased 

4 sharply over the past year and remain at high levels. 

5 These bankruptcies include several of the largest 

6 business bankruptcy filings in history. As the use of 

7 bankruptcy has expanded, job preservation and re8 tirement security are placed at greater risk. 

9 (2) Laws enacted to improve recoveries for em10 ployees and retirees and limit their losses in bankVerDate Nov 24 2008 03:55 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H4677.IH H4677

tjames on DSKG8SOYB1PROD with BILLS
3 

•HR 4677 IH

1 ruptcy cases have not kept pace with the increasing 

2 and broader use of bankruptcy by businesses in all 

3 sectors of the economy. However, while protections 

4 for employees and retirees in bankruptcy cases have 

5 eroded, management compensation plans devised for 

6 those in charge of troubled businesses have become 

7 more prevalent and are escaping adequate scrutiny. 

8 (3) Changes in the law regarding these matters 

9 are urgently needed as bankruptcy is used to ad10 dress increasingly more complex and diverse condi11 tions affecting troubled businesses and industries. 

12 TITLE I—IMPROVING RECOV13 ERIES FOR EMPLOYEES AND 

14 RETIREES 

15 SEC. 101. INCREASED WAGE PRIORITY. 

16 Section 507(a) of title 11, United States Code, is 

17 amended— 

18 (1) in paragraph (4)— 

19 (A) by striking ‘‘$10,000’’ and inserting 

20 ‘‘$20,000’’; 

21 (B) by striking ‘‘within 180 days’’; and 

22 (C) by striking ‘‘or the date of the ces23 sation of the debtor’s business, whichever oc24 curs first,’’; 

25 (2) in paragraph (5)(A), by striking— 


tjames on DSKG8SOYB1PROD with BILLS
4 

•HR 4677 IH

1 (A) ‘‘within 180 days’’; and 

2 (B) ‘‘or the date of the cessation of the 

3 debtor’s business, whichever occurs first’’; and 

4 (3) in paragraph (5), by striking subparagraph 

5 (B) and inserting the following: 

6 ‘‘(B) for each such plan, to the extent of 

7 the number of employees covered by each such 

8 plan, multiplied by $20,000.’’. 

9 SEC. 102. CLAIM FOR STOCK VALUE LOSSES IN DEFINED 

10 CONTRIBUTION PLANS. 

11 Section 101(5) of title 11, United States Code, is 

12 amended— 

13 (1) in subparagraph (A), by striking ‘‘or’’ at 

14 the end; 

15 (2) in subparagraph (B), by inserting ‘‘or’’ 

16 after the semicolon; and 

17 (3) by adding at the end the following: 

18 ‘‘(C) right or interest in equity securities 

19 of the debtor, or an affiliate of the debtor, held 

20 in a defined contribution plan (within the mean21 ing of section 3(34) of the Employee Retire22 ment Income Security Act of 1974 (29 U.S.C. 

23 1002(34))) for the benefit of an individual who 

24 is not an insider, a senior executive officer, or 

25 any of the 20 next most highly compensated 


tjames on DSKG8SOYB1PROD with BILLS
5 

•HR 4677 IH

1 employees of the debtor (if 1 or more are not 

2 insiders), if such securities were attributable to 

3 either employer contributions by the debtor or 

4 an affiliate of the debtor, or elective deferrals 

5 (within the meaning of section 402(g) of the In6 ternal Revenue Code of 1986), and any earn7 ings thereon, if an employer or plan sponsor 

8 who has commenced a case under this title has 

9 committed fraud with respect to such plan or 

10 has otherwise breached a duty to the partici11 pant that has proximately caused the loss of 

12 value.’’. 

13 SEC. 103. PRIORITY FOR SEVERANCE PAY. 

14 Section 503(b) of title 11, United States Code, is 

15 amended— 

16 (1) in paragraph (8), by striking ‘‘and’’ at the 

17 end; 

18 (2) in paragraph (9), by striking the period and 

19 inserting ‘‘; and’’; and 

20 (3) by adding at the end the following: 

21 ‘‘(10) severance pay owed to employees of the 

22 debtor (other than to an insider, other senior man23 agement, or a consultant retained to provide services 

24 to the debtor), under a plan, program, or policy gen25 erally applicable to employees of the debtor (but not 


tjames on DSKG8SOYB1PROD with BILLS
6 

•HR 4677 IH

1 under an individual contract of employment), or 

2 owed pursuant to a collective bargaining agreement, 

3 for layoff or termination on or after the date of the 

4 filing of the petition, which pay shall be deemed 

5 earned in full upon such layoff or termination of em6 ployment.’’. 

7 SEC. 104. FINANCIAL RETURNS FOR EMPLOYEES AND RE8 TIREES. 

9 Section 1129(a) of title 11, United States Code is 

10 amended— 

11 (1) by adding at the end the following: 

12 ‘‘(17) The plan provides for recovery of dam13 ages payable for the rejection of a collective bar14 gaining agreement, or for other financial returns as 

15 negotiated by the debtor and the authorized rep16 resentative under section 1113 (to the extent that 

17 such returns are paid under, rather than outside of, 

18 a plan).’’; and 

19 (2) by striking paragraph (13) and inserting 

20 the following: 

21 ‘‘(13) With respect to retiree benefits, as that 

22 term is defined in section 1114(a), the plan— 

23 ‘‘(A) provides for the continuation after its 

24 effective date of payment of all retiree benefits 

25 at the level established pursuant to subsection 


tjames on DSKG8SOYB1PROD with BILLS
7 

•HR 4677 IH

1 (e)(1)(B) or (g) of section 1114 at any time be2 fore the date of confirmation of the plan, for 

3 the duration of the period for which the debtor 

4 has obligated itself to provide such benefits, or 

5 if no modifications are made before confirma6 tion of the plan, the continuation of all such re7 tiree benefits maintained or established in whole 

8 or in part by the debtor before the date of the 

9 filing of the petition; and 

10 ‘‘(B) provides for recovery of claims arising 

11 from the modification of retiree benefits or for 

12 other financial returns, as negotiated by the 

13 debtor and the authorized representative (to the 

14 extent that such returns are paid under, rather 

15 than outside of, a plan).’’. 

16 SEC. 105. PRIORITY FOR WARN ACT DAMAGES. 

17 Section 503(b)(1)(A)(ii) of title 11, United States 

18 Code is amended to read as follows: 

19 ‘‘(ii) wages and benefits awarded pur20 suant to a judicial proceeding or a pro21 ceeding of the National Labor Relations 

22 Board as back pay or damages attributable 

23 to any period of time occurring after the 

24 date of commencement of the case under 

25 this title, as a result of a violation of FedVerDate Nov 24 2008 03:55 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H4677.IH H4677

tjames on DSKG8SOYB1PROD with BILLS
8 

•HR 4677 IH

1 eral or State law by the debtor, without re2 gard to the time of the occurrence of un3 lawful conduct on which the award is 

4 based or to whether any services were ren5 dered on or after the commencement of the 

6 case, including an award by a court under 

7 section 2901 of title 29, United States 

8 Code, of up to 60 days’ pay and benefits 

9 following a layoff that occurred or com10 menced at a time when such award period 

11 includes a period on or after the com12 mencement of the case, if the court deter13 mines that payment of wages and benefits 

14 by reason of the operation of this clause 

15 will not substantially increase the prob16 ability of layoff or termination of current 

17 employees or of nonpayment of domestic 

18 support obligations during the case under 

19 this title.’’. 


tjames on DSKG8SOYB1PROD with BILLS
9 

•HR 4677 IH

1 TITLE II—REDUCING EMPLOY2 EES’ AND RETIREES’ LOSSES 

3 SEC. 201. REJECTION OF COLLECTIVE BARGAINING AGREE4 MENTS. 

5 Section 1113 of title 11, United States Code, is 

6 amended by striking subsections (a) through (f) and in7 serting the following: 

8 ‘‘(a) The debtor in possession, or the trustee if one 

9 has been appointed under this chapter, other than a trust10 ee in a case covered by subchapter IV of this chapter and 

11 by title I of the Railway Labor Act, may reject a collective 

12 bargaining agreement only in accordance with this section. 

13 Hereinafter in this section, a reference to the trustee in14 cludes a reference to the debtor in possession. 

15 ‘‘(b) No provision of this title shall be construed to 

16 permit the trustee to unilaterally terminate or alter any 

17 provision of a collective bargaining agreement before com18 plying with this section. The trustee shall timely pay all 

19 monetary obligations arising under the terms of the collec20 tive bargaining agreement. Any such payment required to 

21 be made before a plan confirmed under section 1129 is 

22 effective has the status of an allowed administrative ex23 pense under section 503. 

24 ‘‘(c)(1) If the trustee seeks modification of a collec25 tive bargaining agreement, then the trustee shall provide 


tjames on DSKG8SOYB1PROD with BILLS
10 

•HR 4677 IH

1 notice to the labor organization representing the employ2 ees covered by the agreement that modifications are being 

3 proposed under this section, and shall promptly provide 

4 an initial proposal for modifications to the agreement. 

5 Thereafter, the trustee shall confer in good faith with the 

6 labor organization, at reasonable times and for a reason7 able period in light of the complexity of the case, in at8 tempting to reach mutually acceptable modifications of 

9 such agreement. 

10 ‘‘(2) The initial proposal and subsequent proposals 

11 by the trustee for modification of a collective bargaining 

12 agreement shall be based upon a business plan for the re13 organization of the debtor, and shall reflect the most com14 plete and reliable information available. The trustee shall 

15 provide to the labor organization all information that is 

16 relevant for negotiations. The court may enter a protective 

17 order to prevent the disclosure of information if disclosure 

18 could compromise the debtor’s position with respect to its 

19 competitors in the industry, subject to the needs of the 

20 labor organization to evaluate the trustee’s proposals and 

21 any application for rejection of the agreement or for in22 terim relief pursuant to this section. 

23 ‘‘(3) In consideration of Federal policy encouraging 

24 the practice and process of collective bargaining and in 

25 recognition of the bargained-for expectations of the emVerDate Nov 24 2008 03:55 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H4677.IH H4677

tjames on DSKG8SOYB1PROD with BILLS
11 

•HR 4677 IH

1 ployees covered by the agreement, modifications proposed 

2 by the trustee— 

3 ‘‘(A) shall be proposed only as part of a pro4 gram of workforce and nonworkforce cost savings 

5 devised for the reorganization of the debtor, includ6 ing savings in management personnel costs; 

7 ‘‘(B) shall be limited to modifications designed 

8 to achieve a specified aggregate financial contribu9 tion for the employees covered by the agreement 

10 (taking into consideration any labor cost savings ne11 gotiated within the 12-month period before the filing 

12 of the petition), and shall be not more than the min13 imum savings essential to permit the debtor to exit 

14 bankruptcy, such that confirmation of a plan of re15 organization is not likely to be followed by the liq16 uidation, or the need for further financial reorga17 nization, of the debtor (or any successor to the debt18 or) in the short-term; and 

19 ‘‘(C) shall not be disproportionate or overly bur20 den the employees covered by the agreement, either 

21 in the amount of the cost savings sought from such 

22 employees or the nature of the modifications. 

23 ‘‘(d)(1) If, after a period of negotiations, the trustee 

24 and the labor organization have not reached an agreement 

25 over mutually satisfactory modifications, and further neVerDate Nov 24 2008 03:55 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H4677.IH H4677

tjames on DSKG8SOYB1PROD with BILLS
12 

•HR 4677 IH

1 gotiations are not likely to produce mutually satisfactory 

2 modifications, the trustee may file a motion seeking rejec3 tion of the collective bargaining agreement after notice 

4 and a hearing. Absent agreement of the parties, no such 

5 hearing shall be held before the expiration of the 21-day 

6 period beginning on the date on which notice of the hear7 ing is provided to the labor organization representing the 

8 employees covered by the agreement. Only the debtor and 

9 the labor organization may appear and be heard at such 

10 hearing. An application for rejection shall seek rejection 

11 effective upon the entry of an order granting the relief. 

12 ‘‘(2) In consideration of Federal policy encouraging 

13 the practice and process of collective bargaining and in 

14 recognition of the bargained-for expectations of the em15 ployees covered by the agreement, the court may grant a 

16 motion seeking rejection of a collective bargaining agree17 ment only if, based on clear and convincing evidence— 

18 ‘‘(A) the court finds that the trustee has com19 plied with the requirements of subsection (c); 

20 ‘‘(B) the court has considered alternative pro21 posals by the labor organization and has concluded 

22 that such proposals do not meet the requirements of 

23 paragraph (3)(B) of subsection (c); 

24 ‘‘(C) the court finds that further negotiations 

25 regarding the trustee’s proposal or an alternative 


tjames on DSKG8SOYB1PROD with BILLS
13 

•HR 4677 IH

1 proposal by the labor organization are not likely to 

2 produce an agreement; 

3 ‘‘(D) the court finds that implementation of the 

4 trustee’s proposal shall not— 

5 ‘‘(i) cause a material diminution in the 

6 purchasing power of the employees covered by 

7 the agreement; 

8 ‘‘(ii) adversely affect the ability of the 

9 debtor to retain an experienced and qualified 

10 workforce; or 

11 ‘‘(iii) impair the debtor’s labor relations 

12 such that the ability to achieve a feasible reor13 ganization would be compromised; and 

14 ‘‘(E) the court concludes that rejection of the 

15 agreement and immediate implementation of the 

16 trustee’s proposal is essential to permit the debtor to 

17 exit bankruptcy, such that confirmation of a plan of 

18 reorganization is not likely to be followed by liquida19 tion, or the need for further financial reorganization, 

20 of the debtor (or any successor to the debtor) in the 

21 short term. 

22 ‘‘(3) If the trustee has implemented a program of in23 centive pay, bonuses, or other financial returns for insid24 ers, senior executive officers, or the 20 next most highly 

25 compensated employees or consultants providing services 


tjames on DSKG8SOYB1PROD with BILLS
14 

•HR 4677 IH

1 to the debtor during the bankruptcy, or such a program 

2 was implemented within 180 days before the date of the 

3 filing of the petition, the court shall presume that the 

4 trustee has failed to satisfy the requirements of subsection 

5 (c)(3)(C). 

6 ‘‘(4) In no case shall the court enter an order reject7 ing a collective bargaining agreement that would result in 

8 modifications to a level lower than the level proposed by 

9 the trustee in the proposal found by the court to have com10 plied with the requirements of this section. 

11 ‘‘(5) At any time after the date on which an order 

12 rejecting a collective bargaining agreement is entered, or 

13 in the case of an agreement entered into between the 

14 trustee and the labor organization providing mutually sat15 isfactory modifications, at any time after such agreement 

16 has been entered into, the labor organization may apply 

17 to the court for an order seeking an increase in the level 

18 of wages or benefits, or relief from working conditions, 

19 based upon changed circumstances. The court shall grant 

20 the request only if the increase or other relief is not incon21 sistent with the standard set forth in paragraph (2)(E). 

22 ‘‘(e) During a period in which a collective bargaining 

23 agreement at issue under this section continues in effect, 

24 and if essential to the continuation of the debtor’s busi25 ness or in order to avoid irreparable damage to the estate, 


tjames on DSKG8SOYB1PROD with BILLS
15 

•HR 4677 IH

1 the court, after notice and a hearing, may authorize the 

2 trustee to implement interim changes in the terms, condi3 tions, wages, benefits, or work rules provided by the collec4 tive bargaining agreement. Any hearing under this sub5 section shall be scheduled in accordance with the needs 

6 of the trustee. The implementation of such interim 

7 changes shall not render the application for rejection 

8 moot. 

9 ‘‘(f) Rejection of a collective bargaining agreement 

10 constitutes a breach of the agreement, and shall be effec11 tive no earlier than the entry of an order granting such 

12 relief. Notwithstanding the foregoing, solely for purposes 

13 of determining and allowing a claim arising from the rejec14 tion of a collective bargaining agreement, rejection shall 

15 be treated as rejection of an executory contract under sec16 tion 365(g) and shall be allowed or disallowed in accord17 ance with section 502(g)(1). No claim for rejection dam18 ages shall be limited by section 502(b)(7). Economic self19 help by a labor organization shall be permitted upon a 

20 court order granting a motion to reject a collective bar21 gaining agreement under subsection (d) or pursuant to 

22 subsection (e), and no provision of this title or of any other 

23 provision of Federal or State law may be construed to the 

24 contrary. 


tjames on DSKG8SOYB1PROD with BILLS
16 

•HR 4677 IH

1 ‘‘(g) The trustee shall provide for the reasonable fees 

2 and costs incurred by a labor organization under this sec3 tion, upon request and after notice and a hearing. 

4 ‘‘(h) A collective bargaining agreement that is as5 sumed shall be assumed in accordance with section 365.’’. 

6 SEC. 202. PAYMENT OF INSURANCE BENEFITS TO RETIRED 

7 EMPLOYEES. 

8 Section 1114 of title 11, United States Code, is 

9 amended— 

10 (1) in subsection (a), by inserting ‘‘, whether or 

11 not the debtor asserts a right to unilaterally modify 

12 such payments under such plan, fund, or program’’ 

13 before the period at the end; 

14 (2) in subsection (b)(2), by inserting after ‘‘sec15 tion’’ the following: ‘‘, and a labor organization serv16 ing as the authorized representative under sub17 section (c)(1),’’; 

18 (3) in subsection (f), by striking ‘‘(f)’’ and all 

19 that follows through paragraph (2) and inserting the 

20 following: 

21 ‘‘(f)(1) If a trustee seeks modification of retiree bene22 fits, then the trustee shall provide a notice to the author23 ized representative that modifications are being proposed 

24 pursuant to this section, and shall promptly provide an 

25 initial proposal. Thereafter, the trustee shall confer in 


tjames on DSKG8SOYB1PROD with BILLS
17 

•HR 4677 IH

1 good faith with the authorized representative at reason2 able times and for a reasonable period in light of the com3 plexity of the case in attempting to reach mutually satis4 factory modifications. 

5 ‘‘(2) The initial proposal and subsequent proposals 

6 by the trustee shall be based upon a business plan for the 

7 reorganization of the debtor and shall reflect the most 

8 complete and reliable information available. The trustee 

9 shall provide to the authorized representative all informa10 tion that is relevant for the negotiations. The court may 

11 enter a protective order to prevent the disclosure of infor12 mation if disclosure could compromise the debtor’s posi13 tion with respect to its competitors in the industry, subject 

14 to the needs of the authorized representative to evaluate 

15 the trustee’s proposals and an application pursuant to 

16 subsection (g) or (h). 

17 ‘‘(3) Modifications proposed by the trustee— 

18 ‘‘(A) shall be proposed only as part of a pro19 gram of workforce and nonworkforce cost savings 

20 devised for the reorganization of the debtor, includ21 ing savings in management personnel costs; 

22 ‘‘(B) shall be limited to modifications that are 

23 designed to achieve a specified aggregate financial 

24 contribution for the retiree group represented by the 

25 authorized representative (taking into consideration 


tjames on DSKG8SOYB1PROD with BILLS
18 

•HR 4677 IH

1 any cost savings implemented within the 12-month 

2 period before the date of filing of the petition with 

3 respect to the retiree group), and shall be no more 

4 than the minimum savings essential to permit the 

5 debtor to exit bankruptcy, such that confirmation of 

6 a plan of reorganization is not likely to be followed 

7 by the liquidation, or the need for further financial 

8 reorganization, of the debtor (or any successor to 

9 the debtor) in the short term; and 

10 ‘‘(C) shall not be disproportionate or overly bur11 den the retiree group, either in the amount of the 

12 cost savings sought from such group or the nature 

13 of the modifications.’’; 

14 (4) in subsection (g)— 

15 (A) by striking ‘‘(g)’’ and all that follows 

16 through the semicolon at the end of paragraph 

17 (3) and inserting the following: 

18 ‘‘(g)(1) If, after a period of negotiations, the trustee 

19 and the authorized representative have not reached agree20 ment over mutually satisfactory modifications and further 

21 negotiations are not likely to produce mutually satisfac22 tory modifications, then the trustee may file a motion 

23 seeking modifications in the payment of retiree benefits 

24 after notice and a hearing. Absent agreement of the par25 ties, no such hearing shall be held before the expiration 


tjames on DSKG8SOYB1PROD with BILLS
19 

•HR 4677 IH

1 of the 21-day period beginning on the date on which notice 

2 of the hearing is provided to the authorized representative. 

3 Only the debtor and the authorized representative may ap4 pear and be heard at such hearing. 

5 ‘‘(2) The court may grant a motion to modify the 

6 payment of retiree benefits only if, based on clear and con7 vincing evidence— 

8 ‘‘(A) the court finds that the trustee has com9 plied with the requirements of subsection (f); 

10 ‘‘(B) the court has considered alternative pro11 posals by the authorized representative and has de12 termined that such proposals do not meet the re13 quirements of subsection (f)(3)(B); 

14 ‘‘(C) the court finds that further negotiations 

15 regarding the trustee’s proposal or an alternative 

16 proposal by the authorized representative are not 

17 likely to produce a mutually satisfactory agreement; 

18 ‘‘(D) the court finds that implementation of the 

19 proposal shall not cause irreparable harm to the af20 fected retirees; and 

21 ‘‘(E) the court concludes that an order granting 

22 the motion and immediate implementation of the 

23 trustee’s proposal is essential to permit the debtor to 

24 exit bankruptcy, such that confirmation of a plan of 

25 reorganization is not likely to be followed by liquidaVerDate Nov 24 2008 03:55 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\H4677.IH H4677

tjames on DSKG8SOYB1PROD with BILLS
20 

•HR 4677 IH

1 tion, or the need for further financial reorganization, 

2 of the debtor (or a successor to the debtor) in the 

3 short term. 

4 ‘‘(3) If a trustee has implemented a program of in5 centive pay, bonuses, or other financial returns for insid6 ers, senior executive officers, or the 20 next most highly7 compensated employees or consultants providing services 

8 to the debtor during the bankruptcy, or such a program 

9 was implemented within 180 days before the date of the 

10 filing of the petition, the court shall presume that the 

11 trustee has failed to satisfy the requirements of subpara12 graph (f)(3)(C).’’; and 

13 (B) by striking ‘‘except that in no case’’ 

14 and inserting the following: 

15 ‘‘(4) In no case’’; and 

16 (5) by striking subsection (k) and redesignating 

17 subsections (l) and (m) as subsections (k) and (l), 

18 respectively. 

19 SEC. 203. PROTECTION OF EMPLOYEE BENEFITS IN A SALE 

20 OF ASSETS. 

21 Section 363(b) of title 11, United States Code, is 

22 amended by adding at the end the following: 

23 ‘‘(3) In approving a sale under this subsection, the 

24 court shall consider the extent to which a bidder has of25 fered to maintain existing jobs, preserve terms and condiVerDate Nov 24 2008 03:55 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00020 Fmt 6652 Sfmt 6201 E:\BILLS\H4677.IH H4677

tjames on DSKG8SOYB1PROD with BILLS
21 

•HR 4677 IH

1 tions of employment, and assume or match pension and 

2 retiree health benefit obligations in determining whether 

3 an offer constitutes the highest or best offer for such prop4 erty.’’. 

5 SEC. 204. CLAIM FOR PENSION LOSSES. 

6 Section 502 of title 11, United States Code, is 

7 amended by adding at the end the following: 

8 ‘‘(l) The court shall allow a claim asserted by an ac9 tive or retired participant, or by a labor organization rep10 resenting such participants, in a defined benefit plan ter11 minated under section 4041 or 4042 of the Employee Re12 tirement Income Security Act of 1974, for any shortfall 

13 in pension benefits accrued as of the effective date of the 

14 termination of such pension plan as a result of the termi15 nation of the plan and limitations upon the payment of 

16 benefits imposed pursuant to section 4022 of such Act, 

17 notwithstanding any claim asserted and collected by the 

18 Pension Benefit Guaranty Corporation with respect to 

19 such termination. 

20 ‘‘(m) The court shall allow a claim of a kind described 

21 in section 101(5)(C) by an active or retired participant 

22 in a defined contribution plan (within the meaning of sec23 tion 3(34) of the Employee Retirement Income Security 

24 Act of 1974 (29 U.S.C. 1002(34))), or by a labor organi25 zation representing such participants. The amount of such 


tjames on DSKG8SOYB1PROD with BILLS
22 

•HR 4677 IH

1 claim shall be measured by the market value of the stock 

2 at the time of contribution to, or purchase by, the plan 

3 and the value as of the commencement of the case.’’. 

4 SEC. 205. PAYMENTS BY SECURED LENDER. 

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

6 amended by adding at the end the following: ‘‘If employees 

7 have not received wages, accrued vacation, severance, or 

8 other benefits owed under the policies and practices of the 

9 debtor, or pursuant to the terms of a collective bargaining 

10 agreement, for services rendered on and after the date of 

11 the commencement of the case, then such unpaid obliga12 tions shall be deemed necessary costs and expenses of pre13 serving, or disposing of, property securing an allowed se14 cured claim and shall be recovered even if the trustee has 

15 otherwise waived the provisions of this subsection under 

16 an agreement with the holder of the allowed secured claim 

17 or a successor or predecessor in interest.’’. 

18 SEC. 206. PRESERVATION OF JOBS AND BENEFITS. 

19 Title 11, United States Code, is amended— 

20 (1) by inserting before section 1101 the fol21 lowing: 

22 ‘‘SEC. 1100. STATEMENT OF PURPOSE. 

23 ‘‘A debtor commencing a case under this chapter 

24 shall have as its principal purpose the reorganization of 

25 its business to preserve going concern value to the maxVerDate Nov 24 2008 03:55 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 E:\BILLS\H4677.IH H4677

tjames on DSKG8SOYB1PROD with BILLS
23 

•HR 4677 IH

1 imum extent possible through the productive use of its as2 sets and the preservation of jobs that will sustain produc3 tive economic activity.’’; 

4 (2) in section 1129(a), as amended by section 

5 104, by adding at the end the following: 

6 ‘‘(18) The debtor has demonstrated that the re7 organization preserves going concern value to the 

8 maximum extent possible through the productive use 

9 of the debtor’s assets and preserves jobs that sustain 

10 productive economic activity.’’; 

11 (3) in section 1129(c), by striking the last sen12 tence and inserting the following: ‘‘If the require13 ments of subsections (a) and (b) are met with re14 spect to more than 1 plan, the court shall, in deter15 mining which plan to confirm— 

16 ‘‘(1) consider the extent to which each plan 

17 would preserve going concern value through the pro18 ductive use of the debtor’s assets and the preserva19 tion of jobs that sustain productive economic activ20 ity; and 

21 ‘‘(2) confirm the plan that better serves such 

22 interests. 

23 A plan that incorporates the terms of a settlement with 

24 a labor organization representing employees of the debtor 


tjames on DSKG8SOYB1PROD with BILLS
24 

•HR 4677 IH

1 shall presumptively constitute the plan that satisfies this 

2 subsection.’’; and 

3 (4) in the table of sections for chapter 11, by 

4 inserting the following before the item relating to 

5 section 1101: 

‘‘1100. Statement of purpose.’’. 

6 SEC. 207. TERMINATION OF EXCLUSIVITY. 

7 Section 1121(d) of title 11, United States Code, is 

8 amended by adding at the end the following: 

9 ‘‘(3) For purposes of this subsection, cause for reduc10 ing the 120-day period or the 180-day period includes the 

11 following: 

12 ‘‘(A) The filing of a motion pursuant to section 

13 1113 seeking rejection of a collective bargaining 

14 agreement if a plan based upon an alternative pro15 posal by the labor organization is reasonably likely 

16 to be confirmed within a reasonable time. 

17 ‘‘(B) The proposed filing of a plan by a pro18 ponent other than the debtor, which incorporates the 

19 terms of a settlement with a labor organization if 

20 such plan is reasonably likely to be confirmed within 

21 a reasonable time.’’. 


tjames on DSKG8SOYB1PROD with BILLS
25 

•HR 4677 IH

1 TITLE III—RESTRICTING EXECU2 TIVE COMPENSATION PRO3 GRAMS 

4 SEC. 301. EXECUTIVE COMPENSATION UPON EXIT FROM 

5 BANKRUPTCY. 

6 Section 1129(a) of title 11, United States Code, is 

7 amended— 

8 (1) in paragraph (4), by adding at the end the 

9 following: ‘‘Except for compensation subject to re10 view under paragraph (5), payments or other dis11 tributions under the plan to or for the benefit of in12 siders, senior executive officers, and any of the 20 

13 next most highly compensated employees or consult14 ants providing services to the debtor, shall not be 

15 approved except as part of a program of payments 

16 or distributions generally applicable to employees of 

17 the debtor, and only to the extent that the court de18 termines that such payments are not excessive or 

19 disproportionate compared to distributions to the 

20 debtor’s nonmanagement workforce.’’; and 

21 (2) in paragraph (5)— 

22 (A) in subparagraph (A)(ii), by striking 

23 ‘‘and’’ at the end; and 


tjames on DSKG8SOYB1PROD with BILLS
26 

•HR 4677 IH

1 (B) in subparagraph (B), by striking the 

2 period at the end and inserting the following: ‘‘; 

3 and 

4 ‘‘(C) the compensation disclosed pursuant 

5 to subparagraph (B) has been approved by, or 

6 is subject to the approval of, the court as rea7 sonable when compared to individuals holding 

8 comparable positions at comparable companies 

9 in the same industry and not disproportionate 

10 in light of economic concessions by the debtor’s 

11 nonmanagement workforce during the case.’’. 

12 SEC. 302. LIMITATIONS ON EXECUTIVE COMPENSATION EN13 HANCEMENTS. 

14 Section 503(c) of title 11, United States Code, is 

15 amended— 

16 (1) in paragraph (1)— 

17 (A) by inserting ‘‘, a senior executive offi18 cer, or any of the 20 next most highly com19 pensated employees or consultants’’ after ‘‘an 

20 insider’’; 

21 (B) by inserting ‘‘or for the payment of 

22 performance or incentive compensation, or a 

23 bonus of any kind, or other financial returns 

24 designed to replace or enhance incentive, stock, 

25 or other compensation in effect before the date 


tjames on DSKG8SOYB1PROD with BILLS
27 

•HR 4677 IH

1 of the commencement of the case,’’ after ‘‘re2 main with the debtor’s business,’’; and 

3 (C) by inserting ‘‘clear and convincing’’ be4 fore ‘‘evidence in the record’’; and 

5 (2) by amending paragraph (3) to read as fol6 lows: 

7 ‘‘(3) other transfers or obligations, to or for the 

8 benefit of insiders, senior executive officers, man9 agers, or consultants providing services to the debt10 or, in the absence of a finding by the court, based 

11 upon clear and convincing evidence, and without def12 erence to the debtor’s request for such payments, 

13 that such transfers or obligations are essential to the 

14 survival of the debtor’s business or (in the case of 

15 a liquidation of some or all of the debtor’s assets) 

16 essential to the orderly liquidation and maximization 

17 of value of the assets of the debtor, in either case, 

18 because of the essential nature of the services pro19 vided, and then only to the extent that the court 

20 finds such transfers or obligations are reasonable 

21 compared to individuals holding comparable posi22 tions at comparable companies in the same industry 

23 and not disproportionate in light of economic conces24 sions by the debtor’s nonmanagement workforce dur25 ing the case.’’. 


tjames on DSKG8SOYB1PROD with BILLS
28 

•HR 4677 IH

1 SEC. 303. ASSUMPTION OF EXECUTIVE BENEFIT PLANS. 

2 Section 365 of title 11, United States Code, is 

3 amended— 

4 (1) in subsection (a), by striking ‘‘and (d)’’ and 

5 inserting ‘‘(d), (q), and (r)’’; and 

6 (2) by adding at the end the following: 

7 ‘‘(q) No deferred compensation arrangement for the 

8 benefit of insiders, senior executive officers, or any of the 

9 20 next most highly compensated employees of the debtor 

10 shall be assumed if a defined benefit plan for employees 

11 of the debtor has been terminated pursuant to section 

12 4041 or 4042 of the Employee Retirement Income Secu13 rity Act of 1974, on or after the date of the commence14 ment of the case or within 180 days before the date of 

15 the commencement of the case. 

16 ‘‘(r) No plan, fund, program, or contract to provide 

17 retiree benefits for insiders, senior executive officers, or 

18 any of the 20 next most highly compensated employees 

19 of the debtor shall be assumed if the debtor has obtained 

20 relief under subsection (g) or (h) of section 1114 to impose 

21 reductions in retiree benefits or under subsection (d) or 

22 (e) of section 1113 to impose reductions in the health ben23 efits of active employees of the debtor, or reduced or elimi24 nated health benefits for active or retired employees within 

25 180 days before the date of the commencement of the 

26 case.’’. 


tjames on DSKG8SOYB1PROD with BILLS
29 

•HR 4677 IH

1 SEC. 304. RECOVERY OF EXECUTIVE COMPENSATION. 

2 Title 11, United States Code, is amended by inserting 

3 after section 562 the following: 

4 ‘‘SEC. 563. RECOVERY OF EXECUTIVE COMPENSATION. 

5 ‘‘(a) If a debtor has obtained relief under subsection 

6 (d) of section 1113, or subsection (g) of section 1114, by 

7 which the debtor reduces the cost of its obligations under 

8 a collective bargaining agreement or a plan, fund, or pro9 gram for retiree benefits as defined in section 1114(a), 

10 the court, in granting relief, shall determine the percent11 age diminution in the value of the obligations when com12 pared to the debtor’s obligations under the collective bar13 gaining agreement, or with respect to retiree benefits, as 

14 of the date of the commencement of the case under this 

15 title before granting such relief. In making its determina16 tion, the court shall include reductions in benefits, if any, 

17 as a result of the termination pursuant to section 4041 

18 or 4042 of the Employee Retirement Income Security Act 

19 of 1974, of a defined benefit plan administered by the 

20 debtor, or for which the debtor is a contributing employer, 

21 effective at any time on or after 180 days before the date 

22 of the commencement of a case under this title. The court 

23 shall not take into account pension benefits paid or pay24 able under of such Act as a result of any such termination. 

25 ‘‘(b) If a defined benefit pension plan administered 

26 by the debtor, or for which the debtor is a contributing 


tjames on DSKG8SOYB1PROD with BILLS
30 

•HR 4677 IH

1 employer, has been terminated pursuant to section 4041 

2 or 4042 of the Employee Retirement Income Security Act 

3 of 1974, effective at any time on or after 180 days before 

4 the date of the commencement of a case under this title, 

5 but a debtor has not obtained relief under subsection (d) 

6 of section 1113, or subsection (g) of section 1114, then 

7 the court, upon motion of a party in interest, shall deter8 mine the percentage diminution in the value of benefit ob9 ligations when compared to the total benefit liabilities be10 fore such termination. The court shall not take into ac11 count pension benefits paid or payable under title IV of 

12 the Employee Retirement Income Security Act of 1974 as 

13 a result of any such termination. 

14 ‘‘(c) Upon the determination of the percentage dimi15 nution in value under subsection (a) or (b), the estate shall 

16 have a claim for the return of the same percentage of the 

17 compensation paid, directly or indirectly (including any 

18 transfer to a self-settled trust or similar device, or to a 

19 nonqualified deferred compensation plan under section 

20 409A(d)(1) of the Internal Revenue Code of 1986) to any 

21 officer of the debtor serving as member of the board of 

22 directors of the debtor within the year before the date of 

23 the commencement of the case, and any individual serving 

24 as chairman or lead director of the board of directors at 

25 the time of the granting of relief under section 1113 or 


tjames on DSKG8SOYB1PROD with BILLS
31 

•HR 4677 IH

1 1114 or, if no such relief has been granted, the termi2 nation of the defined benefit plan. 

3 ‘‘(d) The trustee or a committee appointed pursuant 

4 to section 1102 may commence an action to recover such 

5 claims, except that if neither the trustee nor such com6 mittee commences an action to recover such claim by the 

7 first date set for the hearing on the confirmation of plan 

8 under section 1129, any party in interest may apply to 

9 the court for authority to recover such claim for the ben10 efit of the estate. The costs of recovery shall be borne by 

11 the estate. 

12 ‘‘(e) The court shall not award postpetition com13 pensation under section 503(c) or otherwise to any person 

14 subject to subsection (c) if there is a reasonable likelihood 

15 that such compensation is intended to reimburse or re16 place compensation recovered by the estate under this sec17 tion.’’. 

18 SEC. 305. PREFERENTIAL COMPENSATION TRANSFER. 

19 Section 547 of title 11, United States Code, is 

20 amended by adding at the end the following: 

21 ‘‘(j) The trustee may avoid a transfer to or for the 

22 benefit of an insider (including an obligation incurred for 

23 the benefit of an insider under an employment contract) 

24 made in anticipation of bankruptcy, or a transfer made 

25 in anticipation of bankruptcy to a consultant who is forVerDate Nov 24 2008 03:55 Feb 25, 2010 Jkt 089200 PO 00000 Frm 00031 Fmt 6652 Sfmt 6201 E:\BILLS\H4677.IH H4677

tjames on DSKG8SOYB1PROD with BILLS
32 

•HR 4677 IH

1 merly an insider and who is retained to provide services 

2 to an entity that becomes a debtor (including an obligation 

3 under a contract to provide services to such entity or to 

4 a debtor) made or incurred on or within 1 year before the 

5 filing of the petition. No provision of subsection (c) shall 

6 constitute a defense against the recovery of such transfer. 

7 The trustee or a committee appointed pursuant to section 

8 1102 may commence an action to recover such transfer, 

9 except that, if neither the trustee nor such committee com10 mences an action to recover such transfer by the time of 

11 the commencement of a hearing on the confirmation of 

12 a plan under section 1129, any party in interest may apply 

13 to the court for authority to recover the claims for the 

14 benefit of the estate. The costs of recovery shall be borne 

15 by the estate.’’. 

16 TITLE IV—OTHER PROVISIONS 

17 SEC. 401. UNION PROOF OF CLAIM. 

18 Section 501(a) of title 11, United States Code, is 

19 amended by inserting ‘‘, including a labor organization,’’ 

20 after ‘‘A creditor’’. 

21 SEC. 402. EXCEPTION FROM AUTOMATIC STAY. 

22 Section 362(b) of title 11, United States Code, is 

23 amended— 

24 (1) in paragraph (27), by striking ‘‘and’’ at the 

25 end; 


tjames on DSKG8SOYB1PROD with BILLS
33 

•HR 4677 IH

1 (2) in paragraph (28), by striking the period at 

2 the end and inserting ‘‘; and’’; and 

3 (3) by adding at the end the following: 

4 ‘‘(29) of the commencement or continuation of 

5 a grievance, arbitration, or similar dispute resolution 

6 proceeding established by a collective bargaining 

7 agreement that was or could have been commenced 

8 against the debtor before the filing of a case under 

9 this title, or the payment or enforcement of an 

10 award or settlement under such proceeding.’’. 

Æ 


tjames on DSKG8SOYB1PROD with BILLS