Protecting Employees and Retirees in Business Bankruptcies Act of 2025

This bill aims to strengthen the position of employees and retirees during corporate bankruptcies, addressing concerns that current laws have not kept pace with increasing business failures and that executive compensation often escapes scrutiny. It seeks to improve recoveries for these groups by significantly increasing the priority wage claim limit to $20,000 and removing time restrictions on earning these wages and benefit contributions. The bill also grants administrative expense priority for severance pay and post-petition employee benefit plan contributions, excluding executives. Furthermore, the legislation allows non-insider employees to claim losses from debtor equity securities in defined contribution plans if fraud or breach of duty caused the loss, and it grants priority for damages related to violations of labor laws like the WARN Act . It mandates that bankruptcy plans provide for the continuation of retiree benefits at pre-confirmation levels or offer financial recovery for modifications, and similarly requires recovery for damages from rejected collective bargaining agreements. A major focus is on reducing employee and retiree losses by making it substantially more difficult for debtors to reject collective bargaining agreements or modify retiree benefits . Debtors must engage in good faith negotiations, propose modifications that are the minimum essential for reorganization, and ensure these changes do not disproportionately burden employees or retirees. Courts must apply a "clear and convincing evidence" standard for approval and consider whether executive incentive programs were implemented, which could presume non-compliance. The bill also introduces a new statement of purpose for Chapter 11 bankruptcies, emphasizing the preservation of jobs and productive use of assets. When approving asset sales or Chapter 11 plans, courts must give substantial weight to offers that preserve jobs, maintain employment terms, and assume pension and health benefit obligations for retirees. In cases of multiple offers, the one best serving these interests should be chosen, and plans incorporating union settlements are presumptively favored. To curb executive compensation abuses, the Act imposes strict limitations on payments and distributions to insiders and highly compensated employees upon exiting bankruptcy. Such compensation must be part of a generally applicable program, not exceed non-management compensation limits, and be deemed reasonable and not excessive by the court. It prohibits special executive payments if non-management severance benefits were reduced or eliminated within one year prior to bankruptcy. Moreover, the bill restricts the assumption of executive deferred compensation or retiree benefit plans if employee defined benefit plans were terminated or health benefits reduced within one year before bankruptcy. Critically, it allows for the recovery of executive compensation if employee or retiree benefits are reduced or defined benefit plans are terminated, with the estate having a claim for a percentage of executive pay equal to the percentage diminution in employee/retiree benefits. Trustees can also avoid preferential transfers made to executives in anticipation of bankruptcy. Finally, the legislation includes provisions allowing labor organizations to file proofs of claim and exempting grievance and arbitration proceedings under collective bargaining agreements from the automatic bankruptcy stay. It also clarifies that collective bargaining agreements under the Railway Labor Act are subject only to that Act's provisions for modification.