S.1381 - Protecting Employees and Retirees in Business Bankruptcies Act of 2025 (119th Congress)
Summary
The "Protecting Employees and Retirees in Business Bankruptcies Act of 2025" (S.1381) aims to amend Title 11 of the United States Code to enhance protections for employees and retirees during business bankruptcy proceedings. The bill addresses issues such as wage priority, claims for stock value losses, severance pay, and executive compensation. It seeks to improve recoveries for employees and retirees while restricting executive compensation programs.
Expected Effects
The Act would likely lead to increased financial security for employees and retirees during corporate bankruptcies. It would also place restrictions on executive compensation, potentially curbing excessive payouts during times of corporate distress. The changes could make bankruptcy proceedings more equitable for workers and retirees.
Potential Benefits
- Increased wage priority in bankruptcy proceedings, potentially leading to greater recovery for workers.
- Enhanced claims for stock value losses in defined contribution plans, offering retirees more protection.
- Priority for severance pay and contributions to employee benefit plans, ensuring workers receive owed compensation.
- Restrictions on executive compensation, limiting excessive payouts during bankruptcy.
- Improved protection of employee benefits during the sale of company assets.
Potential Disadvantages
- Increased costs for businesses undergoing bankruptcy, potentially discouraging investment and job creation.
- More complex bankruptcy proceedings, leading to higher legal fees and administrative burdens.
- Potential for unintended consequences due to restrictions on executive compensation, such as difficulty attracting qualified leadership during restructuring.
- Possible delays in bankruptcy resolution due to increased litigation over employee and retiree claims.
- Could disincentivize risk-taking and entrepreneurship due to increased liabilities during bankruptcy.
Most Disadvantaged Areas:
Constitutional Alignment
The bill primarily addresses bankruptcy law, which falls under the powers granted to Congress in Article I, Section 8, Clause 4 of the Constitution, which grants Congress the power to establish uniform laws on the subject of bankruptcies throughout the United States. The bill's provisions regarding labor and retirement benefits could also be seen as promoting the general welfare, as mentioned in the Preamble. However, the extent to which the bill regulates contracts and property rights could raise questions under the Fifth Amendment's Takings Clause if it unduly infringes upon existing contractual obligations.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).