Summary: Protecting Employees and Retirees in Business Bankruptcies Act of 2025 (S. 1381)

Overview

S. 1381, the Protecting Employees and Retirees in Business Bankruptcies Act of 2025, was introduced in the Senate on April 9, 2025. The bill is intended to strengthen protections and recoveries for employees, retirees, and their benefit plans in corporate bankruptcies, while imposing limits on executive compensation and clarifying certain election and negotiations issues. The measure is currently introduced and referred to the Senate Judiciary Committee for consideration. Primary sponsor is Richard J. Durbin, with several cosponsors including Amy Klobuchar, Josh Hawley, Brian Schatz, Tammy Duckworth, and Sheldon Whitehouse.

Purpose and intent

• Improve financial recoveries for workers and retirees when a company restructures or files for bankruptcy.
• Reduce the losses workers and retirees face from bankruptcies, by enhancing wage and benefit claimability, protecting pension and benefit plan assets, and addressing stock and plan value losses in defined contribution arrangements.
• Constrain executive compensation in the bankruptcy context and prevent certain types of preferential payments to executives.
• Clarify and expand how union claims, asset sales, and certain collective bargaining-related issues are treated during bankruptcy cases, including the interaction with automatic stays and regulatory frameworks like the Railway Labor Act.

Key provisions by title

Title I — Improving Recoveries for Employees and Retirees

• Sec. 101 Increased wage priority: Elevates wage claims in bankruptcy priority, improving employees’ standing to recover wages.
• Sec. 102 Claim for stock value losses in defined contribution plans: Creates a claim mechanism for losses in stock value within defined contribution plans.
• Sec. 103 Priority for severance pay and contributions to employee benefit plans: Establishes higher priority for severance payments and contributions to employee benefit plans.
• Sec. 104 Financial returns for employees and retirees: Addresses financial returns tied to employee and retiree interests in the bankrupt estate.
• Sec. 105 Priority for WARN Act damages: Grants priority status for damages under the Worker Adjustment and Retraining Notification (WARN) Act.

Title II — Reducing Employees’ and Retirees’ Losses

• Sec. 201 Rejection of collective bargaining agreements: Governs how CBAs may be affected in bankruptcy.
• Sec. 202 Payment of insurance benefits to retired employees: Ensures continued access to certain retirement insurance benefits.
• Sec. 203 Protection of employee benefits in a sale of assets: Safeguards employee benefits during asset sales.
• Sec. 204 Claim for pension losses: Creates a basis for workers to claim pension losses.
• Sec. 205 Payments by secured lender: Addresses potential contributions or payments by secured lenders.
• Sec. 206 Preservation of jobs and benefits: Aims to preserve employment and related benefits where possible.
• Sec. 207 Termination of exclusivity: Addresses the bankruptcy process’s exclusivity period.
• Sec. 208 Claim for withdrawal liability: Provides a basis for withdrawal liability claims.

Title III — Restricting Executive Compensation Programs

• Sec. 301 Executive compensation upon exit from bankruptcy: Limits or conditions executive pay upon exit.
• Sec. 302 Limitations on executive compensation enhancements: Caps or restricts compensation enhancements.
• Sec. 303 Prohibition against special compensation payments: Prohibits certain special payments.
• Sec. 304 Assumption of executive benefit plans: Governs how executive benefit plans are treated.
• Sec. 305 Recovery of executive compensation: Enables recovery of certain executive compensation.
• Sec. 306 Preferential compensation transfer: Addresses transfers that may favor certain executives.

Title IV — Other Provisions

• Sec. 401 Union proof of claim: Allows unions to prove claims in bankruptcy proceedings.
• Sec. 402 Exception from automatic stay: Specifies circumstances where protections from the automatic stay may be limited or modified.
• Sec. 403 Effect on collective bargaining agreements under the Railway Labor Act: Addresses interactions with the Railway Labor Act.

Affected parties

• Employees and retirees, including participants in defined contribution and defined benefit plans.
• Unions and collective bargaining units.
• Pension and employee-benefit plans, including insurance-related benefits.
• Employers in bankruptcy, and secured lenders with potential payment responsibilities.
• Executives and their compensation structures.
• Companies undergoing asset sales and restructurings.

Procedural and timeline aspects

• Introduced in Senate on April 9, 2025; referred to the Senate Judiciary Committee.
• The bill’s table of contents and findings are included in its text, signaling a structured approach to reforms across four main titles.
• Status may progress through committee hearings, potential amendments, and floor consideration, subject to Senate procedural timelines.

Sponsors

• Primary: Richard J. Durbin
• Cosponsors: Amy Klobuchar, Josh Hawley, Brian Schatz, Tammy Duckworth, Sheldon Whitehouse

Potential impact

• Strengthened priority for employee wages, severance, and certain benefit-related claims in bankruptcy.
• Enhanced protections for pension and benefit-plan participants and greater accountability for asset sales.
• Tighter controls on executive compensation in bankruptcy contexts to reduce value leakage from workers and retirees.
• Expanded union rights to participate in bankruptcy proceedings and clarified interactions with automatic stay and related labor laws.

This summary reflects the bill’s introduced text and stated sections; actual impacts would depend on enacted language, committee actions, and any amendments adopted during the legislative process.