One of the biggest appeals to a new job is the salary and benefits. In a recession where salaries have been slashed, companies are learning how to snag some of the best employees by offering a competitive benefits package. With the string of corporate bankruptcies in the U.S., should employees be enticed by benefits that they may never see? Has corporate bankruptcy become a tool to help companies get out of their obligations to current and former employees?
We’re seeing a trend in companies filing for bankruptcy to keep up with industry competitors, who have unfairly shed their debt and found new sources of capital. Now it seems like bankruptcy is becoming a tool for companies to strip themselves of their debts and responsibilities to their own employees, both current and retired.
Bankruptcy for an individual means financial consequences, in the form of damaged credit, liquidation of assets or a repayment plan. Corporations filing a Chapter 11 bankruptcy receive the same benefits as an individual, in protection from harassing creditors, but they can reorganize their debts to become a more profitable corporation in the long-run. On top of dodging the liquidation of assets, some companies are even able to negotiate extended repayment plans and additional capital from investors.
One of the best ways for a company to come out “leaner” and more profitable is to rid itself of a union contract. A judge can void this contract if they think it will interfere with the company’s return to profitability. A judge can even decide if a company can stop paying into its pension fund for former employees who have been promised this income. This can drastically cut any pension for retired employees who have planned their lives around the expected income.
This is becoming increasingly worrisome for 40 and 50 year-olds who were promised a pension package over 15 years ago, thinking their hard work would be paid in the form of a comfortable retirement.
The current laws make it very clear that a corporate bankruptcy should protect the interest of the company’s creditors, and leaves much less protection for unions and the needs of the workers. Since the bankruptcy judge is given the power to decide the fate of a company’s employees, it’s interesting to know that they are typically recruited from the top corporate law firms and make over $150,000 a year. While corporate bankruptcy is a hefty and complicated division of the law, what do you think? Are employees protected in the form of getting to keep their job, or should they be entitled to hold the company accountable for the promises they were made just as other creditors are? For more bankruptcy news and information, visit our Waco and Killeen bankruptcy attorney blog at Jeff Davis.
About the Author: Jeff Davis is the Owner of the Davis law firm and a highly experienced Waco and Killeen bankruptcy attorney. To find out more information about a Waco or Killeen bankruptcy lawyer, please visit www.jeffdavislawfirm.com.