(This is a re-post from the AFL-CIO’s Live Convention BLOG)
Bankruptcy laws are rigged against working people. Employers, corporations and lenders often exploit these laws to weaken our retirement security, cut health care and leave young workers saddled with student loan debt, without the prospect of a good job or the ability to discharge the debt through bankruptcy.
Look no further than the coal giants Peabody Energy and Arch Coal, which created Patriot Coal to shed their obligations to tens of thousands of retired miners and their families, or the bankruptcy story of Hostess Brands, where on two separate occasions in the 2000s, Hostess workers, represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers (BCTGM), made tremendous sacrifices to help the company emerge from bankruptcy. Yet, management did not reinvest those wage and benefit concessions back into the company and it improperly diverted workers’ pension contributions to fund its operations and gave its CEO a 300% pay increase. When it became clear the workers were going to fight these maneuvers, the company declared bankruptcy in 2012.
Today, the AFL-CIO passed a convention resolution addressing the need to reform our country’s bankruptcy laws to better shield workers from harm in the form of broken pension and health care promises and to diminish economic hardship that comes from these bankruptcies.
From the body of the resolution:
The labor movement demands reform of our nation’s bankruptcy laws in order to protect workers from disproportionate economic sacrifice. Reform must provide better protection for unpaid wages and benefits and grant workers a separate claim in bankruptcy court for lost pension benefits. Bankruptcy reform should curb executive pay by ensuring that executives do no better than ordinary workers in bankruptcy and by limiting management “incentive” compensation programs. Personal bankruptcy law should be amended to help young workers facing crushing student debts and homeowners facing foreclosure with underwater mortgages. Finally, reforms must prevent employers from using bankruptcy to abolish collective bargaining agreements at will.
On two separate occasions in the 2000s, Hostess workers, represented by the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union, made tremendous sacrifices to help the company emerge from bankruptcy. Yet, management did not reinvest those wages and benefit concessions back into the company. In fact, Hostess came out of bankruptcy with more than $1 billion in debt, more than it had when it first filed for bankruptcy in 2004. Struggling with unsustainable debt levels, the company improperly diverted workers’ pension contributions to fund its operations and gave its CEO a 300% pay increase. When it became clear union members were going to fight these maneuvers, the company declared bankruptcy in 2012 and used Section 1113 of the U.S. Bankruptcy Code to rip up its collective agreements. Despite the threat of liquidation, BCTGM members fought back against Wall Street by striking the company—their only viable option in a bankruptcy system rigged against workers.
The resolution acknowledges the importance of the creation of the Consumer Financial Protection Bureau in the Dodd–Frank Wall Street Reform and Consumer Protection Act and the need to continue to implement the reforms that protect working people.
The next steps to make this commitment a reality are to:
- Launch a campaign to reform corporate and municipal bankruptcy law to protect workers’ retirement security and collective bargaining agreements and to prevent looting by corporate executives, bankruptcy attorneys and Wall Street.
- Work with our community allies to demand personal bankruptcy relief for excessive student loans and underwater home mortgages by permitting bankruptcy judges to modify the terms of these loans just like other forms of debt.
- Use our political voice to demand strong implementation of the Dodd–Frank Act, passage of new legislation to break up too-big-to-fail banks and implementation of a financial transaction tax to make Wall Street pay its fair share.
- Educate ourselves so that we do not forget the devastating consequences of lax Wall Street regulation and to expose the unfairness of a bankruptcy system that favors corporations and creditors over workers and communities.