[Congressional Record (Bound Edition), Volume 163 (2017), Part 1]
[Extensions of Remarks]
[Pages 89-90]
[From the U.S. Government Publishing Office, www.gpo.gov]




  INTRODUCTION OF THE PROTECTING EMPLOYEES AND RETIREES IN MUNICIPAL 
                        BANKRUPTCIES ACT OF 2017

                                  _____
                                 

                         HON. JOHN CONYERS, JR.

                              of michigan

                    in the house of representatives

                        Tuesday, January 3, 2017

  Mr. CONYERS. Mr. Speaker, when a municipality files for bankruptcy, 
its employees and retirees who have devoted their lives to public 
service, such as police officers, firefighters, sanitation workers and 
office personnel, risk having their hard-earned wages, pensions and 
health benefits cut or even eliminated.
  This is why I am introducing the Protecting Employees and Retirees in 
Municipal Bankruptcies Act of 2017. This legislation strengthens 
protection for employees and retirees under chapter 9 municipality 
bankruptcy cases by: (1) clarifying the criteria that a municipality 
must meet before it can obtain chapter 9 bankruptcy relief; (2) 
ensuring that the interests of employees and retirees are represented 
in the chapter 9 case; and (3) imposing heightened standards that a 
municipality must meet before it may modify any collective bargaining 
agreement or retiree benefit.
  While many municipalities often work to limit the impact of budget 
cuts on their employees and retirees, as demonstrated in the chapter 9 
plan of adjustment approved by Detroit's public employees and retirees, 
other municipalities could try to use current bankruptcy law to set 
aside collective bargaining agreements and retiree protections.
  My legislation addresses this risk by requiring the municipality to 
engage in meaningful good faith negotiations with its employees and 
retirees before the municipality can apply for chapter 9 bankruptcy 
relief. This measure would also expedite the appellate review process 
of whether a municipality has complied with this and other 
requirements. The bill ensures employees and retirees have a say in any 
plan that would modify their benefits.


                     Section-by-Section Explanation

  Sec. 1. Short Title. Section 1 of the bill sets forth the short title 
of the bill as the ``Protecting Employees and Retirees in Municipal 
Bankruptcies Act of 2017.''
  Sec. 2. Determination of Municipality Eligibility To Be a Debtor 
Under Chapter 9 of Title 11 of the United States Code. A municipality 
can petition to be a debtor under chapter 9, a specialized form of 
bankruptcy relief, only if a bankruptcy court finds by a preponderance 
of the evidence that the municipality satisfies certain criteria 
specified in Bankruptcy Code section 109. In the absence of obtaining 
the consent of a majority of its creditors, section 109 requires the 
municipality, in pertinent part, to have negotiated in good faith with 
its creditors or prove that it is unable to negotiate with its 
creditors because such negotiation is impracticable.
  Section 2(a) of the bill amends Bankruptcy Code section 109 in three 
respects. First, it provides clear guidance to the bankruptcy court 
that the term ``good faith'' is intended to have the same meaning as it 
has under the National Labor Relations Act, at least with respect to 
creditors who are employees or retirees of the debtor. Second, section 
2(a) revises the standard for futility of negotiation from 
``impracticable'' to ``impossible.'' This change ensures that before a 
municipality may avail itself of chapter 9 bankruptcy relief, it must 
prove that there was no possible way it could have engaged in 
negotiation in lieu of seeking such relief. Third, the amendment 
clarifies that the standard of proof that the municipality must meet is 
``clear and convincing'' rather than a preponderance of the evidence. 
These revisions to section 109 will provide greater guidance to the 
bankruptcy court in assessing whether a municipality has satisfied the 
Bankruptcy Code's eligibility requirements for being granted relief 
under chapter 9.
  Bankruptcy Code section 921(e), in relevant part, prohibits a 
bankruptcy court from ordering a stay of any proceeding arising in a 
chapter 9 case on account of an appeal from an order granting a 
municipality's petition to be a debtor under chapter 9. Section 2(b) 
strikes this prohibition, thereby allowing a court to issue a stay of 
any proceeding during the pendency of such an appeal. This ensures that 
the status quo can be maintained until there is a final appellate 
determination of whether a municipality is legally eligible to be a 
chapter 9 debtor.
  Typically, an appeal of a bankruptcy court decision is heard by a 
district or bankruptcy appellate panel court. Under limited 
circumstances, however, a direct appeal from a bankruptcy court 
decision may be heard by a court of appeals. Until a final 
determination is made as to whether a municipality is eligible to be a 
debtor under chapter 9 of the Bankruptcy Code, the rights and 
responsibilities of numerous stakeholders are unclear. To expedite the 
appellate process and promote greater certainty to all stakeholders in 
the case, section 2(c) of the bill allows an appeal of a bankruptcy 
court order granting a municipality's petition to be a chapter 9 debtor 
to be filed directly with the court of appeals. In addition, section 
2(c) requires the court of appeals to hear such appeal de novo on the 
merits as well as to determine it on an expedited basis. Finally, 
section 2(c) specifies that the doctrine of equitable mootness does not 
apply to such an appeal.
  Sec. 3. Protecting Employees and Retirees. The chapter 9 debtor must 
file a plan for the adjustment of the municipality's debts that then 
must be confirmed by the bankruptcy court if it satisfies certain 
criteria specified in Bankruptcy Code section 943. Section 3 of the 
bill makes several amendments to current law intended to ensure that 
interests of municipal employees and retirees are better protected. 
With respect to plan confirmation requirements, section 3 amends 
Bankruptcy Code section 943 to require consent from such employees and 
retirees to any plan that impairs--in a manner prohibited by 
nonbankruptcy law--a collective bargaining agreement, a retiree 
benefit, including an accrued pension, retiree health, or other 
retirement benefit protected by state or municipal law or as defined in 
Bankruptcy Code section 1114(a).
  Such consent would be conveyed to the court by the authorized 
representative of such individuals. Subject to certain exceptions, 
section 3 specifies that the authorized representative of individuals 
receiving any retirement benefits pursuant to a collective bargaining 
agreement is the labor organization that signed such agreement unless 
such organization no longer represents active employees. Where the 
organization no longer represents active employees of the municipality, 
the labor organization that currently represents active employees in 
that bargaining unit is the authorized representative of such 
individuals.
  Section 3 provides that the exceptions apply if: (1) the labor 
organization chooses not to serve as the authorized representative; or 
(2) the court determines, after a motion by a party in interest and 
after notice and a hearing, that different representation is 
appropriate. Under either circumstance, the court, upon motion by any 
party in interest and after notice and a hearing, must order the United 
States Trustee to appoint a committee of retired employees if

[[Page 90]]

the debtor seeks to modify or not pay the retiree benefits or if the 
court otherwise determines that it is appropriate for that committee to 
be comprised of such individuals to serve as the authorized 
representative.
  With respect to retired employees not covered by a collective 
bargaining agreement, the court, on motion by a party in interest after 
notice and a hearing, must order the United States Trustee to appoint a 
committee of retired employees if the debtor seeks to modify or not pay 
retiree benefits, or if the court otherwise determines that it is 
appropriate to serve as the authorized representative of such 
employees. Section 3 provides that the party requesting the appointment 
of a committee has the burden of proof.
  Where the court grants a motion for the appointment of a retiree 
committee, section 3 requires the United States Trustee to choose 
individuals to serve on the committee on a proportional basis per 
capita based on organization membership from among members of the 
organizations that represent the individuals with respect to whom such 
order is entered. This requirement ensures that the committee, in a 
case where there are multiple labor organizations, fairly represents 
the interests of the members of those various organizations on a 
proportional basis.
  Finally, section 3 of the bill imposes a significant threshold that 
must be met before retiree benefits can be reduced or eliminated. 
Current law has no such requirement. In a case where the municipality 
proposes in its plan to impair any right to a retiree benefit, section 
3 permits the committee to support such impairment only if at least 
two-thirds of its members vote in favor of doing so.

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