1、CRS Legal Sidebar Prepared for Members and Committees of Congress Legal SidebarLegal Sidebari i Making it a Priority: What Happens to Employee Claims When a Business Declares Bankruptcy? April 16, 2019 Workers are not immune from their employers financial difficulties. Troubled companies commonly do
2、wnsize their workforce, cut wages, and curtail employee benefits. Businesses on the brink of collapse may also lack the funds necessary to pay compensation and benefits that employees have already earned. Companies in particularly dire financial straits may ultimately declare bankruptcy to restructu
3、re their obligations or liquidate the business. Individuals employed by such companies face a significant risk of loss of employment or reduced wages or benefits. In part because of the risks that an employers bankruptcy creates for its employees, the federal Bankruptcy Code contains multiple provis
4、ions intended to protect a debtors workers. For instance, Congress has created statutory protections for collective bargaining agreements and retiree benefits that apply in certain business bankruptcy cases. Of particular relevance here, the Bankruptcy Code also grants certain employee claims “prior
