Response to Professor Paul Secunda's Comparatice Analysis of the Treatment of Employment Claims in Insolvency Proceedings and Guarantee Schemes in OECD Countries

Introduction I. Protections for Ongoing Plans and the Insurance System II. Congressional Considerations III. Bankruptcy Reform Efforts in Process Conclusion INTRODUCTION Professor Secunda ably documents the approaches of OECD nations to protecting wage and pension claims in insolvency, particularly priorities and guarantee schemes. His Article will therefore be an important resource to employment, bankruptcy, and international law. The Article should be useful not only to academics, practitioners, government agencies, NGOs, and labor organizations, but also to law reformers. Professor Secunda correctly notes that the United States has longstanding guarantee schemes for unemployment and retirement income, but its bankruptcy priorities for employment-based claims are not particularly strong. His thesis is that the United States--with a Limited Model Two system of guarantees and priorities (1)--can learn from Canada's recently enacted Wage Earner Protection Program Act (WEPPA). (2) WEPPA provides a government guarantee of unpaid wages and related amounts, and a super-priority charge on debtor assets for wages, vacation pay, and pension contributions in Bankruptcy and Insolvency Act (BIA) proceedings (liquidations and smaller company reorganizations). (3) For the past twenty-five years, I have represented the Pension Benefit Guaranty Corporation (PBGC), the nation's pension insurer, practicing both employee benefits and bankruptcy law. At Georgetown University Law Center (GULC), where I have been an adjunct professor for more than twenty years, I have taught both pension insurance law and comparative bankruptcy law. For the past year, I have served on the Labor and Benefits Advisory Committee to the American Bankruptcy Institute's Commission to Study the Reform of Chapter 11 (Commission). My experience is therefore with collective and institutional solutions to insolvency problems. The PBGC itself administers an insolvency system for terminated pension plans, (4) in addition to participating in major corporate bankruptcies. Based on that experience, I believe that keeping businesses and pension plans going despite bankruptcy is where we should focus our efforts. (5) As documented by Professor James Wooten in his study, Political History, (6) ERISA is the result of compromise, between workforce management and worker protection objectives, and between labor and tax policy, among other things. ERISA is also the product of what we now call Rahm's Rule, You never want a serious crisis to go to waste. (7) National pension reform was inspired by the Studebaker shutdown in 1963. (8) And Congress rushed to enact ERISA in the summer of 1974, believing that it would spend the rest of the session on the Nixon impeachment proceedings. (9) In the bankruptcy area, I recommend an equally important book, Professor David Skeel's Debt's Dominion, (10) tracing the history of bankruptcy laws in the United States and the political forces behind them. For those familiar with modern credit-bid proceedings, Skeel's account of SEC Chairman William O. Douglas's attempt to curb similar practices in the 1938 Chandler Act (11) evokes deja vu. (12) At times, it seems that Congress no sooner acts than the seams begin to open, leading to demand for fresh reforms, sometimes in the opposite direction. For example, at least in retrospect, some said that the Pension Protection Act of 2006's (the PPA's) (13) funding reforms were inadequate. (14) But just as PPA took effect, the Great Recession began. In short order, Congress enacted temporary relief provisions, and followed with additional relief provisions in the next several years. (15) The debate continues on what funding regime is necessary to adequately protect pensions without driving employers out of the system. (16) Similarly, the Bankruptcy Abuse, Prevention, and Consumer Protection Act of 2005 (BAPCPA) (17) was seen as favoring creditors and hindering reorganization due to such measures as shorter exclusive periods for the debtor to propose a reorganization plan and solicit votes. …

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