When a company runs out of cash, its employees become both a liability and a claim, and the Bankruptcy Code rewrites the usual rules. We advise debtors, creditors, and acquirers on the employment side of insolvency, including WARN Act exposure, collective bargaining agreements, employee priority claims, and how the workforce moves through a sale or wind-down. The goal is to manage labor risk while the rest of the restructuring plays out.
WARN Act In Bankruptcy
Filing for bankruptcy does not erase WARN Act obligations, and a botched plant-closing or mass-layoff notice can saddle the estate with priority claims. We advise on notice timing, the faltering company and unforeseeable business circumstances exceptions, and how to structure a sale or closure to limit WARN liability. We also defend WARN claims when employees argue notice was inadequate or came too late.
Collective Bargaining Agreements
A debtor cannot simply walk away from a union contract; Section 1113 imposes a demanding process before a court will let a collective bargaining agreement be rejected or modified. We guide employers through the required proposals, information exchange, and good-faith bargaining, and we represent parties at the hearing. We also advise on the parallel rules for modifying retiree benefits under Section 1114.
Employee Priority Claims
Unpaid wages, commissions, and benefit contributions do not all sit at the bottom of the stack; the Code grants employees priority up to a statutory cap. We help employers calculate and treat these claims correctly, and we represent employees and benefit funds asserting priority. Getting the priority analysis right shapes both the plan of reorganization and how much cash the estate must reserve.
Sales And Workforce Transitions
Most distressed businesses are sold, often as assets free and clear under Section 363, and the buyer wants the people without the legacy liabilities. We structure workforce transitions in these sales, advising on which employees to hire, how to handle accrued obligations, and whether successor liability or WARN duties attach. We keep the deal moving so the buyer gets a functioning team and the estate gets paid.