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 largesse 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.
The treatment of workers in corporate bankruptcy stands in stark contrast to the way 'too-big-to- fail' financial institutions are treated when they face bankruptcy. During the 2008 financial crisis, the federal government ran to the rescue of Wall Street by providing $700 billion in bailout loans. For example, after A.I.G. received $180 billion in taxpayer loans, the company paid hundreds of millions in bonuses to executives in the business unit that was responsible for the firm’s collapse. At the time, some argued that to not pay these executive bonuses would abridge the 'sanctity of contracts.'

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:

1. 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.

2. 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.

3. 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.

4. 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.

Read the entire text of One Law for Workers, Another for Bankers—Bankruptcy Abuses and the Unfinished Business of Financial Reform. 

In a related resolution, the AFL-CIO highlighted the retirement crisis America's working families face:

Over half of households are at risk of being unable to maintain their standard of living in retirement, up from fewer than one in three in 1983. Two-thirds of Social Security beneficiaries 65 and older rely on its modest benefits for half or more of their income. The number of workers fortunate enough to have a traditional pension continues to drop: Just 14% of private-sector workers have one today, compared with 45% in 1975.

Instead of addressing these inadequacies in a way that helps people, it's popular in Washington to suggest cutting earned Social Security and Medicare benefits as a "solution" to the retirement gap. The AFL-CIO strongly rejects this thinking and advocates for improving, not cutting, Social Security benefits. 

The AFL-CIO objects to any reduction in Social Security benefits, as well as in Medicare and Medicaid benefits, be it through “indexing benefits for longevity” (i.e., increasing retirement ages), “updating” the annual COLA calculation (i.e., cutting cost-of-living adjustments) or any other euphemism for cutting benefits. Raising cap on wages subject to the payroll tax is an essential part of any solution to strengthen Social Security. 

The AFL-CIO also is committed to ensuring we strengthen the pension system, one of the cornerstones of retirement. 

....Despite the fact that they remain the soundest and most cost-effective vehicles for building and safeguarding retirement income security—with their professional asset managers, lower investment fees and better returns—traditional pensions are subject to continued assault by employers and politicians.

The AFL-CIO affirms its commitment to:

• Repeal the federal law and regulations that have enabled the assaults on private pensions. In particular, we must replace the 2006 Pension Protection Act with new funding rules that will support and grow defined-benefit pension plans.

• Advocate for sensible accounting rules, for both private and public plans, that promote vibrant pension systems rather than the current hostile regulatory environment.

• Work with a broadened coalition of allies to protect state and local workers’ pensions against political attacks that seek to take advantage of government fiscal pressures, capital market weaknesses and the failure of some government employers faithfully to make required contributions to employee plans.

• Fight against employers’ manipulation of bankruptcy law and use of restructuring to escape their benefit obligations to workers and retirees, whether in the private sector at companies like Patriot Coal or in municipalities like Detroit.

• Call on the federal government to support the Pension Benefit Guaranty Corporation, so that single-employer and multiemployer programs are in better financial condition.

Read the entire text of Retirement Security for All.