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Unions Cite Patriot Coal as Example of Bankruptcy Law Hurting Workers

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Wednesday, September 18, 2013   

CHARLESTON, W.Va. - Patriot Coal negotiated an agreement with the mine workers to cover part of retiree costs - but the unions see the situation as proof that U.S. corporate bankruptcy law is biased against employees.

Under bankruptcy law, workers usually come last in line - behind all the other creditors.

Patriot Coal retirees were helped by public protests and the threat of a mine workers' strike, said Kenny Perdue, president of the West Virginia AFL-CIO. In most other cases, however - including 54 companies that employed steelworkers and declared bankruptcy - workers have no way to negotiate, he said.

"They didn't get that chance," he said. "They just shut the plants down, they moved the business overseas if they were able to, and they just said, 'We don't have the money to pay the liabilities that we've incurred.' The handshake didn't mean anything anymore."

Phil Smith, director of communications for the United Mine Workers, said the problem they faced in the Patriot situation is that bankruptcy law seems to have two sets of rules - one for companies and another for workers. Smith said no other country handles corporate bankruptcy that way.

"Workers usually get absolutely nothing," he said. "It just doesn't seem right for the people whose sweat and toil made the company profitable in the first place. It doesn't seem like they're the ones who should bear the brunt of the failure of that company."

In the construction industry, Smith said, companies will often declare bankruptcy, dump their obligations to employees and re-emerge under a new name. In the coal industry, he said, the problem has become so serious, especially in the last decade, that the union and the government now have to rely on funds they've set up to cover the retirees of coal companies that claim bankruptcy protection.

"Speculators who get into the coal industry take as much money as they can out of it, and then get out, dumping all of their obligations and liabilities," he said.

The AFL-CIO is pressing Congress to change corporate bankruptcy law. Patriot and other companies that declare bankruptcy typically argue that they were driven to it by economic conditions. In many of those cases, unions say, executives still get bonuses.




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