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Managing the Modern Workplace
V&E International Labor & Employment Resources

It’s Complicated — Structuring a Bankruptcy Settlement to Avoid Employment Claims

On March 22, 2017, the Supreme Court limited the use of “structured dismissals” in chapter 11 cases, overturning a ruling of the Third Circuit that would have wiped out employee WARN Act claims while paying out lower-priority, general unsecured creditors. It stressed that any distribution scheme in connection with a proposed chapter 11 structured dismissal must follow the basic priority rules of the Bankruptcy Code absent consent of the affected parties. Notably, the Supreme Court avoided determining that interim modifications of the priority scheme cannot be permitted at any time during a case.

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Contributors

Thomas H. Wilson

Thomas H. Wilson Partner

Christopher V. Bacon

Christopher V. Bacon Counsel

Sean Becker

Sean Becker Partner

Stephen M. Jacobson

Stephen M. Jacobson Partner

Martin C. Luff

Martin Luff Counsel

Lawrence S. Elbaum Partner

S. Grace Ho

S. Grace Ho Counsel

Robert Sheppard

Robert Sheppard Associate