As the lockdown restrictions ease and employers slowly return to more normal ways of working, it is unfortunately inevitable that the impact of the coronavirus means some businesses will have to implement restructures and redundancies in order to survive.

This article looks at the key employment law provisions in restructuring/redundancy situations and offers practical guidance for managing these challenging processes.

Restructures and reorganisations

The U.S. Court of Appeals for the Sixth Circuit recently held that wages withheld as a voluntary 401(k) contribution prior to filing bankruptcy were not considered “disposable income” under a Chapter 13 bankruptcy plan.

A copy of the opinion in In re Camille Davis is available at: Link to Opinion.

An individual debtor (“consumer”) filed a Chapter 13 bankruptcy with more than $200,000 in debt ($189,000 unsecured debt) and fewer than $39,000 in assets.

Background

The U.S. Court of Appeals for the Ninth Circuit recently held that bankruptcy courts could confirm Chapter 13 plans proposing estimated time periods to complete the plan if unsecured creditors and the trustee did not object, reversing a contrary ruling from its Bankruptcy Appellate Panel.

A copy of the opinion in In re Nanette Sisk is available at: Link to Opinion.

Bresco Electrical Services Ltd (In Liquidation) -v- Michael J Lonsdale (Electrical) Ltd [2020] UKSC 25

Section 82 of the Coronavirus Act 2020 prevents landlords from forfeiting ‘relevant business tenancies’ until 30 June, and possibly longer. Regulations have also been made restricting the use of commercial rent arrears recovery (CRAR) during the same period, and emergency legislation is promised preventing landlords from serving statutory demands and instituting insolvency proceedings. But tenants should think twice before withholding rent and other lease payments, and landlords do not necessarily have to take a passive role.

The U.S. Bankruptcy Appellate Panel for the Eighth Circuit recently held managing members of a limited liability company that filed a Chapter 11 bankruptcy were equitably estopped from asserting ownership of equipment where the members previously verified documents in the bankruptcy showing ownership of the equipment by the company.

A copy of the opinion in Richards v. Rabo ArgiFinance, LLC is available at: Link to Opinion.

The U.S. Court of Appeals for the Seventh Circuit recently held that absent unforeseen extraordinary circumstances, debtors in Chapter 13 cases cannot proceed on appeal in forma pauperis.

A copy of the opinion in Bastanipour v. Wells Fargo Bank, N.A. is available at: Link to Opinion.

The (the Bill) was given its first reading on Wednesday 20 May 2020. Parliament will not be considering the next stages of the Bill until 3 June 2020 so there is still some time, and possibly further amendments, before this is approved and given Royal Assent. More detailed notes will be provided once this Bill has been given Royal Assent, but the headline points of the current draft are:

Statutory demands

The U.S. Bankruptcy Appellate Panel for the Eighth Circuit recently reversed a bankruptcy court’s disallowance of postpetition interest at the default contract rate, holding that “the bankruptcy court erred in applying a liquidated damages analysis and ruling the default interest rate was an unenforceable penalty,” and also erred in weighing “equitable considerations” to avoid enforcing the contractual default interest rate.