Enron Rights of the Employees Presented By Ho-Min Lee Mike Forbes

Agenda: Overview Timeline Rights of Employees –Under Bankruptcy (creditors) –ERISA –WARN Act –Legislation in Action (H.R & S. 1992) Conclusion

Enron: An Overview Dec. 2, 2001: Enron files for Chapter 11 Bankruptcy. 4,000+ employees were laid off Nearly 20,000 employees lost an estimated $1 billion in stock ( Savings & Pension Plan ).

Timeline Nov. 28, Enron shares falls below $1 Dec. 2, Enron files for Chapter 11 Bankruptcy and bars employees from selling their shares tied into their retirement plans. Jan. 9, US Justice department begins a criminal investigation of Enron. Jan. 23- FBI begins investigation of document shredding. Jan. 28- A class action lawsuit is filed by 400 employees (present and former) against Enron executives, Arthur Anderson, and others to claim damages for their lost pension plans. Feb. 4- Enrons top executives implicated in plot to inflate profits and hide losses. March 20- Both the House and Senate offer pension reform plans, in light of situation with Enron. April 11- The House passes Bushs new pension reform bill.

Rights of Employees Chapter 11 Bankruptcy –Lists employees as unsecured creditors –As an unsecured creditors, employees are entitled to claim their losses after, and only after government (taxes), administration, lawyers, and secured creditors have collected from the bankruptcy. 1.Government (taxes), administrative expenses, & lawyers 2.Secured Creditors 3.Unsecured Creditors

Rights of The Employees Employee Retirement Investment Securities Act of 1974 (ERISA) –Federal statute that protects employee pensions and other benefits –Overrules almost all state laws –Enforced by the Department of Labor *Notable Rules: States that employers have a fiduciary obligation to act in the best interest of employees and their pensions. *Violations: Enron, Arthur Anderson, Enron executives, etc. breached there fiduciary duties to inform employees that Enron stock was a bad investment.

Rights of Employees –Worker Adjustment & Retraining Notification Act (WARN) Applies to companies with 100+ employees laying off 50+ employees within a 30 day period Employer must give employee 60 days notice of termination Employees are entitled to $500 for every day they are not notified, for up to $30,000. –Enron laid off over 4,000 the day they went bankrupt. Although Enron is protected by the employment-at- will doctrine, they failed to give employees sufficient notice of termination, thus violating the WARN Act.

Proposed Legislation President Bush calls for new legislation to protect employee pensions. –H.R Pension Security Act (Boehner-Johnson) Notification of blackouts Stops insider trading during blackouts Allows employees to sell company stock after 3 years –S Protecting Americas Pensions Act of 2002 (Miller-Rangel) Places a cap on amount of company stock in pension plans Increases fiduciary liabilities Mandatory elected joint trusteeships

Conclusion In conclusion, the Enron bankruptcy has left employees with very few legal options. –The WARN act gives them some compensation for their termination. –As unsecured creditors, it is doubtful that they will reclaim their losses from the bankruptcy. –Most employees are relying upon ERISA laws to collect their lost pension funds (by way of class action lawsuit). –Because of the Enron collapse, new legislation (although controversial) is currently underway that will better protect employee retirement plans.

Proposed Website List how employees have been effected by Enron Bankruptcy List the laws that protect employees List new legislation Impact of Enron Bankruptcy