The economic impact of the COVID-19 pandemic cannot be overstated. Many employers have shut down, while others have implemented employee furloughs, layoffs and other cost-saving measures. As many troubled companies will continue to “downsize” and seek to restructure mounting debts, this column addresses important considerations for employers contemplating Chapter 11 bankruptcy.

Contract Rejection

Chapter 11 of the Bankruptcy Code encourages reorganization of financially distressed companies by allowing them to, among other things, reject burdensome contracts. In particular, employers facing bankruptcy should carefully evaluate existing employment agreements as they balance their financial situation with the need to retain talent to successfully restructure.