B. Limitations on Post-Bankruptcy Payment of Severance
The post-bankruptcy payment of severance to "insiders" is prohibited under the new law unless:
(1) the payment is part of a severance program that is generally applicable to all full-time employees, and
(2) the severance payment is not more than 10 times greater than the mean severance pay given to nonmanagement
employees during the calendar year in which the payment is made.
This new limitation appears to apply equally to payments under both pre-bankruptcy and post-bankruptcy severance
agreements. (See 11 U.S.C. § 503(c)(2).)
C. Limitations on Post-Bankruptcy Payment of Retention Compensation
The post-bankruptcy payment of retention bonuses or compensation to "insiders" is prohibited under the new law
unless the Bankruptcy Court makes a finding at an evidentiary hearing that:
(1) the payment is essential for retention of the person because he or she has a "bona fide job offer from another
business at the same or greater rate of compensation,"
(2) the services of that person are "essential to the survival of the business," and
(3) the retention compensation is not more than 10 times greater than the mean amount of similar compensation given to
nonmanagement employees during the calendar year in which the payment is made.
This new limitation appears to apply equally to payments under both pre-bankruptcy and post-bankruptcy retention
compensation agreements. (See 11 U.S.C. § 503(c)(1).)