PG&E Bankruptcy Disclosure Prompted by New California Law

Wall Street Journal—Jonathan Randles

Law requires California utilities give advance notice of a bankruptcy filing

PG&E Corp. was prompted to disclose its intent to file for chapter 11 by a new California law that includes a novel provision requiring utilities give employees a 15-day heads-up before seeking protection and freezes for at least six months the utility’s ability to potentially layoff workers after filing for bankruptcy.

The law, which took effect Jan. 1, is intended to provide employees, creditors and state regulators “the maximum amount of transparency” about a coming bankruptcy, said Paul Payne, spokesman for California Sen. Bill Dodd, D-Napa. The provisions were included in a sweeping bill Sen. Dodd introduced last year aimed at protecting employees and improving how utilities and the state government respond to wildfires, which have devastated California.

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The law “ensures that employers and state regulators aren’t caught off guard by a bankruptcy,” Mr. Payne told The Wall Street Journal. Legislative aides in Mr. Dodd’s office aren’t aware of any other state that requires utilities provide such notice, Mr. Payne said.

The state law also prohibits utilities such as PG&E from laying off its rank-and-file employees or reducing their wages or benefits for 180 days after filing for bankruptcy. Any request to reduce the company’s workforce would need to be reviewed by the California agency regulating privately owned utilities, according to a Senate analysis of the law from August.

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“There is no law that creates a mandatory employment right in the American workplace. It’s groundbreaking,” said Jack Raisner, a lawyer who often represents laid-off employees of distressed companies when they don’t provide legally mandated notice of impending job losses.