Want to know why American Airlines CEO Doug Parker called out United Airlines earlier this week for its choice to move some workers from full-time to part-time? Because United Airlines actually read the act.
American Airlines CEO Attacks United Airlines
Speaking to employees yesterday via telephone, AA CEO Doug Parker told labor management according to Forbes:
“Some airlines think it is OK to go and cut employees’ hours. One [airline] is cutting full-time from 40 hours to 30, a 25% cut in pay. I was there when we were working on CARES and that wasn’t the intent or meaning of it.
“And that is not just for union employees – it is for non-union, too. We disagree with [United’s] position, and if anyone asks, we will let them know we disagree with their position.”
That’s a bold statement, made all the more credible because it goes against Parker’s self-interest in survival. As United Airlines has taken a pessimistic approach to the future of aviation, American Airlines has largely been optimistic. Foolishly so, it seems, but that is a separate discussion.
Furthermore, American Airlines has asked workers to work part-time, so the key question is whether airlines can force workers to work part-time. It is not whether the act requires all workers to work full-time.
But is Parker correct? Let’s look at the act.
CARES ACT Doesn’t Prohibit Reduction In Hours
§4114 of the CARES Act states:
SEC. 4114. REQUIRED ASSURANCES.
(a) IN GENERAL.—To be eligible for financial assistance under this subtitle, an air carrier or contractor shall enter into an agree- ment with the Secretary, or otherwise certify in such form and manner as the Secretary shall prescribe, that the air carrier or contractor shall—
(1) refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020;
(2) through September 30, 2021, ensure that neither the air carrier or contractor nor any affiliate of the air carrier or contractor may, in any transaction, purchase an equity secu- rity of the air carrier or contractor or the parent company of the air carrier or contractor that is listed on a national securities exchange;
(3) through September 30, 2021, ensure that the air carrier or contractor shall not pay dividends, or make other capital distributions, with respect to the common stock (or equivalent interest) of the air carrier or contractor; and
(4) meet the requirements of sections 4115 and 4116.
§4115 says that United must still respect collective bargaining agreements while §4116 limits executive compensation and stock buybacks.
You can read the full text of the bill here.
The important part is (a)(1) above, which prohibits involuntary furloughs or reducing pay rates and benefits.
The key word is furloughs. What does it mean? Does that encompass a reduction in hours as well?
I’d say the answer is clearly no. Although the act does not define “furloughs”, §2202(a)(4)(A)(III) talks about “furloughed or laid off or having work hours reduced” suggesting that furloughs do not encompass a reduction in hours.
I will unpack this further in an upcoming post.
United Airlines Sued By Baggage Handlers
Whether Parker is right or wrong, many agree with his assessment.
In fact, the union representing airport customer service employees and baggage handlers has sued United, arguing that its involuntary reduction in hours is illegal under the CARES Act.
Not surprisingly, United has dismissed the lawsuit as meritless:
“The lawsuit is meritless. Our decision is in full compliance with both the CARES Act and our Collective Bargaining Agreements and importantly, only came after repeated attempts to negotiate a consensual, more favorable agreement with IAM leadership. We continue to employ 100% of our workforce and continue to pay the contractually required pay rates.”
A bipartisan cadre in Congress also believes United is skirting the intent of the law and has asked the Treasury Department to issue further guidance.
CONCLUSION
I applaud Doug Parker and American Airlines for choosing not to cut hours during this difficult time. Frankly, I don’t think it is very practical and will lead to much more pain later, but that is AA’s prerogative and I am happy workers are not suffering yet. However, I am scratching my head over his refusal to actually read the bill. That seems to be Parker’s main problem.
image: American Airlines
Doug Parker is arguing the intent of the act despite the language, while UA is arguing the language of the act despite the intent. But I’m sure both are fully aware of the language actually states.
UA’s COVID strategy is to push the limits of what it can get away with and then reeling back once the backlash is too much. So Doug Parker is rightfully so in countering that strategy by calling them out on it. I’m sure he knows what the bill says which is why he emphasizes that it goes against the intent rather the language of the act. Whether or not it matters is something well have to find out.
It’s right of AA to push back. All airlines are struggling and congress will get involved in this at some point. I think this act by UA shows how desperate they are right now and exposes just how much in disarray the company is behind the scenes. If they have to do this to stay in business when this wasn’t the intent at all of the CARES act, then UA is in more serious trouble than anyone realizes.
As an airline employee myself, I can attest that it’s not just United that’s in serious trouble, they are just the ones speaking the most openly about it. The CARES Act seemingly does allow a cut to workers hours, and it’s something every airline is doing, except apparently American. However, the Act only subsidized about 60% of payroll costs, and considering that workload has dropped by at least 70% across the board, it’s just not sustainable to pay workers who literally have no work to do. If the country wants to continue having air service when we pull out of lockdown, we need to let airlines do what they can to stop hemorrhaging millions of dollars every day.
UA is acting out of desperation. They were the ones fighting refunds for the longest time while AA and DL were handing them out no big deal.
The rotten apple talking about the rotten orange.
What about the definition of pay rates? Could that be a weekly wage, which would cover number of hours?
In my experience with labor contracts, in the State of California, any reduction in work hours was considered a form of Layoff. Often it meant the loss of benefits if the reduction dropped the employee below the minimum number of hour required for benefits, ie: health and welfare benefits. This is a Federal program not a State program so different rules could apply. But, I consider a reduction of hours equities to loss of wages which is what the CARES Act was meant to prevent.
What Dougie didn’t say but is very obvious, he is burning up $25M more in DAILY costs than UA or DL. If either one or both of them get a further leg up on AA, he is already behind the 8-ball and it will be really ugly for him.
Bottom line, he really has no clue what he is doing and way over his head.
I would tend to believe that this statement could be interpreted as not to reduce hours as well, as that would affect the weekly pay rate? Hmmmm?
(1) refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020;
I’m an AA agent (part time) and they DID cut my hours from 25 to 12 hrs a week. Not only that, the are giving full timers,who haven’t been cut, a paid day off to promote ” social distancing”. Are you kidding me??? Cut my livelihood by more than half and then give it away? It is very easy to social distance right now considering ORD is a ghost town. Meanwhile, unemployment is giving me $100 a week and they were sketchy when I asked about the 600 from the cares act.
United should have furloughed 50% of their workforce instead of accepting the Cares Act money
But they were greedy, they wanted the $$$$…employees would have understood that and respected it, but to took the money and then cut employees hours and benefits. its unforgivable, all the hard work Oscar put in to make it and employee friendly company went down the drain in one email.
As a lawyer, love this post! Glad you got this opportunity to use your law degree.