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.
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