I touched on this in my earlier post on American Airlines CEO Doug Parker ridiculing United Airlines for cutting employee hours but I think this warrants a dedicated post. In a nutshell, Congress was either extremely sloppy or did not actually intend for CARES Act funding to prohibit cutting work hours.
CARES Act Doesn’t Prohibit Reduction In Hours For Airline Employees
JetBlue and United Airlines have claimed that the CARES Act, which guarantees pay and employment for airline employees through September 30, 2020, does not mandate keeping all workers at full-time status.
§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 security 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 airlines 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.
One key word is furloughs. What does it mean? Does that encompass a reduction in hours as well?
I’d say the answer is 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.
A second key word is rate. If airlines are not allowed to reduce employee hours, why say “pay rates” cannot be cut versus simply saying “pay” cannot be cut?
Unions will argue that “pay rate” is effectively cut if hours are reduced. It might also argue that those who are paid weekly or bi-weekly cannot suddenly have wages calculated on an hourly basis. That’s not how I read it. Instead, I would argue that rate simply means you cannot be paid less for the same work.
Thus, airlines are clear to reduce hours. Pay rates (per hour) cannot change. Benefits cannot be reduced. But the bill does not require airlines to maintain a certain number of hours.
Could this, drawn to its logical extreme, mean that airlines could reduce all workers to one hour per week, as long as it continued to pay for benefits and not reduce wage rates?
I’d say yes, at least under the text of the act. Now let’s discuss intent.
Textualism Vs. Purposivism
A number of Republicans and Democrats have responded to the hour cuts at JetBlue and United with disgust. For example, Senator Josh Hawley (R-MO) has said:
“It was not the intention of Congress that recipients of this taxpayer money would then turn around and disguise pay reductions by cutting hours.”
Senator Sherrod Brown (D-OH) said:
“The assistance provided to air carriers in the CARES Act was conditioned on protecting airline workers from layoffs and furloughs. The Administration needs to do more to make sure airlines are using the payroll support funding as intended, and not to cut workers hours and benefits.”
There appears to be widespread bipartisan support that Congress meant to preclude reductions in hours from the bill.
So why didn’t it?
It seems clear to me that Congress did not intend, as Parker asserted, for airlines to be able to collect money intended for payroll then reduce payroll expenses. The counterpoint is that CARES Act funding never fully covered labor expenses and still won’t even with the mandatory cut in hours.
So if Congress clearly wanted to limit airlines from reducing hours, why wasn’t that clearly spelled out? On the contrary, the language leaves this loophole wide open.
Courts should not have to correct the sloppiness of Congress. Frankly, it doesn’t matter what was discussed or what Senators thought they passed. The only thing that matters is what they passed, and it seems like they never read the bill before they passed it. If Congress actually intended to limit an airlines’ ability to reduce hours, it should go back and and revise the CARES Act to clearly specify that.
The issue may be moot, temporarily, but I am not moved by arguments that Congress meant to do this or do that (in any context). If it meant to do something, it should have paid attention to detail and ensured that its statutory language was clear. Congress failed. United, JetBlue, and any other airline should feel free to use the bill to their advantage.
And by the way, this sloppiness is just another reason why I opposed bailouts in the first place.