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.
CONCLUSION
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.
This is why non-lawyers hate lawyers.
Was it something I said? 😛
In law, intent matters and conceptually what is implied. Under your reasoning the airlines can keep pay rates the same and reduce everyone down to 1 hour a week and not violate the cares act. This would undermine the whole purpose of the act. I could go on, but i hope. You can figure this out with out me going further.
Words matter more than intent. Indeed, the airlines could theoretically do exactly what you propose, as long as benefits remain unchanged. Furthermore, if you want to go down the legislative history path you’ll see that clear words protecting workers were removed:
https://liveandletsfly.com/airline-lobbying-cares-act/
Oh look, the UA Shrill defending UA screwing over its employees, as if UA didn’t have enough customer-hating policies they had to add a few employee-hating ones too. The wording of the bill obviously wasn’t perfect, but all these bills (including the stimulus one) were rushed out to help people ASAP.
I’ve called out United often over the last week. The word you are looking for is not shill, but fair.
I agree that it doesn’t say that hours can’t be cut back (although it’s likely that cutting an hourly full-time employee to part-time might qualify as a furlough, especially as that would likely effect eligibility for benefits under most employee benefit plans, even if the company continues to “pay” them and also many employee benefits like PTO and what not are earned by hours worked, so that would likely constitute a cut in benefits even if it wasn’t technically a “pay rate” cut) but I disagree that it allows companies to cut pay for those paid on a weekly or bi-weekly basis since those are almost all salaried employees. The “pay rate” for salaried employees is almost always calculated on an annual basis regardless of actual hours worked. So even if United started cutting time for those employees, a textualist reading of the bill would suggest that United couldn’t cut their pay even if they were working far less.
Granted with pilots and, particularly, FAs, even if they have a base salary, they earn a significant portion of their compensation based on the number and nature of the flights they fly. I could see why their unions (which bargained for these pay structures) would see cutting hours as a reduction in the negotiated “pay rate”. Given the intricacies of labor law and employee compensation/benefits law, it could be argued that “pay rate” and “furlough” are terms of art with clearly understood meanings in this context. Since this bill was specifically focused on airlines, which all have a similar union labor/employee compensation and benefits regimes, the terms have a specific meaning in that context it might not be as simple as a lay person’s plain reading of the language (I’m a corporate lawyer but not a labor/employee benefits lawyer and I don’t think you are either so I’m counting us both as “lay persons” here). Also as a lawyer, I would caution stating that anything “seems clear to me” if its not in your specific area of expertise, even constitutional law. I did mergers and acquisitions at a big multinational law firm for years, but I always knew reach out to specialists at our firm when issues related to labor/employee benefits/tax/environmental/regulatory/etc. came up, because I knew when I was out of my depth and needed to seek the advice of an expert. This would almost certainly have been one of those times.
Very thoughtful response, Charles. Thanks for taking the time. As for stepping outside my subject matter expertise, I did consult with an aviation lawyer on this post. Perhaps he can write himself next time. I’m not sure where you found “seems clear to me” but I agree that such language is not helpful without context and in many cases, objectively unhelpful period. I would challenge your suggestion that a textualist approach would suggest United cannot cut pay no matter how many hours were worked. Quite the contrary, the use of the term “rate” is significant and in the context of airline labor contracts does not mean “pay” alone. In any case, you nicely preview the complexities of this issue and how negotiations and potential litigation might shape up.
Great reply Charles. Every contract at the property has different rules; whether that being for hours reduced, furlough policies, etc. Just as furloughs, it’s a lengthy process that takes place, at leasts for the flight attendants. And I’m sure the same goes for ticket agents/CSR’s and mechanics and ramp employees.
“I’m not sure where you found “seems clear to me” but I agree that such language is not helpful without context and in many cases, objectively unhelpful period.”
Matthew, you wrote in the article, “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.”
Ah, but that was about Congressional intent, not legal analysis.
Why would anyone want airlines to keep employees paid for 40 hrs/wk when there is 0-5hrs/week of work to be done? Taxpayers are subsidizing airline payroll expenses, so isn’t that a good thing to reduce taxpayer burden? Why should airline employees get paid to do nothing at taxpayer expense, while 20M+ recently lost their jobs? Airlines should cut their hours down to 1 hr a week if they have no work for them. At least they still have their cush benefits, which is more than the 20M have.
I’m not sure which is more ridiculous, the faux outrage of airline employees, or the bailout itself.
Without regard to the question of Textualism v. Purposivism, I believe (with an extraordinarily high degree of certainty) that we know this legislation was unlike virtually any other spending bill; Amidst a rapidly moving crisis, the vast majority of legislators from across the ideological spectrum agreed that enormous fiscal stimulus was required to avert catastrophe and thus, couldn’t be afforded the usual deliberate legislative process and a hasty effort was adopted, not letting the perfect be the enemy of the good.
Hey Mathew. Was just looking at a old post of yours where you promised to post about chairman’s circle but you never did. May I ask why? I am very interested in it. The thread has resurfaced on FT. We would love to know your knowledge about it. Thanks again and stay safe.
The problem, WR2 , is that the taxpayers have already paid that expense and United has already received the taxpayer funds. By withholding dollars from employees, UA gets to kick some of that taxpayer money over to shareholders and execs.
Cutting hours is one thing,… I think employees expect that. However, what United wants to do is change employees from full-time to part-time status (on paper). This changes everything especially when it comes to recall date. If I’m a 40-hour full-timer and get knocked down to part-time (20 hours) (on paper) and then get completely furloughed on October 1st but get called back 6-12 months later, guess what — they are calling me back as a part-timer (the status I left at) – how convenient for United…. my hourly wage may not have changed but you’re calling the shots as to when, if ever, I will work full-time for United (maybe never). I believe the IAM (union) is correct — that the correct protocol/contract is to furlough the lowest seniority people and then start knocking down full-timers to part-time to displace the furloughed part-timers…. but always with the opportunity, as the need arises, to get those full-timers back to full-time hours. I’m sure someone can explain this a little better as I’ve been retired for six+ years but essentially it’s all about what on paper and the associated benefits of being either a full-timer or a part-timer. Amazing, how when the IAM stated they would file a lawsuit this week against United for trying to skew union/contract rules that United has now “retracted” on all of this.
In addition, being knocked down to part-time or called back as a part-timer affects shift-bid, vacation-bid and of course long-term SSA pension money, IAM pension, PBGC pension etc. because if, for instance, you have 5-10 years left before retirement age, and now you’re earning 50% less your current full-time salary you are in a world of trouble. Might as well just drop down 30% less of what you would have accrued as far as the best of 35-years’ salary formula for the SSA. I totally envision UAL recalling the “demoted” full-timers back as permanent part-timers (much to United’s pleasure and convenience) and so do the current full-timers screaming their heads off on the employee website – many are okay with less hours but they do not want to be re-classified as part-time. — the further dumbing down to a low-cost (more adjectives elude me) Frontier, Spirit or whatever. Well, they pretty much already have that with the quality of life they’ve hired in the past 10-15 years and all the Continental mentality.
The other side of me does get it – how bad this COVD-19 will affect the entire travel industry and tourism (not just airlines) for the better part of 2-3 years and they obviously can’t sustain things as they are. But really, United needs to respect the union contract, furlough from the bottom (last hired, first furloughed) until they get to the number of employees they really need, …. not just summarily or arbitrarily cut people off at the knees.
I’m still fuming that pre-merger UAL employees (myself included) got the major shaft when after the bankruptcy (2000, 2001 ?) United dumped our pensions, turned it all over to the PBGC and now I collect 50% of what I should have gotten PROMISED by United. As well, they have since made $billions and yet saw fit to keep ex-Continental employees’ pensions going. Of course I would never be so naive to think they would restore pensions to UAL retirees but we feel they should.
@Flyboy
Reducing hours only means United will have more money to pay payroll for a month longer. United’s payroll is still higher than the CARES act funding they received so more money is going out the door every month than they received.
The CARES act funding was a bailout for union airline labor and nothing more. Since the money does not even cover payroll for the airlines it was irresponsible for airline management to accept it. It does nothing to bolster the airline which would be better served by laying off 99% of employees, letting them collect unemployment and not diluting shareholders with the equity stakes and ridiculous loan repayments that in no way, shape or form benefits the airlines or their shareholders. Airlines are not run for the benefit of employees but for the benefit of shareholders who invested their capital. Airline management should have reduced payroll to zero two months ago. 30 million people are collecting unemployment and airline employees like flight attendants should be no different.
As for the legality, the statutory language is specific. Congress can change the text but that can only apply to new funding.