After trying to play nice with unions, United Airlines took unilateral action on Friday to shift two work groups from full-time to part-time. Unions are crying foul but United asserts it is still in compliance with the CARES Act.
United Claims It Cannot Afford To Pay Employees Full Wages Any Longer
With a Q1 net loss of $1.7 billion and demand at “zero” (negative if you calculate new travel minus refund requests), United is trying to walk a fine line in shedding labor costs while still, technically at least, complying with the CARES Act. That Act provided an infusion of direct aid and loans to United in exchange for not laying off any employees before September 30, 2020.
But United’s legal team believes it has found a loophole to reduce labor expenses without violating the act: reducing the hours of thousands of employees.
United approached unions representing two works groups, covering full-time baggage handlers, customer service agents, and reservations agents. But because “a consensual, more favorable agreement” could not be reached, United took unilateral action yesterday to slash hours from 40 to 30 per week.
United Vs. Unions
Gregg Hart, United’s Chief Operating Officer, outlined the news in a note to employees yesterday, calling the move necessary for survival.
“Even with a federal government grant that covers a portion of our payroll expense through September 30, we anticipate spending BILLIONS of dollars more than we take in for the next several months, while continuing to employ 100% of our workforce. That’s not sustainable for any company and that’s why we are making difficult decisions across our entire business…
Therefore, effective May 24, 2020, and in full compliance with the provisions of the CBA and the CARES Act, all full-time employees covered by the Passenger Service Employees Agreement and the Fleet Service Employees Agreement will be reduced to part-time status.
While our contract allows for a reduction of full-time employees all the way to 20 hours, we will commit to an equivalent number of 30 hour bid lines. We are making similar changes for our management personnel and those changes will be announced Monday.”
But Michael Klemm, president of the International Association of Machinists and Aerospace Workers District 141, was blunt in his response, asserting that United had no legal right under the CARES Act to make such a move:
“IAM District 141, consequently, advised United management that we are prepared to sue them in federal court if they take this action because we believe that any type of furlough or reduction in pay and/or benefits before September 30, 2020, is a violation of the CARES Act. We will also fight United in the political and public arenas and let our elected officials and the public know that United Airlines management is accepting billions of dollars in taxpayer-funded bailout money with one hand and screwing its workforce with the other.”
Those are fighting words…
Klemm warns that United’s actions are “penny wise, pound foolish” and will alienate loyal customers in the long-term:
“When a merchant takes someone’s money and does not provide the product or service they paid for, that customer will not return. As air travel rebounds, United’s passengers will know that the airline misappropriated the tax money intended to preserve workers’ pay and benefits and will bring their business to responsible carriers. United’s short-term solution will cause long-term problems for the carrier and its shareholders.”
CONCLUSION
United has made its move. Now unions will respond. Politicians may as well. Representative Sheila Jackson Lee (D-TX) is already angry, arguing that funds from the CARES Act were not meant as “an economic bail-out” but “to support the hard-working men and women who are the faces of United Airlines.” She added that the funds “intended to make employees whole during this devastating time due to COVID-19.” This battle may now shift to the courts and halls of Congress.
What do you make of United’s move to cut employee hours?
image: United
Every day, UA is trying to find a new way to be terrible…
And succeeding.
Screwing taxpayers, workers and customers. Who’s left that they can stick it to next week?
What a terrible management team – a real bunch of scumbags.
Been screwing employees for years with pay and pension cuts. Remember esop. Scumbags indeed! BOHICA
It’s stupid to keep paying employees when there is no business, they are not needed and it drains the company of cash. United’s mistake was to not immediately fire 99% of its staff and park all planes until demand goes to profitable levels. Running planes at 10-40% capacity is losing United money with every flight. The CARES act funding for airlines is a bailout for union airline employees and does nothing to help the airline.
News flash – a company that fires 99% of its employees won’t be in business by the time there is some increase in demand
@ Jackson Rogerson — You don’t just “fire” people….. you furlough them based on company seniority for one thing. Firing them means you would then have to start from scratch when you need to restart your business – how ridiculous that (firing) would be versus calling back experienced employees rather than new-hires off the street.
Isn’t this nearly identical to what JetBlue did by making their employees take 24 no-pay furlough days over the next 6 months?
Didn’t DL cut all employee salaries by 25% right before the CARES act was approved?
I don’t know the full numbers but I don’t believe the $5B UAL got was enough to fully cover all employee salaries and with demand at zero, this is just about survival but of course the unions only care about themselves.
You miss the point completely CARE act money is to pay wages to keep employees not cut there wages to reduce losses . Why should my taxes go to a huge corporation whilst I struggle with my bills
There’s literally nothing United can do to make them a worse company and one that I hope I never have to do business with ever again. Sadly that’s probably not going to be possible. Every day they prove how much they suck.
The money from the CARES act is enough for like 60% of payroll expense for that period. UA’s daily cash burn will be $40-45M per day (in part because of the reduction in hours) in Q2 while AA is going to be around $70M per day. If demand continues to hover around zero then AA employees will be in a much worse position.
@Matt… You’re a total UA fanboy (which is fine…I’m a DL fanboy, so I get it), so I’d love to get your take on their new use of “removal” instead of “cancellation” of flights and how it relates to customer refunds and the potential illegality of it.
Sort of old news now, but I will address it since Lucky’s post went viral.
Excellent. I love seeing the point/counterpoint between y’all.
Excellent.
Do employees/union really believe that (even with the bail-out money) that United can sustain full-time salaries for 90,000+ employees ? Even at that October 1st (when furloughs will start) will come very soon, faster than anyone thinks. Then there is “recovery” which will take many months if not 2-3 years as predicted. I totally feel for employees (as a retiree) and still have many friends and relatives working for United but anyone that is not realistic about the situation is just grabbing at straws and getting angry and worked up about something they cannot control. Signed, UAL retiree.
Who really believes taxpayers(or the airlines) should be paying for workers to do nothing for 40 hrs a week? That’s in nobody’s best interest. If they don’t have work to do, they should cut their hours to 8 hrs/week or even less. Enough with these entitled union workers that think economic realities don’t apply to them.
After 48 rocky years working for EAL, UAL,JB and countless others on a part time basis, I am finally calling it a day. Have at it all.
It makes absolutely no sense to maintain a full compliment of employees when your business had dropped by more than 90%.
The CARES Act supplements the pay of most of the employees affected by the change from FT to PT. What no one is saying, most airlines have offered employees voluntary time off options and they can still receive unemployment benefits without the cost associated with going to work.
News Flash….the airline is trying to survive!! Economics 101: No customers, no jobs! That’s the reality. Like it or not. And they’ll be no jobs to return to if the airlines go broke. At least at 30 hours the employees still have income.
I’m a retired United union member. I’ve learned unions need employees to fear the company to justify their existence. The unions need to stop this “us and them” mentality and think “we” if all are going to get thru this.