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.”
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?