One legislator had to remind United that bail-out funds are for workers, not stock buy-backs.
United Airlines is requiring all of its management and administration employees to take 20 unpaid days off work. Now, a recently-filed class action claims that United’s decision constitutes a breach of federal law.
United is among several U.S.-based airlines which accepted government payroll support, offered by the federal CARES Act in response to the ongoing coronavirus pandemic. Such support is conditional: recipient companies cannot cut jobs or pay rates before September 30.
The stimulus was intended, in large part, to help airlines weather the pandemic—and to ensure that their employees continue getting paid.
Fox Business notes that United alone received $5 billion on paycheck support relief from the federal government. Those funds are meant to “cover a portion of [pay and benefits] through September 30.”
But the class action says that United reneged on the terms scarcely two weeks after signing an agreement to receive stimulus paycheck protection funds. United ordered domestic management and administration employees to take 20 days off between May 16 and September 30.
“United’s breach harms the agreement’s intended beneficiaries: United employees,” said Kenneth England, a United shift manager at Chicago O’Hare International Airport.
England, in his lawsuit, also said that United’s policy means workers will receive substantially less money—something the airline has vigorously denied.
“This lawsuit is without merit, as we continue to employ 100% of our workforce,” United said in a statement.
United said it’s asking certain employees to take time off as a cost-cutting measure, meant to “preserve as much financial flexibility now […] so that we can not only survive this crisis, but thrive once it is behind us.”
The airline’s goal is offset losses, as coronavirus has caused an “unprecedented” dearth of demand for domestic and international travel.
“Already, tens of thousands of United employees… have voluntarily agreed to unpaid leave because they want to help the company survive the crisis,” a United spokesperson said in a statement to Fox Business. “This action is the latest proactive, cost-cutting measure we have taken to offset an unprecedented drop in travel demand and will help us achieve our overall goal to preserve as much financial flexibility now so we can not only survive the crisis, but thrive once it is behind us.”
However, United has signaled that it will begin laying off employees as soon as September 30 passes.
“Media reports indicate that United Airlines may cut labor costs by as much as 40 percent in the fall, depending on demand,” U.S. Rep. Donald Payne Jr. (D-NJ). “Hopefully this does not come to pass.”
Payne also said that United may be trying to duck other federal guidance, including the Department of Transportation’s recent mandate that airlines must refund passengers whose flights have been canceled due to coronavirus.
“According to media reports, United Airlines changed the definition of ‘canceled flight’ to reduce the number of refunds,” Payne said. “I would be very disappointed if United Airlines intentionally changed its policies to avoid paying out refunds to passengers affected by this pandemic.”
But Payne added that, as difficult as business may be for airlines, record-low revenues don’t entitle them to abuse consumer protections or renege on obligations to employees.
Ultimately, Payne—like England—has emphasized that CARES Act funding, insofar as it was given to airlines, was intended to help employees stay employed.