The CARES Act provided subsidies to airlines, on the condition that they not furlough workers, or reduce their rates of pay through September 30. However, the statute as enacted has a significant loophole. Gary Leff from View from the Wing explains:
Now United has realized they can switch employees from full time to part time and pay them less. That’s not a furlough, and while it reduces pay it does this through reduced hours not reduced pay rate.
In other words, the federal government has paid United Airlines on the assumption that their employees would work 40 hours per week. But United is only paying their employees for working 30 hours a week. United is pocketing the difference.
The International Association of Machinists and Aerospace Workers union has threatened to sue:
“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.
American Airlines CEO Doug Parker has complained that United is violating the CARES Act:
“Some airlines think it is OK to go and cut employees’ hours,” Parker said, according to notes and recollections from two people who listened to the meeting but asked not to be named.
“One [airline] is cutting full-time from 40 hours to 30, a 25% cut in pay,” Parker said. “I was there when we were working on CARES and that wasn’t the intent or meaning of it.
But that text was stripped from the final version of the bill. The CARES Act, as enacted, leaves this loophole wide open. There is no restriction on reducing hours, so long as the hourly-wage remains the same.
My sense though is that the airline bailout language, pushed so hard and so quickly by industry lobbyists with the public pleading of unions wasn’t well enough drafted – although from the perspective of those advocating the language this was a feature, not a bug.
Welcome to the world of rent seeking and legislative history, Mr. Parker.
Disclosure: I have United elite status which, at the moment, is basically worthless.