Elizabeth Warren accuses airlines and the Treasury Department of violating bailout terms as major airlines cut workers' take-home pay

Sen. Elizabeth Warren accused airlines last week of breaking the terms of their coronavirus bailout by cutting employee hours.
This week, she sent questions to Treasury Sec. Steven Mnuchin asking why the Treasury was not enforcing restrictions against layoffs, furloughs, and pay cuts codified in the CARES Act.
Airlines have argued that cuts in work hours are permitted, but lawmakers say that equates to a pay cut.
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Airlines have cut thousands of employees' work hours in recent weeks, despite a provision of the federal coronavirus bailout prohibiting layoffs or furloughs before September 30.

Now, lawmakers are questioning those airlines and the US Treasury Department, which is administering the bailouts, saying they're effectively allowing furloughs in all but name, and accusing the Treasury of violating the spirit of the bipartisan relief package that passed in March.

Airlines including United and Delta have cut schedules of hourly workers, despite accepting large portions of the $25 billion set aside under the CARES Act for airline payroll support.

The airlines have argued that while the law prohibits job cuts, or reductions in pay rate, reductions in hours due to the lack of demand are permissible. Lawmakers, however, argue that the hourly reductions amount to the same thing.

In a series of questions sent to Treasury Secretary Steven Mnuchin this week, Sen. Elizabeth Warren of Massachusetts asked why the Treasury was not taking action against airlines that were cutting workers hours.

"Why has Treasury taken no action against companies that accepted payroll assistance and then cut worker hours, thereby reducing take home pay for workers," she wrote.

Section 4114 of the CARES Act states that airlines receiving payroll assistance through the program must "refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020."

According to Warren and other lawmakers, cutting hours while not explicitly prohibited is essentially a pay cut because workers take home less.

While the Treasury has issued guidance on several other requirements for airlines receiving the aid, it has not addressed the topic of cuts in work hours.

"Does the Treasury Department plan to issue guidance regarding whether cutting employee hours violates Section 4114 of the CARES Act for airlines receiving financial assistance under the payroll relief provisions," Warren asked. "If yes, when will you release this guidance? If no, why not?"

Warren also asked whether Mnuchin or any other Treasury personnel had met with Delta Air Lines representatives to discuss requirements under Section 4114, and whether any airline had approached Treasury seeking guidance on whether cutting hours or mandating unpaid time off was permissible.

Earlier this month, Warren wrote to Delta and JetBlue describing cuts to workers' hours as "inconsistent with congressional intent and is a blatant and potentially illegal effort to skirt your requirements to keep workers on payroll."

On Tuesday, several House Democrats sent a letter to Mnuchin demanding to know whether he had explicitly permitted airlines to cut work hours, but not pay rate.

"The creative position held by these airlines is that an hours cut is somehow unrelated to compensation, which is protected under the CARES Act," Reps. Jan Schakowsky and Jesus Garcia of Illinois and Katie Porter of California wrote in Tuesday's letter.

"The hour cuts imposed by these carriers have made some workers eligible for unemployment assistance a circumstance the legislation was explicitly designed to prevent. These carriers are very clearly out of compliance with the letter and spirit of the law."

Some workers, including flight attendants and pilots, often have a minimum number of monthly pay hours in their employment contracts. While many typically work more hours than the minimum during a regular schedule month, and are consequently making less now than they did before, the airlines are prohibited from reducing hours below the minimums.

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