- United Airlines has cut work hours for its managers and administrative (M&A) employees, and warned that layoffs are coming.
- However, workers say that the cuts violate terms of the CARES Act bailout , prohibiting pay cuts or furloughs before September 30.
- Business Insider spoke with United M&A workers who described stress, anxiety, and frustration with the airline as they prepare for what could be massive job cuts.
- Are you an employee at United or another airline? Contact this reporter with your thoughts or tips at email@example.com .
- Visit Business Insider's homepage for more stories .
Two months after United Airlines agreed to terms with the federal government and accepted a $5 billion bailout for payroll support, workers at United Airlines are accusing the airline of breaking its promise.
Earlier this month, United announced that it would require management and administrative (M&A) employees to take 20 unpaid days off between May 15 and September 30. The requirement came as airlines around the globe including United reduced flights and grounded portions of their fleets due to a collapse in travel demand during the coronavirus pandemic.
The airline also warned that it would need to reduce its M&A payroll by "at least" 30% American has announced similar plans .
However, under the federal CARES Act, the $2 trillion financial package passed in late March, airlines accepting certain types of aid as part of a $25 billion payroll protection scheme are prohibited from laying off, furloughing, or otherwise cutting employee pay until after September 30.
Airlines receiving a portion of that aid are also temporarily prohibited from buying back stock or paying dividends to shareholders, and are required to cap executive salaries.
United agreed to the terms with the US Treasury Department to receive $5 billion in aid under the payroll program. Seventy percent of that is in the form of grants, while 30% about $1.5 billion is available as low-interest loans, which must be paid back. In a memo to employees in April , then-CEO Oscar Munoz and President Scott Kirby (Kirby took over as CEO in May, part of a planned transition) said that amount would not cover the airline's total payroll expense, which "only represents about 30% of our total costs."
According to a United spokesperson, the required days off are not considered a furlough and comply with the CARES Act because they do not involve a reduction in pay rate, only in the number of hours worked.
Lawmakers have contested that interpretation. Sen. Elizabeth Warren of Massachusetts and several House Democrats have written to airlines and the Treasury Department in recent days arguing that the hourly cuts broke both the spirit and the letter of the CARES Act.
Cutting hours, but not the workload
In interviews with Business Insider, several United employees who work in M&A roles said they saw the unpaid time off as a violation of the requirements and the spirit of the CARES Act.
Another employee, Kenneth England, filed a class-action suit against the airline. In a statement, one of England's lawyers, Douglas M. Werman, said the lawsuit raised important issues about who the stakeholders of the payroll support program actually are.
"Our view is that one stakeholder is United's own employees, and that the terms of the PSP Agreement" Payroll Support Program "between United and the Treasury Department plainly precludes United's Unpaid Time Off Policy," he said.
In conversations with the other United workers, employees described stress, uncertainty, and falling morale, contrasting with a degree of appreciation for the airline's pragmatism amid the uncertainty.
"United couldn't be handling it worse," said one employee, an engineer, who works in an office at the airline's Chicago headquarters.
Like the other employees interviewed for this article, they asked for anonymity because they were not authorized to speak on behalf of the company, and did not want to jeopardize possible future employment.
Initially, United announced a reduction in hours for 27,000 customer service workers and baggage handlers. It quickly repealed the cut after the union representing them, the International Association of Machinists and Aerospace Workers (IAM), filed an injunction in the United States District Court for the Eastern District of New York earlier this month.
The same week, the airline announced a similar cut for M&A workers , requiring them to take 20 unpaid days off between May 15 and September 30 most employees not directly involved in day-to-day airline operations will work a four-day workweek to meet that 20-day threshold. That reduction was not rolled back along with the cuts to IAM-represented workers' hours.
"It's been handled incredibly poorly," the engineer said. "And now there's some tension over union cuts versus administrative workers' cuts."
While some M&A workers are paid hourly, many other M&A employees are salaried. They are often responsible for projects or overseeing teams or segments of operations, rather than performing a task contained to each shift, and they say their responsibilities and workloads have remained the same. They just have less time to complete their tasks.
"Salaried work is based on doing the tasks of that job, not working a certain number of hours," one Chicago-based employee, who works on a customer experience team, said. "It's not like there's less work I still have 50 hours worth of work to do each week, regardless of what they're paying me for."
"It feels like a violation of the spirit of how the CARES Act was supposed to work," the employee added. "It's a technicality."
The engineer said it is impossible to complete their tasks with one less day in the workweek.
Adding to the frustration: the airline asked its employees to lobby for the CARES Act, promising that it would protect them.
"It was portrayed as a stimulus for airline employees," a maintenance manager said. "The company asked us to call our congresspeople and senators for support, and now they're taking pay away."
"Some of us budgeted for the next year assuming we'd make our full salaries through September. Now, we don't even have that little bit of protection," the manager added. "I support my company, I like working here, but that feels wrong to me."
United takes a different tone than its competitors
Despite their stress and unhappiness with the pay cuts, the employees Business Insider spoke with all said that they appreciated the company's pragmatism.
"I have friends at other airlines, and their management is sugar-coating things," the customer experience worker said. "I think they're going to be in for a shock once the job protections expire."
United has taken an unvarnished tone about the current economic environment compared to its rivals, repeatedly saying that it expects to be "smaller" following the crisis and expects to reduce its workforce in October .
"But the challenging economic outlook means we have some tough decisions ahead as we plan for our airline, and our overall workforce, to be smaller than it is today, starting as early as October 1," former CEO Oscar Munoz and former president, now current CEO Scott Kirby wrote in an April 15 memo. "Throughout this crisis, we have been candid and upfront with you. And today is no different."
American, Delta, and Southwest have all suggested a need to downsize, but have not as openly discussed future layoffs.
In a CNBC interview in April, American Airlines CEO Doug Parker said that while he expects the airline's situation to remain bleak through the second quarter, he projected a "very gradual recovery through the third and fourth quarters."
In a communication to employees that week, Parker and airline president Robert Isom wrote that they expect Americans to be "regularly flying again" by September 30.
"It seems unrealistic," one of the United workers said.
A maintenance manager said United's approach "helps us see the reality."
What happens next
"It's not fun losing control over your future," the customer experience employee said. "There's a level of insecurity and anxiety across the board."
Fueling the anxiety is the fact that there had been a lot of poor information given out, the maintenance manager said.
"There's not a lot of good information to help you figure out whether you'll be on the layoff list or not," the employee said. "You don't know whether you should take a buyout or not."
"People are paranoid, and it's a shame. You can't reach out and get clarity, because you're afraid that if you do, or if you push back, you'll end up getting on the list," they added.
After the announcement of cuts to M&A workers' hours, the airline published buyout offers, known as Voluntary Separation Programs, or VSPs, that workers can apply for. The benefits include five years of free flights, and continued pay at 33% of their regular compensation through November 30.
Workers who do not take the buyout and are involuntarily laid off will be notified in July, the airline said, but will remain on the payroll through September 30 in accordance with the CARES Act.
Laid off workers will not receive any cash severance. Instead, employees said, workers can expect to be "walked off the property" when they're notified in July, and continue to be paid despite not working.
"Those last few months of pay are your pseudo-severance," the engineer said.
Workers debating taking the VSP are left with a difficult decision. Unlike frontline workers, whose employment contracts dictate that layoffs are handled based on seniority, the rationale around the M&A layoffs is less clear.
"We have no clue what the criteria is for the layoff," the engineer said. "There's no standard or predictability. It's frustrating."
Are you an employee at United or another airline? Contact this reporter with your thoughts or tips at firstname.lastname@example.org .
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