United Airlines employees have filed a class action claiming the company forced them to take unpaid leave after accepting billions in federal payroll relief.
In exchange for about $5 billion in federal funds through the CARES Act, United officials reportedly agreed in April that the company would not require any of its employees to take unpaid leave or reduce any employee’s pay rate before Sept. 30.
Kenneth England, a salaried non-union manager for United at Chicago O’Hare Airport, filed the class action lawsuit alleging breach of contract because the airline’s management and administrative workers were later ordered to take 20 unpaid days off between May and September.
In March, Congress enacted the Coronavirus Aid, Relief, and Economics Security Act in response to the economic fallout from the COVID-19 pandemic. The CARES Act authorizes the U.S. Secretary of the Treasury to provide financial assistance to certain air carriers for payroll relief, with specific caveats.
On April 20, United entered a Payroll Support Program Agreement with the U.S. Treasury Department providing for an initial support payment of roughly $2.5 billion.
In exchange, the lawsuit reports, United made two assurances as required under the CARES Act: first, that it would not terminate or furlough any employee before Sept. 30, and second, that it would not reduce the salary or wages of any employee without their consent before Sept. 30.
To be eligible for these payroll relief funds, Treasury Department guidelines state that a company must agree to “use such payments exclusively for the continuation of employee wages, salaries, and benefits” and “refrain from conducting involuntary layoffs or furloughs, or reducing pay rates and benefits, of employees of the applicant,” according to the lawsuit.
Just two weeks after company officials signed that agreement, Kate Gebo — the carrier’s executive vice president of human resources and labor relations — sent an email to all United Airlines employees in management and administrative positions. In that email, she said the federal funding “only covers a part of our payroll costs,” the lawsuit states.
“As a result, Gebo announced changes to the work schedule for management and administrative employees,” the filing continues. “Gebo explained, ‘We will be implementing an unpaid time off program for domestic M&A employees to align with less flying, fewer customers, and less working time for frontline employees. Effective between May 16 and Sept. 30, domestic M&A employees will be required to take 20 unpaid days off.’”
England claims this action breached the company’s contract, causing harm to United Airlines employees.
“The Unpaid Time Off Program violates the intent of the contracting parties to enter into an agreement to protect United employees, and Congress’ intention to provide financial support for the employees of air carriers,” the lawsuit alleges. “The Unpaid Time Off Program also violates United’s assurance that salaried employees would not face a pay rate reduction.”
A United spokesman told Law360 that the company is refuting England’s allegations.
“This lawsuit is without merit, as we continue to employ 100% of our workforce,” the spokesman argued.
“Already, tens of thousands of United employees, in an extraordinary show of loyalty to the company, have voluntarily agreed to unpaid leave because they want to help the company survive the crisis. This action is the latest proactive, cost-cutting measure we have taken to offset an unprecedented drop in travel demand will help us to achieve our overall goal to preserve as much financial flexibility now so we can not only survive this crisis, but thrive once it is behind us.”
However, England maintains accepting unpaid leave was far from voluntary for United Airlines employees, who were supposed to be “the intended beneficiaries of the [Payroll Support Program] Agreement.”
England is demanding a jury trial in hopes of “permanently enjoining United from further breaching the contract as alleged.” He also is seeking all recoverable compensatory and other damages for all class members, plus court costs.
“United’s breach harms the agreement’s intended beneficiaries: United employees,” he claims in the lawsuit. “United employees face a substantial reduction in pay as a result of United’s policies, despite the billions of federal dollars United received, specifically transferred to the company to protect employees.”
Were you asked to take unpaid leave by your company? Let us know in the comments section below.
The plaintiff is represented by Douglas M. Werman, Maureen A. Salas, Sarah J. Arendt, Zachary C. Flowerree and Michael M. Tresnowski, all of Weman Salas PC.
The United Airlines Employees Class Action Lawsuit is Kenneth England, et al. v. United Airlines Inc., Case No. 1:20-cv-02877, in the U.S. District Court for the Northern District of Illinois.
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