Has JetBlue just found a workaround to one of the fundamental clauses of the CARES Act?
The basics of the CARES Act
With the CARES Act, US airlines are receiving nearly $50 billion in aid, split between payroll protection and loans. In exchange for accepting this aid, airlines had to agree to some conditions, including:
- Refraining from imposing involuntary furloughs on US-based employees or reducing employee pay or benefits through September 30
- Continuation of service as is reasonable and practicable under Department of Transportation regulations
- Maintaining certain limitations on executive compensation through March 24, 2022
- Suspending the payment of dividends or other distributions and cease stock buybacks through September 30, 2021
Is the CARES Act working as intended?
As I’ve said from the beginning, while I generally support airlines getting some assistance, the actual requirements they created seem silly:
- Airlines aren’t allowed to furlough people or reduce pay through September 30, so United has made it clear that they will be firing people on October 1
- Airlines are required to maintain service, though in the days since the CARES Act passed we’ve seen so many requests with the DOT for reductions in service in light of reduced demand
To be clear, I don’t fault airlines for this, I just feel like the government set the wrong goalposts for airlines.
JetBlue forcing staff to take time off
Airlines have been using a variety of methods to reduce their payroll expenses that work within the foundation of the CARES Act, including:
- Asking employees to take voluntary time off, either paid or unpaid
- Giving employees minimum hours within their contract guidelines
JetBlue has just announced a scheme that has me scratching my head a bit more than others. The airline has informed support and salaried frontline employees that they’ll have to take 24 days of unpaid time off between now and September 30, 2020. Per the memo to employees:
For all support Crewmembers and salaried frontline Crewmembers, we are launching a program to temporarily implement mandatory unpaid time off. You will be required to take 24 days of unpaid time off (UTO) between April 20 and September 30, 2020.
In other words, employees are being forced to take the equivalent of five weeks off over the course of about five months.
Is this a CARES Act workaround?
When I first saw this it sure seemed to me like a CARES Act violation. But that doesn’t seem to be the case.
The CARES Act requires airlines to not:
- Impose involuntary furloughs
- Reduce employee pay
- Reduce employee benefits
In FAQs for employees, JetBlue specifically addresses how this unpaid time off initiative works in light of the CARES Act:
How does this UTO initiative work in light of the CARES Act stipulation preventing involuntary furloughs or reduced pay rates?
Any airline that accepts the payroll support funds agrees to not involuntarily furlough or reduce pay rates for Crewmembers through September 30, 2020. That said, with much less work and less flying, the reality is that we still have much lighter work schedules. Through this UTO initiative, we are reducing work schedules across the company, which is in line with guidance outlined by the CARES Act.
Technically I suppose JetBlue isn’t violating the CARES Act here — they’re not furloughing or directly reducing pay here, but rather are reducing pay in the form of unpaid time off.
One has to wonder how far airlines could take this in the context of the CARES Act. Could an airline require employees to take three months of unpaid time off without violating the CARES Act?
In my opinion there’s a significant distinction between offering employees their standard fewest contractually agreed upon hours, and forcing unpaid time off.
In fairness, I of course recognize airlines are in a bind here. This isn’t an act of greed, or anything, but rather is JetBlue management trying to fight for survival. The airline is doing everything they can to conserve cash.
I’m curious to see if other airlines get creative with ways to further cut payroll while technically adhering to the CARES Act…