A
United Airlines employee filed a proposed class action Wednesday in Illinois federal court alleging the company breached its agreement to receive $5 billion dollars in federal payroll support funds amid the coronavirus pandemic when it informed all management and administration employees they had to take 20 unpaid days off.
Employee Kenneth England said that by taking the billions in federal relief, the airline agreed not to require its workers to take any temporary suspensions or unpaid leave or reduce pay or benefits for any reason until Sept. 30.
Within weeks of agreeing to receive the funds, England said the company announced the required furlough days, which he alleges is a breach of contract under federal common law.
"United's breach harms the agreement's intended beneficiaries: United employees," England said. "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."
On April 20, the
U.S. Department of the Treasury finalized its deal with United and other major airlines on the Payroll Support Program and made its first disbursal of funds. The program was created specifically for airlines and related contractors in March by Congress as part of the Coronavirus Aid, Relief, and Economics Security Act.
"This lawsuit arises out of United's breach of that agreement," England said, adding that two weeks after the company reached the deal to receive the funds, it informed all management and administration employees they would need to take 20 unpaid days off by Sept. 30.
England noted that the coronavirus relief bill said for an airline to be eligible for the Payroll Support Program, it "shall enter into an agreement with the secretary, or otherwise certify in such form and manner as the secretary shall prescribe, that the air carrier or contractor shall refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020."
On May 4, Kate Gebo, United's executive vice president of human resources and labor relations, emailed all management and administrative employees stating that the CARES Act assistance "only covers a part of our payroll costs" and the company will require the 20 furlough days, England said.
United's move violates the express terms of its agreement with the federal government, of which United's employees are intended third-party beneficiaries under federal common law, England said.
"This lawsuit is without merit, as we continue to employ 100% of our workforce," United said in an email to Law360. "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 and 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."
Counsel for England did not immediately respond to requests for comment.
England is represented by Douglas M. Werman, Maureen A. Salas, Sarah J. Arendt, Zachary C. Flowerree and Michael M. Tresnowski of Weman Salas PC.
Counsel for United Airlines could not immediately be determined.
The case is England et al. v. United Airlines Inc., case number
1:20-cv-02877, in the
U.S. District Court for the Northern District of Illinois.
--Editing by Jay Jackson Jr.
For a reprint of this article, please contact reprints@law360.com.