United workers are suing the airline for cutting their schedules to save cash, which unions say violates federal bailout terms

• United is being sued by one of its labor unions after the airline cut worker hours as part of a measure to save cash.
• The union, the International Association of Machinists and Aerospace Workers, said that the cut is illegal under the CARES Act, the federal coronavirus bailout package.
• Airlines are struggling to cut costs as travel demand remains near zero during the coronavirus pandemic.
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A labor union representing 27,000 United employees is suing the airline, alleging that the airline is violating the terms of the billions in aid it accepted through the federal coronavirus bailout package.

The basis of the suit is a decision by United to cut workers' schedules, essentially reducing its labor costs.

Under the $2 trillion bailout package passed by the federal government in late March — the CARES Act — US passenger airlines were eligible for a total of up to $50 billion in aid. CARES Act funding is split into two separate programs: operational loans, and payroll support, which is made up of grants and loans.

By accepting payroll support, airlines were required to agree not to furlough or lay off workers before September 30, nor cut pay rates. Executives at major US airlines have said they expect layoffs after that date.

In April, US airlines — including United — began receiving the first funds under the payroll support program. United said it would receive a total of $5 billion under an agreement with the US Treasury Department. $1.5 billion of that will be a loan.

The airline has said that funds do not fully cover its payroll or other operating expenses, and that it continues to lose tens of millions of dollars each day as travel demand remains near zero due to the pandemic.

Airlines including Delta and United have responded by reducing employees work schedules, arguing that a reduction in hours does not equal a prohibited cut in pay rate.

Workers, however, disagree.

The International Association of Machinists and Aerospace Workers, or IAM, which represents fleet service and passenger service workers at United, filed an injunction in the United States District Court for the Eastern District of New York on Tuesday.

United planned to reduce workers to a 30-hour workweek, down from 40 hours.

"For United to obtain federal funds under the false pretense that it would protect its workers through September and then turn around and do this to their most loyal workforce struggling to survive during this pandemic is unconscionable," Mike Klemm, president of IAM district lodge 141 said in a statement.

In a memo to affected workers, United chief operations officer Greg Hart said that although the airline believes the cuts were compliant with CARES Act requirements, it would offer alternatives.

Hart said that United will offer voluntary leaves to workers, which will bring participating employees down to 30 hours. However, the move would be voluntary, and employees will retain their full-time status, including benefits and seniority.

"We will monitor the participation rates and report back to you on the program's performance at the end of June," Hard said. "Without a high level of participation, we will have no choice but to reconsider a mandatory reduction to 30 hours for our full-time employees."

A representative for IAM did not immediately reply to a request for comment on the proposal.

On Monday, United told management and administrative employees that they would be required to take 20 unpaid days off between May 15 and September 30, and that the airline expects to reduce that workforce by at least 30% on October 1.

"Given the upcoming reductions, I have to ask each of you to seriously consider if choosing a voluntary separation with a robust benefits package might be right for you," human resources head Kate Gebo wrote in a leaked memo.

"We have to acknowledge that there will be serious consequences to our company if we don't continue to take strong and decisive action, which includes making decisions that none of us ever wanted or expected to make," she said.

Are you an employee at United or another airline? Contact this reporter with your thoughts or tips at dslotnick@businessinsider.com.