Please ensure Javascript is enabled for purposes of website accessibility

United Airlines Sued Over Unpaid Furlough Policy

By Lou Whiteman – May 14, 2020 at 10:33AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Workers believe United is violating the terms of the government bailout.

A shift manager at United Airlines Holdings' (UAL -4.01%) Chicago hub has filed suit against the airline, arguing that the company's requirement that nonunion and admin workers take 20 unpaid days off this summer violates the terms of the CARES Act government stimulus plan.

Last Month, United accepted nearly $5 billion in government funds designed to support payroll during the COVID-19 pandemic. Airlines have been hard-hit during quarantine, which has caused travel demand to fall to near-zero. The government responded with $50 billion in aid for the industry, but the funds came with the stipulation that carriers would do no layoffs until the end of September.

A United Airlines 787 exits the hanger.

Image source: United Airlines.

Since March, United has been candid with workers that it expects to cut its workforce once those restrictions expire. The suit, filed in U.S. District Court, alleges that the airline is bending the Treasury Department's rules by reducing the hours worked ahead of the Sept. 30 target date.

The suit is seeking class action status, and the attorneys involved are seeking an injunction to force United not to proceed with the forced time off.

United says the suit is without merit since the airline continues to employ its full workforce. The suit is similar to one filed by the International Association of Machinists arguing that United's decision to cut union mechanic hours violates the Treasury guidelines.

Airlines are in a tough place, since the bailout funds do not fully cover payroll costs and the companies currently need fewer workers, with schedules cut by 80% or more. United's attempt to cut costs and remain in compliance with the guidelines is understandable.

Nevertheless, the controversy adds additional risk to United shares. The airline has a long history of battles with labor groups, and if United emerges as a hotbed of worker unrest, it is going to make it more difficult for the airline to recover coming out of the pandemic.

Lou Whiteman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

United Airlines Holdings, Inc. Stock Quote
United Airlines Holdings, Inc.
$33.07 (-4.01%) $-1.38

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.