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United maps novel legal strategy in labor fight
By Mark Skertic
Tribune staff reporter
Published May 6, 2005
United Airlines could be flying into uncharted legal territory next week when it asks a bankruptcy judge to throw out the contracts of more than 41,000 flight attendants, mechanics and machinists.
The airline will use federal bankruptcy laws when asking the court to void the contracts of three unions. If successful, the carrier has vowed to invoke another law, the Railway Labor Act, to force workers to stay on the job.
In short, United hopes to use the power of the courts to compel workers to accept new pay and benefit terms the company would dictate.
It's an unprecedented argument the airline is making, said Douglas Baird, a bankruptcy expert at the University of Chicago Law School.
"There's a deep-seated principle that's working here independent of the airlines," he said. "This is a country where we don't force people to work under terms and conditions they never agreed to."
But Robert Siegel, a Los Angeles attorney who has represented US Airways in its efforts to terminate its contract with machinists, said United's position might be unique, but it has a sound legal basis.
The Railway Labor Act, which despite its name also governs airline employees, prevents workers from striking until mediation and other efforts have been exhausted.
"When you don't have a contract, it doesn't mean you're free to strike," Siegel said.
United has called the need to further reduce labor costs essential to bringing the airline out of bankruptcy. But it also fears a strike by any of its labor groups would cripple the airline, drive away customers and erode the confidence of financiers needed to provide the money to exit Chapter 11 protection. United entered bankruptcy proceedings in December 2002.
Pension deal
On Tuesday, the carrier will ask the bankruptcy court in Chicago to approve a deal made with the federal Pension Benefit Guaranty Corp. That agency has agreed to take over the carrier's pension plans, a move that would save United about $645 million annually. It ultimately also would reduce the retirement benefits for many employees by thousands of dollars.
If the court accepts that agreement, it would set the stage for a trial to start the next day. United would be back before Judge Eugene R. Wedoff asking him to void the contracts of the Association of Flight Attendants, the International Association of Machinists and Aerospace Workers and the Aircraft Mechanics Fraternal Association.
If successful, United would be free to temporarily impose new wage scales and decide what benefits to offer while beginning negotiations with the unions on new contracts.
The airline has come to terms with its other labor groups.
The U.S. Bankruptcy Code allows a court to dissolve labor contracts if the terms would prevent a company from returning to profitability. But the affected unions have said they would walk off the job if their contracts are terminated. Particularly galling to many is the prospect of losing their pensions.
"Taking away our pensions is not going to solve United's problems," said Mark Farnsworth, 39, a flight attendant for the past decade. "A business plan and a commitment from management would solve the problem."
He was among eight flight attendants who barged unannounced into the Northwestern University classroom of Dipak Jain this week to deliver petitions asking that the pensions be preserved. Jain, a business professor, is a United board member.
`Very bizarre reading'
A legal strategy that combines bankruptcy law and the Railway Labor Act in such a manner would be unprecedented, legal scholars say. They also question whether it would fly with the courts.
"That seems to me a very bizarre reading of the two statutes together," said Henry Perritt, a labor law expert with the Chicago-Kent College of Law.
"I think the best reading is that if the employer changes the terms of work, as of the moment that the change takes place, the union has a right to strike."
United might be right that it has to "do something Draconian to get their labor costs down," Perritt said. "On the other hand, folks are entitled to say whether they want to work under more adverse conditions."
But Siegel, who has represented United in the past and whose clients have included some of the nation's largest airlines, said it would be inconsistent to have a trial that culminates in a judge terminating contracts but then allows employees to walk out.
"Why have the provision that you can reject the contract under a standard that measures what's necessary for successful reorganization," he said, "if the immediate legal consequence of the judge's ruling is you can shut down the company and ruin the estate?"
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By Mark Skertic
Tribune staff reporter
Published May 6, 2005
United Airlines could be flying into uncharted legal territory next week when it asks a bankruptcy judge to throw out the contracts of more than 41,000 flight attendants, mechanics and machinists.
The airline will use federal bankruptcy laws when asking the court to void the contracts of three unions. If successful, the carrier has vowed to invoke another law, the Railway Labor Act, to force workers to stay on the job.
In short, United hopes to use the power of the courts to compel workers to accept new pay and benefit terms the company would dictate.
It's an unprecedented argument the airline is making, said Douglas Baird, a bankruptcy expert at the University of Chicago Law School.
"There's a deep-seated principle that's working here independent of the airlines," he said. "This is a country where we don't force people to work under terms and conditions they never agreed to."
But Robert Siegel, a Los Angeles attorney who has represented US Airways in its efforts to terminate its contract with machinists, said United's position might be unique, but it has a sound legal basis.
The Railway Labor Act, which despite its name also governs airline employees, prevents workers from striking until mediation and other efforts have been exhausted.
"When you don't have a contract, it doesn't mean you're free to strike," Siegel said.
United has called the need to further reduce labor costs essential to bringing the airline out of bankruptcy. But it also fears a strike by any of its labor groups would cripple the airline, drive away customers and erode the confidence of financiers needed to provide the money to exit Chapter 11 protection. United entered bankruptcy proceedings in December 2002.
Pension deal
On Tuesday, the carrier will ask the bankruptcy court in Chicago to approve a deal made with the federal Pension Benefit Guaranty Corp. That agency has agreed to take over the carrier's pension plans, a move that would save United about $645 million annually. It ultimately also would reduce the retirement benefits for many employees by thousands of dollars.
If the court accepts that agreement, it would set the stage for a trial to start the next day. United would be back before Judge Eugene R. Wedoff asking him to void the contracts of the Association of Flight Attendants, the International Association of Machinists and Aerospace Workers and the Aircraft Mechanics Fraternal Association.
If successful, United would be free to temporarily impose new wage scales and decide what benefits to offer while beginning negotiations with the unions on new contracts.
The airline has come to terms with its other labor groups.
The U.S. Bankruptcy Code allows a court to dissolve labor contracts if the terms would prevent a company from returning to profitability. But the affected unions have said they would walk off the job if their contracts are terminated. Particularly galling to many is the prospect of losing their pensions.
"Taking away our pensions is not going to solve United's problems," said Mark Farnsworth, 39, a flight attendant for the past decade. "A business plan and a commitment from management would solve the problem."
He was among eight flight attendants who barged unannounced into the Northwestern University classroom of Dipak Jain this week to deliver petitions asking that the pensions be preserved. Jain, a business professor, is a United board member.
`Very bizarre reading'
A legal strategy that combines bankruptcy law and the Railway Labor Act in such a manner would be unprecedented, legal scholars say. They also question whether it would fly with the courts.
"That seems to me a very bizarre reading of the two statutes together," said Henry Perritt, a labor law expert with the Chicago-Kent College of Law.
"I think the best reading is that if the employer changes the terms of work, as of the moment that the change takes place, the union has a right to strike."
United might be right that it has to "do something Draconian to get their labor costs down," Perritt said. "On the other hand, folks are entitled to say whether they want to work under more adverse conditions."
But Siegel, who has represented United in the past and whose clients have included some of the nation's largest airlines, said it would be inconsistent to have a trial that culminates in a judge terminating contracts but then allows employees to walk out.
"Why have the provision that you can reject the contract under a standard that measures what's necessary for successful reorganization," he said, "if the immediate legal consequence of the judge's ruling is you can shut down the company and ruin the estate?"
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[email protected]
