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Monday, December 10, 2012

McCaskill-Bond: What it is and isn't. UPDATED 12/12

McCaskill-Bond: What it is and isn't.


Many employees are under the mistaken impression McCaskill-Bond “protects” their seniority. It does not. The McCaskill-Bond legistlation simply mandates arbitration in the abscence of an seniority integration agreement between two different unions - at two combining carriers. It does NOT mandate any particular methodology i.e. D.O.H., ratios, career expectations etc. Below you will find the a compilation of reports summarizing the mandates of the statute and some case history of different airline mergers.


The Genisis of McCaskill-Bond:


Missouri Senators Clare McCaskill and Christopher Bond, concerned about the seniority integration treatment of employees at Trans World Airlines ("TWA") following its purchase by American Airlines and integration of the two airlines' operations and workforce, introduced legislation to guarantee labor protective provisions to airline employees with respect to seniority integration for certain covered transactions.


The legislation, known as the McCaskill-Bond statute, was signed into law in December 2007 and is codified at 49 U.S.C. § 42112.


The statute applies when two or more air carriers are involved in a "covered transaction," described as:


A.) A transaction for the combination of multiple air carriers into a single air carrier; and which


B.) Involves the transfer of ownership or control of—
50 percent or more of the equity securities (as defined in section 101 of title 11, United States Code) of an air carrier; or
50 percent or more (by value) of the assets of the air carrier. 49 U.S.C. § 42112 (b)(4).
When such a covered transaction "results in the combination of crafts or classes that are subject to the Railway Labor Act," "sections 3 and 13 of the labor protective provisions imposed by the Civil Aeronautics Board ("CAB" or the "Board") in the Allegheny-Mohawk merger (as published at 59 C.A.B. 45) shall apply to the integration of covered employees of the covered air carriers." Id. § 42112(a).1 In short, these Allegheny-Mohawk Labor Protective Provisions ("LPPs") require that the carrier make provisions "for the integration of seniority lists in a fair and equitable manner," including negotiation with union representatives and binding arbitration in covered transactions. The participants in this negotiation/arbitration process are the affected employee groups, and the carrier or carriers involved. The interests of unionized employee groups are represented by their union, while interests of nonunionized employee groups may be represented by employee committees or by the carrier.


By incorporating Sections 3 and 13 of the Allegheny-Mohawk LPPs, McCaskill-Bond establishes that it is the duty of the surviving or combined carrier to provide the fair and equitable seniority list integration process. The carrier can satisfy this duty by accepting a voluntarily negotiated or arbitrated list from the employee group parties. To the extent that the employee group parties do not voluntarily present such a list to the carrier, however, it is the carrier's duty to engage in arbitration with those groups as provided for in Section 13. If the covered transaction involves employee groups represented by the same union, the statute provides that the union's internal merger policies apply exclusively, with no carrier involvement, except as to whether it will accept and implement the result of the integration process (i.e., the combined seniority list). Likewise, any additional LPP or other merger-related requirements in a CBA that are consistent with the "protections afforded by" Sections 3 and 13 are not directly affected by the statute.


Background of Seniority List Integration in Airline Mergers


Labor Protective Provisions Issued by the Civil Aeronautics Board. As part of its economic regulation of air carriers, the CAB had jurisdiction over proposed mergers from its creation in 1940 through deregulation in 1984. Following the practice of the Interstate Commerce Commission ("ICC"), the CAB would often condition approval of route transfers and mergers on the implementation of certain LPPs. The goal of these provisions was to "ward off labor strife that could impede or delay a route transfer or merger, or detrimentally affect a carrier's stability or efficiency." Braniff Master Exec. Council of the APA v. C.A.B., 693 F.2d 220, 223 (D.C. Cir. 1982) ("Braniff MEC") (summarizing history of LPP use by the CAB).


In 1972, the CAB established a set of LPPs in the Allegheny-Mohawk case. Allegheny-Mohawk, 59 C.A.B. 19, 45 (1972), App. B. Between 1972 and the passage of the Airline Deregulation Act of 1978, the CAB used the Allegheny-Mohawk LPPs as the standard set of provisions in airline mergers. When deregulation became imminent, the CAB began deferring labor protection issues to collective bargaining, unless there were "special circumstances" or the CAB determined that LPPs were "necessary to prevent labor strife that would disrupt the nation's air transportation systems." The Department of Transportation assumed jurisdiction over airline mergers in 1984 and maintained the CAB's policy of deferring labor protection issues to collective bargaining based on the theory that LPPs were inconsistent with deregulation.


Sections 3 and 13 of the Allegheny-Mohawk LPPs. Section 3 of the Allegheny-Mohawk LPPs established the fair and equitable standard for seniority integration, stating:


Insofar as the merger affects the seniority rights of the carriers' employees, provisions shall be made for the integration of seniority lists in a fair and equitable manner, including, where applicable, agreement through collective bargaining between the carriers and the representatives of the employees affected. In the event of failure to agree, the dispute may be submitted by either part for adjustment in accordance with section 13.


Allegheny-Mohawk, 59 C.A.B. at 45.


Section 13 mandated arbitration of disputes with employees that arose in this process or under any of the other provisions of the Allegheny-Mohawk LPPs.2 Section 13 provides:


In the event that any dispute or controversy (except as to matters arising under section 9) arises with respect to the protections provided herein which cannot be settled by the parties within 20 days after the controversy arises, it may be referred by any party to an arbitrator selected from a panel of seven names furnished by the National Mediation Board for consideration and determination. The parties shall select the arbitrator from such panel by alternatively striking names until only one remains, and he shall serve as arbitrator. Expedited hearings and decisions will be expected, and a decision shall be rendered within 90 days after the controversy arises, unless an extension of time is mutually agreeable to all parties. The salary and expenses of the arbitrator shall be borne equally by the carrier and (i) the organization or organizations representing employee or employees or (ii) if unrepresented, the employee or employees or group or groups of employees. The decision of the arbitrator shall be final and binding on the parties.


The above condition shall not apply if the parties by mutual agreement determine that an alternative method for dispute settlement or an alternative procedure for selection of an arbitrator is appropriate in their particular dispute. No party shall be excused from complying with the above condition by reason of having suggested an alternative method or procedure unless and until that alternative method or procedure shall have been agreed to by all parties.


Neither the LPPs nor the CAB's interpretation of them provided any specific criteria for what constituted a "fair and equitable" integration process. Where applicable, "fair and equitable" included "agreement through collective bargaining" between the carriers and the representatives of the employees affected. Allegheny-Mohawk, 59 C.A.B. at 45. The CAB acknowledged that "no single way could be devised that would meet all situations. Whatever the method used ... some employees will be disadvantaged and some will gain." Nat'l Airlines Acquisition, Arbitration Bd., 97 C.A.B. 570, 572 (1982) ("NAA II").


The cases under Sections 3 and 13 make clear that the obligation to provide the fair and equitable seniority list integration process was the obligation of the carrier. The employee groups had no obligation to negotiate or arbitrate with each other over any disagreement of seniority list integration. As the CAB explained in Great Northern Pilots Association:


Sections 3 and 13 impose upon the carrier a duty to integrate seniority listings fairly and equitably and a duty to submit certain disputes between it and its employees to arbitration. They impose no comparable duties on the consolidating employee groups.


91 C.A.B. 795, 799-800 (1981) (denying order to arbitrate on the basis that the Board's "responsibility to order arbitration under section 13 ... does not arise until an integrated list has been presented to the carrier and the carrier has proceeded to act in a manner arguably inconsistent with its duty to integrate seniority lists fairly and equitably and submit to arbitration if it and the employees fail to agree.") (emphasis in original). Thus, employee groups, whether represented or not, had no obligation to arbitrate among themselves.


CAB and Judicial Interpretations of Section 3. Under the Allegheny-Mohawk LPPs, the unions (or other representatives) of the merging employees often agreed among themselves on the method of seniority list integration and presented that proposal to the carrier for approval. See, e.g., Nat'l Airlines Acquisition, Arbitration Bd., 95 C.A.B. 584, 594 (1982) ("NAA I") (noting the board's "long-held and judicially approved view" on such arrangements); Northeast Master Exec. Council v. CAB, 506 F.2d 97, 100-01 (D.C. Cir. 1974) (noting that the board's reliance on intra-employee negotiations "is recognition of a practical means to reach a result meeting the statutory standard"). When the Air Line Pilots Association International ("ALPA") represented pilots at both carriers before the merger, ALPA applied its internal policies to produce an integrated seniority list. See, e.g., Allegheny-Mohawk Merger Case (Petition of Kingston), Order 79-11-53 (Nov. 7, 1979). The Board consistently held that a carrier's acceptance of a seniority integration agreement negotiated in this manner satisfied the obligations created by Section 3, even without active involvement by the carrier in the process. See, NAA I, 95 C.A.B. at 584.


Although Section 3 gave the CAB jurisdiction over the seniority integration process, the CAB limited this oversight to negotiations between the merging carriers and employees, not to those between the merging employee groups (or their pre-merger collective bargaining representatives). See, e.g., Great Northern Pilots Ass'n, 91 C.A.B. 795, 799 (1981) (noting that disputes between employee groups "do not come within the long-established purview of section 13(a)"). Further, under Section 3, the carrier had to negotiate seniority integration with both merging unions. Where a carrier negotiated with and entered into a seniority integration agreement with only one of the unions, the CAB and courts routinely held that the LPPs took precedence over the negotiated seniority rights of one union, even if they were vested in existing contracts. See, e.g., NAA I, 95 C.A.B. at 584; Am. Airlines v. CAB, 445 F.2d 891 (2d Cir. 1971).


CAB and Judicial Interpretations of Section 13. Section 13 was consistently interpreted by the CAB to require arbitration between the carrier and the employee groups or their representatives, not between the employee groups or union representatives themselves. See, e.g., Allegheny-Mohawk Merger Case (Petition of Kingston), Order 79-11-53 (the Section 13 "arbitral duty is imposed on the carrier to provide for peaceful settlement of merger-related disputes between the carrier and employees to avoid, for example, service disruptive strikes.") When seniority integration was negotiated between the unions, the CAB had no authority to order arbitration until the carrier was presented with the relevant agreement. Great Northern Pilots Ass'n, 91 C.A.B. at 799-800. However, when an order for arbitration was proper, CAB policy was to do so for any dispute "at least arguably" covered by the LPPs. See Pan Am. World Airways, Inc. v. CAB, 683 F.2d 554 (D.C. Cir. 1982) (approving this board practice).


Although unions and management were typically the parties in Section 13 arbitrations, other employee groups and individual employees could be granted party status or allowed to otherwise participate. See, e.g., Southern Emps. v. Republic/ALEA, 102 C.A.B. 616 (1983) (describing how seniority integration was negotiated by an "employee committee" established for that purpose without union involvement); Pan Am-TWA Route Exchange, Arbitration Award, 85 C.A.B. 2537 (1980) (noting that three individual engineers were parties to arbitration); NAA I, 95 C.A.B. at 584 (denying dissenting group "full party status" but noting that they'd been given the opportunity to participate in the LPP arbitration). Thus, as indicated by the language of the LPPs, unrepresented employees still had rights to fair and equitable seniority integration and binding arbitration to resolve integration disputes under the Allegheny-Mohawk LPPs.


The CAB's review of a validly negotiated or arbitrated seniority integration was extremely limited. The Board would review arbitrated awards only to determine whether the award "dr[ew] its essence" from the LPPs, "in other words, whether it rest[ed] on grounds consistent with the letter and purpose of the provisions." NAA II, 97 C.A.B. at 573 (internal quotation marks omitted). Even this narrow review was limited to challenges made by parties to the arbitration, which included carriers, employees, and employee representatives who took advantage of their opportunity to participate in the arbitration (as opposed to challenging the results of it after the fact). Id. Where individual employees challenged negotiated agreements or arbitrated agreements under the Allegheny-Mohawk LPPs, the CAB consistently deferred to the results of seniority integration negotiations either between unions or between unions and management. See, e.g., Nat'l Airlines Acquisition, 84 C.A.B. 408 (1979), Great Northern Pilots, 91 C.A.B. at 800 ("when employees challenge a freely negotiated seniority list that has been accepted by the carrier, we refuse to examine the negotiation process 'absent a showing of bad faith or claim that the procedures were otherwise improperly conducted.'") Challenges by dissatisfied members to their union's seniority integration determination could be maintained only by demonstrating bad faith or unfair representation. See Nat'l Airlines Acquisition, 84 C.A.B. 408 (citing Delta Air Lines, Inc. v. CAB, 574 F.2d 546, 550 (D.C. Cir. 1978)).


Internal Union Merger Policy.


Where one union represented both employee groups affected by a transaction prior to a merger, the CAB held that a carrier's acceptance of an integrated seniority list produced pursuant to that union's internal merger policy satisfied the obligations under Section 3. The McCaskill-Bond statute explicitly provides that the union's internal policy applies in this circumstance. While several unions have internal merger policies, most of the litigation has involved ALPA Merger Policy. Under that policy, each Master Executive Council ("MEC") at its respective merging carriers typically chooses two or three merger representatives who are given total authority to negotiate seniority integration on behalf of their MEC, with the overall process subject to the supervision of ALPA's President and Executive Council. ALPA Administrative Manual § 45 (2009). Seniority integration agreements do not require ratification, but the integrated seniority list is generally part of a combined CBA, which does. To avoid having seniority list concerns artificially distort combined CBA negotiation and ratification, ALPA promotes in the application of its most recently revised Merger Policy the resolution of a combined CBA prior to the completion of the seniority list integration process (as was the case in the recent Delta-Northwest and Pinnacle-Mesaba and Colgan mergers and as ALPA is attempting to do with regard to the United-Continental merger). The MEC merger representatives must attempt to negotiate an agreement, but should they fail to do so, the ALPA merger provisions provide for mediation and for binding arbitration.


The ALPA Merger Policy in particular differs from the Allegheny-Mohawk LPPs primarily in three ways. First, in an effort to more comprehensively protect pilot career interests in various forms of transactions, the ALPA guidelines define mergers subject to the policy more broadly, to include both actual combinations and situations in which there is a "reasonable probability" of integration of operations between multiple ALPA carriers. The definition also focuses on the effect of the integration on employees by defining a merger as when "there is or will be a need for an integrated seniority list" and joint representation on other labor issues. In contrast, the Allegheny-Mohawk definitions limited the term "merger" to actual combinations and focused on the operations of the carriers, specifically whether their joint actions served to "unify, consolidate, merge or pool in whole or in part their separate airline facilities or any of the operations or services previously performed by them through such separate facilities."


Second, the ALPA Merger Policy differs from the LPPs in the role it envisions management will play in negotiations. The Allegheny-Mohawk LPPs specifically create an obligation for management to provide for integration of seniority lists in a fair and equitable manner, and acceptance of a list produced under internal union policies was construed to satisfy this obligation. ALPA policy, on the other hand, is governed exclusively by the involved ALPA MEC merger committees, under the supervision of ALPA's President and Executive Council, and forbids management participation in the process except insofar as the merger committees are required to seek management acceptance of the list produced under ALPA's procedures.


Finally, while the LPPs do not provide any criteria for determining how lists should be integrated, ALPA Merger Policy provides specific factors that must be considered in determining what qualifies as a "fair and equitable" process of seniority integration, which include: career expectations, longevity, status, and category.3 The guidelines state, however, that these factors are not exhaustive, and that they are to be considered "in no particular order and with no particular weight."


Seniority Integration in the Absence of McCaskill-Bond


While seniority integration in airline mergers often engenders some controversy, the experiences of US Airways and America West and American Airlines and TWA highlight the potential difficulties associated with seniority list integration.


US Airways and AmericaWest.


In May 2005, America West and US Airways merged as US Airways exited bankruptcy protection. At that time, the legacy America West pilots ("West Pilots") were fewer (about 1,900) than the legacy US Airways pilots ("East Pilots") (about 5,100). America West was also the younger of the two airlines, and the West Pilots had generally been hired more recently than the East Pilots. Both groups were represented by ALPA.


The two ALPA MECs and the two air carriers entered into a Transition Agreement, which created three conditions that had to be met before operational integration of the airlines: (1) creation of an integrated seniority list; (2) a single CBA; and (3) a single FAA operating certificate. The Transition Agreement provided that the ALPA internal merger policy would be used for integration, and that the integrated list would be subject to ratification as part of the new CBA.


After the East and West Merger Representatives could not reach a negotiated agreement,4 the parties selected George Nicolau as a mediator. When mediation failed, a final and binding arbitration was held before Mr. Nicolau. In May 2007, Mr. Nicolau issued an award (1) placing about 500 senior East Pilots at the top of the seniority list because of their specialized experience with wide-body aircraft that America West had not flown prior to the merger, (2) placing about 1,700 furloughed East Pilots at the bottom of the list and (3) then blending the rest of the pilots generally according to relative positions on their original seniority lists (the "Nicolau Award").


The East Pilots were dissatisfied with the award. The list's most controversial component placed a 56-year-old pilot with 17 years at US Airways, who was never laid off, behind a 35-year-old AmericaWest pilot with a few months on the job. In hundreds of similar cases, east pilots with 15 or more years at the carrier went behind west pilots with just a few years. They petitioned ALPA to revisit it, and ALPA attempted to reach a compromise. In the end, however, the East MEC withdrew its representatives from the Joint Negotiating Committee, freezing negotiations for a single CBA. ALPA nonetheless submitted the Nicolau Award to the merged carrier, and the seniority list was accepted.


As a result of this seniority integration process, the US Airline Pilots Association ("USAPA") was created by certain East Pilots, for the express purpose of blocking implementation of the Nicolau Award as required under ALPA Merger Policy. In November 2007, the National Mediation Board ("NMB") certified a representation election. In April 2008, the NMB certified USAPA as the pilot representative for East and West Pilots and extinguished ALPA's certification. USAPA presented a different seniority proposal to the carrier based on date of hire, with West Pilots generally at the bottom. The proposal also included a number of conditions detrimental to West Pilots.


On September 8, 2008, six individual West Pilots sued USAPA and the carrier in federal court on a breach of duty of fair representation and breach of contract claim.5Addington v. US Airline Pilots Ass'n, 588 F. Supp. 2d 1051 (D. Ariz. 2008). The district court dismissed the case against the carrier for failure to exhaust administrative remedies. Id. at 1069. After class certification in the case against USAPA, a jury found that USAPA had breached its duty of fair representation to the West Pilots. The district court then held a bench trial on the remaining equitable issues, ultimately granting injunctive relief to the West Pilots. Addington v. US Airline Pilots Ass'n, No. CV 08-1633-PHX-NVW, 2009 WL 2169164, at *30 (D. Ariz. July 17, 2009).


USAPA appealed to the Ninth Circuit, which overturned the decision on ripeness grounds in June 2010. Addington v. USAirline Pilots Ass'n, 606 F.3d 1174, 1189 (9th Cir. 2010). The Ninth Circuit reasoned that "neither the West Pilots nor USAPA can be certain what seniority proposal ultimately will be acceptable to both USAPA and the airline as part of a final CBA" and that "[n]ot until the airline responds to the proposal, the parties complete negotiations, and the membership ratifies the CBA will the West Pilots actually be affected by USAPA's seniority proposal—whatever USAPA's final proposal ultimately is." Id. at 1179-80.


Meanwhile, in July 2010, US Airways filed a Complaint for Declaratory Relief against USAPA and the Addington plaintiff class, seeking a declaration as to the parties' respective rights and obligations, identifying that the Ninth Circuit failed to "discuss the legal rights, constraints and obligations of US Airways in those collective bargaining negotiations, including how US Airways could complete those negotiations without exposure to potential legal liability in light of the conflicting assertions by the West Pilots and USAPA regarding the permissibility of USAPA's position on the seniority issues." US Airways, Inc. v. Addington, No. 2:10-cv-01570-ROS (D. Ariz. July 26, 2010), ECF No. 642, ¶ 2 (emphasis in original). USAPA opposed the carrier's request for declaratory relief, again on ripeness grounds. Judge Roslyn Silver heard this request by US Airways for a ruling on whether it must accept the Nicolau award or whether it can negotiate a contract that doesn't include the ruling. The carrier said it wants to negotiate a contract without being liable afterwards. During the hearings often more than 100 pilots, nearly all of them from America West, attended, spilling over into the empty jury box where Silver allowed seating. She heard arguments and oral testimony by witnesses and attorneys for the three parties -- the airline, USAPA, and the west pilot group. In her ruling, Judge Silver, says the airline and its pilots union can negotiate a contract that does not include the controversial “Nicolau” 2007 seniority list. Silver's ruling would not, however, disenfranchise supporters of the list proposed by arbitrator George Nicolau. Rather, it would delay the possibility of further legal action on a contract until a contract actually exists -- in the court's terms, until the issue is "ripe." In that regard, Silver reiterated the findings of a 2010 ruling by a U.S. Appeals Court in San Francisco, which had overruled a previous ruling on the simmering dispute by a different judge in the Phoenix court. So the likelihood of further legal action -- by America West pilots, the airline, or both -- remains.


TWA and American Airlines.


In early 2001, TWA, then in bankruptcy, and American Airlines entered into an agreement under which American purchased TWA's assets. TWA's pilots were represented by ALPA, and their CBA required "the fair and equitable seniority integration of employees in the event of a merger or acquisition of TWA." American, whose pilots were represented by the Allied Pilots Association ("APA") and whose CBA required pilots from an acquired carrier to be placed at the bottom of the American seniority list, offered to hire nearly all of TWA's union-represented employees, but only if the TWA-MEC waived their scope and successorship provisions, including the seniority integration provision. Initially, ALPA refused to agree to this request, but after TWA moved to reject its CBA with ALPA under § 1113(c) of the Bankruptcy Code, the MEC consented to the waiver, in exchange for various alternative protections. The deal closed on April 10, 2001.


As an inducement for the waiver, American agreed that it would use its "reasonable best efforts" with APA to secure a fair and equitable process for seniority integration of the American and TWA pilots. But after several months of unsuccessful negotiations between APA and the TWA-MEC, on November 8, 2001, APA and American Airlines executed an agreement that imposed the default seniority integration formula on slightly more than half of the former TWA pilots, giving them American seniority dates of April 10, 2001, while the remainder were placed higher on the list. (TWA flight attendants also largely received April 10, 2001 seniority dates.)


A few months later, the NMB also found that American and TWA were sufficiently integrated to be a single employer for collective bargaining purposes. Dissatisfied TWA pilots then filed suit against the APA, ALPA, American, and TWA LLC for breach of the duty of fair representation. These claims were dismissed in Bensel v. Allied Pilots Ass'n, 271 F. Supp. 2d 616 (D.N.J. 2003), but the Third Circuit resurrected the DFR claim against ALPA on statute of limitations grounds in Bensel v. Allied Pilots Ass'n, 387 F.3d 298 (3d Cir. 2004). The case against ALPA proceeded however. Bensel prevailed and the court found ALPA had breached its duty to fairly represent the TWA pilots. The case has now entered the damages phase. The damages against ALPA could be devastating.
See: http://blogs.star-telegram.com/sky_talk/2011/07/former-twa-pilots-prevail-in-lawsuit-against-alpa.html


Questions Arising Under the McCaskill-Bond Statute


While it is clear that the McCaskill-Bond law was passed as a direct response to the American-TWA merger and was intended to prohibit the type of treatment that former TWA employees experienced in that merger, there is little bargaining history that sheds further light on the intended application of the statute. Relatively little case law exists interpreting the statute. As a result, there are a number of open questions with regard to the scope and application of McCaskill-Bond.


First, it is unclear whether Congress, by requiring application of the Allegheny-Mohawk LPPs, intended to incorporate the case law that had developed before the CAB and federal courts under the LPPs. In particular, the case law under the Allegheny-Mohawk LPPs makes it clear that the carrier has the obligation to provide for integration of seniority lists in a fair and equitable manner, and that the employee groups have a right to seek arbitration with the carrier over seniority integration but not with each other. Whether Congress intended to incorporate—or was even aware—of this case law is uncertain.


Second, there are unanswered questions about where the McCaskill-Bond statute applies. In a recent suit by Midwest Airlines flight attendants and the Association of Flight Attendants ("AFA") seeking seniority integration rights in connection with the acquisition of the holding company that owned Midwest Airlines ("MAG"), a district court for the first time construed and applied McCaskill-Bond. Comm.of Concerned Midwest Flight Attendants for Fair and Equitable Seniority Integration v. Int'l Bhd. of Teamsters, No. 10-C-379, 2010 WL 3860366 (E.D. Wis. Sept. 30, 2010). In this litigation, the district court initially concluded that McCaskill-Bond applied to the transaction under which MAG was acquired. On motion for reconsideration, however, the same judge changed his mind, reaching exactly the opposite decision.


Midwest was purchased by Republic Airways Holdings ("RAH"), a holding company that owned Republic Airlines, Chautauqua, and Shuttle America, and whose flight attendants were represented by the International Brotherhood of Teamsters ("IBT"). The IBT argued that McCaskill-Bond did not apply because the acquisition involved only the holding companies and not the airlines. The district court initially rejected the IBT's contention, finding that the law "does not require that the transaction be between two air carriers. Instead, the amendment only requires that the transaction be 'for the combination of multiple air carriers into a single air carrier.'" Id. at *5 (quoting 49 U.S.C. § 42112, note, § 117(b)(4)).


The court also initially rejected the IBT's argument that the transaction did not come under the coverage of McCaskill-Bond because Midwest ceased operating after the acquisition and the Midwestflight attendants became unemployed. "The logic of the Teamsters' position is flawed because it suggests that an employer could avoid McCaskill-Bond simply by refusing to employ a group of employees from the merging air carrier." Id. at *6. The court held that the law applied if "the purpose of the RAH-MAG transaction was to combine multiple air carriers into a single air carrier."Id. (emphasis added). The court then went on to determine the question of the intent of the transaction as to combining carrier operations was one of fact that would require discovery and possible trial. Id.


On cross-motions for reconsideration, however, the court changed its mind and adopted the IBT's position, holding that McCaskill-Bond did not, in fact, apply to RAH's purchase of MAG. Comm. of Concerned Midwest Flight Attendants v. Int'l Bhd. of Teamsters, No. 10-C-379, 2011 WL 94697, at *2 (E.D. Wis. Jan. 10, 2011). The court reexamined the applicability of McCaskill-Bond and found that it was "apparent that RAH did not combine multiple air carriers—Republic and Midwest—into a single air carrier." Id. (citations omitted). Principally, the court relied upon the purpose of RAH's purchase of MAG, stating that RAH was "hoping to capitalize on the goodwill associated with the Midwest brand," more so than RAH wanted to purchase MAG's equipment, aircraft, flight routes, and employees. Id. In fact, when Republic began servicing Midwest's former routes, "it did so with Republic aircraft and Republic flight attendants." Id. The court, therefore, held that McCaskill-Bond did not apply because the purpose of the transaction was something other than "combin[ing] multiple air carriers into a single air carrier." See id. at *1-3 (citing 49 U.S.C. § 42112, note, § 117(b)(4)). The court concluded that "McCaskill-Bond was never meant to protect the employees of an air carrier that simply goes out of business." Id. at *3.


As a result of the decision on reconsideration, plaintiffs have filed a motion for certification of interlocutory appeal, or alternatively, for entry of partial final judgment pursuant to Federal Rule of Civil Procedure 54(b). The stated basis for the motion is that the court's "holding involved controlling questions of law as to the interpretation of McCaskill-Bond over which there is substantial ground for difference of opinion. McCaskill-Bond is the key statutory claim in the litigation, and appellate review of the statute's meaning—a matter of first impression—should not await final adjudication of Plaintiffs' two remaining claims." The IBT has opposed the motion and there has been no ruling. [Editors' note: The Seventh Circuit recently reversed the district court's decision on the basis that the transaction was a "covered transaction" under McCaskill-Bond, that Midwest became a "single air carrier" with Republic, and that the fact that Midwest went out of business "illustrates the completeness of the integration; it does not negate the statute's coverage." Comm. of Concerned MidwestFlight Attendants for Fair and Equitable Seniority Integration v. Int'l Bhd. Teamsters, 662 F.3d 954 (7th. Cir. 2011).]


Third, in a case arising from the 2008 merger between Delta Airlines and Northwest Airlines, the District Court for the District of Columbia recently questioned, but did not decide, whether there is even a private cause of action under McCaskill-Bond. See Ass'n of Flight Attendants v. Delta Airlines, Inc., Nos. 08-2009, 08-2114, 2010 WL 5300534 (D.D.C. Dec. 21, 2010). At the time of the merger, AFA represented flight attendants employed by Northwest, but Delta flight attendants were not unionized. After Delta began integration of the seniority lists, AFA filed a lawsuit in federal court seeking a declaratory judgment that Delta's actions violated the RLA and was premature in light of the McCaskill-Bond statute. Id. Specifically, AFA alleged that (1) efforts by Delta to initiate a seniority integration process to combine pre-merger Northwest employees and Delta employees constituted unlawful interference with those employees' rights to choose their own representatives and bargain collectively; and (2) Delta was not permitted to integrate seniority lists prior to an NMB finding that a single carrier existed and issuance of an NMB determination of the bargaining representative of the combined carrier. Delta moved to dismiss, arguing that the claims were representation disputes within the exclusive jurisdiction of the NMB. The court denied Delta's motion to dismiss for lack of subject matter jurisdiction, finding that the actions "present no dispute over the representation of the relevant employees." Id. at *1. But the court did not decide AFA's contention that Delta could not integrate seniority lists prior to a single-carrier finding.


In this case, Delta had asserted in pleadings that there was no private cause of action under McCaskill-Bond but had not sought to dismiss on that basis. In the course of its decision, the court noted that there was no indication in the text of the statute that Congress intended to create a private cause of action but did not decide the question because it was not raised by Delta's motion.


Footnotes


1. McCaskill-Bond notably addresses seniority list integration only, and it does not address integration of labor agreements.


2. The other provisions required the merging carriers to: (1) pay a "displacement allowance" to any employee who was "placed in a worse position with respect to compensation" as a result of the merger; (2) pay a "dismissal allowance" to employees who lost their jobs as a result of the merger for a period of time of up to five years for those with 15 years of service with either carrier; (3) continue benefits to employees "affected by the merger"; and (4) provide a relocation benefit to employees forced to move as a result of the merger. Braniff MEC, 693 F.2d at 223 n.2 (internal quotation marks omitted).


3. During the years in which the LPPs were applied by the CAB, ALPA Merger Policy stated a preference for the date of hire method, although the use of temporary restrictions or conditions and ratio-rank was permissible when date of hire did not lead to an equitable resolution. NAA I, 95 C.A.B. at 584.


4. East wanted seniority rights based on date of hire, including for East Pilots who were then on furlough; West wanted those furloughees placed at the bottom of the list, and then the rest of the pilots would be merged based on relative seniority of the original seniority lists of the two airlines.


5. The plaintiffs also sued a class of East pilots in state court, and after removal and consolidation, the state court action was dismissed.


6. Like the pilots, the ground groups (mechanics and related fleet service, stock clerks, and flight simulator technicians) were represented by different unions. The IAM, representing ground groups at TWA, and TWU, representing ground groups at American, attempted to negotiate seniority integration, but ultimately submitted the integration dispute to arbitration before Richard Kasher in February and March 2002 under Sections 3 and 13 of the Allegheny-Mohawk LPPs. During the course of TWA's bankruptcy leading up to American's acquisition of it, IAM and TWA agreed to a Transition Agreement in April 2001, which removed obligations to apply Allegheny-Mohawk seniority integration provisions. The TWU CBAs, however, provided that the LPPs would apply, provided that no employee on the master seniority list would be adversely affected in rates of pay, hours, or working conditions by the integration. The TWU, IAM, and American eventually arbitrated before Arbitrator Kasher. The arbitration award provided that: (1) at certain TWA hubs, TWA employees were permitted to exercise their full TWA seniority, (2) at a city/station where TWA's ASM contribution was less than 10 percent compared to combined TWA and American ASMs, TWA employees will be awarded 25 percent of their seniority, and (3) for all others, TWA employees would receive an April 10, 2001 seniority date.


Editors Note: If you share my concern e-mail me at howard.oshell@aim.com


INFORMATION BRIEF


Minnesota House of Representatives


Research Department



600 State Office Building


St. Paul, MN 55155


Anita Neumann, Legislative Analyst


651-296-5056 June 2008


Airline Mergers and Labor Integration


Provisions Under Federal Law



The proposed merger between Northwest Airlines and Delta Air Lines has raised


questions about how a merger would affect airline employees. Several federal


provisions govern this area. This information brief provides background on these


issues and explains the provisions of the laws that apply in this area.


Overview



Three key federal provisions govern labor management relations when air carriers merge and


integrate their workforces. The provisions are:



the Railway Labor Act;



the Allegheny-Mohawk Labor Protective Provisions; and



Public Law 110-161.


The Railway Labor Act provides the basic guidelines for air carriers and the negotiation and mediation procedures for employers and labor organizations when the “status quo” is changed. It also lays out the methods for resolving disputes over collective bargaining agreements.


Labor Protection Provisions (LPPs) were formalized by order of the Civil Aeronautics Board (CAB) in 1972 during the merger of Allegheny Airlines and Mohawk Airlines. The CAB order gave several protections for employees adversely affected by an airline merger.


A new federal law (Public Law 110-161), enacted in December 2007, directs that two of theAllegheny-Mohawk LPPs must be followed when airlines merge.


House Research Department June 2008


Airline Mergers and Labor Integration Provisions Under Federal Law Page 2


Railway Labor Act



The basic guidelines that apply to air carriers are contained in the

Railway Labor Act (RLA) (amendments added in 1936 apply the railway legislation to air carriers). The RLA specifies negotiation and mediation procedures that employers and labor organizations must complete before they can change the status quo, as well as the methods for resolving both “minor” and “major” disputes over collective bargaining agreements. The RLA also allows employees to sue in federal court to challenge an employer’s violation of the act.



Under the RLA, a “minor” dispute is a dispute arising from interpretation or application of collective bargaining agreements. If negotiation between the affected parties cannot resolve a minor dispute, the issue is submitted to binding arbitration under the National Mediation Board (NMB). Strikes are not allowed over minor disputes.

1


A “major” dispute is one that arises when there is an attempt to create collective bargaining agreements or to alter the terms of existing agreements. Labor organizations are ultimately allowed to strike, or employers may impose a lockout or hire replacement workers only after negotiation, mediation, and “cooling off” options have been exhausted.

2


National Mediation Board





The NMB is the federal panel created under the RLA to conduct union representation elections and to supervise the mediation of labor contract negotiations. The three-member panel is appointed by the president; one member must be from a political party that is not the same as the president’s. The board employs professional mediators to facilitate the negotiations.


Collective Bargaining Agreements



The RLA also grants employees the right to organize and bargain collectively and provides that it is “unlawful for any carrier to interfere in any way with the organization of its employees, or to use the funds of the carrier…to influence or coerce employees in an effort to induce them to join or remain or not to join or remain members of any labor organization…”

3


As part of the process, the NMB defines the “craft” or “class” of employees eligible to vote on whether to form a union or to decertify a union. An employee organization seeking to be the exclusive representative of a class or craft must secure support of 35 percent of the entire craft or class in order to get the NMB to call an election. In an election, a union must win a majority of votes from the entire class or craft—rather than just a majority of those voting. A majority vote of a craft or class is also required in elections to decertify a union.


1



45 U.S.C. § 156.


2


Ibid.


3



45 U.S.C. § 152.


House Research Department June 2008


Airline Mergers and Labor Integration Provisions Under Federal Law Page 3



Under the RLA, collective bargaining agreements do not have expiration dates; rather, they have amendable dates specified in the agreements. Until a change occurs through an agreement negotiated by both parties, through a new agreement resulting from binding arbitration, through a change in the status quo as the result of decertification of the union, or through a change that comes as a result of “self-help” remedies (i.e., a strike by the employees or a lockout or the hiring of replacement workers by the employer), the provisions of the original agreement remain in effect.


Thus, the proportion of unionized and nonunionized workers in particular job classes or crafts obviously plays a major role in determining how the collective bargaining agreements of unionized sectors of the workforce are affected by an airline merger. This is a major issue in the pending NWA-Delta merger because a largely unionized Northwest workforce is being absorbed by a generally nonunionized Delta workforce in virtually all crafts and classes. Only the airline pilots are represented by the same union (the Airlines Pilots Association or ALPA) under both carriers.


After a merger, the mediation board has the authority to rule on whether merged employee groups in a class or craft are comparable and, thus, whether a single bargaining unit applies.


The Mediation Process



Direct negotiations are the first step in the mediation process under the NMB and may be
initiated by one or both of the parties involved by sending a notice of intent to change an existing contract. During the direct negotiation phase, the sides may negotiate without a mediator. If direct negotiations are not successful in resolving differences, the parties may request formal mediation by the NMB. After entering into formal mediation, the NMB decides when a resolution of differences cannot be achieved, and it is the NMB that releases the parties from mediation.


When the NMB concludes that additional mediation activities will not result in an agreement, the NMB may “proffer arbitration.” If the parties accept the board’s arbitration offer, the outcome is binding.

4


If either party rejects the proffer of arbitration, the board imposes a 30-day “cooling off” period during which the parties continue to negotiate. If at the expiration of the 30-day period no agreement has been reached, either party is free to move to “self-help” actions. This means that the union is free to strike and the carrier is free to impose its last offer, impose a lockout, or hire replacement workers.


4


How “binding is binding” is unclear. After the merger of US Airways and America West Airlines, the NMB


arbitrator merged the two pilot groups into a single combined list. Both pilot groups were represented by ALPA.


US Airways had a much more senior pilot group than did America West. US Airways, however, due to financial


difficulties had large numbers of senior pilots on involuntary furlough at the time of the merger. The US Airway


pilots clearly wanted a date-of-hire driven seniority list, while the America West pilot group favored proportional


representation. The arbitrator ultimately ruled in favor of proportion-based integration. The merged pilot group


subsequently voted for a new bargaining agent, the US Airline Pilots Association (USAPA), and is currently


attempting to overturn the arbitrator’s ruling.


House Research Department June 2008


Airline Mergers and Labor Integration Provisions Under Federal Law Page 4



If the self-help activities pose a threat that in the board’s judgment may deprive any part of the country of essential transportation service, the president can intervene by activating a Presidential Emergency Board (PEB) to investigate and report on the dispute. The presidential board has 30 days to develop a settlement proposal and present it to the parties for consideration.


After the presidential board delivers its proposal, another 30-day cooling-off period goes into effect. If either party rejects the president’s proposal, both must wait another 30 days before reverting to their “self-help” activities. Ultimately, Congress has the authority to legislate a settlement.


Labor Protective Provisions and the Allegheny-Mohawk


Merger



Labor Protective Provisions (LPPs) were routinely applied by the Civil Aeronautics Board (CAB) in the 1950s and 1960s in airline mergers. The LPPs were formalized as a set of standards in the board’s 1972 order in the merger of Allegheny and Mohawk airlines.

5 That order granted several protections for employees adversely affected by an airline merger. The protections included a monthly displacement allowance for employees whose compensation was reduced, a dismissal allowance for employees who lost their job, reimbursement for relocation expenses, and compensation for other losses suffered as a direct result of the merger. In addition, the Allegheny-Mohawk order required that seniority systems be integrated in a “fair and equitable manner” and provided mediation and arbitration to resolve disputes over LPPs.



The LPPs, however, required that any adverse impact had to be the result of the merger. Further, the “fair and equitable” standard was generally regarded to have been met if the procedure (rather than the outcome) was fair.


The CAB retreated from LPPs in the early 1980s after the industry was deregulated and began using them on a selective rather than general basis. Since 1985, when the CAB expired and its jurisdiction was transferred to the Department of Transportation under the auspices of the Federal Aviation Administration (FAA), LPPs have been generally rejected.


Recent Federal Legislation



A new federal law,

Public Law 110-161 enacted in December 2007, directs that two of the

Allegheny-Mohawk labor protective provisions must be followed when air carriers merge. The law imposes sections 3 and 13 of the Allegheny-Mohawk order. Section 3 specifies that:“insofar as the merger affects the seniority rights of the carriers’ employees, provisions shall be made for the integration of seniority lists in a fair and equitable manner, including, where applicable, agreement through collective bargaining between the carriers and representatives of the employees affected. In the event of failure to agree,
the dispute may be submitted by either party for adjustment in accordance with section
13.”


6


Section 13 of the Allegheny-Mohawk order directs that when a dispute or controversy cannot be settled by the affected parties within 20 days, either party may refer it to an arbitrator selected from a panel of seven names furnished by the NMB. The parties involved select the arbitrator by alternately striking names until one remains. The selected arbitrator must render a decision within 90 days unless the parties agree to extend that time limit. The salary and expenses of the arbitrator are shared equally between the employer and employee group or individual employees.


The arbitrator’s decision is final and binding. The involved parties may agree on an alternative method for dispute resolution or an alternative procedure for selecting an arbitrator.


The new federal law, however, provides that if the same collective bargaining agent represents the combining classes or crafts at the newly merged airline, then that collective bargaining agent’s internal policies regarding integration will supersede the Allegheny-Mohawk provisions.


This is an important distinction for the pilots in the proposed Northwest-Delta merger. Since both pilot groups are represented by the same union, they are allowed to resolve the issue among themselves.


For other unionized employees who are combining with nonunion employees or employees of another union, the provisions of their collective bargaining agreement related to integration or successor clauses apply only if they do not contradict the “fair and equitable” standard and arbitration procedures of Allegheny-Mohawk. The role airline management would have in integration discussions under these circumstances is unclear.


For more information about labor issues, visit the employment and labor area of our web site



www.house.mn/hrd/issinfo/emp_lab.htm.

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