I did my best to take the PDF version of the letter and re-format it so it could be read in this blog. If you find any errors, please let me know.
SPIVAK LIPTON LLP 1700 Broadway
ATTORNEYS AT LAW New York, NY 10019
T
212.765.2100
F 212.765.8954
spivaklipton.com
MEMORANDUM
TO: Edward
Gleason
FROM: Franklin K. Moss, Denis P. Duffey Jr.
DATE: May 16, 2012
RE: IBT-Consent Decree Opinion Letter
__________________________________________________________________________
You have
asked whether, in light of the merger of United Air Lines, Inc.
("United") and
Continental Airlines, Inc. ("Continental"),
a consent decree issued against United and certain
unions prior to the merger applies to employees
represented by the International Brotherhood of Teamsters ("IBT")
under separate collective bargaining agreements with United (the "IBT-
United CBA"), Continental (the "IBT-Continental CBA"), and
Continental Micronesia (the
"IBT-CMI CBA").
As
explained below, the consent decree is and shall continue to be binding as to employees covered by the IBT-United CBA. As to those
covered by the IBT-Continental CBA and the IBT-CMI CBA, the consent decree
should be considered binding once United and Continental are completely
consolidated into a single corporation, Prior to that consolidation, the
consent decree would only become binding as to such employees upon the
integration of the United, Continental, and Continental Micronesia
("CMI") seniority lists pursuant to the relevant CBAs. Moreover,
since the consent decree will be binding once the lists are integrated, it must
be treated as mandatory with respect to both United and Continental employees
during the process of integration.
BACKGROUND 1
Since 1968, United has been a wholly-owned subsidiary
of UAL Corporation ("UAL"), or of UAL's current successor entity, United
Continental Holdings, Inc. (“UCH”).
In 1973, a
federal discrimination complaint was brought under Title VII of the Civil Rights
Act of 1964 against United and certain unions representing its employees,
including the International Association of Machinists ("IAM"). See
EEOC v. United Air Lines, Inc., Civil Action No. 73 972 (N.D. Ill.). In 1976, a consent decree (the
"Original Consent Decree") was entered in the case. The Original
Consent Decree contained, among other things, provisions concerning seniority
for certain IAM-represented employee classifications at United.
In 1995, a
Final Amended Consent Decree ("Final Consent Decree") was entered in
the referenced discrimination case. The Final Consent Decree continued some
provisions of the Original Consent Decree, including certain of the provisions
governing the IAM-represented employees' seniority, and terminated the
remaining provisions of the Original Consent Decree. United, IAM, and certain
other defendant unions were signatories to the Final Consent Decree.2 The Final
Consent Decree provides that its continued seniority provisions "shall be
fully binding upon United and the IAM and TWU or their successor
unions and are hereby made part of such collective bargaining agreements and
shall be expressly printed and incorporated therein at the next printing of
such contracts." Id.,
Final Consent Decree dated March 2, 1995, § III.
In 2008,
the IBT became the representative of the United employees working in the "Mechanic
and related employees" classification (the "Mechanics")
previously represented by the IAM, 3 including the employees covered by the Final Consent
Decree. At all relevant times, IBT has also been the representative of the
Mechanics at Continental and CMI.
On May 2,
2010, Continental and UAL entered into a merger agreement (the "Merger Agreement").
On October 1, 2011, pursuant to the Merger Agreement, UAL changed its name to
United Continental Holdings, Inc. ("UCH") and Continental became a
wholly-owned subsidiary of UCH, along with United. Shortly thereafter, CMI,
which had previously been a wholly-owned subsidiary of Continental, ceased to
be a separate operating company and was folded directly into Continental.
As result
of the merger, a single management group has assumed responsibility for labor
relations at both United and Continental. On November
30, 2011, the Federal Aviation Administration approved UCH's application for a single
operating certificate covering both United and Continental. It also approved UCH's
application to provide for a single repair station certificate for affected
carriers. In March 2012, the reservations and customer service operations of
United and Continental were integrated. Additionally, the National Mediation
Board ("NMB") has already determined that several of the UCH crafts
(the passenger service, fleet service, flight attendant, and stock clerk
employees) constitute a single transportation system for representation
purposes. It is anticipated that an application for the Mechanics
will be filed with the NMB in the near future and that the NMB will determine
that that craft likewise constitutes a single transportation system for
representation purposes.
As a matter
of corporate form, both United and Continental continue to exist as wholly owned
subsidiaries of UCH, but it is anticipated that the two entities will be fully
and formally consolidated in the near future.
IBT
presently has separate collective bargaining agreements ("CBAs")
covering the Mechanics at United, Continental, and CMI respectively. All three
of the CBAs provide as follows:
In the event of a merger of
airline operations between the Company and another air carrier the Company will
require, as a condition of any such operational merger that provisions be
included requiring that the surviving carrier provide for fair and equitable integration
of the pre-merger technician and related seniority list in accordance with Sections
3 and 13 of the Allegheny Mohawk [Labor Protective Provisions].
IBT-United CBA dated Jan.1, 2010 to June 30, 2013,
Art. I.D.3; IBT-Continental CBA dated Jan.1, 2009 to December 31, 2012, Art LD.3;
IBT-CMI CBA dated April I, 2006 to December 27, 2009, Art.3.B.3.4
The Allegheny Mohawk Labor Protective Provisions (the
"AM LPPs") are rules that were promulgated by the Civil Aeronautics Board to
govern the merger of Allegheny and Mohawk airlines in the early 1970s. Sections 3 and 13
of the AM LLPs provide, in effect, that when an airline merger affects employee seniority,
provisions shall be made for integration of
seniority lists in a fair and equitable
manner, and disputes concerning such integration may be submitted to
arbitration.
DISCUSSION
By its
terms, the Final Consent Decree is presently applicable both to United and to
IBT,
as a successor to IAM as the representative of the
United Mechanics covered by the Final
Consent Decree. The entity resulting from the
anticipated combination of United and Continental would also likely be held to
be bound by the Final Consent Decree. In Bates v. Pacific Maritime Corp.,
the Ninth Circuit applied the following factors in determining that a Title VII
consent decree applied to a successor employer: "(1) the continuity in
operations and work force of the successor and predecessor, (2) the notice to
the successor employer of its predecessor's legal obligations, and (3) the
ability of the predecessor to provide adequate relief directly." 744 F.2d
705, 709-10 (9th Cir. 1984); see also Wheeler v. Snyder Buick,
Inc., 794 F.2d 1228, 1236 (7th Cir. 1986) (applying similar factors but finding no successor
liability). All these factors favor applying the Final Consent Decree to any
successor of United, certainly with respect to those working in operations
formerly controlled by United (the "Former-United Employees").
The
applicability of the Final Consent Decree to those who are currently employed
by Continental (including CMI) in operations previously controlled by
Continental and CMI during the period prior to the integration of the
Continental and United seniority lists (the "Former- Continental
Employees") is less clear. The publicly-available terms of the Merger
Agreement do not expressly address this issue, and we have not found any
successorship or other case law on point.
As a
practical matter, however, the degree of integration of the operations of
United and Continental that has already occurred makes any rationale for
excluding those currently employed by Continental from the scope of the Consent
Decree untenable. Once United and Continental have been completely combined,
even any formal basis for exempting the Former-Continental and CMI Employees from the Final Consent Decree will
disappear.
More
critically, the CBAs' provisions concerning the AM LPPs appear to make application
of the Final Consent Decree to Former-Continental and CMI Employees necessary. Those
provisions of the CBAs require, in substance, that the relevant United,
Continental, and CMI seniority lists shall be integrated in a fair and
equitable manner. Assuming, as argued above, that the Final Consent Decree
seniority provisions will be binding as to the Former-United Employees,
excluding the Former-Continental and CMI Employees from the Final Consent
Decree's seniority provisions would be neither fair nor equitable. The Final
Consent Decree provides in part that seniority for purposes of layoff and
recall will be company-wide for covered employees hired after July 2, 1965. The
Former-Continental CBA and CMI CBA Employees have only craft seniority for
these purposes. Craft seniority will never exceed company seniority, and in
many cases will be less than company seniority. Hence, if, in a merged
seniority list, the Former-United Employees have company seniority for these
purposes and the Former-Continental and CMI Employees do not, many
Former-United Employees will end up higher on the seniority list for these
purposes than similarly situated Former-Continental and CMI Employees. That
would be neither fair nor equitable. Thus a date-of-hire approach for purposes
of layoff and recall in accordance with the Final Consent Decree should be used
in the United-Continental/CMI integration process.
Even in the
absence of the CBA provisions, a federal statute known as the McCaskill-
Bond amendment would require the same outcome. In
substance, that statute provides that if a covered air carrier merger 5 affects employee seniority rights, Sections 3 and 13
of the AM LPPs shall apply to the integration of the employees, except that (1)
if the same union represents the employees of
both entities,
the union's internal policies regarding integration, if any, shall not be
affected and shall supersede the requirements of the statute, and (2) the
requirements of any collective bargaining agreement concerning integration
shall not be affected, so long as they allow for the protections afforded by
Sections 3 and 13 of the AM LPPs. 49 U.S.C. § 42112.
Because the
CBAs both already provide for application of Sections 3 and 13 of the AM
LPPs, and because the IBT represents the relevant
employees of both United and Continental
(including CMI), the McCaskill-Bond amendment would
appear to be irrelevant on the present facts. If, however, any question of the
IBT's continuing representation of either group is raised, or any claim is made
that the CBAs' provisions concerning integration are inapplicable, the McCaskill-Bond
amendment would become relevant and would point to the same result as that set
forth above. If the McCaskill-Bond amendment were to control, it would require
application of the AM LPPs, which in turn would effectively require the
application of the Final Consent Decree's seniority provisions to both the
Former-United and Former-Continental Employees (including CMI employees).
CONCLUSION
The Final
Consent Decree is presently applicable to United employees and should be
held applicable to both Former-United Employees and
Former-Continental Employees
(including CMI Employees), following full, formal
consolidation of United and Continental into a single entity. It is less clear
whether it will be binding as to current employees of Continental and CMI prior
to the merger of United and Continental Seniority lists pursuant to the CBAs.
The Final Consent Decree may be binding as to current employees of Continental,
unless and until the United and Continental seniority lists are merged pursuant
to the CBAs.
For purposes of integrating the United,
Continental, and CMI Mechanic seniority lists,
however, the question of whether the Final Consent
Decree is technically binding on the current Continental and CMI employees is
academic. That the Final Consent Decree is currently binding on IBT and United;
that it will be binding on any successor to United; and that IBT, United, and
Continental are all bound by the AM LPPs mean that as a practical matter, the
Final Consent Decree must be regarded as controlling in the process of
integrating the United, Continental, and CMI Mechanic seniority lists.
FOOTNOTES
1. The facts as stated in this section are based on
documents and information provided by the IBT and on publicly available
information.
2. IAM was not a party to the original Consent Decree
3. The IAM was immediately succeeded as representative
of these employees by the Aircraft
Mechanics Fraternal Association ("AMFA") as
a result of a representation election in 2003. The IBT took over representation
of these employees from the AMF A after another representation election in 2008.
4. The IBT has advised us that the CMI Mechanics have
ratified a new collective bargaining
agreement this past week, and that the operative scope
and status of agreement provisions remain intact.
5. A covered merger is one involving combination of
multiple carriers into a single carrier and the transfer of ownership of
control of either 50 percent or more of the equity securities of an air
carrier, or 50 percent or more of the assets of the air carrier. 49 U.S.c. §
42112. The United Continental merger would presumably qualify, as it involved
the exchange of all of Continental's stock
for United stock.
