How the Trump administration allowed airlines to keep workers' relief money

One of the programs of the bailout was meant to help airline industry companies keep their workers on the payroll

By Justin Elliott - Jeff Ernsthausen
Published July 30, 2020 5:20AM (EDT)
A United Airlines employee stands at a counter with no customers in line at a nearly deserted Los Angeles International Airport due to the coronavirus pandemic (David McNew/Getty Images)
A United Airlines employee stands at a counter with no customers in line at a nearly deserted Los Angeles International Airport due to the coronavirus pandemic (David McNew/Getty Images)

This article originally appeared on ProPublica.

This spring, as the coronavirus spread and international travel bans grounded flights, Gebrish Weldemariam got a layoff letter from his airline catering job at Dulles International Airport.

He'd been working as a driver making more than $18 per hour for Flying Food Group, ferrying in-flight meals between the company's kitchen and gated planes waiting on the tarmac. Between overtime at the airport and a part-time job driving buses on the side, Weldemariam felt that times were good. Last fall, with his wife expecting a fourth child, the family bought a house not far from the airport, allowing him to be nearby to help care for his oldest son, who has Down syndrome and needs constant attention.

"I have kids. I have a mortgage. I have two car loans," Weldemariam said. "That's why I work hard."

Flying Food Group told him only that when business picks up, it would call him. Now, even with boosted unemployment benefits, he said he makes $600 less than a typical week when he was working. He's worried he won't be able to cover all of his monthly bills.

Flying Food didn't just lay off Weldemariam. The Chicago-based company, one of the largest airline caterers in the country, has pink slipped more than 2,000 other workers since March. The cuts left the vast majority of its workforce out of a job at facilities in California, Chicago, Virginia and the New York City area, according to the union UNITE HERE, which represents Flying Food workers. Then in June, the Flying Food was approved to receive $85 million from the Trump administration from a pandemic relief program that was intended to preserve those very jobs.

After ProPublica first wrote about the Payroll Support Program in early July, we heard from dozens of distressed aviation industry workers, many of whom worked for over a decade cooking and loading airline meals onto planes. They wondered why they had been laid off by companies that received government aid.

Those cuts were deeper and more widespread than previously known. Interviews and public records show that Flying Food was among at least seven companies that laid off at least 7,000 workers or cut hours and received money from the $32 billion program.

The companies were allowed to get money to cover payroll for workers they had already laid off because of a series of decisions by the Trump administration in interpreting the CARES Act, which created the program to support aviation industry workers in March.

Flying Food's CEO David Cotton said in a statement that the company "fully intend(s) to comply with the terms of our agreement." The massive decline in the industry forced the company "to make the difficult decision to conduct furloughs, layoffs, and salary reductions to keep our business viable." He added, "The funds from the CARES Act have enabled us to keep our facilities open with reduced staffing levels."

The Payroll Support Program was designed as a pass-through: money would be distributed to airlines and their contractors in a package made up mostly of grants plus a smaller portion of loans. The companies would then pass along the money to workers by keeping them on and paying their wages. Companies accepting the money would have to use it for that purpose and would be barred from laying off employees, even if their business had dried up. It is the part of the pandemic relief law that came closest to the kind of direct payroll replacement enacted in European countries such as Germany.

Congressional Democrats and major airline unions such as those representing flight attendants and pilots are now desperately fighting to extend the program because the prohibition on layoffs expires at the end of September. The large carriers have gotten behind it as well, warning of catastrophic layoffs in the fall if the program is not extended. Both the unions and the Treasury Department agree that the program has supported hundreds of thousands of jobs in the industry.

But workers at the lesser-known businesses that cater to large carriers have not fared as well.

Precisely how many workers have lost their jobs is not publicly known. The application created by the Treasury for companies to apply for Payroll Support Program aid asks them to disclose layoffs conducted since March 1. But a Treasury spokeswoman declined to release the data, and the agency has not yet responded to a public records request for the numbers.

Under the CARES Act, companies were to submit their payroll costs for a six-month period from last year, before the pandemic. Once they signed an agreement with the Treasury, companies had to use the aid for payroll and were not allowed to conduct layoffs through Sept. 30. The idea was that companies would receive money covering six months of payroll, and then they would pay it out over the next six months to keep their workforce at roughly the level it was before the pandemic. The law, which was signed March 27, includes a deadline that the first payments to companies were supposed to go out within 10 days.

That didn't happen. In the case of Flying Food and other firms, the agreements weren't signed until June, long after most workers had already been laid off. The Treasury declined to comment on this delay.

Advocates for the program pointed to two decisions by the Trump administration that then opened the door for companies to get aid packages based on the wages of workers they had already laid off.

First, the Treasury issued guidance on the law in April stating that "there is no deadline" for recipients to spend the aid, an issue on which the statute is silent. The change proved critical. Since the law requires that the aid go only to workers on the payroll, a time limit on when it could spend would have given companies an incentive to keep on as many workers as possible to get the maximum benefit. With no time limit, companies have the opposite incentive, which is to shrink their workforces to make the money last as long as possible.

Second, the administration declined to reduce aid packages for companies that had laid off workers before the money arrived. The application form produced by the Trump administration states explicitly that 2019 payroll sets the "maximum potential amount" that a company can get. Using language not in the statute, the Treasury form states that the amounts to be given out are "determined by the Treasury Department in its sole discretion."

Despite requesting how many workers a company had laid off since March, the Treasury did not cut their aid packages or require them to rehire workers. Experts told ProPublica that the application's language gave the Treasury the ability to do so.

A spokeswoman for Sen. Sherrod Brown, D-Ohio, said his office "is concerned by any report of a company taking Payroll Support Program grants and still proceeding with layoffs." The senator believes there needs to be "greater transparency and oversight by the Treasury Department, and for the Trump administration to better administer these programs that are meant to support small businesses and help protect workers."

A Treasury spokeswoman disputed that the department could have cut the aid. She contended that the law "does not give Treasury flexibility to deviate" from the 2019 payroll calculation.

"Treasury's PSP application materials note that the calculation will be made by the Secretary in his sole discretion," she said in a statement. "That means Treasury's calculation of the statutory formula governs. It does not mean that Treasury is not required to apply the statutory formula."

Other companies that made cuts and are receiving government aid include:

  • Gate Gourmet, which cut around 5,000 of its 8,000 U.S. workers, according to the union UNITE HERE. A company spokeswoman previously said, "To ensure the long-term sustainability of our business in the U.S., layoffs and furloughs were necessary during these unprecedented times."

  • Eulen America, a Spanish-owned firm that offers a range of airline support services, laid off more than 1,000 workers in Florida and New York. A spokeswoman declined to comment.

  • Illinois-based ACTS Aviation Security laid off an unknown number of workers, including in Atlanta. The company didn't respond to a request for comment.

  • Indianapolis-based regional carrier Republic Airwayscut 5% of its workforce, including dozens of flight dispatchers. The company, which received $206 million in government aid, didn't respond to a request for comment.

Perhaps the most drastic cut was at Flying Food's Dulles operation, where, as of June, just two of about 170 were still working, according to UNITE HERE.

In the meantime, Weldemariam, the laid off driver at Dulles, is looking for other jobs.

Concerned that Flying Food wasn't taking safety around the virus seriously before he left this spring, he said he hopes that when flights return, he can go back to work, and that the company and his union can work out a plan to address workers' safety concerns. The company said in a statement that it has an "extensive Pandemic COVID-19 Plan which is compliant with CDC guidelines."

Weldemariam told ProPublica he hasn't heard anything from the company since it got the bailout money. "They took $85 million. I don't know where they put the money; they didn't tell us," he said.

Justin Elliott

Justin Elliott is a reporter for ProPublica. You can follow him on Twitter @ElliottJustin

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Jeff Ernsthausen

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