New Report Shows Treasury Let Aviation Companies Fire Workers While Reaping Federal Funds to “Preserve” Jobs
Washington, D.C. (October 9, 2020) -- Today, the Select Subcommittee on the Coronavirus Crisis released a staff report on the Payroll Support Program (“PSP” or “the Program”), which Congress created to “preserve aviation jobs” by providing payroll assistance to companies in exchange for keeping workers employed. Following a months-long investigation, today’s report reveals that Treasury allowed aviation contractors to fire thousands of workers while still receiving hundreds of millions of dollars in taxpayer funds intended to protect those workers’ jobs.
In response to these findings, Chairman James E. Clyburn sent letters today to seven aviation contractors that collectively received more than $1 billion in PSP funds to demand that they halt layoffs until they have spent all the funds they received.
Today’s staff report found: “Contrary to congressional intent, Treasury permitted aviation contractors to lay off thousands of workers and receive full payroll support calculated based on the companies’ pre-pandemic workforce.” The report further explained: “Treasury’s delays in disbursing PSP funds resulted in more than 16,500 layoffs and furloughs at 15 companies—more than 15 percent of the aviation contractor workforce.”
Congress created the Payroll Support Program in the CARES Act to “preserve aviation jobs and compensate air carrier industry workers,” including aviation contractors. Congress required that Program funds “shall exclusively be used for the continuation of payment of employee wages, salaries, and benefits,” and in exchange required recipients to “refrain from conducting involuntary furloughs or reducing pay rates and benefits until September 30, 2020.”
Despite Congress’s intent to save jobs, the report finds that Treasury made key decisions that led aviation contractors to lay off thousands of workers:
- Delays that cost jobs. Treasury disregarded the CARES Act mandate to begin distributing payroll assistance within ten days of the law’s enactment, and instead took months to execute agreements and provide funds. These delays led at least 15 different aviation contractors to fire or furlough over 16,500 employees before the agreements took effect, more than 15% of the aviation contractor workforce.
- Permission to lay off thousands while PSP applications were pending. Treasury knew companies were conducting layoffs while their PSP applications were pending but failed to object or require that employees be rehired. Internal emails obtained by the Select Subcommittee show that one company, Swissport, “urgently” sought to “furlough or terminate” staff before signing the PSP agreement to avoid “unnecessary costs once the ink is on the paper.”
- Permitting the expenditure of PSP funds without any deadline. Treasury allowed companies to spend PSP funds without a time limit, leading many companies to stockpile the money rather than use it to rehire laid-off workers. The Subcommittee’s investigation showed that at least two contractors, Flying Food Fare and Swissport, did not rehire a single worker based on the hundreds of millions of taxpayer dollars they received.
- Refusal to reduce the amount awarded after mass layoffs. Treasury calculated the amount of assistance awarded to each company based on 2019 payroll figures. Documents obtained by the Subcommittee reveal that Treasury was informed about mass layoffs but refused to lower the amount awarded based on those layoffs. As a result, companies received payroll assistance for jobs they had already eliminated.
In response to today’s report, Chairman Clyburn wrote to the seven aviation contractors that are receiving the most PSP funds and demanded that they halt further layoffs as long as they still have access to federal funding intended to “preserve aviation jobs.”
The Chairman wrote: “Since the purpose of the Program is to preserve jobs, I ask that you honor Congress’s intent and commit to forgo any layoffs or furloughs until all of the PSP funds awarded to you have been exhausted.”
Today’s letters request a response by October 16, 2020.
The Select Subcommittee, along with the Committee on Transportation and Infrastructure and the Committee on Financial Services, launched an investigation into Treasury’s implementation of the PSP on July 29, 2020, with letters seeking documents and information from Treasury and four aviation contractors.
On October 1, 2020, House Democrats passed the updated Heroes Act, which would provide additional payroll support for contractors and the rest of the aviation industry as part of a broader, comprehensive response to the coronavirus pandemic.
Click here to read today’s report.
Click below to read today’s letters: