Seniority Integration And The Mccaskill-Bond Statute

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

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