Lawmakers say airline contractors laid off more than 9,000 despite $728 million in federal aid

Key Points
  • Three House Democrats are urging the Treasury Department to crack down on aid given to airline contractors that laid off workers.
  • Congress set aside $32 billion in payroll support for the aviation industry in the $2.2 trillion CARES Act.
  • Aid recipients are prohibited from laying off workers through Sept. 30.
Inside the Gate Gourmet 110,000 square-feet facility near Dulles Int. Airport.
Astrid Riecken | The Washington Post | Getty Images

Three House Democrats on Wednesday slammed airline contractors that laid off more than 9,000 employees despite accepting millions in federal coronavirus aid.

The lawmakers asked Treasury Secretary Steven Mnuchin to stop aid to the companies or ask for some of the funds back.

Congress set aside $32 billion in payroll support to the ailing airline industry in the $2.2 trillion CARES Act in March. Of that sum, $3 billion was set aside for contractors like caterers. The terms of the aid, which was mostly grants, prohibited recipients from laying workers off through Sept. 30.

"We urge Treasury to stop providing taxpayer-funded payroll support for workers that have been laid off and to recover any funds that were inappropriately awarded," wrote Rep. James Clyburn, D-S.C., chairman of a subcommittee on the coronavirus crisis, Rep. Peter DeFazio (D-Ore.), chair of the House of Representative's transportation and infrastructure committee and Rep. Maxine Waters (D-CA.), chairwoman of the financial services committee, in a letter to Mnuchin.

The Treasury Department said the requirements of the aid ban layoffs after an agreement is signed and that it doesn't have the authority to prohibit job cuts beforehand. It also said it cannot force the companies to rehire workers. 

"The CARES Act, which was passed unanimously, requires Treasury to provide payroll support to eligible applicants," a Treasury Department spokesperson said. "It does not require that former employees be rehired. Treasury has implemented the CARES Act as written."

More than 200 lawmakers and airline labor unions are urging Congress to provide another $32 billion in payroll support to the industry to protect jobs through the end of March 2021.

The lawmakers said they have started an investigation into the aid to contractors and said they found at least 12 that accepted more than $720 million in government support after laying off about 9,300 people.

Lawmakers said airline caterer Gate Gourmet is getting $171 million and that it has laid off more than 3,500 workers in California, Georgia, Illinois and New York.

"To ensure the long-term sustainability of our business in the U.S., layoffs and furloughs were necessary during these unprecedented times," said a spokeswoman for Gate Gourmet's Zurich-based parent, gategroup. "While never an easy decision, this has been done in accordance with our collective bargaining agreements."

The payroll support "to companies that engaged in mass layoffs is not only contrary to congressional intent, but also wastes taxpayer dollars by covering the cost of payroll for employees that have already been laid off," the lawmakers said in a letter to the company.

Unite Here, the labor union that represents workers at Gate Gourmet and Flying Food, another contractor that didn't immediately comment, called accepting the aid despite the cuts "reprehensible."

"These catering companies should be ashamed to have pocketed tens of millions of dollars and then left the workers that money was intended to support to fend for themselves by applying for state and federal unemployment benefits," said Meghan Cohorst, Unite Here's press secretary.

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