Air UK Leisure did this years ago (1991) when Air Europe went bust - took on a load of ex Air Europe B737 DEC and put them at the bottom of the seniority list.
Suitably qualified, and senior enough, individuals couldn’t upgrade or transfer.
Every suitable FO above first DEC at bottom of list should get passover pay - but that won’t happen.
i learned my lesson about the limitations of seniority lists at an early stage of my career.
Company can do what it wants - at least you know where you stand now.