CX US based staff get the CX treatment
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CX US based staff get the CX treatment
It appears the CX commitee which decides what heinous actions to take against its employees is keeping busy and has now come up with this:
Hundreds of US-based cabin crew face loss of welfare benefits as Cathay Pacific halts payments | South China Morning Post
To be honest, the word has been circulating for a while, but it only hit the South China a few days ago.
A word out to the SCMP, by the way, which seems intent on not letting CX get away with any of their contemptible behavior.
Hundreds of US-based cabin crew face loss of welfare benefits as Cathay Pacific halts payments | South China Morning Post
To be honest, the word has been circulating for a while, but it only hit the South China a few days ago.
A word out to the SCMP, by the way, which seems intent on not letting CX get away with any of their contemptible behavior.
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So CX does not intend to pay social security etc. etc... again?! mmm where did we see this before...Paris.
Admittedly different laws and regs, but here we go again, giving staff the shaft.
Can't wait for the next weekly email telling us how wonderful we are, how appreciative they are, while sliding in the blade.
Still...maybe Greg Beni**** can get another promotion out of this
Admittedly different laws and regs, but here we go again, giving staff the shaft.
Can't wait for the next weekly email telling us how wonderful we are, how appreciative they are, while sliding in the blade.
Still...maybe Greg Beni**** can get another promotion out of this
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Oasis--short answer is yes (meaning how the law applies; to the best of my knowledge FICA was never deducted and the programs never entered in the first place for them). There is an exemption ability for duties operated solely as part of an international flight. For example, a flight from SFO to HKG could be exempted. As could a flight from SFO to ANC because it departed the US and flew through non-domestic airspace for a substantial portion of the flight. A flight from ANC-DFW could also be exempted but not a flight from DFW-ATL, LAX-ATL, LAX-SFO, etc.
As I'm sure you know tax law within the US is extremely complex and the interpretations often vary (and are even sometimes reversed by the IRS). The employer has the option to 'opt in' or not if the flight is solely an international one with the particular group of employees. Both the employee and the employer share in the costs of FICA and medicare. While there are opinions on all sides as to whether or not this would be good for the employee, obviously reversing horses in mid stream isn't acceptable to anyone. And more importantly highlights the entity and throws a bunch of flags toward regulatory entities as to why this happened. And the who that looks into the issue may well not be the person you might have spoken with AT that regulatory body.
Much like if you called and asked if you could deduct commuting expenses. Depending on how you phrased it an IRS rep (or tax attorney) might say 'yes' (i.e. If it was for tips or uncompensated laundry expenses), but in general most of these expenses are in reality non-deductible. So if you made a blanket deduction you could later find yourself in trouble--and not know you were in trouble until an audit happened and SHTF.
There are also other payments that occur as part of the job which could be subject to FICA (i.e. What happens for ground/reserve duties compensated but not part of a flight, positioning flights between US destinations--like SFO to JFK, paid online learning, etc.). It's not particularly difficult to segregate the domestic duties and payments from the international ones, but it is something that has to be done. Overall, it's probably easier for the company simply to opt in from an accounting perspective--but they could save money by fractionally opting out if it were done in the conrrect manner.
What isn't acceptable I think really to anyone is (without consultation and by directing 'this is so') taking a position that you 'opt in' and then later saying you are 'opting out.' This would be hard to justify on many levels--not the least of which is it would appear to be a tax dodge and leaves those accumulating credits out in the cold and without benefits. What the F/A's need to do is sign nothing in the near term, organize, get competent tax and legal advice, and find out (given the specifics of the situation) if this is even legal. My guess would be no--other than the domestic duty issue the circumstances haven't changed (i.e. It's the same group of folks under the same set of conditions as before). My guess also is that if they HAVE asked the question the inconvenient specifics of the operation might have been left out (some of which COULD well subject them to FICA).
So it's a huge self-generated quagmire. Not to mention things like SDI. In the US you have to have SOME form of ability to deal with injuries on duty--now that could be an equivalent level of self-insurance, etc. But you can't just dump folks in the cold without recourse (not saying that's what happened in this arena because I don't know if the F/As have been offered an equivalent level of self insurance for short and long term disability -- which might in practice be better than entering the statutory disability world).
The BEST solution would have been to simply leave things alone (at least as FICA and medicare are concerned). I do think if the F/As pursue this in depth (assuming that the company didn't offer them something which would be in the long run better than having Social Security) they can open a huge can of worms and ultimately prevail; the main problem is the US regulatory genie is something that is best left in the bottle.
As I'm sure you know tax law within the US is extremely complex and the interpretations often vary (and are even sometimes reversed by the IRS). The employer has the option to 'opt in' or not if the flight is solely an international one with the particular group of employees. Both the employee and the employer share in the costs of FICA and medicare. While there are opinions on all sides as to whether or not this would be good for the employee, obviously reversing horses in mid stream isn't acceptable to anyone. And more importantly highlights the entity and throws a bunch of flags toward regulatory entities as to why this happened. And the who that looks into the issue may well not be the person you might have spoken with AT that regulatory body.
Much like if you called and asked if you could deduct commuting expenses. Depending on how you phrased it an IRS rep (or tax attorney) might say 'yes' (i.e. If it was for tips or uncompensated laundry expenses), but in general most of these expenses are in reality non-deductible. So if you made a blanket deduction you could later find yourself in trouble--and not know you were in trouble until an audit happened and SHTF.
There are also other payments that occur as part of the job which could be subject to FICA (i.e. What happens for ground/reserve duties compensated but not part of a flight, positioning flights between US destinations--like SFO to JFK, paid online learning, etc.). It's not particularly difficult to segregate the domestic duties and payments from the international ones, but it is something that has to be done. Overall, it's probably easier for the company simply to opt in from an accounting perspective--but they could save money by fractionally opting out if it were done in the conrrect manner.
What isn't acceptable I think really to anyone is (without consultation and by directing 'this is so') taking a position that you 'opt in' and then later saying you are 'opting out.' This would be hard to justify on many levels--not the least of which is it would appear to be a tax dodge and leaves those accumulating credits out in the cold and without benefits. What the F/A's need to do is sign nothing in the near term, organize, get competent tax and legal advice, and find out (given the specifics of the situation) if this is even legal. My guess would be no--other than the domestic duty issue the circumstances haven't changed (i.e. It's the same group of folks under the same set of conditions as before). My guess also is that if they HAVE asked the question the inconvenient specifics of the operation might have been left out (some of which COULD well subject them to FICA).
So it's a huge self-generated quagmire. Not to mention things like SDI. In the US you have to have SOME form of ability to deal with injuries on duty--now that could be an equivalent level of self-insurance, etc. But you can't just dump folks in the cold without recourse (not saying that's what happened in this arena because I don't know if the F/As have been offered an equivalent level of self insurance for short and long term disability -- which might in practice be better than entering the statutory disability world).
The BEST solution would have been to simply leave things alone (at least as FICA and medicare are concerned). I do think if the F/As pursue this in depth (assuming that the company didn't offer them something which would be in the long run better than having Social Security) they can open a huge can of worms and ultimately prevail; the main problem is the US regulatory genie is something that is best left in the bottle.
Last edited by Shep69; 26th Oct 2016 at 13:21.
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Shep69, this is from California law (my bolding):
648. "Employment" does not include service performed on or in
connection with a vessel or aircraft not an American vessel or an
American aircraft, if the employee is employed on and in connection
with such vessel or aircraft when outside the United States.
This is interpreted by those more educated on these matters than I as meaning that if the employee EVER does any work on or in connection with the aircraft WHEN outside of the United States, or if the employee MAY be ASSIGNED to do work (i.e. EMPLOYED on or in connection with) on the aircraft WHEN outside of the United States, the exemption applies to ALL work done by the employee. Therefore, any domestic sectors or ground duties would also be exempt.
Also, an employer cannot opt-in to FICA, just like a worker cannot, on his or her own volition, contribute to FICA if he or she performs work which is not considered employment by the FICA laws.
No one in the US or California government said, "Hey! Cathay! Stop sending us money!" However, the intent of the law is that if performance of work is not considered employment, an employer (or an employee) cannot arbitrarily decide to call it work and then contribute to FICA.
I think Cathay is correct in stating that it has no option to continue FICA contributions, even if it wanted to do so. The question remains: what happens to the contributions already made?
SDI is exempted, as well, by California law in the same manner as FICA.
648. "Employment" does not include service performed on or in
connection with a vessel or aircraft not an American vessel or an
American aircraft, if the employee is employed on and in connection
with such vessel or aircraft when outside the United States.
This is interpreted by those more educated on these matters than I as meaning that if the employee EVER does any work on or in connection with the aircraft WHEN outside of the United States, or if the employee MAY be ASSIGNED to do work (i.e. EMPLOYED on or in connection with) on the aircraft WHEN outside of the United States, the exemption applies to ALL work done by the employee. Therefore, any domestic sectors or ground duties would also be exempt.
Also, an employer cannot opt-in to FICA, just like a worker cannot, on his or her own volition, contribute to FICA if he or she performs work which is not considered employment by the FICA laws.
No one in the US or California government said, "Hey! Cathay! Stop sending us money!" However, the intent of the law is that if performance of work is not considered employment, an employer (or an employee) cannot arbitrarily decide to call it work and then contribute to FICA.
I think Cathay is correct in stating that it has no option to continue FICA contributions, even if it wanted to do so. The question remains: what happens to the contributions already made?
SDI is exempted, as well, by California law in the same manner as FICA.
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The obvious is being missed here: the CX ground staff in the US are legally employed US employees, with all associated benefits. It seems likely that the US based cabin crew have been fooled into thinking all along that they were of the same status. The answer is for CX to employ all cabin staff in a US based legal business entity. Of course, now that the truth has been revealed, they will probably just threaten to close the US base if the cabin crew insist on such a resolution. Once again, the "caring employer" at it's best. To the rest of you who think trusting CX with you career is a viable option....well, good luck with that. 
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Yup Oval and good discussion. And that's exactly what it will come down to. This is mirrored in 26USC 3121 section b (4) as well as several other publications (there are other amplifications to this and guidance pamphlets from the IRS as well).
https://www.law.cornell.edu/uscode/text/26/3121
Like I said tax law is a huge quagmire so I'm understandably leery about those who seem more well educated but advocate something that doesn't sound right.
Does the intent of the rule mean that income sourced for operations/personnel in the US be taxed and subjected to FICA (as well as the other disability requirements), or that ALL income can be excluded (meaning FICA and coverage) simply by it being a foreign aircraft with US nationals operating it (albeit one that touches and flies between US ports from time to time--but mostly flies internationally) ?
Perhaps I expressed myself badly by using the term 'opt in.' What I meant was that for the purposes of SDI and FICA one can either claim they are completely excluded from it (as has been just done), or they can acknowledge they are essentially operating within the US with US nationals employed at bases there and pay the FICA (at least for the portion that is sourced to within the US).
So here is the situation. You have a foreign corporation with a US base(s) (and a license for its entity at a physical location in San Fran to do so which is where the US nationals are employed--albeit d/b/a as a foreign corporation) employing US nationals/PRAs living there (some of whom are CA residents) and paying them in US dollars to US banks. Some of its aircraft operate within the CONUS point to point (most don't and operate internationally), some of its employees are paid for duties which originate and terminate solely between points within the US (as well as while sitting on the ground in the US). Every other US statue applies to them regarding work conditions at the US bases--as well as many as they operate internationally. If one of them is injured (or indigent) they will (as US nationals/PRAs) be applying for disability and/or relief in their home nation (the US) and state (state of basing at least).
Not to mention that (as US nationals) they are paying full US taxes on all income derived there (with a credit toward that paid to HKG for the fraction of days spent in HKG).
How would you like to argue the case that they are somehow exempt ?
Perhaps I am missing something but I wouldn't like to make that case. AND (in the US) when you find one law that tells you can do something screwy (especially with the government and its money), there's often another one that you missed that tells you that you can't.
It also invites scrutiny as to why exactly IS the entity a d/b/a rather than a 'normal' American satellite branch of a company. Perhaps there are excellent reasons for this. Eventually the duck winds up quacking so there isn't alot of shield for a foreign corporation in the US compared to a locally established entity--at least in terms of the reach of the law of the land and practical implications.
So as I said I'd probably have left just well enough alone. But I guess we'll see.
And, like I said, the F/As really need to get organized as well as get some competent legal advice about their situation. I'd sign nothing in the mean time.
Despite the cynicism here I do believe that if it comes to pass that bona-fide tax overpayments were made the F/As would get their money back (as well as would the company)--but in so doing might lose any SS credits in the process. But this issue is way over the heads of ordinary working stiffs like us and rather than a "we're going to do this so sign here" type of approach they need an entity to assist them that really knows what it's doing.
https://www.law.cornell.edu/uscode/text/26/3121
Like I said tax law is a huge quagmire so I'm understandably leery about those who seem more well educated but advocate something that doesn't sound right.
Does the intent of the rule mean that income sourced for operations/personnel in the US be taxed and subjected to FICA (as well as the other disability requirements), or that ALL income can be excluded (meaning FICA and coverage) simply by it being a foreign aircraft with US nationals operating it (albeit one that touches and flies between US ports from time to time--but mostly flies internationally) ?
Perhaps I expressed myself badly by using the term 'opt in.' What I meant was that for the purposes of SDI and FICA one can either claim they are completely excluded from it (as has been just done), or they can acknowledge they are essentially operating within the US with US nationals employed at bases there and pay the FICA (at least for the portion that is sourced to within the US).
So here is the situation. You have a foreign corporation with a US base(s) (and a license for its entity at a physical location in San Fran to do so which is where the US nationals are employed--albeit d/b/a as a foreign corporation) employing US nationals/PRAs living there (some of whom are CA residents) and paying them in US dollars to US banks. Some of its aircraft operate within the CONUS point to point (most don't and operate internationally), some of its employees are paid for duties which originate and terminate solely between points within the US (as well as while sitting on the ground in the US). Every other US statue applies to them regarding work conditions at the US bases--as well as many as they operate internationally. If one of them is injured (or indigent) they will (as US nationals/PRAs) be applying for disability and/or relief in their home nation (the US) and state (state of basing at least).
Not to mention that (as US nationals) they are paying full US taxes on all income derived there (with a credit toward that paid to HKG for the fraction of days spent in HKG).
How would you like to argue the case that they are somehow exempt ?
Perhaps I am missing something but I wouldn't like to make that case. AND (in the US) when you find one law that tells you can do something screwy (especially with the government and its money), there's often another one that you missed that tells you that you can't.
It also invites scrutiny as to why exactly IS the entity a d/b/a rather than a 'normal' American satellite branch of a company. Perhaps there are excellent reasons for this. Eventually the duck winds up quacking so there isn't alot of shield for a foreign corporation in the US compared to a locally established entity--at least in terms of the reach of the law of the land and practical implications.
So as I said I'd probably have left just well enough alone. But I guess we'll see.
And, like I said, the F/As really need to get organized as well as get some competent legal advice about their situation. I'd sign nothing in the mean time.
Despite the cynicism here I do believe that if it comes to pass that bona-fide tax overpayments were made the F/As would get their money back (as well as would the company)--but in so doing might lose any SS credits in the process. But this issue is way over the heads of ordinary working stiffs like us and rather than a "we're going to do this so sign here" type of approach they need an entity to assist them that really knows what it's doing.
Last edited by Shep69; 26th Oct 2016 at 19:38.
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Shep69, lots of good points. My bottom line is that I don't think the law was originally meant to apply to Cathay's US-based crew, rather crew of Qantas (for example) who fly LHR-JFK-LAX-SYD.
We'll see what happens...
Oh, and the entity is not a d/b/a. It's a foreign corporation registered with the Secretary of State of California. It has to comply with all US laws which apply to its operations and employees in the US. Unfortunately, this exempts it from FICA, FUTA and since the states' disability insurance law is due to a mandate by the federal government, SDI.
We'll see what happens...
Oh, and the entity is not a d/b/a. It's a foreign corporation registered with the Secretary of State of California. It has to comply with all US laws which apply to its operations and employees in the US. Unfortunately, this exempts it from FICA, FUTA and since the states' disability insurance law is due to a mandate by the federal government, SDI.
