Contracting legislation, USA
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Contracting legislation, USA
Hello
I have been told a rumour that it is legally impossible to hire aircrew via a third party company in the USA. Is this correct?
Could anyone give me the legal basis for this claim and provide a reference?
In Europe it is legally possible (and increasingly normal) to sign a contract with a contracting agency tasked with hiring pilots on behalf of an air carrier.
Thanks in advance!
I have been told a rumour that it is legally impossible to hire aircrew via a third party company in the USA. Is this correct?
Could anyone give me the legal basis for this claim and provide a reference?
In Europe it is legally possible (and increasingly normal) to sign a contract with a contracting agency tasked with hiring pilots on behalf of an air carrier.
Thanks in advance!
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It's not legally impossible, it's just not very common. There's really not much need for that, most operators do their own HR management. Very occasionally you might see corporate operators turn to staffing agencies if they need people with some rare and specific skills (exotic languages, experiences in a particular country/airport and such), but even that's pretty rare.
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So it isn't illegal?
The reason why it's an increasing practice in Europe is because it frees the employer from legal responsibility. Labour rights are coupled to a formal employment contract between the air carrier and the pilot. Now pilots create and register a firm in their own name that signs a professional contract with a third party crewing company. Being in effect a contract between two contracting agencies it frees the air carrier from all employment obligations. It also robs pilots of the right to strike, shifting the balance of power heavily towards the employer and effectively empowering them to dictate employment standards altogether.
The competition in the US is harsh, just like in Europe. I would guess this would be an attractive option for american air carriers if they had the opportunity.
The reason why it's an increasing practice in Europe is because it frees the employer from legal responsibility. Labour rights are coupled to a formal employment contract between the air carrier and the pilot. Now pilots create and register a firm in their own name that signs a professional contract with a third party crewing company. Being in effect a contract between two contracting agencies it frees the air carrier from all employment obligations. It also robs pilots of the right to strike, shifting the balance of power heavily towards the employer and effectively empowering them to dictate employment standards altogether.
The competition in the US is harsh, just like in Europe. I would guess this would be an attractive option for american air carriers if they had the opportunity.
So it tranfers legal responsibility for what?
At the larger carriers the union negotiates a contract with the airline. If you receive an offer of employment it will reference the collective bargaining agreement. You agree to bound by the terms of the contract. If there is no union contract there will be (you hope) some sort of employee handbook outlining the T&Cs.
You could say the airlines are in effect an employment agency. At the major airlines in the US there is usually a "holding company." AMR corporation owns American Airlines and American Eagle. They could in theory (and in the case of Eagle may well) move the flying to another airline. There is normally a whole chapter in the contract covering "scope." It will say something like "all flying under the (airline name) will be done by employees covered by this contract." The unions would like to have scope apply to the holding company but there is really no way to do that since you are not an employee of the holding company. AMR could create a whole new company (American Vulture?), move all their RJ flying to Vulture and shutdown Eagle.
At the larger carriers the union negotiates a contract with the airline. If you receive an offer of employment it will reference the collective bargaining agreement. You agree to bound by the terms of the contract. If there is no union contract there will be (you hope) some sort of employee handbook outlining the T&Cs.
You could say the airlines are in effect an employment agency. At the major airlines in the US there is usually a "holding company." AMR corporation owns American Airlines and American Eagle. They could in theory (and in the case of Eagle may well) move the flying to another airline. There is normally a whole chapter in the contract covering "scope." It will say something like "all flying under the (airline name) will be done by employees covered by this contract." The unions would like to have scope apply to the holding company but there is really no way to do that since you are not an employee of the holding company. AMR could create a whole new company (American Vulture?), move all their RJ flying to Vulture and shutdown Eagle.
Last edited by MarkerInbound; 13th Jul 2013 at 23:43.
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AMR could create a whole new company (American Vulture?), move all their RJ flying to Vulture and shutdown Eagle
Yeah, was just trying to point out the differences in the US.
So Ryan tells European Pilot Hiring Corp they need a pilot. EPHC puts the word out they're hiring. I'm guessing there are stated T&Cs but what's to keep SJS(Shiny Jet Syndrome), llc from saying they'll take the job at 80% of the stated T&Cs. If each pilot is an individual contractor you could end up with everyone having their own deal.
I just can't see what's in it for the contracting company.
So Ryan tells European Pilot Hiring Corp they need a pilot. EPHC puts the word out they're hiring. I'm guessing there are stated T&Cs but what's to keep SJS(Shiny Jet Syndrome), llc from saying they'll take the job at 80% of the stated T&Cs. If each pilot is an individual contractor you could end up with everyone having their own deal.
I just can't see what's in it for the contracting company.
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That's exactly why it's done. The airlines effectively eradicate legal employment rights and hire at increasingly tougher T&C's. The crewing agencies take a share in the difference.
I'm very surprised that the US, with relatively liberal legal employment practices in general, hasn't yet seen operators go down this road. This is one of the foundations on which one of Europes biggest carriers, Ryanair, has built their operation.
Also, Norwegian Long Haul (NLH) are planning long haul operations with the 787 out of the US based on this model quite soon. I'm having trouble seeing how carriers with unionized pilot groups can compete with the cost structure of NLH with staff working for half the salary. That has been the paradigm in european aviation the last 10 - 15 years.
I'm very surprised that the US, with relatively liberal legal employment practices in general, hasn't yet seen operators go down this road. This is one of the foundations on which one of Europes biggest carriers, Ryanair, has built their operation.
Also, Norwegian Long Haul (NLH) are planning long haul operations with the 787 out of the US based on this model quite soon. I'm having trouble seeing how carriers with unionized pilot groups can compete with the cost structure of NLH with staff working for half the salary. That has been the paradigm in european aviation the last 10 - 15 years.
KN,
Remember the US airlines didn't have to use contracting because of liberal US labor laws. The Europeans had tough laws on hiring, but especially on firing; expensive tax systems; until EU, labor could mostly only work within their own country, that is, national airlines. With integration, any line can hire among the Continent, hence far more competition amongst labor and more opprtunitity for labor to get into aviation. Ryan Air, Easy Jet could never have operated prior to EU integration. Contracting is, as much as anything, a way around the restrictive labor laws.
GF
Remember the US airlines didn't have to use contracting because of liberal US labor laws. The Europeans had tough laws on hiring, but especially on firing; expensive tax systems; until EU, labor could mostly only work within their own country, that is, national airlines. With integration, any line can hire among the Continent, hence far more competition amongst labor and more opprtunitity for labor to get into aviation. Ryan Air, Easy Jet could never have operated prior to EU integration. Contracting is, as much as anything, a way around the restrictive labor laws.
GF
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Hello galaxy flyer,
Of course you're right. The system in play in Europe today is a result of a liberalization of legislation. What I don't understand, on the other hand, is how Europe ended up with this system whereas the US hasn't. I am guessing there is a legislative reason for this, because if not, US carriers are going to have a real tough time competing against the likes of Norwegian Long Haul (NLH).
If the US has survived because there hasn't been any real competition from low cost long haul carriers from Europe, then the US future may be tough. Then "fairly liberal employment laws" won't cut it, because pilots and cabin crews in these types of operations have absolutely no formal employment rights. They are extremely "cost effective".
NLH's model runs on pilots without any unionized rights whatsoever. The cabin crew is the same. As of now they employ thai CC for flights "connecting" in Oslo, Norway, but in reality they've switched Norwegian CC's with thai. If they can they will use this model in the US also. How can then unionized carriers compete? That's why I hope you guys have legislative barriers when it comes to these types of organizations.
Of course you're right. The system in play in Europe today is a result of a liberalization of legislation. What I don't understand, on the other hand, is how Europe ended up with this system whereas the US hasn't. I am guessing there is a legislative reason for this, because if not, US carriers are going to have a real tough time competing against the likes of Norwegian Long Haul (NLH).
If the US has survived because there hasn't been any real competition from low cost long haul carriers from Europe, then the US future may be tough. Then "fairly liberal employment laws" won't cut it, because pilots and cabin crews in these types of operations have absolutely no formal employment rights. They are extremely "cost effective".
NLH's model runs on pilots without any unionized rights whatsoever. The cabin crew is the same. As of now they employ thai CC for flights "connecting" in Oslo, Norway, but in reality they've switched Norwegian CC's with thai. If they can they will use this model in the US also. How can then unionized carriers compete? That's why I hope you guys have legislative barriers when it comes to these types of organizations.
Last edited by KristianNorway; 25th Jul 2013 at 13:18.
KN,
To try to answer your very valid points, here goes. US airline union contracts have section on "scope of work" which defines, really restricts. Who will do what flying. The ompany's agreement is all flying will be done with pilots under the contract subject to some exceptions. For example, the ALPA contract at Delta says all flying done by the Corporation will be flown by pilots on the DL seniority list. The exceptions are for up to 450 regional jets of all sizes, of which, only 325 can be of 76 seats weighing no more than 86,000 pounds. There are also provisions for joint ventures like AF on specific routes and similarily with Alaska on specific routes with limits on passengers carried. It used to be very simple--all flying was done by ALPA pilots, period, but bankruptcies up paid to those contracts.
I agree that theoretically the companies here could do contracts, but it just isn't done here for reasons that might be cultural more than anything. Remember, any non-union employees here are employed at the discretion of the employer. If XYZ airline hired its own employees, they could fire any pilot they wanted without much restriction from the government. No need to contract out.
Yes, NULH and all the others are going to hurt all "legacy" carriers as long as cheap labor is there.
GF
To try to answer your very valid points, here goes. US airline union contracts have section on "scope of work" which defines, really restricts. Who will do what flying. The ompany's agreement is all flying will be done with pilots under the contract subject to some exceptions. For example, the ALPA contract at Delta says all flying done by the Corporation will be flown by pilots on the DL seniority list. The exceptions are for up to 450 regional jets of all sizes, of which, only 325 can be of 76 seats weighing no more than 86,000 pounds. There are also provisions for joint ventures like AF on specific routes and similarily with Alaska on specific routes with limits on passengers carried. It used to be very simple--all flying was done by ALPA pilots, period, but bankruptcies up paid to those contracts.
I agree that theoretically the companies here could do contracts, but it just isn't done here for reasons that might be cultural more than anything. Remember, any non-union employees here are employed at the discretion of the employer. If XYZ airline hired its own employees, they could fire any pilot they wanted without much restriction from the government. No need to contract out.
Yes, NULH and all the others are going to hurt all "legacy" carriers as long as cheap labor is there.
GF
