NEWSLETTER

The Fourth Circuit Court of Appeals has affirmed judgment in favor of US Airways in an ERISA lawsuit filed by a group of US Airways employees. See Difelice v. US Airways, Inc. (Aug. 1, 2007). The plaintiffs in this case represented employees who were participants in US Airways’ 401K Saving Plan who claimed US Airways, which was the plan administrator and named fiduciary for the Plan, breached its fiduciary duty owed under ERISA by retaining the Company Stock Fund as one of the investment options under the Plan after a federal court blocked the proposed merger of US Airways and United Airlines.

As the Plan administrator and named fiduciary, US Airways was responsible for selecting and terminating investment options available to Plan participants. One of the investment options was the Company Stock Fund through which participants could buy units of publicly traded US Airways Group Inc. stock (US Airways Group Inc. was US Airways’ parent company). The plaintiffs claim that US Airways had a duty under ERISA to close the Company Stock Fund in August 2001 because of US Airways’ dire financial prospects.

After certifying the class and holding a non-jury trial, the federal trial court ruled in favor of US Airways. The Fourth Circuit affirmed the trial court’s decision, holding that the lower court correctly concluded that US Airways met its fiduciary duty to engage in a reasoned, " ‘prudent’ decision-making process, using ‘appropriate methods to investigate the merits’ of retaining the Company Fund as an investment option."

The court noted that US Airways offered a number of different investment options to plan participants and allowed participants to transfer their investment funds freely between these diversified options. Additionally, plan participants could remove funds from the Company Fund without restriction. Furthermore, plan literature "repeatedly noted the risks associated with a non-diversified retirement portfolio in general, and the Company Fund in particular; US Airways explicitly informed participants, in words as well as through use of a clear graphic, that the Company Fund carried the highest risk of the available options." The court also found it significant that US Airways monitored the performance of the Company Fund and sought outside legal opinions with regard to its fiduciary duty requirements.

The Fourth Circuit noted that the heart of the employees’ case appeared to be the view that, given their losses and US Airways’ undisputed knowledge of its uncertain financial condition over the class period, US Airways must have violated ERISA’s "prudent man" duty when it continued to offer the Company Fund as a Plan option. Dismissing the case, the court stated: "[a]lthough we are not unsympathetic to the Employees’ losses, such a contention is not tenable."

A federal court in Texas recently refused to grant the Equal Employment Opportunity Commission’s (EEOC) motion for temporary injunction prohibiting Exxon from discharging its pilots when they reach age 60. See Equal Employment Opportunity Commission v. Exxon Mobil Corp. (May 30, 2007). In this case, several pilots who were discharged by Exxon when they turned 60 filed charges of discrimination with the EEOC, claiming their terminations violated the Age Discrimination in Employment Act (ADEA). The ADEA prohibits employers from discriminating against employees age 40 and older on the basis of age; however, the law permits an employer to discharge an employee on the basis of age where age is a bona fide occupational qualification (BFOQ).

The EEOC issued a determination finding the company’s policy of discharging pilots upon reaching age 60 violated the ADEA. Subsequently, the EEOC filed a complaint in federal court asking the court to enjoin the company from involuntarily retiring a class of pilots under its Age 60 policy. The court denied the EEOC’s motion, finding the agency failed to meet the requirements for obtaining a preliminary injunction.

First, the EEOC failed to demonstrate a substantial likelihood that it would prevail on the merits of its claim that Exxon violated the ADEA by discharging the Age 60 pilots. 

Exxon claimed that its policy requiring pilots to retire when they reach age 60 is identical to the FAA’s Age 60 Rule for commercial airline pilots and, thus, qualified as a BFOQ. The court agreed, holding that Exxon was entitled to rely on the expertise of the FAA and apply the Age 60 rule to its own pilots because there was no substantial difference between the work performed by commercial airline pilots and the work performed by Exxon’s pilots.

The court also held that the Age 60 Rule is a BFOQ because it is reasonably necessary for the safe operation of Exxon’s aircraft and it is impossible or highly impractical to determine on an individual basis whether a particular pilot’s age renders him or her unable to perform safely and efficiently. "Based on the FAA’s determination and the evidence before the court, Exxon’s Age 60 Rule is reasonably necessary to safely operate is corporate aviation department."

The court acknowledged that the FAA is considering changing the Age 60 Rule to permit a pilot or co-pilot to fly until age 65 as long as another crew member is under age 60. However, "until that change is made and since the Court has found Exxon to be congruent to a commercial airline, Exxon should be able to rely on the same standards that govern every commercial airline in this country."

The D.C. Circuit Court of Appeals has upheld the Federal Aviation Administration (FAA) regulations requiring drug and alcohol testing of all employees of air carriers including employees of contractors and subcontractors at any tier. See Aeronautical Repair Station Ass’n v. FAA (D.C. Cir. July 17, 2007). The plaintiffs in this case argued that the FAA exceeded its authority in extending the drug and alcohol testing requirements to employees of subcontractors at any tier and claimed the agency violated the Regulatory Flexibility Act when it promulgated the regulations. The D.C. Circuit upheld the substance of the regulations, but ordered the FAA to conduct studies in accordance with the RFA to determine the impact of the regulations on small employers. However, in light of the importance of the safety purposes furthered by the regulations, the court refused to defer enforcement of the rule against small entities until the RFA analysis is conducted.

The 1991 Omnibus Transportation Employee Testing Act (Omnibus Act) directed the FAA to promulgate alcohol and drug testing regulations. In accordance with the Omnibus Act, the FAA revised its drug testing regulations in 1994 and, for the first time, promulgated regulations for alcohol testing. Both the 1994 Drug Rule and the 1994 Alcohol Rule required that an "employer" test each covered "employee," defined as "a person who performs, either directly or by contract" any of eight listed "safety-sensitive" functions. Subsequently, the FAA revised its regulations to require testing employees who perform the listed functions "directly or by contract (including by subcontract at any tier)."The plaintiffs challenged the revised rule, claiming the FAA exceeded its statutory authority under the Omnibus Act by including employees of subcontractors at any tier and, specifically, employees of noncertificated repair subcontractors. The court rejected this argument, holding that the FAA’s interpretation of the language of the Omnibus Act was reasonable.

The Ominibus Act directed the FAA to prescribe regulations requiring air carriers to conduct drug and alcohol testing of "airmen, crewmembers, airport security screening contract personnel, and other air carrier employees responsible for safety-sensitive functions." The court held that the language of the Act is ambiguous with regard to whether the testing requirement applies to employees of all subcontractors and that the FAA reasonably concluded that the phrase "other air carrier employees" can include employees of an air carrier’s contractors as well as its direct employees.

Additionally, the court held that "noncertificated" subcontractors also reasonably could be treated as "other air carrier employees" and thus subject to mandatory testing under the Omnibus Act. Air carriers routinely contract with repair stations that are "certificated" under Part 145. A Part 145 repair station is authorized to "[p]erform maintenance, preventive maintenance, or alterations" on aviation components or to "[a]rrange for another person," that is, a subcontractor, whether certificated or not, "to perform the maintenance." If the subcontractor is not certificated, the certificated repair station must ensure that the noncertificated person follows a quality control system equivalent to the system followed by the certificated repair station, and must approve the aviation component for return to service.

The plaintiffs argued that a certificated subcontractor can be seen as acting as an alter ego of the air carrier, thus its workers can be fairly characterized as "air carrier employees" while noncertificated entities should not be considered air carrier employees. The court rejected this argument, noting that the Omnibus Act does not mention certification, but instead requires the FAA to determine those "safety-sensitive functions" – performed by other than "airmen, crewmembers, [and] airport security screening contract personnel" – subject to drug and alcohol testing and that the FAA has consistently and reasonably included aircraft maintenance work among such functions. Thus, the court held that it was not unreasonable for the FAA to require testing of maintenance employees, certificated or not, in order to ensure that all maintenance work, by whomever performed, is done properly and that each aviation component is safe for aviation use.

Changes To the No-Docking/Union Leave Reporting Requirements

Prior to the announced changes, the DOL took the position that union officials/employees who are also employed by an employer are not required to report payments received from their employer pursuant to a union leave or no-docking clause whereby the official/employee was paid by the employer for time spent on union business. With the DOL's changes, however, union officials/employees no longer have a blanket reprieve from the reporting requirements for such payments, although they will still be free of the reporting requirements to an extent.

With the change, payments need not be reported if: (1) such payments were for 250 hours or less during the course of the year; and (2) the payments were made pursuant to a clause in a collective bargaining agreement. If both elements are not met, the payments are reportable. So, if the union official/employee was paid for over 250 hours of union work, the official/employee must report the payments. Likewise, if the collective bargaining agreement does not contain union leave or no-docking language, the union official/employee must report the payment even if it is for less than 250 hours.

Changes To The De Minimis Exception

The DOL has excepted de minimis transactions from the reporting requirements of the LMRDA so long as the total dollar amount of such transactions is $250 or less. For example, if an employer gives $250 worth of money or gifts to a union official/employee over the course of a year, the transaction is not reportable. The DOL has changed the de minimis exception by stating that payments or gifts of $20 or less do not need to be included in determining whether the $250 has been met. Consider the example of an employer who gave a union official/employee a $200 watch, and also bought the official eight dinners at $20 each over the course of the year. In sum, the employer spent $360 on the union official/employee, but the official/employee is not required to report the transactions because the eight lunches do not need to be included in computing the threshold. The DOL has specifically noted, however, that multiple gifts or payments of $20 or less must be reported if it appears the arrangement was designed to avoid the disclosure requirements.

Capital Cargo International
Transfer of certification from Capital Cargo Crewmember Association to ALPA granted July 25, 2007.

Alaska Airlines
TWU lost an election to represent Flight Crew Training Instructors. Out of 24 eligible employees, there were 12 votes for TWU. Dismissal July 18, 2007.