UNITE HERE Dispute with Sky Chefs Back on the Plate

Los Angeles, CAUNITE HERE International Union's California labor lawsuit against Sky Chefs Inc. is back on the plate. The Ninth Circuit ruling in December reversed U.S. District Judge Percy Anderson's dismissal in May 2022 of the Union's lawsuit which challenged unilateral wage and benefits changes made by the airline catering company on its employees at Los Angeles International Airport.

Judge Anderson deemed the complaint as a "minor dispute" under the Railway Labor Act that must be resolved in arbitration. The dispute occurred in April 2022 when Sky Chefs replaced its employee healthcare plan called the Consumer-Driven Health Care Plan with the Copay Healthcare Plan (LAX Plan) for which Sky Chefs pays 100% of individual employees' premiums.

Sky Chefs said this was a better plan for its employees, but it failed to negotiate with the union over the switch despite the union's demand to do so.  According to the union, Sky Chefs claimed that improving its healthcare offerings meant it no longer needed to pay its employees higher wages to comply with a Los Angeles city ordinance called the Living Wage Ordinance (LOW). And that is how it reduced workers' wages.

Minor v Major Dispute

According to court documents, UNITE HERE sees this case as a “major dispute”:

"Where an employer asserts a contractual right to take the contested action, the ensuing dispute is minor if the action is arguably justified by the terms of the parties' collective-bargaining  agreement. Where, in contrast, the employer's claims are frivolous or obviously insubstantial, the dispute is major." Although Sky Chefs may unilaterally raise wages under the collective bargaining agreement (the Master National Agreement (MNA)) per the Management Rights provision, Sky Chefs cannot lower wages without negotiation… Sky Chefs lowered certain employees' wages by as much as $5.67 per hour.”

The MNA, which predates the LWO, makes no distinction between "health benefit wages" and "cash wages," and the health benefits are not less expensive for employees who need coverage for spouses or children. Sky Chefs' changes therefore go beyond "merely offering better health benefits through a different means," and instead violate the express terms of the MNA, giving rise to a single, "major dispute." 

Sky Chefs argued that it has complied with the MNA's wage requirements, and it “has simply ceased padding workers' paychecks to comply with the LWO now that it is complying in a different way — by offering better benefits,” reported Law360.

UNITE HERE’s labor report in October 2019 proposed a $15/hour minimum wage floor, higher annual raises for all employees, and increased spending on health benefits, which Sky Chefs rejected. [In 2019], hourly wages range from $8.40 - $28.50 with 57% of employees earning less than $15. Workers pay expensive premiums for health insurance, at a cost of over $500/month for family coverage. As of 2018, only 34% of LSG Sky Chefs’ US employees had any employer-provided health insurance coverage and only 9% had coverage for a family member or child.

Sky Chefs argued that the union’s economic proposals would “more than double” the current cost of labor. The airline catering company told the press and the US government that that the scope of the proposed changes would radically alter the cost structure of its business. It wrote a letter to the US National Mediation Board stating: “The Union’s current economic proposals cumulative cost is more than $1.5 billion dollars over 4 years. The year 1 impact is $279 million dollars, which is approximately a 70% cost increase. Simply stated, if the Company were to accede to the demands of the union, we would ultimately be out of business.”

Perhaps the company would go out of business because its employees can’t make a living wage…
The case is UNITE HERE International Union v. Sky Chefs Inc., case number 22-55608, in the U.S. Court of Appeals for the Ninth Circuit.