Mnuchin Says United Complying With Virus Law Despite Layoffs
(Bloomberg) -- United Airlines Holdings Inc. is complying with the law as it takes $4.95 billion in federal aid yet still plans to lay off thousands workers later in the year, according to Treasury Secretary Steven Mnuchin.
The $2.2 trillion pandemic relief law, called the Cares Act, requires companies to refrain from layoffs until the end of September in exchange for federal aid. United, which is taking the third-largest amount of the money, this month announced it would lay off 3,800 workers in October, as soon as that restriction lifts.
“We believe right now that they’re in compliance with the program,” Mnuchin said Tuesday in response to a question during a Senate Banking Committee hearing.
A key goal of the Cares Act is to keep people from losing jobs. The bill included separate programs to help small- and medium-sized businesses cope with coronavirus-related closures.
Still, more than 36 million people have lost their jobs in two months as a result of social distancing measures and stay-at-home orders. Mnuchin has warned that economic data will continue to be dire through June before a recovery begins.
Mnuchin faced questions from several lawmakers on how his implementation of the law is directly helping workers. Senator Sherrod Brown, an Ohio Democrat, asked if businesses accepting federal relief were being required to maintain their payroll levels.
‘Spirit of the law’
“I am following what was the exact letter and spirit of the law that we negotiated with you and others on a bipartisan basis,” Mnuchin said.
The restrictions on layoffs don’t apply to companies getting loans through the Fed. Still, both Treasury and the Fed have discretion on making loans. Some lawmakers said the agencies should use that power to force companies to keep their employees on the payroll.
“The law gives Treasury and the Federal Reserve the authority to write rules determining which companies get taxpayer relief and how they can spend that money,” Warren said to Mnuchin. The two agencies must “require, as part of the terms of the loan, that companies be required to keep people in their jobs.”
An updated term sheet the Fed released last month left the door open to layoffs at medium-sized businesses tapping its Main Street loan program. The Fed said participants “should make commercially reasonable efforts to maintain its payroll and retain its employees” while the loan is outstanding.
“In the Main Street facility we have put in a provision that we expect people to use their best efforts to support jobs,” Mnuchin said. “The airlines had specific requirements, and we are” following those.
Warren found this to be in violation of the “spirit” of the Cares Act: “You’re telling me you’re not going to require them to keep jobs.”
A congressional oversight panel is gearing up to ask the Treasury similar questions. The watchdog panel overseeing Fed and Treasury aid programs said this week it wants to know the impact on “overall employment” and the “financial well-being of the people” in the U.S.
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