Inquiry opened over layoffs at contractors given U.S. aid

WASHINGTON — Democratic lawmakers have opened an investigation into whether four aviation contractors violated provisions of the federal virus-relief measure by laying off thousands of workers despite receiving millions of dollars from the government to keep workers on the job.

An analysis by the House select subcommittee on the coronavirus crisis found that more than $500 million in federal funds went to four companies that have laid off more than 7,500 workers.

On Wednesday, lawmakers sent letters to the companies, including three that provide catering services to airlines: Flying Food Fare, Gate Gourmet and Swissport. A fourth, G2 Secure Staff, provides services to airports including baggage handling, wheelchair assistance and pre-departure screening, according to its website.

“Congress created this program to ‘preserve aviation jobs’ by providing wage assistance to companies in exchange for keeping workers on the payroll,” lawmakers wrote. “Giving payroll support to companies that engaged in mass layoffs is not only contrary to congressional intent, but also wastes taxpayer dollars by covering the cost of payroll for employees that have already been laid off.”

The letters — which urge the companies to rehire the employees or return a portion of the money — were signed by Reps. James Clyburn, D-S.C., chairman of the select subcommittee on the coronavirus crisis; Maxine Waters, D-Calif., chairwoman of the Financial Services Committee; and Peter DeFazio, D-Ore., chairman of the Transportation and Infrastructure Committee.

The lawmakers also are asking companies to provide information about their dealings with the Treasury Department, which administered the program, including whether company officials informed the government about layoffs that occurred between when an application for aid was submitted and when a final agreement was signed. Treasury officials noted that the Coronavirus Aid, Relief, and Economic Security Act does not require companies to rehire employees who were let go before the signing of an agreement.

According to the committee, Gate Gourmet laid off more than 3,500 workers in California, Georgia, Illinois and New York and is scheduled to receive $171 million through the measure.

In a statement, Nancy Jewell, a company spokeswoman, said any layoffs or furloughs were conducted in accordance with the company’s collective bargaining agreements.

Flying Food Fare laid off more than 800 employees in Arizona, California and Hawaii since the legislation was signed in late March, the committee said. It received $85 million from the act and also appears to have received loans through a separate Paycheck Protection Program aimed at helping small businesses. Company officials did not respond to a request for comment.

Meghan Cohorst, a spokeswoman for Unite Here, a union that represents workers at Flying Food Fare and Gate Gourmet, said that even before the layoffs, airline catering jobs were among the worst paid and the workers the worst treated in the industry.

“They’re exactly the type of person in the country who these federal funds were supposed to help,” Cohorst said. “We think that the behavior of these companies, especially Gate Gourmet and Flying Food Group, is reprehensible.”

Swissport is set to receive $170 million in payroll support funds, the secondhighest sum of any aviation contractor, the committee said. Records show that in the weeks before it signed its agreement, it laid off nearly 3,000 workers in Florida, Michigan, New York, Virginia and Washington. In a statement, Swissport said it has met all requirements under the virus-relief measure.

Similarly, the committee reported that officials at G2 Secure Staff — which is expected to receive $85 million under the federal program — laid off nearly 400 workers in California, Colorado, Georgia, Michigan and Virginia on the day the Cares Act was signed into law.

Daniel Norman, the company’s chief executive and president, said it welcomes “the opportunity to fully explain the actions we took, working closely and transparently with our employees and the SEIU [Service Employees International Union], to save jobs and benefit our workers just as Congress intended.”

In a letter sent to Treasury Secretary Steven Mnuchin, lawmakers expressed concerns about the handling of the program. “We urge Treasury to stop providing taxpayer-funded payroll support for workers that have been laid off and to recover any funds that were inappropriately awarded,” Clyburn, DeFazio and Waters wrote.

Treasury officials said they have implemented the law “as written,” adding that it has been critical to keeping workers on the job.