Will the Healthy Terminals Act Lead to Unhealthy Airport Employer Financial Statements

The articles in the New York press regarding the Healthy Terminals Act tested our resolve to get the most informative and balanced information from whatever sources had thorough clear and readable details on New York State Bill # S6266D

The Bill

The Healthy Terminals Act was passed by the New York Legislature in the summer of 2020 and signed into law by Governor Cuomo on December 31st, and the ramifications will begin to take affect after the special panel decides on wages and benefits that will apply to the “covered” workers. * 

When the Governor signed the bill, the “fiscal officer,” usually the Comptroller of a city, will determine the prevailing wage every September 1st beginning in 2021 “for the various classes of covered airport workers in the locality.”  “Wage” includes the “basic hourly cash rate of pay” and a supplemental benefits rate for fringe benefits.

The end-game of passage, unless employers seek legal recourse, are threefold; an increase in wages and benefits for covered employees, an increase in costs for airlines and airport vendors, and a possible extension of wage increases and benefits to union workers outside the periphery of the airport, who supply products or services to airports, or directly support the airports mission.  Unions need dues and dues comes from signing up a new worker.

The Act compels covered airport employers to provide an unspecified, but likely substantial increase in wages and benefits for covered employees. Under the Act, cities will set a prevailing hourly rate for covered airport workers starting September 2021 and subject to annual revision thereafter. The Act also creates an obligation for covered employers to provide fringe benefits, such as health insurance, life insurance, unemployment benefits, and other benefits not required by federal, state, or local law.

As currently drafted, the Act has an expansive scope and applies to air carrier employees as well as employees covered by collective bargaining agreements. At the same time, the Act appears to override existing bargained-for rates of pay and benefits. 

Passage Impacts and Background

What is known is that employer costs will rise and therefore prices to both non-aviation people as well as consumers of direct airport products. What we do not know is the full financial impact of the bill since the final wages and benefits will not be known until a “fiscal officer” figures it out. This fiscal officer will probably be the city comptroller. Does this refrain sound familiar?

The New York Daily News was the local media that did surface coverage of the bill’s passage, and further investigation was necessary to discover all the details. The bill could end up to be a hotly contested topic, especially if SEIU tries to broaden the coverage to a wider circle of companies. 

When you talk about worker’s salaries you are only looking at the tip of the iceberg at the true cost of an employee. At the international company I worked for, all departments doing budgets had to add 40% to wages before arriving at what they called, total cost per employee. This covered benefits, training, cost to house and cost of technical support. And then build the budget on that basis, not simply salary.  

Wages and benefits are such a hot topic, it is for most businesses large or small, the biggest budget item on their balance sheet. This is always controversial because the great majority of people working in private industry do not have the same benefits accruing to government or semi-government agencies. These fringe benefits such as pensions, paid health care coverage and liberal holiday and vacation policies are the equivalent of salary increase for the private sector. This is why I believe the bill as written is a cost impediment to stay or be a new investor in airport employers.   

Will affected employers sue for damages? The Act appears to override existing bargained-for rates of pay and benefits. Given the potential impact of the Act, it likely will create another showdown between a state government and air carriers involving preemption challenges under the Railway Labor Act, the Airline Deregulation Act, and the dormant Commerce Clause.

The real rub is using their power as political leaders, and as a legal monopoly to force the private companies who work in the airports to substantially raise their costs, and therefore the prices paid by airport and airline customers. If they are successful in this gambit, who’s to say if they also increase their airport rule making coverage to vendors who provide products and services to airports, or even firms adjacent to airports such as warehouses. 

Having this kind of power is a delicate thing because the combination of governmental power and the fact that a monopoly of sorts runs the airports, you have a situation causing competition to become irrelevant. The plans and actions they take cannot be under-cut by a competitor. 

Economics is a powerful motivator and the water torture of taxes, fees and regulations wears businesses and the people that work in them down. The eventual move to tax friendlier locations happens no matter how much people would prefer to stay in the place where their memories live.  

The Pandemic Becomes a Political Tool

Even worse, why does a state government use a pandemic as a way to goad private companies to raise wages and provide additional benefits? The windfall to SEIU and its workers is breathtaking; and for different reasons, it’s also breathtaking for us NY State taxpayers. The guy sitting at the ledger has to balance out all these goodies with taxpayer money. 

When an airline has to raise fares because of airport related charges, it is the average Joe paying the increases. When the government levies a corporate tax, it is Joe consumer that pays that bill as well. When I hear people saying; “let the corporations pay more taxes to fill budget deficits” they do not understand the full ramifications of the process. Do they believe corporate executives and staff dig into their pockets to pay the bills; nope, they dig into their customers pockets with increased prices. 

I was at a conference in Miami several years ago and one of the speakers said something that sums up the situation in spades; “The government official who invented the corporate tax was a genius because the government is using private industry to collect taxes, and then having to take the blame when they raise prices.” I wish I could remember that person’s name so I can give him credit for the quote. It is masterful.

This is a story of state leadership in economic trouble, an agency that wants to do the right thing but is struggling with the economic downturn with reduced travel and tolls and added to this are companies that need to stay viable having their arms twisted. It is not a pretty thing to watch. The shame of it is that the objective is noble, but the means to this end is not. 

Alfredo Ortiz, President and CEO of the Job Creators Network used strong language when the government inconsistently applied rules in to restaurants and bars which had different applications, and a crazy-quilt maze of geographic color zones. Why do two restaurants across the street from each other have different rules to follow? 

I will paraphrase Mr. Ortiz in this paragraph; The governor also seems to have one set of rules for his friends, and a totally different set of rules for bars and restaurants. Cuomo’s crew go to a Buffalo Bill’s game en masse, and bar owners have to close at 10PM. In the middle of half-time for televised games which are food and drink establishment’s key draw for revenues. He also ignores the facts. Tracing data from September to November indicate that these two components of retail service contributed only 1.4% of that periods COVID-19 infections. 

The bill has also drawn opposition from the Queens Chamber of Commerce and the Business Council of New York State, who argue that it’s a government mandate that will bankrupt airlines who already are in dire straits. 

The SEIU in a statement said; The NY Healthy Terminal Act (S6266/A8142) is a bill that will require employers to provide benefits supplements compensation that tens of thousands of workers at New York’s transportation hubs can use to acquire quality healthcare they desperately need. It is time that highly profitable airlines provide a path to affordable health insurance so these important members of our community can take care of their health while they serve the public.

The Times Union, Albany’s Daily newspaper said in an editorial; “And now, just as the industry is teetering on the brink of insolvency, New York lawmakers are poised to push it over the edge with an employer health care mandate that could have the complete opposite result of its sponsors’ intent, causing a loss of good-paying jobs and the current insurance coverage they provide.”

In summary, the owners and investors of airport business establishments and the customers who pay for their goods and services deserve as much consideration and financial relief as the SEIU union workers and their political sponsors. 

However, while the bill as written has flaws, we recognize the need for workers to have some basic protection. Raising benefits permanently may be a politically expedient gesture; but applying bonuses to workers in exposed jobs may be a more balanced approach in solving the problem. The pandemic will not last forever.

Covered airport employers are defined as any entity employing a covered airport worker (other than public agencies) and covered airport locations include any airport operating under the jurisdiction of the Port Authority of New York and New Jersey, which currently encompasses JFK, LGA, and SWF-Stewart Intl. The Act does not exclude air carriers and appears to cover not only air carriers, but also ground handling companies providing ramp, catering, and other support services.

Note: Many of the legal arguments in the article are detailed at Seufoirth Shaw Law firm website.

Mr. Alba was previously Editor of the Airport Press for 12 years covering both local as well as global aviation news. Prior to this, Mr. Alba had Executive positions in Systems Engineering and Marketing with IBM World Trade, and had foreign assignments in the Far East and Latin America earning three Outstanding Achievement Awards. Mr. Alba also directed a new function dealing with Alternate Fuels for Public Service Electric & Gas company in New Jersey and founded a Natural Gas Vehicle Consortium consisting of car company executives and fleet owners, and NGV suppliers in New Jersey. Mr. Alba was a founding partner of ATA, an IT Consulting company which is still active in Central and South America. After leaving the armed forces, Mr. Alba’s initial employee was the U.S. Defense Department as an analyst.

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