NetJets Europe pilots aim to unionize by year-end

 - December 5, 2006, 5:02 AM

NetJets Europe pilots are preparing to establish trade union representation at the fractional ownership company. According to Teamsters union officials, a group of the European pilots is now evaluating four possible options for union representation and it expects to launch the new organization by year-end.

The main issues on which the NJE pilots want dialog with the company are the confusing legal status of their employment contracts and, in particular, their dissatisfaction over the way social security and pension benefits are handled. The pilots concerned want to end the practice whereby some of them are employed by a company that is outside European Union (EU) jurisdiction, leaving the pilots directly responsible for all tax, social security and pension contributions.

Many of the NJE pilots based in mainland Europe are employed by a company called NetJets Staff Management Ltd., which is registered in the Isle of Man, a UK Crown Dependency that is not part of the EU. This means that these employees are essentially “offshore” for the purposes of income tax, social security and pension contributions. AIN has seen a pay-stub for one of the pilots and this clearly shows the name of the Isle of Man company concerned. It has also seen the employment contract of another pilot and this shows the name of another Isle of Man-based subsidiary of NetJets.

However, some other NJE pilots apparently are employed in Portugal, where the company’s AOC holder, NetJets Transportes Aereos, is based, and these crewmembers have different benefits arrangements. A third group of UK-based pilots is employed under British contracts under yet another set of tax rules.

According to sources familiar with NJE labor relations, the company is expected to propose revised employment terms to its flight crews on December 1 in a bid to head off the prospect of union representation within the company. These are expected to include the offer of a contract that would be “onshore” as far as EU tax and benefits rules are concerned and they might also include pay raises of between 15 and 20 percent for captains, first officers and flight attendants. The same sources, speaking to AIN on condition of anonymity, said that the company had sent a provisional communication on this matter to the flight crew on November 13.

Back in 2002, NetJets Europe imposed a new pay structure on its pilots which, according to a May 2002 company memo seen by AIN, resulted in just over one third of staff receiving pay cuts. The decreases in annual salary ranged from less than €1,000 to more than €10,000 and in some cases amounted to a 35-percent cut in total pay. However, the same company memo also insists that about two-thirds of pilots actually saw increases in their pay from the new structure.

More interesting is the official reasoning given by NetJets for the restructuring of pay grades. The company explained that its existing salary structure was based on “a central assumption that the more hours a pilot has, the better that pilot is.” Accordingly, pilots’ remuneration increased on a sliding scale commensurate with their flying experience. “However,” the company communiqué continued, “with the benefit of experience and hindsight, we have concluded that there is little or no evidence to support the central assumption described above.”

In other words, concluded NetJets, experienced pilots are no better than less experienced pilots and so there is no reason to pay them more. At the same time, the fractional ownership leader’s marketing message to its prospective clients continues to be dominated by claims that it employs only the most experienced flight crew in the industry and so leads the industry in safety standards. 

To NetJets, Silence is Golden
sent NetJets a detailed summary of its conclusions about the company’s employment practices in Europe and requested verification and clarification of this information. A company spokesman responded with a short statement saying simply, “It is our policy not to discuss our personnel or labor matters in the press.”

According to Simon Jeffreys, a partner with London law firm CMS Cameron McKenna specializing in employment law, it is legal for a European Union company to employ staff through an offshore company registered somewhere like the Isle of Man. However, he added that in some EU member states the practice is viewed as questionable both ethically and politically.

Countries such as France and Belgium demand social security contributions as high as 25 percent of an employee’s salary, whereas in the UK the amount charged is 12 percent. If employers are not making a contribution to social security, the shortfall results in a greater tax burden for both the employees and other employers in the country concerned.

Jeffreys explained to AIN that the most common reasons for companies using an offshore firm to employ staff are to avoid the need to pay employee contributions to social security and to have less onerous employment conditions in terms of being able to fire or furlough staff. He said that to employ staff directly in the countries where they live, a company such as NetJets would have to establish a subsidiary in each and every EU state in which it had employees living (regardless of where they actually worked). This would create a significant bureaucratic burden and could also expose the company to additional corporate taxes in all or some of the countries concerned. “Companies generally want to limit their tax and business footprint,” commented Jeffreys.

There is no single EU employment law in effect throughout the 25 member states. The European Commission defines directives on employment policy, issuing member states with minimum standards that must be incorporated into their national laws. However, there is still significant variation between the states because some countries chose to enforce much more stringent standards than the minimum requirements.

An EC official told AIN that (under the Rome Convention of 1980) companies and employees can choose to have any employment contract they like as long as the contract concerned does not take away any of the employment protection that would usually be given to employees in the country where the employer is effectively based. In the case of NetJets Europe, the EC would define this as Portugal since this is where the firm’s AOC holder, NTA, is registered.

The same official said that companies, including NetJets, are currently able to exploit loopholes in European employment law because neither EU directives nor national law have caught up with the realities of global business practices. In his view, the onus is now on states such as Portugal to check that companies based there do comply with European and national rules.

Jacques Leroy, a senior partner with Belgian law firm Taquet, told AIN that although the use of offshore contracts by EU firms is not illegal, the practice is increasingly facing the prospect of legal challenges by individual employees and governments who are not happy with its social and financial consequences. “This is what we call social dumping,” said Leroy, referring to arrangements where companies avoid having to make social security contributions and so place an additional burden on other taxpayers in the country concerned.

At the same time, Leroy stressed that in some cases the use of offshore employment contracts can also benefit employees, who might pay less in tax and social security contributions–as long as they can get the national tax authorities to accept their offshore status. Indeed, another source familiar with NJE’s employment terms told AIN that some pilots are quite happy with their pay and conditions (see page 18).

Leroy confirmed that, in general terms, companies are free to choose the legal foundation that will be applicable for their employment relationship with staff and that this is why the NetJets contracts specify, for example, the Isle of Man as the chosen jurisdiction. However, the mandatory minimum employment terms spelled out in EU directives and treaties say that the employment laws of the state in which “the employment relationship prevails” should take precedence.

“So, for example, a Belgian court might well decide that if a pilot lives in Belgium and takes off mainly from Belgian airports to go to work, then Belgium is his or her principle place of employment and therefore Belgian employment law should prevail,” Leroy stated. [In fact, low-cost carrier Ryanair is now appealing a recent Belgian court ruling that a group of its Belgian-based  flight attendants is entitled to Belgian employment rights, even though their contracts specify that the laws of the carrier’s home country Ireland should apply.–Ed.]

Pilots “Treated Like Illegal Immigrants”
Amy Vidovich, recording secretary with Local 1108 of the International Brotherhood of Teamsters, told AIN that significant numbers of NJE pilots are “tired of being treated like illegal immigrants” because of their offshore employment contracts. She said that NJE has previously imposed pay cuts on its pilots, having failed to seek agreement for the move from a May 2002 proposal sent to its flight crew.

Teamsters Local 1108 is one of three union bodies that the NJE pilots are evaluating as a basis for possible representation. It already represents NetJets pilots in the U.S. and has secured significant pay increases for them. The branch also represents pilots from the rival Flight Options fractional operator, and is currently negotiating improvements in pay and working conditions with this company.

The NJE pilots have also held discussions with the UK-based International Pilots Association, as well as with a Portuguese trade union called SPAC-APPLA. One major issue, given the complexity of employment laws among the EU member states, is whether any of these union partners have adequate international recognition and authority for cross-border negotiations. The NJE pilots are also considering forming their own independent organization that might have links to fractional ownership flight crew representatives in other countries.

Any new union organization at NJE is likely to operate under the name NetJets European Pilots Association. It will likely be a Web-based organization similar to the independent union established by pilots with low-cost airline Ryanair, which itself has steadfastly refused to recognize union representation.