ISSUE OF SEVERANCE PAY IN TEXAS AIR'S PURCHASE OF EASTERN UNDER REVIEW

ISSUE OF SEVERANCE PAY IN TEXAS AIR'S PURCHASE OF EASTERN UNDER REVIEW

The Department of Transportation said it will hold a formal hearing to decide if severance pay should have been awarded to Eastern Airlines' employees when the company was acquired by Texas Air Corp.

The department, which has declined to intervene in labor disputes arising

from airline mergers, is acting in response to a court order that directed a further DOT review of some aspects of the merger.The investigation involves the awarding of labor protection payments, principally severance pay and moving expenses, to Eastern employees disadvantaged by the Texas Air acquisition.

The department has the authority under the Federal Aviation Act to award labor protection. It has refused to authorize payments unless they are necessary to prevent labor strife that could seriously disrupt the nation's air transportation system. The department also said it would consider awarding payments in other extraordinary circumstances.

At the time of the Texas Air-Eastern acquisition, the DOT declined to award payments to Eastern employees. The department, as it had in previous airline mergers, said the availability of collective bargaining provides ample opportunities for employees to resolve labor issues.

Airline unions, including the Air Line Pilots Association and the International Association of Machinists, contested the DOT ruling and appealed the case to the U.S. Court of Appeals for the District of Columbia.

The court generally upheld the department's finding that labor protection was unnecessary, but questioned DOT's reasoning on one key point. The department was ordered to reconsider the single issue.

After soliciting additional information from Texas Air, Eastern and the airline unions, the department decided it did not have enough information to resolve the court's concern. A formal hearing was ordered Wednesday to review the issue.

The labor protection case comes a week after DOT launched a massive investigation into safety practices at Eastern and Continental Airlines, another Texas Air subsidiary.

The department also is conducting a management review of Texas Air's corporate operations.

A DOT spokesman said the labor protection hearing does not signal a change in its policy to limit the department's intervention in labor cases.

Officials at Texas Air were unavailable for comment. The Air Line Pilots Association said it was reviewing the decision and would defer comment.

The hearing has been scheduled for June 22, and an administrative law judge within the DOT has been ordered to make a recommendation on labor protection by Aug. 19. The department said it will review that finding and make a final decision by Sept. 30.

The appeals court remanded the labor protection case to the DOT because of concerns that the Texas Air acquisition would end the unions' status as a collective bargaining representative. If that happened, any collective bargaining agreements negotiated by the unions' could be unenforceable.

Since the department declined to award labor protection because of remedies available through collective bargaining procedures, the court's concerns affect the basis for the DOT's decision.

The department said the information it solicited from the airlines and unions since the court's February 1988 decision provide too little information on which to base a decision on the status of Eastern's collective-bargaining agreements.