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Boeing vs. the NLRB: A Naked Power Grab by Radical Pro-Unionists

Boeing made a legal business decision that unions opposed, and the National Labor Relations Board is using this as a pretext to unlawfully expand its power.

by
Hans A. von Spakovsky and James Sherk

Bio

May 12, 2011 - 12:31 am

The National Labor Relations Board (NLRB) contends that President Obama’s chief of staff, Bill Daley, threatened and made coercive statements against Boeing employees.

You haven’t heard about these charges?

Daley was on Boeing’s board of directors when the company unanimously decided to open up a second assembly line for the 787 Dreamliner in Charleston, S.C. The NLRB argues this illegally violated the rights of Boeing’s unionized employees. The complaint against Boeing thus implicates Daley in any supposed wrongdoing — although the mainstream media has avoided mentioning this.

Of course, anyone familiar with the National Labor Relations Act (NLRA) will tell you that the NLRB’s charges have no merit. Daley would have never got past White House vetting otherwise.

In short, Boeing made a legal business decision that unions opposed, and the NLRB is using this as a pretext to unlawfully expand its power.

Boeing currently builds 787s in unionized Washington state, and its customers love the plane. Demand is so strong, the company needed to build a second assembly line. Boeing decided to locate this second line in South Carolina instead of Washington state.

This was a sound business decision. South Carolina offered Boeing $900 million in tax-incentives, has better tort laws, and is geographically closer to many suppliers. South Carolina is also a right-to-work state with few union members. Building in Charleston dramatically reduces the risk of strikes — a real benefit since the International Association of Machinists (IAM) regularly launches expensive strikes in Washington.

So Boeing decided to build its new plant in South Carolina — and the IAM objected. After a two-year wait, during which Boeing spent $2 billion, the NLRB recently filed a complaint. The NLRB contends that Boeing illegally “transferred work” from Washington in “retaliation” for the IAM’s strikes.

Contrary to the NLRB’s unsupported claims, the government cannot tell companies where they can and cannot create jobs. Even on their own terms, the NLRB’s dubious charges do not pass legal muster.

Boeing’s actions can’t be characterized as a “reprisal” against the union when Boeing is not closing its existing Washington plant or “transferring” work from it. No members of the union are losing their jobs.  Boeing is simply creating new production capabilities in a second facility in South Carolina. The NLRB’s own regional director, Richard Ahearn, admitted this. As if this weren’t enough, the union’s collective bargaining agreement expressly states that Boeing can build new assembly lines wherever it chooses.

The NLRB says Boeing CEO Jim McNerney engaged in anti-union activity by stating in an interview that recurring strikes by the union factored into Boeing’s decision. The First Amendment protects Boeing executives’ freedom to say this. After five strikes over the past 35 years, Boeing was confronted with repeated lapses in productivity that hampered its ability to deliver promised products on time. This is an economic reality that Boeing must consider when investing in new facilities.

The law does not prohibit a company from responding to economic realities, or saying that they are doing so. The Supreme Court has ruled that the NLRA permits management to make decisions “essential for the running of a profitable business” and “to reach decisions without fear of later evaluations labeling its conduct an unfair labor practice.”

But under the NLRB’s warped view of the law, all manufacturers who have facilities in heavily unionized states (like Washington) could not expand their operations into right-to-work states (like South Carolina).This interpretation violates the fundamental structure of the NLRA. Congress carefully balanced the interests of both union members and employers. The Act protects workers’ ability to unionize, but it also allows states to implement right-to-work laws so that workers cannot be forced to join unions.

The NLRB is trying to upend that balance. Its interpretation effectively means unionized companies cannot expand in right-to-work states, at least not without serious litigation. The Board wants to force companies to invest in only unionized operations instead of exercising other options.

If the NLRB succeeds it will do serious damage to American workers and the economy. Businesses do not have to make capital investments or create new jobs. They will invest less if the government tells them they cannot take advantage of their best opportunities.

Studies show that unions raise costs, leading unionized firms to invest 15 to 20 percent less in R&D than nonunion firms. As a result, union shops create fewer new jobs. Employment grows 3 to 4 percentage points less a year in unionized firms than nonunion ones. The NLRB’s charges are a guaranteed prescription for even higher unemployment.

Boeing’s General Counsel, Michael Luttig, will testify before the Senate’s Health, Education, Labor and Pension Committee on May 12 at a hearing on the “Endangered Middle Class.” He will certainly have a lot to say about how the NLRB is endangering the employment prospects of thousands of middle class workers.

The NLRB’s complaint will be heard by an administrative law judge on June 14. Whatever the decision, it is sure to be appealed to the four-member board of the NLRB, which is dominated by radical, pro-union appointees. The worst is Craig Becker, an Obama recess appointee who has argued that the freedom of businesses to invest and make decisions about capital should be limited by the government in order to strengthen unions. If the NLRB finds against Boeing, the company will then appeal the NLRB’s illegitimate actions in federal court. Even one of President Obama’s liberal, empathetic judges would have a hard time upholding the NLRB, given Supreme Court precedent and the complete lack of a legal basis for these claims.

What is really going here is a direct frontal assault against right-to-work states being engineered by an out-of-control federal agency staffed by union activists. Federal law allows states to compete for new investment by implementing labor laws that prohibit workers from being forced to join unions. The NLRB has no authority to threaten business investment and job creation to benefit unions by forcing businesses to expand only in closed shop states.

Congress should amend the National Labor Relations Act to reaffirm its longstanding interpretation that any new investment decisions — such as expanding existing facilities or building new plants — do not constitute an unfair labor practice. This amendment would prevent abusive litigation by an overzealous NLRB and protect companies’ ability to freely make investments that benefit their shareholders, their customers, their employees, and the overall economy.

Hans A. von Spakovsky is a Senior Legal Fellow and James Sherk is a Senior Policy Analyst at The Heritage Foundation; their new legal analysis on the NLRB actions against Boeing is available here.
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