NLRB Drops Complaint against Boeing; Unions May Be the Real Winner

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Boeing plant photoWhen Boeing Co. two years ago announced plans to open a plant in South Carolina to assemble many of its 787 Dreamliner commercial jets, the decision triggered an outcry by the International Association of Machinists. The IAM's unofficial partner, the National Labor Relations Board (NLRB), filed a complaint against the company this April to block its opening of the facility, located in a Right to Work state. Last Friday, December 9, the board dropped its action. With the plant up and running for a half year, Boeing won a "victory" -- so says CNN. Or did it? The union, with an able assist from the NLRB, in fact, already had realized its desire to intimidate companies out of relocating or expanding in a Right to Work state by finalizing a favorable contract extension with Boeing only days earlier.

This side of Wisconsin, it would be difficult to find a labor issue dominating the headlines this year as much as the NLRB's suit against the Chicago-based Boeing. National Legal and Policy Center twice this May was on the case, analyzing the details and explaining the stakes. To recap: Boeing, after extensive market analysis, internal debate and (futile) negotiations with the Seattle-based Machinists Local Lodge 751, announced in October 2009 that it would open a second assembly line near Charleston, S.C. to build its new, fuel-efficient 787 Dreamliner luxury jumbo jet. Most production would occur at the company's unionized facility in Everett, Wash., about 25 miles north of Seattle. Of the combined 10 jets per month rolling off the assembly lines, three would come from the 1.2 million-square-foot South Carolina plant, where workers voted 199-68 to decertify the IAM as its sole bargaining representative shortly after the announcement of the expansion.

The Machinists union saw this as a betrayal of Boeing workers. But management, having capitulated in several strikes by its Puget Sound-area work force over the previous two decades (including an especially costly one in 2008), this time stood firm. It decided that shifting a portion of its planned 787 production to a Right to Work state was a sound business decision, as workers in such states aren't required to join a union, or pay "agency fees" in lieu of joining, as a prerequisite for keeping their jobs. Commercial carriers were fearful of the impact of further labor stoppages. Virgin Atlantic founder Richard Branson, in fact, went so far as to state that Boeing's labor problems could derail Virgin's purchase of a fleet of jets. In response to such market pressure, Boeing announced it would buy and retrofit a vacant plant in North Charleston, S.C., previously occupied by Vought Aircraft to build the $185 million per unit aircraft. The company, which paid $750 million for the complex, eagerly anticipated the opening, as did South Carolina state officials, who had added nearly $900 million in tax abatements and other incentives. Orders for the aircraft had been coming in since 2004. The project looked like an economic development winner, especially since no union jobs in Washington State would be lost in the process.

The International Association of Machinists and Aerospace Workers thought otherwise. Being a union with a lot of clout, representing about 35,000 Boeing employees nationwide with 25,000 of them in Washington State, it took action. On March 26, 2010, the union filed a complaint with the National Labor Relations Board, claiming that Boeing senior executives, by situating a nonunion plant in South Carolina, had retaliated illegally against the IAM's right to strike. The NLRB agreed to review the case. And a little over a year later, this past April 20, the board filed a 10-page Unfair Labor Practices complaint against Boeing. "A worker's right to strike is a fundamental right guaranteed by the National Labor Relations Act," noted NLRB Acting General Counsel Lafe Solomon in an accompanying statement. "We also recognize the rights of employers to make business decisions based on their economic interests, but they must do so within the law."

It was a highly questionable premise. A company's expansion into a Right to Work state to avoid future strikes would seem no more "unfair" than a union's wielding of a strike threat as a negotiating tool. No matter - the NLRB scheduled a hearing starting on June 14 before an Administrative Law Judge in Seattle. The IAM by this time had filed a separate civil suit against South Carolina Republican Governor Nikki Haley, who took office this past January, accusing her of suppressing the right of Boeing workers to join a union. Haley bitterly denounced the union in a guest editorial in the April 29 edition of the Wall Street Journal. "We don't need unions playing middleman between our companies and our employees," she wrote. "We don't want them forcefully inserted into our promising business climate." A fellow South Carolinian, Sen. Jim DeMint, R-S.C., likewise remarked: "This is nothing more than a political favor for the unions who are supporting President Obama's re-election campaign. Unfortunately, it comes at the expense of hundreds of jobs in South Carolina and thousands of jobs nationwide."

For months, partisans on both sides closely followed the case, viewing it as a national morality play. Last week, on December 9, the board ended the drama, announcing it would drop the complaint. General Counsel Solomon remarked that from the start he had preferred a settlement. "This case was never about the union or the NLRB ruling telling Boeing where it could put its plants," he said in a reporters' conference call that day. "This was a question for us of retaliation, and that remains the law. If we were ever faced with a similar pattern, we might well issue a complaint." The agreement, he emphasized, assures job security for Boeing employees in Washington State and South Carolina.

The board's decision to drop the case, coincidentally or not, came just two days after Boeing Machinists union rank and file ratified a four-year contract extension with Boeing reached in private negotiation the previous week. Under the agreement, the union would drop its charges against Boeing, while the company in turn would build its 737 Max jet at its union plant in Renton, Wash., a suburb of Seattle. The deal also included a two percent annual wage increase, a $5,000-per-worker bonus, and most significantly, a commitment from the company to keep manufacturing aircraft as much as possible in the Puget Sound area. Boeing spokesman Tim Healy called the new contract "a starting point of a new relationship with the IAM."

New, however, doesn't mean better - at least not for the company. And that's how a large number of Republicans in Congress felt months before. In May, Sen. DeMint, along with Sens. Lindsey Graham, R-S.C., and Lamar Alexander, R-Tenn., introduced a bill, the Job Protection Act (S. 964), to bar the board from overriding an employer's decision to site a facility in a particular state. This August, House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif., subpoenaed the NLRB for all documents, including e-mails and call logs, related to the case dating back to January 1, 2009. Issa stated that he wanted to identify how the board arrived at its decision to go after Boeing. It marked the first time since 1940 that the NLRB has been subject to a congressional subpoena. Finally, in September, the House, in a 238-186 Republican-majority, party-line vote, passed the Protecting Jobs from Government Interference Act (H.R. 2587), sponsored by Rep. Tim Scott, R-S.C., to strip the NLRB of key powers, including the authority to order an employer to close a plant or to refrain from relocating a plant at a specific site. While the Senate is less likely to follow suit given its Democratic majority, such actions send a powerful signal to the NLRB and the Obama administration that discontent over the board's course of action is very real.

Supporters of Boeing see the NLRB's decision to drop its complaint as, at best, a qualified victory for employer and worker freedom. Republican presidential candidate and former Massachusetts Governor Mitt Romney said the announcement was "good news for the people of South Carolina," but also a sign that union bosses are "calling the shots." The decision, he noted, "does little for workers and businesses around the country who depend on a fair and impartial U.S. government." Another GOP presidential candidate, former Utah Governor Jon Huntsman, called the outcome "a victory in a battle that should have never been fought." Senator DeMint was even more emphatic that organized labor had triumphed:

The NLRB's dismissal of charges against Boeing only after union approval of their new contract only confirms the charges were a politically motivated negotiation tactic, not a serious complaint based on merit. Unfortunately, real and serious damage to America's competitiveness has already been done. A precedent has been set by the NLRB that they will attack businesses in forced-unionism states that try to create jobs in right-to-work states.

The NLRB's Solomon from the beginning has disputed such an interpretation. This past September, he told reporters: "Regrettably, some have chosen to insert politics into what should be a straightforward legal procedure." That may be formally true. Yet it hardly can be overemphasized that the two Democrats who sit on the normally five-member board and constitute for now a 2-1 majority - Chairman Mark Gaston Pearce and Craig Becker - has an extensive background as a union lawyer. Their honed instincts tell them in cases such as these that a union's grievances should prevail over those of an employer. And they delivered for the union. Indeed, why else would the IAM be in such a good mood? "We believe the proposed extension is good for our members, it's good for Boeing, it's good for airline customers, and it's good for communities," said Machinists spokeswoman Connie Kelliher. "It secures a strong future here, provides top-notch pay and benefits, and really signals the start of a potential new relationship with Boeing."  Translation:  The union won.

On the surface, Boeing seems to have come out ahead and remains as such. Former House Speaker and GOP presidential front-runner Newt Gingrich called the outcome "a victory for Right to Work states."  The company opened its North Charleston, S.C. "787 Dreamliner" plant on schedule this past June. More recently, at the start of this December, it opened a nearby facility to make interior components for the Dreamliner. The bills on Capitol Hill to curb NLRB authority remain on the table. Congressman Issa is proceeding with his investigation. And the State of South Carolina is continuing its battle with the board on any number of fronts. Yet in the face of all this, it would be hard to avoid one  overriding conclusion: Boeing secured "labor peace" at a steep price. Its contract agreement with the Machinists is a clear reminder that a unionized company's expansion into Right to Work territory can be achieved only with union permission. It's also a reminder that the NLRB, at least with a Democratic majority, all too often acts as a union law firm of the last resort.

Related:

NLRB's Boeing Decision Sparks Senate Response

NLRB Sues Boeing; Seeks End to Commercial Jet Production in South Carolina