In Shot Heard Around Business World, Obama's Labor Board Issues Complaint Against Boeing

On Wednesday, President Obama’s union-controlled National Labor Relations Board issued a complaint against the Boeing Company that, if ruled in the union and NLRB’s favor, may prove to have far-reaching consequences across the American business landscape. Ultimately, the outcome to this case will state whether or not America has, in fact, become entirely hostile to business (and the jobs they provide). The complaint was issued by the NLRB’s Acting General Counsel (the same one who threatened to sue South Carolina and three other states over the states’ secret-ballot initiatives) and is set to go to hearing on June 14th before an administrative law judge in Seattle.


At issue, according to the NLRB, is whether Boeing violated federal labor law by deciding to transfer a second airplane production line from a union facility in the state of Washington to a non-union facility in South Carolina for “discriminatory reasons.”

Regardless of the fact that Boeing now employs around 1,000 employees in South Carolina and has spent millions to build a facility, the NLRB’s Acting General Counsel is seeking an order for Boeing to maintain production of the second production line in Washington.

Lafe Solomon, acting general counsel for the National Labor Relations Board, has suggested a remedy for Boeing’s actions: that Boeing will maintain a second 787 line in Washington state. The labor board, however, isn’t saying Boeing has to close its South Carolina facility.

We’re not telling them what to do with it,” said Nancy Cleeland, a spokeswoman with the labor board.

Despite the possibility of political retaliation on the part of the Obama NLRB, as well as the possible job losses in South Carolina an eventual NLRB decision may cause, the core principle at stake is whether or not an employer has the right to move business away from a unionized location that has repeatedly been the victim of extortive strikes, causing the employer hundreds of days of lost production, customer delays and billions in revenue.

The Background—

In 1989, the International Association of Machinists engaged in a 48-day strike against Boeing which caused the company to miss orders and resulted in sales being $2 billion less than projected.


In 1995, the IAM struck again—this time lasting 69 days.

In 2005, while not as lengthy as prior strikes, the IAM struck Boeing for four weeks.

In 2008, the IAM struck Boeing for 58 days and cost the company $1.8 billion.

In 2009, with orders for its new 787 having been put in jeopardy Boeing officials began exploring alternatives to having to deal with union strikes every three or four years. One alternative was to talk to the union about obtaining longer contracts with no-strike clauses and the other was to begin searching for location for a second production line outside of the Puget Sound area. It decided to do both.

Boeing entered into discussions with the IAM, something that even the NLRB noted it did not have to do:

The investigation did not find merit to the union’s charge that Boeing failed to bargain in good faith over its decision regarding the second line. Although a decision to locate unit work would typically be a mandatory subject of bargaining, in this case, the union had waived its right to bargain on the issue in its collective bargaining agreement with Boeing.

As Boeing is a huge employer in the Puget Sound, the local media coverage was quite extensive as the talks between the IAM and Boeing were taking place. Eventually, however, the union’s demands in exchange for a long contract (and no strikes) were too great and talks broke down. According to a statement from Boeing:

Boeing had hoped to secure a long-term agreement with a no-strike clause that would ensure production stability for its customers and be cost competitive for the future.  In exchange, however, the IAM insisted upon terms unacceptable to Boeing, including a guarantee that Boeing would place all future commercial airplane production in Puget Sound, and a promise from the company to remain neutral in all IAM union organizing campaigns nationwide. When an agreement with IAM leaders could not be reached, Boeing opted to build the new facility in North Charleston.


Following the decision to expand production to a second line in South Carolina, in March 2010, the IAM filed unfair labor practice charges with the NLRB alleging, among other things, that Boeing retaliated against union employees for the 2008 strike. [Striking (that is, acting in concert), after all, is a protected right.]

In reviewing the NLRB’s complaint (see in full below), the Acting General Counsel accuses the company’s decision was coercive and is, apparently, basing his decision on five “incidents”—the first “incident” was that a company officer explained the decision on an earnings conference call that was later reported on, as well as posted on Boeing’s intranet site; the second was in a Q&A distributed to managers; and the other three were newspaper reports. All of these “incidents” took place after negotiations with the IAM had broken down and the decision was made. However, because all of them had basic statements explaining the business rationale for locating the production line in South Carolina was to have a “dual sourcing” system to ensure continuity because of past strikes, the NLRB believes that is illegal.

In an interview, former NLRB member John Raudabaugh was shocked at the NLRB’s action:

“It seems to me that Boeing has done nothing wrong,” Raudabaugh said.

He says the union leaders were informed well in advance that Boeing was looking elsewhere for new production.

“The union representatives had repeated meetings with the company,” he said. “They fully understood the reasons that Boeing was undertaking and they have a legal obligation to communicate to their members. I find this just amazing, I can’t believe that Boeing won’t prevail.”


Boeing vows to fight.

Even as Boeing has expanded in South Carolina, it has also added jobs in Puget Sound which seems to undermine the NLRB’s claim that the company’s decision was based on union animus (animosity toward the union) versus sound business judgement. Nevertheless, Boeing has vowed to fight.

“This claim is legally frivolous and represents a radical departure from both NLRB and Supreme Court precedent,” said Boeing Executive Vice President and General Counsel J. Michael Luttig. “Boeing has every right under both federal law and its collective bargaining agreement to build additional U.S. production capacity outside of the Puget Sound region.”


Boeing also was critical of the timing of the complaint, which comes a full 17 months after the company announced plans to expand its manufacturing capacity in the United States in South Carolina.  Construction of the factory is nearly complete and the company has hired more than 1,000 new workers.  Final assembly of the first airplane is slated to begin in July.

Boeing has made it clear that none of the production jobs created in South Carolina has come at the expense of jobs in Puget Sound and that not a single union member has been adversely affected.  In fact, IAM employment in Puget Sound has increased by approximately 2,000 workers since the decision to expand in South Carolina was made in October 2009.

Boeing does seem to have well-established law on its side—most notably, several U.S. Supreme Court Cases appear to undermine various components of the NLRB’s complaint (Darlington Mills, First National Maintenance, American Ship Building, as well as NLRB vs Brown)—which makes one wonder whether politics are more at play here.


The Politics of  Pull…

Last November, voters of four states (South Carolina being one of them) voted to ensure the secrecy of their ballots in unionization campaigns. In January, the NLRB’s Acting General Counsel threatened to sue the states if they moved to act on the voter-approves measures to which the Attorneys General for all four states shot back a terse reply. In early February, the Acting General Counsel seemed to back down from his earlier threat.

In January, the newly-elected governor of South Carolina, Nikki Haley, was sued by the Machinists union after she stated that she was opposed to unions.

Haley, however, is not one to be intimidated by the Machinists or the NLRB. Following the NLRB’s complaint on Wednesday, Haley fired right back:

“This is an absolute assault on a great corporate citizen and on South Carolina’s right-to-work status. We will continue to do everything we can to protect that status, and to stand with companies like Boeing who understand what it means to take care of their employees without the interference of a meddlesome, self-serving union. This bullying will not be tolerated in South Carolina.”

Senator Lindsay Graham [R-SC] issued a blistering statement which also speaks to the broader principles at stake for American businesses (and jobs):

This is one of the worst examples of unelected bureaucrats doing the bidding of special interest groups that I’ve ever seen. In this case, the NLRB is doing the bidding of the unions at great cost to South Carolina and our nation’s economy.

If successful, the NLRB complaint would allow unions to hold a virtual ‘veto’ over business decisions.  Left to their own devices, the NLRB would routinely punish right-to-work states that value and promote their pro-business climates. The current makeup of the NLRB Board has been skewed against business.  This action will not be allowed to stand.

“I would be surprised if any court recognized the legitimacy of this complaint.  It’s pretty easy to see that at its heart, this is about union politics. As Senator, I will do everything in my power, including introducing legislation cutting off funding for this wild goose chase, to stop the NLRB’s frivolous complaint.”


Senator Jim Demint [R-SC] also issued a similar statement with respect to the politics of pull likely at play:

“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. There is no doubt that if the National Labor Relations Board’s claim against Boeing moves forward, it will have a chilling effect on job growth in my state and in right-to-work states across the country. Using the federal government as political weapon to protect union bosses at the expense of American jobs cannot be tolerated. I intend to use every tool at my disposal as a United States Senator to stop the President from carrying out this malicious act.”

Here is the full NLRB complaint:

NLRB Boeing Complaint


“I bring reason to your ears, and, in language as plain as ABC, hold up truth to your eyes.” Thomas Paine, December 23, 1776

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