Boeing: How The NLRB's Action May Impact U.S. Jobs

Tuesday, May 31, 2011 - 01:00

The Editor interviews Richard F. Vitarelli, Partner, McCarter & English, LLP.

Editor: Rick, please describe your practice.

Vitarelli: I headed the labor, employment, and benefits practice at one of Connecticut's largest firms, until about four months ago, when I joined McCarter and became part of its East Coast labor practice. For almost 17 years, I have represented unionized clients as well as non-union clients who are in sectors that are susceptible to union organizing. Across industries, my job is to represent the interests of management in connection with any labor and employment issues that might arise.

Editor: What are your thoughts about Boeing's position?

Vitarelli: Boeing has a compelling story. Workers in Boeing's Washington State operations have not been affected by the move. In fact, Boeing has hired additional workers in Washington State, and plans to continue doing so even as it expands in South Carolina. This is unlike other cases brought by the NLRB seeking extraordinary remedies, where employers are alleged to have committed unfair labor practices that have had a tangible and direct adverse effect on employees.

Fundamentally, it is not unlawful for Boeing simply to elect to create new jobs in South Carolina for the business reasons of mitigating the impact of possible future strikes, avoiding natural disasters or for some other contingency that might impact production of its new Dreamliner aircraft. Of course, there may be other facts that come out in the litigation that ascribe an unlawful intention to Boeing's decision. The complaint alleges that Boeing's decision was retaliation for prior strikes and cites statements allegedly made by Boeing executives to support this claim. The Board's theory has support in NLRB case law, but not in this exact factual context. At its heart, the issue in the case is intent.

Boeing also makes a strong equitable argument that it should not have to close down its new operation, lay off all South Carolina employees, and move all the work being done in South Carolina to Washington, given the delay on the part of the NLRB in issuing its complaint. The Board and any enforcing court will need to consider hardship to Boeing in complying with the proposed remedy if a violation is found. Boeing can certainly demonstrate that complying with such a remedy would be extremely costly.

Editor: The NLRB is asking for "restoration." What are your views?

Vitarelli: The NLRB has sparingly used the restoration remedy to remedy severe unfair labor practices, for example, where the employer has done something egregious in an effort to chill unionization or rights protected by the NLRA. It has been used where a company has decided, following a union-organizing drive at a particular facility, to close that facility to send a message to employees who might contemplate organizing another facility or group of employees. Other cases have involved subcontracting work in flagrant disregard of a contractual or legal obligation to bargain with the union before doing so. Notably, neither the Board nor Boeing seems to dispute that Boeing had the contractual right and legal right to relocate work to South Carolina. Again, the issue is really one of intent, specifically, whether Boeing decided to move in retaliation for several strikes that Washington-based employees staged over the past 25 years, and to send a message to its employees that it would move work in the face of strikes or unionization.

The Boeing case is quite different in that there appears to be no evidence that workers in the State of Washington have been or will be harmed. If the facts that Boeing is presenting in public statements are accurate, the Board would be ordering Boeing to hire new people to service additional production in Washington, and would have to shut down its South Carolina operations. Unlike other cases where a restoration remedy would be utilized, there appears to be no evidence that existing employees have lost jobs or will lose jobs because of Boeing's decision.

The application of the restoration remedy seems particularly unfair in this case because of the significant delay by the NLRB in issuing the complaint while Boeing continued to construct its factory in South Carolina and establish operations there. Further delay will result because it will take considerable additional time before the NLRB decides the case.

Editor: What legal grounds does Boeing have for challenging the NLRB action?

Vitarelli: It could be argued that the scenario I described is a violation of due process, or marks an impermissible departure from precedent without appropriate notice. Boeing has already stated its position that this scenario involves a radical departure from prior Board policy and case law. Although there is some support for the Board's position on the merits, the use of the remedy in this case is extraordinary. The remedy sought here goes beyond a typical "make whole" remedy and seeks to undo a core business decision - the establishment of a new facility - that Boeing was permitted to make. Boeing is crying foul and asserting that it had no notice that its decision was unlawful or that a restoration remedy could issue under the facts.

Editor: Will the NLRB's complaint impact job creation?

Vitarelli: Complaints of this type can be counterproductive in terms of job creation generally. It makes the prospect of doing business in the United States, especially in traditional union strongholds, particularly unattractive. Concerns about unionization and its consequences, which include possible strikes and work rules that limit productivity, have led many industries to locate facilities vulnerable to unionization either in right-to-work states or overseas. Fewer would-be employers or investors will consider locating or investing in manufacturing or other business operations in traditional union strongholds like the Northeast, some Midwestern states, California - and obviously Washington State. These states may see their tax revenues drop and jobs leave because of erosion of their manufacturing base, which impacts not only the manufacturers but every service business, supplier and community that depends on them.

Editor: Do employees in the South need unions?

Vitarelli: Employers nationally are getting smarter about having proactive workplace policies and compensation practices that address the needs of the modern workforce. In some ways, federal employment laws have created a strong deterrent to cutting corners or ignoring legal obligations and workers' rights. Workers in every state today enjoy a federal and state regulatory safety net that eliminates problems that unions were created to address. Employers today are generally more accountable than bosses of the past and undertake a more modern approach to human resources issues and legal compliance. Employers tailor and adapt policies, wages and benefits to the needs of their own workforces better and more quickly than a union might under the collective bargaining process. Many emphasize a culture of uniform enforcement and processes to avoid favoritism in things like access to training, promotional opportunities and incentive compensation. These are some of the reasons we are not seeing a surge of private sector union activity in the South or elsewhere.

Today's employers use open door policies and programs that encourage communication between employers and employees, as well as a liberal sharing of information about financial challenges and competitive forces that impact the business. Employees, who understand the challenges of the business better appreciate their wage and benefit packages if they understand the cost structure of the business and the state of competition. Educated employees also understand that job security comes from being competitive and efficient, not from seniority systems or union rules.

Employers also conduct salary surveys and periodic evaluations and tie increases and incentives to performance. Continuous improvement programs and investment in facilities and equipment is always seen by employees as a tangible sign of job security. Because there is more visible corporate investment in manufacturing pockets in the South, employees there are less afraid of losing their jobs or hours than their counterparts in the North, who may not see such signs of investment. Employees in the South also observe the movement of work from union strongholds to their communities. I would imagine this is among the reasons why employees in the South may not be receptive to unions.

Editor: Is the Boeing situation part of a broader NLRB strategy?

Vitarelli: Absolutely. With the Democratic majority appointees now in place, it is clearly the current NLRB's objective to increase both the percentage and the numbers of unionized employees in the United States without a legislative change. The Board majority has publicly stated a desire to make the Board a more potent agency through decision-making and administrative rulemaking. Directives from the Acting General Counsel encouraging the Regions to target categories of cases during initial organizing and first contract bargaining for expedited processing and aggressive remedies reveal a systematic strategy to do this.

Memoranda have been sent by the Acting General Counsel to the Board's regional offices directing them to consider interim injunctive relief in the federal courts where, for example, a union supporter has been terminated in the early days of a union-organizing drive or while an election petition is pending.

The Board is also looking at card check cases. The Dana Corp. case, decided several years ago, provided protections for employees where an employer and a union entered into a lawful card-check agreement providing for recognition of the union based upon a showing of cards. In that case, the NLRB directed that once a card-check recognition agreement has led to recognition of the union following a collection of cards, employers would be required to post a notice notifying them of this fact and of their right to file a petition with the NLRB for a secret ballot election. The NLRB has already telegraphed that it will overturn that decision to remove the posting requirement, and will be delaying or effectively eliminating the employees' right to challenge the result through a Board-supervised election in card-check cases.

While these efforts are geared toward initial organizing, the Boeing case is an effort by the Board to maintain existing unionized workforces and prevent further erosion through corporate decision making. The Board is reviewing other legal principles, like Boeing, geared toward preventing erosion of existing unionized workforces.

Please email the interviewee at rvitarelli@mccarter.com with questions about this interview.