Published Nov. 21, 2011

Much has been written and said in political and journalistic arenas about the National Labor Relations Board’s complaint against Boeing, arising from Boeing’s decision to build its second 787 Dreamliner plant in North Charleston instead of the Pacific Northwest. Setting politics and punditry aside, what is the actual law governing this dispute and the likely outcome of the case? With the disclaimer that predicting the outcome of litigation is an imperfect science, here is my analysis.

Rod Smolla Furman University president

The case
Boeing’s plants in Washington and Oregon are unionized, and since 1975, the collective bargaining process has led to strikes — in 1977, 1989, 1995, 2005, and 2008 — disrupting Boeing’s production of airplanes. Boeing, the NLRB claims, located its new plant in South Carolina as an act of retaliation and discrimination against the unions, describing Boeing’s actions as “coercive,” “inherently destructive” of the rights of the unions, and likely to discourage membership in the union and union activity.  The NLRB cites a number of statements by Boeing executives and managers to support its claims. The NLRB seeks to force Boeing to operate its second Dreamliner plant in Puget Sound.

Boeing responds by asserting that its decision was based on a multiplicity of business factors, including financial incentives offered by the state of South Carolina, achieving greater geographic diversity for its commercial airline business, protecting the stability of its global 787 production system, and the favorable business climate in South Carolina. Boeing maintains that even if it was motivated in part by a desire to mitigate the harmful effects of future strikes, such a motive does not constitute “retaliation” against the unions; instead, it insists that it would have reached the same decision even if it had not taken into consideration the potentially damaging impact of future work stoppages.

The case will first be decided by an administrative law judge, then it may be appealed to the full board of the NLRB, consisting of five members. The NLRB’s decision may in turn be reviewed by a federal court of appeals and, ultimately, the U.S. Supreme Court.

The outcome
What is the likely outcome? The NLRB will assert that Boeing’s overriding motivation was avoidance of the disruptions caused by the many past union strikes in Puget Sound and that this motivation taints the decision as an unfair labor practice, effectively seeking to punish the unions for their past strikes. For the sake of argument, let’s give the NLRB the maximum benefit of the doubt and assume that a reviewing court accepts as factually accurate the view that Boeing located the second Dreamliner plant to avoid future strikes. Does it follow that a court would find Boeing guilty of an unfair labor practice?

In my judgment, the most sound prediction is “no.” Even if it is adjudged that, given the history of strikes, Boeing was principally motivated by a desire to avoid the disruptive impact of future stoppages, I believe reviewing courts will hold that this motivation does not constitute a violation of the National Labor Relations Act. My prediction is grounded in certain fundamental aspects of our nation’s carefully balanced labor laws.

The NLRA makes it an unfair labor practice to “interfere with, restrain or coerce employees in the exercise of the rights guaranteed” by the act or to encourage or discourage membership in a union “by discrimination in regard to hire or tenure of employment or any term or condition of employment.”

Perhaps the single most salient fact in this dispute is that Boeing is not cutting any existing jobs in its Puget Sound operations. If an employer seeks to influence its existing workers to avoid participating in union activity by threatening to cut jobs and move them to another state, that threat may in some circumstances constitute an unfair labor practice. When the employer says “Don’t form a union, or else you will lose your jobs,” or says “Don’t go on strike, or I will shut down the plant and move it,” it may be plausible to interpret the employer’s actions as threats, intimidation or retaliation.

Collective bargaining limits
Even a decision to entirely shut down a plant is not an unfair labor practice when there is no nexus between that decision and efforts to coerce employees. As the Supreme Court recognized in First Management Corp. v. NLRB, decided in 1981, virtually any important decision a company makes will have some impact on workers. But economic impact alone does not make every management decision a “term or condition of employment” subject to collective bargaining.

In the words of the court, “Congress had no expectation that the elected union representative would become an equal partner in the running of the business enterprise in which the union’s members are employed.” The court held that even a decision to shut down a facility is not subject to mandatory collective bargaining but is the prerogative of the company in choosing how it will run its business. It stated that “the harm likely to be done to an employer’s need to operate freely in deciding whether to shut down part of its business purely for economic reasons outweighs the incremental benefit that might be gained through the union’s participation in making the decision.”

If a plant closure is not an unfair labor practice when it is not done to influence a union’s present or future behavior, then surely a decision on expansion also falls within an employer’s “need to operate freely.” Moreover, Boeing’s current collective bargaining agreement with the union states that “the work to be performed by the company and the places where it is to be performed” are not subject to arbitration under the agreement.

Inevitable winners, losers
The Boeing case also implicates fundamental legal principles regarding the nature of the American economic marketplace. The framers of our Constitution contemplated a market of interstate commerce in which capital, goods, services and labor would move freely in a competitive common market. We all know that the nation needs more jobs. When a company such as Boeing invests in a major new manufacturing plant, new jobs are created — and that is good for the country as a whole. But deciding where within the country those jobs will go inevitably produces winners and losers.

States and localities compete fiercely for those jobs, through a variety of strategies calculated to entice companies such as Boeing. Quality of life, educational infrastructure, business climate, tax incentives and favorable labor laws are among the many tools. Our Constitution and our national labor laws are deliberately neutral in this competition, not favoring the North or the South, Washington or South Carolina, “union shop” states or “right-to-work” states.

Of course companies will likely consider the degree of union activity in a state when choosing expansion locations — a reality that provides some advantage to the 22 right-to-work states, with laws providing that no person may be compelled to join or pay dues to a union as a condition of employment. But the NLRA is deliberately agnostic on this point.  The 1947 Taft-Hartley Act declared federal labor law to be neutral on this policy, explicitly permitting right-to-work laws. 

Under the logic of the NLRB’s complaint against Boeing, the union states have the trumps over right-to-work states by treating a company’s decision to expand to those states, or to a foreign country for that matter, as inherently violating the rights of the unions. This would read into the nation’s labor laws a skewing of the playing field that Congress intentionally sought to avoid when it passed Taft-Hartley and is in tension with the fundamental constitutional principle that states are not allowed to project their social policies into sister states in a manner that impedes the free flow of commerce as determined by market forces.

Protected speech isn’t evidence
Finally, there are important First Amendment dimensions to the Boeing dispute. The NLRB complaint is heavily predicated on statements made by Boeing executives surrounding the expansion decision. Those executives, and the Boeing Co. itself, possess freedom of speech rights to make such statements. As evidenced in the Citizens United decision involving corporate political expenditures, the current Supreme Court is especially vigilant in enforcing those free speech rights.

In a landmark 1969 labor case, National Labor Relations Board v. Gissel Packing Co., the Supreme Court placed labor law in alignment with the First Amendment, stating that the NLRA “merely implements the First Amendment by requiring that the expression of ‘any views, argument, or opinion’ shall not be ‘evidence of an unfair labor practice,’ so long as such expression contains ‘no threat of reprisal or force or promise of benefit’ in violation of the Act.”
Put simply, if the speech of a corporation or its officers is protected by the First Amendment, it cannot be used to prove an unfair labor practice. This makes fundamental constitutional sense, for as water cannot rise higher than its source, Congress cannot abridge the freedom of speech guaranteed by the Constitution simply by passing ordinary legislation.

Under standard First Amendment principles, expressions of opinion and statements of truthful facts are protected speech. Unions naturally do not like expressions by a company that say there are economic benefits to spreading bets across union and nonunion states, or noting that protection against disruptive work stoppages may be economically beneficial to the corporation’s business. But as long as those expressions are not “true threats,” in the parlance of First Amendment law, they are constitutionally protected. As the Court put it in Gissel, an employer’s free speech right to communicate his views to his employees is firmly established and cannot be infringed by a union or the board.”

In conclusion, I repeat: Prediction of what courts will do is not an exact science, or as Oliver Wendell Holmes once put it: “Certainty is generally illusion, and repose is not the destiny of man.” With that caveat, my prediction is that reviewing courts will hold that Boeing’s actions were protected by the Constitution and federal labor laws.

Rod Smolla, president of Furman University, is a nationally recognized legal scholar and litigator.