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The Obligation To Be Struck

Job creation is still a top national priority, according to the Obama administration. Apparently someone forgot to tell the folks at the National Labor Relations Board.

The NLRB recently filed a complaint asking Boeing Co. to abandon the new 787 Dreamliner plant it has nearly finished building in South Carolina in order to instead expand its existing operations in Washington state. The $2 billion Boeing has already invested in South Carolina would go to waste, and the 1,000 employees already hired there would be out of luck.

According to the NLRB, opening the new plant in the right-to-work state of South Carolina would constitute illegal retaliation against workers in Washington and Oregon for strikes there and would “discourage these and/or other employees from engaging in these or other union and/or protected, concerted activities.”

The employees at Boeing’s facilities in Washington and Oregon are organized by the International Association of Machinists and have gone on strike five times since 1975 — in 1977, 1989, 1995, 2005 and 2008. The 2008 strike lasted 58 days and cost the company $1.8 billion, according to The Wall Street Journal.

Despite its turbulent relationship with the IAM, Boeing still originally wanted to put its new production line in the Puget Sound area. In talks over the new line, however, the union demanded that Boeing commit to building all future planes in the area. Given the number of past strikes, Boeing executives were leery of making themselves completely dependent on the union for all eternity. They decided to put the new production line on the other side of the country, with the goal of mitigating the effects of work stoppages caused by IAM strikes. A Boeing executive told The Seattle Times, in an interview cited by the NLRB, “The overriding factor was not the business climate. And it was not the wages we’re paying today. It was that we cannot afford to have a work stoppage, you know, every three years.”

The NLRB says Boeing’s decision not to subject itself to further uncertainty at the hands of the union was an act of retaliation against union members. But Boeing did not fire the workers who participated in the strikes, nor did it take existing work away from the unionized plants. In fact, since the announcement of the new plant in South Carolina, 2,000 additional workers have been hired at the unionized factories in Washington and Oregon. What Boeing did do was make a prudent business decision.

Businesses have an obligation to treat union members fairly, but they do not have an obligation to leave themselves completely at the mercy of work stoppages. As Boeing’s general counsel, J. Michael Luttig, said, “This claim is legally frivolous and represents a radical departure from both NLRB and Supreme Court precedent.” Even the generally liberal New York Times noted, “It is highly unusual for the federal government to seek to reverse a corporate decision as important as the location of plant.”

If the U.S. had a global monopoly on making airplanes, abandoning large investments to move plants to less profitable locations at the whims of the NLRB might simply be a cost of doing business. But the NLRB does not have the authority to boss around Boeing’s main rival, Airbus, which is based in Toulouse, France. Canada’s Bombardier and Brazil’s Embraer, both of which are increasingly important players in the small-jetliner market and which want to move upmarket, are similarly beyond the reach of American regulators. The NLRB is not just doing a favor for Boeing’s unions; it is handing a windfall to Boeing’s international competitors.

Boeing plans to contest the complaint in June at a hearing in front of an NLRB administrative law judge. I wish the company luck; it will need it. Since President Obama’s appointment of Craig Becker last year gave pro-union members a majority on the board, the NLRB and its administrative judges have shown themselves to be far less interested in impartially overseeing labor relations than in delivering union votes to the Democratic administration. Boeing will, however, eventually get the chance to appeal the case to a federal court that is not administered by kangaroos.

Dictating where Boeing can build new plants may sound great in union halls, but not many big commercial jets get built in union halls. No company can be expected to make multi-billion-dollar investments in suboptimal locations just to give its workers a chance to exercise their right to strike. Companies do not have an obligation to make strikes easier for their workers or costlier to themselves.

If the NLRB’s aggressive new position is allowed to stand, those new planes will not be built in South Carolina or in Washington. They’ll be built in Europe, and they will carry an Airbus nameplate. Let’s see how that resonates with American voters next year when the sitting president tells them how much he cares about job creation on this side of the Atlantic.

Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s most recent book, The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book, Looking Ahead: Life, Family, Wealth and Business After 55.

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