The Death of Federalism

Boeing's next generation passenger aircraft will be the 787 "Dreamliner." The company opened its 787 "final assembly plant in Everett [Washington] in May 2007." That facility makes several types of aircraft, and employed almost 28,000 in 2007.

Despite serial setbacks and delivery delays, Boeing has 835 unfulfilled orders for the Dreamliner jets. Back in October 2009, Boeing announced creation of a separate 787 final assembly facility in North Charleston, South Carolina -- in part because of "labor disruptions" at the Washington state facility. According to the Wall Street Journal, unions have "shut down Boeing's commercial aircraft production line four times since 1989, and a 58-day strike in 2008 cost the company $1.8 billion."

The South Carolina plant is nearly ready, with production scheduled to start this July. Boeing has hired over 1000 employees for that facility. Meanwhile, back in Washington state, Boeing has increased employment by 2000 workers.

Last week -- eighteen months after Boeing selected South Carolina! -- the National Labor Relations Board filed a complaint seeking (see pages 7-8) to force Boeing to locate its second Dreamliner final assembly plant in Washington state. The NLRB claims Boeing violated Section 7 of the National Labor Relations Law ("Taft-Hartley"), which preserves employee rights "to form, join, or assist labor organizations, to bargain collectively," and Section 8(a)(1), which prohibits employers from interfering with that right.

Why? Because the South Carolina plant will be non-union, and, according to the NLRB, Boeing's decision was motivated by "anti-union animus." This is despite the fact that Section 14(b) of the labor laws give states the rights to prohibit compulsory union membership as a condition of employment. Some 22 states have such "right to work" laws, including South Carolina. Still, the NLRB says that choosing South Carolina for a second assembly facility was unlawful retaliation for union agitation in Washington state.

Boeing says the Supreme Court hasn't allowed labor laws to intrude on business judgment. But, precedent in this field is specific to the facts. Yet here, even assuming anti-union motivations, the Washington state assembly facility still operates and employs. So the NLRB is asserting a virtual union worker veto over where companies choose to expand. At the same time, it's punishing states for passing laws that attract investment--instead, they become stuck in unfavorable states. Megan McArdle correctly observes:

Boeing does not seem to have claimed that it was trying to break the union; it said it was moving to seek a more amenable labor force. As far as I know, that's not against the law, even if unions wish it were. Companies have been moving south for decades to get a better tax and labor environment. For the NLRB to declare that companies have no right to move would be tantamount to declaring that they are legally captive to whatever the local unions and governments care to dole out.

So much for the free movement of goods in interstate commerce--rights the Obama Administration is defending in other contexts. As Claire Berlinski says, "All that's missing are the words 'Five Year Plan.'"

Questions: Doesn't the NLRB's position read the "right to work" exemption of Section 14(b) out of the labor laws, substituting Federal fiat? And, if the NLRB prevails, why would any multinational decide to invest in new U.S. manufacturing, to the detriment of job creation? Or might the issue not be jobs but union dues?