Home » Economic Development | Right-To-Work Might Be Working

Economic Development | Right-To-Work Might Be Working

By Greg Paeth

Employees of companies that have unions are no longer required to join the union and pay dues since the Kentucky General Assembly passed and Gov. Matt Bevin signed right-to-work legislation in January 2017.
Employees of companies that have unions are no longer required to join the union and pay dues since the Kentucky General Assembly passed and Gov. Matt Bevin signed right-to-work legislation in January 2017.

There’s debate about how critical “right-to-work” status is when a state tries to convince a company – especially a major employer – to build a plant inside its borders.

There was nothing ambiguous, however, in one recent case near Ashland in Greenup County when Braidy Industries decided to invest $1.3 billion in an aluminum rolling mill in South Shore, where the population was — at last count — 1,122.

Braidy Industries said at the time of the April 26 announcement and continues to say today that it would not have given Kentucky any consideration as a site for the project unless the state had adopted right-to-work legislation.

“Braidy Industries supports right-to-work,” CEO Craig Bouchard said in an email from Europe, where he was meeting with prospective customers of the mill, which will supply auto body sheet aluminum, plate and ultra-high-strength alloys for the aerospace industry. “Our board of directors considered 24 towns and municipalities. We did not begin a dialogue with the Commonwealth of Kentucky until the law was enacted. As a point of fact, we would not have chosen any site in Kentucky without its passage.”

That mirrors what he said in late April when the project was announced and supports comments by Gov. Matt Bevin, who had made right-to-work legislation a top legislative priority once his Republican Party controlled the governor’s mansion, the House and the Senate. Last November’s elections delivered the House to the GOP for the first time since 1921.

While some pieces of legislation get shuffled around longer than a bus ride from Paducah to Pikeville, House Bill 1 rocketed through both chambers of the legislature and Bevin signed it on a Saturday, Jan. 7, with its effective date only two days later.

Kentucky became the 27th state to pass right-to-work legislation, which allows employees to work in a union shop without becoming a union member or paying union dues. Previously, employers with union shops were required to make employees join the union and pay its dues to get and retain a job. Throughout the country, the legislation has been considered anti-union and part of a strategy to diminish their power by shrinking their bank accounts.

In late May, Louisville-based Teamsters Local 89 and the Kentucky AFL-CIO sued the state, the governor and the Labor Cabinet in Franklin Circuit Court in an effort to overturn the right-to-work legislation, claiming the new law was an “arbitrary exercise of power” that is “a pretext for anti-union discrimination and political gains.”

The suit contends the law violates the state constitution by taking the union’s right to represent workers and collect dues – union property, it argues – without providing any compensation for that property. Dues-paying members are subsidizing “free riders” who don’t pay because the union is required by federal law to represent all of the employees who do similar work even if they don’t pay dues, said Louisville attorney Irwin H. Cutler Jr., who represents the AFL-CIO in the lawsuit.

“Right-to-work is way down on the list (of factors that influence site selection),” said Cutler, who doubts that the legislation was, in fact, pivotal to Braidy’s decision.

In his email from Europe, Bouchard – the Braidy Industries CEO – made it clear that he disagrees strongly about mandatory union dues.

“Regarding right-to-work, there is much confusion on this topic and many people miss the key point. Any individual has the right to choose how to spend his or her income. No one is empowered to take away this right,” he wrote.

Bevin and his Cabinet for Economic Development have trumpeted the long-term impact of the aluminum mill, the first greenfield U.S. aluminum mill in 30-plus years, which is expected to create 1,000 construction jobs and 550 advanced manufacturing jobs once the project is completed in 2020.

When the project was announced, Bevin said it had “…the potential to be as significant as any economic deal ever made in the history of Kentucky. … This $1.3 billion investment will create enormous opportunity for people in the region, and would not have been possible without our recently passed right-to-work legislation. … The ripple effect of this investment will be significant and will produce positive change in the region for generations to come.”

Record year for projects … by June

The state’s news release said the Braidy deal, which will break ground next spring, “marks a turning point in bringing economic development to Eastern Kentucky” a little more than 53 years after President Lyndon B. Johnson declared the country’s War on Poverty in Appalachia.

The opening page of the Economic Development Cabinet’s website shows a photo of Bevin signing the right-to-work legislation next to a headline that says “KY IS NOW RIGHT TO WORK.” Three highlighted project announcements beneath a photo of the governor focus on the aluminum mill, the $1.5 billion Amazon.com shipping hub at the Cincinnati-Northern Kentucky International Airport, and Toyota’s decision to invest another $1.3 billion in its sprawling plant in Georgetown.

“Kentucky’s right-to-work status matters tremendously in getting us that initial seat at the table. The volume of inquiries and leads we’ve been getting since January certainly supports this,” according to an email from Jack Mazurak, a spokesman for the cabinet.

By late May, Mazurak pointed out, the state had already “shattered the state’s all-time, full-year (business) investment record,” which provides “more supporting evidence of the importance of right-to-work.”

Braidy Industries played no role in pushing right-to-work legislation through the House and the Senate, Mazurak said.   

“Chronologically, it was not an if-then situation. The General Assembly passed right-to-work legislation in early January. Mr. Bouchard was first connected with our cabinet and the Governor’s Office in early February,” according to Mazurak.

“However, Gov. Bevin, our cabinet’s leadership and other state officials knew (from site-selection consultants, who work on behalf of companies looking to expand) that Kentucky had previously been eliminated from consideration for other, unrelated economic development projects due to not being right-to-work. It’s likely there have been many other projects from which we were initially eliminated but, in that regard, we don’t know what we don’t know. Now we have a seat at the table. We’re in the ballgame and on the field, so to speak,” Mazurak said.

Leveling the project playing field

There is no simple formula that determines what factors are most important to a company searching for a plant site, according to Mazurak and others familiar with the process. And right-to-work isn’t always a key factor in a corporate decision. “…Each project is different and each company’s lineup of factors is different,” Mazurak said.

Hal B. Goode, president and CEO of the Kentucky Association for Economic Development for the last five years and a 28-year veteran of the economic development profession, said his organization has pushed right-to-work legislation for many years.

“We want to make sure that everything is on a level playing field when companies come in,” Goode said. “They’re coming in looking for reasons to eliminate you, and that (an absence of right-to-work legislation) was one of the things that would come up to eliminate Kentucky.”

During meetings of Kentucky United, right-to-work legislation routinely emerged as being vitally important to making Kentucky more competitive, Goode said. His association and Kentucky United, a public-private economic development organization, sometimes work together.

The Kentucky Chamber pushed passage of right-to-work legislation for decades, said President and CEO Dave Adkisson and Ashli Watts, vice president of public affairs for the organization.

“The Kentucky Chamber, representing thousands of businesses across the state, has advocated right-to-work legislation for at least 30 years,” Adkisson said when the legislation was approved. “The Kentucky General Assembly made a bold and historic decision to pass a right-to-work law, to guarantee workers a choice about joining a union and to tell the world that Kentucky is open for business. We congratulate the General Assembly and Gov. Bevin for having the courage to pass this legislation and to make Kentucky an even better place to do business. We are confident this will lead to more jobs and more opportunities for Kentuckians.”

Studies show that private-sector employment grew by more than 17 percent in right-to-work states in recent years, the chamber said. That was just over double the growth rate for states that had not passed similar legislation.

Prevailing wage law repealed as well

Accompanying right-to-work was repeal of Kentucky’s “prevailing wage” requirement, which mandated that projects funded publicly could not pay construction workers less than average union wages in the area where work was to be done.

Just six months after the legislation was signed, prevailing wage repeal has had no obvious impact on highway construction in the state, said Chad LaRue, executive director of the Kentucky Association of Highway Contractors, which is based in Frankfort.

However, he said the overwhelming majority of the more than $700 million in highway work done recently by the Kentucky Department of Transportation includes federal funds, which require that contractors pay “prevailing wages.”

“Our industry is supportive of paying a living wage and regardless of the changes in the law, we have not seen the wages dip,” said LaRue, whose membership is overwhelmingly non-union. KAHC did not take a stance on the issue.

While it’s far from the driving force behind a billion-dollar project and it won’t create a single job for the City of Fort Mitchell in Northern Kentucky, the right-to-work legislation and a companion bill that repealed the state’s prevailing wage law have found a fan in Jude Hehman, mayor of the upscale suburb in Kenton County.

City administrator Sharmili Reddy confirmed that the city received bids to repair three streets last December and that Fort Mitchell was prepared to spend about $897,000 for the work.

After prevailing wage repeal legislation passed in early January, the city decided to seek bids again and one contractor said his company would do the work for $823,000.

“This legislation not only saved us $75,000 on a road project which we have invested back in our infrastructure, but will also save taxpayer dollars for future public projects by putting them on a level playing field with private projects,” Hehman said.

Greg Paeth is a correspondent for The Lane Report. He can be reached at [email protected].