Business
Column: How anti-union southern governors may be violating federal law
Six Republican governors in the Deep South want their constituents to know that they’re looking out for them.
That’s why they issued a joint statement earlier this year condemning the organizing campaign launched by the United Auto Workers at auto plants across the region.
“As governors, we have a responsibility to our constituents to speak up when we see special interests looking to come into our state and threaten our jobs and the values we live by,” the governors said.
We have one federal labor policy, not 50 different state policies, when it comes to union organizing and collective bargaining.
— Benjamin Sachs, Harvard Law School
Three of the governors have gone further — signing laws denying state economic development subsidies to any employer that voluntarily recognizes a union (that is, without insisting on a formal vote by workers). They’re Kay Ivey of Alabama, Brian Kemp of Georgia and Bill Lee of Tennessee.
These steps raise the question of whether those governors and other political leaders are breaching federal labor law by their actions, which could prompt the government to invalidate unsuccessful union votes and order new elections.
“We have one federal labor policy, not 50 different state policies, when it comes to union organizing and collective bargaining,” says Benjamin Sachs, a professor of labor and industry at Harvard Law School and the author of a recent article examining how the actions of anti-union politicians may have illegally interfered with employees’ right to “a free and untrammeled choice for or against” a union.
Sachs acknowledges that the rules governing federal preemption of state labor laws are murky about the conditions in which federal labor law would prevail, and also the point at which politicians’ actions render union representation elections unfree and unfair — threshold findings that would prompt the National Labor Relations Board to invalidate an election and order a new vote.
That said, “Alabama probably can’t condition its economic incentives on the relinquishment of the federal right” to voluntary recognition of a union, Sachs told me. But he adds that how any such case unfolds would depend on the federal court that heard it.
Political interference in union organizing campaigns in the South isn’t new. In 2014, Sen. Bob Corker of Tennessee and the state’s then-governor, Bill Haslam — both Republicans — threatened Volkswagen with retribution for taking a tolerant view of a UAW organizing campaign at its factory in Chattanooga.
One visiting VW executive referred positively to the labor-management “works councils” common in the company’s home, Germany: “Volkswagen considers its corporate culture of works councils a competitive advantage,” he said.
Corker, a former Chattanooga mayor, voiced an almost certainly specious claim that VW executives had “assured” him that the company would open a new SUV manufacturing line at the plant — if the workers turned the UAW down. A local VW executive denied that.
After losing the election, the UAW filed an unfair labor practices complaint with the NLRB, but ultimately withdrew it. The union lost another election at the plant in 2019, but two months ago it won a third election there, its first victory at an auto plant in the Deep South.
As the UAW stepped up its campaign to unionize other plants in the South, the region’s Republican political leaders pushed back hard. In their joint statement, the governors of Alabama, South Carolina, Georgia, Mississippi, Texas and Tennessee accused the union of unspecified “misinformation and scare tactics.”
Parroting an argument straight out of the corporate anti-union playbook, they said, “The experience in our states is when employees have a direct relationship with their employers, that makes for a more positive working environment. They can advocate for themselves and what is important to them without outside influence.” All six states have automobile plants that could be targeted by the UAW.
One question relevant to whether the governors have crossed over to engaging in unfair labor practices that could invalidate a union election, Sachs says, is whether the NLRB could judge them to be “agents” of the employers. In that case, the board might consider their actions to be tantamount to actions by an employer interfering with the workers’ right to vote in a free and fair election.
“It doesn’t seem too crazy that the board might find the elected officials to be agents of the employers,” Sachs says. In several cases in which an employer didn’t disavow statements by elected officials warning a plant would close or there would be a loss of jobs if its workers voted to unionize, the board found the election to be unfair. In similar cases, the board does not have to find that there was direct contact between the politicians and the employer.
The chief target of the anti-union laws signed by Ivey, Kemp and Lee is the “card check” procedure, one of the two paths to union recognition under federal labor law — the other being a secret ballot. In the card check process, after more than 50% of employees at a workplace sign authorization cards seeking representation by a union, the employers can voluntarily recognize the union, waive any demand for a secret ballot among the workers, and participate in negotiations.
The Alabama, Georgia and Tennessee laws deny state economic incentives to companies that accept card check authorizations without demanding a secret ballot. They also forbid employers to voluntarily provide unions with contact information for employees without the workers’ prior consent. These both are requirements that obviously make unionization drives harder.
Like other Republican state initiatives, the anti-unionization laws were incubated on the far right — specifically the Koch-backed American Legislative Exchange Council, or ALEC — the source of model laws aimed at cutting taxes, hamstringing healthcare reforms, privatizing public education, blocking environmental regulations and other such conservative hobby horses.
The anti-union laws in the three states are reproduced almost verbatim from a model law ALEC dubbed the “Taxpayer Dollars Protect Workers Act.” To put it another way, neither the state legislators nor the governors had to break a sweat to draft and enact these measures — they were spoon-fed the texts.
Southern states are generally quite candid about their efforts to attract manufacturers by guaranteeing them a low-wage rank-and-file workforce and union-free factory floors. On its economic development web page, for example, Oklahoma even brags about how much lower than national averages are the median hourly wages in 12 occupational categories — $17.01 for machinists vs. $19 nationally, $26.17 vs. $30.75 for construction managers, and so on.
Oklahoma doesn’t have any auto plants, but hope springs eternal. Oklahoma and the six states whose governors signed the anti-union letter are all “right-to-work” states, which ban contracts requiring all workers in a unionized workplace to be union members.
In signing Alabama’s measure denying economic incentives to employers that voluntarily negotiate with unions, Ivey declared, “Alabama is not Michigan. … We want to ensure that Alabama values, not Detroit values, continue to define the future of this great state.”
She said a mouthful. The median annual wage in Alabama was $41,350 last year. In Michigan, where unions are popular, it was $46,940. That’s higher than in any of the other states whose governors signed the anti-union letter. (The median wage in Mississippi, whose governor, Tate Reeves, signed the joint statement, was $37,500, the lowest in the nation.)
Whether states can use their economic incentives to ban card check recognition may have to be weighed by the courts. As John Fry of Harvard Law observed in a report earlier this year, states clearly can’t outlaw card check agreements directly — such agreements are legal under federal law, which protects voluntary recognition of a union and the voluntary sharing of employee contact information.
As for wielding economic incentives as a weapon, the Supreme Court has ruled that states can impose labor-related rules mostly when they’re applied to projects in which the states have a direct interest, such as on public works projects.
But the issue is almost certain to come before the courts again; following its negotiating successes with the Big Three automakers last year, the UAW announced a two-year, $40-million campaign to organize nonunion plants “across the country, and particularly in the South.”
The union lost a unionization election last month at Mercedes plants in Alabama, but has now turned its attention to a Hyundai plant in the same state. Politicians across the South are sure to react with ever more draconian laws and policies aimed at forestalling unionization. Will they be smart enough to keep on the right side of the legal line? Possibly, but that’s not the way to bet.
Business
Startup Varda Space Industries snags former Mattel plant in El Segundo
In an expansion of its business of processing pharmaceuticals in Earth’s orbit, Varda Space Industries is renting a large El Segundo plant where toy manufacturer Mattel used to design Hot Wheels and Barbie dolls.
The plant in El Segundo’s aerospace corridor will be an extension of Varda Space Industries’ headquarters in a much smaller building on nearby Aviation Boulevard.
Varda will occupy a 205,443-square-foot industrial and office campus at 2031 E. Mariposa Ave., which will give it additional capacity to manufacture spacecraft at scale, the company said.
Originally built in the 1940s as an aircraft facility, the complex has a history as part of aerospace and defense industries that have long shaped the South Bay and is near a host of major defense and space contractors. It is also close to Los Angeles Air Force Base, headquarters to the Space Systems Command.
Workers test AstroForge’s Odin asteroid probe, which was lost in space after launch this year.
(Varda Space Industries)
Varda is one of a new generation of aerospace startups that have flourished in Southern California and the South Bay over the last several years, particularly in El Segundo, often with ties to SpaceX.
Elon Musk’s company, founded in 2002 in El Segundo, has revolutionized the industry with reusable rockets that have radically lowered the cost of lifting payloads into space. Though it has moved its headquarters to Texas, SpaceX retains large-scale operations in Hawthorne.
Varda co-founder and Chief Executive Will Bruey is a former SpaceX avionics engineer, and the company’s spacecraft are launched on SpaceX’s workhorse Falcon 9 rockets from Vandenberg Space Force Base in Santa Barbara County.
Varda makes automated labs that look like cylindrical desktop speakers, which it sends into orbit in capsules and satellite platforms it also builds. There, in microgravity, the miniature labs grow molecular crystals that are purer than those produced in Earth’s gravity for use in pharmaceuticals.
It has contracts with drug companies and also the military, which tests technology at hypersonic speeds as the capsules return to Earth.
Its fifth capsule was launched in November and returned to Earth in late January; its next mission is set in the coming weeks. Varda has more than 10 missions scheduled on Falcon 9s through 2028.
For the last several decades, the Mariposa Avenue property served as the research and development center for Mattel Toys. El Segundo has also long been a center for the toy industry as companies like to set up shop in the shadow of Mattel.
The Mattel facility “has always been an exceptional property with a legacy tied to aerospace innovation, and leasing to Varda Space Industries feels like a natural continuation of that story,” said Michael Woods, a partner at GPI Cos., which owns the property.
“We are proud to support a company that is genuinely pushing the boundaries of what’s possible, and are excited to watch Varda grow and thrive here in El Segundo,” Woods said.
As one of the country’s most active hubs of aerospace and defense innovation, El Segundo has seen its industrial property vacancy fall to 3.4% on demand from space companies, government contractors and technology startups, real estate brokerage CBRE said.
Successful startups often have to leave the neighborhood when they want to expand, real estate broker Bob Haley of CBRE said. The 9-acre Mattel facility was big enough to keep Varda in the city.
Last year, Varda subleased about 55,000 square feet of lab space from alternative protein company Beyond Meat at 888 Douglas St. in El Segundo, which it started moving into in June.
Varda will get the keys to its new building in December and spend four to eight months building production and assembly facilities as it ramps up operations. By the end of next year, it expects to have constructed 10 more spacecraft.
In the future, Varda could consolidate offices there, given its size. Currently, though, the plan is to retain all properties, creating a campus of three buildings within a mile of one another that are served by the company’s transportation services, Chief Operating Officer Jonathan Barr said.
“We already have Varda-branded shuttles running up and down Aviation Boulevard,” he said.
Business
How Iran War Is Threatening Global Oil and Gas Supplies
Ships near the Strait of Hormuz before and after attacks began
Every day, around 80 oil and gas tankers typically pass through the Strait of Hormuz, the narrow waterway off Iran’s southern coast that carries a fifth of the world’s oil and a significant amount of natural gas.
On Monday, just two oil and gas tankers appear to have crossed the strait, according to a New York Times analysis of shipping activity from Kpler, an industry data firm. Since then, one tanker passed through.
“It’s a de facto closure,” said Dan Pickering, chief investment officer of Pickering Energy Partners, a Houston financial services firm. “You’ve got a significant number of vessels on either side of the strait but no one is willing to go through.”
Tankers have been staying away from Hormuz since the U.S.-Israeli attacks on Iran that began on Saturday. A prolonged conflict could ripple broadly across the global economy, threatening the energy supplies of countries halfway around the world and stoking inflation.
International oil prices have climbed 12 percent since the fighting began, trading Tuesday around $81 a barrel, and natural gas prices have surged in Europe and in Asia.
A senior Iranian military official threatened on Monday to “set on fire” any ships traveling through the Strait of Hormuz. Vessels in the region have already come under attack. Several oil and gas facilities have also been struck or affected by nearby shelling, though the damage did not initially appear to be catastrophic.
Where ships and energy facilities have been damaged
A fire broke out Tuesday at a major energy hub in Fujairah, United Arab Emirates, from the falling debris of a downed drone, the authorities said. On Monday, Qatar halted production of liquefied natural gas, or fuel that has been cooled so that it can be transported on ships, after attacks on its facilities.
The sharp reduction in tanker traffic is reducing the supply of oil and gas to world markets, pushing up prices for both commodities. And the longer that ships stay away from the Strait of Hormuz, the less oil and gas get out to the world, which could raise prices even more.
Shipping companies have paused their tankers to protect their crew and cargo, and because insurance companies are charging significantly more to cover vessels in the conflict area.
On Tuesday, President Trump said that “if necessary,” the U.S. Navy would begin escorting tankers through the strait. He also said a U.S. government agency would begin offering “political risk insurance” to shipping lines in the area.
In addition to tankers, other large vessels regularly go through the strait, including car carriers and container ships. In normal conditions, nearly 160 make the trip each day.
Some ships in the region turn off the devices that broadcast their positions, while others transmit false locations — making it hard to give a full picture of the traffic in the strait.
The Shiva is a small oil tanker that has repeatedly faked its location, according to TankerTrackers.com, which tracks global oil shipments. It is suspected of carrying sanctioned Iranian oil, according to Kpler. The Shiva was one of the two tankers that crossed the strait on Monday.
The oil and gas that typically move through the strait come from big producing countries like Saudi Arabia, Iraq, Iran and United Arab Emirates, and are exported around the world.
Where tankers moving through the Strait have traveled
In 2024, more than 80 percent of the oil and gas transported through the Strait of Hormuz went to Asia. China, India, Japan and South Korea were the top importers, according to the U.S. Energy Information Administration.
Countries have energy stockpiles that could last them into the coming months, but a continued shutdown of the strait could damage their economies.
Several big disruptions have roiled supply chains in recent years, but the tanker standstill in the Strait of Hormuz could have an outsize impact.
Business
Paramount credit downgraded to ‘junk’ status over debt worries
Paramount Skydance’s jubilation over its come-from-behind victory to claim Warner Bros. Discovery has entered a new phase:
Call it the deal-debt hangover.
Two major ratings agencies have raised concerns about Paramount’s credit because of the enormous debt the David Ellison-led company will have to shoulder — at least $79 billion — once it absorbs the larger Warner Bros. Discovery, bringing CNN, HBO, TBS and Cartoon Network into the Paramount fold.
Fitch Ratings said Monday that it placed Paramount on its “negative” ratings watch, and downgraded its credit to BB+ from BBB-, which puts the company’s credit into “junk” territory. Fitch said it took action due to “uncertainty” surrounding Paramount’s $110-billion deal for Warner Bros. Discovery, which the boards of both companies approved on Friday.
S&P Global Ratings took similar action.
To finance the Warner takeover, Ellison’s billionaire father, Larry Ellison, has agreed to guarantee the $45.7 billion in equity needed. Bank of America, Citibank and Apollo Global have agreed to provide Paramount with more than $54 billion in debt financing.
“Potential credit risks include the prospective debt-funded structure, Fitch’s expectation of materially elevated leverage and limited visibility on post-transaction financial policy and capital structure,” Fitch said.
Late last week, Paramount sent $2.8 billion to Netflix as a “termination fee” to officially end the streaming giant’s pursuit of Warner Bros. That payment paved the way for Warner and Paramount’s board to enter into the new merger agreement.
Paramount hopes the merger will be wrapped up by the end of September. It needs the approval of Warner Bros. Discovery shareholders and regulators, including the European Union.
Paramount executives acknowledged this week the new company would emerge with $79 billion in debt — a considerably higher total than what Warner Bros. Discovery had following its spinoff from AT&T. That 2022 transaction left Warner Bros. Discovery with nearly $55 billion of debt, a burden that led to endless waves of cost-cutting, including thousands of layoffs and dozens of canceled projects.
Warner still has $33.5 billion in debt, a lingering legacy that will be passed on to Paramount.
Paramount plans to restructure about $15 billion in Warner Bros. Discovery’s existing debt.
Paramount CEO David Ellison at a 2024 movie premiere for a Netflix show.
(Evan Agostini / Invision / AP)
Paramount told Wall Street it would find more than $6 billion in cost cuts or “synergies” within three years — a number that has weighed heavily on entertainment industry workers, particularly in Los Angeles.
Hollywood already is reeling from previous mergers in addition to a sharp pullback in film and television production locally as filmmakers chase tax credits offered overseas and in other states, including New York and New Jersey.
Some entertainment executives, including Netflix Co-Chief Executive Ted Sarandos, have speculated that Paramount will need to find more than $10 billion in cost cuts to make the math work. More recently, Sarandos went higher, telling Bloomberg News that Paramount may need $16 billion in cuts.
Cognizant of widespread fears about additional layoffs, Paramount Chief Operating Officer Andrew Gordon took steps this week to try to tamp down such concerns.
Gordon is a former Goldman Sachs banker and a former executive with RedBird Capital Partners, an investor in Paramount and the proposed Warner Bros. deal. He joined Paramount last August as part of the Ellison takeover.
During a conference call Monday with analysts, Gordon said Paramount would look beyond the workforce for cuts because the company wants to maintain its film and TV production levels.
Paramount plans to look for cost savings by consolidating the “technology stacks and cloud providers” for its streaming services, including Paramount+ and HBO Max, Gordon said. The company also would search for reductions in corporate overhead, marketing expenses, procurement, business services and “optimizing the combined real estate footprint.”
It’s unclear whether Paramount would sell the historic Melrose Avenue lot or simply centralize the sprawling operations onto the Warner Bros. and Paramount lots in Burbank and Hollywood.
Workers are scattered throughout the region.
HBO, owned by Warner Bros. Discovery, maintains its West Coast headquarters in Culver City; CBS television stations operate from CBS’ former lot off Radford Avenue in Studio City; and CBS Entertainment and Paramount cable channels executive teams are located in a high-rise off Gower Street and Sunset Boulevard, blocks from the Paramount movie studio lot.
“The combination of PSKY and WBD could create a materially stronger business than either individual entity,” Standard & Poor’s said in its note to investors. “However, this transaction presents unique challenges because it would involve the combination of three companies, with the smallest, Skydance, being the controlling entity.”
David Ellison’s production firm, Skydance Media, was the entity that bought Paramount, creating Paramount Skydance.
Ellison has not announced what the combined company will be called.
Paramount shares closed down more than 6% Tuesday to $12.45.
Warner Bros. Discovery fell 1% to $28.20. Netflix added less than 1% to close at $97.70.
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