By Bryan Corliss
Jan. 29, 2020 © Leeham News — Two weeks into the job, and new Boeing CEO Dave Calhoun is already facing his first labor-management showdown, with SPEEA, the union for engineers and technical workers at the company’s Puget Sound plants.
On Monday, the vice president of engineering functions for Boeing Commercial Airplanes sent a message to members of SPEEA at Boeing, saying that his team has agreed to meetings with SPEEA’s leadership to discuss “areas of contention between the company and the union.”
Chief among those is SPEEA’s charge that Boeing has been manipulating data used to help calculate annual pay adjustments for engineers and techs, while also allowing front-line managers to blow off annual performance reviews required for engineers and technical workers to determine who would be released first in the event of a layoff.
The union, through a spokesman, declined on Monday to talk about the accusations it’s made in writing about the wage issues. BCA’s VP of engineering functions, Todd Zarfos, said in his note that the two sides have “agreed to refrain from any further accusations and rebuttals about the identified areas of dispute.”
Instead, Zarfos said, they will “work together on possible solutions.”
Jan. 13 was Calhoun’s first official day on the job. It was also the day that Boeing management announced its annual “salary exercise” for members of SPEEA, which represents some 24,000 aerospace workers – most at Boeing.
It was not a happy coincidence. SPEEA issued a statement calling the company’s wage calculations for the year “a new low for company leadership currently mired in a series of scandals of their own making,” and said that management had “contrived” to hold pay increases to an “artificially reduced lump sum.”
The six-year contract Boeing and SPEEA agreed to in 2016 has a more-complicated pay formula than most union contracts. But in very simple terms, the premise is that Boeing will ensure that its Puget Sound engineers are paid salaries 15% above the market rate for U.S. engineers doing similar work, while techs are paid 20% above market rate.
The two sides review nationwide wage data every year – the contract calls out a specific annual report by a specific human resources consulting firm – to calculate that figure.
Boeing, in the contract, agrees to put an amount equal to 5% of the previous year’s total wages into a pool each year. Money to raise pay to keep engineers and techs at their target pay, relative to the market, comes out of that pool. Anything left over is paid out as a lump sum.
For example, the first year of the contract saw engineers get salary increases of 2.8% and one-time payments of 2.2% (which add up to a total of 5%). Techs saw raises of 2.3% with one-time payments of 2.7%.
However, from the beginning, the union expressed surprise that the market pay data that Boeing provided seemed to indicate that wages for engineers and techs are falling nationwide. This seemed counter-intuitive given low nationwide unemployment and high demand for skilled engineers and techs in particular. And, as a result, workers got bigger one-time bonuses with smaller increases to their base salary.
On Jan. 13, the union said it had found the answer, and accused Boeing of substituting a different set of data that reported lower pay rates. As a result, that has kept salary increases artificially low, the union claimed.
SPEEA said it has proposed several solutions to the problem, which were rejected by Boeing management. Prior to Monday’s announcement of a joint effort to reach a solution, the union said it was contemplating a lawsuit.
“Litigation will resolve this,” said the union’s Jan. 13 statement, “but it doesn’t have to be this way.”
In addition, SPEEA reported that managers supervising nearly half of its members failed to conduct required performance reviews during the past year. These reviews are used to determine retention rankings, which Boeing and SPEEA agreed to use as the criteria for who gets laid off first in a downsizing – a hot-button issue given the uncertainty about 737 MAX production and a rumored further cut in 787 production rates.
The contract specifies that managers are to hold three face-to-face meetings a year to discuss individual goals and progress toward meeting them. But for roughly 30% of SPEEA members, the union claimed that managers had pencil-whipped their way through the process, filing paperwork for all three meetings on one day.
Another 10% had only two of the required meetings and at least 5% percent of the workers got no meetings at all, the union said.
“This confluence of bad data and bad process has now been joined by bad faith,” the union thundered. “You cannot have a fair performance-based compensation system when there was no actual or meaningful measurement of performance.”
Tensions between Boeing and SPEEA ratcheted up a little higher last week, when a 14-member SPEEA delegation went to the Washington state capitol in Olympia to seek help from the Legislature in its fight to get the state’s paid family leave act extended to its members.
Washington state in 2017 adopted one of the United States’ first paid family and medical leave laws, which grants workers 12 to 16 weeks of paid leave for things like giving birth, undergoing surgery or taking care of a family member with a health issue. Workers themselves actually fund this; their employers take 0.4% out of each paycheck, which goes into a state-administered account that workers can tap when they need to use paid leave.
There’s one exception: Workers who were covered by a collective bargaining agreement as of October 2017 aren’t eligible to take part until their current contracts expire.
SPEEA’s contract with Boeing expires in October 2022.
Union leaders say when they approached Boeing about getting SPEEA-represented workers on the state-sponsored family leave plan before 2022, the response from management was “sure – what are you willing to give up to get it?”
That’s unfair and wrong, said SPEEA Executive Director Ray Goforth in a press statement issued last week.
“Paid family and medical leave is the right of every resident of Washington,” he said. “It’s not a bargaining chip.”
The SPEEA delegation testified in support of a bill proposed by Democrats in the state Senate, which would eliminate the provision that allows Boeing to delay offering the benefit to its employees. The measure (Senate Bill 6216) is before the Senate’s Labor & Commerce Committee, which has not voted on whether to send it to the full Senate.
While the pay and family leave issues specifically involve the engineers’ union, the union for touch-labor workers has already started urging its members to prepare for a walkout when its contract expires in 2024.
In December, the leadership at Machinists Union District Lodge 751 in Seattle began urging members to establish “individual strike funds” to help tide them over should the union decide to go on strike when the contract is up. By starting now with a simple $50 contribution per paycheck, workers could have about $5,000 saved up by January 2024, which is when the current 10-year agreement expires.
Part of this move is simply smart negotiating on behalf of the union. A membership that’s got money in the bank can weather a strike much more comfortably than one that’s living paycheck-to-paycheck. Those savings accounts will strengthen the union’s hand at the bargaining table.
At the same time, IAM 751 leaders and activists have not forgotten how then-CEO Jim McNerney and his team strong-armed the Machinists into accepting the current deal, which capped annual wage increases at an average of 0.5 percent for a decade, while also eliminating defined-benefit pensions. (In return, the company agreed to locate 777X final assembly and wing production in Everett, without considering other sites.)
In theory, new CEO Calhoun should be walking into a relatively calm and settled period of “labor peace,” allowing him to focus on all the other major issues facing Boeing. After all, SPEEA’s contract has more than 2.5 years to run, while IAM 751’s contract doesn’t expire for nearly four years.
However, in this, as in so many other things, Calhoun is left to clean up a mess left by his predecessors. McNerney was overwhelmingly unpopular with the Puget Sound rank-and-file, particularly after his off-hand crack about “cowering employees” in a 2014 earnings call, which came just a few months after the company had maneuvered the Machinists into giving up their pensions.
The recently departed Dennis Muilenburg talked a good game about respect for the unions, but he largely continued McNerney’s scorched-earth fight with Machinists in South Carolina, even going as far as adding ex South Carolina Gov. Nikki Haley – who once bragged she wore high heels so she could kick unions out of her state – to Boeing’s board of directors.
Calhoun was on Boeing’s board for all of it, which – as many have said – suggests he’s going to be an incrementalist, not a bold change agent.
But if Calhoun is serious about rebuilding the culture at Boeing Commercial Airplanes, he’s going to have to get buy-in from the workforce, and he’ll need the backing of leadership at the unions. That’s going to require a big change in direction from the very top of 100 N. Riverside Plaza (Boeing’s Chicago headquarters).
Maybe Monday’s announcement of upcoming meetings to try to work the dispute with SPEEA are a sign that Calhoun wants a better relationship with his unionized workers. Or maybe it’s just a tactical move to head off a threatened lawsuit. Time will tell.