Conditioning Tax Incentives on VW’s Union Status?

As the date for the union election at Volkswagen’s Tennessee plant approaches, state lawmakers are threatening to withhold tax incentives from the automaker if the union wins the election.  But conditioning the availability of tax incentives on VW’s union status would in all likelihood be preempted by federal labor law, and therefore illegal.

Here’s the most recent report from the state:

If the workers opt for UAW representation, VW would have a “very tough time” securing more incentives from the state legislature, Bo Watson, a state senator from suburban Chattanooga, said during a press conference this morning. He was flanked by House Majority Leader Gerald McCormick, a powerful figure in Tennessee politics, who said the “heavy hand” of the UAW is unwelcome in the state.

“The taxpayers of Tennessee reached out to Volkswagen and welcomed them to our state and our community,” McCormick, a Republican from Chattanooga, said in an e-mail to Automotive News. “We are glad they are here. But that is not a green light to help force a union into the workplace. That was not part of the deal.

A spokesman for Tennessee Gov. Bill Haslam said in an e-mail to Automotive News that state lawmakers would play a big role in approving incentives for the VW plant because the project would be too large to approve with existing funding for the state’s “FastTrack” incentive program.

“The governor has been clear about the impact of the UAW on the state’s ability to recruit other companies to Tennessee,” the Haslam spokesman said. “Any discussions of incentives are part of additional and continued talks with VW, which we look forward to.”

If Tennessee state lawmakers follow through and withhold future tax incentives based simply on VW’s union status, their action would run afoul of National Labor Relations Act preemption principles. A state may not, that is, condition tax incentives on the bare fact that a firm is union or nonunion.  Absent some clear, genuine, and specific proprietary interest in discriminating against union employers, such selective use of state tax incentives would be impermissible under federal law.