Several hundred union and non-union workers walked off the construction site for Tesla Motors' massive $5 billion battery factory near Reno, Nevada today, after accusing a third-party contractor of using lower paid, out-of-state laborers.
The walk-off is just the beginning, local union leader Todd Koch told Fortune.
"We're not sure if the protest is going to continue at the job site tomorrow or not," says Koch, who is president of the Building and Construction Trades Council of Northern Nevada. "We're considering our options. But I can say, this is just the opening salvo and we're not going to give up. Tesla hasn't heard the last from us."
Between 300 and 350 union and non-union workers left the job site to protest Brycon Corp., a New Mexico-based company hired by Tesla, Koch says. The protest was initially reported by local news station KOLO.
The dispute isn't over hiring non-union workers, Koch insists, adding that the goal is to get more Nevada workers on the site.
"There have been Nevada construction workers on the job who have been displaced by these contractors and workers from out of state," Koch says. "Workers on this site—non-union and union alike—have watched this happen over time, and they're saying, 'Are we next?'"
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The protest could significantly impact Tesla's progress on the factory if this one-day walk-off really is just the first of many. The 10-million-square-foot Gigafactory is central to Tesla's plan to slash battery costs and produce a cheaper, all-electric car. The massive factory will have the capacity to produce 50 gigawatt hours of battery packUnion to Tesla: Gigafactory Worker Protest Is Just the Beginnings a year, and is expected to reduce the per-kilowatt-hour cost of its lithium-ion battery packs by more than 30% by the end of 2017.
If Tesla execs are worried, they're certainly not expressing it publicly. The company's statement:
Today's activity stems from the local Carpenters Union protesting against one of the third party construction contractors that Tesla is using at the Gigafactory. Their issue is not with how Tesla treats its workers. Their issue is that of the many third party contractors that are involved in the construction of the Gigafactory, many are union but the one at issue is not. The union is also claiming that this contractor is somehow favoring out of state workers. In reality, more than 50% of the workers used by this contractor and more than 75% of the entire Gigafactory workforce are Nevada residents, demonstrating the project’s strong commitment to Nevada.
The Nevada legislature approved in 2014 a gift basket of $1.4 billion in tax breaks, free land, and other benefits in exchange for certain commitments from Tesla. The SB 1 bill, which was approved in a special session, requires that 50% of the estimated 3,000 construction workers on the project and the 6,500 people who will eventually work at the gigafactory be Nevada residents.
How Nevada won the Tesla gigafactory
So far, data from Tesla suggests the company has well exceeded that requirement. Tesla said in a report to Nevada's economic development office that in the fourth quarter of 2015, there was a weekly average of 894 construction workers, of which 74% were residents of Nevada. Tesla reported that since the project began there's been a weekly average of 645 construction workers, of which 73% have been residents of Nevada. Koch says the union lobbied state legislators unsuccessfully to require 100% of workers be Nevada residents.
Koch says Tesla's response missed the point and attempts to distance itself from the out-of-state worker issue. "To say, gee we don't have any control over these third-party vendors is disingenuous," says Koch. "They have total control."