This story was updated Tuesday, August 4, 2020, at 8 a.m. with more information.
President Donald Trump said Monday that he had fired the chairman of the Tennessee Valley Authority, criticizing the federally owned corporation for hiring foreign workers to replace IT workers in Chattanooga and other TVA cities.
Trump told reporters at the White House that he was formally removing TVA chairman James "Skip" Thompson and former TVA Chairman Richard Howorth from the nine-member board, and he threatened to remove other TVA board members if they continued to hire foreign labor.
Thompson, a Decatur, Alabama businessman appointed to the post by Trump in 2017, was elected TVA board chairman last year and disagreed with President Trump in April over his criticism of TVA and its CEO, Jeff Lyash.
Trump, who previously denounced the $8.1 million compensation package given to Lyash as "ridiculous," also called upon the TVA board to replace Lyash and immediately hire a new chief executive officer who "puts the interests of Americans first."
"The new CEO must be paid no more than $500,000 a year," Trump said. "We want the TVA to take action on this immediately. ... Let this serve as a warning to any federally appointed board: If you betray American workers, you will hear two words: 'You're fired.'"
Trump blasted Lyash for replacing many of TVA's in-house information technology workers with contractors who rely heavily on foreign workers under the H1-B visa program for highly skilled workers.
TVA laid off 62 IT workers in June and plans to cut another 38 workers by October after hiring contractors to perform much of the computer and software development now done by TVA employees, who primarily work at the computer center in the Chattanooga Office Complex.
TVA spokesman Jim Hopson said Monday "all jobs related to TVA's Information Technology department must be performed in the U.S. by individuals who may legally work in this country."
TVA said outsourcing the IT work to contractors that specialize in cybersecurity and utility software technology will be more efficient and reliable for TVA, but the labor union that represents the displaced workers said the change won't save money and will cut local jobs.
"That's a direct contradiction of TVA's mission to help the Tennessee Valley," said Gay Henson, president of the Engineering Association Local 1937.
Henson said TVA workers are now having to train their replacements and many of the new contract workers are not U.S. citizens but are working in America under H-1B visas.
The federal utility has contracted with CapGemini, which is based in France and has nearly half of its workforce in India; the Canadian-based CGI; and Accenture Federal Services, which is headquartered in Virginia and is a subsidiary of the Irish-based Accenture plc.
As Trump was meeting with workers who would shortly be laid off by TVA, Trump was passed a note from White House Chief of Staff Mark Meadows that said Lyash had called the White House and was promising to address the labor concerns.
Some of the attendees, who are set to soon see their last TVA paycheck, teared up as Trump read the message, even though it is still unclear if those workers will be able to keep their jobs.
Trump acknowledged that he was made aware of the outsourcing program at TVA after seeing a television ad produced by U.S. Tech Workers, a nonprofit group that wants to limit visas given to foreign technology workers, that aired in prime time on Fox News.
The group, led by Kevin Lynn, criticized the TVA for furloughing its own workers and replacing them with the contractors. The ad, Lynn said, had an "audience of one," aiming to persuade Trump to stop the outsourcing.
Read President Trump's executive order on TVAView
One of TVA's largest labor unions, which represents the IT workers being laid off, has been fighting the proposal for most of the past year with appeals to the TVA board, management and Congress for protection of the affected workers.
Paul Shearon, president of the International Federation of Professional and Technical Engineers, said too many engineers and IT workers are being replaced by foreign workers.
"I don't think there is a non-management person in the United States who would say that is any fair way to treat workers," Shearon said.
Trump made the announcement as he signed an executive order to require all federal agencies to complete an internal audit to prove they are not replacing qualified American workers with people from other countries. The White House said the order will help prevent federal agencies from unfairly replacing American workers with lower-cost foreign labor.
In response to the television ad, Trump initially tweeted last month that he couldn't fire TVA's CEO over the outsourcing since TVA is an independent federal corporation and the CEO is hired and fired by the TVA board. But Trump does appoint the directors of the TVA board, who must be confirmed by the U.S. Senate and serve at the will of the president of the United States.
The firing of Thompson and Howorth from the TVA board marks only the second time in TVA's 87-year history that a president has removed a director from the TVA board. President Franklin D. Roosevelt removed Arthur Morgan, one of the original TVA board members, from the then-three-member TVA board in 1938.
Trump's moves were applauded Monday by both of the leading Tennessee senatorial candidates trying to succeed retiring U.S. Sen. Lamar Alexander, R-Tennessee.
"President Donald Trump is right, we can't outsource American jobs at a time when our unemployment rate is higher than ever," said Bill Hagerty, a former trade ambassador for Trump. "President Trump and his administration have taken unprecedented steps to keep people employed during this difficult period, and it flies in the face of those efforts when TVA decides to outsource Tennessee jobs."
The other leading candidate, Dr. Manny Sethi, said, "President Trump was right to take action" to limit the actions of the Tennessee Valley Authority.
"Our public utilities do not need overpaid bureaucrats and executives," he said.
Previously, U.S. Rep. Steve Cohen, D-Memphis, had urged Congress to include in coronavirus relief measures a requirement that TVA and other federal agencies not be allowed to outsource IT operations, but that measure was never adopted.
U.S. Rep. Chuck Fleischmann, R-Chattanooga, also said Monday he supports Trump's efforts.
"I agree with President Donald Trump that we should prioritize the hiring of American workers," Fleischmann said.
But U.S. Sen. Lamar Alexander, R-Tenn., defended the board and leadership of TVA, which he said has cut TVA's debt to the lowest level in 30 years while keeping power rates well below the national average.
"TVA may have shown poor judgment hiring foreign companies during a pandemic, but, on most counts, it does a very good job of producing large amounts of low-cost, reliable electricity," Alexander said. "Residential electric rates are among the 25 percent lowest in the country, and industrial rates are among the lowest 10 percent."
Alexander also noted that Lyash is paid less than the average compensation for CEOs of comparable investor-owned electric utilities in the United States.
Alexander and former Senate Majority Leader Bill Frist sponsored legislation in 2004 to revamp the TVA board and to pay all TVA employees, including the CEO, comparable compensation to industry norms.
Lyash is the highest paid federal employee in America, but his compensation package ranks in the bottom 25% of comparable utilities, according to compensation surveys of 37 other electric utilities by the consulting firm of Willis Towers Watson Energy Services.
Staff writer Dave Flessner contributed to this AP story.