Homebuilders Waiting to See Impact of NLRB Ruling

by devteam September 1st, 2015 | Share

A ruling last week from the National Labor Relations Board (NLRB)rnhas sent many companies who rely on contract labor into a bit of a panic.  While there is one school of thought thatrnsays the ruling may impact homebuilding, it is not clear that it would affectrnthat traditional subcontractor relationship.</p

The ruling, the first of two that will probably come from thernboard, concerns Browning-Ferris Industries, a Milpitas, California recycling company.  Browning-Ferris uses contract workers from arntemporary staffing agency called Leadpoint. rn The Teamsters Union tried tornorganize Leadpoint’s employees but wanted the ability to also negotiate withrnBrowning Ferris.  Its rational was that collectivernborrowing would be more effective if it also included the larger company whichrnactually has control over the employees’ working conditions.  It asked NLRB to designate Browning-Ferris asrna “joint employer.”</p

A regional NLRB director ruled against the Teamsters butrnthey appealed and the Board’s general counsel filed an amicus brief asking thernBoard to apply a broader definition to what it means to be an employer than thernone that has been in place for over thirty years. The Board split along partyrnlines striking down earlier decisions on the basis that the growth of therncontingent or contract workforce has grown to a point where those rulings didrnnot conform to the purposes of the National Labor Relations Act.  The new standard is actually a return to anrnearlier definition of employer.  </p

In its ruling reversing the regional directors decision NLRBrnsaid that the recycling firm exercised sufficient control over the contractrnemployees – hiring, firing, supervising setting work hours and providingrnsupervision – to qualify as a joint employer under the new standard and that,rnif Leadpoint employees did vote to join the Teamsters that the union would bernallowed to bargain with both companies.</p

Waiting in the wings is another case in which the Fast-FoodrnWorkers Committee, with the assistance of the Service Employees InternationalrnUnion, has been attempting to win a $15 minimum wage and has filed severalrncomplaints with NLRB against McDonalds challenging whether the company qualifiesrnas a joint employer with the franchise owner. rnNLRB has consolidated the complaints into a single case and a decisionrnis expected soon.</p

Even before the recession more and more companies were usingrncontract and temporary employees to avoid staffing build-ups and layoffs thatrncan accompany rising and falling work orders and to lower the costs ofrnadministering a work force.  In recentrnyears the use of contractors and sub-contractors has spread from construction,rnwhere it has long been the model, to trucking, health care, and high tech.  Some companies such as Uber have built anrnentire business model on subcontracting. </p

Employers describe outsourcing as a way to run theirrnbusinesses and managing staffing efficiently while labor advocates and manyrnacademics call it a way to avoid offering workers the protections of arntraditional employer relationship.  </p

Diana Olick of CNBC writes that homebuilders are concerned</bby the ruling as the vast majority of home construction is carried out byrnsubcontractors.  However few of thernbuilder representatives she spoke with actually seemed worried.   </p

Big publicly owned homebuilders do have large staffs butrnstill contract out a lot of work to the building trades.  As Stuart Miller, CEO of Lennar told Olick, “We think that our business is highlyrndifferentiated from what’s being discussed in the current case or evenrnextensions.” Among larger builders, a subcontractor could work for Lennarrnone day and Pulte the next, so it is still unclear how the new ruling wouldrnapply.</p

“It obviously depends on the factsrnof each case, but in the construction industry in particular, these kinds ofrnrelationships have been in place for decades, and so even before the testrntightened in the 1980s not every contracting relationship in the buildingrnindustry was considered a joint employer,” Wilma Liebman, a formerrnchairman of the NLRB told Olick.</p

Builders appear to be content to waitrnuntil a ruling comes down that more closely applies to their business modelrnbefore becoming too alarmed, but lobbyists have already circled a fewrnwagons.  The Washington Post says the Congressional Republicans have attachedrna rider to the FY2016 budget that would prevent the implementation of arnnew joint employer standard, some representatives have vowed to roll back thernnew standards, and one Senator has introduced a bill to invalidate the NLRBrnruling

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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