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NAHB Decries Joint Employer Change

Friday, October 9, 2015

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Stating that a new rule regarding joint employer relationships would hurt housing affordability and small businesses, a Texas home builder also told Congress this week that the standard is “fundamentally unrealistic.”

“Businesses could be found to be joint employers of another company’s workers by merely setting the work schedule of their subcontractors or requesting additional subcontractors to complete a job that is running behind schedule,” said Ed Martin, according to the National Association of Home Builders (NAHB).

Martin—who was testifying Tuesday (Oct. 6) before the Senate Committee on Health, Education, Labor and Pensions—is one of several homebuilders who have raised concerns about the new standard.

Change in Standard

On Aug. 27, the National Labor Relations Board (NLRB) issued a split decision involving Bowing-Ferris Industries of California. The NLRB redefined its standard for determining joint-employer status, according to an agency statement.

©iStock.com / levkr

The NAHB and its members have said a new joint-employment standard will hurt the housing industry, which regularly uses subcontactors to build new homes.

The new standard, according to the NLRB, is designed “to better effectuate the purposes of the Act in the current economic landscape.”

The agency applies what it calls long-established principles to find that two or more entities are joint employers of a single workforce if they are both employers under the common meaning of the law and they share or co-determine the issues regarding terms and conditions of employment, according to the statement.

In deciding the case of Browning-Ferris Industries, the NLRB said it determined that the company was a joint employer with Leadpoint—a subcontractor—because the company kept direct control of the terms and conditions of employment of Leadpoint’s employees and reserved the right to control those terms and conditions.

NAHB, in its statement this week, said the decision overturns decades of precedence of the traditional joint employer test, which had been that an employer must exercise “direct and immediate control” over an employment relationship.

Initial Response

In August, the NAHB came out with an immediate response against the decision.

“The homebuilding industry, which is primarily made up of small businesses who rely greatly on the work of subcontractors would overwhelmingly be harmed by the new standard,” said Tom Woods, NAHB chairman, in a statement provided to CNBC in August.

“It will cripple small businesses across the country, including the homebuilding industry as it is in its fragile recovery.”

©iStock.com / Justin Horrocks

In August, the NLRB issued a split decision regarding joint employment, which changed the standard to a more broad definition of control of a company over its subcontractors.

Wilma Liebman, a former chairwoman of the NLRB, told CNBC at the time that the joint employer relationship would have to be examined on a case-by-case basis.

“It obviously depends on the facts of each case, but in the construction industry in particular, these kinds of relationships have been in place for decades, and so even before the test tightened in the 1980s not every contracting relationship in the building industry was considered a joint employer,” said Liebman.

Test Method Uncertain

Martin, who is the past president of the Texas Association of Builders, said this week that the uncertainty is what concerns him the most.

“We question whether the simple act of choosing a project’s completion date would trigger a finding of joint employment,” said Martin in the NAHB statement.

“For example, if Tilson Homes contracted with a painting company for a home in Austin, would we be prevented from telling the subcontractors when to paint the walls or even when the walls would be constructed?

“Would we be prevented from scheduling installation of the fire sprinklers or cabinets? Would the roof be completed in time for the codes inspector to visit?” Martain asked the committee.

The NAHB also said that the timing is an important factor in the NLRB’s decision. Many of the nation’s housing markets are beginning to see sustainable growth, the homebuilder’s association said, and the recent decision could put a damper on that.

Martin said the rule would change a decentralized market into a more centralized one, which could lead to less competition and higher home prices.

“If left unchecked, the Browning-Ferris decision will be damaging to the marketplace and housing affordability,” he said.

   

Tagged categories: Contractors; Government; Home builders; Labor; National Association of Home Builders (NAHB); Subcontractors

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