NLRB Delivers Crushing Blow to Small Businesses

Home Builders Especially Affected

In a long-awaited, 3-2 decision, the National Labor Relations Board (NLRB) changed the well-established standard for determining whether two separate and independent companies are joint employers under the National Labor Relations Act. The case is Browning –Ferris Industries of California, Inc. d/b/a BFI Newby Island Recyclery.

BFI Newby Island Recyclery owned and operated a recycling facility and it contracted with Leadpoint Business Services to provide workers to help sort materials inside the facility. The relationship between BFI and Leadpoint was governed by a temporary labor services agreement. The issue in the case was whether BFI and Leadpoint were joint employers of the sorters, screen cleaners, and housekeepers that Leadpoint provided to BFI.

For the past 30 years the NLRB has held that whether an otherwise independent company was a joint employer turned on whether the company retained for itself sufficient control of the essential terms and conditions of employment of the employees employed by the other employer.

A key element of that determination was whether the company exerted “direct and immediate control over employment matters of the other entities’ employees.” The board’s focus was on whether the joint employer meaningfully affected matters relating to the employment relationship such as hiring, firing, discipline, supervision and direction.

In finding that BFI was a joint employer, the NLRB applied a new standard that eliminates the requirement that the employer actually exercise the authority to control. Now, the right to control will not be considered in determining joint-employer status.

As a result, direct, indirect (e.g., through an intermediary), and potential control over working conditions are all relevant to the joint-employer inquiry.

Examples include dictating the number of workers to be supplied; controlling scheduling, seniority, and overtime; and assigning work and determining the manner and method of work performance.

The dissenting members of the board criticized the expanded standard, arguing that it abandoned a longstanding test that provided certainty and predictability. They predicted that it would subject countless entities to unprecedented new joint-bargaining obligations that most do not even know they have, to potential joint liability for unfair labor practices and breaches of collective-bargaining agreements, and to economic protest activity.

The National Association of Home Builders is an executive committee member of the Coalition to Save Local Businesses, which was successful in including appropriations riders in both House and Senate appropriations measures to block the NLRB from investigations on an expanded joint employer standard. Because the appropriations strategy is not a guaranteed success — the President’s signature is necessary on the final bill — your Home Builders Association will support soon-to-be introduced bicameral legislation that will protect the NLRB’s traditional joint employer definition.

We ask all members to encourage their Representatives and Senators to support this legislation upon Congress’ return in September.

The case is Browning-Ferris Industries of California Inc., et al v. Sanitary Truck Drivers and Helpers Local 350, International Brotherhood of Teamsters, Case number 32-RC-109684.

Statement by Tom Woods, Chairman, National Association of Home Builders
Tom Woods, Chairman of the National Association of Home Builders (NAHB) and a home builder from Blue Springs, Mo., issued the following statement on the National Labor Relations Board’s (NLRB) decision in the Browning-Ferris case that will expand the definition of a joint employer.

“The decision by the NLRB to expand the definition of a joint employer not only delivers a huge blow to businesses across the country who rely on the work of sub-contractors, by threatening a business owner’s control of their own company, but it is also bound to have a chilling effect on the overall economy and job growth.

“The NLRB abandoned a standard that has been recognized for decades, and expanded the definition of a joint employer to now hold businesses liable for workers they do not even employ, potentially even putting them on the hook for legal ramifications. The new standard no longer requires that a business ‘directly and immediately’ control a workforce run by another business, to be named a joint employer, but rather expands the definition to include indirect control.

“The home building industry, which is primarily made up of small businesses who rely greatly on the work of sub-contractors would overwhelmingly be harmed by the new standard. Building a home requires the work of multiple specialty trade contractors such as roofers, electricians and framers, but these small builders can’t afford to have a large full-time staff to include all of these trades, so they contract with specialty trades based on project needs. With the NLRB’s recent decision, these small businesses would now be subject to unprecedented Board jurisdiction. The overall construction sector is made up of more than two million individual proprietorships, all of whom would be subject to this new rule.“If this ruling is allowed to stand, it will cripple small businesses across the country, including the home building industry as it is in its fragile recovery. NAHB intends to continue its fight against this regulatory overreach, and put the control back in the hands of small businesses.”