NLRB Ruling May Make GCs Liable for Subcontractor Labor Violations

Originally published by: NAHBMay 20, 2015

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The National Labor Relations Board (NLRB) is seeking to expand the definition of an employer and the potential changes could have consequences for members of the residential construction industry.

Specifically, the NLRB is moving towards a broader definition of the joint employer standard and seeking to overturn the model that has been in place for 30 years.

Under the National Labor Relations Act, a joint employer relationship exists when one company exerts “direct and immediate control over employment matters of the other entities’ employees.” In other words, a company is able to hire, fire and supervise the employees of another firm.

The NLRB is seeking to enlarge its definition of joint employment to include any business that has a direct, indirect or potential control over any employee working conditions. Under this broader definition, an employer could be held liable for the labor and employment practices of third-party vendors, suppliers and other contracted parties, such as independent contractors and subcontractors, over which they have no direct control.

How Could This Change Affect the Home Building Community?

Depending on how far the NLRB goes, a change in the joint employer status could mean that an employer could be held jointly liable for any labor violations committed by its subcontractors.

Moreover, the proposed changes would not only overturn policies which control joint liability for unfair labor practices, but also for union organizing and collective bargaining. A single primary employer would be deemed to be engaged in common efforts with the secondary employer, and therefore make each subject to the other’s labor disputes.

Under the NLRB’s proposed changes, any economic dependency or relationship between the two entities would trigger a joint employer finding.

Cases Pending Before the NLRB

There are two relevant cases before the NLRB:

  • McDonald’s. More than 300 unfair labor practice charges have been filed across the nation against McDonald’s franchises. The NLRB has determined that in some instances that McDonald’s is a joint employer with its franchisees. In other words, McDonald’s could be held jointly liable for alleged labor violations committed by its franchisees.
  • Browning-Ferris Industries of California. The Teamsters Union has filed a union representation case alleging that Browning-Ferris, a waste management company, should be considered a joint employer with a subcontractor, Leadpoint Business Services. Leadpoint is an independent staffing contractor and under the established joint employer standard, Browning-Ferris does not have the ability to hire, recruit or fire Leadpoint workers. The Teamsters are arguing the joint employer status should be expanded because Browning-Ferris is using an independent firm (Leadpoint) to supply workers. The case is pending.

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