NLRB decision to shield contractors in labor disputes

The National Labor Relations Board on Wednesday released a final rule that could help construction companies that hire subcontractors avoid liability under federal labor law, a decision union critics say will shield some employers from accountability.

The rule, scheduled to take effect April 27, will allow companies to be considered “joint employers” that could be faced with liability under federal labor law only if they exercise direct control over key parts of their workers’ employment conditions, such as wages, benefits and discipline. The GOP-controlled board’s action returns the rule to the way it had been viewed before 2015, when an NLRB decision during the Obama administration expanded the definition of what types of companies could be on the hook for labor-law violations.

Wednesday’s ruling was decried by Democrats and labor unions but won praise from business groups in general. Many argued the decision would give companies more certainty in their relationship with workers. Among other things, the ruling is expected to make it harder to pursue companies for claims of unfair labor practices and to prevent companies from having to bargain with subcontracted workers who are unionizing.

Construction groups were among the supporters.

“With further clarification of the standard, contractors will be better able to work and coordinate with multiple employers without fear of being unexpectedly and unfairly found to be joint employers,” said Kristen Swearingen, vice president of legislative and political affairs for the Associated Builders and Contractors, a mostly non-union trade group.

Labor unions and worker advocates, meanwhile, argued the board’s decision is designed to make it extremely difficult to prove that a company is a joint employer. Some groups also contended the ruling could allow some companies to short-circuit collective-bargaining agreements or other union obligations by using affiliated entities.

Under federal law, if two companies are found to be joint employers, they are required to bargain with whatever union represents their employees. Both companies could also be found liable for unfair labor practices and, as a result, be subject to picketing or other union actions.

John Zapfel, political director for the Milwaukee-based International Brotherhood of Electrical Workers Local 494, said the ruling comes at the expense of “millions of working people.” Labor unions are now likely to challenge the board’s rule in court.

“It’s reopening something that will only benefit large corporations and not working families,” Zapfel said. “They say it allows for more clarity. We think it allows business to shirk responsibility.”

The NLRB’s final rule finds that two companies can be considered joint employers only if they hold direct control over essential functions of employment, defined exclusively as wages, benefits, hours of work, hiring and firing, discipline, supervision, and direction. In a summary, the board wrote that the decision will foster “predictability and consistency” and result in better relations between labor and management.

At the same time, the NLRB did find that a company can be considered a joint employer if it exercises “contractually reserved control,” or the reserved right to control workers laid out in a contract.

Brian Turmail, vice president of public affairs and strategic initiatives for the Associated General Contractors of America, praised the NLRB’s proposed joint-employer rule. Although AGC was still examining the ruling on Wednesday, he expected it would be a “positive development” for the industry. Follow @natebeck9