The National Labor Relations Board (NLRB) on Thursday overruled a controversial Obama-era regulation and  restored earlier joint-employer standards for home building firms and other small businesses.

In a 3-2 vote, the Republican-controlled board overruled its 2015 decision in a case that said a company could be labeled a joint employer with a subcontractor if it has “indirect” control over the terms and conditions of employment or has the “reserved authority to do so.”

“In all future and pending cases, two or more entities will be deemed joint employers under the National Labor Relations Act (NLRA) if there is proof that one entity has exercised control over essential employment terms of another entity’s employees (rather than merely having reserved the right to exercise control) and has done so directly and immediately (rather than indirectly) in a manner that is not limited and routine,” the NLRB said in a statement.

In 2015, the NLRB decided in the case of Browning-Ferris Industries of California Inc.  that “joint employment” was defined as a worker who is directly or indirectly employed by two or more employers, making both of them responsible for compliance with a statute. That would include contractors, subcontractors, staffing agencies and franchisees. The decision covered the key terms of an worker’s employment, including hiring and firing, supervision, scheduling, and the means and method of employment.

Granger MacDonald, chair of the National Association of Home Builders (NAHB) and a home builder and developer from Kerrville, Texas, praised the NLRB’s decision.

“NAHB applauds the NLRB decision to overturn its ruling in the case of Browning-Ferris Industries that radically expanded the traditional test for joint employer status,” MacDonald said. “The Browning-Ferris decision in 2015 made the standard for joint employment so broad and vague that an employer could be held liable for the labor and employment practices of independent contractors and subcontractors over which they have no direct control. By rescinding the Browning-Ferris standard, the NLRB has restored the traditional definition of joint employment in which a company must exercise ‘direct and immediate control’ over a worker in a business-to-business relationship. Home building firms and other small businesses who work closely with subcontractors and third-party vendors will now have more certainty and clarity regarding their employment decisions. The NLRB action restores the sensible criteria that has worked so well for the economy for more than 30 years.”

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