A ruling last week from the National Labor Relations Board (NLRB) has sent many companies who rely on contract labor into a bit of a panic.  While there is one school of thought that says the ruling may impact homebuilding, it is not clear that it would affect that traditional subcontractor relationship.

The ruling, the first of two that will probably come from the board, concerns Browning-Ferris Industries, a Milpitas, California recycling company.  Browning-Ferris uses contract workers from a temporary staffing agency called Leadpoint.   The Teamsters Union tried to organize Leadpoint's employees but wanted the ability to also negotiate with Browning Ferris.  Its rational was that collective borrowing would be more effective if it also included the larger company which actually has control over the employees' working conditions.  It asked NLRB to designate Browning-Ferris as a "joint employer."

A regional NLRB director ruled against the Teamsters but they appealed and the Board's general counsel filed an amicus brief asking the Board to apply a broader definition to what it means to be an employer than the one that has been in place for over thirty years. The Board split along party lines striking down earlier decisions on the basis that the growth of the contingent or contract workforce has grown to a point where those rulings did not conform to the purposes of the National Labor Relations Act.  The new standard is actually a return to an earlier definition of employer.  

In its ruling reversing the regional directors decision NLRB said that the recycling firm exercised sufficient control over the contract employees - hiring, firing, supervising setting work hours and providing supervision - to qualify as a joint employer under the new standard and that, if Leadpoint employees did vote to join the Teamsters that the union would be allowed to bargain with both companies.

Waiting in the wings is another case in which the Fast-Food Workers Committee, with the assistance of the Service Employees International Union, has been attempting to win a $15 minimum wage and has filed several complaints with NLRB against McDonalds challenging whether the company qualifies as a joint employer with the franchise owner.  NLRB has consolidated the complaints into a single case and a decision is expected soon.

Even before the recession more and more companies were using contract and temporary employees to avoid staffing build-ups and layoffs that can accompany rising and falling work orders and to lower the costs of administering a work force.  In recent years the use of contractors and sub-contractors has spread from construction, where it has long been the model, to trucking, health care, and high tech.  Some companies such as Uber have built an entire business model on subcontracting.

Employers describe outsourcing as a way to run their businesses and managing staffing efficiently while labor advocates and many academics call it a way to avoid offering workers the protections of a traditional employer relationship. 

Diana Olick of CNBC writes that homebuilders are concerned by the ruling as the vast majority of home construction is carried out by subcontractors.  However few of the builder representatives she spoke with actually seemed worried.   

Big publicly owned homebuilders do have large staffs but still contract out a lot of work to the building trades.  As Stuart Miller, CEO of Lennar told Olick, "We think that our business is highly differentiated from what's being discussed in the current case or even extensions." Among larger builders, a subcontractor could work for Lennar one day and Pulte the next, so it is still unclear how the new ruling would apply.

"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," Wilma Liebman, a former chairman of the NLRB told Olick.

Builders appear to be content to wait until a ruling comes down that more closely applies to their business model before becoming too alarmed, but lobbyists have already circled a few wagons.  The Washington Post says the Congressional Republicans have attached a rider to the FY2016 budget that would prevent the implementation of a new joint employer standard, some representatives have vowed to roll back the new standards, and one Senator has introduced a bill to invalidate the NLRB ruling