NLRB Threatens Contractor-Subcontractor Relationship

AGC of America filed comments with the National Labor Relations Board (the “Board”) on Dec. 7 in response to the agency’s proposed rule to revise the standard for determining joint-employer status under the National Labor Relations Act (“NLRA”).

The proposed rule would rescind a regulation promulgated by the Board during the Trump Administration and replace it with a standard that would render more employers subject to being deemed a joint employer of another company’s employees.

Regulations presently allow a company to be deemed a joint employer under the NLRA only if it actually exercises substantial direct and immediate control over one or more essential terms and conditions of the other company’s employees’ employment. The newly proposed rule would allow a finding of joint-employer status when the putative joint employer has exercised control only indirectly, or has merely reserved the right to control but has never exercised any control, over the other company’s employees.

AGC signed onto joint comments opposing the rule that were submitted by the Coalition for a Democratic Workplace (“CDW”) as well as submitted supplementary independent comments in order to provide the Board with greater insight into the problematic impact that the proposed rule would have in the construction industry if implemented. CDW’s comments explain how the proposed rule is arbitrary and capricious, conflicts with the common-law standards on which it is purportedly based, lacks Congressional authorization, and would harm business and labor relationships. AGC’s own comments highlight how the proposed rule is unworkable, unfair, and unlawful as applied in the construction industry, particularly when applied to traditional construction contractor-subcontractor relationships.

“Due to the nature of the work and well-established practices, the reservation and exercise of some control by one company over another is inherent in the construction industry,” AGC stated in its comment letter. “A contractor should be able to use and direct subcontractors without taking on joint-employer status provided that the contractor does not directly and excessively control essential terms and conditions of employment of the subcontractors’ employees and unless its participation in collective bargaining is essential to meaningful bargaining.” AGC urged the Board to withdraw the proposed rule or to revise it so as to retain a more appropriate standard.

The Board received a high volume of comments during the now-closed public comment period, so a final rule is not expected for some time. Despite the many concerns raised by AGC and others opposing the proposed rule, AGC expects the Board to issue a final rule that is similar in scope to the proposal. The concerns raised, however, are likely to be useful in efforts to reverse the rule in future litigation or in rulemaking by a future Republican-controlled Board.

As previously reported, the Board is already embroiled in litigation over its efforts to change the joint-employer standard on a separate track through adjudication, particularly through the protracted Browning-Ferris Industries case.

AGC will monitor all tracks and continue to report on significant developments.


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