Construction industry reps decry NLRB ruling

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Although a recent landmark decision by the National Labor Relations Board stemmed from a complaint involving workers at a recycling plant, construction officials say it could easily throw a wrench into relations between general contractors and subs.

The federal board, commonly called the NLRB, voted 3-2 on Thursday in a ruling that could greatly expand the types of businesses that can be held liable for violations of labor laws. Before the decision, a company generally could not be found responsible for a violation of that sort unless it exercised “direct and immediate” control over employees involved in a labor complaint.

With Thursday’s ruling, federal officials will now be able to impose liability on a company that does no more than control the terms and conditions of employment “indirectly or through an intermediary, or … has reserved the right to do so.” Reached Friday, various construction-industry representatives predicted profound consequences for general contractors, especially in their relationships with subs.

Brian Turmail, executive director of public affairs at the Associated General Contractors of America trades group, said federal officials are essentially asking general contractors to police the labor and employment practices of their subs. It’s a responsibility, he said, that few construction companies are ready or willing to take on.

Turmail also noted recent Department of Labor rules that make general contractors and subs who work with the federal government more responsible for ensuring a certain percentage of their workforce is made up of veterans and the disabled.

“Now, in addition to your day job of building structures, you get to be an auditor for the federal government,” Turmail said.

Geoff Burr, vice president of government affairs for the Associated Builders & Contractors of America, a mostly non-union trade group, predicted a fundamental change in general contractors’ dealings with subs. Company officials who had once seen themselves as having arms-length relationships with subcontractors’ employees will now have to worry about labor violations that they might have little authority to prevent.

“I feel like this challenges the entire existing business model in the industry,” Burr said. “If it’s applied on a regular basis to construction companies, we will have to consider altering that model and reworking agreements between generals and subs.”

Rufino Gaytan, a labor and employment lawyer at Godfrey & Kahn’s Milwaukee office, said it’s not entirely clear what the NLRB’s ruling will mean for industries outside those involved directly in the case, although it is certain to have wider consequences. For one, he predicted that some general contractors will find themselves reconsidering how much direct and indirect control they want to exercise over subcontractors.

The NLRB’s decision seems to suggest that the greater a company’s authority, the greater its exposure to labor-law liability. General contractors might respond, Gaytan said, by negotiating contracts that abdicate control over all subcontractor matters aside from insisting that a particular part of a project be completed on time and on budget.

“Obviously, that’s the extreme,” he said. “But general contractors who take that sort of a stance will be taking the safest or most conservative approach to avoid that joint-employer designation.”

Although many observers were quick to predict widespread consequences from Thursday’s NLRB decision, defenders noted that the underlying case arose from a very specific set of circumstances. Namely, members of the NLRB had been asked to rule on the Teamsters union’s right to represent workers at a Browning-Ferris Industries’ recycling plant in Milipitas, Calif.

The workers were not direct employees of Browning-Ferris but rather of Leadpoint Business Services, a staffing agency. The Teamsters, in its attempt to represent the workers, asked the NLRB to decide if Browning-Ferris and Leadpoint could be considered “joint employers.”

In voting against the majority in Thursday’s decision, the two Republican appointees on the NLRB complained in writing that the decision does little to tell employers when they can now expect to be held responsible for possible labor violations affecting an employee of a partner company.

“There can be no certainty or predictability regarding the identity of the employer,” wrote the two dissenters, Philip Miscimarra and Harry Johnson.

The Democratic appointees who hold the majority of the board’s seats countered by contending that the NLRB “cannot attempt today to articulate every fact and circumstance that would define the contours of a joint employment relationship.”

Wisconsin Attorney General Brad Schimel stepped into the debate earlier this month, joining his counterparts in five other states in sending a letter to NLRB chairman Mark Pearce. The letter, dated Aug. 11, argues that the pending change “will expose companies to liability for workers they don’t actually employ” and “make it more difficult to structure relationships with other businesses.”

In a statement released the day after the NLRB’s ruling, Schimel contended that “even routine business decisions, like whether to fire a contractor or how to structure operations, will now be examined in light of how they affect union organizing efforts.” Follow @TDR_WLJDan