Joint Employer Bill Would Give Clarity, Certainty to Small Businesses

NAHB today urged Congress to pass the bipartisan Save Local Business Act, legislation that would boost housing affordability and provide small businesses certainty and predictability by clarifying under law what constitutes a joint employer.

Testifying before two subcommittees of the House Committee on Education and Workforce, NAHB Chairman Granger MacDonald said, “The line that once clearly separated two employers is so blurry that neither I nor others in our industry can see where it lies. As a business owner, this bipartisan legislation would provide clarity by ensuring that I am held accountable for my employees, but not those of another company. Codifying this definition will provide the legal certainty every employer deserves.”

In 2015, the National Labor Relations Board (NLRB) overturned decades of precedence in the case of Browning-Ferris Industries of California Inc. by radically expanding the traditional test for joint employer status in which a company must exercise “direct and immediate control” over an employment relationship.

Under the expanded standard, a company could be considered a joint employer if it has indirect control or the potential to determine the key terms of an employee’s employment, including hiring and firing, supervision, scheduling and the means and method of employment.

“In the aftermath of Hurricane Harvey, my focus is on getting families back into their homes,” MacDonald told lawmakers. “We have endured and rebuilt from bad storms before, and we’re doing it again. But this time, it is with the added worry of whether my company could be held liable for the practices of contractors, third-party vendors, and suppliers that we have hired to help with this job and over whom we have no direct control.”

The NLRB’s expanded joint employer standard has provided little clarity on the level of control sufficient to create the joint-employer relationship, leaving home builders and other small businesses with no certainty or predictability in exercising many commonplace business practices. Exposed to unlimited and unpredictable joint employment liability, small businesses are finding it increasingly challenging to comply and therefore compete.

“This is particularly problematic for residential building firms, the majority of which have less than 10 employees and rely on an average of 22 subcontracting firms to build a home,” said MacDonald. “Limiting or deterring the use of independent contractors and subcontractors will reduce the number of local home building firms, raise construction costs and harm housing affordability.”

The Save Local Business Act offers a common-sense solution to the ambiguity created by the Browning-Ferris decision by affirming that a company may be considered a joint employer of a worker only if it ‘directly, actually, and immediately’ exercises significant control over the primary elements of employment.

“We urge Congress to act swiftly on this bipartisan bill, which would restore the traditional definition of joint employment that had been in effect for decades before the Browning-Ferris decision and provide a level playing field for all small businesses,” said MacDonald.

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