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Expanded Joint-Employer Definition Will Harm Housing Affordability, Small Businesses

WASHINGTON, D.C. – October 13, 2015 – (RealEstateRama) — A recent ruling by the National Labor Relations Board (NLRB) to expand its joint employer standard will hurt housing affordability and small businesses, a prominent Texas home builder told Congress today.

Testifying before the Senate Committee on Health, Education, Labor, and Pensions, Ed Martin, president and CEO of Tilson Home Corp. and a past president of the Texas Association of Builders, called the new joint employer standard “alarming.”

“Businesses could be found to be joint employers of another company’s workers by merely setting the work schedule of their subcontractors or requesting additional subcontractors to complete a job that is running behind schedule,” said Martin. “There is no certainty or predictability regarding the identity of the employer under this new standard. It is fundamentally unrealistic.”

On Aug. 27, the NLRB overturned decades of precedence in the case of Browning-Ferris Industries of California Inc. by dramatically expanding the traditional test for joint employer status in which a company must exercise “direct and immediate control” over an employment relationship.

Under the new joint employer standard adopted by the NLRB, a company could be considered a joint employer if it has indirect control or the potential to exercise control of a subcontractor’s employee’s employment, including hiring and firing, discipline, supervision, scheduling, and assigning work and determining the means and method of employment.

The new test leaves employers guessing over how much indirect control they must have over another employer’s workers to be considered a joint employer.

This is especially problematic for home building firms, which rely on an average of 22 subcontractors to build a typical single-family home.

“We question whether the simple act of choosing a project’s completion date would trigger a finding of joint employment,” said Martin. “For example, if Tilson Homes contracted with a painting company for a home in Austin, would we be prevented from telling the subcontractors when to paint the walls or even when the walls would be constructed? Would we be prevented from scheduling installation of the fire sprinklers or cabinets? Would the roof be completed in time for the codes inspector to visit?”

At a time when many of the nation’s housing markets are beginning to see widespread consistent, sustainable growth, Martin warned lawmakers that the NLRB’s joint employer ruling will harm housing affordability and the ongoing housing recovery.

“This ill-advised decision will needlessly drive up the cost of housing and could force many small builders out of business by making it too costly to use the independent subcontractors they need to keep their businesses viable,” he said.

Noting that the home building industry is highly decentralized, with a majority of firms consisting of less than 10 employees and building less than 10 homes per year, Martin added that the NLRB ruling will lead to a centralization of the industry, with less competition among small firms and higher house prices.

“Decentralization of the market is better for the housing recovery because more competition among small firms will yield more affordable housing options for consumers,” he said.

“If left unchecked, the Browning-Ferris decision will be damaging to the marketplace and housing affordability,” Martin added. “For these reasons, I strongly encourage Congress to restore the traditional definition of joint employment and ensure a level playing field for all businesses.”

Elizabeth Thompson