This feature is a part of “The Dotted Line” series, which takes an in-depth look at the complex legal landscape of the construction industry. To view the entire series, click here.
A change in the party controlling the White House often comes with a change in federal rules and regulations.
In February, the National Labor Relations Board issued a final rule withdrawing a Biden-era joint employer standard and replacing it with one adopted during President Donald Trump’s first administration in 2020. The rule determines whether two companies can both have control or influence over an employee, and therefore be liable for that employee.
A federal judge had previously vacated the rule from former President Joe Biden’s term published in 2023, finding it “contrary to law” and “arbitrary and capricious.” The NLRB said the 2023 rule never took effect.
The newest reversion of the rule is far simpler, with fewer metrics for determining when a worker is jointly employed. To understand the difference, it’s helpful to review a little recent history.
The old rule
The 2020 rule was actually the first of its kind, according to Doris Short, a partner in Philadelphia-headquartered Duane Morris’ New York office. For years prior, the NLRB interpreted the National Labor Relations Act based on executive guidance, but didn’t codify it.
Legal experts told Construction Dive the rule’s definition and application is wholly up to whomever controls the executive branch — so there could be more flipping in the future. The Biden-era rule was, itself, a reversion of sorts to guidance from 2015.
That version considered seven factors, only one of which needed to be true for joint employment. It looked at whether companies were responsible for:
- Wages, benefits and other compensation.
- Hours of work and scheduling.
- The assignment of work.
- The supervision of work.
- Work rules and directions on the manner and methods of work and the grounds for discipline.
- The hiring and discharging of workers.
- Working conditions related to safety and health.
The rule now
As of Feb. 27, determining whether a company is a joint employer of a worker — and therefore liable and responsible as an employer of that worker — is much simpler. If a company possesses and exercises direct and immediate control over a vital aspect of employment, such as wages, then they are a joint employer, according to a post by Laura A. Pierson-Scheinberg, Richard F. Vitarelli and Jiyoon Yoon, attorneys at law firm Jackson Lewis.
By contrast, the Biden rule, and similar interpretations of the NLRA in the past, have indicated a company is a joint employer when there is the possibility of control, not just the reality of control over an employee’s work, Short told Construction Dive.
Dan Rosenberg, principal for Chicago law firm Much Shelist, called the Biden-era rule “in the context of construction, pretty goofy.” The seven factors didn’t always jive with the reality of construction’s business model, where a general contractor may be running a jobsite but is rarely directly in control of a specific tradesworker employed by a subcontractor.
Nonetheless, Rosenberg said the latest version takes the NLRB’s stance and clarifies it for builders going forward.
“I think this offers way more clarity and really is in line with how the industry operates,” Rosenberg said.
Employment in contracts
The reality of the general contractor-subcontractor relationship has been the same for decades, Rosenberg said. The direct employer of the skilled tradespeople on site is almost always clearly the sub.
However, the Biden-era rule — which Rosenberg speculated sought to protect exploited workers in the gig economy — could have created situations where a GC was considered a joint employer of a worker, even though the longtime precedent was the opposite.
That required more specific contract language to better define the roles of project partners.
“The Biden administration's rule sort of put some of that in question and required and really led people to go back and look at their contracts and take even more formality to define things,” Rosenberg said.
The reversion puts things in line with how the industry has historically operated. This was a logical step, Rosenberg said.
Going forward, there is value in keeping the more definitive contract language, legal experts said, but it may not be imperative. Either way, it’s vital that the contract is adhered to.
“The contract language has to track reality, not the other way around,” said Charles Krugel, a human resources attorney and counselor based in Chicago.
The Biden-era rule was very broad, Krugel said. Before, even power that an employer may have had over a worker, but never exercised, could make them a joint employer, according to Krugel.
Now, the rule requires more: power, authority and reality. “It can't just be sort of in-theory that maybe they could, maybe they can't,” he said.
That adherence to the contract also matters in the context of managing the work even in circumstances that may feel like they’re in the best interest of project delivery, Short said.
“I've been on more than one construction project where a subcontractor's superintendent or foreman is terrible — or even if they get sick or something — and someone on the GCs team is like, ‘Oh my God, forget it, I’m just going to do this,’” Short said. “They sort of effectively take control over the crew of the subcontractor. That would be a thing to be avoided.”
In other words, a GC taking charge of a subcontractor’s crew can become a much clearer example of an assumption of control over those workers.
A future flip
Attorneys agreed there’s a real chance for the standard to flip back should Democrats control the White House again.
Still, the exact language would likely need to pivot, Rosenberg said, due to the legal battle that prevented the Biden-era rule from ever going into effect. But a potential middle ground that exempts industries with a subcontractor business model could provide a path.
“I would suggest if they're going to [reinstate a stricter joint employer rule], they should just define in it that construction's exempted,” he said. “Sort of the old rules are going to apply to certain industries like construction.”
