AGC's Human Resource and Labor News - August 11, 2014 / Issue No. 4-2014 (Print All Articles)

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AGC Submits Comments on Proposed Minimum Wage for Federal Contractors

AGC of America has submitted comments to the U.S. Department of Labor’s Wage and Hour Division (WHD) asking the agency to clarify its proposed rule implementing Executive Order 13658 (EO), which establishes a minimum wage of $10.10 per hour for direct federal contractors and subcontractors.

AGC of America has submitted comments to the U.S. Department of Labor’s Wage and Hour Division (WHD) asking the agency to clarify its proposed rule implementing Executive Order 13658 (EO), which establishes a minimum wage of $10.10 per hour for direct federal contractors and subcontractors. The new minimum wage impacts covered contracts entered into on or after January 1, 2015. Federally assisted contractors are not affected. The order also mandates that the Secretary of Labor determine a new minimum wage for federal contractors in 2016, and each year thereafter, based on the annual percentage increase in the Consumer Price Index for urban wage and clerical workers.

The proposed regulations cover workers whose wages are governed by the Davis-Bacon Act and the Service Contract Act. The rule would also cover other workers whose wages are governed by the Fair Labor Standards Act (FLSA) for all time spent directly supporting a covered contract. This includes workers who are non-exempt under the FLSA, are not laborers or mechanics as defined by the Davis-Bacon Act, and may or may not work on the site of the covered project. It includes a broad contract clause flow-down requirement and a broad debarment.

AGC’s comments urge WHD to:

  • Provide additional clarification and examples of covered contracts and contract-like instruments, including explicit exclusion of subcontracts for materials supplied to construction contractors;
  • Provide additional clarification and examples of covered workers and covered work, including the application of a 20 percent de minimis rule for workers who are not covered by the Davis-Bacon Act;
  • Institute a safe harbor for compliant prime contractors and higher-tier subcontractors instead of holding such contractors responsible for all lower-tier subcontractor violations;
  • Freeze wage rate mandates for the duration of multi-year contracts, or, at the very least, include an adjustments clause in contracts for minimum wage increases;
  • Add outreach efforts to notify contractors of minimum wage increases to the passive notice methods proposed;
  • Clarify how the EO applies to “indefinite delivery, indefinite quantity” contracts; and
  • Restrict use of the debarment process to contractors that willfully or recklessly violate the law.

The EO instructs the Secretary of Labor to issue final regulations by Oct. 1, 2014. AGC will continue to monitor for any new developments and will notify members once final regulations are issued.


New Executive Order Requires Federal Contractors to Disclose Labor Law Violations, Give Workers Pay Information, and Limit Arbitration

On July 31, President Obama issued the latest, and most far-reaching, executive order in a series of presidential directives imposing new mandates on federal contractors. The Fair Pay and Safe Workplaces Executive Order (“EO”) purports to help federal agencies “identify and work with contractors with track records of compliance” with labor laws in order to “reduce execution delays and avoid distractions and complications that arise from contracting with contractors with track records of noncompliance.” It imposes several new obligations on federal contractors and contracting agencies, increasing the burdens and risks for covered contractors. It does not cover federally assisted contracts.

On July 31, President Obama issued the latest, and most far-reaching, executive order in a series of presidential directives imposing new mandates on federal contractors. The Fair Pay and Safe Workplaces Executive Order (“EO”) purports to help federal agencies “identify and work with contractors with track records of compliance” with labor laws in order to “reduce execution delays and avoid distractions and complications that arise from contracting with contractors with track records of noncompliance.” It imposes several new obligations on federal contractors and contracting agencies, increasing the burdens and risks for covered contractors. It does not cover federally assisted contracts.

Most significantly, the EO establishes a new system for contractor disclosure, and agency consideration, of labor law violations from the past three years before a prospective contractor may be awarded a federal contract with a value over $500,000 starting in 2016. Contracting agencies must require prospective prime contractors to disclose any administrative merits determination, arbitral award or decision, or civil judgment rendered against the company for violations of any of 14 federal statutes and executive orders, as well as “equivalent” state laws. Post-award, contractors must update the disclosures every six months. Contracting agencies must consider the disclosures in determining whether the contractor is a “responsible source” and whether further action is needed. Further action could include additional remedial measures, compliance assistance, declining to exercise an option on a contract, contract termination, suspension, or debarment. The EO requires contractors to impose similar requirements on subcontractors with a subcontract worth over $500,000.

The EO also directs contracting agencies to require contractors subject to the above disclosure mandates to provide workers with certain documentation of their hours and pay each pay period. The provision covers all individuals who work under a covered contract and for whom the company must maintain wage records under the Fair Labor Standards Act (“FLSA”), Davis-Bacon Act, Service Contract, or “equivalent” state laws. The document must include information about the individual’s hours worked, overtime hours, pay, and any additions made to or deductions made from pay. If the individual is exempt from overtime pay under the FLSA and if the employer has informed the individual of his or her exempt status, then the document need not include a record of hours worked. If the individual is treated as an independent contractor rather than an employee, then the company must provide a document informing him or her of that status. Again, similar requirements apply to subcontracts.

Furthermore, the EO includes a restriction on employer-mandated arbitration. More specifically, it directs contracting agencies to require contractors with a federal contract worth over $1 million to agree that the decision to arbitrate any claims brought by an employee or independent contractor alleging a violation of Title VII of the Civil Rights Act of 1964 or alleging a tort related to sexual assault or harassment may only be made with the individual’s voluntary consent given after the dispute arises. The EO again includes flow-down requirements for subcontracts.

In addition, the EO directs the General Services Administration to develop a single website for contractors to meet all of their reporting requirements (those arising under the present EO and otherwise). According to a White House Fact Sheet on the EO, “The desire to ‘report once in one place’ is a key theme in the feedback received from current and potential contractors. This step is one in a series of actions to make the federal marketplace more attractive to the best contractors, more accessible to small businesses and other new entrants, and more affordable to taxpayers.”

The EO directs the Federal Acquisition Regulatory (“FAR”) Council to issue implementing regulations and the Department of Labor to issue guidance. No time frame is specified. The EO takes effect immediately but applies only to solicitations for contracts specified in the FAR Council’s regulations. AGC is closely monitoring developments and exploring ways to prevent any negative impact on AGC members.

For more information, contact Denise Gold at (703) 837-5326 or goldd@agc.org, or Jimmy Christianson at 703-837-5325 or christiansonj@agc.org.


New Executive Order Prohibits Sexual Orientation and Gender Identity Discrimination by Federal and Federally Assisted Contractors

On July 21, President Obama signed an executive order (EO) prohibiting federal and federally assisted contractors and their subcontractors from engaging in employment discrimination based on sexual orientation or gender identity.

On July 21, President Obama signed an executive order (EO) prohibiting federal and federally assisted contractors and their subcontractors from engaging in employment discrimination based on sexual orientation or gender identity.

The newly signed EO amends EO 11246. President Lyndon Johnson originally signed EO 11246, which prohibits contractors with federal and federally-assisted construction contracts that exceed $10,000 and their subcontractors from discriminating against any employee or applicant for employment based on race, creed, color, sex or national origin. As such, government contractors have long known about and should be familiar with the requirements to comply with EO 11246, which require filing of compliance reports. The new EO simply amends EO 11246 to include sexual orientation and gender identity to the list of classes protected from employment discrimination. It is unclear at this time whether the new EO imposes new affirmative action obligations.

The new EO will become effective on or after the U.S. Department of Labor (DOL) issues a final rule. DOL is charged with preparing regulations within 90 days, which would be sometime in late October. The EO will apply only to new contracts entered into on or after DOL issues a final rule. AGC will monitor the rulemaking process and provide updates as appropriate.


AGC Provides OFCCP with Construction Industry Overview

In response to a request from Director Pat Shiu of the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP), AGC provided the agency, and other invited Labor Department staff, with a detailed overview of the construction industry. The request stemmed from a March 27 meeting between AGC and OFCCP Director Pat Shiu and her staff regarding the agency’s plans for revising the regulations related to the employment of women and minorities in construction and how AGC might be able to help the agency understand the application of those regulations to the construction industry. The presentation took place on June 2 at the Labor Department’s headquarters in Washington, DC.

In response to a request from Director Pat Shiu of the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP), AGC provided the agency, and other invited Labor Department staff, with a detailed overview of the construction industry. The request stemmed from a March 27 meeting between AGC and OFCCP Director Pat Shiu and her staff regarding the agency’s plans for revising the regulations related to the employment of women and minorities in construction and how AGC might be able to help the agency understand the application of those regulations to the construction industry. The presentation took place on June 2 at the Labor Department’s headquarters in Washington, DC.

The presentation included an economic analysis of the industry, an overview of federal construction work, and challenges that are unique to the construction industry. In addition, employment, workforce development and training trends were discussed.

AGC’s general counsel, Mike Kennedy, and chief economist, Ken Simonson, began the discussion by detailing the breakdown of residential versus non-residential construction employment and spending. Federal construction lawyer and industry expert Andrew Stephenson, of the law firm of Holland & Knight, educated the group on the many decisions and challenges that are managed by federal construction contractors, such as the various delivery systems available, procurement procedures, and risks. Additionally, Tim Johnson, Senior Director of Government Affairs for the National Center for Construction Education and Research, and Naomi Hackenberg, an HR consultant with Workplace HR, discussed common recruitment practices and challenges, as well as how construction craft training is funded and delivered.

For a copy of the presentation slides, click here. For more information on the laws regulated by OFCCP, visit OFCCP’s webpage or the Labor and HR Topical Resources page of the AGC website. The Primary category is “Affirmative Action/EEO” and the secondary category is “Affirmative Action.”


OFCCP Proposes Rule for New Equal Pay Report

On August 8, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued a Notice of Proposed Rulemaking that, if implemented, will require covered federal contractors and subcontractors to submit an annual Equal Pay Report on employee compensation.

On August 8, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued a Notice of Proposed Rulemaking that, if implemented, will require covered federal contractors and subcontractors to submit an annual Equal Pay Report on employee compensation.

The proposal covers contractors with more than 100 employees and with a contract, subcontract, or purchase order worth $50,000 or more that covers a period of at least 30 days. On an annual basis, such contractors would have to submit on the new Equal Pay Report summary employee compensation data by sex, race, ethnicity, and specified job categories, as well as other relevant data points that would include hours worked and number of employees.

OFCCP plans to use the collected data to help direct its enforcement resources toward federal contractors whose summary data suggests potential pay violations, while reducing the likelihood of reviewing companies that are less likely to be out of compliance. OFCCP states that it will also release aggregate summary data on the race and gender pay gap by industry and EEO-1 category to enable contractors to review their pay data using the same metrics as OFCCP and take voluntary compliance measures.

The proposed rule is the result of an April 2014 Presidential Memorandum directing OFCCP to establish a tool that would require Federal contractors and subcontractors to submit summary data on compensation paid to their employees, including by sex and race. OFCCP originally published an Advanced Notice of Proposed Rulemaking more than three years ago announcing the desire to create such a tool. AGC provided comments to OFCCP after the 2011 announcement.

AGC will submit comments on the proposal before the November 6 deadline. Members interested in providing input to AGC should promptly contact Tamika Carter at cartert@agc.org.


OFCCP Issues FAQs on Employer-Employee Relationships

On August 5, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued new Frequently Asked Questions (FAQs) addressing how federal contractors should assess their employment relationships to distinguish “employees” from “independent contractors” or other non-employee workers. The FAQs describe what are commonly referred to as the “Darden” factors, derived from the 1992 Supreme Court decision in Nationwide Mutual Insurance Co. v. Darden, and provide examples illustrating their application in determining which workers are employees.

On August 5, the U.S. Department of Labor’s Office of Federal Contract Compliance Programs (OFCCP) issued new Frequently Asked Questions (FAQs) addressing how federal contractors should assess their employment relationships to distinguish “employees” from “independent contractors” or other non-employee workers. The FAQs describe what are commonly referred to as the “Darden” factors, derived from the 1992 Supreme Court decision in Nationwide Mutual Insurance Co. v. Darden, and provide examples illustrating their application in determining which workers are employees.

The FAQs stem from questions asked of OFCCP by contractors regarding the definition of “employee” following the release of final rules that impact the affirmative-action obligations of direct federal contractors and subcontractor with regard to Veterans and individuals with disabilities. For more information on the Veterans regulations, click here. For more information on the regulations regarding individuals with disabilities, click here. AGC members may also find additional information on OFCCP and the laws it is responsible for enforcing on AGC’s Labor & HR Topical Resources webpage. The primary category is “EEO” and the secondary category is “Affirmative Action/EEO.”


Affordable Care Act Affordability Percentage Increases for 2015; Draft Employer Reporting Forms Released

On July 24, 2014, the Internal Revenue Service (IRS) released Revenue Procedure 2014‐37 to index the Affordable Care Act’s (ACA) affordability percentages for 2015. As a result, large employers (according to the ACA’s definition) will need to ensure that an employee’s contribution for self-only coverage, if elected, will not exceed 9.56 percent of the employee’s income from that employer. This percentage increased from the 9.5 percent that was written into the original law and subject to change each year to reflect increases in inflation. Under the ACA’s employer mandate play or pay rules, large employers may be assessed penalties for failure to offer full-time employees minimum value coverage that is affordable.

On July 24, 2014, the Internal Revenue Service (IRS) released Revenue Procedure 2014‐37 to index the Affordable Care Act’s (ACA) affordability percentages for 2015. As a result, large employers (according to the ACA’s definition) will need to ensure that an employee’s contribution for self-only coverage, if elected, will not exceed 9.56 percent of the employee’s income from that employer. This percentage increased from the 9.5 percent that was written into the original law and subject to change each year to reflect increases in inflation. Under the ACA’s employer mandate play or pay rules, large employers may be assessed penalties for failure to offer full-time employees minimum value coverage that is affordable.

Also on July 24, the IRS issued the following draft versions of the ACA’s reporting forms that large employers will use, beginning in 2015, to report health coverage provided to employees:

Once implemented, the IRS will use these forms as a primary means to track enforcement of the ACA employer mandate. Instructions on how to complete the forms are expected to be made available by the IRS later this month.

AGC will alert members when final versions of the forms with instructions are available. For additional information on the Affordable Care Act, including articles, government resources, pre-recorded webinars and more, visit AGC’s online library of ACA information and resources at www.agc.org/ACA.


Affordable Care Act Questions Answered During AGC Webinar

AGC recently hosted a webinar to educate construction contractors on the latest regulations that implement the employer mandates of the Affordable Care Act (ACA). The webinar, Affordable Care Act Update for Construction Employers, is a follow-up to AGC’s 2013 webinar series, The Affordable Care Act: The Impact of Health Care Reform on Your Construction Business. A recording of the webinar is available in the AGC Bookstore.

AGC recently hosted a webinar to educate construction contractors on the latest regulations that implement the employer mandates of the Affordable Care Act (ACA). The webinar, Affordable Care Act Update for Construction Employers, is a follow-up to AGC’s 2013 webinar series, The Affordable Care Act: The Impact of Health Care Reform on Your Construction Business. A recording of the webinar is available in the AGC Bookstore.

During the webinar, Jack Widman, Mark Levengood and Jennifer Abrams, attorneys and employee benefits specialists with the law firm of Susanin Widman & Brennan, P.C, shared information to help construction contractors avoid the legal pitfalls of compliance with the complex law. The attorneys provided much-needed clarifications of the employer mandate requirements, details of the transition relief provided by the employer mandate final regulations, details of the new employer reporting requirements, clarification of the 90-day waiting period limitations, and more.

Much of the webinar focused on the application of the law to seasonal workers and employers who contribute to multi-employer health plans – a topic specifically of interest to construction employers that operate on a union basis. AGC Director of Congressional Relations Jim Young added to the discussion by sharing information about AGC’s advocacy efforts with regard to seasonal workers and multi-employer health plans.

The webinar was pre-approved for 1.5 general recertification credits by the HR Certification Institute (HRCI), the internationally recognized leader in human resource certification.

To purchase a recording of the webinar, visit the AGC Bookstore. AGC members may access AGC’s online-library of ACA information and resources at www.agc.org/healthcarereform.


Agencies Clarify Confusing “Trial Period” Exemption under the Affordable Care Act

On June 20, the agencies implementing the Affordable Care Act (ACA) released a final rule clarifying the effect of orientation periods (also known as “trial periods”) on the “90-day waiting period rule” under the ACA. The “90-day waiting period rule” prohibits group health plans and health insurance issuers from imposing a waiting period of more than 90 days before the beginning of coverage for full-time employees.

On June 20, the agencies implementing the Affordable Care Act (ACA) released a final rule clarifying the effect of orientation periods (also known as “trial periods”) on the “90-day waiting period rule” under the ACA. The “90-day waiting period rule” prohibits group health plans and health insurance issuers from imposing a waiting period of more than 90 days before the beginning of coverage for full-time employees.

The New Rule: Under the terms of the new final rule, the agencies clarify that employers subject to the ACA may require up to a month of “reasonable and bona fide” employment orientation before the 90-day count begins for purposes of the 90-day waiting period rule. This clarification was important because the earlier final rule that was issued by the agencies in February on the topic of 90-day waiting periods (“the February Rule”) did not exactly reach a “final conclusion” on this issue, which left many health plans and parties to collective bargaining negotiations confused.

The February Rule: While the language of the February Rule permits reasonable and bona fide orientation periods to tack on to the 90-day waiting period, the rule also states that the agencies are simultaneously issuing a proposed rule (issued in the same issue of the Federal Register) that provides that the proposed maximum duration for such orientation periods is “one month.” The February Rule further provides that, while the agencies are soliciting comments on the proposed rule, the agencies will consider compliance with the proposed rule’s one month maximum time period “to constitute a reasonable and bona fide orientation period under [the ACA] at least through the end of 2014.” That language was not very helpful to parties in the middle of negotiating their collecting bargaining agreement expiring in early 2015 or later.

The new final rule resolves this issue by adopting the proposed rule without substantive changes and applying the rule to plan years beginning on or after January 1, 2015. The “one month” period is measured by adding one calendar month and subtracting one calendar day from an employee’s start date in a position that is otherwise eligible for coverage. The 90-day waiting period must begin on the next day following the orientation period.

Editor’s note: This article was written by guest authors Daniel N. Kuperstein and Keith R. McMurdy. Mr. Kuperstein and Mr. McMurdy are both with the law firm of Fox Rothschild LLC in its Labor and Employment/Employee Benefits Group. For additional information, visit www.foxrothschild.com.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.


Collective Bargaining So Far This Year Yields Average First-Year Increase of 2.2%

The AGC-supported Construction Labor Research Council has released its latest report on collective bargaining settlements in the industry. Settlements reported to CLRC between January and June 2014 resulted in an average first-year wage-and-benefit increase of 2.2 percent or $1.10. For newly negotiated multi-year agreements, the average second-year increase was 2.5 percent or $1.23, and the average third-year increase was 2.5 percent or $1.28. Each of these averages is very similar to the average increases negotiated in 2013 and slightly higher than those negotiated in 2012, CLRC reports. The percentage of settlements with no increases negotiated during the latest period was the same as that reported in 2012 but higher than that reported in 2013.

The AGC-supported Construction Labor Research Council has released its latest report on collective bargaining settlements in the industry. Settlements reported to CLRC between January and June 2014 resulted in an average first-year wage-and-benefit increase of 2.2 percent or $1.10. For newly negotiated multi-year agreements, the average second-year increase was 2.5 percent or $1.23, and the average third-year increase was 2.5 percent or $1.28. Each of these averages is very similar to the average increases negotiated in 2013 and slightly higher than those negotiated in 2012, CLRC reports. The percentage of settlements with no increases negotiated during the latest period was the same as that reported in 2012 but higher than that reported in 2013.

The median increases for the year to date were slightly lower than those of 2013, at 1.9 percent or $1.01 for the first year, 2.4 percent or $1.15 for the second year, and 2.5 percent or $1.24 for the third year. The report explains that the median – which is the rate at which half of the negotiated increases are higher and half are lower – is less affected by outliers.

Interestingly, the South Central Region (AR, LA, NM, OK, TX) was the region with the highest average first-year percent increase but the lowest dollar increase. “This is because the South Central region has some of the lowest rates, and a relatively small increase in dollars and cents turns out to be a relatively large increase when the percent is calculated,” CLRC explains.

The craft with the lowest average percent first-year increase was the Painters at 1.5 percent, and the craft with the highest such increase was the Operating Engineers at 4.2 percent.

The trend toward negotiating shorter-term agreements that began during the recession continues to subside. Forty-two percent of agreements negotiated so far this year were for one year, as compared to 68 percent in 2011, and 48 percent were for three years or more.

The full report, which contains additional information and graphs, has been distributed through the Union Contractors e-Forum and is posted in the Labor & HR Topical Resources area of AGC’s website under the main category “Collective Bargaining” and subcategory “Collective Bargaining Agreement Data.” The report is a preliminary one, with yearly averages and other data likely to change as additional settlements are added throughout the year. An updated report is scheduled for release in September.

AGC’s collective bargaining chapters are reminded to please send settlements information to CLRC (clrc@clrc.biz) regularly and promptly after completion of bargaining.


McCarthy Building Companies to Share Effective Change Management Strategies at AGC HR & Training Conference

Many HR and training professionals have had an initiative, rollout or project that did not achieve its expected amount of traction, even after spending countless hours and dollars on training and implementation. As a result, HR and training professionals must learn to take a strategic approach to change management in order to make a lasting impact on the company. This, and other topics, will be discussed at AGC’s 2014 Construction HR & Training Professionals Conference, Oct. 15-17, in Phoenix, Ariz. For more information or to register for the conference, visit www.agc.org/hrted.

Many HR and training professionals have had an initiative, rollout or project that did not achieve its expected amount of traction, even after spending countless hours and dollars on training and implementation. As a result, HR and training professionals must learn to take a strategic approach to change management in order to make a lasting impact on the company. This, and other topics, will be discussed at AGC’s 2014 Construction HR & Training Professionals Conference, Oct. 15-17, in Phoenix, Ariz. For more information or to register for the conference, visit www.agc.org/hrted.

The session, “So Your Initiative Didn’t Stick: Try Change Management” will be led by McCarthy Building Company’s Director of Organizational Effectiveness, Matthew Hunt, and Director of Learning and Development, Robin Renschen. During the session, Hunt and Renschen will share their experiences with change management since working with McCarthy Building Companies, one of the nation’s oldest and largest privately-held construction companies. Specifically, the presentation will explore how McCarthy successfully implemented a more strategic approach to initiative rollout, leading to a 2014 Top 125 Best Practices Award from Training Magazine. They will discuss how integrating training within a holistic change management approach can support successful and lasting results for each initiative.

AGC’s Construction HR & Training Professionals Conference will offer unique educational and networking opportunities for HR, training, and workforce development professionals in the construction industry. Sessions for training professionals will cover the most cutting-edge techniques in training and development currently in use and envisioned for the future of the industry. The HR sessions will help HR professionals in the industry remain up to date and compliant with employment laws and best practices. Like the session on change management, some sessions will interest both HR and training professionals alike.

Back by popular demand is the Federal Construction HR Workshop, which will be held the afternoon of October 15. This pre-conference workshop is designed to help staff responsible for compliance on federal and federally assisted projects by providing practical information and best-practice advice from experts and peers experienced in the area.

For those seeking to earn professional credentials at the event, conference attendees who hold a PHR, SPHR or GPHR certification and attend the entire conference and workshop will earn 12 general recertification credits through the HR Certification Institute. In addition, three sessions have been pre-approved for Strategic Management (Business) credits towards SPHR recertification.

For complete session descriptions, schedule, registration, and hotel information, visit the AGC website.


Supreme Court Agrees with AGC-Supported Coalition: 2012 Recess Appointments to NLRB Unconstitutional

The U.S. Supreme Court handed down a big victory to the AGC-supported Coalition for a Democratic Workplace (CDW) and U.S. Chamber of Commerce (Chamber) in a June 26 opinion invalidating President Obama’s January 2012 recess appointments to the National Labor Relations Board (NLRB or Board).

The U.S. Supreme Court handed down a big victory to the AGC-supported Coalition for a Democratic Workplace (CDW) and U.S. Chamber of Commerce (Chamber) in a June 26 opinion invalidating President Obama’s January 2012 recess appointments to the National Labor Relations Board (NLRB or Board).

The case arose after the NLRB issued a ruling in February 2012 that employer Noel Canning, a small bottling company in Washington state – unlawfully refused to reduce to writing a verbal collective bargaining agreement with a union. The company appealed, claiming that the decision was invalid because it was issued while the five-member Board included three improperly appointed recess appointees and therefore lacked a quorum. President Obama made the appointments on Wednesday, January 4, 2012, during a five-week period when the Senate was conducting only pro forma sessions every Tuesday and Friday. Noel Canning argued that the three-day adjournment was not long enough to trigger the President’s recess appointment authority under the Recess Appointments Clause of the Constitution.

CDW and the Chamber jointly filed a brief and presented oral argument supporting Noel Canning in the U.S. Court of Appeals for the D.C. Circuit. In January 2013, the circuit court ruled in the company’s favor. It found that a President’s recess appointment authority is limited to appointments made during an intersession recess of the Senate (i.e., a recess that occurs in the midst of a formal session rather than between sessions) and only to fill vacancies that arise during the recess in which the appointment is made. Those conditions did not exist when the January 2012 recess appointments took place, rendering the appointments invalid. The case was appealed to the Supreme Court, where the Chamber served as co-counsel to Noel Canning and CDW submitted a supportive amicus brief.

The Supreme Court rejected the D.C. Circuit’s reasoning but accepted Noel Canning’s argument about the inadequacy of a three-day adjournment. It held that the Recess Appointments Clause authorizes recess appointments during intrasession recesses but only if the recess is of “substantial length.” In light of historical practice, the Court found that a recess of more than three days but less than ten days is presumptively too short to fall within the clause. Furthermore, the Court held, “the Senate is in session when it says that it is, provided that, under its own rules, it retains the capacity to transact Senate business.” During the period in question, the Senate not only said it was in session and retained the power to conduct business, it actually did conduct business when it passed a bill by unanimous consent during one of its Friday pro forma sessions.

The decision is significant in that it clarifies a President’s recess appointment authority, limiting it and shifting the balance of power in the direction of the Senate. The impact is lessened, however, by the Senate’s adoption of new filibuster rules late last year, which reduced the need for a President to rely on recess appointments to make controversial appointments during times of a divided government. The most immediate and practical impact of the decision will likely be a considerable slow-down of processing and backlog of cases at the Board, because it must now review the 700-plus cases it decided while the recess appointees were serving. It could also slow down the Board’s rulemaking initiatives, most notably the “quickie election rule” which would expedite the election process in union representation cases. The substantive outcome of those cases and rulemaking is not likely to change much, though. Currently, the Board has five Senate-confirmed members, with the same political bent (a Democrat majority) as when the recess appointees were serving. This properly constituted Board is free to effectively “rubber-stamp” those invalidated decisions, and is likely to do so.

For more information, please contact Associate General Counsel Denise Gold at or (703) 837-5326.


AGC Tells NLRB to Keep “Joint Employer” Standard As-Is

AGC, its coalition Coalition for a Democratic Workplace, and other employer organizations, submitted a group amicus brief in a case before the National Labor Relations Board (“NLRB” or “Board”) addressing the standard for determining when two companies constitute “joint employers” under the National Labor Relations Act (“NLRA”).

AGC, its coalition Coalition for a Democratic Workplace, and other employer organizations, submitted a group amicus brief in a case before the National Labor Relations Board (“NLRB” or “Board”) addressing the standard for determining when two companies constitute “joint employers” under the National Labor Relations Act (“NLRA”).

The case, Browning-Ferris Industries of California, Inc., involves BFI’s use of a labor supplier at one of its recycling facilities. The Teamsters union sought to organize the supplied workers and filed a petition for a representation election with the NLRB. The question presented is whether BFI and the labor supplier are joint employers of those workers or whether the labor supplier is their sole employer. If the companies are joint employers, then they would be jointly responsible for any unfair labor practices and collective bargaining obligations with regard to the supplied workers. Such bargaining obligations can even restrict the customer employer’s freedom from terminating or modifying its business relationship with the labor supplier.

The Board adopted the current standard for determining joint employer status in the 1984 TLI and Laerco Transportation cases. Since then, the Board has found joint employer status when two separate entities share the ability to directly or immediately control or co-determine essential terms and conditions of employment, such as hiring, firing, discipline, supervision, and direction of employees. Applying that standard in Browning-Ferris, the NLRB regional director found that the companies were not joint employers. On appeal, the Teamsters and the NLRB general counsel asked the Board to return to a broader standard, as applied prior to 1984. The general counsel, specifically, is seeking adoption of a standard under which an entity could be a joint employer if it exercises direct or indirect control over working conditions, has unexercised potential to control working conditions, or “where ‘industrial realities’ otherwise [make joint employer status] essential to meaningful bargaining.”

AGC’s group brief urges the Board to maintain the current standard. The “stability and predictability” of the standard has allowed companies “to structure their business relationships in a sensible and optimal fashion, subcontracting discrete tasks to other companies with specialized expertise to provide services that would otherwise be far more difficult or costly to supply,” the brief explains. “At the same time, the current joint employer standard has not denied any employee the right to union representation…nor has it prevented any union from bargaining with the employer directly involved in setting the terms and conditions of employment in a workplace.” The proposed alternative standard “would enmesh separate businesses in bargaining relationships over which they have no significant control without any materially greater protection of employee rights under the Act.” The brief specifically addresses construction, noting that the alternative “could have a particularly destabilizing impact on well-settled subcontracting practices in the construction industry.”

AGC will continue to monitor the case and will report on the Board’s decision when published.


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