New labor laws could cripple new construction:

Just when New Home Sales, Building Permits and Housing Starts are all trending in the right direction, leave it to the government to detail it.

Home builders are balking at a new labor law ruling that puts them on the hook for issues involving millions of subcontractors. Roofers, plumbers, electricians, framers are just some of the 25 categories of subcontractors used to build a home. The National Labor Relations Board (NLRB) could, in some cases, now deem them "joint employees" of the home builders.

"The home building industry, which is primarily made up of small businesses who rely greatly on the work of subcontractors would overwhelmingly be harmed by the new standard," said Tom Woods, chairman of the National Association of Home Builders (NAHB) in a release. "It will cripple small businesses across the country, including the home building industry as it is in its fragile recovery."

The vast majority of home construction is carried out by subcontractors. While the larger, public home builders have more specialty workers on staff, they still contract a significant amount of their work out to subs.

The NLRB's ruling was based on a case in another industry, so it remains to be seen exactly how it would apply to the builders.

"It obviously depends on the facts of each case, but in the construction industry in particular, these kinds of relationships have been in place for decades, and so even before the test tightened in the 1980s not every contracting relationship in the building industry was considered a joint employer," said Wilma Liebman, a former chairman of the NLRB.

Builders say they stand ready to fight the ruling as soon as a case arises, which they clearly expect will happen soon. "If it is applied to the home builder sector ... it is impossible to comply with and use the same business model that has been working successfully for 200 years," said Jerry Howard, CEO of the NAHB. 

Source:

Brian Woolley

Prospect Mortgage