Subcontracting increases specialization and helps keep prices lower for consumers. That value may be lost, however, thanks to a recent decision of the National Labor Relations Board.
The NLRB wants to redefine many contractors as joint-employers of their subcontractors’ employees. That means firms with unionized subcontractors would no longer have the option of switching service providers if they are dissatisfied.
One little recognized consequence of this new joint-employer rule is that it would eliminate a lot of competition from smaller firms, as James Sherk explains: “Joint employment would further require joint employers to engage in unwieldy multi-firm bargaining with all the other companies who jointly employ their contractors. […]
If the large business competed directly against the small businesses they could easily prefer higher costs, in order to put their less well-capitalized rivals at a disadvantage. Just the legal fees from prolonged negotiations would strain many small businesses’ finances. The new joint employer standards would make it prohibitively difficult for many businesses to sign service contracts. Service contracts would instead become agreements to partially merge with another business.”
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