Construction Law Signal

Construction Law Signal

Insights & Information on Current & Emerging Developments affecting the Construction Industry

OSHA Continues Delayed Enforcement of Confined Space Standard for Residential Contractors

Posted in Construction, Project Management

As we discussed last summer, the Occupational Safety and Health Administration (OSHA) issued a new Confined Space in Construction Standard, which went into effect on August 3, 2015 and required heightened training, continuous worksite evaluations and communication for all construction workers performing work in manholes, crawl spaces, tanks and other confined spaces not intended for continuous occupancy that are located on construction projects.  Enforcement of the new standard was postponed through October 2, 2015 for all contractors covered by the standard to provide additional time to train and acquire necessary equipment.  In October 2015, OSHA further extended the temporary enforcement delay through January 8, 2016, but this time limited the extension to contractors performing residential construction work, which includes those contractors working on single-family homes, duplexes and townhouses.  The extension did not apply to contractors working on multi-unit apartment buildings.  Earlier this month, OSHA issued a memorandum that again extended the delayed enforcement of the standard through March 8, 2016 for residential construction work.

Under the delay policy, OSHA will not issue citations to contractors engaged in residential construction work if the contractor is making good faith efforts to comply with the confined space standard, as long as the contractor complies with either the training requirements of the new standard, found at 29 CFR 1926.1207, or the former training requirements, found at 29 CFR 1926.21(b)(6)(i).

Factors considered by OSHA to determine if a contractor is engaged in good faith compliance efforts include:

  • If the contractor has not trained its employees as required under the new standard, whether the employer has scheduled such training;
  • If the contractor does not have the equipment required for compliance with the new standard, including personal protective equipment, whether the contractor has ordered or otherwise arranged to obtain such equipment required for compliance and is taking alternative measures to protect employees from confined space hazards; and
  • Whether the contractor has engaged in any additional efforts to educate workers about confined space hazards and protect workers from those hazards.

Full enforcement of the confined spaces standard for non-residential contractors remains in effect, and those contractors should continue to comply with the standard’s requirements.  We will continue to monitor the enforcement of the standard for residential projects.

Lisa M. Wampler is a Partner in the Construction Group of Cohen Seglias Pallas Greenhall & Furman PC. She has an active and diverse construction litigation practice and represents owners, general contractors, construction managers and the different trades in complex matters involving all phases of the construction process.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual dispute.

Ignorance is not Bliss: Construction Contract Provisions You Need to Know

Posted in Construction, Contract

On January 21, 2016, Please join us for Ed Seglias and Jason Copley‘s seminar, “Ignorance is not Bliss: Construction Contract Provisions You Need to Know,” for the General Building Contractors Association (GBCA) in Philadelphia, PA.

This seminar will focus on key provisions in the standardized contract forms that often affect the risks and outcomes on a typical commercial construction project. For example, Ed and Jason will discuss provisions that allocate risk for differing site conditions, hazardous materials, delays beyond the contractor’s control and defection or omissions in design drawings. They will also examine contract provisions addressing payment, indemnity, scope changes and termination. Finally, they will review notice provisions, dispute resolution provisions and some bonding and warranty provisions to provide some general guidance about these terms.

To register for this event, click here.

Edward Seglias is the Vice President of Cohen Seglias Pallas Greenhall & Furman PC as well as a Shareholder and a member of the Board of Directors. He is also the Managing Partner of the Firm’s Delaware office and a Partner in the Firm’s Construction Group. Ed concentrates his practice in construction law and commercial litigation and has successfully tried numerous construction and commercial cases in the mid-Atlantic region.

Jason A. Copley is the Managing Partner of Cohen Seglias Pallas Greenhall & Furman PC and a Partner in the Firm’s Construction Group as well as a Shareholder and member of the Board of Directors. Jason focuses his practice on representing contractors, subcontractors and owners in the areas of construction and commercial litigation and maintains offices in both Philadelphia and Harrisburg.

To Be or Not to Be in Arbitration? That is the Question

Posted in Construction, Contract

Arbitration has become a very common and effective way to resolve construction disputes in lieu of traditional litigation, and it is easy to understand why:

  • The parties can select arbitrators with construction expertise who speak their language and are more likely to understand complex construction issues than a general court of law.
  • Arbitrations are characteristically speedier from inception to award.
  • Discovery (the parties’ exchange of information and taking of depositions) is often more truncated and can, therefore, be less costly.
  • Arbitrator awards are typically binding and not normally subject to an appeals process that tends to add more time and cost to the outcome.

We would be remiss, however, if we did not mention that arbitration is not for everyone.  Parties are often required to pay filing and other administrative fees that are considerably more expensive than the cost of court filings, and they must also pay the arbitrators, who typically bill by the hour (feel free to insert your own generic lawyer joke here).  In the construction context, we find that owners, developers, and public entities often will elect litigation over arbitration.

The finality of the award cannot be overstated.  This article about a recent federal court decision – in which a party discovered after the award that one of the arbitrators failed to disclose a number of serious charges that included the unauthorized practice of law – drives the point home.  Under the Federal Arbitration Act, courts may only vacate an arbitration award under very limited and extreme circumstances:

  • the award was obtained by corruption, fraud, or undue means;
  • there was evident partiality or corruption in any of the arbitrators;
  • the arbitrators were guilty of misconduct for refusing to hear evidence relevant and material to the dispute; or
  • the arbitrators exceeded or imperfectly executed their powers.

In other words, a court will not disrupt an arbitration award simply because the arbitrators may have “gotten it wrong.”

It can be strange and counterintuitive to think about how a dispute should be resolved when signing a contract.  Most parties to a construction contract are, understandably, thinking about the excitement of starting a new project, how to build the project cooperatively and safely, and how to manage it in a way that will be profitable to the companies involved.  It is nonetheless important to think about dispute resolution while negotiating your construction contract.  This is so because the decision to arbitrate or litigate is often one that is made within the contract document itself rather than by the election of the parties after the dispute has arisen.  If a dispute develops, the language of the contract will have important implications for how your dispute is decided, who will decide it, and how much time and money it will cost to resolve.

Tony Byler is a Partner at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group. As a trial lawyer, he focuses his practice on representing public and private owners, contractors, subcontractors and material men. Tony also serves as an arbitrator on the Roster of Neutrals for the American Arbitration Association.

Daniel E. Fierstein is an Associate in the Construction Group of Cohen Seglias and focuses his practice on construction law. Dan counsels clients at all tiers of the construction industry, including general contractors, subcontractors, owners, developers, and design professionals.

Carpenters' Company Master Builder Dialogues: Building the Buildings of the Future

Posted in Bond, Contract, Liens, Pennsylvania, Project Management

Pleaseman filling agreement between owner and contractor join us tomorrow, 11/4, for Shawn Farrell‘s presentation “Construction Disputes: Lessons Learned” at the Carpenters’ Company of City and County of Philadelphia’s Master Builder Dialogues.

Shawn Farrell has over 20 years of experience litigating construction disputes, and will share the lessons he learned to demonstrate how an effective project management team can identify and manage the risks associated with construction contracts without the need for litigation. This seminar will instruct participants on the realistic application of contract terms, payment statutes, lien law, and bond rights to construction operations, with the objective of maximizing profit and minimizing the time to close out a project.

For more information and to register, please visit the Carpenters’ Company’s website.

Which Design-Build Contract is Right for You & Your Projects? - DBIA - AIA - CONSENSUS DOCS - EJCDC?

Posted in Pennsylvania

Please join us for Ed Seglias‘ presentation at the Design-Build Institute of America Tri-State Chapter Inaugural Event on October 6, 2015 in Philadelphia. Ed and Kevin Peartree of Ernstrom & Dreste will discuss and compare form contracts commonly used in Design-Build Projects including AIA, Consensus Docs and EJCDC Design-Build Forms. Their discussion will highlight the benefits and risks associated with the standard forms for owners, contractors and designers alike. Talking points include:

  • How do the different forms address: Early Phases of a Design-Build Project, Setting the Price, Standards of Care, Performance Guarantees, Site Information, Responsibilities of the Owner, Contractor, and Designer, and Ownership of Documents.
  • What the design-build subcontractor should look for: Performance Based Contract, Scope of Work, Incorporation by Reference, and Flow-Down Clauses.
  • What you need in a Design-Build Teaming Agreement: Structure of the Team, Risk/Reward Sharing, Design-Builder and A/E Services, and Risk Allocation.

For more information and to register, please go to the DBIA Website

West Virginia Government Contractors Must Continue to Work While Awaiting Approval of a Change Order

Posted in Construction, Contract, Lisa Wampler, Lori Azzara, West Virginia
Construction change order

In late July, the West Virginia Purchasing Division of the Department of Administration issued an “emergency rule” that exempts construction contracts from a new law regarding change order approval. This new law, which went into effect on July 1, originally required that all change orders be approved by the Purchasing Division and the Attorney General prior to commencement of work. The emergency rule, which was adopted by the West Virginia Secretary of State, clarifies that change orders related to government construction contracts do not require prior approval. The rationale behind the exemption for government construction contracts relates to the lengthy work stoppages that would inevitably occur while waiting for the required preapproval. The Department found that these stoppages are “costly and unfeasible” and often lead to “increased costs for the taxpayer, state government agencies, contractors and countless others.” So as to avoid these delays and additional costs, contractors on public West Virginia projects must continue to work after submitting a change order request.

Contractors should be familiar with this change to the law’s applicability, as failing and/or refusing to perform work while a change order is pending approval may subject you to liability for any resulting delays to the Project’s completion and/or additional costs incurred by the government. Contractors faced with a change in their original scope of work should consult with an attorney prior to proceeding with the work to ensure that all rights to payment for performance of the new and/or additional work are preserved.

Disparate Impact is Here to Stay: What the Supreme Court's Decision Means for the Multi-Family Industry

Posted in Real Estate

On June 25, 2015, Justice Kennedy delivered the Supreme Court’s decision in Texas v. Inclusive Communities Project.  In the case, the Court determined that the Fair Housing Act of 1968 includes disparate impact claims.  Prior to Texas v. Inclusive Communities Project, nine of the twelve federal Courts of Appeals had ruled that the Act encompassed disparate impact claims. Nevertheless, there remained much dispute over the Act’s inclusion of such claims.

There are two forms of discrimination:  disparate treatment and disparate impact.  Disparate treatment is the intentional discrimination based on a person’s inclusion in a protected class (such as race, color, national origin, sex, religion, familial status, or disability).  Disparate impact, on the other hand, has little to do with intent.  Rather, disparate impact occurs when a policy that appears to be neutral on its face is discriminatory against a protected class when it is applied.  It has never been questioned that the Act prohibits disparate treatment.  Until June 25, however, there had been much debate over whether the Act prohibits disparate impact.  The debate is now settled!

The Court recognized, though, the potential dangers of disparate impact claims.  In his opinion, Justice Kennedy wrote:  “An important and appropriate means of ensuring that disparate-impact liability is properly limited is to give housing authorities and private developers leeway to state and explain the valid interest served by their policies.”  The Court concluded that policies adopted by government or private developers are not “contrary to the disparate impact requirement” unless they are “artificial, arbitrary, and unnecessary barriers.”

To address this problem, the Court decided to heighten the burden necessary to establish an initial case of disparate impact liability before considering evidence to rebut the claim.  In short, plaintiffs in discrimination cases will need to show that the implementation of the policy of which they complain creates the discriminatory impact.  By raising the bar of what is needed to assert a valid disparate impact claim, the Court has created some protection for housing providers to ensure that disparate impact claims will not cripple the industry.   The Court also recognized that housing providers  must be allowed to consider market factors when making housing decisions and take into consideration many factors in defending their policies.  If the challenged policy “is necessary to achieve a valid interest,” it will likely survive scrutiny under the disparate impact analysis.

While Texas v. Inclusive Communities Project involved the specific issue of tax credit distribution for housing projects, the Court’s decision makes clear that its holding applies to all housing matters covered by the Act.  Thus, all housing providers should carefully review their policies with counsel to limit the risks of having to defend disparate impact claims.

About the Authors: 

Steven M. Williams is the Managing Partner of the Harrisburg, Pennsylvania office of Cohen Seglias, Chair of the firm’s Commercial Litigation Group and a member of the Business Practices and Labor & Employment Groups. Steve has been representing landlords in virtually every aspect of their business for over 23 years and concentrates his practice in the areas of commercial and civil litigation, real estate, landlord and tenant law, employment law, business and corporate law and construction law.  He can be reached at 717.234.5530 or swilliams@cohenseglias.com.

Alexander F. Barth is an Associate in the Business Transactions and Commercial Litigation Groups at Cohen Seglias. He focuses his practice on commercial litigation and represents businesses and individuals in complex commercial disputes.  Alex represents residential and commercial real estate developers in land use and zoning matters throughout Pennsylvania and New Jersey. He can be reached at 215.564.1700 or abarth@cohenseglias.com.

U.S. Department of Labor Issues New Guidance on Misclassification of Employees as Independent Contractors

Posted in Business, Construction, Labor and Employment

The U.S. Department of Labor (DOL) issued guidance on July 15 aimed at curbing the misclassification of employees as independent contractors.  The guidance provides several examples of workers in the construction industry.  It is now clear that the DOL is bent on targeting contractors and subcontractors.  If you have mechanics, installers, estimators, or any workers functioning as an independent contractor, you are probably at risk. Construction Site Sign

The DOL’s guidance begins by stating that most workers should be classified as employees and not independent contractors.  According to the DOL, only workers that are genuinely in business for themselves may be classified as independent contractors.  The DOL uses six factors to determine whether someone is in business for him/herself:

  1. Is the worker’s work an “integral part” of the employer’s business?  According to the DOL, “for a construction company that frames residential homes, carpenters are integral to the employer’s business because the company is in business to frame homes, and carpentry is an integral part of providing that service.”  Therefore, hiring an individual who uses the tools of the trade as an independent contractor is risky business for almost any construction company.
  2. Does the worker’s managerial skill affect the worker’s opportunity for profit and loss?  According to the DOL, a true independent contractor has the opportunity not only to make money but to lose it by making poor business decisions.  The DOL is looking for independent contractors to exercise business judgment (not just decide how many hours they are going to work or how many projects they are going to accept from the employer).
  3. How does the worker’s relative investment compare to the employer’s investment?  In order to be a true independent contractor, the worker must make a substantial investment (and therefore undertake some risk for a loss).  The DOL’s view of what qualifies as a substantial investment may surprise you.  Merely purchasing hand tools and other equipment is not enough.  The DOL even cited a case where a group of rigging welders had invested in equipped trucks costing between $35,000 and $40,000 as being too small of an investment.
  4. Does the work performed require special skill and initiative?  For this factor, the DOL focuses on business skills and not technical skills and uses the following example:  “A highly skilled carpenter provides carpentry services for a construction firm; however, such skills are not exercised in an independent manner.  For example, the carpenter does not make any independent judgments at the job site beyond the work that he is doing for that job; he does not determine the sequence of the work, order additional materials, or think about bidding the next job, but rather is told what work to perform where.  In this scenario, the carpenter, although highly skilled technically, is not demonstrating the skill and initiative of an independent contractor (such as managerial and business skills).”
  5. Is the relationship between the worker and the employer permanent or indefinite?  According to the DOL, a worker who works for the same employer for a sustained period of time is not showing the business initiative that one would expect from a true independent contractor.  Workers who work until they are terminated look like at-will employees (not independent contractors).
  6. What is the nature and degree of the employer’s control?  According to the DOL, in order to qualify as an independent contractor, the worker must control meaningful aspects of his own business and stand as a separate economic entity.  This means that imposing quality control measures and schedules on a worker will likely render him/her an independent contractor.

In sum, the DOL’s guidance marks a clear signal to those in the construction community that using independent contractors carries significant risks.  Mitigating measures, like issuing 1099 Forms and entering into written independent subcontractor agreements, will more often than not fail to save the day.  These rules hold true for workers in the field and those performing office/non-manual work.

We have worked with dozens of contractors on classification issues.  If you have any questions about the proper classification of someone who performs work for your company, please contact Marc Furman or Jonathan Landesman.

OSHA'S New Rule Increases Protection to Construction Workers in Confined Spaces

Posted in Construction

Last month, the Occupational Safety and Health Administration (OSHA) added a new rule that provides increased protections to those working in confined spaces on construction projects.  The new rule, which goes into effect on August 3, 2015, applies to manholes, crawl spaces, tanks and other confined spaces not intended for continuous occupancy that are located on construction projects.  OSHA predicts that the new rule will prevent approximately 780 serious injuries and 5 deaths each year.

Manhole without cover in the concrete block

Confined spaces are defined as those that (1) are large enough for an employee to enter; (2) have limited means of entry or exit; and (3) are not designed for continuous occupancy.  The rule provides construction workers in confined spaces with the same protections already afforded to workers in manufacturing and general industry but differs in several construction-specific respects.  “Unlike most general industry worksites, construction sites are continually evolving, with the number and characteristics of confined spaces changing as work progresses.  This rule emphasizes training, continuous worksite evaluation and communication requirements to further protect workers’ safety and health,” according to Dr. David Michaels, Assistant Secretary of Labor for Occupational Safety and Health.

The new rule requires a “competent person” to initially evaluate the project site and identify all confined spaces.  Employers must then train their employees on the existence, location and dangers posed by each confined space.  Workers not authorized to perform entry rescues must also be trained on the dangers of attempting such rescues.  Employers are further required to coordinate with emergency services before workers enter certain confined space.  After this pre-entry planning is conducted, employers must continually monitor the confined space for air contaminant and engulfment hazards.

Communication is heavily emphasized in the new rule.  Because multiple contractors are likely present on a project site, each with its own workers needing to enter the confined space, contractors are required to coordinate and share safety information with each other.  The controlling contractor, such as the general contractor, is responsible for ensuring compliance with the new rule by its subcontractors and visitors to the project site.

Contractors who have employees or subcontractors working in confined spaces should familiarize themselves with the new rule’s requirements and immediately start implementing them.  Significant fine and citations can be issued for each violation of the new rule.  Additional information and compliance assistance materials are available on OSHA’s Confined Spaces website.

Lisa M. Wampler is a Partner in the Construction Group of Cohen Seglias Pallas Greenhall & Furman PC.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

Pennsylvania Supreme Court Clarifies Applicability of Contractor and Subcontractor Payment Act

Posted in Pennsylvania, Prompt Payment Act

Last week, the Supreme Court of Pennsylvania  issued a decision which has important consequences for all members of the construction industry involved with public works projects. In Clipper Pipe & Service, Inc. v. The Ohio Casualty Insurance Co., the Court held that the Contractor and Subcontractor Payment Act (CASPA), which is a statute that addresses when payments are to be made on construction projects and provides remedies for noncompliance, does not apply to public works construction projects. The Court’s decision means that, when working on public projects, the contractor-friendly remedies under CAPSA are not available to contractors and subcontractors, who must now rely exclusively on the less favorable and less certain relief under Pennsylvania’s Prompt Payment Act (PPA).

Court, vintage scales and dollar sign.

Prior to the Court’s decision, it was unclear whether CASPA applied to nonpayment claims on public works construction projects because the courts were divided. After the Supreme Court’s decision in Clipper Pipe, CASPA’s favorable remedies are no longer available to contractors or subcontractors on public works projects.  Those remedies are only available on private construction projects in Pennsylvania.

By clarifying the applicability of CASPA, the Court’s holding has practical consequences for all construction project participants. CASPA and the PPA have important differences that affect the rights of owners, contractors, and subcontractors (which includes second-tier subcontractors/suppliers). The most important differences involve the penalty, attorney’s fees, and interest provisions of the respective statutes.

CASPA requires a court to impose a penalty of one percent (1%) per month on a party who has wrongfully withheld payments. The PPA provides a court with discretion to award an additional one percent (1%) penalty if the court determines that the nonpaying party acted in an “arbitrary” or “vexatious” manner in withholding the payment(s) in question. The CASPA penalty, unlike the PPA penalty, is not discretionary.  Therefore, an unpaid contractor has a better chance of recovering additional damages under CASPA than under the PPA for wrongful withholding of payments.

CASPA also mandates an award of reasonable attorney’s fees to the substantially prevailing party in litigation or arbitration. The court is permitted, but not required, to award attorney’s fees under the PPA to the prevailing party, if the party withholding payment acted in bad faith. Although a contractor has a higher burden under CASPA (“substantially” prevailing party), if it meets that standard, the court must award attorneys’ fees.  Under the PPA, if a contractor meets the lower standard (“prevailing party”), a court can still decide not to award attorney’s fees, even if the court determines that the nonpaying party acted in bad faith.

In addition to these remedies, under CASPA, unpaid contractors or subcontractors can recover interest at a rate of one percent (1%) per month on any unpaid amount that is considered late under the contract or statute. Conversely, the PPA’s rate is determined by the Secretary of Revenue and thus, is less clear and fluctuates (currently, the rate is .25% per month).

Given the differences between the two payment statutes, those defending against payment claims on public projects – which can include owners, contractors, or, in some instances, subcontractors – will view this decision as a good one because the more favorable CASPA remedies are no longer available.  Those prosecuting such claims – which can include contractors or subcontractors – may perceive it as weakening their ability to induce payment.

It is important for owners, contractors, and subcontractors to know ahead of time what potential costs and legal standards apply to their construction projects.  These legal standards affect the likelihood of recovering costly expenses such as attorney’s fees, which, in turn, influences business decisions involving payment disputes.  While members of the construction industry will view this decision differently, they can all agree that the Court brought clarity to this previously unresolved issue.

Jason C. Tomasulo is Senior Counsel at Cohen Seglias Pallas Greenhall & Furman PC. He focuses his practice on construction law and represents owners, general contractors, subcontractors, suppliers and sureties.

Daniel E. Fierstein is an Associate in the Construction Group of Cohen Seglias and focuses his practice on construction law. Dan counsels clients at all tiers of the construction industry, including general contractors, subcontractors, owners, developers, and design professionals.

Patrick Cullen, a summer associate with Cohen Seglias, contributed to this post.