Construction Law Monitor

How To Collect NSF Checks in Washington, Oregon and Louisiana

Scott Wolfe — Thu, 11 Mar 2010 07:05:59 -0800

In today's economy, NSF checks are becoming a fact of life for those in the construction industry. When it comes to your company's collections problems, however, receipt of NSF checks may not be all that bad.

That's because nearly every state imposes stiff penalties against those who pass hot checks. What type of penalties you ask? If you're forced to collect on an NSF check, you'll likely be entitled to attorneys fees, legal costs and interest, and that's in addition to statutory liquidated damages that can be as stiff as double the amount of the check.

In all the states where I practice (Oregon, Washington & Louisiana), there exists powerful statutes designed to deter bad checks. If you receive a NSF check, it's important you follow the procedures of these statutes to ensure you will qualify for the penalties.

Over the past few days, I've been contacted by folks about NSF check collections a bit more than usual, and so I spent some time over the weekend drafting short and understandable step-by-step guides on how to collect on a NSF check in these three states.

We published them as Legal Guides over at Avvo.com. Take a look at them here:

How to Collect on NSF Check in Louisiana

How to Collect on NSF Check in Washington

How to Collect on NSF Check in Oregon

Step-By-Step Guide to Filing Miller Act Claims at Avvo.com

Scott Wolfe — Tue, 09 Mar 2010 07:15:40 -0800

In today's economic climate, even contractors who typically work on private projects are testing the waters with federal and state construction works. And unfortunately, these newcomers are finding themselves a bit lost in procedures when it comes time to get paid.

In the event a federal project (or GC on a federal project) goes sour, contractors and materials suppliers must turn to the Miller Act as a remedy.

We've written about the Miller Act in previous posts right here on the Construction Law Monitor. But we're not the only act in town, take a look at the Miller Act conversations on the Construction Lien Blog, as well as the Federal Construction Contracting Blog.

In addition to these resources, I've just published a Legal Guide on Avvo.com titled "How to File A Mechanics Lien."

It breaks down the process in four steps, easy on the eyes:

Determine if you have the right to file a claim
Send Miller Act Notice to the prime contractor within 90 days from last furnishing labor/materials
Sent Notice to the surety (optional)
File Suit Against the Bond within 1 year from last furnishing labor/materials

Take a look at it over on Avvo.com by clicking here.

New Nationwide EPA Stormwater Effluent Guidelines Now Effective

Scott Wolfe — Thu, 04 Mar 2010 07:00:15 -0800

At the end of 2009, the U.S. Environmental Protection Agency (EPA) published effluent limitations guidelines (EGLS) and new source performance standards (NSPS) to control storm water runoff and the discharge of pollutants from construction sites. The new regulations took effect on February 1, 2010, requiring all permits issued by the EPA to incorporate the new requirements.

New Maximum Numeric Turbidity Limitations

For the first time, the EPA has set numeric limits for the discharge of storm water from construction sites. The EPA has set a maximum daily average numeric limit of 280 NTU (a turbidity measurement) for covered sites.

In case you don't know, Wikipedia defines Turbidity as:

Turbidity is the cloudiness or haziness of a fluid caused by individual particles (suspended solids) that are generally invisible to the naked eye, similar to smoke in air. The measurement of turbidity is a key test of water quality.

The turbidity limitations will effect construction sites on a phase-in schedule. Construction sites with 20 or more acres of earth disturbance must comply starting August 2, 2011, and those sites with 5 or more acres of earth disturbance must comply starting February 2, 2014.

Covered sites must monitor the storm water discharge for turbidity, report the results of the monitoring and use control technologies (which are not defined) to ensure that the maximum levels are not exceed.

Other Changes (Non-Numeric BMPs)

The EPA has identified other mandatory Best Management Practices (BMPs) relating to: (i) Erosion and Sediment Controls (40 CFR § 450.21(a)); (ii) Soil Stabilization (40 CFR § 450.21(b)); (iii) Dewatering (40 CFR § 451.21(c)); (iv) Pollution Prevention Measures (40 CFR § 450.21(d)); and (v) Prohibited Discharges (40 CFR §450.21(e)).

Additional Resources:

Environmental Protection Agency Web Release of Regulations

Full Text of Regulations

Article by Barnes & Thornburg, LLP

Article by Vinson & Elkins, LLP

Who Assumes The Risk of Material Cost Increases?

Scott Wolfe — Tue, 02 Mar 2010 07:01:08 -0800

Here’s the situation: During construction, the rise in material costs have impacted your ability to complete the project as originally bid.

Who is responsible for the change in material costs? The contractor or the owner?

Material Prices Are Going Up, Up, Up

While the economy has struggled for two years, material costs have remained quite steady in recent times. In fact, Ken Simonson, chief economist for the Associated General Contractors of America, documents a 2.3% decrease in material costs in the first 9 months of 2009.

Simonson speculates, however, that this drop in prices in materials is bittersweet. Between the months of October and November 2009, material prices rose 0.6%, and Simonson writes that the construction industry should treat this rise as a “warning call.”

Simonson is not alone.

The San Francisco Business Times reports that "Material costs continue to squeeze contractors." Likewise, New Jersey Biz writes that "Spiking materials costs may puncture project prices."

Prices Increases Creates Danger Zone for Contractors

The current economy presents a dangerous situation for contractors. On the one hand, material costs are on the rise. On the other hand, the lack of construction work makes the bidding process more competitive than ever.

So, how does a general contractor keep its bid low enough to win, without risking that price increases will render the job unprofitable?

This really boils down to the question of who is responsible for increases in material costs. If the owner, the project bid can be as competitive as possible given the current material costs. If the contractor, the project bid must take price increase into account.

Escalation Clauses In Contract

Here is the good news for contractors: there are ways you can protect yourself from being held responsible material price increases.

How? Well, your contract of course.

As every contractor and developer should know, the contract is the law between the parties. An "Escalation Clause" in your agreement will shift the burden of material price increases from the contractor to the property owner, or another party.

ConstructionExec.com has a great overview article on escalation clauses: Price Adjustment Clauses: A Solution for Dealing with Changing Material Costs. Or check out this equally good discussion at ModernContractorSolutions.com: Material Price Escalation Clauses: A Modest Proposal.

Essentially, if a contractor agrees to construct something for a lump sum price, the contractor typically assumes the risk of material costs increases. An escalation clause shifts this risk to the other contracting party.

Here is what it may look like:

The Contract Price is based upon construction material prices as of the execution of this Agreement. Any significant price increases in lumber, drywall, _______________, and/or other construction material that occurs during the period of time between contract execution and substantial completion of the Project, shall cause the contract price to be equitably adjusted by an amount reasonably necessary to cover any increase. As used herein, a significant price increase shall mean any increase in price exceed ____ percent (____%) experienced by the contractor from the date of signing.

Certainly, a contractor is motivated to have this type of provision in its contract...but why would the Owner agree? One reason an Owner may be interested in an escalation clause is that it would increase the Owner's bidding pool and make contractors more comfortable to lower their bid amounts.

Responsibility for Price Increases When There Isn't An Escalation Clause

So, price increases have affected your project's bottom line and the contract doesn't have an escalation clause....now what?

If you're working under a lump sum contract, you likely have an uphill legal battle to get compensated for the unexpected price increases. While not the case law everywhere, most U.S. courts will take the approached expressed by the landmark Louisiana decision in Standard Oil Co. v. Fontenot, 198 La. 644 (1941), where the Louisiana Supreme Court stated that in a lump sum contract "It is possible that the anticipated and expected profit may turn into a loss because of a low bid or advances in the prices of materials or the cost of labor."

So, how can you challenge this general principal? Here are a few possibilities:

Mistake: The contractor must argue that its bid contained certain mistakes relating to the material prices....and that the mistake was both the contractors and the other party's. This is a very tall order.

Impossibility / Impracticability: These are legal theories that a party cannot be required to perform on a contract if it is impossible or impractical. While the contractor may feel like performance of a contract is impossible or impractical if material prices rise too much, courts will not likely share the feeling. Material and labor price increases are not a secret, and therefore, it will be difficult to show that the increases were not foreseeable when agreeing to the lump sum.

Force Majeure: If prices increase significantly because of some act of God (i.e. New Orleanians can think of Hurricane Katrina's effect on material costs), the the contractor may be on to something. Most construction contracts have a Force Majeure clause, and the contractor could potentially rely on this clause to escalate the contract price in the event an act of God effected material costs.

Guidelines For A Successful Construction Project

Scott Wolfe — Thu, 25 Feb 2010 07:00:58 -0800

Every construction project starts with good intentions and a shared goal: successfully deliver the project to the owner on time and on budget. Of course, that's much easier said than done.

A few groups collaborated to publish some guidelines on how to make this happen.

The Associated General Contractors of America (AGC), the American Subcontractors Association (ASA) and the Associated Specialty Contractors (ASC) published the updated guidelines at http://www.constructionguidelines.org. Or you can download the PDF directly here.

Contractors of all sizes can benefit from having these guidelines desk side. Keep them handy, and pick them up whenever you have a question or concern about a certain phase of work. While it may not answer your problem directly, it may get you thinking in the right direction.

A Great Blog Focused On The Importance of Words

Scott Wolfe — Tue, 23 Feb 2010 07:00:41 -0800

Ken Adams is the leading authority on modern and effective contract drafting, and I'm one of the many happy readers of his blog, Adams Drafting.

The blog focuses entirely on words, and how they effect the meaning of contracts.

Too frequently, lawyers draft contract documents by resurrecting a form from their database and changing party names. While a lawyer may spend hours inspecting a contract's wording when a dispute has arisen, they infrequently spend time inspecting the words when drafting the agreement.

Ken examines words and phrases used frequently in contracts, and discusses the problems they may cause.

Ever think about the word "specific" in a contract? Ken's post on the word specific discusses how it "more often than not...serves no purpose."

Or what about the combination of words in a contract...we frequently see the terms "fraud" and "intentional misrepresentation" used in a contract together. Ken asks, doesn't these two words mean the same thing? And if so, why use both of them?

The Adams Drafting blog also has good tips on contract layout issues, like how to number pages and what to put in a contract's header and footer.

Words are so important to the practice of law, and as such, every lawyer should at least be thinking about their use of words. Adams Drafting is a great resource for this.

But Adams Drafting is not just for lawyers. Contractors and those in the construction business sign contracts left and right - sometimes they write those contracts, sometimes they negotiate its provisions, and sometimes they sign a provided form agreement. They too can benefit from this blog's discussion of words, and how they can affect agreements.

Scott Wolfe Contributes Guest Post on Construction Law Musings

Scott Wolfe — Fri, 08 Jan 2010 11:00:56 -0800

Big thank you to our friend Christopher Hill who operates the Construction Law Musings blog for allowing me to become his blog's first three-time Guest Post Friday writer.

This morning, Musing's published a blog post I wrote titled "A Lien By Any Other Name Can Sound Just As Sweet."

The article provides readers with a broad overview of the lien-like remedies available to them, as they differ based upon the classes of projects. In large part, the article explains the difference between a traditional lien (filed against the property on private projects) and a "claim" type of lien (filed against a bond on a state and federal project).

Of course, this post only skims the surface, but sometimes, it's the basic information that is needed to help folks understand the details. And why is it important to understand these details? The article on Musings concludes with that answer as follows:

Regardless of what class of project you’re working on, a lien-like remedy is probably available to you in the event of non-payment. However, it’s critical to understand the different remedies available at the onset of construction, for each remedy carries different pre-lien or pre-claim requirements.

Take a look at the article by clicking him, and be sure to subscribe to Christopher's blog which posts great information relevant to those in the construction industry.

Introducing Two New Blogs Focused on the Pacific Northwest

Scott Wolfe — Thu, 07 Jan 2010 11:45:27 -0800

Wolfe Law Group is happy to announce the launch two new blog focused on the Pacific Northwest, and particularly the states of Washington and Oregon.

The Northwest Construction Law Blog focuses on construction law issues and updates in Oregon and Washington. We launched this blog to help your company stay informed about important legal updates in Oregon and Washington, but also to educate contractors and suppliers about legal issues they confront (sometimes unknowingly) everyday

At the Northwest Green Building Law Blog, we’ll be focusing on green building legal matters that affect the states of Washington and Oregon.

Wolfe Law Group practices law in Washington and Oregon, and focuses its practice on the construction industry. We have two full-time LEED AP attorneys who are familiar with green building issues and disputes.

Wolfe Law Group is the leader in the legal industry with its publishing of quality legal resources and information. All of our attorneys consistently publish articles and discussions on our legal blogs, and all of our content keeps you in mind. We strive to post articles and discussions that are relevant to your business, so you can stay advised of legal matters that are important to your company, and get a better all-around understanding of how the law affects your day-to-day work.

Take a look at our listing of industry leading blogs here.

Organization: A Secret To Managing Legal Messes...Start 2010 on the Right Foot

Scott Wolfe — Mon, 28 Dec 2009 09:45:19 -0800

Happy New Year.

Did you make it through 2009 alive? It certainly was a tough year. Perhaps your legal bills were more than ever before, or maybe you got by without spending much or anything at all on counsel. In either case, let's make a resolution to avoid expensive legal bills in 2010.

How do you do it?

Ask an attorney how to avoid legal messes and expensive litigation, and they'll likely start discussing legal precedent, contractual provisions and other technicalities. Sure, all of that stuff is important when you're knee deep in litigation. By that point, however, you'll already have an attorney to handle those issues.

What about before you're knee deep in litigation; how do you avoid legal messes?

The most valuable piece of advice I give clients who ask me how to avoid legal fights and messes is to be organized.

Organization is your best friend when entering a litigation scenario. It proves your case when you're right, and it paints a clear picture of your risk and exposure when your wrong or possibly wrong. And insofar as your contractual and legal duties are concerned, if you're organized and know what they are, you'll have a much better chance of fulfilling them.

Now, you're quite lucky that it's now 2010. That's because the World Wide Web has been improving for over 20 years now, and it's got a million ways to help you organize your construction business (large or small) in the new year.

Here are a few of our favorite web applications out there that can help you stay organized, and avoid legal bills and messes.

Keep Your Files Organized

Construction projects can have tons of paper exchanged. Contract documents, job specs, change orders, correspondence...the list can go on. And, to top it off, all these documents are being exchanged between you and your employees, and your subcontractors, suppliers, their subs and suppliers, the property owner...the list can go on.

How do you manage all that collaboration, and all that paper?

SugarSync: This works with PCs, Macs, on iPhones and Blackberrys, on just about anything else...and it's easy as pie. Add a file to a folder on your computer, and it instantly gets added to that folder on everyone else's computers. You can share files or folders with other companies, allowing them to just see the docs or edit / trash it.

The possibilities are endless, and the cost is low. This program can single-handely change the way you exchange documents on your construction project.

Box.Net: Like Sugar Sync, this is another document management system to help you organize documents to a construction project and collaborate with others on the documents. Insofar as features and collaboration are concerned, Box.net gets the edge. You can sign documents electronically, send documents via fax, edit docs, send docs via postal mail, and more...all within the box.net interface. Box.net is entirely web-based, however, meaning you can't just drag and drop a file into a folder on your PC and let it do its magic. On the ease of use, SugarSync gets the edge.

Notice and Lien Deadline Management

It doesn't matter if you just work in one state, or if you work in every state. Notice and lien requirements are confusing, and the effort required to comply with these requirements can feel constant. How do you keep up?

ExpressLien: Enter Express Lien. This company provides two different sets of services.

First, it helps you manage your lien and notice requirements and deadlines. You put in your project data, and it calculates your requirements and deadlines and displays it to you all on an easy to read online interface. How much? It's free.

Second, if you want, you can order your notice and lien documents directly through Express Lien. They will take your project data, create the documents, file/send them, and keep track of all the delivery and filing data in your online profile. Document filing is done for a low flat fee.

Will The Health Care Bill Hurt Small Contractors?

Scott Wolfe — Wed, 23 Dec 2009 11:41:37 -0800

At the eleventh hour, the U.S. Senate added a provision to the controversial health care bill pending in Congress that has the construction industry on edge. The Associated General Contractors of America released a statement on their website complaining that "without debate or advance notice, language was added to the Senate health care legislation that singles out small construction firms for harsher treatment than any other industry."

What is the rub?

Well, while employers with less than 50 employees are typically not required to provide health care coverage, the exemption for construction firms is only those with less than 5 employees! Failing to provide health care coverage could subject the construction firm to fines.

The Wall Street Journal is running a great article about the construction industry's reaction to the recent addition to the Senate bill.

Contractors Beware - Louisiana Appeal Court Says Compliance with Building Codes is Not a Cause for Change Orders

Scott Wolfe — Thu, 17 Dec 2009 07:30:00 -0800

This fall, the Louisiana 1st Circuit decided Bonvillain Builders LLC v. Gentile, finding that a property owner was not required to pay nearly $50,000 in requested change orders because the extra work was required under the original contract.

In Gentile, the construction contract required the contractor to meet all prevailing building codes. A situation arose with regard to the parish's drainage requirements, as the original design did not accommodate the code. The drainage study and total completed price for the drainage work was eventually tallied to cost $47k more than estimated.

The contractor wanted the property owner to pay for this, because it was an "unknown condition." The owner rejected the change orders arguing the contractor was responsible to meet prevailing building codes.

The Gentile court agreed with the property owner. According to the first circuit, the contract unambiguously required the contractor to comply with prevailing building codes. The fact that the designer and the contractor overlooked the drainage requirements and failed to properly provide for the the same in its plans and bid…did not pass the burden of paying for the drainage onto the owner. Instead, the contractor/designer was liable for the mistake.

The court found that the drainage requirements were not a "hidden condition" of the property, but merely, something the contractor and designer overlooked.

What Does It Mean For You?
Nearly every construction contract has a provision similar to the one in Gentile where the contractor (or sub) is required to meet prevailing building codes. When bidding on a project, its critical to bid responsibly. Failing to understand and accommodate the prevailing building codes applicable to the site can end up destroying the project's bottom line.

The real key is understanding what is and what is not a "change order." The term gets used so frequently by those working on a construction project, we sometimes forget its true meaning and warp the term to work to a party's convenience.

A change order is not issued overtime the cost of work or scope of work is greater than anticipated. It's only issued when the scope of work is changed.

If the owner adds a new complex to the plans, or requires a different quality of materials - this will likely result in a change order. However, if you simply didn't correctly estimate the amount of work that would be required for a task or misunderstood the prevailing building codes…a change order will not be an available remedy.

Like the situation in Gentile, you will be legally responsible for your own mistake.

Of course, this Gentile case will not likely apply to a scenario where a change is required because of a hidden site condition. If a hidden site condition is found, a change order is appropriate. The court in Gentile just clarified something that may seem a bit obvious: failing to take into account the building codes in the parish was not a hidden condition, regardless of whether it was or was not scoped in the original plans.

Scott Wolfe Jr Speaks at Louisiana Engineering Soceity Meeting

Jessica Reiser — Thu, 19 Nov 2009 12:16:57 -0800

November 18, 2009- Scott Wolfe, Jr., founder and member of Wolfe Law Group, LLC was invited to speak at the Louisiana Engineering Society: New Orleans Chapter's Monthly Meeting. Scott would like to extend his thanks to the LES for the invitation to speak and the opportunity to meet several people in the engineering industry.

The LES has three main chapters in the state of Louisiana and is dedicated to the advancement of the engineering profession by pursing an active leadership role through various resources.

For LES' full mission and vision statements, click here. Incorporating speakers during the monthly meetings is just one of the many ways the LES provides its members with resources and information relevant to the field of engineering.

As a construction lawyer, Scott Wolfe consults with engineers as experts on various cases. Since the discovery of Chinese Drywall in completed construction projects across the state, he has become familiar with the basic problems of Chinese Drywall, how it effects individuals and contractors and how to proceed in the case that Chinese Drywall is detected.

The issue of Chinese Drywall is not only relevant to contractors and home/property owners, it extends to architects, engineers and attorneys. Engineers in particular are being contracted to perform inspections of homes and businesses suspected of harboring Chinese Drywall.

Scott focused his presentation on the pertinent issue of Chinese Drywall in the state of Louisiana. Below is the slide presentation that was used during the meeting yesterday.

Chinese Drywall: What Are We Looking For

View more presentations from Scott Wolfe.

100% of Nothing is Nothing: Justifying the Contingency Fee

Scott Wolfe — Mon, 16 Nov 2009 09:45:25 -0800

What is contingency fee?

Here is the definition:

A method of paying a lawyer for legal representation by which, instead of an hourly or per job fee, the lawyer receives a percentage of the money her client obtains after settling or winning a case. Often contingency fee agreements award the successful lawyer between 20% and 50% of the amount recovered [read definition on wikipedia].

In plain english, you attorney works on a "contingent" basis, meaning the attorney's payment is dependent on the outcome of the case. If you recover money, the attorney gets a percentage of the recovery. If nothing is recovered, you pay nothing in fees.

What's Good About Contingency Fees?

For the client, contingency fees have many positives.

The cash-flow impact of litigation is substantially lower, you gain leverage over the other party who needs cash flow to fund the case, and a portion of the case’s risk is transferred and borne by your attorney.

The only “negative” of a contingency fee is that the fee can be substantial. When a recovery is made, the attorney fee is usually between 30-45% of the amount recovered. But, as we’re about to explain, this really isn’t as bad as it sounds.

100% of Nothing is Nothing

For the client, contingency fees have many positives.

WLG Loves Contingency Fees

We love representing clients on a contingent fee basis for one very important reason: We can more zealously represent our clients.

When clients are billed for fees, it’s inevitable that bills will be challenged and cash crunches will arise. This effects how our firm can represent a client.

If $10,000 in discovery motions are needed, for example, but the client can’t afford it, the client’s claim is weakened.

Contingency fees result in more aggressive litigation…which results in higher settlements and more successful trials.

This blog post was originally posted on our Wolfe Law Rocks blog, and can be read here.

The New Contractor on the Block

Corey Fitch — Thu, 29 Oct 2009 10:23:07 -0800

There are 231,400 homes in Seattle built prior to the advent of a mandatory state energy code. This means that if un-renovated, these homes are likely to have little or no insulation in their walls and attics, outdated heating equipment, and air leakage equivalent to having 5x5ft hole in one of their walls. Homes built today under the increasingly stringent energy code are not exempt for similar performance defects. Poorly installed insulation is the norm, missing draft stops abound, and the average amount of conditioned air lost through leakage in duct work is in the 30% range.

Traditionally, home efficiency improvements and incentives have focused on individual elements, high efficiency furnaces, Energy Star appliances, insulation, and of course windows. Focus on these products has caused widespread consumer belief that these stand alone items can serve as a silver bullet to make their home more efficient, but the facts don’t back it up. What good is a 95% efficient furnace if the distribution system is sucking 30% of its air through leaks in an unconditioned crawl space, or how about installing R-38 fiberglass in an attic over unsealed can lights that effectively turns insulation into an air filter. The solution these and other home efficiency and comfort problems lies in a whole house systems approach to home efficiency, health, comfort, and durability through diagnostic testing and verification that produces real world results.

The residential branch of building science is called Home Performance, and while veterans of the industry have thought a windfall of consumer acceptance was just around the corner for years, the current climate crisis and economic collapse have lead homeowners as well as legislators to recognize the need to make significant and measurable reductions in residential energy use. The industry is also receiving much needed support from the recently for formed national Home Performance trade association Efficiency First, and at a local level Home Performance Washington. These organizations along with national professional certifications from the Building Performance Institute and RESNET, are lending credibility and quality assurance to home performance contracts and providing a means of separating the building scientists from the snake oil salesmen.

On October 19th, Vice President Biden released a report titled “Recovery Through Retrofit” on the creation of green jobs and energy savings for the middle class. This report outlines a means of creating a thriving and long lasting Home Performance retrofitting industry. So if you haven’t heard of us yet, you soon will, and if you are about to spend all your savings of windows that claim to cut your utility bills in half, consider calling a Home Performance specialist first, and let us help you prioritize how to make the biggest impact on your families comfort, health, and wallet.

Construction Law Monitor Welcomes Guest Blogger

Jessica Reiser — Tue, 27 Oct 2009 15:23:50 -0800

Beginning this month on Construction Law Monitor and Louisiana Green Law, Corey Fitch, a project manager for Seattle based company, Sound Home Performance will become a regular guest blogger. With a background in green building construction, Fitch is dedicated to serving residential energy needs, from energy efficiency to energy generation.

Fitch specializes in the following areas: Whole house diagnostic evaluations for energy efficiency, comfort, health & safety, and durability; General Contracting services to provide needed renovations; Performance testing for new construction; and Building Science and Green Building consulting for new and existing construction.

With this level of expertise, Fitch will be consistently contributing information about the building industry with a focus on sustainable building and the legal issues which impact those practices. Please check back regularly and visit lagreenlaw.com to stay up to date on green building practices that effect the construction industry and homeowners alike.

Are Your Employees Checking Email Through Mobile Devices? Are You Paying Them Overtime?

Scott Wolfe — Tue, 15 Sep 2009 07:34:43 -0800

No long introduction required here. With iPhones, Blackberrys and laptops, everyone in the 2009 workplace knows that work can follow an employee home and to vacation (ABCNews published a good overview of the issue).

Recently, however, terminated employees are seeking compensation for this "overtime" work through costly litigation with high-stakes for employers across the country.

What will the courts say? It's not clear.

The U.S. Fair Labor Standards Act was passed in 1938 with working conditions for factory workers in mind. These workers punched into work, and out of work, with very little opportunity to continue their work duties after-hours while at home or on vacation.

But how times have changed. And now, when you take the FLSA's rule that workers must be paid overtime whenever they work 40+ hours (regardless of any permission from an employer), and apply it to the "after-hours" work performed by so many of the country's workforce...the result is complicated.

In today's economic client, construction companies are looking to be leaner and meaner, and that sometimes means less salary workers and more hourly employees. It also means companies are working to maximize the return on each worker.

More and more, construction workers and project managers are being outfitted with mobile devices to communicate about the project through email and text messages...and even to take photographs of the jobsite and work through project management systems. When the mobile devices go home or on vacation...is your company prepared to pay overtime?

Right now, the law on this issue is simply unclear, and the best practice for those in the construction industry is to discourage workers from working at home or on vacation (don't bother them!), or to ask workers to log this time and turn it into your company for payment.

There's no telling how the courts will decide this issue, but if it goes against employers, the failure to pay employees for out-of-office work could be expensive.

Nominate Construction Law Monitor for the Annual List of the 100 Best Legal Blogs

Jessica Reiser — Fri, 11 Sep 2009 11:25:12 -0800

Wolfe Law Group's blog, Construction Law Monitor provides clients, colleagues and those interested in learning more about the legal and/or construction industries access to well written, informative and up-to-date blog posts.

Annually, the American Bar Association (ABA) publishes a list of 100 best legal blogs. If you would like to nominate Construction Law Monitor for one of the best legal blogs, please CLICK HERE.

The deadline for submitting your nomination is Friday, October 2, 2009.

We would like to thank you in advance for not only nominating Construction Law Monitor as one of the 100 best legal blogs, but for reading our blog and being interested in the topics we discuss.

How Not To Recover on a Mechanics Lien

Scott Wolfe — Fri, 11 Sep 2009 07:08:30 -0800

We've said it before, and we'll say it again: Mechanic Lien statutes (in all states) are hyper-technical. Litigators familiar with the lien statutes must tread carefully when making lien claims...and those unfamiliar with the statutes must be more careful.

A 2007 Washington Appeals decision underscores this point. In DBM Consulting Engineers, Inc. v. United States Fidelity and Guaranty Company, a contractor won its suit against a defendant but was still unable to recover on the lien's bond. Why? Because the contractor "failed to obtain judgment upon the lien, only obtaining a judgment on the breach of contract claim."

The background to this suit is that a contractor filed suit against a client for its failure to pay a debt, and the client subsequently recorded a lien bond to free up the property for sale. The contractor then won it's lawsuit against the client...but when it moved to recover against the bond, its claim was denied.

The appeals court provided this pithy conclusion:

A lien bond does not eliminate a lien entirely. A lien bond releases the property from the lien, but the lien is then secured by the bond. While the applicable foreclosure process depends on whether the lien is secured by property (which can then be sold) or by a bond, in either situation, the lien must be foreclosed upon before the lienholder is entitled to recover on the lien. So in order to be entitled to payment on the bond, DBM needed to foreclose its lien. Because DBM did not obtain a judgment foreclosing its lien, Travelers is not obligated to pay on the lien bond.

A fellow construction firm in the Pacific Northwest, Carney Law, discusses the DBM decision on its website saying that the Court's holding "is yet another application of the familiar canon that the mechanics' lien statute is strictly construed to determine whether the lien attaches." It is also another application of the canon that the statues are hyper-technical, with a slew of traps for the unwary.

While this example is from Washington, the same general principals hold true in Louisiana and elsewhere: wade through mechanics lien statutes carefully.

4 Years Post-Katrina Construction Outlook in New Orleans is Optimistic

Scott Wolfe — Tue, 08 Sep 2009 07:08:08 -0800

Just last week, New Orleans marked the 4 year anniversary of Hurricane Katrina. Coverage of the anniversary looked back on the somber experience, and then looked forward to the city's continued progress.

Construction Outlook is Optimistic

The construction market in New Orleans has managed to largely avoid the national recession, giving Hurricane Katrina a silver lining. As four years have now passed since the storm, many are wondering: can the construction boom continue?

Fortunately for regional contractors, the answer seems to be yes.

In July, we reported at the Construction Law Monitor that the Army Corps of Engineers were seeking more contractors to perform federal levee projects. Just last week, the Corps reported more good news for infrastructure projects in Louisiana stating plans to spend $1 billion to restore wetlands.

And while much has already been spent to rebuild the Crescent City, on Katrina's anniversary President Obama vowed to speed the nation's recovery effort. In the New York Times article covering the topic, it was reported that the government has freed up "hundreds of millions of dollars in assistance that has not been distributed."

Legal Information About Public Works Projects

There's a lot to be optimistic about in the South Louisiana construction industry...but, most heavy spending projects are publicly funded. Those who have experience working on public projects aren't concerned about this, but many companies who ordinary focus on private work may be shaking in their boots. There's no need to be concerned.

While public contracts certainly have unique requirements and details, it doesn't need to be foreign territory. Here are some blog posts here at the Construction Law Monitor to help the private contractor better understanding public contracting:

The Public Contracting Category. You can start by reading the articles posted in the "Public Contracting" category.
The Stimulus Package and Your Construction Business. This blog posts discusses the difference between public and private contracts, and explains how your company can get federal and public work.
E-Verify. A hot topic in federal contracting, your company should read and learn about the new e-verify requirements when preparing work on a federal contract.
Getting Paid: Here are some posts on getting paid (and filing claims to get paid) in public works projects.

Is Your Contractor's or Subcontractor's Certificate of Insurance Worthless?

Scott Wolfe — Thu, 03 Sep 2009 07:45:31 -0800

If you look closely at your contractor's or subcontractor's certificate of insurance, you're likely to find a disclaimer that reads something like this:

This certificate is issued as a matter of information only and confers no rights upon the certificate holder. This certificate does not amend, extend or alter the coverage afforded by the policies below.

Normally, the certificate of insurance is produced specifically for the purpose of demonstrating that a particular party is a "certificate holder" or "additional insured." But the very document itself has a boldfaced disclaimer that the certificate cannot be relied upon.

This begs our question: Is the certificate of insurance worthless?

Legally Speaking...Yes

It will be the burden of the insured (or the party claiming coverage) to prove the existence of a policy and coverage. Tunstall v. Stierwald, 809 So.2d 916 (La. 2002).

There is clear case law that reliance on certificates of insurance may be easily misplaced. In T.H.E. Insurance Co. v. City of Alton, for example, the US 7th Circuit held that a party "could not simply rely on the certificate [of insurance] for the terms and conditions of coverage." 227 F.3d 802, 806 (2000).

A certificate of Insurance is not an insurance policy, and the certificate itself is not ordinarily issued by the insurance company. Simply speaking, a party claiming coverage will likely not meet its burden of proving insurance coverage by pointing to a certificate of insurance only.

So, How Do You Confirm Insurance?

Our friends in Mississippi who run the Construction Law Toolbox blog posted last week asking "Can I Rely On My Subcontractor's Certificate of Insurance?" They provide a good analysis of the problem with certificates of insurance in their article, and they offer a "best practices'" for those in the construction industry:

The best business "policy" is to always obtain and read the actual insurance policy itself. In reviewing the policy, take into consideration the circumstances related to each particular project.

While this is more difficult than the ordinary receipt and filing of your contractor's or subcontractor's certificate of insurance, it's the only way to confirm that the insurance policy required by your contract has been properly provided.

Options If You Have a Certificate, But No Insurance

What to do if you have a Certificate of Insurance...but no actual insurance?

While you may not have a perfect claim against the insurer, you have a number of alternative claims. Some example claims: A suit against the insurance agency for negligent or intentional misrepresentation, or for errors and omissions, or a suit for breach of contract against the person or entity who was required to provide insurance.

These claims may expire quickly, so if you a certificate of insurance (but, no actual insurance), it's important to promptly seek the advice of counsel.