October 2017
ASA Files ‘Friends of the Court’ Brief in Texas Wrap-Up Insurance Case
Workers’ compensation insurance has long played an important role for the construction industry in managing the many risks that are inherent in the construction process, and insureds should be able to depend on the workers’ compensation policies and Texas laws to provide protection against financial harm, ASA and others in the construction industry told a Texas appeals court in an amici curiae, or “friends of the court,” brief filed on Sept. 25 in the case of Manhattan | Vaughn, JVP, Appellant, v. Josefina Garcia, Individually and as Heir to the Estate of Angel Garcia; and Orbelinda Herrera, as Next Friend of A.G. and B.G. (Minors).
The issue before the appeals court is whether the trial court erred when it refused to use the “exclusive remedy” provision of the workers’ compensation bar on negligence claims to dismiss lawsuits against the contractor participants in a controlled insurance program (CIP). Texas appellate courts almost uniformly validate and uphold CIPs, noting that one of the benefits is to provide workers’ compensation coverage for the industry. In this case, however, the trial court rejected the defendants’ attempt to use the “exclusive remedy” provision of the workers’ compensation laws and the result was an almost $54 million verdict against two contractors who were enrolled in the CIP. ASA and the amici curiae urged the First Court of Appeals in Houston, Texas, to reverse the judgment of the trial court.
In the underlying case, Texas A&M University hired Manhattan | Vaughn as a general contractor on a $4.5 million project to expand and renovate Kyle Field, and Manhattan | Vaughn hired Lindamood Demolition as a subcontractor to perform demolition work. The project was insured under an Owner-Controlled Insurance Program, often referred to as a wrap-up insurance policy, purchased by Texas A&M, and both the general contractor and subcontractor were OCIP participants. Such an insurance program provides compensation coverage to all employees on the project site. An employee of the subcontractor, Angel Garcia, fell to his death when a piece of machinery he was operating was overloaded and tipped over and fell. The family sued. The general contractor and subcontractor have appealed.
Under Texas law, an employer can choose not to subscribe to workers’ compensation and therefore can be subject to a civil suit for an employee’s injury or death. (This is different from most other states where workers’ comp is the exclusive remedy for an employee’s injuries or death unless the employer can be found guilty of intentionally bad conduct.) Even though all parties involved in this case were OCIP participants, and the OCIP included workers’ compensation coverage for the enrolled participants and their employees, a trial court denied the defendants’ motion for summary judgment as to the provision of workers’ compensation coverage through the OCIP (and extension of exclusive remedy protection) to all OCIP participants. The jury returned a verdict for $53.8 million against the general contractor (who the jury determined bore 75 percent of the responsibility) and against the subcontractor (who the jury determined was 25 percent responsible) for the circumstances at the stadium that led to Garcia’s death.
“Manhattan | Vaughn provided workers’ compensation insurance as contemplated by the [Texas Workers Compensation] Act, coverage was in place, and the Garcias received workers’ compensation benefits as prescribed for Mr. Garcia’s unfortunate death,” the amici curiae said. “As a result, the exclusive remedy rule applies. The trial court’s ruling to the contrary runs afoul of a substantial body of Texas case law and frustrates the purpose of the Act. It also ignores the most recent Texas Supreme Court precedent interpreting OCIPs, which unequivocally extends exclusive remedy protection throughout all tiers on a project and provides an alternate means for extending exclusive remedy protection to Manhattan | Vaughn.”
The amici curiae continued, “… the death of Angel Garcia was a terrible and heart-rending occurrence. But the mechanism contemplated in the [Texas Workers Compensation] Act performed flawlessly, and Mr. Garcia’s family received their statutory benefits in exchange for giving up the right to sue their employer. They were not left without a remedy.”
The amici curiae cited cases in the brief where Texas appellate courts have supported their position: “… by recognizing and approving CIPs, that is, insurance programs in which an upper tier provides compensation coverage to all employees on the project site through the CIP, Texas appellate courts have universally upheld a CIP as a means whereby an upper tier owner, such as Texas A&M, provides workers compensation to employees of a lower tier, such as Manhattan | Vaughn and its subcontractors. The result is that a CIP provides protection for all of the employees on the job site through workers compensation insurance for employee injuries, and at the same time, all parties on the job site are also protected by the exclusive remedy protection conferred under … [the Texas Workers Compensation Act]. By providing workers compensation protection for all workers on the jobsite, a CIP is a perfect vehicle by which to advance to public policy of Texas … to extend workers compensation insurance to as many workers as possible.”
Amici curiae in the brief are: Texas Building Branch of the Associated General Contractors of America, Associated Builders and Contractors of Texas, TEXO—The Construction Association, Associated General Contractors—Houston Chapter, American Subcontractors Association, Inc., Higginbotham Insurance and American Contractors Insurance Company Risk Retention Group. Patrick J. Wielinski and Travis M. Brown of Cokinos Young, Irving, Texas, filed the brief for ASA and the amici curiae. ASA’s Subcontractors Legal Defense Fund financed the brief. Contributions to the SLDF may be made online.
ASA Files Comments on New Overtime Rule
In a Sept. 25 letter, ASA urged the U.S. Department of Labor to revise regulations for overtime eligibility under the Fair Labor Standards Act. Earlier this year, Labor Secretary Alexander Acosta said the salary threshold proposed by DOL under the Obama administration was excessive and too burdensome on many employers. The Obama-era rule, which was struck down by the courts, would have raised to $47,476 the salary threshold under which virtually all workers are guaranteed overtime pay if they work more than 40 hours per week. Acosta suggested, however, that the current minimum salary level of $23,660 should be updated. Subsequently, on July 26, DOL’s Wage and Hour Division published a request for information, a first step to revise the overtime regulation. The overtime rule was last adjusted in 2004. ASA’s comments focus on how potential changes to overtime eligibility would impact construction employers. Fundamental to ASA’s response is the understanding that the white-collar exemptions’ minimum salary level must be set at a level that satisfies the historical gatekeeper function. That is, the salary level should be set at a level which the employees below it clearly would not meet any duties test; above the level, employees would still need to meet a duties test in order to qualify for exemption. Further, ASA recommended that any means and methods established as a duties test be easy to understand and implement so that both employers and employees to reduce administrative burdens and claims of misclassification.
Attorneys to Discuss Using Drones in Oct. 24 ASA Webinar
In the Oct. 24 ASA webinar, “Using Drones: What Subcontractors Need to Know,” attorneys Brian Esler, P.C., and Seth Row, Miller Nash Graham & Dunn, LLP, will explain what subcontractors need to know to use drones legally on the job, including the new FAA regulations on drone use, and what steps to take to minimize risks from drone use including insurance traps for the unwary. The webinar will take place from noon to 1:30 p.m. Eastern time. Registration is $99 for ASA members and $179 for nonmembers. Register online. For more on drones, read “Drones—Coming Now to a Construction Site Near You” by Esler and Row in the May 2017 edition of The Contractor’s Compass.
IRS Proposes Security Change to W-2 Tax Form
On Sept. 20, the Internal Revenue Service proposed a rule to amend the Form W-2, Wage and Tax Statement, to require employers to obscure employee social security numbers. In the proposal the first five digits would be obscured or replaced with a symbol. The final four digits will remain clear. The goal of the change is to protect employees from identify theft. If the change is implemented, the IRS plans to incorporate this into forms and instructions. Employers would be permitted to use a truncated taxpayer identification number or TTIN on the employee’s copy of the report. Interested parties can submit comments at www.regulations.gov, the federal government’s regulation portal, on or before Dec. 18, 2017.
Make Your Hotel Room Reservations for SUBExcel 2018
Make your hotel reservations online at Tempe Mission Palms, site of SUBExcel 2018. ASA’s annual national convention will take place Feb. 28-March 3, 2018, in Tempe, Ariz. ASA has negotiated the special room rate of $204 single/double. The cutoff date for the room block is Feb. 5, 2018. You can also make hotel reservations by calling (800) 547-8705. Most registrants will plan to arrive on Wednesday, Feb. 28, 2018, in time to attend the ASA President’s Welcome Reception that evening. Online registration is coming soon! For more information, visit ASA’s SUBExcel 2018 Web site or enter via the SUBExcel 2018 Web portal, www.SUBExcel.com.
OSHA Announces Policy for Enforcing Silica Rule Beginning on Sept. 23
The Occupational Safety and Health Administration announced that from Sept. 23 through Oct. 22, it will help employers who are trying to comply with its rule on respirable crystalline silica, which requires construction employers to limit worker exposure to silica and to take other steps to protect workers. During that 30-day period, all citations under the rule will be reviewed by OSHA at the national level. The memorandum from Thomas Galassi, acting deputy assistant secretary for the U.S. Department of Labor, to OSHA regional administrators, states:
“During the first 30 days of enforcement, OSHA will render compliance assistance and outreach to assure that covered employers are fully and properly complying with its requirements. Given the novelty of the Table 1 approach, OSHA will pay particular attention to assisting employers in fully and properly implementing the controls in the table. OSHA will assist employers who are making good faith efforts to meet the new requirements to assure understanding and compliance.
“If, upon inspection, it appears an employer is not making any efforts to comply, OSHA’s inspection will not only include collection of exposure air monitoring performed in accordance with Agency procedures, but those employers may also be considered for citation. Any proposed citations related to inspections conducted in this time period will require National Office review.”
Under the OSHA standard, construction employers can either use a control method, as laid out in Table 1 of the standard, or they can measure workers’ exposure to silica and independently decide which dust controls work best to limit exposures to the permissible exposure limit in their workplaces.
ASA, in collaboration with 22 other construction associations, has initiated a lawsuit to prevent OSHA from implementing its rule; oral arguments were scheduled for September. In addition, ASA, as part of the Construction Industry Safety Coalition, has filed a petition with OSHA requesting the agency to stay and reopen the rulemaking. For more information, see the ASA Fact Sheet on OSHA’s Rule on Respirable Crystalline Silica, the ASA Frequently Asked Questions on the OSHA Standard on Respirable Crystalline Silica, and the free ASA video-on-demand, “OSHA Silica Rule—Applications for Subcontractors” (Item #8101), presented by Gary Visscher, Esq., Law Office of Adele L. Abrams, P.C.
ConsensusDocs Celebrates 10th Anniversary
In September, ConsensusDocs celebrated its 10th anniversary. During these first 10 years, ASA has worked within ConsensusDocs to develop more than 100 construction contract documents that incorporate best practices and fairly allocate risk to help reduce costly contingencies and adversarial negotiations. ASA representatives in these negotiations include the chair of ASA’s Task Force on Contract Documents Brian Cubbage, contracts administration counsel, Heico Construction Group, Alexandria, Va., and ASA Chief Advocacy Officer E. Colette Nelson. ASA also has worked within ConsensusDocs to develop an easy-to-use platform that is Microsoft Word-based. As a result, the ConsensusDocs platform provides instant access to your contract documents from any computer through a Web-based portal. A subscriber can simply log-in and use his or her personalized dashboard to locate recent projects, edit contracts, review changes made by his or collaborators or start a new contract.
Construction Industry Unites to Prevent Worker Suicide
ASA members work in an industry that is focused on safety and is increasingly aware of the critical role wellness plays in the lives of workers. However, too often employers neglect an important topic that can positively impact the safety, wellness and productivity of employees—mental health. This issue was spotlighted in a study by the Centers for Disease Control and Prevention, which ranked construction first in the number of suicide deaths and second in the suicide rate. To address this threat, ASA, as a member of the Construction Industry Alliance for Suicide Prevention, is working to reduce suicide in the construction industry. One tool to help you in your own company is A Construction Industry Blueprint: Suicide Prevention in the Workplace, a 15-page handbook that lists danger signs, suggests conversation tips, and provides sample tool box talks. September is National Suicide Prevention Month—a great time for construction firms to explore the Alliance’s Web site for helpful resources.
Superior Prime Contractors and Specialty Trades: Apply for ASA’s Best Practices Awards by Nov. 3
Prime contractors and specialty trade contractors that have signed, within the past year, a contract directly with a construction owner under which it performs construction services are encouraged to apply for ASA’s National Construction Best Practices Awards. These awards recognize prime contractors who construction subcontractors say are the best to work for—those who are committed to best business practices like safety management, prompt payment, prompt processing of change requests and claims, and effective project scheduling and coordination. The criteria for these awards include the use of a standard subcontract whose provisions substantially reflect the best practices incorporated into the ASA-endorsed ConsensusDocs 750 Standard Agreement Between Constructor and Subcontractor, as well as highly favorable evaluations from three specialty trade contractors, based on 20 project management factors. Each applicant must supply three sealed business-practices recommendations from specialty trade contractors that have worked for it in the past year along with a copy of its standard subcontract with its application. A construction attorney will evaluate the standard subcontract, and the ASA Task Force on Ethics in the Construction Industry will evaluate the recommendations from specialty trade contractors. Prime construction contractors that use the ASA-endorsed ConsensusDocs 750 contract form as their standard subcontract automatically pass the subcontract evaluation. The application deadline is Nov. 3, 2017, and the application fee is $495. Awards will be presented during ASA’s annual convention, SUBExcel 2018, which will take place Feb. 28-March 3, 2018, in Tempe, Ariz. Information about these awards is located under “About ASA” on the ASA Web site.
Apply for ASA Certificate of Excellence in Ethics by Dec. 15
The deadline to apply for an ASA Certificate of Excellence in Ethics is Dec. 15. This certificate recognizes subcontractors that demonstrate the highest standards of internal and external integrity. Applicants must meet a number of critical milestones before the Dec. 15 deadline, particularly those who have not yet developed a documented ethics program. ASA provides a timeline to help applicants keep on track. Each applicant is also required to respond to questions concerning the firm’s corporate ethics policies and procedures, its construction practices, and its general business practices. Each applicant must submit detailed documentation, including sealed letters of recommendation from a customer, a competitor, and a supplier. Applicants can learn more about the judging criteria and submission requirements in the program brochure, download an application, and access a resource guide to help them prepare and submit an application. This guide contains model documents, such as sample recommendation letter requests and model policies on topics ranging from competition and conflicts of interest to internal procedures and whistle blowing. Certificate recipients will be announced during an awards ceremony held in conjunction with SUBExcel 2018, which will take place Feb. 28-March 3, 2018, in Tempe, Ariz. Information about this certificate is located under “About ASA” on the ASA Web site.
Employers Must Use New I-9 Effective Sept. 18
Effective Sept. 18, all employers must now use the new Form I-9, Employment Eligibility Verification, which was published by the U.S. Citizens and Immigration Services on July 17. The changes to the form impact the instructions and the “List of Acceptable Documents. In the instructions, the new form reflects the change in the name of the Office of Special Counsel for Immigration-Related Unfair employment to Immigrant and Employee Rights Section. It also removes the words “the end of” from the phrase “the first day of employment.” For more information, see the USCIS Wage page on I-9, Employment Eligibility Verification.
