January 2018

New Video Highlights Speakers and Education Offered at SUBExcel 2018

A new ASA video highlights the speakers and education topics that will be offered during SUBExcel 2018, the premier education and networking event for construction subcontractors and suppliers. SUBExcel 2018 will take place Feb. 28-March 3 at the Tempe Mission Palms in Tempe, Ariz. Register online and make your hotel reservations in the ASA room block at Tempe Mission Palms. The early-bird deadline to register and the hotel room block cut-off date is Jan. 31. Speakers include:

• Arizona Secretary of State Michele Reagan
• Dave Sanderson, an inspirational survivor, speaker, and author
• Teresa Magnus, Magnus & Company
• Stephane McShane, Maxim Consulting Group
• Stephen Rohrbach, F.A. Rohrbach
• Joel Stinson, FMI
• Griff Hall, Johns Hopkins University Carey School of Business
• Philip J. Siegel, Esq., Hendrick, Phillips, Salzman & Siegel
• Bryan Bernardo, LEED-AP, Kitchell Contractors

For more information, read a brochure and visit www.SUBExcel.com.

Learn How to Get Better Subcontracts in Feb. 13 ASA Webinar by Eric Travers, Esq.

Eric Travers, Esq., Kegler, Brown, Hill and Ritter, ASA’s general counsel, will explain how to negotiate fairer, and better, subcontracts in the Feb. 13 ASA webinar, “Getting Better Subcontracts.” “It is a reality for subcontractors that on most jobs they will be asked to sign, often on short notice and with little time to consider the full implications of all the terms, a contract form prepared by their customer and containing numerous clauses that shift risk in a way that does not reflect what the subcontractor considered when putting its bid price together,” Travers said. In the webinar, Travers will focus on the most common subcontracting issues of concern that arise and will provide practical information on the unique considerations and legal risks of subcontracting. This 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.

Owner ‘Unjustly Enriched’ When Sub Goes Unpaid, Says Kentucky Supreme Court

The Kentucky Supreme Court ruled that a construction owner received substantial benefit in a situation when subcontractors had indisputably performed under the contract and the construction owner had never paid for that work. ASA filed an amicus brief on July 18, 2016, in Superior Steel, Inc. and Ben Hur Construction Company, Inc. vs. the Ascent at Roebling’s Bridge, LLC, Corporex Development & Construction Management, LLC, Dugan & Meyers Construction Company and Westchester Fire Insurance Company, in which it asked the Court to overturn an appeals court’s ruling that precluded subcontractors from recovering payment for their extra-contractual work under a “pay-if-paid” contract clause and permitted the project owner to benefit from valuable extra-contractual work provided by subcontractors without payment, known as “unjust enrichment.” In its Dec. 14, 2017, ruling, the Court agreed with ASA concerning “unjust enrichment,” observing, “[A]ny recipient of a substantial benefit in the form of authorized extra work should not be surprised that payment will be due, eventually….” Thus, the Court affirmed the trial court’s decision that the owner and prime contractor must pay the subcontractors. However, the Court demurred on ruling that the pay-if-paid clause should not be enforced, saying that issue is better left to the state legislature. Specifically, the Court said, “After considering the various approaches of our sister states, we decline to hold ‘pay-if-paid’ terms are unenforceable as a matter of public policy…. While there are valid reasons for disfavoring ‘pay-if-paid’ provisions, any prohibition against this type of contract clause should come from the legislature rather than this Court.” ASA member Thomas R. Yocum, Benjamin, Yocum & Heather, LLC, Cincinnati, Ohio, prepared the brief for ASA. ASA’s Subcontractors Legal Defense Fund financed the brief. Contributions to the SLDF may be made online.

Court of Appeals Upholds OSHA Silica Rule

In a wide-ranging decision issued on Dec. 22, 2017, the U.S. Court of Appeals for the District of Columbia Circuit decisively rejected the arguments made by ASA and the Construction Industry Safety Coalition on the crystalline silica rule issued by the Occupational Safety and Health Administration in March 2016. The rule, which OSHA started enforcing in the construction industry on Oct. 23, 2017, requires construction employers to limit worker exposure to respirable crystalline silica and to take other steps to protect workers. In a lawsuit filed in April 2016, and in later briefs and oral arguments, industry coalition had petitioned for a review of five issues: (1) whether substantial evidence supports OSHA’s finding that limiting workers’ silica exposure to the level set by the rule reduces significant risk of material health impairment; (2) whether substantial evidence supports OSHA’s finding that the rule is technologically feasible for the foundry, hydraulic fracturing and construction industries; (3) whether substantial evidence supports OSHA’s finding that the rule is economically feasible for the foundry, hydraulic fracturing and construction industries; (4) whether OSHA violated the Administrative Procedures Act in promulgating the rule; and (5) whether substantial evidence supports provisions that allows workers who undergo medical examinations to keep the results confidential from their employers and that prohibits employers from using dry cleaning methods unless doing so is infeasible. The court rejected all five of industry’s challenges. However, the Court did agree with the North America’s Building Trades Unions on their petition concerning the absence of medical removal protections. The Court ruled that “OSHA was arbitrary and capricious in declining to require MRP for some period when a medical professional recommends permanent removal, when a medical professional recommends temporary removal to alleviate COPD symptoms, and when a medical professional recommends temporary removal pending a specialist’s determination.” The court directed OSHA to reconsider or further explain those aspects of its silica rule. In the meantime, ASA will continue to work with OSHA to seek clarification of and to publish additional enforcement guidance on issues that some in the construction industry have found to be confusing.

The Tax Bill Is Law—Now What?

Now that Congress has passed and President Trump has signed the “Tax Cuts and Jobs Act,” ASA members’ questions have ranged from “What’s in it?” to “What now?” ASA Chief Advocacy Officer E. Colette Nelson offers seven steps that ASA members should take as a result of the new tax law.

1. Consult with your tax advisor to determine how the law will impact your company. Be patient. The new law is long and complex, and even tax experts don’t agree on what some provisions mean. Interpretations may change over time.
2. Review your employee benefit structure. The new law includes provisions dealing with health insurance, family leave, transportation benefits and more.
3. Prepare for a change in your payroll system. The new law significantly alters the structure of the tax-withholding system. The IRS will have to develop and issue new tax tables, and employers will have to implement them in mid-tax year.
4. Help your employees prepare to comply with the new law. Almost certainly, every employee will have to complete a new W-4. They are likely to need help to avoid under- or over-withholding. If necessary, bring in your payroll processor or tax advisor to assist employees.
5. Watch for regulations from the Internal Revenue Service, as the agency issues interpretations and rules of how businesses and employees must comply with the law. Many of these rules will be issued as “interim final” without an opportunity for public comment before they take effect.
6. Recognize that Congress almost certainly will revisit the law during 2018. The 1986 tax law, which passed after more than a year of hearings and drafting, needed more than 100 “technical corrections.” The 2017 law was written in only weeks, with more than a few provisions added at the last minute. Republican Congressional leaders already have said they will revisit some provisions. In the Senate, such corrections will need 60 votes (i.e., Democratic votes) to pass the Senate.
7. Brace for further changes to the tax code in future years regardless of which party controls Congress. If Republicans remain in control, they will, at a minimum, consider making permanent many of the now temporary provisions. If the Democrats gain control, they will revisit the law to determine how to shift benefits from higher income taxpayers to lower income taxpayers.

Foundation of ASA Updates Lien & Bond Claims in the 50 States

Construction subcontractors and suppliers rely on mechanic’s lien and payment bonds to assure their payment. To help you learn your lien and bond rights in the states in which your company does business, the Foundation of ASA has updated its Lien & Bond Claims in the 50 States, a downloadable manual which outlines the lien and bond laws in each state and the District Columbia.

A mechanic’s lien is a claim against property to secure a debt, such as a debt owed to a construction subcontractor for the value of work performed and materials furnished on a construction project. A payment bond, which is required on most public construction, assures the owner that the prime contractor will pay its subcontractors and suppliers.

The FASA manual provides a summary of the basic requirements of each state’s lien and bond laws, including who is covered; critical deadlines for notices, claims and suits; filing procedures; and more. The summary of laws was prepared by Donald W. Gregory, Esq., and Eric B. Travers, Esq., Kegler, Brown, Hill and Ritter, Columbus, Ohio, ASA’s general counsel, with input from attorneys from around the country. FASA Lien & Bond Claims in the 50 States (Item #3006) is $55 for ASA members and $80 for nonmembers.

New Web Site Gives Readers One More Way to Read The Contractor’s Compass

Some readers may prefer to read The Contractor’s Compass in a digital, page-flipping format, while others may prefer to be able to print out a pdf and read the magazine on paper. Now, there’s one more way to read ASA’s official educational journal for subcontractors—online! A new ASA Web site, contractorscompass.org, devoted to The Contractor’s Compass gives readers the ability to read, and search for, articles on the Web. The seven newest articles appear on the home page, and all articles, including from past editions, can be found under the “Articles” link. Links to past PDFs and digital, page-flipping magazines are located under the “Archives” link. Using the “Search” box at the bottom of the site, you can look for specific topics, like “Legally Speaking” or “Cash Management” for example. If you’re reading an article on a topic and you want to find other articles on the topic, simply click on the boxed keywords adjacent to the article, like “Taxes,” “Forecast,” “Claims,” “Bidding,” or “Contracts.” Of course, you can still access The Contractor’s Compass under “News & Periodicals” or “Foundation of ASA Home” via the ASA Web site, www.asaonline.com.

ASA Releases New FAQ on Retainage

Retainage, the holding of funds from a contractor until the completion of a contract, is a serious problem in the construction industry. Because of retainage, many contractors and subcontractors do not receive funds they already have earned for work properly performed. Contractors and subcontractors frequently are asked to act as bankers, financing in addition to building, the construction projects on which they work. ASA’s new Frequently Asked Questions on retainage is designed to provide tips on dealing with retainage to both the most experienced in as well the newcomers to the construction industry. The FAQ reviews the types of retainage clauses a subcontractor is likely to encounter and provides guidelines on how to deal with them. The FAQ is available to ASA members as a downloadable PDF document under “Contracts and Project Management” in the Member Resources section of the ASA Web site.

ASA Adds Complimentary ‘Harassment Training’ Webinar to Schedule on Feb. 6

Harassment is rampant. Whether it’s Hollywood, politics, academia or business, you cannot escape the reports. With the heightened awareness employers must do what they are required by law and in their power to prevent harassment in the workplace. In this webinar, Jamie Hasty, SESCO Management Consultants, will explain the broad definition of unwelcome sexual conduct and the problems caused by this inappropriate behavior. She will discuss why preventing sexual harassment helps everyone; how to respond to quid pro quo harassment; how to confront harassers and tell them to stop unwelcome behaviors; the negative impacts of workplace flirtations; proper procedures for reporting and investigating complaints; and consequences of false accusations. This webinar is complimentary for ASA members and nonmembers. Register online.

California Becomes First State to Enact Payment Transparency

California Gov. Jerry Brown (D) signed AB1223 on Oct 8, 2017, making the state the first to enact a payment transparency law. The new law requires state agencies to put on their Web sites information that will help construction subcontractors and suppliers determine when and how much their prime customers are responsible to pay them. Specifically, the new law requires that within 10 days of making a construction contract payment, a state agency must post on its Web site the following:

1. The project for which the payment was made.
2. The name of the construction contractor or company paid.
3. The date the payment was made or the date the state agency transmitted instructions to the Controller or other payer to make the payment.
4. The payment application number or other identifying information.
5. The amount of the payment.

“One of the challenges for subcontractors working under the prompt payment laws and ubiquitous pay-when-paid clauses is finding out when their customers are paid,” said Daniel F. McLennon, a partner in the San Francisco office of Smith, Currie & Hancock, and the 2017-18 chair of the Government Relations Committee for ASA of California. “This new California law directly addresses that problem.” He added, “This payment transparency law was motivated by problem-solving discussions in meetings of ASA’s Task Force on Government Advocacy.” ASA Chief Advocacy Officer E. Colette Nelson called on other ASA chapters to follow the lead of ASAC, saying, “California is a bellwether for legislation across the states. Other ASA chapters should follow the lead of ASA of California.” The new California law applies to state contracts valued at $25,000 or above.

Are You Evaluating The Prime Contractor Factor

Subcontractors and specialty trade contractors assume the greatest risks and reap the smallest rewards of all the participants in the construction business. In such a hostile environment, subcontractors must take all reasonable precautions to minimize or control risks. One of the surest ways to reduce risks is to be highly selective in choosing its prime contractor partners. Not only is it appropriate for a subcontractor to discriminate when selecting contractors with which it wishes to do business, it is absolutely necessary. ASA’s white paper The Prime Contractor Factor sets forth a process to help an individual subcontractor develop and implement its own program to evaluate and select contracting partners that will treat it reasonably, fairly and honestly in a subcontractor relationship. The white paper addresses:

• Characteristics of quality prime contractors.
• Discusses how a subcontractor can develop criteria for evaluating its potential contracting partners.
• Outlines sources of information.
• Describes procedures to help a subcontractor develop its own rating system.
• Suggests a process for setting up a preferred contractor program.

The white paper is available free for ASA members under “Bidding and Market Development” in the Member Resources section of the ASA Web site.

ASA’s Glossary of Terms Answers ‘What Does That Word Mean?’

Have you ever read a subcontract document and wondered “What does that word mean?” Do you wish you had a tool to help an employee, new to the construction industry, understand the industry jargon? ASA’s Glossary of Common Construction Contract Terms might be just what you’ve been looking for. The 16-page glossary provides an alphabetical list of terms and acronyms—from AAA to xcu— frequently used in construction contracts and subcontracts and discussions about them, as well as the definition of such terms. The ASA Glossary of Common Construction Contract Terms is available under “Contracts & Project Management” in the Member Resources section of the ASA Web site.