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Never Sign an OSHA Witness Statement

Posted By Western States Roofing Contractors Association, Monday, July 23, 2018

Courtesy of: Trent Cotney, Cotney Construction Law

Tel: 866.303.5868 | Email: tcotney@cotneycl.com

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Never Sign an OSHA Witness Statement

During any OSHA inspection, the Compliance Safety and Health Officer (“CSHO”) will more than likely take witness testimony from crew members that are on site. This CSHO will hand-write the interview answers and ask the employee to sign the witness statement. Most employers and employees do not understand their rights during an OSHA inspection and do not know that they are not required to sign witness statements. This article explores OSHA’s interviewing process, the use of witness statements by OSHA, and suggests alternatives to signing a witness statement.

 

Everyone has the right to counsel.

First and foremost, it should be noted that any member of management, including officers, directors, and owners have the right to have counsel present during any OSHA interview. In addition, any supervisory employee is also considered part of management, and therefore has the ability to have counsel present during the interviews. When OSHA inspects a job site, supervisory employees such as crew leaders, foremen, superintendents, and/or project managers should assert their right to have counsel present before giving any testimony to OSHA. In other words, the supervisor should state their name, position and assert the right to counsel. This will give the individual an opportunity to discuss the alleged violations with management and counsel prior to being interviewed. It will also allow management and counsel to be present during the interviews. Generally, these interviews occur at counsel’s office or OSHA’s area office rather than the job site, thereby limiting exposure to additional potential violations.

With regard to crew member interviews, management and counsel for management generally cannot be present during non-supervisory employee interviews. However, if the employee requests that counsel be present for the interview, OSHA must allow counsel to be present.

 

What will OSHA ask?

During the interviews, OSHA will ask a variety of questions regarding safety training and job site specific acts or omissions. For example, common safety training questions include how to properly tie off, use personal protective equipment (“PPE”), properly install anchor points, properly tie off ladders, knowledge about hydration and water breaks, knowledge regarding risks associated with swing radius, inhalation of chemicals and/or silica, as well as other potential hazards.

The job site specific questions will focus on the who, where, when, what, and how. In particular, employees will be asked questions regarding training they received and commands they received on the date of the incident. For example, the CSHO will ask whether employees were instructed to tie off on the date of the inspection, whether supervisory employees inspected the crew members during construction, and the reason(s) why employees were not tied off (even if they were). OSHA often asks whether employees were not wearing fall protection because they were told to complete work at an accelerated pace or to meet certain schedule obligations. If an employee answers in the affirmative, it could be damaging to the employer.

 

Written witness statement.

While the testimony is being taken, the CSHO will be drafting a witness statement, which generally contains self-serving declarations for purposes of prosecuting the employer. No one is required to sign a witness statement.  Both supervisory and non-supervisory employees can refuse to sign witness statements. This leaves the CSHO with only his or her own notes, which can still be used as evidence, or the CSHO can still contact the local Area Office and ask that it issue a subpoena requiring that the employee’s testimony be taken under oath. This delay in obtaining testimony may be beneficial for the employer because it will allow the employee to have the opportunity to think about his or her answers and be in a better mindset for purposes of providing testimony. It also gives the employee the chance to speak with counsel and/or management if he or she wishes to do so.

Obviously, regardless of when testimony is provided, all employees must always tell the truth. However, even a slight postponement in giving testimony can provide an employee with enough time to properly collect his or her thoughts, and ensure that he or she gives truthful testimony, while remaining alert enough to detect and avoid the onslaught of “Gotcha!” questions OSHA loves throwing at unsuspecting witnesses.

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Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

Trent Cotney, CEO of Cotney Construction Law, is an advocate for the roofing industry, General Counsel of Florida Roofing & Sheet Metal Contractors Association (FRSA), Roofing Technology Think Tank (RT3), Tennessee Association of Roofing Contractors (TARC), and several other local roofing associations. For more information, contact the author at 866.303.5868 or go to www.cotneycl.com.

Tags:  LEGAL  SAFETY 

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PARTY WHO PARTICIPATES IN ARBITRATION CANNOT THEREAFTER BACK OUT

Posted By Western States Roofing Contractors Association, Monday, July 16, 2018

By Kenneth S. Grossbart
Abdulaziz, Grossbart & Rudman

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The subject of Arbitration has been discussed by me in previous articles. This article again addresses the concept of Arbitration but with a twist.

Arbitration is an alternative form of resolving disputes. It is an alternative to the filing of a lawsuit and proceeding with your case through the court system. Arbitration is a very popular form of dispute resolution and oftentimes is faster and cheaper than going through the court system.

Arbitration is a consensual process which means in order for the parties to arbitrate a dispute all parties must consent to having the matter arbitrated. Oftentimes that consent comes in the form of an Arbitration Clause that is contained in the contract between the parties. In this set of facts, Company A signed an Advertising Insertion Order with Company B. The Order included an agreement to arbitrate all disputes. During the course of the relationship between Company A and Company B, Company A accumulated an unpaid balance with Company B. Company A filed a Demand for Arbitration seeking damages in the amount of the unpaid balance. Company B agreed that they signed the Order but claimed that the Order was unenforceable because Company A’s products were fraudulent. Regardless of the claims of Company B, Company B voluntarily participated in the Arbitration and in fact asked the Arbitrator to issue an Order requiring one of the parties to post a Bond. Company B later rescinded its participation in the Arbitration proceedings when the Arbitrator declined to issue the Order. The Arbitrator ultimately found for Company A and the trial court confirmed the Arbitration Award. Company B challenged the Arbitrator’s jurisdiction arguing that he did not consent to arbitrate the dispute.

The matter was reviewed and ruled upon by the appellate court. The appellate court confirmed the lower court’s ruling finding that the parties did in fact consent to Arbitration. The appellate court found that Company B’s conduct and participation in the Arbitration showed that he clearly and unmistakably consented to Arbitration. First Company B did not object to Arbitration, they willingly participated in the Arbitration proceedings, availed themselves of the Arbitrator’s authority when asked to have the Arbitrator rule upon the posting of a Bond and thereafter tried to rescind his voluntarily participation after the Arbitrator denied the request. Thus the court found that Company B’s actions constituted clear and unmistakable evidence that he consented to the Arbitration proceedings.

The take away from this set of facts is that if you challenge the jurisdiction of an Arbitration Tribunal, it must be done at the beginning of your case. You cannot temporarily participate in the Arbitration proceedings and then at some point in time when you don’t like how the Arbitration is proceeding attempt to back out. Courts will consider your participation to constitute a clear and unmistakable evidence of your consent to arbitrate.

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Kenneth Grossbart is recognized as one of the foremost authorities in California construction law. Over the past 35 years, Ken has become a respected speaker on Mechanic’s Liens and other construction related issues. Abdulaziz, Grossbart & Rudman provides this information as a service to its friends & clients and it does not establish an attorney-client relationship with the reader. This document is of a general nature and is not a substitute for legal advice. Since laws change frequently, contact an attorney before using this information. Ken Grossbart can be reached at Abdulaziz, Grossbart & Rudman: (818) 760-2000 or by E-Mail at , or at ksg@agrlaw.com

June / July ‘18

www.agrlaw.com

Tags:  BUSINESS  LEGAL 

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Reefer and Roofers – The Impact of Legalization of Marijuana

Posted By Chris Alberts, Western States Roofing Contractors Association, Monday, July 9, 2018
Updated: Tuesday, July 10, 2018

Courtesy of: Trent Cotney — Cotney Construction Law

 Tel: 866.303.5868 | Email: tcotney@cotneycl.com

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 Regardless of one’s opinion on the matter, it is becoming apparent that Marijuana is here to stay.  While many states have legalized Marijuana for both recreational and medicinal purposes, what is unclear are the potential liabilities for an employer whose employees are actively using the drug, particularly at work.  Questions arise such as can you require that your employees don’t use marijuana at all?  Due to the inherent dangers involved in the roofing industry, an employer has real and justified reasons for not wanting his or her employees to be under the influence while on the job.  Unlike alcohol, testing for marijuana has a way to go and as more and more states legalize the drug, the issues already present will only be further complicated.

Currently 30 states and the District of Columbia have legalized either recreational or medicinal use of marijuana. During the 2016 election cycle, California, Maine, Massachusetts and Nevada joined Alaska, Colorado, Oregon, Washington, and the District of Columbia legalizing marijuana for recreational use. Vermont is the first state to legalize recreational marijuana through state legislature and the law went into effect on July 1, 2018.

While certain states allow recreational and medicinal marijuana use, the drug is still illegal at the federal level. This divergence between state and federal law creates a variety of unique issues for employers.  Due to marijuana being illegal at the federal level, those working under a government contract or for a federal employer are prohibited from using marijuana in any way (even if it is for medicinal purposes). This prohibition extends to both on site use as well as off-site/at-home use. Accordingly, under federal law, the roofer employer has the ability to fire an employee for failing a drug test under the aforementioned federal work conditions.

If you’re an employer working under a federal contract, then the law is quite clear. Handling marijuana usage for roofers on private and state projects, however, is quite hazy (no pun intended). Two of the biggest issues still up in the air include: employees arriving to the job under the influence of marijuana, and zero-tolerance drug policies.  A number of other state courts have upheld employers’ right to continue to implement zero-tolerance policies. This results in employers likely being able to continue to enforce their zero-tolerance drug policies.

Since marijuana use impairs an individual’s motor functions, employers who have employees who operate machinery, vehicles, or other type of equipment will certainly not want them doing so under the influence of marijuana. Further, there is not presently a method for testing whether an individual is currently under the influence of marijuana. Drug tests simply show that the individual has used marijuana within the past 30 days (the length varies by different testing methods). These are further reasons to continue to drug test employees and enforce zero-tolerance policies when it comes to on-site safety.

While other state courts have upheld an employer’s right to discipline employees for failing a drug test for marijuana use, employers should still be wary of how courts will respond to the implementation of both recreational and medicinal marijuana laws. Further, state legislatures and other administrations have stated they will continue to provide updates and guidance on how marijuana laws will affect roofing employers/employees.

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Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

Trent Cotney, CEO of Cotney Construction Law, is an advocate for the roofing industry, General Counsel of Florida Roofing & Sheet Metal Contractors Association (FRSA), Roofing Technology Think Tank (RT3), Tennessee Association of Roofing Contractors (TARC), and several other local roofing associations. For more information, contact the author at 866.303.5868 or go to www.cotneycl.com.

Tags:  BUSINESS  LEGAL 

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A VIEW FROM THE HILL - POLITICAL NEWS: Regulatory & Tax Reform Update

Posted By Western States Roofing Contractors Association, Monday, May 21, 2018

Regulatory and Tax Reform Update

By: Craig Brightup, The Brightup Group LLC

When President Trump took office, he signed Executive Orders 13771 and 13777 to cut federal regulations.  EO 13771 says no new rules can be issued without cutting two existing regulations, and EO 13777 put White House monitors in the agencies to enforce deregulation efforts.  As a result, the 2017 Federal Register contained 61,308 pages of regulatory actions, which is the lowest count since 1993 and a 36% drop from 95,894 pages in 2016, the highest level ever recorded.

Unfortunately, one of the rules finalized under President Obama that went into effect under President Trump is the Occupational Safety and Health Administration’s (OSHA) silica rule.  However, the federal government’s Spring Regulatory Agenda was released in May and an OSHA entry announces it will publish a Request for Information (RFI) to revise the construction silica standard’s Table 1 engineering controls.  

Though publication of the RFI in the Federal Register is probably a few months down the road, OSHA’s commitment to do an RFI could ultimately lead to a reopening of the rule.  This positive development is a result of negotiations with the Construction Industry Safety Coalition, which is also working with OSHA to develop a series of Frequently Asked Questions (FAQs) about the rule’s complex set of requirements. 

OSHA also appears not to be aggressively enforcing the rule while negotiations are ongoing, at least in Fed-OSHA states, and hopefully President Trump’s pick to head the agency, Scott Mugno, will soon be confirmed by the Senate in order to be involved in the RFI before it’s published.

On the tax reform front, it bears repeating that IRC Sec. 179’s new expensing provisions in the Tax Cuts and Jobs Act are a big victory for the roofing industry and WSRCA members.  In fact, WSRCA members can have their cake and eat it, too!   

Sec. 179 allows businesses to purchase needed equipment and write-off the full amount, or a major portion of it, on their taxes for that year.  Qualifying property includes certain vehicles and virtually all construction equipment and machinery.  But, an even bigger breakthrough for the roofing industry and its customers is that Sec. 179 qualified property now includes improvements to nonresidential roofs!

The new limit on the total amount of Sec. 179 property a business can purchase each year before the deduction is totally phased-out is $2.5 million, and the annual limit for the deduction is now $1 million.  As such, a roofing contractor can use Sec. 179 to buy qualifying business equipment and then sell a commercial roof to a property owner who can write-off up to $1 million in the year the roof is purchased.  And the $1 million annual deduction and $2.5 million maximum business investment limits are permanent and indexed for annual inflation starting in 2019.

Also, don’t forget the IRC Sec. 168(k) Bonus Depreciation Deduction, which has been raised to 100 percent for qualifying property.  This generally covers property with a depreciable tax life of 20 years or less and the IRS is expected to clarify eligibility for full bonus depreciation in June.

The Western Roofing Expo will also take place in June, and I look forward to seeing you at the Legislative Luncheon on Monday, June 11, where I’ll be joined once again by NRCA CEO Reid Ribble to discuss these and other industry issues. 

Tags:  BUSINESS  LEGAL 

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Travel Time Compensation

Posted By Trent Cotney, Cotney Construction Law, LLP, Friday, April 27, 2018
Updated: Friday, April 27, 2018

Almost all your employees travel for their job, whether it is to your office, to a jobsite, to make sales, etc. Therefore, it is important that as the employer, you understand what travel time is compensable – meaning, when must travel time be paid time and count toward overtime.

Travel between home and work is not compensable, as long as it is within the “normal commuting area.” This is true whether the employee works at a fixed location (e.g., office) or different jobsites. If you require employees to report at a meeting place to receive instructions or pick up tools, travel between the meeting place and the jobsite is compensable. Travel between jobsites during the workday is compensable. When determining if travel time is compensable, it makes no difference if the employee is driving a company vehicle or a personal vehicle.

There are many strategies for reducing the payroll cost of travel time. For instance, you can pay employees a lower payrate for drive time than worksite time. You can also institute a written policy establishing a broad scope of what is considered the employee’s “normal commuting area” and limiting paid travel time to drivers rather than passengers. Moreover, some of your employees (e.g., outside sales) may be exempt from certain wages laws and not entitled to paid travel time. It is important to consult with a labor and employment attorney to reduce your payroll expenses and protect against potential wage and hour liability.

Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation. Regulations and laws may vary depending on your location. Consult with a licensed attorney in your area if you wish to obtain legal advice and/or counsel for a particular legal issue.

About the Author: Benjamin Briggs is an attorney in the Tampa office of Cotney Construction Law.  He specializes in labor and employment matters. Cotney Construction Law advocates for the roofing industry, serves as General Counsel of FRSA, TARC, RT3, TRI, and NWIR. For more information, contact the author at 866-303-5868 or go to www.cotneycl.com

Tags:  BUSINESS  LEGAL 

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ROOFING EDUCATION CONFERENCE

Posted By WSRCA, Tuesday, April 17, 2018



Western Roofing Expo 2018


Roofing Education Conference

WSRCA knows that you as a roofing or waterproofing contractor need to stay on top of the latest technical developments in the industry — and that's no easy feat! OSHA compliance, product issues, and best business practices are just a few of today's concerns. WSRCA has put together an amazing line-up of premium educational workshops for you - the roofing contractor - to succeed in today's competitive business environment. Earn CEU's, educate your company, and get a leg up on thecompetition!


Presented by: the Western States Roofing Contractors Association

ONLINE REGISTRATION SPONSORS


Follow WSRCA on Facebook, LinkedIn, Twitter, and Google +


   

Tags:  BUSINESS  LEGAL  SAFETY  TECHNICAL 

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BEWARE: TEXAS COURTS WILL NAIL ROOFERS FOR ACTING AS PUBLIC ADJUSTERS

Posted By Western States Roofing Contractors Association, Tuesday, March 6, 2018

Courtesy of: Cotney Construction Law

The abundance of storm damage from the 2017 hurricanes has brought to light an important and costly lesson for contractors repairing the damage where insurers are involved: be careful not to cross the line between being a contractor for the insured and being the insured’s negotiator with its insurer.  The case of Lon Smith & Associates, Inc. v. Key, No. 02-15-00328, 2017 WL 3298391 (Tex.App.-Fort Worth, Aug. 3, 2017) highlights this issue.

In Lon Smith & Associates, the Keys retained Smith to repair their hail damaged roof through a contract that authorized Smith to “pursue [the] homeowners [‘] best interest for all repairs, at a price agreeable to the insurance company and [Smith] and further provided that “[t]he final price agreed to between the insurance company and [Smith] shall be the final contract price.”  The final contract price agreed to between the Keys and Smith was $33,769.50, however, insurance proceeds only covered $18,926.69, leaving a substantial balance owed by the Keys.  After the Keys failed to pay the difference, Smith brought suit and obtained a default judgment.  Separately, the Keys brought suit against Smith, asserting that the contract violated Texas Insurance Code section 4102.051’s prohibition against a corporation acting or holding itself out as a public insurance adjuster in the absence of a license. See Tex. Ins. Code Ann. § 4102.051(a) (West Supp. 2016). Accordingly, the Keys claimed the agreement was illegal, void, and unenforceable. See id. § 4102.207(a), (b) (West 2009).  In essence, the Keys asserted (and the Court agreed) that the contract was void- meaning that any money paid to the contractor would have to be disgorged, or given back.  But it did not stop there- the Keys sought and obtained class certification to join as plaintiffs “all Texas residents who from June 2003 through the present signed agreements with [Smith]” that contained the same language.  Several similar suits are also making their way through Texas courts as of the writing of this article.

Based upon the lessons of Smith, if you are a roofer or any type of contractor involved in restoration work where insurance is involved, you should have your contracts reviewed by an attorney familiar with these issues.  Aside from the contract language, it is also important to remember that actions speak louder than written words –meaning, even if your contract doesn’t have language like the Smith contract but you are getting involved in negotiations with your customer’s insurer, you are likely crossing the line into adjusting.  Sadly, you may face the same results.  To that end, make sure you contact counsel that can help you navigate the minefields associated with this type of work.  If you do work outside of Texas, note that many states have enacted similar restrictions, so find out beforehand what type of restrictions exist.

Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation. Regulations and laws may vary depending on your location. Consult with a licensed attorney in your area if you wish to obtain legal advice and/or counsel for a particular legal issue.

Tags:  LEGAL 

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The Anatomy of a Construction Defect Law Suit and Steps to Take to Avoid Them

Posted By Western States Roofing Contractors Association, Monday, February 5, 2018
Updated: Monday, February 5, 2018

 

By: Dan Cornwell

Dan Cornwell is the President and founding member of CC&L Roofing Company established in 1978 in Portland Oregon and the Principal of Cornwell Consulting Group established in 2007. He is a former president of WSRCA, current director and former president of the National Slate Association, a member of the Tile Roofing Institute’s technical committee and the Secretary of the Portland Chapter of the Roofing Consultants Institute. Mr. Cornwell has provided consulting services on over 300 Construction Defect Litigation Cases. He can be reached for questions or comments at dan@cornwellconsulting.net

 

Picture This: You are a roofing contractor in the foyer at your office and in the process of shaking hands with a client who has come in to sign a contract for a lucrative job; the door opens and some guy walks in and serves you with a summons. You have just been named in a construction defect law suit and you and your client are both taken aback!

Of course you knew nothing about this coming, no one gave you notice of some alleged failure of your work and possibly you performed the work on said project 6 to 10 years ago or in some cases even longer. Possibly you don’t even remember the job, and if you do it is likely that there were no indications or notifications of anything wrong with your work. No one called you to say it was leaking or requested warranty service.  This does not seem like fair treatment so how could this possibly repeatedly happen to roofing contractors across the Western United States?

How It Started

The course that brought you here may have begun a year or more prior to you being named and it is possible and even likely that the roofing portion of the project had little or nothing to do with the initialization of the law suit you have just been named in.

 

Every construction defect case usually has one or possibly two main drivers or actual serious defects that get the case started. Possibly the property owners in wet climates noticed mushrooms growing out the trim on the corners of their windows or noticed mold on the interior, possibly settlement issues caused cracking, or decks began to sag from rot or condensation caused the roof sheathing to sag under foot? Any of these would initiate the building owner to call someone for repairs which brings the defects in the construction to light.

If it a is condominium project or homeowners association, it is  possible that professional plaintiffs experts looking for business initiated contact with the association board informing them of what the experts consider the boards “due diligence responsibly as trustees to ensure there are no latent construction defects prior to the expiration of the statue of repose”.

Whether the property owners noticed irregularity’s in the construction and initiated the call for repairs eventually leading them to an attorney or whether they were contacted by phishing plaintiff’s experts looking for business who directed them to an attorney makes little difference. Everyone is familiar with the term ‘Ambulance Chasing Attorneys” and today we now have “Sawdust Chasing Attorneys” or those along with their experts who rely upon construction defect litigation for their livelihood.

Once the plaintiff’s experts are on the scene they don’t just look at the portions of the construction that may be failing. Rather they inspect and observe all the building components often working from boilerplate lists of defects they have on file. Commonly following an initial observation of the building, a preliminary report is provided to the owners stating that a litany of potential defects have been discovered and additional investigative openings need to be undertaken to determine the severity of the issues.

The preliminary report usually leads to a select contractor being retained to preform destructive testing who makes investigative openings at numerous cherry picked locations in the building envelope while the plaintiff’s experts photograph and document the findings. The defects discovered during the invasive openings may be the actual cause of failures in the building envelope or structure with obvious resultant damage present. However, many of the alleged deficiencies which end up listed in the Lawsuit Complaint are often just technical in nature.

Although these technical deficiencies may be performing and causing no damage to the building, these alleged defects either do not follow the manufactures instructions, industry standards, ASTM or even code requirements.  Often these issues are related to items such as type of fasteners, or fastener placements not meeting specs, underlayment or weather resistive barriers not properly lapped with other components or flashings, improper sealant joints, undersized diverter flashings and so on.

These items all get listed on the complaint filed with the courts and often they are described in ambiguous terms that do not give the reader a clear description of what the actual issues consist of? Some examples of these statements are: Inadequate weather protection for exterior wall assemblies: Inadequate metal flashing provisions and dimensions: Improper water-restive barrier installation: Inadequate rough opening flexible flashing provisions: Inadequate rough opening air control provisions: Improper utility penetrations: and of course: Inadequate weather protection at roof assemblies and maybe, inadequate or undersized diverter flashings at roof/wall/eave interfaces.

The plaintiff’s experts who make these allegations may or may not possess construction related experience and backgrounds, some may, and others may have construction management degrees but no practical experience with the tools of the trade while others might have zero construction training or experience but got hired on to take photos and quickly worked their way up the status of “expert witness”. However do not underestimate plaintiff’s experts, they all study codes, manufactures instructions, and or course WSRCA and NRCA installation details or industry standards and are quick to point out any conditions that do not meet those accepted standards.

If you are fortunate the experts hired by plaintiffs on your project will be those who commonly provide services for both the defense of contractors and who also occasionally work for plaintiffs. This experienced type of expert usually has a good and realistic understanding of what is and is not causing problems for the building owners and as such their demands for repairs may be more realistic than those who only work the plaintiff’s side and often just call for full replacement of all components on the exterior of the building. It is not that the “plaintiff’s only” experts are evil; rather they see themselves as righteous protectors of property owners who have been damaged by ruthless contractors and may be overzealous in obtaining justice and of course as much settlement money as possible for their clients.  Put differently, they generally are very good at making mountains out of mole hills.

All of the above occurrences transpired unbeknownst to you at the job site which you worked on at some point in the past, the evidence has been gathered, the cards have be stacked and you are guilty of performing work on said project (be it improper work or not) and are now being sued for committing that work.

Who Sues Who?

Commonly you are a subcontractor and in most instances you are being sued by the general contractor who built the project. General contractors commonly require sub-contractors to name them as additional insureds on their insurance policies and once the general contractor is sued by the plaintiffs / property owners they turn the matter over to their insurance carrier for defense of the claim. Their insurance carrier then subrogates the claim to the subcontractors who may or may not be the cause of the defects alleged to exist at the property.

Even if the GC does not believe your work is a fault, even if you have a great ongoing relationship with them and have completed numerous jobs for the GC and might even be close friends after years of doing business together, once the GC turns the claim into their carrier for defense it is out of their hands. Their insurance carrier is going to look to you and every other subcontractor who performed work on the project to pay for the claim.  Conversely if you hired any sub-subcontractors to perform any work on the project your insurance will also subrogate the claim to them as well.  Who is actually at fault will be sorted out later. Unfortunately you are generally considered “potentially guilty” until proven innocent.

The Right to Repair

Some states have passed right to repair bills for instance in California, CA Civil Code 917 and in Oregon, ORS 701 in an effort to allow those who performed the work to have an opportunity to make repairs prior to the initiation of the law suit. These were put in place with good intentions but in some cases can have an adverse effect for subcontractors. In order to name you in a lawsuit the suing party must provide you with the required “right to repair” notices. Sounds good, but the requirement means that whether your work is suspect as contributing to damages at the property or not, if they don’t send you the notice of right to repair then they can’t name you in the suit. In essence this ensures that they will send you the notice so you are in. 

The notice you receive may also include some ambiguous wording such as:

“Please note that the investigations and conclusions are preliminary in nature. It is impossible to know the full extent of the construction defects and damage at the property without additional major destructive testing. In compliance with the statues of (your state) you are required to:

1. Send us a written response stating your intent to perform some or all the remediation.

2. An offer to pay a stated amount of compensation for some or all of the acknowledged defects and consequential damages.

3. Or a letter denying all responsibility for the defects at the property”

This wording puts you in the position of agreeing to either fix or pay for problems at the property which you do not know the extent of, and have no way of knowing the eventual cost of repairs, or even if your work is at fault at all?  At this point you end up notifying your carrier that you are being sued and turn it over to them to defend.

The Ultimate Statute of Repose

The statute of repose varies in time in different states and can be thought of as similar to a statute of limitations (ask an attorney for the true definition) for construction defect claims. 

Your states statutes may vary but in California and Oregon it is 10 years and in Washington it is 6 years from the date of substantial completion or the issuance of the certificate of occupancy. Basically this means that upon the expiration the statue of repose property owners can no longer bring construction defect law suits against contractors. However these limits have been trampled on in some cases and upon appeal have been extended by judges who apparently thought allowing a case to proceed after 13 or 14 years was the right thing to do.  

In some instances the general contractor was brought into litigation at the very end of the statute and by the time you get a summons, a year or more has past beyond the expiration of the statute, but since the case was brought against the general contractor prior to the expiration, who you named additional insured, you are now in the case.

What Happens Once Named in a Construction Defect Litigation Lawsuit

Once you are named: First notify your insurance agent who will notify your insurance carrier. Second; hopefully you kept good records of the construction process including photographs of the work in progress. You will need to copy your entire job file and supply it to your carrier as your file may at some point be subpoenaed by others and your attorney will certainly need your file for your proper defense. Your file is now evidence and you should keep both paper copies (in case of computer crashes) and electronic copies on file. Records from plaintiff’s or general contractor’s files may be incomplete or missing years after completion and you may even be accused of completing work you did not perform. Your file may be your salvation in such occurrences.

Your carrier will likely send you a reservation of rights letter which basically says they are looking at the case and may or may not provide coverage. This is complex stuff based on the fine print you probably never read in your policy, but in general they are required to provide a defense for you but may limit their exposure in paying for remediation of the alleged defects.   In short they are responsible for damages to the property resulting from your work, but they do not cover your work product. So if your work is found and proven to be deficient, improperly installed and requires replacement but no damages to the building resulted from your work, there is no coverage and you are on your own for the replacement costs.

Whereas if there are resultant damages to the building from the work you installed, leaks and rot instance, this will trigger coverage for replacement and repairs. No one wants to have their work found deficient, but finding damage as a result of your work is actually a good thing in some cases as it will trigger coverage by your policy.

You insurance company will hire an attorney to represent you in the case and your attorney will, with approval of the carrier, hire an expert to aid in your defense.  You may have a say in selecting who your expert will be and you will want someone with experience and knowledge in roofing installations. A good expert on your team can often refute overly aggressive claims of negligence on your part made by plaintiff’s experts and provide the proper arguments for your attorney to use in your defense.

You will need to provide your expert and attorney with your knowledge of the work process and as the case proceeds on you will likely be deposed by other attorneys in the case. However once this is accomplished and you have an expert and attorney working on your behalf, do your best to give them the ball and let them run with it. Go out and make some money and live your life and forget about the case if you can, eating your guts out won’t change the outcome.

Lastly once you are in the case, begin to earmark and set aside funds for your deductible payments when the case eventually settles or resolves. If you have changed carriers since completion of the work and damages have allegedly been accruing since that time, you may have multiple carriers providing and sharing in the costs of your defense, if that is the case you will likely end up making deductible payments to each of those carriers.

Your expert will visit the site and observe your work in place,  potentially there may be additional destructive testing by the defense parties to open additional areas not cherry picked by plaintiffs in an attempt to either prove that damage is either isolated to only a few areas or is not occurring at all. Following the site visits and any additional destructive testing, there will be experts meetings where the experts for all parties including the attorneys meet in a room to discuss the findings onsite. Generally attorneys are not allowed to offer opinions in experts meetings, but the experts are allowed as guided by a mediator to hash out what they believe are and are not problems with the building and upon whom the blame rests.

It is not uncommon to have disagreements and a variance of opinions between the plaintiff’s, subs and the general contractor in these meetings as to where fault lies and how significant damages really are. Defense experts may prepare an alternative scope or repairs targeting problem areas that minimize the overall scope of repairs recommended by the plaintiffs. Much of the fault as to who caused it and or why damage is or is not occurring can be cleared up during experts meetings even though the opinions expressed therein are protected as mediation communications and cannot be used in court.

The best possible outcome is that your expert will be able to show the mediator and other parties during the meeting that your work is perfect and not at fault whatsoever. This may lead to your dismissal from the case once the other parties see that it will be difficult to impossible to either extract settlement monies from your carrier or for them to prevail against you at trial.

Following the experts meetings which may be repeated with two to three follow up meetings after additional investigative openings are made, or when new information comes to light, the case moves on to mediation. Prior to reaching this point, your expert will have arrived at a conclusion of whether or not any of your work is at fault. If some of your work is deemed faulty or potentially shares in resultant damages to the property, then a speculation is made of how much of the damages may be related to sequencing of the construction, or can be attributed to other trades modifying your work after completion and who should share in the costs of repairs? The general contractor will often be assigned to pay a portion or percentage of any damages caused by their subcontractors for failure to properly supervise their work. 

Your expert will advise your attorney of how much, if any, liability you face in this case and provide an approximate estimate of the repair costs to remediate these problems or what portion of settlement demands made by the general contractor or plaintiff’s you may share in. Your attorney will then advise the carrier of the potential exposure in best in worst case scenarios should the case proceed to trial. The carrier based upon the information provided by your expert and attorney will assess the position and potential for loss should a jury not find in your favor at trial and will allocate a maximum settlement amount to be paid to settle the case on your behalf.

Commonly the parties attending mediation in the case meet in separate private rooms in the same building. Demands for payment to reach settlements are made by the plaintiffs to general contractor, who in turn makes demands for payment to the subcontractors in an attempt to settle the case.

The mediator travels back and forth from one room to the next, meeting with all the parties involved in an attempt to cajole the plaintiffs to take less and or the defendants to pay more to try to settle the case. It is common for no neutral ground to be reached at the first mediation with each party feeling out the others so the mediation fails. Often it takes a second and sometimes a third mediation prior to settlement being reached with around 99% of construction defect cases eventually settling in mediation. A successful mediation can be described as a situation where everyone goes away angry due to either paying more than they wanted or receiving less.

The remaining 1% of cases head to trial where anything can happen. Often as not the defense wins at trial having a good argument and reason to be there to begin with, however trail is always a crapshoot and juries can deliver big verdicts for plaintiffs as well. This is why most cases settle during mediation due to the fear of the unknown verdict coupled with the high costs of defense to bring a matter to trial.

Avoiding Construction Defect Lawsuits

Unfortunately the only surefire way to ensure you are not named in a construction defect case is not to do the work to begin with. Not a good choice when you make your living installing roofs, but the truth is when everyone who touches a building gets named in the suit, sooner or later even if you installed the most perfect roof ever, the windows, wall cladding,  trim, doors, or decks or other components may fail and you will be in the case.

There are clause’s you can add to your contracts that may cut your exposure time limit down to four years or less instead of the full statute of repose in your state which are a very good idea. However you should consult an attorney for proper advice in your state as to the wording. These may not be of much help when you are required to sign the general contractors contracts unless you can get your clause added to their language.

Short of that, avoiding mass production lowest bidder home owner association work which is a main target for construction defect suits will avoid the most probable exposure. If this is your bread and butter type of work then try to get the general contractor to provide a wrap policy with high enough coverage limits for everyone.

Basically just doing really good work will either help you avoid being named in a lawsuit or get you out once you are named. Education for the business owner and the entire crew is paramount, even if your grand pappy did it that way and you have been doing it that way for decades that does not mean it meets the manufactures requirements, specs or even code. I don’t have room to mention all the potential defects that one can be accused of here so I will say that belonging to associations like the WSRCA and attending seminars, reading technical bulletins, and studying written details, then implementing those practices into your installations is the best possible method of either staying clear of or being dismissed from a construction defect claim.

Virtually every roofing contractor I know including my own company has at some point in time assumed the role of a “plaintiff’s expert”, although not necessarily involving a lawsuit.

You get called out to a property for service where the original contractor is either no longer in business or will not return calls or the owner simply refuses to have them back. The roof is leaking, and you find some of the worst cut corner sloppy work imaginable which of course was performed by the lowest bidder. You have to tell the property owner that they got a really bad job and then what it will cost to fix it or completely replace it.

You have just assumed a role similar to what plaintiff’s experts do, conversely should this roof lead to a law suit some attorney and some other expert will be hired to provide a defense for the guy who did the cut corner work described above. Providing a defense for really bad work obviously will not be easy.

My point in summation is that construction defect claims are not going away anytime soon, but they may in some instances have raised the bar on the overall quality of construction now being built. Hopefully those who are the critics, the plaintiff’s experts and attorneys, along with those who provide defense of the contractors involved can rise to a level of looking at what is wrong and what is not instead of attempting to extract as much money as possible from every party involved regardless of the quality of work completed. Not every contractor’s work is prefect and where faulty work causes damages it needs to be fixed. Hopefully we can get to a point that when the contractors work is not the cause of damage, that those who are the accusers will agree and dismiss the allegations.

However there is money involved, so don’t hold your breath.

 

 

Tags:  LEGAL  TECHNICAL 

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Arbitration Agreement

Posted By Kenneth S. Grossbart — Law Offices of Abdulaziz, Grossbart & Rudman, Monday, January 22, 2018

We have written before regarding the concept of arbitration vs. litigation.  Arbitrating disputes is very common and arbitration clauses are found in all types of different situations.  Arbitration clauses are very common in construction related contracts as well as employment related contracts.  Arbitration is favored by the courts and if there is an arbitration clause contained in a contract, the court more often than not will enforce the arbitration clause and require that the parties arbitrate their disputes as oppose to litigating their disputes in the court system. 

A recent California Appellate[1] case addresses the validity of an arbitration clause that was contained in an employment agreement.  Maya Baxter was employed by AssetMark Investment Services, Inc.  Genworth North acquired AssetMark.  Genworth required that Ms. Baxter sign an arbitration agreement.  The arbitration agreement required that all employment disputes be resolved according to Genworth Alternative Dispute Resolution guidelines.  At a later date, Genworth eliminated Ms. Baxter job position and as a result terminated her employment.  Ms. Baxter sued Genworth for wrongful termination alleging Genworth fired her because of her race.  Genworth filed a motion to compel arbitration pursuant to the arbitration clause contained within the employment contract however the court denied Genworth’s motion on the grounds that the arbitration agreement was procedurally and substantively unconscionable. 

As mentioned above, the greater percentages of motions to compel arbitration are granted and thus compel the parties to arbitrate their disputes.  It is a rare situation that a trial court denies a motion to compel arbitration.  However in this instance that is exactly what the court did. 

In denying Genworth’s motion to compel arbitration, the trial court found that Ms. Baxter did not have the power to bargain with Genworth over the terms of the arbitration agreement.  As a result, the trial court found that unconscionability was present in the negotiation of the arbitration clause.  The court further found that the provisions of the arbitration clause were unfairly one sided in favor of Genworth.  By way of example Ms. Baxter was not allowed to communicate with other employees about her claims.  Baxter was also restricted on discovery, shortened limitation periods and limited Baxter’s ability to seek administrative remedies prior to participating in arbitration. 

Because the trial court found that the arbitration clause was both procedurally and substantively unconscionable, the court ruled that the arbitration clause is unenforceable and Ms. Baxter can pursue her disputes in the court system. 

Although arbitration is a favored means of dispute resolution, there are instances where arbitration clauses will not be held to be unenforceable.  Where the facts of this particular case are in the realm of employer/employee, the situation can be equally construed in any type of industry such as the construction industry. 

Whether you are the maker of the contract or the one asked to sign someone else’s contract, pay particular attention to the arbitration clause and make sure that the clause does not unfairly favor one person over the other. 



[1] The holding of this case would no doubt be the same in other States.

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Independent Contractors vs. Employees

Posted By WSRCA, Monday, November 20, 2017


 

WSRCA Contractors Counsel: Legal Talk 

Independent Contractors vs. Employees

 

By: Kenneth S. Grossbart

Abdulaziz, Grossbart & Rudman

 

In past articles, we have written regarding the importance of classifying those persons who worked on your projects. Employees vs. independent contractors. Although our office has written on this subject before, I recently read an article by our colleague, Phil Vermeulen of the Contractors Licensing Center in Sacramento, who also wrote on the topic.

 

It is a very common practice for contractors to classify their workers as “independent contractors” when in reality they would be considered to be employees. This policy is done primarily to avoid the cost of workers’ compensation and overtime pay that would be due and owing to workers classified as employees. As Phil points out in his article, the Department of Industrial Relations (“DIR”) has strongly cautioned employers to be very careful with this dangerous practice. We reprint the following from DIR:

 

A federal court judge has sided with California Labor Commissioner, Julie A. Su, issuing a judgment in favor of five port and rail truck drivers against SPO Cartage Inc. The ruling awards the drivers reimbursement for expenses and unlawful deductions in the amount of $958,660 plus attorneys fees and costs. The Labor Commissioner previously issued awards to the five drivers following hearings that found they had been misclassified as independent contractors. XPO Cartage appealed the five decisions in Superior Court and the case was removed to Federal Court, where attorneys for the Labor Commissioner defended the decisions on behalf of the drivers. After a four-day bench trial and post-trial briefing, U.S. District Court Judge William Keller ruled that all five drivers were misclassified as independent contractors and were entitled to reimbursement for expenses and unlawful deductions.

 

State courts have also upheld the Labor Commissioner’s awards in misclassification cases in many other professions, particularly in construction, so we cannot emphasize enough, take heed!! All employers are urged to be aware of this important decision and the myriad consequences of misclassification of employees including:

 

• Stop orders and penalty assessments pursuant to Labor Code section 3710.1;

• Liability for overtime premium, meal period pay, and other remedies available to employees under the Labor Code and Orders of the Industrial Welfare Commission;

• Exposure for tort liability for injuries suffered by employees when workers’ compensation insurance is not secured (Labor Code section 3706);

• Exposure for unfair business practices (Business & Professions Code section 17200);

• Tax liability penalties; and

• Criminal liability (Labor Code section 3700.5).

 

Although the reprint from the DIR deals exclusively with a California business, the points raised would appear to be equally applicable to those businesses that operate outside of California. All businesses that are presently or are considering using independent contractors to perform work should do so with caution and not before seeking qualified legal advice.

Tags:  LEGAL 

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CONSTRUCTION CONTRACTS

Posted By WSRCA, Wednesday, October 11, 2017

CONSTRUCTION CONTRACTS

Important Document Too Often Overlooked by Contractors

by: Kenneth Grossbart — Abdulaziz, Grossbart & Rudman

 

A written construction contract is a very important document that is overlooked by too many contractors. A contract is the best tool with respect to proving what was agreed upon, especially in the case of a dispute. There is no one-stop construction contract for all projects. What is required and what should be included in a contract will depend on the type of work performed, who the client is, what the amount of the contract is, the parties to the contract, if the contractor has been disciplined, etc.

What works for one project or with one contractor, may not work for another. Given the numerous types of projects and contracts available (home improvement, service and repair, new residential construction, commercial, and residential under $500, as well as subcontract or master subcontract agreements between contractors), the initial decision a contractor needs to make is what type of contract should be used on a particular project. Please visit our website www.agrlaw.com for additional information required on contracts.

After determining the type of contract needed, it becomes easy to determine the legally required clauses for that contract. The next determination would be the remaining contract clauses or terms to be incorporated into the contract. The essential terms to any construction contract will include: the names of the parties, the parties addressed, the jobsite address and description, scope of work, contract price, time for performance, and time for payment.

The remaining contract terms can be broken down into a couple of categories. First, those terms required by insurance carriers in the event of a claim, or required to be incorporated by the contract documents. Most insurance policies require upper-tier contractors to have a written contract with their subcontractor that includes indemnity provisions, which basically shift the defense of every claim and coverage for the claim to the subcontractor, regardless of fault. Insurance clauses typically include a requirement to name the contractor and owner as additional insureds, and to bear the risk of loss during construction. Most direct/prime contracts will require that the subcontracts have the same warranty terms as in the prime contract so that the owner is protected.

Next are the contract terms that are helpful or necessary to govern in the event of a dispute. These clauses can include clauses governing delay, requiring mediation or arbitration, imposing the right to attorney's fees in a dispute, termination for convenience or cause, increase in material costs, retention, and reservation of rights to name a few. The dispute resolution clause could turn out to be one of the most important clauses in the contract, should a dispute arise because it could save time and money in the long run having the dispute procedures laid out rather than having to go through court to argue how to dispute the matter. Construction contracts purchased from a professional and knowledgeable source (trade Association or builders' exchanges) or even directly from a construction attorney are your best bet to make sure that you have a contract that works for you and your business.

 

 

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