Update regarding the Construction Workplace Misclassification Act

Posted on August 12, 2011 by Ron Pollock

On February 10, 2011, the Construction Workplace Misclassification Act (CWMA) took effect in Pennsylvania, ushering in a new era of heightened scrutiny for businesses that classify employees as independent contractors. While there have yet to be any legal decisions further explaining the reach of the new law, affected employers should be aware of the following features and developments.

The CWMA includes a built-in “good faith” defense for employers accused of CWMA violations. The Act states that a defense to such a violation exists if the person for whom the services are performed believed in good faith that the individual who performed the services qualified as an independent contractor at the time the services were provided. Until several cases are tried, however, the extent to which employers must prove “good faith” is unknown. Affected employers should instead take proactive steps in order to ensure compliance, including:

 

a)      Determine how many workers are utilized as independent contractors by performing an internal audit.

 

b)      reclassify workers and groups of workers previously classified as independent contractors according to the test provided in the CWMA (discussed here.)

 

c)      Review the company’s contracts and relationships with legitimate independent contractors to ensure that these agreements will remain intact despite greater scrutiny.

 

Employers should also be aware of several CWMA-related forms posted on the Pennsylvania Department of Labor and Industry’s website. There is no indication from the Department of Labor and Industry that employers must provide these forms within the workplace.

 

a)      A complaint form, which asks for information regarding tools supplied by a given employer, whether certain employees have their own liability insurance, and how workers on a given job are paid. This form provides further insight into what factors are considered when an employer is under investigation for alleged CWMA violations. Available at: http://iccomplianceph.files.wordpress.com/2011/02/pa-construction-workplace-misclassification-complaint-form.pdf

 

b)      A warning poster, aimed specifically at individuals holding themselves out as independent contractors. Available at: http://iccomplianceph.files.wordpress.com/2011/02/pa-construction-workplace-misclassification-act-poster.pdf

Tags:

Insurance and Indemnity Provisions may Reduce the Cost of Construction Accidents

Posted on July 14, 2011 by Ron Pollock
Jobsite accidents are personally and economically costly. While everything may be done to avoid accidents, they will never be eliminated entirely. The claims process and possible litigation is expensive even if the case is successfully defended. The company can protect itself by writing strong indemnity and insurance provisions into its contracts. There are several areas to keep in mind when drafting these provisions. 

 
A.)  Specifically review “boilerplate” insurance and indemnity provisions.   Boilerplate, or contract provisions simply transferred automatically from contract to contract without modification, may have gaps or not be applicable to certain situations that may be relevant to a particular job site. Likewise, relying on another party to indemnify your company or name your company as an additional insured must be appropriately detailed or it may fail when it is needed most.

 
B.) Insurance policy renewals should be tracked diligently, through a docket system for reminding appropriate parties of the need for renewal.

 
C.) In a related item, keep documentation to confirm coverage is in place, particularly if relying on another party to have insurance. Certificates of Insurance can be inadequate or not detailed, so actual policy declarations should be reviewed.

 
D.)  Finally, an insurance broker/contractor/attorney partnership can coordinate these issues to avoid expensive exposure. 
Tags:

Does your insurance cover exposure from design-build jobs?

Posted on July 7, 2011 by Ron Pollock
The design – build approach can be advantageous for a project owner as well as the contractor. The relationships do require the contractor to assume the responsibility for the design contract. As a result, contractors must confirm that their insurance scheme protects them from exposure that may result from this liability.

 
There are several ways to deal with this exposure. First, the designer’s professional liability policy can be used to protect the contractor. Second, the contractor’s general and umbrella liability policies, while typically excluding professional liability, can be helpful if the contractor can obtain a professional liability policy with coverage for defined professional services. This definition should be reviewed carefully to ensure design – build exposure is protected. 

 
Prior to bidding, it is critical to ensure a contractor’s insurance program provides protection for added design responsibility. This is important to the project owner and designer as well since a failure to adequately insure against possible risk may affect all parties to the project. 
Tags:

Update of Residential Sprinkler Requirement

Posted on June 30, 2011 by Maria Di Stravolo Elliott
With the signing of the House Bill No. 377 by Governor Tom Corbett, the requirement of installing automatic fire sprinklers in one-family and two-family homes pursuant to the 2009 International Residence Code (and future revisions) has been eliminated. The sprinkler requirements, however, are still required for new townhome construction. To protect owners, the sections of the Bill dealing with sprinklers (now codified at 35 P.S. § 7210.901(g)) do require builders of such homes to do the following at or before the time of entering into the purchase contract:
 
  • Offer to the buyer the option to install or equip, at the buyer's expense, an automatic fire sprinkler system in home pursuant to the 2009 International Residential Code;
  • Provide the buyer with information which explains the initial and ongoing cost of installing and equipping an automatic fire sprinkler system in the home; and
  • Provide the buyer with information, as made available by the State Fire Commissioner on the agency's website, on the possible benefits of installing an automatic sprinkler system.
 
If the buyer chooses not to have a sprinkler system, then the home will still have some fire protection. The floor assembly of the home will need to be fire-resistance rated with a 1/2 -inch gypsum wallboard membrane, 5/8 -inch wood structural panel membrane, or equivalent, on the underside of the floor framing member. (see 35 P.S. § 7210.901(h).
Tags:

Property Owners Not Liable for Construction-Related Personal Injury Accidents

Posted on April 18, 2011 by Ron Pollock
The Pennsylvania Supreme Court has ruled recently that property owners that retain contractors are no longer liable for construction-related personal injury accidents on their property. The ruling benefits property owners while increasing the risk allocation and risk exposure for construction managers, general contractors and other non-employee involved subcontractors.

 
The Pennsylvania Supreme Court in the case of Beil v. Telesis Construction, Inc. clarified that owners are not liable for injuries to employees of independent contractors or subcontractors absent control over the “means and methods” of the work being performed, such as directing the subsequently-injured plaintiff how to actually do the work in question. 
 
For more information on this decision and its implications to owners, contractors, construction managers and subcontractors, please contact Ron Pollock (717-399-1539 or rpollock@barley.com) or any member of Barley Snyder’s Construction Law Group.
Tags:

Employers vs. Independent Contractors: Know the New Law

Posted on April 7, 2011 by Ron Pollock
On October 13, Governor Rendell signed into law the Construction Workplace Misclassification Act which makes it both a civil and a criminal offense for a contractor to knowingly misclassify an employee as an independent contractor. Pennsylvania joins several states that have taken similar measures to penalize employers that improperly classify workers as independent contractors to avoid paying certain taxes and other employee benefits.

 
The Act establishes criteria particular to the construction industry under which employees can be classified as independent contractors, including a requirement that the independent contractor maintain liability insurance. The Act also imposes both civil and criminal penalties for misclassification of workers, and requires employers to post notices in the workplace.

 
Which Employers Are Covered Under the Act?

Employers in the construction industry that are already subject to the Pennsylvania Workers’ Compensation Act and the Pennsylvania Unemployment Compensation Act are covered by this new Act. The Act also extends liability to individual officers or agents of the employer. Construction is defined broadly as the “erection, reconstruction demolition, alteration, modification, custom fabrication, building, assembling, site preparation and repair work done on any real property or premises under contract, whether or not the work is for a public body and paid for from public funds.”

 
What Are The Criteria For Independent Contractor Status?

The Act establishes a three-part test that an individual must meet to be properly classified as an independent contractor: 
1. The individual must have a written contract to perform construction services;
2. The individual must be free from control or direction over the performance of those services, both under the contract and in fact; and
3 .The individual must be customarily engaged in an independently established trade, occupation, profession or business.
The Act also sets forth the six specific criteria that will determine whether an individual meets the third part of the test of being “customarily engaged in an independently established trade, occupation, profession or business.”

The Act also sets forth the six specific criteria that will determine whether an individual meets the third part of the test of being "customarily engaged in an independently established trade, occupation, profession or business."

1. The individual must possess the essential tools, equipment and other assets necessary to perform the services, independent of the employer.
2. The individual arrangement with the employer is such that the individual must realize a profit or suffer a loss as a result of performing the services.
3. The individual must perform the services through a business in which the individual has a proprietary interest.
4. The individual must maintain a business location separate from the location of the employer.
5. The individual must:
                a. Have previously performed the same or similar services for another person, meeting
                the criteria 1 through 4 above, and while free from direction or control over the
                performance of the services; or
                b. Hold him or herself out to others as available and able
                to perform the same or similar services meeting the criteria of 1 through 4 above, and
                while free from direction or control over the performance of the services.
6. The individual must maintain liability insurance of at least $50,000 during the term of the contract.

 
What Penalties May Be Imposed For Violations Of The Act?

The failure to properly classify an individual subjects employers to civil penalties of up to $1,000 per misclassified employee for a first violation, and up to $2,500 per misclassified employee for each subsequent violation. Importantly, the Act also allows the Secretary of Labor and Industry to petition a court for a stop-work order requiring the cessation of work by those individuals who are misclassified, or if a majority of individuals at a worksite are misclassified, to petition for a cessation of all business operations of the employer at each site where a violation occurred. The stop-work order remains in effect until the court issues a release order.

 
In addition, the Act provides for criminal penalties for employers that violate the act and those who intentionally contract with such an employer knowing the employer intends to violate the Act. An intentional violation is a misdemeanor of the third degree for a first offense and a misdemeanor of the second degree for a subsequent offense. A negligent violation is a summary offense subject to a fine of not more than $1,000.

 
Does The Act Prohibit Retaliation?
Yes, the Act prohibits an employer from discriminating or taking an adverse action against any person who in good faith files a complaint or informs any person about an employer’s non-compliance with the Act. An adverse action within 90 days of the person’s complaint raises a rebuttable presumption of retaliation.
Tags: ,

Chinese-Made Drywall: Another Litigation Risk?

Posted on August 6, 2009 by Ron Pollock

  Builders, developers, sub-contractors, shipping companies and suppliers, importers, distributors, architects and others may potentially be impacted if litigation in this area becomes prevalent in the Northeast, as the Gulf Coast is already seeing mass tort litigation forming. In particular, it is important to review insurance policies early to ascertain whether coverage is provided in the event of a claim. Further, we recommend checking your supply chain to identify drywall sources, handling and documentation and preserve any documents involved.

 There has been a great deal of discussion recently with respect to property damage and personal injury claims arising from Chinese-made drywall, which is alleged to have contamination issues causing property and personal injury damages. While the science behind this remains murky, the problem may be particularly significant as statistics show that there are approximately 600 million pounds of Chinese-made drywall in at least 60,000 homes in the U.S.A. today. Commercial applications can also be involved.

According to an April 17th article in the Wall Street Journal, “Complaints about foul smelling Chinese-made drywall that first emerged in a few dozen homes in Florida in January have spread to hundreds of homes in several states.” As we saw with mold and synthetic stucco, the science surrounding Chinese-made drywall is still being developed. CNN reported in March that the drywall is alleged to have high levels of sulfur, and that the material emits sulfur-based gases that smell of rotten eggs and corrode piping and wiring, causing electronics and appliances to fail. At this point, the Gulf Coast has been in the forefront of these claims as high temperatures and humidity are purportedly primary triggers of problems resulting from the Chinese-made drywall. The United States Consumer Products Safety Commission has posted an internet alert on Chinese drywall, noting that it has received 1,174 reports from residents in 24 states who believe their health symptoms or the corrosion of certain metal components in their homes are related to the presence of drywall produced in China. Consumers largely report that their homes were built in 2006 to 2007. recommend checking your supply chain to identify drywall sources, handling and documentation and preserve any documents involved.

Tags:

Blasting Violations: Limitations on DEP's ability to issue

Posted on July 10, 2009 by Chip Haws

In the case Wampum Hardware Co v. DEP (March 2009), the Environmental Hearing Board sustained an appeal of a DEP order which was issued to Wampum relative to a blast at Wampum's quarry. The blast in question ejected rock into the air, which rock was expelled several hundred feet from the site of the blast. The blaster established a 950 foot safety zone which was nearly twice the size required by DEP regulations. No rock was expelled from the safety zone. The closest that any rock landed to any person on the site was 250 feet. Rock from the blast traveled up to 700 feet from the blast, which clearly was beyond what would have been the required safety zone under the regulations. The regulation that DEP relied on to issue the Order provided: “blasting…may not be done or performed in a manner…constituting a hazard or danger or do harm or damage to persons or property in the area of the blasting.” The Board found that there was no evidence that any harm or hazard to persons or property in the area of the blasting, due to the size of the safety zone. As part of DEP's order, Wampum was direct to revise its blasting plan and as a result, agreed to change the material used for stemming shots, to lower the depth of stemming and to increase the delay in shots, each of which were designed to decrease the potential for flyrock. It appears that the Board missed the point that the blast at issue was not properly designed and fired, as rock traveled well beyond what would have been anticipated within the typical safety zone, the fact that no one was hurt was not due to design, but rather good luck. 

Tags: ,

Home Improvement Contractor Act is Coming to Pennsylvania

Posted on March 27, 2009 by Ron Pollock

 

The Home Improvement Contractor Registration Act has become the law in Pennsylvania and is due to go into effect this Summer. At least part of the goal of this Act is to curb the impact of “fly-by-night” contractors by requiring all contractors that work in the residential home improvement area to register in a statewide database. The Act is designed to carry enforcement provisions and serve the purposes of protecting the public as well as legitimate contractors. It is expected that a form contract will be promulgated prior to the effective date of the Act. Highlighted points include:

 

Continue Reading...
Tags:

Recent Developments of Pennsylvania's One Call Act

Posted on May 10, 2007 by Bob Dennison

In 2006, the Superior Court of Pennsylvania and the Commonwealth Court of Pennsylvania issued decisions that may dramatically effect an injured party’s right to now recover economic (only) loss damages from “facility owners” in receipt of notices through Pennsylvania’s One Call Act and their failures to properly comply with the Act, and, “other professionals,” that are “in the business of supplying information” that provide false or inaccurate information when acting in compliance with the Act. The theory of recovery may differ between facility owner and a party that is a provider of information largely depending upon the status of the injured party and privity of contract or agreement, although the end result is the same--i.e., an aggrieved party may now be permitted to seek recovery for losses that are  purely economic that might otherwise have previously been precluded pursuant to the economic loss doctrine. 

The law, however, is far from settled. In fact, re-argument has been granted in that matter decided by Superior Court, now withdrawn and awaiting decision. Nevertheless, the cases are interesting from the standpoint of demonstrating both the courts trend of perhaps expanding the scope of recoverable economic damages, generally, where the actions sound in tort rather than contract law where privity of contract can not be established and more directly relating to actions maintained pursuant to the One Call Act. 

In the matter Excavation Technologies, Inc. v. Columbia Gas Company of Pennsylvania, (Pa. Super 2006)(re-argument granted - awaiting decision), the Superior Court permitted an excavator to seek recovery from a facility owner, and in this case, a utility company, for economic loss damages where a utility company allegedly marked several lines improperly, and, in some instances not at all. The utility company argued the excavator was precluded from maintaining an action because all of the damages were economic only and sounded only in tort, thus, were precluded pursuant to the economic loss doctrine where no privity of contract could be established. 

In its original holding, the Superior Court, relying upon Bilt-Rite Contractors, Inc. The Architectural Studio, 581 Pa. 454, 866 A.2d 270 (2005), reasoned that where information is negligently supplied by one in the business of supplying information, such as an architect, design professional, or in the instant action, a utility company, and where it is foreseeable that the information supplied will be relied upon by third persons, even absent privity of contract, a party may be held accountable for their consequences of a negligent failure to perform services in a competent fashion. The Court indicated that a duty exists to provide information accurately because parties justifiably rely upon information received from services required and provided pursuant to the One Call Act, and in fact, it is in the public’s interest for reporting companies to report accurately, the Court held that companies required to comply with the One Call Act are subject to negligent misrepresentation claims. 

Continue Reading...
Tags:

Allstate Loses Big in Katrina Case

Posted on April 18, 2007 by Ron Pollock

Allstate Insurance has lost a case in which it denied coverage to a Louisiana man who lost his home to Hurricane Katrina. The dispute centered around whether the home was destroyed by wind or storm surge. Storm surge damage was not covered by insurance, which resulted in a battle of the experts as to the cause of the home's destruction:

Jim Neva, a surveyor and engineer who inspected the house for Allstate, initially told Robert Weiss, who is listed as the policy holder, and his wife, Merryl, that wind may have destroyed the home before the surge of water washed away its remnants.

He later backed off that conclusion, however, and deferred to engineering consultant Craig Rogers of Rimkus Consulting Group. Rogers, who wrote the final report on the home for Allstate, convinced Neva that storm surge demolished the house.

Rogers said he didn't personally inspect the property until after he wrote the report. He said he based his conclusions in part on evidence gathered by other Rimkus engineers - a practice he described as common. But Trahant questioned the move.

"Why did Allstate elect to rely on the one engineer who never set foot on the property until long after he stamped his report?" Trahant said in closing arguments.

The $2.8 million verdict included a $1.5 million penalty for delay in payment of the claim.  The jury's decision, including the hefty penalty, will no doubt be closely analyzed by the insurance industry and plaintiff's bar in light of the numerous similar disputes pending in Lousiana and Mississippi.

Tags:

Litigation - Employment

Posted on January 29, 2007 by Ron Pollock

OSHA has set forth a standard that an employer shall insure that each employee uses protective footwear when working in areas where there is a danger of foot injuries due to falling or rolling objects, piercing the sole or where such employees feet are exposed to electrical hazards. Employers have frequently had questions over when safety shoes are required and who has to pay for them. Generally, it is believed that the OSHA standard will be interpreted with an eye towards the employer’s experience with foot injuries to determine whether there has been a history of foot injuries due to work-related accidents. Where the hazard is particularly great, a history of prior accidents may not be required. OSHA representatives have recently announced that they are “working on the standard to tighten it up,” presumably to create some certainty as to when protective footwear will be required in the workplace. 

Tags: