Construction Law Blog
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This is Part II of a two part blog on Construction Bankruptcy issues. For Part I, click here.
The Bankruptcy Code is Federal law. Bankruptcy courts are part of the federal (not state) judiciary system. Lien and bond claim law, however, can involve federal or state law. Federal bankruptcy intersects state lien and bond law when a participant in a construction project goes broke. As with anything else, there are winners and losers when someone on a construction project goes bankrupt. The goal is to take the available action to protect yourself. The winners are the ones who get out of the project before the bankruptcy occurs, obtain a security interest for their claims, or swiftly assert their available rights once the bankruptcy petition is filed. The losers are generally the ones who become unsecured creditors in the bankruptcy estate. Unsecured creditors share in whatever meager assets remain in the bankruptcy estate after secured creditors and administrative fees are paid.
In Washington, general contractors are primarily responsible for compliance with the Washington Industrial Safety and Health Act of 1973 ("WISHA"), even when it comes to the conduct of their subcontractors. If a subcontractor commits a violation, the Washington Department of Labor and Industries ("L&I") may still issue a general contractor a citation. The Board of Industrial Insurance Appeals - the quasi-judicial administrative body charged with reviewing L&I citations - has found a limited exception to a general contractor's "primary responsibility," but only if the general contractor has a safety program that is effective in practice and the violation was the result of unpreventable misconduct.
Minimum Wage Increases in 20 States: On January 1, 2015, employers in 20 states and the District of Columbia, as well as those who perform work on federal contracts and subcontracts, will see an increase in the minimum wage. In nine states which make adjustments to keep up with rising inflation (i.e. Washington), the increase is automatic. In 11 other states and the District of Columbia, the minimum wage is being raised as a result of new laws approved by the legislatures or by vote of referendum. To assist you in determining which states have raised the minimum wage and what the minimum wage is in those states, the U.S. Department of Labor provides an interactive map and state-by-state report (available here), which employers can use to determine the applicable minimum wage in a state. Also, as previously reported in this blog (available here), the new minimum wage for federal contractors and subcontractors is $10.10 as a result of an interim final rule issued on December 15, 2014.
OSHA Reporting Requirements: Beginning January 1, 2015, employers covered by the Occupational Safety and Health Administration ("OSHA") are required to report all work-related fatalities within eight hours, and all inpatient hospitalizations, amputations and losses of an eye within 24 hours. Previously, employers were required to report all workplace fatalities and when three or more workers were hospitalized in the same incident. Employers may report these serious incidents to OSHA by calling the nearest OSHA area office during normal business hours (list available here); calling the 24-hour OSHA hotline at 1-800-321-OSHA (6742); or reporting online here.
Construction contractors and subcontractors with contracts covered by the Wage Rate Requirements (Construction) Statute (formerly known as the Davis-Bacon Act) will be required to pay employees no less than $10.10 per hour. The Federal Acquisition Regulatory Council on December 15, 2014 published an Interim Final Rule and request for comments on a proposed rule to implement Executive Order 13658, which President Obama issued on February 12, 2014. The Rule establishes a new minimum wage covering services in construction contracts of $10.10 per hour, which will be adjusted annually by the Department of Labor. The Rule does not excuse a contractor’s non-compliance with any applicable federal or state prevailing law or any applicable or municipal ordinance establishing a minimum wage higher than the minimum wage established by the Executive Order.
As previously reported, the Harmon Tower, a new unfinished building located on the Las Vegas strip purportedly had such substantial structural defects that it was slated to be demolished. Read our previous blog post here. Seattleites are well-acquainted with new buildings being razed before their time. The McGuire Building, a 25-story apartment in Belltown built in 2001, was taken apart piece-by-piece in 2011 and 2012 due to corroding post-tension rods throughout the concrete structure.
Since December 2013, the tunnel boring machine ("TBM") known as "Bertha," built by Hitachi Zosen Corp. in Osaka, Japan, has been stuck under Seattle's waterfront about 1,000 feet from where it began. We have previously updated our readers on Bertha's progress with posts, including, STP’s Plan to Fix Bertha, Bertha and Brenda, and Big Bertha Stuck. As background, Bertha is the TBM digging the $2 billion tunnel designed to replace the aging Alaskan Way Viaduct that was damaged in the 2001 Nisqually earthquake.
One of the most common and avoidable mistakes made by construction contractors and subcontractors involves the execution of overly broad "partial" lien release documents in order to receive progress payments. Typically, the partial release document provides that the party receiving payment releases all claims of any type arising out of work performed through the end of the monthly payment period. While, at first blush, this may seem to be a reasonable and innocuous request in order to receive payment for work performed during that month, this type of release also has the unintended effect (from the contractor's perspective) of releasing the contractor's claims for work performed prior to the end of the month, but for which no payment has been received, such as pending change orders or unpaid retainage.
As discussed in a previous post on November 3, 2014, revisions to the Disadvantaged Business Enterprise (DBE) regulations in the works for over two years went into effect. In addition to the revisions to the application forms and size standard discussed, there were also changes focusing on ownership, control, appeals, and good faith efforts.
Dispute Review Boards ("DRB") - sometimes referred to as Dispute Resolution Boards - are creations of the construction industry. DRBs were developed by predominantly non-lawyer construction professionals who were dissatisfied with the use of arbitration and litigation to resolve construction disputes.