Bill Would Impose Significant Apprenticeship Requirements on New Jersey Contractors

Russell McEwan | Littler Mendelson PC | January 7, 2019

On December 17, 2018, the New Jersey Legislature paved the way for a game-changing prerequisite for N.J. public works contractors. The State Assembly and Senate passed Assembly Bill A-3666 and forwarded it to Governor Murphy for his signature. If signed into law as is expected, the bill—which would impose new apprenticeship and training requirements on public works contractors—would be among the most restrictive of its kind in the country. Governor Murphy has until the end of January to sign the legislation, which would become effective 90 days thereafter.

What Are the New Contractor Obligations?

The bill, which blazed its way through the lawmaking process, would require a contractor to certify its participation in a U.S. Department of Labor (DOL)-approved apprenticeship program in order to obtain or renew its public works contractor registration certificate. Further, apprenticeship programs would have to include training for every classification of worker a contractor employs on a public works jobsite. Thus, if a contractor employs workers in a single job classification, participation in a program limited to just that one classification would suffice. If, however, a contractor employs workers in multiple classifications on a covered job site, the contractor would have to certify participation in an apprenticeship program that encompasses each and every such classification.

It is anticipated that many of the state’s 10,000+ registered contractors do not currently participate in a DOL-approved program, and would not therefore be able to register/renew their public works contractor registration certificates. Instead, only those contractors that participate in a DOL-approved program (whether through or in conjunction with a trade association or a labor union) or that maintain their own apprenticeship program will be able to obtain and/or renew their public works contractor registration certificates. It is important to note that there is nothing in the law to suggest that currently registered contractors will be precluded from continuing to perform prevailing wage work while their current registration is in effect. However, once the new law is in effect, contractors will not be able to obtain or renew their registration unless they are able to certify that they participate in an apprenticeship program.

What Are a Contractor’s Options?

Contractors that are not currently participating in an approved apprenticeship program but wish to remain eligible for prevailing wage work have several options. First, a contractor could sign with a building trades union. Most of the building trades unions operating in New Jersey maintain DOL-approved apprenticeship programs. There are, of course, implications beyond apprenticeship that accompany union relationships. Before signing with a union, contractors are advised to seek counsel to fully understand the obligations that go along with forming a collective bargaining relationship.

Second, contractors could team up with an association/industry group that maintains DOL-registered apprenticeship programs. These groups are currently few in number in New Jersey, although the pending law has spurred a flurry of activity. Existing groups like the Associated Builders & Contractors are reported to be awaiting final approval on an apprentice program covering multiple classifications, and new groups with similar plans are rumored to be on the horizon.

Third, contractors can create their own DOL-approved apprenticeship program. While maintaining an apprenticeship program is frequently the option offering the greatest flexibility for an individual contractor, those that opt to go this route must be prepared to navigate the process of designing and registering a program, and to comply with mandatory record-keeping and other requirements once their program is operating.

In the interim, contractors whose public works contractor registration certificates expire in the first quarter of 2019—before the law’s likely effective date—are encouraged to renew at the earliest possible time (i.e., 30 days prior to expiration). Where possible, contractors should consider renewing for a two-year period. By doing so, they may be able to buy time until their next renewal to address the apprenticeship issue.

Floating on Assumption: Navigating Construction Project Float Ownership

Whitney Judson | International Law Office | January 7, 2019

Introduction

Construction project schedules are oftentimes the source of many disputes between project owners and contractors. These disputes notoriously evolve into the subject of litigation and arbitration claims that assign fault for delayed project completion to one party or another. A party finding itself in such a scheduling dispute involving concurrent delays will need to demonstrate that the delays it caused did not affect the project completion date, while delays caused by the other party did impact the schedule. One way to prove this is to effectively evaluate the float on the project schedule and to make a careful evaluation of the circumstances surrounding each delay, including which party had the right to absorb any available project float. Oftentimes when delays occur and float is available, each party assumes it has a right to absorb the float. There are sensible reasons why one party may assume entitlement to float and subsequent exemption from liability for damages related to its delay. However, mere assumptions about float ownership—as reasonable as they may seem—could lead to unfavorable outcomes.

Project float is defined as “[t]he amount of postponement which a path of activities can experience without delaying the overall project completion.” Titan Pacific Const. Corp. v. U.S., 17 Cl .Ct. 630, 636 (1989). See also MW Builders, Inc. v. United States, 134 Fed. Cl. 469, 478 n.5 (2017) (“The term ‘float’ refers to the amount of time an activity may be delayed before affecting the critical path of the project”). Ownership of float is critical to a concurrent delay analysis and has a strong impact on whether a contractor has a legal right to delay damages or time extension of a project.

Contractor-owned float

Contractors sometimes assume that they should own and control any float on a project schedule. Many construction contracts require the contractor to control means and methods in the most efficient manner, including effectively sequencing work on the project. Having the ability to control project sequencing and coordination assists the contractor in creating the schedule and estimating the completion and float times for all activities. When delays later interrupt the schedule, the contractor may be responsible for using means and methods to efficiently make adjustments so that the project may nonetheless finish on time when possible. The contractor could arguably also use any available project float for schedule recovery.

For this reason, some construction contracts may include clauses granting the contractor float ownership. Such clauses could mean that owner-requested changes to activities that are not on the critical path require the owner to grant an extension to the contract completion date, despite the availability of unused float. If the contractor is contractually granted ownership of float, the contractor may argue that it has the right to use the float however it wishes—including reserving the float as a safety net for any contractor-caused delays, or conserving the float in an effort to complete the project ahead of schedule.

It is not completely safe to assume however, that a contract clause granting the contractor ownership of project float will fully safeguard the contractor from being affected by owner-caused delays. A contractor’s responsibility to control the means and methods of the project likely involves the contractor’s good faith effort to mitigate delays. If the owner causes a delay, the contractor owning float nonetheless may have a duty to adjust the work and schedule to mitigate the effects of that delay. The owner may likely be responsible for any costs related to the adjustment of the work and the mitigation of the delay without use of available float, but the contractor is still affected by an owner’s delay because it may have to work to implement the same scheduling and sequencing adjustments required when the owner simply utilizes available float.

Owner-owned float

Owners sometimes assume that they should own all available project float. After all, the owner is financing the project and owns and takes responsibility for its construction and completion. If a contract specifies that the owner of a project controls the float, the owner may argue that it has the right to direct the contractor to make non-critical changes without being required to grant the contractor an extension of the completion date. The owner may also argue that in certain circumstances, it has the right to use the float to excuse itself for its own delays. If the length of the owner-caused delay does not overrun the project float, it likely will not affect the critical path. In this situation, the owner may not be required to extend the project completion date, despite being responsible for project delays.

A contract clause granting float ownership to a project owner, however, may not shield the owner from the obligation to compensate the contractor for any damages that the owner’s non-critical delays cause. For example, an owner who uses float to make a change to a non-critical activity that requires additional manpower or materials may not be required to extend the contract completion date, but likely will be required to compensate the contractor for any costs associated with implementing the owner’s requested change.

Project-owned float

If the contract does not specify which party owns the float, the float is typically assumed to be owned by the project itself. This means neither the owner nor the contractor has exclusive control over the float. The float is instead consumed by whichever party needs it on a “first come, first served” basis. Here are two examples with different outcomes that illustrate the implications of shared float: A contractor builds a schedule indicating that glass window installation on a project carries 32 days of float before it begins to affect the critical path. The owner, at some point, decides to implement circular windows on the project, rather than keeping the original square-shaped design contemplated in the project schedule. This increases the amount of time needed to install the glass windows on the project. The contractor determines that cutting circular windows takes 29 days longer than cutting squared windows. The owner’s change therefore causes a delay and consumes all but 3 of the 32 days of float available for window installation. This delay is clearly the fault of the owner, but does not require the owner to grant a contract extension because the delay does not affect the critical path of the project, as the owner had a right to use available project float to offset its delay.

Conversely, if the contractor experienced 5-day delay in the staining of the glass for the windows prior tothe owner requesting a change in the shape of the windows, the contractor has the right to use 5 of the 32 days of float, leaving 27 days of float remaining. The owner’s subsequent 29-day circular window change would then overrun the available float and affect the critical path, requiring the completion date to be extended by 2 days. In each example, the first party to use the float is granted priority of ownership. If the other party is responsible for a subsequent, additional delay to the same activity on the schedule, it is only allotted whatever amount of float is remaining. Delays running beyond the remaining float may require a contract extension or delay damages.

Comment

Successfully staking claim on project float may excuse a party’s delay in a concurrent delay dispute. This should not be done by reliance on assumptions of float ownership. Rather, the parties should engage experienced counsel to negotiate a contract clause that clearly and unambiguously assigns ownership of project float. Such clauses may not offer unbridled use of non-critical delays to the float-owning party, but they allow the parties greater control over the possibilities of legal outcomes and provide a clear understanding between the parties of how float is to be utilized. If the parties do not specify float ownership, shared float is assumed and the parties then lose the ability to specify how the float is allocated. When the parties share project float, they must take care to expeditiously exercise their right to it, as float is consumed on a first come, first served basis. Simply assuming that the amount of float indicated on a project schedule will be available at any given time could have grave consequences. Speaking with legal counsel experienced in construction law matters, including scheduling and delay issues, is helpful to any party who wishes to proactively address float ownership issues and avoid or limit future liability for delays on a construction project.

Naughty or Nice. Contractor Receives Two Lumps of Coal in Administrative Dispute

Garret Murai | California Construction Law Blog | January 7, 2019

So, how were your holidays? Hopefully you were good and didn’t receive a lump of coal from Santa. For one contractor, 2018, wasn’t such a good year. And as its name, Black Diamond, suggests, it did indeed receive a black diamond from the courts. Actually, two of them.

Contractors’ State License Board v. Superior Court (Black Diamond No. 1)

In Contractors’ State License Board v. Superior CourtCourt of Appeals for the First District, Case No. 1154476 (October 11, 2018), the Contractors State License Board (“CSLB”) brought disciplinary proceedings against Black Diamond Electric, Inc. (“Black Diamond”), a C-10 Electrical Contractor, for violating: (1) Labor Code section 108.2, which requires individuals performing work as electricians to be certified; and (2) Labor Code section 108.4, which permits uncertified persons seeking on-the-job experience to perform electrical work so long as they are under the direct supervision of a certified electrician.

The CSLB filed an accusation against Black Diamond in March 2017. In response, Black Diamond filed a “Notice of Defense” claiming that “the work its employees were performing required neither certification nor supervision” and that the CSLB’s interpretation of the applicable Labor Code sections were erroneous. In its request for relief, Black Diamond sought a “permanent injunction barring any disciplinary action for violation of Labor Code sections 108 et seq.”

In April 2018, an administrative law judge heard the accusation and found that Black Diamond had violated the Labor Code by having individuals perform electrical work without certification or direct supervision by a certified electrician and recommended revocation of Black Diamond’s contractor’s license. The CSLB Registrar adopted the proposed decision, but before the decision became effective, Black Diamond asked the CSLB to stay entry of the decision so it could file a motion for reconsideration. The CSLB granted the request.

Meanwhile, while the administrative proceeding was pending, Black Diamond filed a complaint in the Contra Costa County Superior against the CSLB seeking a declaration that the CSLB was “knowingly enforcing Labor Code § 108, et seq. illegally” and seeking a “permanent injunction enjoining and restraining the [CSLB] from seeking to enforce the ‘direct supervision’ provision of Labor Code section 108.4(a)(3) until the [State Legislature] provides the [CSLB] with further clarification.”

In response, the CSLB filed a demurrer to the complaint arguing that the Superior Court lacked jurisdiction because Black Diamond had not yet exhausted its administrative remedies in the parallel administrative proceeding. The trial court overruled the demurrer on the ground that Black Diamond’s complaint for declaratory relief was “not limited to the pending administrative proceeding, but is based on the [CSLB’s] interpretation of [Labor Code] section 108 and how the [CSLB] will apply its interpretation to [Black Diamond] going forward.” The CSLB appealed.

On appeal, the First District Court of Appeal overturned the decision of the trial court finding that the Administrative Procedure Act permitted Black Diamond to object to an accusation not the ground that it “does not state acts or omissions upon which the agency may proceed” and to “[o]bject to the form of the accusation . . . on the ground that it so indefinite or uncertain that the respondent cannot identify the transaction or prepare a defense.” The Court of Appeal also noted that the Administrative Procedure Act allows Black Diamond to conduct discovery and to move to compel discovery if necessary.

As such, held the Court of Appeal, “[s]ince the relevant statutes provide [Black Diamond] with an administrative remedy, it must first exhaust that remedy before it may seek redress in court.”

Lump of coal number one.

Contractors’ State License Board v. Superior Court (Black Diamond No. 2)

In Contractors’ State License Board v. Superior Court (2018) 23 Cal.App.5th 125, while Black Diamond’s action with the Contra Costa County Superior Court was pending, Black Diamond served interrogatories and a request for production of documents on the CSLB and noticed the deposition of David R. Fogt, the Registrar of the CSLB.

In response, the CSLB filed a motion for protective order to prevent deposition, arguing that: (1) the deposition was improper before the court heard the CSLB’s demurrer; (2) the deposition was noticed for the purpose of harassing Mr. Fogt and was burdensome because the deposition sought to depose Mr. Fogt on the definition of statutory terms, which are issues of law, not fact; and (3) the deposition notice was improper because top government executives are normally not subject to deposition. In opposition to the motion, Black Diamond argued that it’s deposition notice was permissible.

In February 2018, the trial court issued a tentative ruling denying the CSLB’s motion for protective order finding that Mr. Fogt “has direct factual information and that he was directly involved in issues related to this case before his appointment as Executive Officer.” The CSLB appealed.

On appeal, the First District Court of Appeal noted that “[t]he general rule in California and federal court is that agency heads and other top governmental executives are not subject to deposition absent compelling reasons” unless: (1) “the deposing party . . . show[s] that the government official ‘has direct personal factual information pertaining to material issues in the action . . . ” (emphasis in original); and (2) “the deposing party  . . . also show[s] “the information to be gained from the deposition is not available through any other source.”

In response to Black Diamond’s argument that it was not seeking to depose Mr. Fogt in his executive capacity, but rather, was seeking  information that Mr. Fogt had gained during his earlier career with the CSLB, the Court of Appeals held that “[I]t does not matter that [Black Diamond] claims to seek information Fogt gained before he was elevated to his current position. The rule prohibiting the deposition of agency heads and other highly placed public officials is grounded on the concern that such proceedings will consume the officials’ time and hamper them in the conduct of government business.”

Further, held the Court of Appeal, Black Diamond’s purported purpose of deposing Mr. Fogt “to inquire about the CSLB’s] prior administrative interpretations fo the statute, and prior applications to it, that occurred by his direction, through his authority since his appointment as Enforcement Chief,” sought information on issues of law alone, thereby precluding his deposition, not facts. “The only information relevant to the [CSLB’s] interpretation of the Labor Code will be the text of the statutes, legislative history, and perhaps official administrative interpretations,” explained the Court, and “[Black Diamond] is not permitted to ask agency officials how they personally interpret statutes administered by the [CSLB], since their personal views are irrelevant to the purely legal issue of statutory construction.”

Lump of coal number two.

Proposed Changes to EPA’s Stormwater Permit for Construction Sites

Robinson & Cole | January 2, 2019

The Environmental Protection Agency (EPA) recently announced its intention to modify the 2017 National Pollutant Discharge Elimination System (NPDES) General Permit for Construction Stormwater Discharges (2017 CGP). EPA implements the 2017 CGP in states and territories that have not yet received authorization to implement the NPDES Stormwater program. Primarily, this includes New Hampshire, Massachusetts, Puerto Rico, and the District of Columbia.

EPA’s proposed modifications to the 2017 CGP are intended to be narrow and not affect the underlying, substantive requirements of the permit. The proposed modifications include: changes to the definition of “operator;” division of permit responsibilities when there are multiple operators at a single construction site; and alignment with EPA’s Effluent Limitations Guidelines and New Source Performance Standards for Construction and Development (C&D Rule). Elements of the 2017 CGP that would not change include the eligible coverage area (construction sites that take up at least an acre, or less than an acre if they are part of a larger community plan of development), the number or type of entities eligible to be covered, and the CGP’s expiration date (February 16, 2022).

Definition of Operator

The 2017 CGP includes parenthetical examples of the parties that EPA may consider an “operator” for purposes of complying with the terms of the permit. The parenthetical examples, while included in an attempt to provide clarity, instead have caused confusion. EPA proposes to remove the parenthetical examples, thereby allowing parties to rely solely on the substantive definition of operation for determining whether they should seek permit coverage.

Multiple Operators

EPA’s proposal would remove references to joint and several liability from the 2017 CGP. EPA views these references as an inaccurate explanation of what the permit compliance duties are for multiple operators that share implementation responsibilities under the permit. In addition, EPA’s proposal would clarify that operators that divide responsibilities do not have to duplicate permit-related functions to be in full compliance with the permit if one operator is appropriately implementing the requirement for the rest of the operators.

EPA provided the following example: If Operator A relies on Operator B to satisfy its permit obligations, Operator A does not have to duplicate those permit-related functions if Operator B is implementing them for both operators. However, Operator A remains responsible for permit compliance if Operator B fails to implement any measures necessary for Operator A to comply with the permit.

C&D Rule Alignment

To better align the 2017 CGP with the C&D Rule, the EPA proposes three changes:

  • Add language in an effort to convey more precisely that dust control is important for preventing sediment from being discharged in stormwater.
  • Streamline language to more precisely focus on controlling stormwater discharges to minimize erosion at discharge points.
  • Clarify that “minimization of exposure” is not required where the exposure to precipitation and stormwater will not result in a discharge of pollutants or where exposure of a specific material or product poses little risk of stormwater contamination (such as final products and materials intended for outdoor use).

The 2017 CGP will remain in effect as it is currently written while EPA receives public comment on its proposed modifications. Comments must be submitted to EPA no later than January 28, 2019.

Effective Documentation Techniques for Construction Project Participants

Michael Kaney | Shutts | December 28, 2018

WHY DO WE NEED TO DOCUMENT PROJECTS IN THE FIRST PLACE?

Project documentation can help avoid claims or litigation altogether.  Good and timely communication can mitigate or eliminate surprises between parties.  A clear understanding of what transpired during a project can prevent claims from turning into costly litigation.

Project documentation helps answer the important question of: “who knew what, when?”  If an issue is well documented then there is very often no reason to disagree and any questions that arise will generally have an answer that is supported by a paper trail of documentation.

The outcome of construction litigation is determined by the FACTS of what occurred at or on the project.  The facts can be shown through accurate and up-to-date documentation.  Thus, effective project documentation can lower litigation costs or prevent litigation altogether.

SOME SUGGESTED METHODS OF PROJECT DOCUMENTATION

Daily Reports

Daily reports can be essential for supporting and defending pre-litigation and litigation construction claims.  These reports should be created contemporaneously with the work that is completed each day, meaning, these reports should actually be daily reports.  It is much easier to recall what happened on a particular day the day it occurred as oppose to trying to piece the puzzle together a few days later.  Daily reports should become a routine.

Daily reports can consist of some of the following items:

  • Workforce
    • Who worked on the project that day?
    • Who are they employed by? Are they covered by insurance?
    • What are their daily duties/tasks?
    • Were those tasks completed? If not, why?
    • How many hours were workers present on the job site?
  • Equipment
    • What equipment was used on the job site that day?
    • Who owns the equipment? Is the equipment owned by the contractor(s) or was it rented?
    • What was the purpose of the equipment?
  • Events/Jobs
    • What events were scheduled for the day? Were they completed?
  • Weather
    • What was the weather on the given day?
    • Were there any delays due to weather? How long were the delays and will that affect the overall completion time of the project?
  • Time and Date
  • Visitor and/or Delivery Log
    • Who visited the job site? What was their purpose of visiting?  How long did they stay?
    • Were there any deliveries to the job site? If so, what were they and what purpose did the materials serve?

Meeting Minutes

Meeting minutes should be a complete reflection of every topic or issue discussed during the meeting.  The overall purpose of the meeting should also be reflected.  This ensures that anyone reading the minutes thereafter that was not in attendance has a comprehensive understanding of what transpired during the meeting.  The minutes should be inclusive insofar as they capture all comments from both sides on any particular issues or topics that were discussed.  Accuracy and completeness are the goals of documenting meeting minutes.

E-Mails / Text Messages

How are you currently set up?  One server?  Multiple servers?  Employees use personal email?  E-discovery issues!!  Text?  Company phone or personal?

All emails are subject to discovery and turnover to the other side in the unfortunate event of a lawsuit.  E-mails and text messages should only be sent with the understanding that they may become public in litigation at some point.  I know that is scary.  What is your email retention program?  Do you print and file your emails?  It may be useful to print and store hardcopy emails just like you should store these electronically in whatever email retention program you have.

Emails are useful as a form of contemporaneous communication.  Emails are just as important as hard copy correspondence and thus must be given the same due diligence as any form of hard copy communication.

Schedules

Schedules allow contractors to provide the owner of a project with a timeline for when specific work will be completed.  Schedules serve as guideposts for all parties involved in a project.  A schedule should set out attainable deadlines that give each party the ability to understand what is occurring at any given point on a project.  Schedules are a record of what has happened and what will happen on a project and should be used as a contemporaneous communication between the owner and contractors.

Miscellaneous

  • Daily reports in the version of a checklist can help save time.
  • Electronic checklists on a phone or tablet can also save time and ensure that information is stored legibly as opposed to handwriting a daily report.
  • Take pictures! Pictures capture the facts, evidence, and events at a project.  Be sure to note the time and date the picture was taken.

This list is not exhaustive or all encompassing.  Rather, it is a good starting point for construction project participants to ensure they are documenting their projects in a way that can hopefully prevent costly litigation in the future.