Legal

Conflict in Court Over Income Recognition for Construction Contractors

The 9th Circuit Court’s review of how construction contractors should recognize income had a somewhat surprising outcome. The key question being considered was: When should developers recognize income under the completed contract method? Is it when the entire project is complete, is it on percentage of completion, or is it upon the sale of each individual home sold?  

Shea Homes, which used the completed contract method to account for its planned development communities, claimed that final completion and acceptance under Reg. 1.460-1(c)(3) did not occur until the last road was paved and the final bond
was released. However, the Internal Revenue Service (IRS) contended that final completion took place upon the sale of each home.
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Farewell John Hancock: The Emerging Use of Digital Signatures

The law of electronic signatures primarily derives from two statutes: the Electronic Signatures in Global and National Commerce Act 2000 (ESIGN), which governs at the federal level, and the Uniform Electronic Transactions Act (UETA), which governs each state (except New York, Illinois and Washington). Both laws establish that electronic signatures are legal with only a few exceptions.
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Decision Opens the Door to Joint Employer Liability for Contractors

On Jan. 25, the 4th Circuit Court of Appeals dealt a significant blow to the traditional contractor-subcontractor relationship. In finding that a contractor and subcontractor could be considered “joint employers” of the subcontractor’s workers for purposes of the Fair Labor Standards Act (FLSA), the court’s decision has opened a Pandora’s Box of potential wage and hour issues, including claims for overtime pay against contractors and higher-tier subcontractors from the employees of lower-tier subcontractors.
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Before Employees Leave, Protect Your Assets

A review of most construction companies’ financial records reveals their primary value is their owners and employees. Thus, firms have a compelling interest in attracting and retaining skilled and professional labor, as well as avoiding the devastating loss of talent and know-how when they leave or engage in competing businesses. Construction companies that cater to the demands unique to each type of employee will find an edge in the employment marketplace. For instance, to attract older employees, construction companies could consider offering a wide array of tax-advantaged savings and retirement incentives, including health savings accounts, college savings accounts, 401(k) accounts, simplified employee pensions, IRAs and qualified and non-qualified deferred compensation plans. 
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The Power of the Congressional Review Act

For more than a decade, it was common for elected officials on Capitol Hill to say, “the Congressional Review Act (CRA) has only ever been successful once.” However, under the Trump administration, the rarely used CRA has successfully overturned eight overreaching Obama-era regulations. Passed in 1996, the CRA allows new regulations to be overturned by Congress through a joint resolution of disapproval.
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What Merit Shop Contractors Should Expect From the Trump Administration

While controversies over the first nominee for Secretary of Labor slowed implementation of the Trump administration’s labor agenda during the first 100 days of the president’s term, construction industry leaders are already seeing a sharp contrast with the anti-business agenda of the Obama administration, as federal labor agencies have begun to review and in some cases retract burdensome regulations imposed by previous officials. 
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ICE Is Coming for Undocumented Workers: How to Prevent Corporate Frostbite

Undocumented workers and the businesses that knowingly or unknowingly employ them are coming under the microscope. Just looking at recent headlines, the president has implemented two immigration bans, is challenging so-called “Sanctuary Cities” that do not help federal immigration enforcement, has instructed government agencies to become more aggressive in enforcing immigration laws and is already reviewing proposals to strengthen the border wall. Plus, the E-Verify program for verifying worker status is likely to become mandatory.
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Resolving Disputes and Negotiating Contracts Without Breaking the Bank

Legal services are notoriously expensive, yet they are necessary to protect companies and their owners, assert legal rights, recover payment for construction services and defend against meritless claims. Attorneys are especially useful in developing and negotiating contracts and significant change orders, setting up corporate structures to minimize and maintain risk, resolving disputes through compromise or litigating them to judgment. From a construction executive’s viewpoint, legal services are like any other service: They must be managed with the goal of obtaining the most value for the lowest cost.
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Congress, States Consider Legislation to Prevent PLA Mandates

On March 14, Sen. Jeff Flake (R-Ariz.) introduced the Fair and Open Competition Act (S. 622) to prevent federal agencies and recipients of federal funding from requiring contractors to sign controversial project labor agreements (PLAs) as a condition of winning federal or federally assisted construction contracts. Rep. Dennis Ross (R-Fla.) introduced a companion bill (H.R. 1552) in the U.S. House of Representatives that was reported favorably out of committee March 28.
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Three Ways for Contractors to Mitigate Risk and Lower Insurance Premiums

Many business executives believe insurance brokers have control over the quotes they provide, but that’s not the case. Insurance carriers control the price, and they provide the best rates to companies that proactively manage their risk. The less risky a contractor appears, the fewer claims it’s likely to have and the “safer” the company looks. Therefore, the lower the premium they are likely to get.

Here are three ways general contractors can mitigate risk and make their companies more desirable to insurance carriers.
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Dissecting the House Tax Blueprint

In June 2016, as part of Speaker Paul Ryan’s “Better Way” initiative, the House Ways and Means Committee rolled out its “Blueprint” for tax reform. This broad overview outlined Republicans’ talking points for the campaign trail and the anticipated showdown with the Clinton White House, if not a Democratic Senate majority. 

After a false start with the ill-fated Camp Draft, expectations were tempered for legislative action. The topline items read as a veritable wish list of pro-growth provisions that were hailed by tax coalitions and trade groups alike. The tradeoffs were largely ignored, with any prospective pushback muted by dismal electoral expectations. After an initial burst of coverage, the Blueprint receded as Congress left town, leaving all eyes trained on an increasingly surreal presidential race. 
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Risk Management in a 24-Hour Society

Builders and developers can’t escape scrutiny when confronted with government investigations, workplace accidents, dissatisfied customers and employee complaints.

Reputation in the construction field is a crucial business quality. It’s paramount to ensure a sufficient risk management strategy is in place, and enhanced media exposure means non-traditional risk management actions are needed to prepare for and respond to challenges.
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Legislation Introduced To Repeal Davis-Bacon Act

Rep. Steve King (R-Iowa) has introduced legislation, H.R. 743, in the U.S. House of Representatives to repeal the prevailing wage requirements of the Davis-Bacon Act. The bill now awaits passage by the House Committee on Education and the Workforce.

ABC has long supported full repeal of the archaic 85-year old Davis-Bacon Act. The prevailing wages from the law are administered through an unscientific and fundamentally flawed survey process by the U.S. Department of Labor, and the Congressional Budget Office has estimated that the Davis-Bacon Act will raise federal construction costs by $13 billion between 2018 and 2026. 
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Executive Insights

Nine experts offer advice on what contractors need to know about obtaining additional insured coverage, how to keep from overextending in the potential burst of construction activity under the Trump administration, insights on contractors purchasing surety bonds directly, trends in owner expectations for design-build projects and the benefits of the surety bonding prequalification process. 
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Wisconsin Senate Approves Bill to End PLA Requirements

State senators in Madison, Wis., recently approved a bill preventing local governments from requiring contractors to work with unions on taxpayer-funded building projects. Republicans who control the Legislature contend ending the use of project labor agreements (PLAs), which establish wages and other conditions for certain projects, will protect taxpayers. The bill, which passed on a 19-13 vote, now heads to the state Assembly.
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Congress Votes to Permanently Block ‘Blacklisting’ Rule

Congress has passed legislation (H.J. Res. 37) that will block implementation of the Obama administration’s Fair Pay and Safe Workplaces Executive Order 13673, commonly referred to as “blacklisting,” through the Congressional Review Act. The House approved H.J. Res. 37 with a bipartisan vote of 236-187 and the Senate passed the measure by a vote of 49-48.
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A Potential Gap in Indemnity Coverage

Commercial contracts in the construction industry generally contain indemnity provisions in which one party (the indemnitor) agrees to assume the liability of the other party (the indemnitee) as a result of personal injury or property damage. Historically, one party indemnifies the other regardless of fault—meaning the indemnitor assumes liability for all damage to its own property and people, regardless of who caused the damage. To the extent allowed under state law, this obligation also can include indemnity for damage caused by the sole negligence of the indemnitee.  
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Employment Agreements Mitigate Construction Litigation Concerns

Employers often only require employees serving in a management position to execute employment agreements with provisions largely focused on competition, disclosure and solicitation. However, a more expansive use of employment agreements should be considered, particularly given the increased resort to litigation by all levels of employees utilizing the provisions of the Fair Labor Standards Act (FLSA).  

The FLSA essentially requires employers to properly compensate non-exempt employees for their actual hours worked at a regular rate for their first 40 hours worked during each week, as well as at an overtime rate of time and a half for every hour worked beyond the initial 40. With vastly increasing regularity, employees have been initiating litigation against employers in an effort to recover additional compensation for overtime hours. Employers utilizing a job bonus system for compensation, with or without an hourly rate of compensation, are particularly targeted, as are employers that fail to collect or maintain accurate time records. 
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Final Rule Revises EEO Framework for National Apprenticeship Act

The U.S. Department of Labor’s Employment and Training Administration issued a final rule updating the equal employment opportunity regulations that impact the National Apprenticeship Act of 1937. Current regulations prohibit discrimination in registered apprenticeship programs on the basis of race, color, religion, national origin and sex. An amendment to 29 CFR Part 30 updates the equal employment opportunity standards to include age (40 or older), genetic information, sexual orientation and disability among the protected base.
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Kentucky and Missouri Become Right to Work States

Kentucky and Missouri recently passed legislation that prevents workers from being required to join a labor union in order to accept or maintain a job, making them the 27th and 28th Right to Work states, respectively.
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Injunction Blocks Overtime Rule

Responding to a legal challenge filed by Associated Builders and Contractors (ABC) and a coalition of business groups, the U.S. District Court for the Eastern District of Texas issued a preliminary injunction blocking the U.S. Department of Labor’s final overtime rule from taking effect Dec. 1. 
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Court Blocks 'Persuader' Rule

In mind-November, the U.S. District Court for the Northern District of Texas found the U.S. Department of Labor’s “persuader rule” to be unlawful and blocked it from taking effect.
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Curb Discovery Costs With a Tailored Arbitration Clause

Arbitration is premised on using arbitrators with knowledge of the subject matter to conduct more efficient proceedings. A lot of the uncertainty and expense can be eliminated with a well-crafted arbitration clause.  

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Trump Administration Promises Regulatory Relief

In November, Democrats netted a total of six seats in the U.S. House of Representatives and two seats in the U.S. Senate, falling short of the predictions of many political experts. Additionally, more than 200 candidates endorsed by Associated Builders and Contractors (ABC) in the House and 21 in the Senate were elected or re-elected, reflecting a better than 90 percent candidate success rate for those ABC endorsed. 
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Revised I-9 Form Now Available; Required by Jan. 22

The Department of Homeland Security and U.S. Citizenship and Immigration Services (USCIS) have released a revised I-9 Form that employers must use beginning Jan. 22, 2017, to verify all new hires' employment eligibility, including U.S. citizens and non-citizens. Employers who fail to use the new form on or after Jan. 22 may be subject to penalties.
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Don’t Wait Until It’s Too Late to Understand Protective E&O Policies

Protective E&O is an essential insurance policy where perceived concerns about the amount and adequacy of the design firm’s professional liability insurance can be questioned in relationship to the complexity and size of the project. Brokers and insureds need to be aware of several seemingly innocuous clauses contained in many of these policies.
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LEED Liability: Construction Contract Concerns for Green Building Projects

Despite the continuous narrative tied to green building, construction contracts have simply not kept pace, and most form contracts or standard clauses do not address contractual issues specific to sustainable projects. 
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Medical and Benefits Costs Are Top Concerns

Fifty-six percent of construction businesses surveyed for the 2016 Travelers Risk Index report they worry most about medical cost inflation and legal liability, followed by rising employee benefits costs and broad economic uncertainty. Rounding out the top eight construction business concerns are attracting and retaining talent, employee safety and workplace violence, legal and regulatory compliance, and cyber risk and data breaches.
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How Does Safety Impact Surety Bonding?

When safety issues become a factor in a contractor’s ability to finish a project, the surety starts to question what other issues might be out there that could have a negative impact on the contractor’s ability to complete the project.
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Surety’s Impact on Emerging Trends in Public Construction

Given the choice of security requirements, the surety market continues to provide the product with the best combined benefit for contractors and their obligee in today’s evolving construction and surety markets. 
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Preliminary Injunction Granted Against ‘Blacklisting’ Final Rule

On Oct. 24, the U.S. District Court for the Eastern District of Texas issued a nationwide preliminary injunction that prevents the Federal Acquisition Regulatory (FAR) Council from implementing the Fair Pay and Safe Workplaces final rule, commonly referred to as the blacklisting rule, which was scheduled to go into effect on Oct. 25.
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Surety Industry Advocates for Inclusion of Bonds on Federal and State P3s

Even though procurement methods have evolved—including the use of P3s—construction remains a risky business, making the protections that surety bonds provide for taxpayers’ investments and the payment guarantees for subcontractors and suppliers just as relevant and important in P3s. 
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How Do the Employee Benefits You Offer Aid Retention and Curb Turnover?

We could have the best programs in place, but if our employees can’t navigate the plan, it hurts them and our bottom line. Our internal benefits team provides education, claim assistance and even billing negotiations. 
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Surety Bonds, LOCs and Parental Guarantees: What’s the Difference?

To address the security need, owners and contractors can be faced with a choice between traditional surety bonds and letters of credit (LOC). Additionally, parental guarantees are often included as a supplement or substitute for the security. These alternatives have unique implications that should be considered by contractors and owners when choosing the best path.
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Sureties Hungry for Business Across Market Sizes

Construction Executive surveyed top leaders in the surety bonding industry to create a big-picture view of the current state of the market. Overall, the news is positive for contractors. Experts say construction and surety market cycles have been strong, creating increased competition. 
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Preparing for the First Contractor-Surety Meeting

Successful contractors spend time and effort establishing their first surety company relationship. Contractors that want faster answers and the benefit of the doubt from their surety in a delicate situation will always welcome face-to-face visits with their professional agent and underwriter. 
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Inside the Mind of a Surety Bond Underwriter

It is truly amazing how much risk contractors take on a daily basis for a seemingly modest return. Likewise, for the surety underwriter—which is, in fact, guaranteeing the contractor’s work—a tremendous amount of trust is involved.
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Executive Insights

Eighteen surety experts offer advice on how contractors can take their bonding capacity to the next level, how character impacts bondability, the cash management techniques contractors should employ to be successful as the economy recovers, and the bonding implications as the government promotes joint ventures as a way for small businesses to participate in federal projects.


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Beyond the Basics: Three Overlooked Bonds to Keep Projects on Task and on Target

There are numerous types of bonds to consider depending on the size and scope of a project. Don't forget about wage and welfare bonds, transactional commercial surety bonds and subdivision/completion bonds.
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An Overly Soft Credit Environment Can Adversely Affect Small Contractors

Fast bond products or “quick issue” bonds have sped up the process of obtaining a bond for smaller projects. Quick turnaround and minimal underwriting—sometimes solely based on credit score—allow for speedy answers when time is of the essence. That’s the upside. The downside of this softer credit-based underwriting is that the relationship-building and counseling process can suffer. 
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Three Onerous Contract Provisions to Avoid

Contractors must carefully read and study contracts before signing them. While this may seem obvious, it is surprising how often project participants sign agreements containing clauses that a party did not read, did not understand or did not take seriously.
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‘Blacklisting’ Final Rule Takes Effect

Under the new “blacklisting” rule, effective Oct. 25, federal contractors and subcontractors are required to disclose any violations of 14 federal labor laws and OSHA-approved state plans to an Agency Labor Compliance Advisor (ALCA). ALCA will perform an assessment of the violations and make a recommendation to the contracting officer about whether a federal contractor is responsible enough to be awarded a contract covered by this rule. 
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New Overtime Rule Raises Exemption Threshold to $47,476

The Protecting Workplace Advancement and Opportunity Act (S. 2707/H.R. 4773) has been proposed to require the DOL to examine the impact on stakeholders, including the public sector, before implementing any changes to the exemptions. The employer community is expected to redouble its efforts in support of this legislation and other solutions. 
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Technology, Insurance and Personnel Drive Safe Auto Programs

In the following Q&A Travelers offers insight on recruiting qualified commercial drivers and integrating them into a company’s safety culture, as well as the impact of telematics on construction fleets and the insurance products needed to limit financial liability.
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OSHA Delays Enforcement of Anti-Retaliation Provisions in Electronic Reporting Rule

OSHA has delayed enforcement of the anti-retaliation provisions in its electronic injury reporting final rule from Aug. 10 to Nov. 1. Just days before the announcement, Associated Builders and Contractors (ABC), TEXO and a coalition of stakeholders filed a lawsuit challenging the rule’s anti-retaliation provisions, which will limit some forms of post-accident drug testing and safety incentive programs by deeming them to be unlawfully retaliatory.
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Court Blocks DOL’s Final Persuader Rule

The U.S. District Court for the Northern District of Texas issued a nationwide injunction blocking the U.S. Department of Labor from implementing the final persuader rule, keeping it from taking effect July 1. 
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OSHA Finalizes Electronic Recordkeeping Rule

Effective Aug. 10, companies in high-hazard industries (including construction) with at least 20 employees must electronically submit injury and illness information, which OSHA will then post on its website.
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The Value of an Annual Partnering Meeting

The results of the partnering meeting, as it becomes an annual tradition, will prove to be valuable throughout the year, and help to provide a big-picture view of the construction business that otherwise would not be possible.  Read More >

Methods of Obtaining a Stay Pending Another Arbitration

Use of a motion to stay is a more straightforward method of obtaining a stay. However, a preliminary injunction can get the attorney in front of the court, and it could be a quick or last option to stay an arbitration.  Read More >

Assignment Issues Implicated in Contract Clauses

In theory, the purpose of an anti-assignment clause is to protect a party’s right to choose who it works for. Most industry professionals believe such a clause prevents assignment and conduct their affairs accordingly. If the goal is to actually prevent an assignment while a contract is executory, the clause needs to specifically state that any assignment in violation of the agreement is void and unenforceable.
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