Vol. 23, No. 10
(518) 869-9800
Inside this Edition: Two New Bills On ESSA’s Legislative
Agenda, President’s Message, Without Notice,
Transfer Of Accounts Receviable Held Not To Be a Trust Fund Diversion, New USERRA Posting Requirement, Welcome New
Members, Calendar Of Events, Thank
You To Members For Legal Defense Fund Contributions, Member
Anniversaries
TWO NEW BILLS ON ESSA’S LEGISLATIVE AGENDA (Go
Top)
In recent
weeks, the Empire State Subcontractors Association (ESSA) has been considering
the introduction of two new bills, both regarding issues of significant
importance to subcontractors. One bill
would deal with problems associated with the delegation of design responsibility
to contractors and subcontractors, and the other bill would clear up confusion
as to when the one-year statute of limitations for commencing an action against
the surety on a public works payment bond begins.
Design Delegation - In
January, ESSA asked Senate Judiciary Committee chairman John DeFrancisco to
host a meeting of interested parties to discuss the lack of enforcement by the
Education Department of the Board of Regents rule on design delegation. This 1996 rule states that architects and
engineers may delegate certain specifically defined design work to third-party
engineers hired by contractors and subcontractors. This design delegation, however, must be limited to project
components ancillary to the main components of the project. In addition, the rule states that the
principal architect or engineer is required to review and approve the design
submitted (usually through the shop drawing process) by the contractor’s
engineer for conformance with the specifications and overall project design. Unfortunately, architects and engineers
routinely violate this requirement, stamping shop drawings with exculpatory
language such as “reviewed for effect on structure only”. ESSA has had little success in getting the
Education Department, either directly or through the courts, to enforce the
approval requirement contained in the Regents rule. On February 14th, a meeting was held at Senator
DeFrancisco’s office, which included the participation of ESSA, GBC and
representatives of the architects and engineers associations as well as the
Department of Education’s Office of the Professions. While little progress was made at this meeting, Senator
DeFrancisco was able to experience the frustration this issue has caused contractors
and subcontractors, referring to language favored by architects and engineers
as “words of equivocation”. Following
the meeting, ESSA wrote to Senator DeFranciso asking that he sponsor
legislation that would amend the Education Law to unequivocally require design
work submitted by contractors and subcontractors to be approved without
exception. ESSA is awaiting the
Senator’s response.
Payment Bond Claims –
Section 137 of the New York State Finance Law provides for payment bonds to
protect subcontractors and suppliers providing labor and materials to public
work projects. This section of law has
been the subject of recent court decisions interpreting when the commencement
date for the one-year statute of limitations for commencing an action against
the surety begins. In order to clear up
some of the misunderstandings and misinterpretations found in these cases, ESSA
has proposed legislation to make clear when the commencement date of the
statute of limitations begins so that subcontractors and suppliers unmistakably
know when the period for commencing an action against the payment bond will
expire. ESSA has submitted the draft
legislation to the New York State Law Review Commission for review and is
seeking the Law Review Commission’s support.
NESCA
Membership Meeting
April
7, 2005
Century
House – 6:00 p.m.
6:00 Open
Bar/Registration
6:30 Dinner:
Prime Rib
7:10 Business
Announcements
7:30 Program: General Contractor Showcase
Featuring
Turner Construction Company
Turner
Construction Company was established in 1902 in New York City, and now boasts a
nationwide network of offices with a construction volume of more than $6
billion. Established in 1994, Turner’s
Albany office employs a team of over 100 professionals and completes about $100
million of work annually. Join us to
meet Turner’s Albany office leadership team and learn more about this company’s
philosophy, market niche and how they run their projects.
Open Bar, Dinner, Tax &
Gratuities - $35
PRESIDENT’S MESSAGE (Go Top)
In early
March, I attended a meeting of the Board of Directors of NESCA’s state
affiliate, the Empire State Subcontractors Association (ESSA). ESSA, comprised of NESCA and our four sister
chapters located in Buffalo, Rochester, Syracuse and New York City, has been
looking out for the interests of subcontractors and suppliers for more than 30
years. During this time, ESSA has
compiled an impressive list of accomplishments, including 34
pro-subcontractor/supplier bills signed into law since 1975.
Having attended this Board
meeting, I have to say how impressed I am with the number of different issues
ESSA is currently involved in. For
instance, ESSA has drafted a variety of bills that are intended to help subcontractors
and suppliers in such diverse ways as:
protecting and reducing retainage, securing damages for owner-caused
delays, outlawing certain indemnification and additional insured requirements,
standardizing subcontract documents on public works, easing service
requirements in the filing of liens, and clearing up the statute of limitations
for filing claims against payment bonds.
In addition to ESSA’s direct legislative program, our state association
is working with the General Building Contractors and other organizations on
problems related to design delegation and to strict liability under Sections
240 & 241 of the Labor Law.
But wait, there’s more! ESSA also reviews virtually every bill
introduced in both houses of the Legislature for impact on subcontractors and
suppliers. To give you an idea of what
this entails, so far during the 2005 legislative session, more than 6,500 bills
have been introduced in the Assembly and over 3,500 bills have been introduced
in the Senate. ESSA then closely
monitors the several hundred bills that have a direct impact on the
construction industry, submits legislative memoranda in support of or
opposition to many of these bills, and in certain cases takes a more active
role in lobbying for or against.
Is there any other organization
doing this on behalf of construction subcontractors and suppliers in New York
State? The answer is no. That’s why it’s so important that NESCA and
ESSA continue to build numbers through increased membership. It’s this simple. The larger we become, the more resources and clout we will have
at our disposal to get positive results for our members. And that’s where the average member can help
by convincing non-member subcontractors and suppliers to join. Think of it this way. It’s in your best business interests to see
NESCA and ESSA grow. So please, talk to
non-member subcontractors and suppliers you may know about NESCA. Call the NESCA office and ask that information
be sent to your prospects. Bring
non-members to NESCA membership meetings.
If you do all three of these things, you’ll help to build your
association, and we’ll all benefit.
WITHOUT NOTICE, TRANSFER OF
ACCOUNTS RECEVIABLE HELD NOT TO BE A TRUST FUND DIVERSION (Go Top)
On November 19, 2004, the
Supreme Court of the State of New York, Appellate Division, Fourth Department,
decided Le Chase Data/Telecom Services,
LLC v. Daniel Goebert, et al. and Business Funding Group, Inc. (Action No. 1) and
Le Chase Data/Telecom Services, LLC v. Mark Burgholzer, doing business as
Business Funding Group (Action No. 2).
In
this case, defendant operating as a Factor entered into a Factoring Agreement
with Light House Communication Design, a contractor, providing design and
construction of a fiber optic telecommunication network in connection with a
project owned by MCI Worldcom Network Services, Inc. Pursuant to the Factoring
Agreement, Business Funding was to advance funds to Lighthouse in return for an
assignment of certain MCI accounts receivable.
Subsequently, Lighthouse subcontracted with plaintiff to provide the
labor and materials necessary to furnish and install and test two of the fiber
optic cable networks that Lighthouse designed for the MCI project. Plaintiff
commenced this action against Business Funding alleging that funds received by
Lighthouse from MCI, which were paid to Business Funding pursuant to the
Factoring Agreement, constituted trust funds pursuant to Lien Law §79 and
Business Funding should have held those funds as Trustee for the
plaintiff. Plaintiff further alleged
that those funds were unlawfully diverted to Business Funding by Lighthouse and
that Business Funding knew or should have known of the unlawful diversion.
The
Court recognized that a Notice of Assignment is considered an affirmative
defense in any action for diversion of trust funds under §72 of the Lien
Law. However, no such notice was filed
by the assignee, Business Funding Group.
The defendant nevertheless claimed that co-existing with the protections
afforded to the assignee by filing a notice of assignment under Lien Law §15 is
a separate defense under Lien Law Article 3A for a purchaser in good faith
without notice. The Court then
concluded that Business Funding was a purchaser in good faith for value and
without notice that the transfers were a diversion of trust assets and
consequently that the transfers made pursuant to the Factoring Agreement were
not a diversion of trust assets.
The
lesson for subcontractors arising out of this case is that subcontractors
should require contractors to notify them of any factoring arrangements that
they may have made with respect to their accounts receivable. If such a factoring arrangement is in place,
the subcontractor or the contractor should notify the Factor, preferably in
writing, that the accounts receivable constitute trust funds under Article 3A
of the New York State Lien Law. This
would then cut off any purchaser in good faith without notice defense available
to the Factor.
Effective
March 10th, employers are required to provide notice to employees of
their rights under the Uniformed Services Employment and Reemployment Act
(USSERA). Employers may meet this
obligation by posting the notice in a prominent place where employees
customarily check for such information, or may provide the notice to employees
in other ways such as handing or mailing out the notice or distributing the
notice via electronic mail. The USERRA
poster is now available from the Department of Labor at www.dol.gov/vets/programs/userra/poster.pdf.
USERRA
protects the job rights of individuals who voluntarily or involuntarily leave
employment positions to undertake military service. The law also prohibits employers from discriminating against past
and present members of the uniformed services and applicants to the uniformed services. USERRA provides that returning service
members are reemployed in the job tht they would have attained had they not
been absent for military service (the “escalator” principle), with the same
seniority, status and pay, as well as other rights and benefits determined by
seniority. USERRA also requires that
reasonable efforts (such as training or retraining) be made to enable returning
service members to refresh or upgrade their skills to help them qualify for
reemployment. The law further provides
for alternative reemployment positions if the service member cannot qualify for
the escalator position. USERRA also
reaffirms and clarifies that while an individual is performing military
service, he or she is deemed to be on a furlough or leave of absence and is
entitled to the non-seniority rights accorded other individuals on non-military
leaves.
NESCA
members may obtain more information about USERRA by visiting www.dol.gov/vets/programs/userra.
WELCOME
NEW MEMBERS (Go Top)
4 Walker Way
Albany, NY 12205
(518) 464-6462; FAX (518)
869-3260
Contacts: Aaron Brundige,
Joe Clark
2789 Phillips Road
Castleton, NY 12033
(518) 479-3023
Contact: Gary Wolfe
772 South Street
Newburgh, NY 12550
(845) 562-4211; FAX (845)
562-8782
Contact: Maryann Prokosch
4 Walker Way
Albany, NY 12205
(518) 862-9354; FAX (518)
869-3260
Contacts: Tony Lanza, Joe
Clark
CALENDAR OF EVENTS (Go Top)
April 7, 2005
Board of
Directors Meeting
Century House,
Latham, 6 pm
April 14, 2005
NESCA
Membership Meeting
Century House,
Latham, 6 pm
April 19, 2005
NESCA/GBC ECA
Seminar
Sales Tax
Requirements
Building Industry
Center, 6 pm
THANK YOU TO MEMBERS FOR LEGAL DEFENSE FUND
CONTRIBUTIONS (Go Top)
NESCA’s Legal Defense Fund,
financed through the voluntary contributions of our members, provides the
association with the means to access New York’s court system concerning issues
of common interest and significant importance to subcontractors and the
construction industry. We extend our
sincere thanks and gratitude to the following members who have made recent
contributions to the Legal Defense Fund:
Abele Tractor &
Equipment Co., Inc. Architectural
Glass & Mirror, Inc.
C & C Welding Co., Inc. C & K Insulation,
Inc.
CS Architectural Products,
Inc. Campito Plumbing &
Heating, Inc.
D.J. Heating & AC, Inc. Dagostino Building
Blocks, Inc.
Esserman & Pelter, LLP Fall Fittings, Inc.
Clifford R. Gray, Inc. Gomez Electrical
Contractors, Inc.
Harbour Roads J & K
Plumbing & Heating Co., Inc.
J. Hogan Refrigeration &
Mech., Inc. R. M. Lill, Inc.
Martino Tile, Inc. McLeod
Systems, Inc.
Mechanical Testing, Inc. Mid Orange Mechanical
Corp.
Miller’s Ready Mix Moisture
Barriers, Inc.
Mullally Bros., Inc. OC Iron works,
Inc.
Rommel Fence, LLC S & O
Construction Services, Inc.
Sage Bros. Painting Co.,
Inc. Schenectady Steel
Co., Inc.
Section 7900 Associates, LLC Stone Bridge Iron & Steel,
Inc.
Sure Temp Co., Inc. Troy Boiler Works,
Inc.
Vanguard Roofing Western Building Restoration Co., Inc
The Woodward Company
MEMBER
ANNIVERSARIES (Go Top)
In April, the following
members have reached milestone anniversaries as members of NESCA. Thank you very much for your continued
support!
Ten
Years Fifteen Years
Consolidated Masonry Contrs., Inc. GlasSolutions Unlimited Corp.
Twenty-Five Years
Wm. Jacobs & Sons, Inc. Sheridan Supply Corp.