The Empire State Subcontractors Association (ESSA) has adopted a legislative program for the 2004 session of the New York State Legislature. Requiring that retainage on private projects be placed into an interest-bearing escrow account and reforming the strict liability provisions of Sections 204/241 of the Labor Law continue to top the priority list. ESSA’s 2004 program consists of a variety of proposals intended to protect the rights of construction industry subcontractors and suppliers, as follows:

Retainage held in interest-bearing escrow account – This legislation would require that retainage on public and private projects in NYS be deposited into an interest-bearing escrow account for the benefit of those from whom retainage has been held. Several other states already have such escrow account laws. This bill made it to the Senate floor during the 2003 session and will be pushed hard by ESSA early in the 2004 session.

Reform of 240/241 Labor Law – This legislation would provide much-needed relief to NYS contractors and subcontractors who must currently cope with an absolute liability standard (no defense) when sued for gravity-related injuries. The current law has resulted in runaway litigation, which has had a huge cost and insurance impact on the construction industry since injured workers don’t have to prove negligence. ESSA will join other construction industry groups in seeking amendments to this onerous and costly law.

Retainage Reduction – This legislation would require a 50% reduction in retainage on all public works projects upon completion of 50% of the project. Retainage held on state and local public works projects can amount to a significant sum of money for many subcontractors. This bill would get a large portion of the money held as retainage by the public owner into the pockets of subcontractors sooner than is currently the case.

Bid Listing/Standard Subcontract/Direct Pay – This is “back burner” legislation only intended to be pushed if it appears the Wicks Law is in jeopardy. It would require bid listing of subcontracts in excess of $25,000, a standard form subcontract, and direct payment to listed subcontractors by public owners.

Payment Bonds – This legislation would require a payment bond be posted on certain “hybrid” projects in New York State such as those where a private owner leases property from a public entity and then constructs a building on this property for the benefit of the private owner. Currently, subcontractors and suppliers have no lien rights on these hybrid projects. This bill would provide payment bond protection to subs and suppliers.

Hold Harmless – 3^rd Parties – This legislation would close a long-standing loophole in the General Obligations Law by prohibiting hold harmless clauses which require subcontractors to indemnify the general contractor or the general contractor to indemnify the owner, for damages caused by the negligence of 3^rd parties.

Delay Damages – This legislation would impact on all public works projects in New York State by allowing contractors and subcontractors to recover delay damages where such delay is for an unreasonable period of time and is the fault or responsibility of the public owner.

In 2003, ESSA’s legislation to make Section 21 consistent with Section 18 of the Lien Law, thereby making it clear that the duration of public improvement liens is one year, was signed into law by Governor Pataki.

NESCA Membership Meeting

January 8, 2004

Century House – 6:00 p.m.

Joint Meeting With NAWIC

6:00 Open Bar/Registration

6:30 Dinner: Prime Rib

7:15 Business Announcements

7:30 Program

Open bar, dinner, tax and gratuities - $35

PRESIDENT’S MESSAGE (Go Top)

On December 11^th, NESCA held its annual holiday meeting and reception at the Century House in Latham, a meeting attended by 225 members and their spouses. This holiday party was very enjoyable and proved to be both an entertaining and rewarding evening for all who attended. Our Toys for Tots campaign yielded a van-load of toys, in addition to the $2,500 we turned over to representatives of the Marine Corps. Thank you to all who donated a toy for this worthy program. Following dinner, comedian/impressionist Steve Van Zandt, thoroughly entertained everyone. Our entertainment, along with a fantastic menu, was co-sponsored by NESCA’s Board of Directors and Past Presidents. I’d like to thank the following companies for their generosity in co-sponsoring this event:

· AWESCO

· Albany Interiors, Inc.

· All-Lifts, Inc.

· Alltek Energy Systems, Inc.

· The Breakell Law Firm, P.C.

· Burjon Construction Co., Ltd.

· Burt Crane and Rigging

· Campito Plumbing & Heating, Inc.

· Clemente Latham Concrete

· Cristo Demolition, Inc.

· Harbour Roads

· Henderson-Johnson Co., Inc.

· KAMCO Supply Corp.

· Marshall and Sterling, Inc.

· Maximum Security Products Corp.

· John M. Mullins Rigging & Hauling

· NES Rentals

· Precision Glass & Aluminum, Inc.

· Rose & Kiernan, Inc.

· S & O Construction Services, Inc.

· Stants Combustion Associates, Inc.

· Stone Bridge Iron and Steel, Inc.

· Teal, Becker & Chiaramonte, CPA’s

· Valley Equipment Co., Inc.

· Victaulic Company of America

· The Woodward Co.

As we enter the new year, I’d like to remind members about two upcoming NESCA events. First, on February 14, 2004 NESCA will once again hold a Valentine Dinner Dance at the Century House. We have a fantastic menu and great music and dancing lined up for the Dinner Dance, so I hope everyone marks February 14^th on your calendars. Flyers and registration forms for the Dinner Dance will be mailed out to all members in early January.

As for the other event, NESCA’s 19^th Annual Frank Campito Car/Cash Giveaway will be held at Shaker Ridge Country Club on March 25, 2004. As many of you know, this event is great fun and we give away many prizes including a terrific grand prize valued at $25,000! Tickets are now on sale for $200 at the NESCA office, and each ticket includes a very nice cocktail reception for two at the March 25^th event.

Finally, I encourage all members to make plans to attend NESCA’s first membership meeting of the new year, to be held on January 8, 2004 at the Century House. Our speaker will be Ken Green, president of the Saratoga Economic Development Corp., who will talk about current and future projects in Saratoga County.

Jeffrey B. Senft, President

FEDERAL COURT HOLDS “PAY WHEN AND IF PAID” CLAUSE DOES NOT WAIVE MILLER ACT RIGHTS (Go Top)

On May 22, 2002, the United States Court of Appeals for the Ninth Circuit handed down its determination in the United States for the Use and Benefit of Walton Technology, Inc.; Walton Technology, Inc. v. Weststar Engineering, Inc. and Reliance Insurance Company. In this case, the plaintiff Walton Technology, Inc., was a subcontractor on a federal construction project who claimed that defendant Weststar Engineering, Inc. failed to pay rental fees for equipment, which was used on the project. As a defense to the claim, Weststar contended that a “pay when and if paid” clause in its agreement with Walton meant that no sums were justly due under the Miller Act until Weststar had received payment from the owner of the project. Reliance Insurance Company, as defendant’s insurance company contended under the general rule of suretyship law, a surety’s liability is co-extensive with that of its principal and that such co-extensive liability between a surety and its principal is in every case defined and limited by the principal’s contractual liability.

The Court in rejecting the surety company’s contention held that the liability of a surety and its principal on a Miller Act payment bond is co-extensive with the contractual liability of the principal only to the extent that it is consistent with the rights and obligations created under the Miller Act. The Court then concluded that the surety could not assert the unsatisfied “pay when and if paid” clause contained in the agreement as a defense to liability on the Miller Act payment bond. The Court further stated “a subcontractor’s right of recovery on a Miller Act payment bond accrues ninety days after the subcontractor has completed its work, not “when and if” the prime contractor is paid by the government. Permitting a Miller Act surety to avoid liability on the payment bond based on an unsatisfied “pay when and if paid” clause in the subcontract would, for all practical purposes, prohibit a subcontractor from exercising its Miller Act rights until the prime contractor has been paid by the government. In cases where the government does not pay the prime contractor within the one year statute of limitations period, the subcontractor would be barred from asserting its Miller Act rights”.

The ruling in this case is particularly significant for federal projects in states which have not declared, “pay when and if paid” contingent payment clauses invalid. In New York State, the New York State Court of Appeals in the Westfair case had invalidated contingent payment clauses.

Terence J. Burke

NESCA Legal Counsel

USE OSHA’S NEW RECORDKEEPING FORMS IN 2004 (Go Top)

In January 2004, employers across the country will begin to record work-related injuries and illnesses on the latest version of the OSHA 300 Log. If you haven’t seen it yet, now is a good time to review the revised 300 Log and 300A annual summary forms. The forms were published in October and contain several changes for the 2004 recording year and beyond. Foremost among the revisions is the addition of an occupational hearing loss column (M)(5) to OSHA’s Form 300, Log of Work-Related Injuries and Illnesses. Other changes include:

· “Days away from work” column (K) now comes before the days “On job transfer or restriction” column (L).

· Clearer formulas for calculating incidence rates.

· More prominent column heading “Classify the case” to make it clear that employers should mark only one selection among the four columns offered.

· Comparable changes on the 300A annual summary to reflect the 300 Log changes.

· Addition of a field for NAICS classification information on the 300A.

Beginning January 1, 2004, document all recordable hearing loss cases by checking (M)(5) on the OSHA 300 Log, regardless of whether the case is the result of an injury or an illness. This is a change from previous recording criteria where hearing loss cases were recorded based on whether they were classified as an injury or illness.

Employers must begin to use the new OSHA 300 Log on January 1, 2004. The new form has the date of revision (rev. 1/2004) located next to the form number.

Injuries and illnesses for years prior to 2004 should continue to be recorded on the appropriate form for that year. Additionally, employers should use the old OSHA 300A annual summary form (without the hearing loss field) to post as required in February 2004. The new 300A form that includes a space to record hearing loss should be used in 2005 to post the 2004 data (February 1 through April 30).

The new rule continues to provide a partial exemption for employers who had 10 or fewer workers at all times in the previous calendar year.

For more information and copies of the new OSHA recordkeeping forms, NESCA members should visit OSHA’s website at www.osha.gov.

WELCOME NEW MEMBERS (Go Top)

Canale Electric Corporation

62 Gifford Avenue

Poughkeepsie, NY 12601

(845) 452-7705; FAX (845) 452-9167

Contact: Michael Canale

Fall Fittings, Inc.

380 Route 208

New Paltz, NY 12561

(845)-255-5710; FAX (845) 255-3208

Contact: Robert Zaccheo

Postler and Jaeckle Corp

1062 Central Avenue Suite 204

Albany, NY 12206

(518) 462-2022; FAX (518) 462-2622

Contact: Bill Royer

Tri-Tech, Inc.

878 Albany Shaker Road

Latham, NY 12110

(518)-782-5011; FAX (518) 782-5013

Contact: Mike Rose

CALENDAR OF EVENTS (Go Top)

January 8, 2004

Board of Directors Meeting

Century House, Latham, 5 pm

January 8, 2004

NESCA Membership Meeting

Century House, Latham, 6 pm

January 20, 2004

NESCA/GBC/ECA Seminar

Time Management

Building Industry Center, 8 am

MEMBER PROFILE – SECURITY SUPPLY CORP. (Go Top)

Security Supply Corp. is the largest independent wholesale distributor of plumbing, heating and air conditioning products in Northeastern New York. Founded in 1934 by William Bennet, Harold Williams, Sr. and Earl Vadney, the company now has eleven branch locations serving Eastern Upstate New York, Western Massachusetts and Western Vermont.

Headquartered at 196 Maple Avenue, Selkirk, New York, Security Supply’s 106 employees are located at the main office in Selkirk and at branches in Albany, Schenectady, Glens Falls, Johnstown, Plattsburgh, North Adams, Watertown, Massena, Kingston and at their newest branch in Poughkeepsie. The company is led by president Keith Bennett and a management team consisting of: David Willey, Controller; Kim Willey, Purchasing Manager; Brian Fowler, Sales Manager; Michael Mullins, Commercial Sales Manager; Kevin Williams, MIOS; Dan Guasp, Operations Manager; and Nicole O’Brien, Credit Manager. Security Supply’s business philosophy is to provide multiple branch locations to conveniently service its customers throughout Northeastern New York.

Security Supply’s extensive inventory includes HVAC products, heating service parts, heating accessories, residential and commercial plumbing products, pipe, valves & fittings, and miscellaneous related products. The company’s strength as an industry leader in the hydronic heating field is enhanced by its staff of heating and radiant heating specialists. Full design, layout, estimating and assistance are provided for any hydronic heating or radiant application. Security Supply’s Commercial Department works closely with mechanical contractors and has provided products to many of the notable projects throughout upstate New York and the Capital District including the Albany Airport and the Center for Medical Science.

A member of NESCA since 1986, Security Supply Corp. experienced an eventful 2003 by expanding the warehouse at its Albany location, completing construction of a Bath Expressions Showroom at its Plattsburgh branch, and opening its newest branch (the former Dutchess Wholesalers, Inc.) in Poughkeepsie.

NESCA members who would like to be profiled in a future Newsletter should contact the NESCA Office.

REVISION TO OGS PAYMENT FOR STORED MATERIALS (Go Top)

Based in large part on NESCA’s urgings, the NYS Office of General Services (OGS) has revised its recent policy change regarding payment for stored materials. NESCA Members may recall that in early 2003, OGS changed its policy to require that contractors submit a copy of a “paid invoice” with the Affidavit for Payment of Stored Materials in order for the payment to be processed. This meant that contractors had to pay in full for materials stored prior to making application for payment to OGS. The revised policy no longer mandates a paid invoice, but only states that a paid invoice is preferred. A copy of the new policy can be found on the OGS website at www.ogs.state.ny.us.

BUSINESS PAYS ROUGHLY ONE OF THREE STATE AND LOCAL TAX DOLLARS IN NEW YORK (Go Top)

New York State businesses pay roughly one of every three tax dollars collected in New York State, a tax burden that is higher than most other states, according to a briefing paper in The Public Policy Institute’s Tax Watch ’04 series.

The new paper entitled “Corporate, Personal, Property Taxes: All Part of a Heavy Tax Burden on Business”, is one in a series of papers published by The Public Policy Institute (PPI) to document the effect of taxes on New York’s economy, and the importance of restraining government spending as an essential first step in reducing New Yorker’s tax burden. PPI is the research affiliate of The Business Council of New York State.

Businesses pay many different business taxes in New York, including the state’s general corporate income tax and taxes on specific industries such as telecommunications and energy utilities, insurers, banks, petroleum companies, truckers and taverns. In addition, many businesses, especially smaller ones, pay taxes through their owners’ personal income tax. And businesses pay about a quarter of all sales taxes, an even higher percentage of local property taxes, and about two-thirds of the state’s hidden taxes on health insurance, the paper noted.

Other papers published by The Public Policy Institute as part of its Tax Watch 04 series include:

· “Taxes Are Far Out of Line in New York. Will Albany Make Them Worse?”

· “High-Growth States Are Low-Tax States. It’s Time For New York to Wise Up.”

· “New York’s Property Taxes Are Too High. Albany And Localities Are Both to Blame.”

· “Personal Income Tax: The Biggest Hit On New York’s Workers and The Economy.”

Enclosed with this Newsletter are the first five Tax Watch 04 papers. Subsequent Tax Watch 04 papers published by PPI will be included with next month’s Newsletter.

POLL SHOWS THAT NEW YORKERS PREFER LESS GOVERNMENT AND LOWER TAXES (Go Top)

A late fall Quinnipiac University poll confirms that New Yorkers strongly prefer lower taxes, even if government services are cut. The results were virtually identical to a similar Quinnipiac poll 11 months prior. They also echoed the findings of two other independent polls in 2003.

More than half of respondents said New York should cut government services and keep taxes at their present level, the poll showed. Only 36 percent said they preferred higher taxes to keep services at their present level. Upstaters favored lower taxes and government spending even more strongly than downstaters, the university said. Respondents were not asked about a third option: reduced spending and less government spending. New York leads the nation in both categories.

There was little new in the findings of the latest Quinnipiac poll, which was released November 7. In fact, when lawmakers raised taxes in 2003, they ignored polls by Quinnipiac, Marist College, and the Syracuse Post-Standard that all showed the same clear preference for less government and lower taxes.

Governor Pataki, Senate Majority Leader Joseph Bruno and Assembly Speaker Sheldon Silver have all vowed not to raise taxes in 2004. However, as New Yorkers have learned often, you can’t go to the bank with anything politicians say in the fall.

NEW YORK STATE’S TORT REFORM OUTLOOK FOR 2004 (Go Top)

Despite anticipated opposition from trial lawyers, so-called consumer groups, and their friends in the Legislature, pressure to enact tort reform in New York State will be heightened in 2004 by the effects of recurring fiscal problems within the state and local governments.

As a widening insurance crisis, now in its third year, continues to damage the business climate, driving some contractors out of the state (or out of business) and increasing the cost of construction, pressure will build for a solution that can only come from reform of Sections 240 and 241 of the Labor Law. This was evident in a series of public hearings held by the Insurance Department across the state during November, in which organization after organization testified that the only long-term solution to the insurance crisis in the construction industry is Labor Law reform.

Medical professionals’ demand for relief will only grow louder in 2004. Doctors everywhere are angry that the current system is too costly and affects the quality of care. They are now at a boiling point, as demonstrated by the “Step-Out” job-action held in cities across the state in 2003. Having been subject to another large insurance increase over the summer, New York’s physicians will be even more committed to this cause in 2004.

The city of New York’s continuing fiscal plight will be made worse by the growing number of September 11-related lawsuits that could dwarf the $500 million-per-year tort losses it already pays. The most recent legal outrage is the $100 million lawsuit against the city brought by the family of a city councilman who was shot by a man he invited to City Hall and personally escorted around the metal detectors.

And finally, the need for tort reform will be highlighted by the heightened effects of the economic slowdown on the state, and the fact that New York’s business climate now ranks 45^th out of all 50 states. Tort reform is a key component of a well-reasoned economic recovery plan, should one be put into place.

Opponents of tort reform, namely the NYS Trial Lawyers Association, are highly motivated and well bankrolled. According to the reports filed with the NYS Board of Elections, the trial lawyers’ political action committee raised $1.09 million in 2002 and donated $1.04 million to state legislative candidates. The only thing that will trump the big money lobbying and political contributions that the trial lawyers use to perpetuate the status quo is the active involvement of people and businesses who are the victims of the out of control tort system. The key to success in 2004 will begin at the grassroots level. NESCA members are urged to actively lobby your elected representatives for tort reform.

Have you ever wondered why, despite years of effort by the construction industry, the insurance industry, and public and private building owners in New York State to amend Sections 240 and 241 of the Labor Law, reform of this onerous law has yet to occur? A new report published by The Manhattan Institute’s Center for Legal Policy explains why the struggle for tort reform has been such a difficult one.

Trial Lawyers, Inc.: A Report on the Lawsuit Industry in America 2003 sheds significant light on the size, scope and inner workings of an industry poorly understood by the media and the general public. Here’s what James R. Copeland, Director of the Center for Legal Policy had to say about the problem of lawsuit abuse.

“The lawsuit industry today is truly a behemoth, but – unlike the major corporations in our regular market economy – it remains financially opaque. Whereas public corporations must disclose their financials in 10-Ks according to SEC regulations, trial lawyers practice in private partnerships that, under the guise of attorney-client privilege, have shielded their financials from public scrutiny. Trial Lawyers, Inc., while not an annual report, presents a snapshot of the lawsuit industry as it exists today. The picture is not pretty. Total tort costs today exceed $200 billion annually, or more than 2% of America’s gross domestic product – a significantly higher percentage than in any other developed nation. In 2001, the last year for which data are available, U.S. tort costs grew by 14.3%. Over the last 30 years, tort costs grew at a compounded annual rate of 9.1%; by comparison, the U.S. population grew by 1.1% annually, the consumer price index grew at 5.0% annually, and the gross domestic product grew at 7.6% annually during the same period. While our figures on the size of the lawsuit industry are estimates – due to the industry’s lack of transparency – those estimates are sparingly conservative. The above statistics were derived in studies conducted by Tillinghast-Towers Perrin that aggregated insured tort costs going to legal defense, plaintiffs, plaintiff’s attorneys, and administrative overhead. Significantly, these estimates exclude the tobacco settlements, most contract and securities litigation, and most punitive damages, as well as the substantial fees generated by the legal profession outside the field of tort law. And our analysis fails to account for many of the perverse side effects of over-litigation, such as reduced investment and innovation and costly protective practices like “defensive medicine.”

While many Americans may understand that the lawsuit industry in America has run amok – the public tends not to appreciate that the litigation industry is nothing but Big Business. Given that 19% of all tort costs go to plaintiffs’ attorneys, we can imagine a corporation called Trial Lawyers, Inc., which rakes in almost $40 billion per year in revenues – 50% more than Microsoft or Intel and twice those of Coca-Cola. The lawsuit industry’s lack of transparency prevents us from making an accurate profit estimate, but if its margins are as high as we suspect, Trial Lawyers, Inc. might well be the most profitable business in the world. Indeed, the biggest difference between the lawsuit industry and most other industries is that Trial Lawyers, Inc. is in a noncompetitive market and that its takings are necessarily zero-sum, since the industry involves redistribution rather than free exchange.”

Excerpts from Trial Lawyers, Inc.

As follows are some eye-opening excerpts from Trial Lawyers, Inc. that will broaden your understanding of what the construction industry and others are up against:

· “Leading plaintiff’s lawyers run complex, multi-million dollar organizations that use sophisticated and expensive marketing to pursue clients through every commercial avenue, including the Internet. Like any business expanding its market presence, Trial Lawyers, Inc. uses sales tactics such as no-cost, no-risk offers. Free from the threat of antitrust actions, which have never been brought against the lawsuit industry, the industry is organized into cartels: alliances of firms specialize in particular kinds of lawsuits, trade information, share briefs, combine clients, and jointly finance actions. The lawsuit industry even has its own venture capitalists – investors who back firms filing enormous, speculative class action suits with the hope that there will be rich rewards somewhere down the road.

· The impact of predatory litigation is staggering. Asbestos litigation alone has driven 67 companies bankrupt, including many that never made or installed asbestos, costing tens of thousands of jobs and soaking up billions of dollars in potential investment capital.

· From tobacco settlements to asbestos class action suits, the lawsuit industry now boasts fees that can range as high as an astounding $30,000 per hour, turning some members of Trial Lawyers, Inc. into overnight billionaires and providing capital to bankroll new lawsuit ventures in new markets. The mega-fees from the 1998 tobacco settlement were nothing but egregious. Some 300 lawyers from 86 firms will pocket as much as $30 million over the next 25 years even though, for many of them, the suits posed minimal risk and demanded little effort.

· Perhaps nowhere are class action suits more pervasive – or more pernicious – than in the securities industry. Within days of a drop in a company’s stock price (usually a high-growth technology stock with a naturally high share-price volatility), Trial Lawyers, Inc. swoops in to file a claim – often lacking any real proof of corporate wrongdoing. Corporations faced with the inevitable, extremely onerous discovery process must defend themselves at great expense; little wonder that such cases typically settle, with one-third of the proceeds going to Trial Lawyers, Inc. These actions merely redistribute wealth from one class of shareholders to another – with a sizable cut for Trial Lawyers, Inc. – and thus do nothing to curb management abuse. Some critics have called this system nothing less than “legal extortion”; a Florida judge rejecting a recent securities class action settlement compared the lawyers in that case to “’squeegee boys’ who….run up to a stopped car, splash soapy water on its perfectly clean windshield and expect payment for the uninvited service of wiping it off.”

· No doctor is safe from Trial Lawyers, Inc. A 2002 Medical Economics survey of 1,800 physicians found that 58% had been the target of a lawsuit. In some areas of the country, such as the border counties of south Texas, predatory attorneys have swarmed in and recruited impoverished immigrants as claimants. Doctors and hospitals in Hidalgo County got hit with 750 claims between 2000 and 2001, compared with 131 in 1999. As a result of Trial Lawyers, Inc.’s relentless assault on the medical industry, insurers are abandoning plaintiff havens, leaving thousands of doctors and hospitals scrambling to find coverage.

· Despite the lack of scientific evidence, successful mold suits are the newest growth sector for Trial Lawyers, Inc. The American Bar Association Journal made the case blatantly when it headlined a recent article on the growth of mold litigation MOLD IS GOLD.

· Trial Lawyers, Inc. has poured funds into the coffers of its political allies to gain unprecedented influence at the national and state levels. PAC contributions are merely the tip of the iceberg when it comes to Trial Lawyers, Inc.’s political influence. Through individual and soft money contributions, as well as PAC donations, the lawsuit industry has surpassed all others in political giving in every election cycle since 1990.

This is only a small sample of what is contained in Trial Lawyers, Inc., and NESCA members are encouraged to read the full report. Trial Lawyers, Inc. can be found on the Manhattan Institute’s new website dedicated to tort reform at www.triallawyersinc.com.

ESSA ADOPTS 2004 LEGISLATIVE PROGRAM (Go Top)

· AWESCO

Terence J. Burke

NESCA Legal Counsel

Fall Fittings, Inc.

Tri-Tech, Inc.

CALENDAR OF EVENTS (Go Top)

January 8, 2004

Board of Directors Meeting

January 8, 2004

NESCA Membership Meeting

January 20, 2004

NESCA/GBC/ECA Seminar

Time Management