ESSA SUPPORTS EXTENSION OF PAYROLL LIMITATION LAW (Go Top)

In letters sent last December to Governor George Pataki, Senate Majority Leader Joseph Bruno and Assembly Speaker Sheldon Silver, the Empire State Subcontractors Association (ESSA) has expressed support for an extension of the Construction Employment Payroll Limitation Law, which is due to sunset on December 31, 2005. The Payroll Limitation law was enacted in 1998 as a means of ensuring that workers’ compensation premiums paid by higher wage paying and lower wage paying construction employers were more equitably distributed. Prior to this law, construction employers who paid higher wages were severely penalized because those higher wages resulted in higher workers’ compensation premium. Below is an article submitted by Allied Safety Management, Inc., ESSA’s Workers’ Compensation Safety Group manager, which explains the Payroll Limitation Law in more detail and urges member support for a continuation of this law.

New York Workers’ Compensation Payroll Limitation Law to Sunset December 31, 2005 (Go Top)

In June of 1998 Governor George Pataki signed into law the Construction Employment Payroll Limitation Law. This was in response to an “hours worked” alternative as a means of determining workers’ compensation premium. The law’s intent was to provide a more equitable distribution of premium between high wage paying and low wage paying employers. This was accomplished in two basic ways, first by limiting the amount of weekly payroll per employee, second by imposing rate differentials to the base (manual) rate subject to three state wide territorial (geographic) locations.

This law was written with a sunset provision and is due to expire on December 31, 2005. However, NYCIRB who oversees its’ implementation may traditionally publish changes in rates, assessments, territorial differentials that are effective 10/1 of each year. Therefore it is possible the Contractors Payroll Limitation Law could end on 9/30/05.

This law is exclusive to the construction industry and is applied to 82 classification codes currently in use for the industry. The law went into effect October 1, 1999 and the payroll cap used in determining premium was structured to phase in over a four-year period. The New York Compensation Rating Board (NYCIRB) issued guidelines that include the use of a maximum of payroll of $750 per week.

The Construction Payroll Limitation Law does not mandate an individual contractor cap payroll. However, the insurance carrier is mandated to charge the territorial differential regardless of whether the payroll is capped. This means if you are not properly applying the cap, you can be paying significantly more for your workers’ compensation coverage and are putting your company at a competitive disadvantage. Contractors may enjoy a 50% or higher reduction in their premium depending on several factors such as hourly wages, overtime, class codes and geographic location. Audits and premium computation for workers’ compensation has evolved into a very complex process requiring increased attention and expertise to properly manage. This is but one of the advantages of participating in your Association sponsored workers’ compensation safety group.

There would be significant cost to allowing this law to expire. Therefore we suggest a heightened level of attention by contacting your business associations, local politicians and lobbyist to ensure this law and all its benefits are brought before the legislature and lobbied to the fullest extent to ensure its continuation. This issue becomes more critical with the New York Compensation Insurance Rating Board requesting an average manual rate increase of 9.5%, which if approved by the NYS Insurance Department could become effective as early as April 1, 2005. In June of 1998 Governor Pataki signed into law , Senate Bill S7744 ( also identified as assembly Bill A11294) the Construction Employment Payroll Limitation Law. This was in response to an “hours worked” alternative as a means of

John Blackmore, Vice Pres. & Director of Workers Comp

Allied Safety Management, Inc.

There will be no regular NESCA Membership Meeting held in March. Members are instead encouraged to register for the March 12^th St. Patrick’s Dinner Dance to be held at the Century House and the March 31^st Car/Cash Giveaway to be held at Shaker Ridge Country Club.

PRESIDENT’S MESSAGE (Go Top)

On February 8, 2005, NESCA’s officers had the pleasure of attending a dinner with Assemblyman Paul Tonko to discuss issues of importance to subcontractors doing business in New York State. With the retirement of Assemblyman Ron Tocci last year, Assemblyman Tonko has become the primary sponsor of the Empire State Subcontractors Association’s legislative program in the Assembly. Our meeting with Assemblyman Tonko proved to be very beneficial, not just because we had the opportunity to talk about ESSA’s legislative program and other important construction industry issues, but also because Assemblyman Tonko was able to learn more about ESSA and its members. After attending this dinner, I thought about how our legislative program, along with other proactive initiatives aimed at the state’s contracting agencies and the courts, represent one of the three basic tenets of our association -- advocacy. NESCA serves as an advocate for subcontractors and suppliers before all three branches of government for one very good reason, namely, because our members neither have the time nor the resources to do this on their own. In other words, NESCA provides advocacy because you’re busy running your own businesses. While there are many organizations that purport to provide advocacy for a variety of business interests, I believe NESCA stands out. Why? Because NESCA actually gets results! Think about it. In the last 12 months, NESCA has (1) passed legislation requiring owners to post payment bonds on “hybrid” construction projects; (2) worked with DASNY to improve that agency’s change order procedures; and (3) filed an amicus brief supporting a member’s successful legal action challenging an illegal contingent payment clause. That’s three important wins within the three different branches of government, in just 12 months! As I said, NESCA gets results.

The other two basic tenets of NESCA are information and education, and the association is accomplishing many things in these areas as well. Regarding information, our monthly newsletter, lien bulletin, special bulletins and membership meetings all provide key information to members on a regular basis. As for education, I’m sure you are well-aware of the many educational seminars and courses offered by NESCA each year. In fact, in just the month of February members had access to an OSHA 10-Hour Course; a 5-week superintendent training program on general and specialty contractor dynamics; a 5-week course on basic computer skills for the construction industry; and part 1 of a top legal issues seminar. We’re now well into NESCA’s current fiscal year, and while the vast majority of our members have fully paid their 2004-05 membership dues, there are still roughly 20 members who have not yet paid. For those of you in this category, please read this message again and focus on what I said previously. NESCA gets results! These results are well worth the annual dues rate of $635. To you unpaid members, please renew your membership today. To all the rest of our members, please recruit a new member and help make NESCA an even stronger organization.

Kevin J. Garrity, President

ATTENTION SHOULD BE PAID TO STATUTE OF LIMITATIONS ON PAYMENT BOND CLAIMS (Go Top)

On August 5, 2004, the New York State Supreme Court, County of Jefferson rendered a Memorandum Decision and Order in the case of Phelps Guide Rail v. U.S. Fidelity & Guaranty Company and Mid-State Construction Services, Inc. The plaintiff subcontractor had filed a claim on a payment bond, which had been provided in accordance with State Finance Law §137. The subcontractor then proceeded to commence an action against the surety on the bond. The surety moved the court for an order dismissing the action on the grounds that it was time-barred and that the action was commenced beyond the one-year statute of limitations, under State Finance Law §137(4)(b). That section provides in part “no action on a payment bond furnished pursuant to this section shall be commenced after the expiration of one year from the date on which final payment under the claimant’s subcontract became due”. The Court citing the ruling in Windsor Metal Fabricators Ltd. v. General Accident, 94 NY2d 124 (1999), stated that it was bound by the Windsor ruling wherein the Court of Appeals held that the one year period starts to run when the subcontractor has demanded final payment and 90 days have passed since the subcontractor completed its work. Further, the court as in Windsor rejected the plaintiffs proposed contract based calculation of the measuring date.

As result of the Windsor case and the instant case and the ambiguities found in §137 of the State Finance Law, there continues to be confusion concerning the statute of limitations for commencing an action on a Section 137 bond. Hopefully, the New York State Legislature will amend the statute to provide a clear and more definitive basis for calculating the commencement date for such an action.

Terence J. Burke, NESCA Legal Counsel

IRS RELEASES CONSTRUCTION

TAX CURRICULUM (Go Top)

The Internal Revenue Service has released the Construction Industry Federal Tax Curriculum (www.irs.gov/pub/irs-utl/construction_curriculum_2004.pdf), an 80-page guide to federal income and payroll tax issues that commonly arise for construction businesses. Topics include accounting methods, travel and entertainment, depreciation, recordkeeping, worker classification, employment taxes, and electronic filing and paying, as well as basics of income and business expenses. The guide is designed for students who will enter construction or have construction clients but also provides a good introduction for small-firm owners.

GENERAL CONTRACTORS ADOPT LEGISLATIVE PROGRAM (Go Top)

By now, NESCA members should be fully aware of the 2005 legislative program adopted by the Empire State Subcontractors Association (see November 2004 Newsletter). Requiring private owners to place all retainage held into an interest-bearing escrow account is again ESSA’s top priority. We also thought it would be interesting to let members know what the general contractors have up their sleeve for the 2005 legislative session. As follows is the 2005 legislative program adopted by the General Building Contractors of NYS.

Labor Law 240 Reform – GBC will continue working with other construction industry groups to reform the strict liability provisions of the Labor Law.

Subcontractor Prevailing Wage Liability – GBC will make an effort to enact requirements for timely notice to prime contractors of alleged subcontractor prevailing wage violations. GBC is seeking to avoid prime contractor liability for unknown subcontractor underpayments years after the violations may have occurred.

Surety and Responsible Bidder Reform – GBC will seek to ensure performance and payment bonds on public work are from quality sureties rated A- or better. GBC will also seek to codify in statute a strong standard of bidder responsibility.

NYC SCA Prequalification – GBC will seek to amend the New York City School Construction Authority prequalification limitation language to match that of the Lower Manhattan Construction Coordinating Act so that all those who are prequalified are allowed to bid SCA projects, and are not denied the opportunity to bid because of some arbitrary limitation.

SUCF Change Order Limits – GBC will seek to increase the limit above which change orders on State University Construction Fund projects must be approved by SUCF’s trustees. The current limit is $20,000. GBC will seek to increase this limit to $100,000.

WELCOME NEW MEMBERS (Go Top)

Daniel A. Budd Excavating & Contracting, LLC

2 Hibernia Road

Salt Point, NY 12578

(845) 266-5500; FAX (845) 266-5922

Contact: Daniel Budd

Dundon Insulation

203 Treadwell Road

Windsor, NY 13865

(607) 775-3035; FAX (607) 775-3045

Contact: Patrick Dundon

CALENDAR OF EVENTS (Go Top)

March 2, 2005

ESSA Board of Directors Meeting

Building Industry Center 10:30 am

March 3, 2005

Board of Directors Meeting

Century House, Latham, 6 pm

March 7-10, 2005

NESCA/GBC/ECA Seminar

OSHA 30-Hour Course

Building Industry Center

March 12, 2005

St. Patrick’s Dinner Dance

Century House, 6 pm

March 28, 2005

NESCA/GBC/ECA Seminar

Hot Legal Issues Part 2

Building Industry Center 6 pm

March 31, 2005

20^th Annual Car/Cash Giveaway

Shaker Ridge Country Club, 7 pm

MEMBERS ASKED TO COMPLETE ANNUAL BPI INFORMATION FORM

One of the most important services NESCA offers its members is the Business Practices Interchange (BPI). The BPI allows members to obtain accurate, first-hand information on the business practices of general contractors, developers and owner-builders.

All members were recently mailed, and asked to complete our annual Business Practices Interchange listing form. The BPI is a referral service, and we merely ask members to provide us with the names of contractors you have done business with during the preceding twelve months. This information will be entered into NESCA’s database. Members seeking information about a particular contractor may then contact the NESCA office and will be referred to other members who have reported they have recently done business with that company.

Members are encouraged to return your completed BPI form to the NESCA office as soon as possible. This service is totally member-driven and will only work if completed forms are returned.

SMALL BUSINESS DAY TO BE HELD MARCH 22^ND

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Small Business Day will be held on March 22, 2005 at the Empire State Plaza Convention Center in Albany. Co-sponsored annually by the Business Council of NYS, the Chamber Alliance of NYS and the National Federation of Independent Business, Small Business Day is also supported by the Empire State Subcontractors Association. Small Business Day is entirely devoted to the small business community in New York State. It is the venue to let elected officials and policy makers know what is on the mind of the small business owner. Attendees will be given the forum to advance issues, interact with other small business owners, legislative and policy leaders, and learn about what various state agencies are doing for the small businesses in New York. NESCA members who would like to register for Small Business Day may do so by using the registration form enclosed with the Newsletter.

MEMBER ANNIVERSARIES (Go Top)

In March, the following members have reached milestone anniversaries as members of NESCA. Thank you very much for your continued support!

Five Years Twenty-Five Years

All American Masonry, Inc. R.F. Peck Co., Inc.

Don’t Forget to Order Your Ticket for NESCA’s 20^th Annual Frank Campito Memorial Car/Cash Giveaway to be held on March 31^st at Shaker Ridge Country Club from 7:00 – 9:30 p.m.

Vol. 23, No. 9

John Blackmore, Vice Pres. & Director of Workers Comp

Terence J. Burke, NESCA Legal Counsel

Daniel A. Budd Excavating & Contracting, LLC

Dundon Insulation