(518) 869-9800
November 2003
Inside
This Edition: Governor Signs
ESSA’s Lien Duration Amendment, Commercial Claims
Limit Increased To $5,000, New Prevailing Wage Penalties
Vetoed, President’s Message, Courts
Disagree On Assignee’s Rights Under State Finance Law Section 137, Failure To Post W.C. Notice Penalty Enacted, Unlicensed Professional Practice Bill Signed, Welcome New Members, Calendar Of Events,
Getting Paid For Your Work
GOVERNOR SIGNS ESSA’S LIEN DURATION AMENDMENT (Go Top)
On
September 17, 2003, Governor Pataki signed the Empire State Subcontractors
Association’s “technical corrections” bill into law (Chapter 524, Laws of 2003),
marking the 33rd legislative success for NESCA’s state affiliate
since 1975. This legislation, sponsored
by Senator Kemp Hannon and Assemblyman Ron Tocci, makes section 21 of the New
York State Lien Law consistent with section 18 of the Lien Law. Several years ago ESSA amended section 18 of
the Lien Law, by extending the duration of public improvement liens from six
months to one year. Section 21 of the
Lien Law contained a reference to the previous six-month period, but was not
amended. This has caused some confusion
in the courts, and needed to be cleared up.
The legislation signed by the Governor on September 17th makes it clear
that public improvement liens are effective for one year from the date of
filing.
COMMERCIAL CLAIMS
LIMIT INCREASED TO $5,000 (Go
Top)
On September 30, 2003, a bill was signed by Governor Pataki (Chapter 601 Laws of 2003) that will increase the threshold for commercial claims court actions (small claims court for business) by $2,000, from the current $3,000 to $5,000. Legislation creating commercial claims courts was approved by the Legislature in 1987 to provide businesses access to a swift, inexpensive means of collecting small claim amounts without having to be represented by an attorney. This was important because it allowed businesses a method of seeking justice for small amounts due. Prior to this law, many businesses in New York State simply would not bother to collect on small debts because the delinquent dollars just weren’t worth the effort. Attorney’s fees would often amount to more than the debt itself. The Empire State Subcontractors Association actively lobbied for passage of this bill by the Legislature, and urged Governor Pataki to sign it.
NEW PREVAILING WAGE
PENALTIES VETOED (Go Top)
On September 30, 2003,
Governor Pataki vetoed a bill that would have imposed significant new penalties
against contractors and subcontractors who violate the state’s prevailing wage
law. Currently, contractors and
subcontractors who underpay wages and/or supplements on public work
projects in New York State are subject to penalties which include the back
payment of such wages and/or supplements, plus interest at 16%, to the affected
employees (typically through the withholding of future contract payments by the
public agency), as well as a civil penalty of up to 25%. In addition, contractors charged with two or
more concurrent violations face debarment from public work contracts for a
period of five years. This bill would
have added to these existing remedies by allowing employees and employee
organizations (unions) to bring legal actions directly against contractors and
subcontractors in cases where no payment bond has been posted on the project. Such legal actions would have provided for
the payment of triple damages, court costs and fees, attorney’s fees and expert
witness fees by the contractor or subcontractor as well as a 25% civil penalty
payable to the Commissioner of Labor.
PRESIDENT’S MESSAGE (Go Top)
On
October 9th, NESCA held its 23rd Annual Trade Show at the
Century House in Latham. To those of
you who did not attend this year, you missed a really fantastic Trade
Show! I thank and congratulate Trade
Show chairman Dick McNitt and his committee for organizing such a well-attended
and beneficial event, not just for the 45 exhibitors, but for everyone who
attended! NESCA’s Trade Show brought
together hundreds of people, all with a common tie: a direct connection to
northeastern New York’s commercial construction industry. In addition to the many NESCA subcontractors
who attended, many of the region’s best-known general contractors and
commercial developers were also at the Show.
It was a veritable who’s who in the commercial construction
industry! General contractors including
BBL, Bast Hatfield, U.W. Marx, Pike Construction, Turner Construction, Sano
Rubin, Welliver McGuire, D.A. Collins and LeChase Construction were there. Developers who attended included British
American, The Picotte Companies and the Omni Group. The exposure our exhibitors received was tremendous! I can think of no other event that brings
together so many from within our industry for one evening. The contacts, the communication, the
networking that takes place at the Trade Show is an amazing thing to
witness. I have no doubt our exhibitors
walked away from the Trade Show satisfied with the turnout and the number of
customers and potential customers they were able to visit with in just a 4-hour
period. The food was great, the door
prizes were outstanding, and I’m very pleased to report that NESCA was able to
raise $1,300 for the Marine Corps Toys for Tots program through the silent
auction. Adding to this amount is the
$1,200 raised by Trojan Energy Systems through their own raffle at the Show,
which means we will be able to turn over $2,500 to the Marine Corps in
December. Thank you to Trojan Energy
Systems for their efforts and to our exhibitors for donating some great items
for the silent auction.
Since
September, NESCA has been extremely busy in many areas. We’ve had interesting membership meetings in
Albany, Kingston and Binghamton, our annual golf outing, our trade show, and
multiple educational seminars and courses.
During the coming months the association will provide members with many
additional educational, networking and social opportunities. Upcoming seminars and courses include an
OSHA 10-Hour course, 5-week STP courses on Contract Documents and Construction
Law and Planning & Scheduling, and seminars on Notary Public, Lead, Time
Management and Hot Legal Issues.
Members will receive registration forms for each of these specific
educational programs. We’ll also be
holding membership meetings in November and January, and our annual Holiday
Reception & Dinner in December.
I
strongly encourage all members to take full advantage of our program
offerings. There is so much valuable
information provided at our seminars and meetings that subs and suppliers just
can’t get anywhere else.
Jeffrey B. Senft, President
COURTS DISAGREE ON ASSIGNEE’S RIGHTS UNDER STATE FINANCE
LAW SECTION 137 (Go Top)
The
Supreme Court, Appellate Division, Second Department on March 10, 2003, decided
the Quantum Corporate Funding, Ltd. V. Westway Industries, Inc., et al. Case. The Second Department in this case pointed
out its contrary holding to that of the Appellate Division, First Department in
Quantum Corp. v. Fidelity, decided on February 23, 1999.
The
fact pattern in both cases are similar in that the assignee of the
subcontractor’s right to payment brought an action against a surety company
which had issued a New York State Finance Law §137 payment bond.
The
Second Department determining in favor of the Assignee stated “State Finance
Law §137 reads in pertinent part: Every person who has furnished labor or
material, to the contractor or to a subcontractor….shall have the right to sue
on such payment bond. The statute was
modeled primarily after the provisions of the Miller Act, governing
payment bonds for Federal public works”.
The Second Department then following determinations of the United States
Supreme Court in construing the Federal Miller Act, held that “assignees
of the claims of persons furnishing labor or material come within the
protection of the statutory bond”.
The
First Department, reaching its determination against the rights of the assignee
held “it is clear that security provided pursuant to State Finance Law §137,
like that provided under Article 3A of the Lien Law, is for the benefit of
statutory beneficiaries. The protection
of the statute extends only to ‘subcontractors, materialmen and laborers’ and
confers no further rights upon the subcontractor’s assignee.”
Subcontractors
will find that lending institutions which would not be allowed to secure their
loans by having access to a statutory payment bond may be reluctant to make
such loans. Consequently, lenders may
be more receptive to making loans governed by the Second Department ruling as
opposed to the First Department ruling.
FAILURE TO POST W.C.
NOTICE PENALTY ENACTED (Go Top)
On September 22, 2003, Governor Pataki signed a law that imposes on employers a $250 penalty for each violation for failure to post the required notice informing employees of coverage under the workers’ compensation law. Monies collected from any such fines will be deposited into the uninsured employer’s fund.
The Governor signed another workers’ compensation related bill on September 5, 2003, entitled the Workers’ Compensation Assurance Act. This new law is designed to prohibit employers from avoiding workers’ compensation coverage by making it unlawful for any employer to refuse to hire or employ, or to discharge from employment, an employee in order to evade the obligation to provide workers’ compensation coverage for such employee. This law also prohibits waivers of workers’ compensation coverage for out of state employers.
UNLICENSED PROFESSIONAL
PRACTICE BILL SIGNED (Go Top)
On October 1, 2003, Governor Pataki signed legislation allowing the Education Department to directly enforce statutory prohibitions related to the unlicensed practice of a profession. Until now, enforcement has been handled by the Office of the Attorney General. This new law empowers the Education Department to issue cease and desist orders whenever it has reasonable cause to believe a person has practiced a profession without a license. It also authorizes a full adjudicatory hearing process within the Department that could result in a civil penalty of up to $5,000.
The Education Department may use this new law to go after contractors it believes are illegally engaging in design-build contracts. NESCA members who engage in design-build contracts would be wise to consult your attorneys to make sure your company is doing so in conformance with the 1988 New York State Court of Appeals decision Charlebois v. Weller, which found that design-build agreements are legal in New York so long as they are structured in a way that separates the design and construction functions and differentiates and separates the designer from the contractor.
WELCOME NEW MEMBERS (Go Top)
Hayes Paving Co., Inc.
100 Saratoga Village Blvd.
Ste 115
Ballston Spa, NY 12020
(518) 583-6300; FAX (518)
899-7623
Contact: Brian Hayes
20 Farrell Street
South Burlington, VT 05403
(802)-658-3797; FAX (800)
286-3633
Contact: Larry Cain
CALENDAR OF
EVENTS (Go Top)
OSHA 10-Hour Course
Building Industry Center, 12
Noon
STP Unit # 4 Course Begins
Contract
Documents/Constr.Law
Building Industry Center, 6
pm
Building Industry Center, 12
Noon
Century House, Latham, 5 pm
Century House, Latham, 6 pm
GETTING PAID FOR
YOUR WORK (Go Top)
New York State law provides a number of tools to assist subcontractors and suppliers in getting paid for your work on construction projects. Many of these tools come as a result of laws NESCA has been successful in getting enacted over the years.
Private Construction Prompt Payment Law – This new law applies to
private commercial construction projects where the total cost exceeds $250,000,
and provides subcontractors and suppliers with several protections to include:
(1) the right to payment within 7 days after the general contractor receives
payment from the owner with an interest penalty of 1% per month; (2) the right
to stop work for non-payment; (3) and retainage in excess of the percentage
held by the owner is prohibited.
Public Construction Prompt Payment Law – Requires NYS public
owners to pay contractors within 30 days of receipt of an approvable
requisition and contractors to pay subcontractors and suppliers within 15 days
of receipt of payment from the public owner, to include interest penalties for
late payment. The maximum retainage allowed
to be held from subcontractors is 5% unless the contractor requests subs to
post payment and performance bonds and the sub is unwilling or unable to do so.
Private Mechanic’s Lien – A Mechanic’s Lien is a legal
devise which becomes an encumbrance on the real property upon which the project
is located. A Notice of Lien must be
filed in the County Clerk’s office where the project is located at any time
during the progress of work or within 8 months (4 months for single family
dwellings) after the completion of the subcontractor’s work.
Public Improvement Lien – A Public Improvement Lien
is not a lien on the real property but rather is a claim against the public
fund set up for the construction project.
A Notice of Lien must be filed with the public owner at any time before
the public improvement is completed and accepted by the public owner, or within
30 days after such completion and acceptance.
Payment Bonds – On many projects, including most NYS public work,
the prime contractor is required to post a bond with the owner guaranteeing that
all legitimate bills will be paid. On
bonded projects, an unpaid subcontractor or supplier may file a claim against
the bond.
Trust Fund Law – Article 3-A of the NYS Lien Law establishes a
trust for each individual project performed.
As such, prime contractors have a fiduciary duty to pay subcontractors and suppliers from funds
received on that particular project from the owner. Funds may not be diverted to any other purpose including the
payment of subcontractors and suppliers on other projects. This law carries both civil and criminal
penalties.
Contingent Payment – In 1995, the State Court of Appeals
declared “pay-if-paid” clauses void and unenforceable in New York State. This means general contractors may not rely
indefinitely on non-payment by the owner as a legal excuse for not paying
subcontractors and suppliers.
Interest and Legal Fees – The State Finance Law
enables subcontractors and suppliers who make successful claims for overdue
payments on public projects to recover interest and legal fees.
Members who would like more information (including sample letters and forms) regarding any of the above payment remedies should contact the NESCA office.