Vol 21, No. 3

(518) 869-9800

September 2002

 

Inside this Edition:  Prompt Payment Bill Signed Into Law, President’s Message, Court Allows Partial Indemnification Of

Contractor, Average Workers’ Comp. Rates To Remain Stable, Welcome New Member, Calendar Of Events, Governor Signs Wage Recovery Bill, New York Compensation Insurance Rating Board Manual Rates Selected Construction Classifications, New York Construction Classification Premium Adjustment Program (PAP)

 

 

PROMPT PAYMENT BILL SIGNED INTO LAW (Go Top)

                On July 18, 2002 Governor Pataki signed into law a construction industry prompt payment bill which will have an effect on payment standards as well as remedies for non-payment on private commercial construction projects located in New York State.

                This new law, chapter 127, laws of 2002 will become effective on January 14, 2003 and shall apply to contracts entered into on or after that date unless the contract is part of a project for which a permit has been issued and work has begun prior to January 14th.

                This new law, as drafted, is somewhat ambiguous and confusing in places, and it requires an extremely careful reading to determine whether certain provisions of the law are mandatory, and therefore override contract language, or are merely “default” provisions to be relied on in cases where the contract is silent about a particular issue.

                Basically the new prompt payment law applies to private commercial construction projects where the cost exceeds $250,000.  Specifically exempted from the law are all public works projects and most private residential projects.  A key to understanding the law is to read the legislative intent, which states, among other things:

A reading of the legislative intent of the law before analyzing its specific provisions provides the framework for understanding just what it means.  After thorough review, it is NESCA’s interpretation that the majority of the provisions contained in this statute are mandatory provisions, that is, they must be complied with notwithstanding language to the contrary that may be contained in a contract between an owner and contractor or between a contractor and subcontractor.  Key provisions of the law include:

Billing Cycle & Payment Period – The law allows the owner and contractor to establish a billing cycle and payment period.  In the absence of a billing cycle and payment period contained in the contract, the law provides for a “default” billing cycle which is the calendar month in which the work is performed and a “default” payment period which is 30 days after approval of the invoice.  These are the two primary areas where we believe contrary terms contained in a contract supersede the default provisions.  That is, an owner and a contractor may negotiate a longer (or shorter) billing cycle and payment period.

                The following provisions of the law appear to be mandatory.

Invoices – Owner must approve (or disapprove) invoices within 12 business days.  Contractor must approve or disapprove subcontractor invoices within 12 business days.

Payment – Contractor must pay subcontractor within 7 days after receipt of payment from the owner. 

Interest Penalties – If the owner (or contractor) fails to pay the contractor (or subcontractor) within the established payment period, interest penalties of 1% per month apply.

Stop Work Provisions – If a contractor or subcontractor is not paid within the established payment period, it may suspend performance of work after providing a 10-day written notice.

                Enclosed with this Newsletter is a more detailed summary of the new prompt payment law.  Members are advised to consult your attorney before exercising your rights under this new law.

 

 

PRESIDENT’S MESSAGE (Go Top)

 

                I hope everyone has enjoyed the summer, and while it’s been a hot one, the dry weather has certainly allowed all of us the chance to engage in our favorite outdoor activities.  Now, as the summer of 2002 winds down, NESCA will enter autumn fully focused on business, with our “pedal to the metal” so to speak.  The association will pick up right where it left off in June, with another stimulating year of meetings, seminars and other activities planned for our members.

                Members have already received registration information for NESCA’s 18th Annual Golf Outing to be held on September 9, 2002 at the Shaker Ridge Country Club.  Chairman Brian Carmer and his Golf Committee have planned an exciting event, with lots of prizes, trophies and giveaways!  This event is a sellout nearly every year, so if you’d like to participate, I highly recommend you return your registration form to the NESCA office as soon as possible.

                Also in September, NESCA will hold its first membership meeting of the new year, at 6:00 p.m. at the Century House in Latham.  Our speaker will be NESCA legal counsel Terry Burke, who will make a presentation on the new private sector construction prompt payment law.  This law was just signed by Governor Pataki, and establishes prompt payment standards – along with remedies – for private commercial construction projects.  Terry will also cover New York’s public work projects prompt payment laws, which have been on the books for a number of years.  The new private sector law will arm contractors, subcontractors and suppliers with some new tools to help you get paid on time.  However, it’s a little confusing to read, so I highly recommend ALL members come to this meeting and learn more about how you will be able to use this law to your advantage.  Terry will be providing attendees with handouts summarizing both the public and private sector prompt payment laws.

                On September 20th and 21st, NESCA’s state affiliate, the Empire State Subcontractors Association, will be holding its Annual Fall Conference at the Sheraton Saratoga Springs Hotel & Conference Center.  This Conference will not only provide members from ESSA’s five affiliated chapters across the state with the opportunity to network and trade ideas, but there will be a complete slate of educational programs held at the Conference as well.  Since this Conference will be held locally, I strongly urge members of NESCA to register and attend.  ESSA will also hold its legislative planning meeting, at which time all members will have the chance to provide input regarding ESSA’s pending 2003 legislative program.

                Finally, NESCA’s 22nd Annual Trade Show will be held at the Century House on October 10th.   By now, members should have received some information and exhibitor registration forms for the Trade Show.  To all suppliers and service companies, the NESCA Trade Show has been, and is, the best commercial construction trade show around.  I highly recommend you sign up for exhibit space early, because there are a limited number of spaces available.

 

James M. Elacqua

President

 

COURT ALLOWS PARTIAL INDEMNIFICATION OF CONTRACTOR  (Go Top)

                On July 2, 2002, the Supreme Court of New York, Appellate Division, First Department, handed down its decision in the Donald Dutton, et al. v. Charles Pankow Builders, Ltd. case.  In this case, the contractor sought indemnification from the subcontractor for damages the general contractor suffered as a result of claims of two construction workers.  In the case brought by the construction workers, the court apportioned liability 20% against the general contractor and 80% against the subcontractor.

                The subcontractor offered as a defense that the indemnification clause underlying the general contractor’s cause of action for contractual indemnification purported to indemnify the general contractor for its own negligence contrary to General Obligations Law §5-322.1, and therefore such clause is void and unenforceable even though the subcontractor had been negligent.

                The Appellate Court in refuting the subcontractor’s position stated “insofar as pertinent, the challenged indemnification clause provides that ‘to the fullest extent permitted by applicable law’, the subcontractor will indemnify the general contractor for all liabilities arising out of personal injury sustained in connection with the subcontractor’s work regardless of whether the [the general contractor is] partially negligent.”  The court found that the indemnification clause called for partial, not full, indemnification of the general contractor whose damages are partially caused by its negligence and therefore was enforceable.

                Section 5-322.1 of the New York State General Obligations Law provides in part that an agreement “purporting to indemnify of hold harmless the promissee (general contractor) against liability for damage arising out of bodily injury to persons or damage to property contributed to, caused by or resulting by the negligence of the promissee (general contractor), its agents, or employees or indemnity, whether such negligence be in whole or in part is against public policy and is void and unenforceable.”  Subcontractors would contend that this language is clear and unequivocal and means simply that if a contractor’s sole or part negligence caused the damage, he should not be entitled to any indemnification from the subcontractor whether or not the subcontractor was negligent.  It appears that the New York State Legislature should clarify the meaning of this statute by amendment.

 

Terence J. Burke, Esq., NESCA Legal Counsel

 

AVERAGE WORKERS’ COMP. RATES TO REMAIN STABLE  (Go Top)

                Average workers’ compensation rates in New York will remain unchanged in the year starting October 1, 2002, the state Insurance Department has announced.  Assessments for the second injury fund and other special funds will be reduced from 14.4 percent to 13.2 percent of premium.

                Employers’ workers’ compensation costs reflect both premiums and assessments.  New York State sets “manual rates” for nearly 800 different job classifications.  The premiums employers actually pay are based on the total of the manual rates for all jobs on the payroll, modified by the employer’s experience.  After an employer’s total premium is calculated in this way, an additional percentage, the so-called administrative assessment, is added to the bill.  Money collected from assessments covers the administrative costs of the Workers’ Compensation Board and ensure that several special funds administered by the Board are adequately funded.  The New York Compensation Insurance Rating Board recommends both manual rates and assessments each May, subject to review and approval by the State Insurance Department.  The Insurance Department generally announces the final rate change in July, to take effect in October.

                Employers will also be billed an additional 3 percent for a “disaster preparedness provision”.  This extra amount is intended to help carriers better financially manage potential catastrophe disasters, similar to the September 11, 2001 terrorist attacks, as well as natural catastrophic losses which may occur.

                Although the overall rate level is not changing, individual classification rates may change upward or downward based on the most recently available loss experience.   

The Insurance Department has also approved, effective April 1, 2003, an adjustment in credit allowed under the New York Construction Classification Premium Adjustment Program (PAP).  PAP provides premium credits for eligible construction employers to address premium differences between high wage and low wage paying employers having similar construction operations.  The table of allowable credits has not been adjusted since 1997.  The new table will allow credits that will range from 5% for an hourly wage of $15.50 to 35% for an hourly wage of $39.50 and over.  It is important to note that employers must apply for this credit annually, 6 months prior to policy renewal.  Members who believe they may be eligible for the PAP credit should contact their workers compensation carriers. 

 

WELCOME NEW MEMBER (Go Top)

Walter S. Pratt & Sons

317 Columbia Turnpike

Rensselaer, NY  12144

(518) 465-1549; Fax (518) 465-0712

Contact:  Mike Mills

 

CALENDAR OF EVENTS (Go Top)

 

September 5, 2002

Board of Directors Meeting

Century House, Latham, 6 pm

 

September 9, 2002

Annual NESCA Golf Outing

Shaker Ridge Country Club

Colonie, 11 am

 

September 12, 2002

NESCA Membership Meeting

Century House, Latham, 6 pm

 

September 20-21, 2002

ESSA Annual Conference

Sheraton Saratoga Springs

 

September 25, 2002

12-Week NESCA/GBC/ECA Course Begins

“Basic Blueprint Reading & Estimating”

Building Industry Center, 6 pm

 

October 3, 2002

Board of Directors Meeting

Century House, Latham, 6 pm

 

October 10, 2002

22nd Annual Trade Show

Century House, Latham, 5 pm

 

 

GOVERNOR SIGNS WAGE RECOVERY BILL (Go Top)

Other Labor-Driven Bills Pending

 

On July 30th Governor Pataki signed Chapter 242 Laws of 2002, a bill which will allow employees to recover unpaid wages from the contractor, the subcontractor or the bonding company within one year of the date of the filing of an order by the commissioner of labor determining a wage or supplement underpayment.  In essence, since it can often take several years for the commissioner to issue a determination, this bill gives underpaid employees a longer window of opportunity to file a claim against the bond than is currently afforded unpaid subcontractors and suppliers, who must file a claim against the bond within one year from the date on which final payment became due.

Several other labor-driven bills have passed both houses of the Legislature and are awaiting delivery to the Governor for his signature or veto.  One of these bills would grant unions the same standing to enforce the prevailing wage law as the public agency in charge of a public works project.  It would also allow such employee organizations to enforce the provisions of the law without any evidence of non-compliance.  The bill essentially anoints private labor unions with governmental prosecutorial and enforcement powers.  A second bill would apply prevailing wage requirements to projects where a contract is entered into by a third party acting on behalf of a public entity pursuant to a lease, permit or other agreement between such third party and the public entity.  This bill is intended to overturn a court decision, which found that the Department of Labor was blocked from enforcing the prevailing wage law against a contractor who performed access road work for a private developer.  The language of the bill appears broad enough to also include industrial development agencies within the definition of what constitutes a third party, thereby requiring contractors who perform work financed through IDAs to pay prevailing wages.

 

New York Compensation Insurance Rating Board Manual Rates

Selected Construction Classifications (Go Top)

            The New York State Insurance Department has approved a revision in workers’ compensation rates to become effective on policies with rating anniversaries October 1, 2002 and after.

 

W.C. Classification                 CODE             10/1/98            10/1/99            10/1/00            10/1/01            10/1/02

 

Landscape Gardening & Drivers          0042                         9.53                         9.63                         9.12                         8.81                         8.82

Machinery Erection NOC, Drivers       3724                         9.71                         9.55                         9.02                         9.19                         9.24

Masonry NOC                                         5022                       19.36                       21.00                       19.61                       20.50                       18.19

Painting – Bridges, 2 Story Struct.       5037                       30.37                       31.02                       28.12                       35.20                       27.82

Iron/Steel Erection – Frame                   5040                       24.08                       21.93                       22.45                       18.74                       14.93

Iron/Steel Erection – NOC                     5057                       25.53                       20.26                       22.62                       24.53                       21.15

Steel Erection 2 Stories – Commer.       5059                       90.77                       78.07                       76.78                       75.08                       58.38

Steel Erection 2 Stories – Residen.       5069                       16.55                       18.28                       20.37                       23.18                       26.58

Iron/Steel/Brass Erect. Non-Struct.      5102                       15.29                       14.46                       12.42                       11.47                         9.06

Plumbing NOC & Drivers                      5183                         8.51                         8.49                         8.23                         8.40                         7.68

Elec. Wiring in Building & Drivers       5190                         6.29                         6.77                         6.22                         6.06                         6.04

Concrete Construction NOC                 5213                       22.08                       22.04                       20.80                       19.32                       17.70

Driveways/Sidewalks & Drivers           5221                       14.77                       15.14                       12.36                       12.87                       12.15

Concrete Bridges/Culverts                    5222                       21.65                       17.89                       17.12                       17.95                       18.28

Tile/Terrazzo/Marble – Interior             5348                       11.34                       12.11                       10.57                         9.71                         9.08

Carpentry NOC                                        5403                       13.51                       14.34                       13.73                       14.65                       15.29

Lathing & Drivers                                   5443                       13.23                       14.58                       16.41                       20.44                       16.02

Drywall/Wallboard Installation            5445                       11.22                       11.14                       10.47                       10.79                         9.57

Painting, Decorat. NOC & Drivers       5474                       13.16                       13.37                       13.21                       12.89                       12.73

Insulation Work NOC & Drivers          5479                       11.11                       11.01                         9.97                       10.81                         8.99

Plastering NOC & Drivers                     5480                       13.36                       11.57                       12.85                       10.81                         9.24

Paper Hanging & Drivers                      5491                         2.69                         2.94                         2.86                         3.18                         3.65

Street/Road Pave, Repave, Drivers      5506                      13.35                       12.40                       12.05                       13.45                       12.62

Street/Road Subsurface, Drivers          5507                         7.38                         8.79                         9.90                         9.37                         8.65

Excavation – Rock & Drivers                5508                         9.29                         8.90                         8.23                         7.93                         8.64

Heating, A/C Duct Work & Drivers     5536                         8.92                         8.44                         8.24                         8.56                         7.71

Sheet Metal Inst. NOC & Drivers         5538                       13.52                       15.10                       14.91                       14.96                       14.73

Roofing – Sloped & Yard, Drivers       5545                       33.19                       33.63                       31.40                       33.69                       29.72

Roofing – Flat & Yard, Drivers             5547                       25.24                       23.79                       23.38                       21.23                       24.86

Executive Supervisors                            5606                         6.88                         6.86                         5.95                         5.35                         5.26

Cleaners – Debris Removal                   5610                         5.06                         5.22                         4.78                         5.54                         5.51

Carpentry 1,2 Family Detached             5645                       14.10                       14.89                       14.07                       14.40                       13.96

Carpentry – Res. 3 Stories or Less       5651                       15.72                       15.13                       13.08                       13.69                       14.02

Underpinning & Drivers                        5703                       33.00                       33.41                       31.56                       29.99                       29.29

Pile Driving NOC & Drivers                  6003                       26.58                      29.90                       22.21                       18.88                       15.97

Excavation/Grading NOC, Drivers        6217                         9.03                         8.75                         8.91                         8.50                         8.49

Irrigation/Drainage System, Drivers   6229                          6.75                         5.88                         5.11                         6.27                         7.21

Tunneling Not Pneumatic All Ops.      6251                       59.40                       47.06                       34.35                       28.94                       22.17

Coffer-Dam (Non Pneumatic)                6252                       18.72                       20.82                       21.04                       19.39                       15.13

Sewer Construc. – All Ops, Drivers     6306                       11.52                       11.33                       10.62                       10.85                         8.71

Water Main Construc., Drivers            6319                        9.55                         8.51                         7.05                         6.85                         7.18

Conduit Constr. For Cables, Drivers   6325                          8.30                         9.16                         8.10                         9.48                       10.89

Trucking NOC & Drivers                       7219                       10.73                       10.87                       10.22                       10.59                       11.11

Drivers NOC                                            7380                         8.37                         8.59                         8.37                         9.10                         9.57

Cable Inst. In Conduits, Drivers           7536                       11.95                       11.25                       11.02                       12.09                       11.91

Railroad – Lay Track, Drivers               7855                       25.32                       20.25                       16.60                       16.57                       15.37

Contractors Permanent Yard                 8227                       12.11                       12.38                       11.84                       11.11                         9.38

Surveyor                                                   8601                         1.37                         1.11                         1.09                         1.07                         0.85

Executive Officers                                   8809                         0.43                         0.45                         0.43                         0.45                         0.40

Clerical                                                      8810                         0.40                         0.39                         0.37                         0.39                         0.34

Paint Traffic Lines, Safety Groove       9402                         6.83                         7.18                         7.03                         6.72                         6.09

 

NYS Assessment                                                                     9.4%                      13.6%                     16.5%                     14.4%                     13.2%

 

 

New York Construction Classification Premium Adjustment Program (PAP) (Go Top)

            In 1993, the New York Compensation Insurance Rating Board developed, and the New York Insurance Department approved, the New York Construction Classification Premium Adjustment Program (PAP).  This program was developed to address workers’ compensation premium differences between high wage and low wage paying employers in the construction industry in New York State.

            The PAP provides premium credits to experience rated employers whose employees earn a higher than average hourly wage for a particular construction classification.  The Insurance Department has approved, effective April 1, 2003 for new and renewal business a new table of premium credits for the affected construction classifications.  The current table of premium credits has been in effect since 1997.  Since that time, wage inflation has increased the New York wage levels for all industries, including construction.  Given this wage inflation, a $15.50 hourly wage will become the minimum average wage for eligibility of a PAP credit.  However, since the Payroll Limitation Law, which became effective in 1999, caps the payrolls of the higher wage paying employers, the only change to the table is a minor extension to the table in order to maintain the current percentage increments.

            The PAP provides for a premium credit, for up to one year, for a policy which contains one or more construction classifications, and therefore, construction employers much apply for the PAP credit annually.  The application must be received six (6) months prior to policy renewal.  If the application is received subsequent to the due date, it must be accompanied by a letter stating the reason(s) for the delay.  The Rating Board will not accept or process applications that are received more than twelve (12) months after policy renewal.

            The employer must submit the required payroll and hours worked information to the Rating Board for calculation of any applicable credit.  The basis for determining the credit is the limited payroll of each employee for the number of hours worked (excluding overtime) for each construction classification (other then employees engaged in the construction of one or two-family residential housing) for the third quarter, as reported to taxing authorities, for the year preceding the policy date.  Total payroll is to continue to be reported for employees engaged in the construction of one or two-family residential housing.  A credit may be determined for each construction classification by dividing the total payroll (excluding overtime) by the number of hours worked to arrive at the average hourly wage for the classification.  In the absence of specific records for salaried employees, it will be assumed each such individual worked forty (40) hours per week.  The factors for each hourly wage shown in the table below are used in the calculation of the employer’s final credit:

 

Average Hourly Wage                        Factor

Under $15.50                            .00

$15.50 - $16.49                         .05

$16.50 - $17.49                         .06

$17.50 - $18.49                         .07

$18.50 - $19.49                         .08

$19.50 - $19.99                         .09

$20.00 - $20.49                         .10

$20.50 - $20.99                         .11

$21.00 - $21.49                         .12

$21.50 - $21.99                         .13

$22.00 - $22.49                         .14

$22.50 - $22.99                         .15

$23.00 - $23.49                         .16

$23.50 - $23.99                         .17

$24.00 - $24.49                         .18

$24.50 - $24.99                         .19

 

Average Hourly Wage                        Factor

$25.00 - $25.49                         .20

$25.50 - $26.49                         .21

$26.50 - $27.49                         .22

$27.50 - $28.49                         .23

$28.50 - $29.49                         .24

$29.50 - $30.49                         .25

$30.50 - $31.49                         .26

$31.50 - $32.49                         .27

$32.50 - $33.49                         .28

$33.50 - $34.49                         .29

$34.50 - $35.49                         .30

$35.50 - $36.49                         .31

$36.50 - $37.49                         .32

$37.50 - $38.49                         .33

$38.50 - $39.49                         .34

$39.50 and over                         .35     

 

                The total construction classification base credit amount, in dollars, must be calculated and then divided by the total policy premium at manual rates including construction and non-construction classifications.  The result will be the average base credit percentage which is then used to calculate the final credit to be applied to the policy. Final eligibility and calculation of the premium credit is determined by the New York Compensation Insurance Rating Board.  Members who believe they may be eligible for the PAP credit should contact their workers compensation carriers.