Vol 19, No. 10 (518) 869-9800 April 2001

Inside This Edition: Liability Crisis Underscores Need For Labor Law Reform * Wrap-Up Insurance Bill Opposed By ESSA * President’s Message * Arbitration Filing Can Delay Court Action Filing Period * Building Aid Proposal Could Spell Trouble For School Construction Projects * Welcome New Members * NESCA Board Approves New Section 125 Program Administrator * Cash Winners At NESCA’s 16th Annual Car/Cash Giveaway * President Bush Bans PLAs On Federally Funded Work * Governor Taps New Labor Department Head * Bush Order To Require Posting Of Employee Rights * OSHA Revises Recordkeeping Regulations

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LIABILITY CRISIS UNDERSCORES NEED FOR LABOR LAW REFORM Go Top

During the past year, many contractors and subcontractors have seen their general liability insurance rates skyrocket. Some have reported a doubling or tripling (or more) of their premiums. Still others have found that their long-standing general liability carriers now refuse to underwrite them at all. Indeed, many general liability carriers have simply abandoned the New York market. Some subcontractors report having been told by insurers that they will write the subcontractor’s general liability insurance only if the subcontractor gives the insurer their workers’ compensation business as well. Many would say we have entered a general liability “crisis”. The reason? Sections 240 and 241 of the Labor Law, the so-called “safe place to work” law. Insurance carriers are saying they just can’t tolerate 240/241 claims any longer.

Sections 240 and 241 of the Labor Law place an “absolute” standard of liability on contractors and building owners to provide a safe place to work. This means an injured employee does not have to prove negligence on the part of the contractor or owner. He needs only to show he suffered an injury. There is essentially no defense a contractor or owner can mount even if the injured worker caused his own injury because he failed to follow company safely rules, was drunk or on drugs, or was culpable in some other way.

Given the difficulties the construction industry is facing with liability insurance cost and availability, the 2001 legislative session may present the best opportunity in a long time to convince the State Legislature that Labor Law Sections 240 and 241 is costly, wasteful, unfair and in need of reform. It is the only law of its kind in the country, and represents a pure gravy train for the trial lawyers. Members are urged to write to your legislative representatives, Senate Majority Leader Bruno, Assembly Speaker Silver and Governor Pataki, and let them know we need reform of 240/241 NOW! Enclosed with this newsletter is a sample letter for your use. Please send your letters out immediately and send copies to the NESCA office.

WRAP-UP INSURANCE BILL OPPOSED BY ESSA Go Top

The Empire State Subcontractors Association (ESSA) has submitted written opposition to language contained in Governor Pataki’s proposed 2001-02 budget which proposes the centralized procurement of owner controlled (wrap-up) insurance and surety bonds by the NYS Office of General Services. Part E of Budget Bill S.1147/A.1999 would allow state agencies, public authorities and municipalities to purchase “wrap-up” insurance policies and surety bonds for projects with a total estimated cost in excess of $25 million and multiple related projects with a total aggregate estimated cost in excess of $50 million, as an alternative to the traditional contractor-provided insurance policies and surety bonds. This bill would reverse the long-standing public policy of the existing law which is intended to guard against subjective and political influence in the purchasing of insurance for public works projects.

ESSA opposes the wrap-up proposal on the basis that wrap-up coverage provides the contractor with no option on the amount of a deductible, may create duplication of coverage, and promotes confusion about where the contractor’s regular coverage leaves off and the wrap-up coverage picks up. Additionally, wrap-up policies normally contain a limit (tail) on completed operations coverage of about two to three years. This would require contractors and subcontractors to then purchase completed operations coverage for each project performed under a wrap-up, something which is both costly and difficult. Further, the concept of wrapping up surety bonds for a project simply doesn’t make sense. The bill completely fails to recognize the purpose of surety bonding and the difference between suretyship and insurance.

PRESIDENT’S MESSAGE Go Top

We continued with our “mini-seminar” approach to membership meeting programs on March 8th with a presentation by Terry Burke of Harris Beach, LLP on the topic of “Delays and Changes”. As with earlier mini-seminar presentations this year, Terry did an excellent job providing attendees with a tremendous amount of material in a short amount of time. Members learned about the importance of clear and reasonable schedule and notice language in their subcontracts and were provided with examples of unsatisfactory requirements and how to counteract them. Terry also reviewed change orders, field orders and change directives and the differences between the three. He provided examples of fair and unfair change order language, and important provisions for subcontractors to be on the lookout for regarding change orders. Terry reviewed the importance of clear entitlement to additional compensation for delays and disruptions and provided sample language. He taught us what the purpose of a force majeure provision is, explained why it is important to differentiate between casual overtime and major scheduled overtime when negotiating subcontract language, spent time discussing liquidated damages, payment for concealed conditions, and much more. Terry also provided attendees with many useful handouts including sample letters, forms and examples of good and bad subcontract language.

I cannot stress enough how much useful information is being provided to members at these monthly dinner meetings, and I encourage all members to attend or send somebody else from your company. Our April 12th mini-seminar topic will be “Indemnification and Hold Harmless Clauses” and will be presented by Jim Barriere with Couch White, LLP. I hope you make plans to attend.

As we approach the end to another long northeastern winter, it’s a good time to give members a “heads up” on the dates for some of NESCA’s upcoming warm weather events. On Monday, June 11th, NESCA and the General Building Contractors of NYS will hold the 6th Annual Joint Mid-Hudson Golf Outing at the Wiltwyck Golf Club in Kingston. On Thursday, July 26th, we will hold our 3rd Annual Day at Saratoga Race Track in Saratoga. And on Monday, September 10th we will hold our 17th Annual Golf Outing, this year at McGregor Links Country Club in Saratoga. Please mark these dates on your calendar. Detailed information on each of these events will be mailed to all members prior to the event.

Congratulations to Tony Lanza with Advantage Electric Co., Inc. who is now $25,000 richer as a result of his holding the winning ticket at NESCA’s 16th Annual Frank Campito Memorial Car/Cash Giveaway held on February 22nd at the Century House!

Finally, at our March membership meeting we failed to have a winner for our monthly “attendance incentive” drawing. Had Trevor Hash or somebody else from SAFCO been in attendance, you would have won free membership in NESCA for our 2001-02 year, a $550 value! Attend NESCA’s April 12th membership meeting and perhaps YOUR company’s name will be drawn for a free membership!

Steve Dewey

President

ARBITRATION FILING CAN DELAY COURT ACTION FILING PERIOD Go Top

In Joseph Francese, Inc. v. Enlarged City Sch. Dist., 95 N.Y.2d 59, the Court of Appeals addressed a statute of limitations tolling provision set forth in CPLR §204(b). This section may suspend the running of the statute of limitations period within which to bring a court action if a party seeks to adjudicate the legal dispute through arbitration. The issue in this case was: Does the stay apply when the demand for arbitration is thereafter determined to have been done erroneously?

This case involved a Subcontractor suing a School District for an alleged breach of a contract. Portions of the contract addressing legal dispute resolution through arbitration were stricken but some portions remained.

The Subcontractor properly served a demand for arbitration of the dispute upon the School District based upon portions of the contract allowing arbitration. The School District moved to remove the case from arbitration claiming the language was stricken from the contract. The trial court and the Appellate Division both agreed with the School District and ruled that the arbitration clause was removed from the contract and was unavailable to the Subcontractor to adjudicate the dispute.

The Subcontractor thereafter commenced a state action five months later alleging breach of contract. The School District moved to dismiss the Subcontractor’s action as untimely arguing the stay did not extend the statute of limitations period. The trial court agreed with the School District and dismissed, holding that the tolling provision did not apply. The Appellate Division agreed stating the Subcontractor needed to prove that its unsuccessful demand for arbitration was made under a color of right and done in good faith. The Court stated that the absence of doing so made the stay inapplicable.

The Court of Appeals, noting this was a case of first impression, disagreed and reversed the two lower court rulings. The Court found that requiring the Subcontractor to demonstrate good faith before selecting arbitration would discourage parties from selecting arbitration as an efficient and inexpensive means of resolving disputes. Lack of evidence of a good faith reason for choosing arbitration does not render the arbitration stay inapplicable.

Terence J. Burke, Esq.

NESCA Legal Counsel

BUILDING AID PROPOSAL COULD SPELL TROUBLE FOR SCHOOL CONSTRUCTION PROJECTS Go Top

Governor Pataki has proposed several significant changes in school building aid which could negatively impact on construction work to be performed this summer, but Senate Majority Leader Bruno has already gone on record stating the Senate will reject the Governor’s plan.

During the last five years, there has been a tremendous amount of school construction work statewide, and many NESCA members have been extensively involved in this type of work. Since 1997-98, the volume of locally approved school construction projects has more than tripled. That is because currently, State funding for school construction is provided through an open-ended formula. This open-ended formula and the rapid growth in building aid paid to school districts is, according to the Governor, hampering the ability of the State to fund other educational priorities, including efforts to meet the State’s new higher learning standards. To deal with this problem, the Governor has proposed in his 2001-02 budget several major modifications to school construction aid. One of these modifications is called “Priority-Based Project Selection”. This would put a rating system in place in which capital projects would be sorted by State Education Department (SED) staff and funded in order of priority until funding for the year is exhausted. Lower priority projects which are not funded would have to wait for funding in subsequent years. As a result of this budget proposal, SED stopped approving new projects on January 15, a move which threatened the 2001 school construction season.

In a March 9, 2001 press release, Senate Majority Leader Joseph Bruno and Education Committee Chairman John Kuhl, Jr. announced that the Senate will reject the Governor’s plan, explaining that it could delay or derail important school district renovation and new construction projects. Senator Bruno stated that he was making the announcement even before a final budget plan is in place “to end uncertainty on the part of school district administrators and lenders over whether their projects will be eligible for state reimbursement.” By delaying decisions on whether to begin new projects while they awaited final action on the state budget, school districts ran the risk of losing part of or all the 2001 construction season.

NESCA has since learned that SED has begun to once again approve projects for the coming construction season.

WELCOME NEW MEMBERS Go Top

Albany Windustrial Co., Inc.

432 South Pearl Street

Albany, NY 12202

(518) 436-7920; Fax (518) 436-8032

Contacts: Tim Frederick,

Denise Murphy

Capital Gypsum

20 Green Mountain Drive

Cohoes, NY 12047

(518) 783-6121; Fax (518) 783-0110

Contacts: Mike Foucault,

Terry Malone

R&D Concrete Cutting & Drilling

P.O. Box 4956

Clifton Park, NY 12065

(518) 383-8620; Fax (518) 383-1350

Contact: Ron & Donna DeLude

NESCA BOARD APPROVES NEW SECTION 125 PROGRAM ADMINISTRATOR

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NESCA’s Board of Directors has approved Corporate Benefit Planning as the new administrator for the association’s group Section 125 Flexible Benefits Plan. The Section 125 Flexible Benefits Plan allows both member companies and their employees to save substantial tax dollars in qualified health insurance premiums, qualified medical reimbursement expenses, dental expenses and dependent care expenses. These types of expenses are usually paid by employees with their after-tax take home pay. But with a Flexible Benefits Plan, employees can elect to have the plan pay for these personal expenses on a pre-tax basis, thereby reducing federal income taxes, FICA and state/local income taxes. Employers also save by reducing their portion of FICA liability.

Corporate Benefit Planning (CBP) will provide members who elect to participate in the program with special NESCA group rates. CBP’s services for the plan will include employee information seminars, enrollment materials, plan and claim administration, reimbursement and record keeping, testing for discrimination, development of plan documents and preparation of Form 5500. For further information on the NESCA Section 125 Flexible Benefits Plan, members should contact Deborah Grasso at Corporate Benefit Planning at (518) 785-0115.

CASH WINNERS AT NESCA’S 16TH ANNUAL CAR/CASH GIVEAWAY Go Top

As follows are the winners of NESCA’s 16th Annual Car/Cash Giveaway held on February 22, 2001 at the Century House:

Ron Carmer - $400

Rich Gabriels - $400

Roger Jones - $400

Scott Bernstein & George Grober - $400

Tom Burke - $400

Farrah Fisher - $400

Bob Story - $400

Todd Kilburn - $400

Brian Carmer - $400

Mike Tyrrell - $400

Brian Carmer - $500

Greg Sheehan & Serge Shishik - $750

Mary Cooper & Elizabeth Wendover - $1,000

Leon Jones - $2,500

And the Grand Prize Winner....

Anthony Lanza - $25,000!!!

PRESIDENT BUSH BANS PLAs ON FEDERALLY FUNDED WORK Go Top

On February 17, 2001, President Bush issued an executive order banning project labor agreements (PLAs) on federal and federally funded construction projects. Executive Order 13202, was one of four labor-oriented executive orders issued by the President that day.

Executive Order 13202 states that federal agencies awarding contracts after February 17th shall ensure that neither the agency nor any construction manager acting on behalf of the agency shall require or prohibit contractors and subcontractors to enter into or adhere to agreements with unions. The executive order further states that federal agencies may not discriminate against contractors and subcontractors for becoming or refusing to become signatory to agreements with unions on the project in question or other related construction projects. The ban on PLAs also covers federally assisted projects. Contracts awarded before February 17th and all related subcontracts are not governed by the executive order.

An exemption on the PLA ban may be granted by the head of a federal agency if it is determined that special circumstances require an exemption in order to avert an imminent threat to public health or safety or to serve the national security. However, an agency finding of “special circumstances” may not be based on the possibility or presence of a labor dispute concerning the use of contractors or subcontractors who are not signatory to labor agreements with one or more unions.

In issuing Executive Order 13202, President Bush revoked the pro-PLA Executive Order 12836 issued by President Clinton in 1993 as well as all related rules, regulations and policies.

AFL-CIO President John Sweeny expressed “outrage” at President Bush’s decision to issue the executive order and the Building and Construction Trades Department of the AFL-CIO called the ban “nothing short of a declaration of war on construction workers.”

GOVERNOR TAPS NEW LABOR DEPARTMENT HEAD Go Top

Governor Pataki has selected Linda Angello as the new Commissioner of the New York State Department of Labor. Angello has served as the Director of the Governor’s Office of Employee Relations since 1995. Angello will replace James McGowan who retired in October from the post, and James Dillon who has been Acting Commissioner since McGowan’s departure.

As OER Director she was responsible for negotiating and implementing agreements with the state’s nine public employee unions. She helped develop historic pension legislation for public employees and used innovative techniques to reduce the state’s workforce without layoffs. Prior to being named Director of OER, Angello served as Chief of Staff to New York State Senator Caesar Trunzo. She also served as Committee Director for the Senate Standing Committees on Civil Service and Pensions, Government Operations and Housing and Community Development.

BUSH ORDER TO REQUIRE POSTING OF EMPLOYEE RIGHTS Go Top

President Bush has signed an executive order which requires government contractors to inform employees that they cannot be required to join unions. The executive order also requires federal contractors to inform non-union employees that they do not have to pay a portion of their dues used to support activities unrelated to collective bargaining, such as for political purposes.

Executive Order 13201, issued on February 17, 2001, requires federal contractors (with contracts in excess of $100,000) to post a notice in conspicuous places in and about its plants and offices, including all places where notices to employees are customarily posted. The notice requires the following information:

NOTICE TO EMPLOYEES

Under Federal law, employees cannot be required to join a union or maintain membership in a union in order to retain their jobs. Under certain conditions, the law permits a union and an employer to enter into a union security agreement requiring employees to pay uniform periodic dues and initiation fees. However, employees who are not union members can object to the use of their payments for certain purposes and can only be required to pay their share of union costs relating to collective bargaining, contract administration, and grievance adjustment.

If you do not want to pay that portion of dues or fees used to support activities not related to collective bargaining, contract administration, or grievance adjustment, you are entitled to an appropriate reduction in your payment. If you believe that you have been required to pay dues or fees used in part to support activities not related to collective bargaining, contract administration, or grievance adjustment, you may be entitled to a refund and to an appropriate reduction in future payments.

For further information concerning your rights, you may wish to contact the National Labor Relations Board (NLRB) either at one of its Regional offices or at the following address:

National Labor Relations Board

Division of Information

1099 14th Street, N.W.

Washington, D.C. 20570

Executive Order 13201 also requires contractors to include such provisions in every subcontract or purchase order entered into in connection with the federal contract so that such provisions will be binding upon each subcontractor and vendor.

Contractors failing to comply with the terms of the executive order may face contract suspension, termination and debarment, and could also be included on a published list of noncomplying contractors.

Executive Order 13201 will become effective and apply to contracts resulting from solicitations issued on or after April 19, 2001.

OSHA REVISES RECORDKEEPING REGULATIONS Go Top

The Occupational Safety and Health Administration (OSHA) has issued a revised rule designed to improve the system employers use to track and record workplace injuries and illnesses. OSHA’s current recordkeeping requirements have been in place since 1971. OSHA believes the revised rule will produce better information about occupational injuries and illnesses while simplifying the overall recordkeeping system for employers.

The final rule becomes effective on January 1, 2002. OSHA has published the rule early in the year to give employers time to learn the new requirements and to revise computer systems they may be using for recordkeeping. During the transition period, employers must adhere to requirements of the current rule. Like the former rule, employers with 10 or fewer employees are exempt from most of the requirements of the new rule.

HIGHLIGHTS OF OSHA’S RECORDKEEPING RULE

OSHA’s rule addressing the recording and reporting of occupational injuries and illnesses affects approximately 1.3 million establishments. The revision (according to OSHA) improves employee involvement, creates simpler forms, provides clearer regulatory requirements, and allows employers more flexibility for using computers to meet OSHA regulatory requirements. The following is a brief summary of some of the key provisions of the recordkeeping rule.

· Updates three recordkeeping forms:

OSHA Form 300 (Log of Work-Related Injuries and Illnesses); simplified and printed on smaller legal sized paper.

OSHA Form 301 (Injury and Illness Incident Report); includes more data about how the injury or illness occurred.

OSHA Form 300A (Summary of Work-Related Injuries and Illnesses); a separate form updated to make it easier to calculate incidence rates.

· Eliminates different criteria for recording work-related injuries and work-related illnesses; one set of criteria will be used for both. (The former rule required employers to record all illnesses, regardless of severity)

· Requires records to include any work-related injury or illness resulting in one of the following: death; days away from work; restricted work or transfer to another job; medical treatment beyond first aid; loss of consciousness; or diagnosis of a significant injury/illness by a physician or other licensed health care professional.

· Includes new definitions of medical treatment, first aid, and restricted work to simplify recording decisions.

· Requires a significant degree of aggravation before a preexisting injury or illness becomes recordable.

· Adds additional exemptions to the definition of work-relationship to limit recording of cases involving the eating and drinking of food and beverages, common colds and flu, blood donations, exercise programs, mental illnesses, etc.

· Clarifies the recording of “light duty” or restricted work cases. Requires employers to record cases when the injured or ill employee is restricted from their “normal duties” which are defined as work activities the employee regularly performs at least once weekly.

· Applies the same recording criteria to musculoskeletal disorders (MSDs) as to all other injuries or illnesses. Employer retains flexibility to determine whether an event or exposure in the work environment caused or contributed to the MSD. Forms include columns dedicated to MSD cases.

· Eliminates the term “lost workdays” and focuses on days away or days restricted or transferred. Also includes new rules for counting that rely on calendar days instead of workdays.

· Requires employers to establish a procedure for employees to report injuries and illnesses and tell their employees how to report. Employers are prohibited from discriminating against employees who do report. For the first time, employee representatives will have access to those parts of the OSHA 301 form relevant to the employees they represent.

· Protects employee privacy by (1) prohibiting employers from entering an individual’s name on Form 300 for certain types of injuries/illnesses (e.g., sexual assaults, HIV infections, mental illnesses, etc.); (2) providing employers the right not to describe the nature of sensitive injuries where the employee’s identity would be known; (3) giving employee representatives access only to the portion of Form 301 which contains no personal identifiers; and (4) requiring employers to remove employees’ names before providing the data to persons not provided access rights under the rule.

· Requires the annual summary to be posted for three months instead of one. Requires certification of the summary by a company executive.

· Changes the reporting of fatalities and catastrophes to exclude some motor carrier and motor vehicle accidents.

The full text of the new Recordkeeping Regulations can be found on OSHA’s website at http://www.osha.gov./