Vol 19, No. 6 (518) 869-9800 December 2000

Wishing You Happy Holidays and a Healthy Prosperous 2001

Inside This Edition: Survey Results: Retainage Still A Problem For Subs * President’s Message * Lessee Held Liable Under New York Scaffold Law * Subcontractors Beware Of Illegal Insurance “Tie-In” Requirements * OSHA Issues Plain Language

Workplace Poster * Welcome New Members * Membership Committee Announces New Member Recruitment Incentive * Try These NESCA Benefits

SURVEY RESULTS: RETAINAGE STILL A PROBLEM FOR SUBS Go Top

Retainage, the holding of funds until the completion of a contract or beyond, continues to be a serious problem for subcontractors according to a member survey conducted by the Empire State Subcontractors Association (ESSA).

NESCA’s state affiliate conducted the survey in preparation for a December 12th ESSA Board of Directors meeting, at which time the Board will address possible legislative solutions to the retainage problem. During the 2000 legislative session, ESSA introduced legislation which would require a 50% reduction in retainage on all public works projects upon completion of 50% of the project. For the 2001 session, ESSA’s Board may also consider legislation which would require retainage to be deposited into an interest-bearing escrow account for the benefit of contractors and subcontractors. It is ESSA’s long-standing position that since retainage represents funds which have been previously earned by the subcontractor and which are merely being held by the owner to ensure future performance, those funds should be held in an interest-bearing account for the benefit of the subcontractor until such time they are released.

The results showed that the average annual business volume of the subcontractors who completed the survey is $6.1 million with an average of 40 employees. Total receivables of these companies averages $1.2 million with an average of $220,000 of this amount represented by retainage.

Subcontractors responding to the survey also reported that the amount of retainage held on public projects is, on average, less than the amount held on private jobs, but retainage is held for a longer period of time on public projects. The survey results showed that retainage held on public projects averages 7.25% and is held for an average of eight (8) months. Retainage held on private projects averages 9.5% and is held for an average of five (5) months. For all projects, the average maximum period of time retainage has been held before it was released is 20 months.

A closer look at the survey results shows that for public projects, both the average amount of retainage held and the average length of time it is held varies depending on whether the company operates primarily as a subcontractor or as a prime (mechanical/electrical) contractor. Prime contractors reported an average of 5% retainage held for an average of 4.3 months, while subcontractors reported an average of 8% retainage held for an average of 9.4 months. This interesting differential indicates that part of the retainage problem may be due to general contractors holding subcontractor retainage for longer periods of time, and in higher amounts, than public owners are holding from general contractors. It also clearly shows one advantage of contracting directly with the public owner.

Enclosed with this Newsletter is a copy of the ESSA Retainage Survey results.

PRESIDENT’S MESSAGE Go Top

So far so good! It appears that NESCA’s new membership meeting format is working very well for us this year. At our November 9th membership meeting, Kevin Laurilliard, with the law firm McNamee, Lochner, Titus and Williams, P.C. made an excellent presentation on the issue of “Scope of Work”. We had very good attendance at this meeting, and a breakdown of those who attended showed that lots of subcontractors came to hear Kevin’s presentation. Kevin reviewed many examples of both good and bad contract clauses which can impact on a subcontractor’s scope of work. He provided sample clarifications to open-ended scope requirements. He reviewed the difference between performance and prescriptive specifications. He pointed out undesirable dragnet and protection of work clauses and discussed ways to counter these clauses. He provided handy tips for negotiating scope and performance terms as well as undesirable warranty provisions. In short, Kevin provided attendees with lots of “meat and potato” information to help them to avoid agreeing to precarious subcontract scope provisions. Great job Kevin!

For the third year in a row, NESCA’s December 14th membership meeting will be a special holiday version dinner meeting and reception. Instead of conducting our normal business, we’ll be getting into the holiday spirit by giving our members an opportunity to socialize with your friends and peers within the association. This holiday meeting and reception will feature a 3-hour open bar, champagne station, fantastic hors d’oeuvres, a first-class dinner with a dessert station and international coffees! We encourage all members to bring your spouses (or significant others) with you because spouses are invited to come to the holiday meeting and reception for free! Also, please remember to bring a toy with you to the meeting for our traditional Toys for Tots campaign in conjunction with the United States Marine Corps. NESCA has been involved in this very worthwhile program for over 20 years, and we encourage you to help make the holidays happier for local kids through your toy donation. The Marines will be represented at our meeting, and we’d sure like to be able to present them with lots of toys again this year. So mark December 14th on your calendar and bring your spouse to the holiday meeting and reception. I know those of you who attended last year don’t have to be convinced to come again this year! For the rest of you, you’re absolutely guaranteed to have a great time!

On another matter, NESCA’s 16th Annual Frank Campito Memorial Car/Cash Giveaway will be held on February 22, 2001 at the Century House from 7:00 - 9:30 p.m. Over the last fifteen years, this event has proven to be

one of NESCA’s most exciting, and a great fund raiser for the association as well! Once again, all ticket holders and their guests will be invited to enjoy the drawing at the February 22nd cocktail reception. This year, prizes awarded will total more than $34,000! The ticket price for the Car/Cash Giveaway remains at $200. Flyers have been mailed to all members, and you may purchase a ticket directly from the NESCA office or from a member of the Board of Directors.

Steve Dewey

President

LESSEE HELD LIABLE UNDER NEW YORK SCAFFOLD LAW Go Top

The New York State Supreme Court, Appellate Division, Second Department recently determined that the lessee of a building where a renovation project was carried out was a “contractor, owner, or agent” within the meaning of New York State’s scaffolding law (Labor Law Section 240(1)) and, therefore, was strictly liable for any violation thereof resulting from a mechanic’s injury in a fall from a ladder. In Frank Prass, et al. v. Viva Loco of 110, Inc. 712 N.Y.S.2d 620, the court concluded that the President of Viva Loco, the lessee of the premises, directly hired various contractors and trades people employed on the work site and had an office on and walked around the work site daily. He also coordinated the various stages of the work and spent 11-15 hours per day on the work site. The court found that this was sufficient proof that defendant was a “contractor, owner or agent” within the meaning of Labor Law Section 240(1). Thus, the court imposed the strict liability of the scaffolding law on the defendant.

This case, in effect, extends the definition of owners and contractors subject to strict liability under Labor Law Section 240(1) to a lessee who, although not an owner or contractor per se, becomes directly involved in the supervision of construction on the premises.

Terence J. Burke, Esq.

NESCA Legal Counsel

SUBCONTRACTORS BEWARE OF ILLEGAL INSURANCE “TIE-IN” REQUIREMENTS Go Top

In recent years, general liability insurance premiums have been relatively stable and large limits have been available. Unfortunately for contractors and subcontractors, in the past year this began to change as insurers tightened underwriting standards and sought premium increases. Some might even say the construction industry is entering into a general liability “crisis” as contractors and subcontractors have been hit with significant increases -- if they can get coverage at all. Many general liability carriers are abandoning the market and simply refusing to underwrite subcontractors.

A number of members have notified the NESCA office that some insurance carriers are telling them that they must write the subcontractor’s workers’ compensation coverage in return for providing the subcontractor with general liability coverage. Members need to be aware that this type of demand by an insurer constitutes an illegal “tie-in” sale. According to the NYS Insurance Department (OGC Opinion 87-2), the practice by insurers of refusing to furnish an insurance policy unless the insured purchases an additional policy, or “supporting business” violates NYS Insurance Law.

Members are asked to contact the NESCA office if you encounter a “tie-in” sale demand by an insurance carrier. Further, in light of this tight general liability market, it would be wise to begin talking to your insurance agent about future G.L. coverage 3-4 months before your existing policy is due to expire.

OSHA ISSUES PLAIN LANGUAGE

WORKPLACE POSTER Go Top

The Occupational Safety & Health Administration (OSHA) has recently introduced a new workplace poster for informing workers of their rights to a safe workplace. Redesigned as part of the “plain language initiative”, it gives workers and employers information they need to make sure their workplace is safe. It also tells workers how they can file a complaint, report an emergency, seek OSHA advice, and that they have the right to confidentiality.

The new plain language poster (OSHA 3165) replaces OSHA’s currently required workplace poster (OSHA 2203). As supplies of OSHA 2203 diminish, the new workplace poster will be phased in to take its place. Employers do not need to replace current 2203 posters, but they are required to post an OSHA notice of employee rights in a prominent location. The OSHA 2203 poster will continue to be in compliance with OSHA regulations. Subcontractors may order a pre-printed copy of the OSHA 3165 poster by using the online publications order form on OSHA’s website at http://www.osha.gov/

COLONIE BLOCK & SUPPLY CO., INC. would have won a FREE membership in NESCA for 2001-2002 had there been a representative in attendance at NESCA’s November 9th membership meeting! NESCA members don’t miss your chance to win a free membership in NESCA! Attend the January 11th membership meeting!

WELCOME NEW MEMBERS Go Top

Kneeland Construction Company, Inc.

25 Corporate Circle

Albany, NY 12203

(518) 452-7320; Fax (518) 452-6359

Contacts: Peter DiPace, Suzi Granger

Orange County Ironworks, Inc.

27 Stone Castle Road

Rock Tavern, NY 12575

(845) 564-8421; Fax (845) 564-8415

Contacts: Glenn Whitney,

Carl Bargisen

MEMBERSHIP COMMITTEE ANNOUNCES NEW MEMBER RECRUITMENT INCENTIVE Go Top

NESCA Membership Committee Chairman Mark Woodward has announced a new member recruitment incentive for 2000-2001. Effective retroactive to July 1, 2000, any NESCA member who recruits a new member into the association between July 1, 2000 and June 30, 2001 will receive $50. There is no limit to how many new members may be recruited. If you recruit one new member, you’ll receive $50 -- if you recruit ten new members, you’ll receive $500! The following NESCA members have already won $50 in this membership recruitment campaign:

Dick McNitt - KAMCO Supply Corp.

Dennis Colgan - C & C Welding Co., Inc.

Ed Lawless - Weather Guard Industries, Inc.

Russell Veith - Royal Crane, Inc.

Jeff Senft - S & O Construction Services, Inc.

Jim Vellano - Vellano Bros., Inc.

TRY THESE NESCA BENEFITS Go Top

FREE LIEN FILING SERVICE - NESCA will file liens for members on projects located anywhere in New York State for both private or public projects. Every member is entitled to preparation of up to three (3) liens absolutely free of charge during any NESCA fiscal year. This includes all filing fees, postage, service fees and administrative expense. The lien service includes preparation of the Notice of Lien, preparation of notification letters and service of the Notice of Lien on the owner and the contractor, filing the Notice of Lien in the appropriate County Clerk’s office or with the proper public officials, and filing of an Affidavit of Service with the County Clerk’s office or with the public officials. To use the NESCA Lien Service, contact Lorraine at the NESCA office.

EMPLOYMENT PRACTICES LIABILITY PROGRAM - This program provides several key advantages to members who must purchase EPL insurance coverage, most notably a substantial cost savings (up to 50% or more) when compared to standard industry individual policy premiums, The EPL Program has been specifically tailored for NESCA and its members by Allied Coverage Corp. with insurance provided by Lexington Insurance Company. For more information about the NESCA EPL Program, contact Lisa-Ann Marchica at Allied Coverage Corp at 1-800-861-9452, Ext. 259.

EMPLOYEE ASSISTANCE PROGRAM - Members may take advantage of our full-service EAP initiated and developed for NESCA members by Human Resource Associates for the extremely low fee of $25 per covered employee per year. The NESCA EAP includes confidential counseling and referral services for employees and their families, written EAP and drug testing policies, and a 24-hour crisis line.