DOL DRAFTING REGS ON PREVAILING WAGE SUPPLEMENTS Go Top

The New York State Department of Labor recently released its third version of draft regulations dealing with the issue of supplemental benefit contributions on NYS prevailing wage projects. NYSDOL released its initial draft in early May, and has revised its subsequent drafts, in part, based on comments submitted by NESCA and other associations.

NESCA had previously reported (March and May 2000 Newsletters) on the Labor Department’s position that for purposes of compliance with the prevailing wage law, supplements contributed into a benefit plan must be “annualized” and may not be “pooled”. In April, NESCA also prepared and distributed to all members a detailed bulletin which thoroughly explained this issue (members may contact the NESCA office if you would like another copy).

The latest draft continues to require annualization for most supplemental benefits. However, an exception is made where contributions to a plan are made on less than an annual basis (weekly, monthly, quarterly), in which case DOL will not annualize the contributions, but instead will use the shorter time period to calculate the hourly cash equivalent of the contributions.

The draft also recognizes that pension contributions will not be subject to annualization as long as the pension plan provides for immediate participation by an employee and 100% vesting after an employee works no more than five hundred hours. This provision is consistent with how pension contributions are treated under the federal Davis-Bacon law.

The latest draft is at least a step in the right direction for DOL, particularly by allowing full credit for pension contributions made on behalf of employees engaged in public work, even if additional pension contributions are not made while the employee is engaged on private projects.

What continues to remain unclear is the issue of retroactivity, that is, will DOL move forward in assessing retroactive reparations against contractors who were participating in plans not in compliance with the April 1999 “Notice”. Much my hinge upon the outcome of the two CPI lawsuits which are currently on appeal.

ESSA LIEN DURATION BILL DELIVERED TO GOVERNOR Go Top

A bill promoted by NESCA’s state affiliate, the Empire State Subcontractors Association (ESSA), which would amend the Lien Law by extending the duration of public improvement liens from six months to one year, has been delivered to Governor Pataki for his consideration. This legislation, delivered to the Governor on August 11th became a “ten day bill” upon delivery. That means the Governor has ten days to either sign the bill or veto it. If he does neither, the bill will automatically become law.

Private mechanic’s liens have long had a one-year duration period, while the duration of public improvement liens has been only six months. If the Governor signs the bill, the duration of liens will become consistent for both public and private improvements -- a one year period. By extending the duration of liens on public improvements to one year, subcontractors and suppliers will have a more reasonable initial time period to secure payment or negotiate a suitable settlement without inadvertently losing their liens rights.

If signed into law, this bill will take effect on January 1, 2001 and will become ESSA’s 31st legislative success since 1975.

PRESIDENT’S MESSAGE Go Top

All members should have recently received a letter from Program Committee chairman Bob Kind which announced some exciting changes to NESCA’s monthly membership meeting programs and format. The Program Committee had met on July 26th, and decided that things needed to be “shaken up” to increase the level of interest and attendance at our dinner meetings. During the course of the committee meeting, the discussion kept returning to two major points:

1) Our members’ time has become a huge consideration concerning attendance at meetings. People just don’t seem to have as much free time to attend meetings -- no matter how beneficial -- as they once did.

2) We need to give members good business reasons to attend NESCA membership meetings by providing valuable and timely information which they can immediately use to benefit their companies.

With these two factors in mind, the Program Committee constructed a schedule and format for our 2000-2001 membership meetings which will not only take less of our members’ valuable time, but will also provide more applicable, construction-specific information. To steal less of our members time, the committee decided to condense our meetings into a two-hour time frame -- meetings will now begin promptly at 6:00 p.m. and will conclude at 8:00 p.m. While we are cutting back on our meeting time-frame a bit, we believe the content of our meetings will actually be greater. That’s because the committee decided that this year’s meeting programs will consist of a series of “mini-seminars”, featuring construction-specific topics of importance to subcontractors and suppliers. These mini-seminars will cover important day-to-day issues which directly affect our businesses and will include extremely useful handouts to take home with you. Further, if you find you can’t attend the reception and dinner portion of a particular meeting, you may still attend the seminar (beginning at 7:30) for only $10.

Enclosed with this Newsletter is a flyer and registration form for our first membership meeting “mini-seminar” to be held on September 14th. Walt Breakell with the law firm Breakell & Couch, P.C. will be covering Lien Law Article 3-A trust funds, a law which is tremendously beneficial to subs and suppliers, but not very well understood by anybody. Walt recently represented several subcontractors in an Article 3-A action and will have lots of tips and pointers for us. I encourage you and others from within your company to attend this meeting because I guarantee you will learn many valuable things. Just ask yourself the five questions about Article 3-A listed on the enclosed flyer. If you can’t answer these questions, then there is no doubt that you should attend the meeting. But will you find the time? One final thing. NESCA’s Board of Directors has approved a new attendance incentive for our meetings which I think you’ll be interested in. Each month we will pull a members’ name in a special drawing, and if that member is represented by somebody at the meeting, that company will receive its 2001-2002 membership in NESCA free of charge! I hope to see you on September 14th.

Steve Dewey

President

COURT DISMISSES UNLICENSED SUBCONTRACTOR’S LIEN Go Top

In a recent decision of the Supreme Court, Appellate Division, Second Department (JME Enterprises, Inc. v. Kostynick Plumbing and Heating, Inc. et al.) 708 N.Y. Sup. 2d, 696 (June 5, 2000), the court affirmed a lower court decision holding that an unlicensed subcontractor was not entitled to a mechanic’s lien or to recover in breach of contract from the general contractor for work performed in installing a fire suppression system.

JME Enterprises, Inc., the plaintiff, subcontracted for the installation of a fire suppression system with Kostynick Plumbing and Heating, Inc., the general contractor on a construction project for the defendant Eastern Transfer of New York, Inc. While the general contractor held a valid license as required by the Administrative Code of the City of New York, JME did not have such a license. Seeking to recover $41,000 as a balance due for completed work, JME commenced an action for breach of contract and filed a mechanic’s lien against the project property.

JME contended that although it did not have the required license, it was in a “business association” with the general contractor pursuant to the provisions of the Administrative Code and as such was in the “direct employ” of a licensed master fire suppression piping contractor. The Administrative Code provided that “it shall be unlawful for any person to........install any fire suppression piping system in the City of New York unless that person is a licensed master fire suppression piping contractor, partnership, corporation or other business association and unless such work is performed under the direct and continuing supervision of a licensed master fire suppression contractor.” In dismissing JME’s complaint and vacating the mechanic’s lien, the court held that JME’s contention was without merit since neither JME nor its employees were employees of the general contractor.

Subcontractors performing work requiring a license who assume that they are covered and protected by the license of the general contractor should heed the ruling in this case and proceed with caution or else suffer the loss of their lien rights.

Terence J. Burke

NESCA Legal Counsel

SBA SETS NEW SIZE STANDARDS FOR CONSTRUCTION Go Top

The federal Small Business Administration (SBA) has established new small business size standards for the construction industry effective July 2000. The new size standards have been adjusted as follows:

General Building Contractors (SIC Group 15) - $27.5 million (was $17 million)

Heavy Construction (SIC Group 16) - $27.5 million (was $17 million)

Dredging & Surface Cleanup (SIC 1629) - $17 million (was $13.5 million)

Special Trade Contractors (SIC Group 17) - $11.5 million (was $7 million)

This represents the first adjustment to SBA size standards since 1984.

NESCA MEETS WITH DASNY TO DISCUSS AGENCY PROCEDURES Go Top

On July 26th, a committee of NESCA members met with officials from the New York State Dormitory Authority (DASNY) to discuss areas of general concern regarding that agency’s policies and procedures. The majority of this meeting focused on three basic issues: (1) Retainage; (2) Change orders; and (3) Consistency of policy between DASNY headquarters and the field.

NESCA was represented at this meeting by Jeff Senft with S & O Construction Services, Inc., Joe Gomez with Gomez Electrical Contractors, Inc., Ed Lawless with Weather Guard Industries, Inc., and Steve Taylor & Brett Sherman with Consolidated Masonry Contractors, Inc. DASNY officials in attendance included Managing Director of Construction Douglas Van Vleck, Senior Director of Project Management Rick Bianchi, and Assistant Director of Contracts and Cost Control John Kemp.

Regarding the retainage issue, NESCA expressed concern over the length of time retainage is often held by DASNY and also with the fact that DASNY has, in certain instances, held additional money above and beyond retainage to induce contractors to correct defective work. NESCA pointed out that the whole purpose of retainage itself is to do just that; to serve as an inducement to performance. In most cases the retainage already being held by DASNY should be adequate for getting a contractor back to correct defective work. Several examples were outlined where the amount of additional money held by DASNY was considerably more (as much as five fold) than the actual cost to correct the defective work. When faced with these examples, the DASNY officials agreed that too much money was being held.

NESCA also expressed concern about the length of time it takes to get paid on change orders. DASNY agreed that timely processing and payment of change orders is a problem. NESCA suggested, and DASNY agreed to look into the use of a “field order” system so that at least the small changes could be processed and paid quickly.

Finally NESCA expressed concern regarding a lack of communication and consistency between DASNY headquarters and its field employees. DASNY responded that they are considering bringing their field employees in for training, and may wish to have NESCA participate in this process.

Over the next year, NESCA will seek to continue meeting with DASNY in an effort to improve that agency’s policies and procedures and to build a more positive relationship between the subcontractor community and the Dormitory Authority.