ASA President’s Letter-January 2014

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ASA President’s Letter-January 2014

Dear ASA Member:

ASA is the only national association focused on the issues unique to construction subcontractors, suppliers and specialty trade contractors, at all levels and before all branches of government and within the construction industry. At the federal level, ASA focuses on issues such as subcontractor bidding and payment on federal and federally-assisted construction, as well as the unique challenges to subcontractors posed by tax, safety and health and environmental issues. At the state level, ASA not only conducts direct advocacy, but produces model legislation and other materials to help ASA chapters and other subcontractor advocates in the states to pursue subcontractor-friendly legislation. In addition, ASA is the only construction association with a Subcontractors Legal Defense Fund that finances “friend of the court” briefs in precedent-setting cases in courts all over the country.

In 2014 and beyond, ASA will work to:

  • Extend subcontractor payment protections to projects financed through public-private partnerships in all 50 states and by the federal government.
  • Deter the erosion to subcontractor payment protections by those who would waive statutorily-required payment bonds.
  • Curb the use of individual surety bonds by federal agencies.
  • Eliminate the use of electronic reverse auctions by federal agencies.
  • Continue to seek opportunities to strengthen state laws dealing with subcontractor bidding, subcontractor payment and equitable risk allocation in construction.
  • Continue to educate public policymakers about the monoposonistic nature of the construction industry.
  • Continue to identify and intervene in precedent-setting court cases on subcontractor issues.
  • Continue to educate subcontractors about statutory protections and negotiating strategies.

To the naysayers who think that effecting change is impossible, look at what ASA accomplished in 2013:

  • Stopped the erosion of subcontractor payment rights on construction projects financed through public-private partnerships by convincing legislatures to require payment bonds on such projects with the passage of new laws in California, Florida, Illinois, Maryland, and North Carolina.
  • Preserved 24 state laws that restrict the use of forum selection clauses in a challenge before the U.S. Supreme Court.
  • Added to a growing number of states in which commercial general liability insurance policies insure property damage that unintentionally results from defective work with a ruling by the Connecticut Supreme Court.
  • Improved subcontractor payment on private work in the District of Columbia with the enactment of an ordinance that established minimum standards for such payment.
  • Preserved subcontractor mechanic’s lien rights in Georgia with the enactment of a new law that clarified that contractors/subcontractors have lien rights for the full amount of the contract work successfully completed that is owed and due.
  • Limited retainage on public work in Maryland with the enactment of law that limits retainage on public work to 5 percent and requires the public entity to release retainage within 120 days of “satisfactory completion” or, if there is a dispute, within 120 days after resolution of the dispute.
  • Limited subcontractor liability for the actions of others with important decision by the Supreme Court of Minnesota, which ruled that a general contractor cannot shift liability to a subcontractor for damage caused by a general contractor’s own direction of the subcontractor’s work. This ruling was subsequently strengthened by the enactment of a state law that prohibits contracts that require insurance coverage for the negligence or intentional acts or omissions of another.
  • Limited the use of individual sureties in New Mexico through the enactment of a new law that requires that all insurers, including individual sureties, must possess a certificate of authority to write surety bonds in the state.
  • Established an important precedent before the Ohio Supreme Court, which held that notice and claims provisions that place an “impossible burden” on a contractor are against public policy.
  • Curbed the misclassification of employees as independent contractors on public construction in Texas with the enactment of a law that establishes strict penalties for misclassification. Further curbed misclassification in Illinois with enactment of a law that makes it easier to pursue civil and legal penalties against employers who intentionally misclassify workers in an effort to avoid paying employment taxes and insurance, overtime and other benefits and another new law that requires all contractors to report to the Illinois Department of Labor all payments to individuals who are not classified as employees of the company.
  • Improved subcontractor protections on public work in Wisconsin with enactment of a new law that implements a form of bid filing, limits retainage to 5 percent, and assures prompt release of retainage upon completion of the project.

Indeed, during ASA’s nearly 50 years of advocacy work, our major achievement has been making subcontractor rights an issue before all branches and at all levels of government. Under ASA’s leadership, the federal government eliminated retainage on construction in 1983, and subsequently, many states also eliminated or reduced retainage on public work. In 1988, ASA successfully led the fight for prompt payment of subcontractors on federal construction. All 50 states now have established minimum standards of payment for construction subcontractors on public work, and many states have also enacted minimum payment standards on private work. In 1999, ASA led an effort to strengthen the federal Miller Act, which requires that prime construction contractors provide bonds to protect subcontractor payment on federal construction. Many states followed suit. At the state level, ASA has been active in strengthening mechanic’s lien laws and eliminating the use of contingent payment clauses. ASA has also led the effort in state legislatures and in the courts to equitably allocate risk on construction contracts, enacting numerous state laws to limit subcontractor liability for the actions of others through contracts and insurance.

Legislation is an inescapable fact of life. Laws impact virtually every segment of the U.S. economy, including the construction industry. Each year, more than 170,000 measures are introduced in the state legislatures; roughly 30,000 become law. ASA chapters have the challenge of determining which of the thousands of measures introduced will impact subcontractors and assuring that subcontractor interests are represented. The sheer volume of relevant legislative information is an initial barrier. An organization with limited resources, thus may focus on just a few issues. In ASA, that may include, for example, mechanic’s liens, Little Miller Acts, retainage, payment timing, indemnity, and bidding. Once your chapter identifies and limits the issues it wants to monitor, or even lobby, explore and learn how to navigate your state legislature’s Web site. (Access your state legislature via the ASA Web site.) Most such sites allow full-text searching to identify key words and phases. Most sites will allow you to link to a page(s) for each bill that you want to monitor, making it easier to routinely check their status. A few state legislatures’ sites even allow you to set up alerts, which will email you each time there is a change in status on the bill(s) of your choice.

The construction industry, along with virtually every other segment of the U.S. economy, is subject to government regulation. Thus, it is important for construction associations, like ASA, to stay abreast of regulations published by nearly 11,000 state and federal agencies. Of course, ASA monitors and actively provides input into the rulemaking process at the federal level. ASA chapters have the challenge of assuring that subcontractor interests are protected in the state and local regulatory processes. The first step is to determine which agencies regulate ASA members. For example, at the state level, subcontractors will be impacted by state agencies regulating government purchasing, workplace and employment, the environment and tax compliance, to name just a few. Most states publish a weekly register (e.g., California Regulatory Notice Register, Maryland Register, Virginia Register of Regulations), which include proposed and final changes to state regulations. These “registers” tell readers how and when they can comment on proposals.

Supreme Court Justice Thurgood Marshall said, “There is very little truth in the old refrain that one cannot legislate equality. Laws not only provide benefits, they can even change hearts of men — some men, anyhow — for good or evil.”

I encourage you to learn how ASA works to change laws — and how you can be a part of that process — by participating in the March 6 workshop, “There Ought to Be a Law,” during ASA’s annual convention, SUBExcel 2014, in New Orleans, La. This workshop, presented by ASA Chief Advocacy Officer E. Colette Nelson, features a panel of ASA members who have successfully changed laws to protect subcontractors’ rights to equitable risk and prompt payment. So the next time you think, “There ought to be a law,” you’ll know the steps you need to take to make it so. Register for SUBExcel 2014

Happy New Year!

Jack Austhof
2013-14 ASA President

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