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Posts Tagged ‘contractors’

California Prompt Payment Act: A Tool In The Tool Belt To Secure Payment

Posted on: September 13th, 2019

By: David Molinari

In the construction industry, payments come slowly.  Prompt payment laws exist in some form nationwide and can vary from state to state.  These laws serve to create timelines for when payments must be made and institute interest penalties for late payments.  In California, the contractors are armed with Civil Code 8800 et al. California’s Prompt Payment Act.  The Prompt Payment Act covers private projects; while the Public Contract Code 10260 and 20104, et al. governs public works.

With respect to private projects, such relationship as an owner and direct contractor, the owner must pay a direct contractor within 30 days of that contractor’s request.  There are exceptions to the 30-day time limit:  First, if the parties agree to another timeframe in their contract; or if there is a “good faith dispute.”  A good faith dispute cannot be used as a license to withhold payment to the contractor.  An owner may withhold up to 150% of the amount in dispute.  If retainages are being withheld, the owner must pay retentions within 45 days after competition of the improvement.  If the contractor corrects or completes the disputed work and sends a notice of the correction, the owner must then accept or reject the work within 10 days.

For the director contractor and subcontractor relationship, the general contractor must pay subcontractors within seven days of receiving each progress payment related to that subcontractor’s work.  These timeframes may be changed by the contract between the general and the subcontractor.  The good faith dispute also applies to payments in this relationship.  As for retainage, the general contractor must pay retention to the subcontractor within 10 days of receiving retention payment from the owner.  If a general contractor withholds retainage from the subcontractor for correction or completion of their work, the general contractor must accept or reject the subcontractor’s work within 10 days of the correction.  When payments are being improperly withheld, a 2% per month interest penalty begins to apply.

California’s Prompt Payment protection also applies to public projects.  With respect to the public entity direct contractor relationships, the timeframes vary depending on the public entity that is a party to the construction contract.  State and local agencies must pay progress payments within 30 days after receiving requests.  Any requests that are rejected must be returned to the direct contractor with a written explanation within seven days.  Retentions must be released within 60 days of completion of the work of improvement.

Direct contractors on public works and their subcontractors also must follow set timelines; with the rules generally the same as private projects.  The general contractor must pay subcontractors within seven days of receiving a progress payment relating to that subcontractor’s work.  Timeframes can be changed by the written contract and the good faith dispute for withholding payment also applies.

When a general contractor withholds retentions from a subcontractor, those retentions must be paid within seven days after receiving all or a portion of the retention.  Progress payments improperly withheld begin to accrue 2% monthly interest.

Making a claim under the Prompt Payment Acts is the contractor’s best leverage to secure receiving compensation for work provided.

If you have any questions or would like more information, please contact David Molinari at [email protected].

Who Did What for Whom? Construction Lien Rights in Georgia Depend on the Contractor, Not the Cost

Posted on: March 18th, 2019

By: Jason Kamp

In 2013, the Georgia General Assembly expanded the scope of items covered under its construction lien statute, O.C.G.A. § 44-14-361, by amending subsections (c) and (d). The statute now allows contractors to claim liens for contract expenditures for general conditions or other costs that are not strictly for labor, services, or materials that become part of the property as traditionally required. For example, a general contractor can now claim a lien for insurance, security, or cleaning costs or interest owed on the principal amount due under its construction contract.

Importantly, the expansion of the type of costs entitled to lien rights does not translate into an expansion of the type of contractors entitled to lien rights. The expanded lien rights still depend on whether the contractor at issue fits into one of the nine categories laid out under subsection (a) of the statute. To illustrate, a general contractor can now claim a lien on costs for providing security services on site under its contract, because it furnishes other materials and services for the improvement of real estate under (a). However, a security services contractor is not entitled to a lien on the costs for providing security services on a construction site, because it does not fit within any of the (a) categories.

It is easy to see how Georgia’s expansion of lien rights to non-traditional costs may blur the distinction between actor and act in practice. Additional attention to “who did what for whom” may be warranted when undertaking lien waivers, organizing contractor relationships, or other activities touching on lien rights as a result.

If you have any questions or would like more information, please contact Jason Kamp at [email protected].

California’s New Independent Contractor Test

Posted on: July 11th, 2018

By: Christine Lee

On April 30, 2018, the California Supreme Court issued a landmark decision in Dynamex Operations West, Inc. v. Superior Court, No. S222732, in which the Court adopted an extremely broad view of workers who will be deemed “employees” as opposed to “independent contractors” for purposes of claims alleging violations of California’s Wage Orders.  This decision will undoubtedly lead to increased litigation challenging classification of workers across the state as employers will now have a much higher burden to defeat such claims.

Under the new “ABC” test set forth in Dynamex, a worker will be presumed to be an employee unless the hiring entity proves all of the following:

(A) The worker is free from the control and direction of the hiring entity in connection with the performance of the work, both under the contract and in fact; and

(B) The worker performs work that is outside the usual course of the hiring entity’s business; and

(C) The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work he or she performed for the principal.

An employer’s failure to establish any one of the three factors will result in a determination that the worker is an employee as a matter of law.  The Court’s ruling specifically applies to claims asserted under the IWC Wage Orders, which impose obligations related to minimum wages, overtime, and required meal and rest breaks. It is presently unclear how the case applies to claims arising under other statutes.

We encourage all companies doing business in California to immediately evaluate classification of outside contractors or vendors.  Under Dynamex, the vast majority of persons performing services for a company will be considered employees if they are performing work within the usual course of the company’s business, even if those individuals act autonomously and are free from control or direction of the hiring entity.

Therefore, we strongly encourage employers to consult with counsel to evaluate and consider reclassifying independent contractors or risk finding themselves on the losing end of an expensive and painful misclassification case.

If you have any questions or would like more information, please contact Christine Lee at [email protected].

NLRB Delivers One-Two Punch to Pair of Standards that Have Dogged Employers

Posted on: December 18th, 2017

By: Paul H. Derrick

In a stunning development, the National Labor Relations Board has overruled a pair of controversial standards that have caused headaches in the business community for years.

In the first case, the NLRB reversed an Obama-era decision that put employers potentially on the hook for labor law violations committed by their subcontractors and franchisees.  By a 3-2 vote, the Board erased its decision in a case known as Browning-Ferris Industries, which found a company to be a joint-employer with a subcontractor or franchisee if it had “indirect” control over the terms and conditions of the terms and conditions of the workers’ employment or had the “reserved authority to do so.”

Since that broad standard was adopted, the Board has used it to bring literally hundreds of cases against McDonald’s and other businesses for the alleged acts of their contractors and franchisees.  Going forward, however, the NLRB says that two or more entities will be deemed joint employers under the National Labor Relations Act only if there is proof that one entity actually exercised direct and immediate control over essential employment terms of another entity’s employees.  Proof of indirect control, contractually-reserved control that has never been exercised, or control that is limited and routine will no longer be sufficient to establish a joint-employer relationship.

In a second unexpected development, also by a narrow 3-2 margin, the NLRB overturned its 2004 decision in Lutheran Heritage Village-Livonia, under which many seemingly harmless workplace rules were deemed unlawful.  The Board had determined in that case that employer rules violate the NLRA if they “could be reasonably construed” by employees to prohibit the exercise of rights under the NLRA.

Going forward, the NLRB says that it will consider the nature and extent of a challenged rule’s potential impact on employee rights under the NLRA and the legitimate justifications associated with the rule.  The Board also announced three categories into which it will now classify rules to provide greater clarity and certainty to employees, employers, and unions.

The first category covers rules that are legal in all cases because they cannot be reasonably interpreted to interfere with workers’ rights or because any interference is outweighed by business interests; the second covers rules that are legal in some cases, depending on their application; and the third covers rules that are always unlawful because they interfere with workers’ rights and cannot be outweighed by business interests.  Notably, the Board also announced that it will no longer find a rule to be unlawful simply because it requires employees to foster “harmonious interactions and relationships” or to maintain basic standards of civility in the workplace.

Because of ongoing changes in the NLRB’s composition and the recent nomination of a new General Counsel, these latest decisions will certainly be the subject of challenge and much debate.  If you have any questions or would like more information, please contact Paul Derrick at [email protected].

Dangers of Hiring Independent Contractors

Posted on: July 22nd, 2013

By: Leanne Prybylski

Many contractors hire independent contractors, rather than employees, to avoid paying taxes and benefits.  Contractors should be aware, however, that the costs of misclassifying employees as an independent contractors could end up being more expensive than it would have been to pay the taxes and benefits for the employees in the first place.  For more information, see the recent article by Leanne Prybylski, “The Dangers of Hiring Independent Contractors.”