Construction Developments

Texas Construction Alert: Important Reminder about Construction Claims for Builders and ContractorsIn light of the recent devastation caused by Hurricane Harvey, we want to remind area builders of the 2011 law that applies to disaster remediation contractors performing work in Texas.

In 2011, wildfires ravaged over 40,000 acres of Texas land located in Bastrop and Grimes Counties. In addition to those wildfires, Texas experiences tornadoes, hail storms, floods and hurricanes on a regular basis. As a result, residential, commercial and industrial properties and structures required construction remediation. While many honest and hardworking Texas construction companies were there to help, some communities were plagued by unscrupulous contractors, referred to as “storm chasers,” who took money up front and failed to perform services as promised. In response to the misdeeds of these storm chasers, the Texas Legislature enacted the Disaster Remediation Contracts Statute which affects contractors who engage in remediation construction projects stemming from a natural disaster.

A new law was passed in 2011 by the Texas Legislature and was included in Chapter 58 of the Texas Business & Commerce Code.

The law applies to disaster remediation contractors, which is identified as those engaged in the removal, cleaning, sanitizing, demolition, reconstruction, or other treatment of improvements to real property performed because of damage or destruction to that property caused by a natural disaster. A natural disaster is defined as widespread or severe damage, injury, or loss of life or property related to any natural cause, including fire, flood, earthquake, wind, storm, or wave action, that results in a disaster declaration by the governor. This means that any construction remediation project related to a natural disaster falls under this new law.

The statute requires any agreement for disaster remediation work be reduced to a written contract. Contracts for disaster remediation projects must contain a disclosure statement with specific language outlining the statute’s prohibitions in boldfaced type of at least 10 point font:

This contract is subject to Chapter 58, Business & Commerce Code. A contractor may not require a full or partial payment before the contractor begins work and may not require partial payments in an amount that exceeds an amount reasonably proportionate to the work performed, including any materials delivered.

The requirements and legal effects of the statute cannot be waived by any party through contract or other means. Additionally, any violation of the statute is also considered a violation of the Texas Deceptive Trade Practices Act which allows for the recovery of attorneys’ fees and multiplying damages in certain instances.

The law also provides that a contractor may not require a full or partial payment before the contractor begins work and may not require partial payments in an amount that exceeds an amount reasonably proportionate to the work performed, including any materials delivered. Therefore, a contractor cannot require a down payment, draw or other form of payment until work begins.

The law does not apply to remediation contractors if they maintain a physical business address in the county or a county adjacent to where the work is to be performed for one year prior to the date of contracting. This exception allows “local” companies to continue business as usual. However, the best practice would be to have your contracts and business practices set to comply with this law so that you can be ready to help in the event the next natural disaster is more than a county away. This new law affects all contracts entered into on or after September 1, 2011.

OSHA and Workplace Violence: What Contractors Need to KnowAlthough most contractors go to great lengths to promote jobsite safety, the fatal injury rate in the construction industry – which employs almost 6.5 million people – still exceeds that of any other U.S. industry. The Occupational Safety and Health Act (OSHA) has an entire section of regulations just for contractors. The OSHA regulations help contractors mitigate jobsite hazards such as falling, electrocution, and chemical exposure.  Outside of these known jobsite risks looms the less familiar, but possibly just as dangerous, threat of workplace violence. Workplace violence may include any act of violence, by any individual, against an employee. Employers in all industries may face OSHA citations for failing adequately to prevent it. Yet OSHA does not have a single standard that specifically addresses workplace violence. So what is a contractor to do?

Although OSHA does not regulate workplace violence per se, its “General Duty Clause” requires employers to take “feasible means” to prevent against known threats of violence. The General Duty Clause requires employers to provide “employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm.” The elements of a General Duty Clause violation are: (1) a hazard in the workplace; (2) the employer or the employer’s industry recognizes the hazard; (3) the hazard is likely to cause death or serious physical harm; and (4) there is a feasible means of eliminating or materially reducing the hazard.

In the context of workplace violence which might give rise to an OSHA citation, a key element is that the hazard must be known to the employer or the employer’s industry. Thus, OSHA citations for breaches of the General Duty Clause typically arise in healthcare — for example, in a psychiatric hospital where employees regularly face violent patients. In the construction realm, these citations are much less common. Nonetheless, a contractor could violate the General Duty Clause by ignoring or failing to recognize obvious threats or signs that an individual was going to commit an act of violence against other employees.

While the foregoing focuses on OSHA citations, a contractor could also face civil liability in a lawsuit by an injured employee against an employer. Furthermore, while the availability of workers’ compensation may bar many such lawsuits, contractors should not blindly rely on workers’ compensation insurance as a shield.  If the contractor knew about an obvious threat and ignored it, an employee may be able to circumvent the usual bar and recover directly against the contractor.

Despite the lack of specific regulation beyond the General Duty Clause, OSHA has voluntary guidelines to prevent and mitigate workplace violence. The guidelines provide a helpful outline of a preventative program:

  • Identify and authorize individuals within the company to implement anti-violence programs.
  • Assess what positions or tasks are most likely to lead to violent incidents.
  • Create measures to control the risk.
  • Train employees to identify potential violence and handle violent incidents.
  • Evaluate the effectiveness of the company’s program.
  • Make sure that the hiring process thoroughly vets potential employee backgrounds.

Contractors should endeavor to prevent violence by employees and third parties just as any other employer.  Most contractors have numerous projects occurring at the same time, and workers may face different threat levels based on the location of those projects. Thus, contractors should tailor preventive measures to reflect the location and nature of the projects. For example, if a project is in a neighborhood with a high crime rate, a contractor should devote more resources to safety training and dedicate on-site management to preventing and mitigating harm.

A critical element, and good starting point, is general awareness of potential harm in the first place. This starts with the hiring process and carries through to evaluating the general safety of workers on particular projects and raising awareness of threats on a daily basis.

Highlights of the 2017 Revisions to the AIA-A101, A102, and A103As discussed in a May blog article, the American Association of Architects (AIA) revise their form agreements between owner and contractor approximately every 10 years, and these form documents were recently revised by the AIA a couple of months ago.

This article focuses on comparing the changes from the 2007 version to the 2017 version of the following documents: AIA-A101 (standard form agreement between owner and contractor where the basis of payment is a stipulated sum); AIA-A102 (standard form agreement between owner and contractor where the basis of payment is the cost of the work plus a fee with a guaranteed maximum price); and AIA-A103 (standard form agreement between owner and contractor where the basis of payment is cost of the work plus a fee without a guaranteed maximum price). These documents (collectively referred to as the “Standard Form Agreement”) should be read in conjunction with the AIA-A201 (general conditions between owner and contractor). The May blog article provides an analysis of the 2017 revisions to the AIA-A201.

In its 2017 revisions, AIA makes many of the same changes across all three of the Standard Form Agreements. Also, similar to the changes to the AIA-A201, many of the changes to the Standard Form Agreements are minor clarifications and improvements or create new “check the box” features. Some of the substantive changes to the Standard Form Agreements are highlighted below:

  • As is the case with the AIA-A201, the most significant change to the Standard Form Agreements is the creation of the insurance and bonds exhibit. The 2007 Standard Form Agreements contained only a cross-reference to the insurance requirements in the AIA-A201. Under the 2017 version, much of the insurance and bonds information has been removed from the AIA-A201 and placed into an exhibit that is attached to the Standard Form Agreements. This change allows for greater flexibility and easier customization of the insurance requirements.
  • The Standard Form Agreements include a new method for calculating the amount that an owner must pay to a contractor for termination for convenience. Specifically, the parties are now prompted to agree upon a fee that the owner must pay to the contractor if it is terminated for the owner’s convenience. This termination fee is in addition to payments that the owner must make to the contractor for (i) work properly performed and (ii) costs incurred by reason of the termination, including costs attributable to termination of subcontracts.
  • The progress payment calculation has been simplified across the Standard Form Agreements and now includes, among other minor adjustments, a provision adding change directive amounts to the progress payment calculation and a provision subtracting amounts that the contractor does not intend to pay to subcontractors. The Standard Form Agreements also include a much more thorough procedure for withholding retainage.
  • The AIA-A102 and AIA-A103 are occasionally executed before the contract documents are finalized and the guaranteed maximum price or control estimate may contain certain assumptions. The AIA has added a paragraph to both form documents allowing for revisions to the contract documents that are consistent with the stated assumptions contained in the guaranteed maximum price or control estimate. The contractor is required to notify the owner and architect about any inconsistencies.
  • AIA-A103 now includes a section regarding procurement of long-lead items. This new section requires the contractor to prepare a list of long-lead items and allows the owner to procure such items on terms acceptable to the contractor. The contract for the long-lead items are later assigned to the contractor and the contractor must accept full responsibility for those contracts.
  • The AIA-A102 and AIA-A103 also include a new section forbidding the contractor from making advance payments to suppliers for materials that have not been delivered to the project site without the prior approval of the owner.

As indicated above, AIA made other minor revisions to the Standard Form Agreements, and the list above is not comprehensive of all revisions. Anyone attempting to use the 2017 form documents should carefully examine and compare the 2017 version with the 2007 form. If you have any other questions about the recent AIA revisions or drafting a contract for your particular project, please do not hesitate to contact us.