News & Announcements
ASA President’s Monthly Newsletter-November 2008
Dear ASA Member:
Payment assurance for work performed — a long-standing goal of ASA across the country — recently took on new importance for one contractor. Last month’s events on the tiny island of West Caicos (located near the Bahamas) were eye-opening for the managers of Israeli contractor Ashtrom Group.
The managers’ misfortune began when work on a luxury resort project came to an abrupt halt because the project’s financing fell through. Lehman Brothers, which financed the project, filed for bankruptcy on Sept. 15. Matters deteriorated after the laborers learned, in pay-if-paid fashion, that they would not be paid for their work. What followed was something that no one ever wants to see repeated, but which does show how deep the feeling is that project finances need to be responsibly managed starting at the top, and for the benefit of every participant in a construction project. The laborers decided they would “retain” the managers, i.e., keep them from leaving the island, until they were paid!
The fear that the managers must have experienced is unfathomable. Fortunately, there was a happy ending. Through local law enforcement’s and Ashtrom’s efforts, no parties suffered permanent harm. The managers left the island unharmed, and ultimately, the laborers received their wages.
The “incident on West Caicos” is an extreme reminder of the risks and emotions that construction projects can involve, especially when financing is or suddenly becomes uncertain. The managers who were held captive certainly have a new outlook on their freedom and their lives post-release.
Meanwhile, the collapse of Lehman Brothers was just a sign of the greater financial storm to come — a credit crunch that threatens the viability of an increasing number of projects around the country, and around the world.
One proactive step that subcontractors can take to protect themselves from the storm is to ensure that they have access to information about project financing. A good contract will help a subcontractor get information about financing or changes in financing, no matter what stage of work the subcontractor is in. Be sure to obtain a contractual “flow down” to the subcontractor of the same right to financing information that the ownercontractor agreement establishes for the prime contractor. For example, if a subcontractor can secure the right to financing information that the ASA-endorsed ConsensusDOCS 200 document affords to prime contractors, the subcontractor will be able to obtain financing information at any time during the project. Not all contracts are the same! Be aware of some subtleties that can make a big difference in case financing problems occur. Flow-down of the American Institute of Architects’ A201-2007, for example, would severely limit the subcontractor’s right to financing
information after work has started. That could leave subcontractors on projects like the West Caicos resort, which had a mid-project cash crisis, in the dark.
More project financing problems worldwide also means more pay-if-paid problems at home. The projects that have come to a stop are a stark reminder that funds may never materialize on some projects, despite subcontractors’ proper performance of work. With project financing riskier than at any time in recent memory, subcontractors need to evaluate the risk of payment that is conditioned on their customers’ “receipt” of funds. While some states have made pay-if-paid provisions illegal, many still have not. ASA members can learn about the laws in their projects’ state(s) with ASA’s “Contingent Payment in the 50 States Chart” on the ASA Member Resources page of the ASA Web site, ww.asaonline.com.
Finally, keep in mind that you are not alone. ASA members have a long tradition of helping their fellow subcontractors. That tradition continues with ASA’s and FASA’s new, online forum for subcontractors and suppliers that are concerned about the impact of the credit crunch and other economic issues on their businesses. Join the ASA/FASA Discussion/Mentoring Group on the Economy to send and receive messages from other subcontractors that have faced challenges similar to the challenges that your company faces. Register online at www.asaonline.com/Web/economy.htm.
If you have any questions or comments, please feel free to contact me via e-mail at bolmo@asa-hq.com. Thank you.
Very truly yours,
William J. Olmo, III
ASA President, 2008-09
P.S. Don’t forget to vote, and encourage others to do the same. Election Day is Tuesday, Nov. 4!
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ASA Working For You
ASA and Other Industry Leaders Publish Guidelines for Terminations/Suspensions and Warranties ASA, the Associated General Contractors of America (AGC), and the Associated Specialty Contractors (ASC) have published a “Guideline on Terminations and Suspensions” and a “Guideline on Warranty for a Construction Project.” These guidelines assist everyone involved in construction with the sensitive issue of contractor and subcontractor termination, and clarify the roles and responsibilities outlined in project warranties. The “Guideline on Terminations and Suspensions” is an easy-to-use reference that clears up issues such as who the construction owner should contact when there’s a warranty issue; who is responsible for warranty repairs, replacements and alterations; and who is responsible for paying for repairs and replacements of defective products. The “Guideline on Warranty for a Construction Project” describes key differences between for-cause and for-convenience termination/suspension and issues that commonly arise before, or in the aftermath of, terminations/suspensions, such as the timing of notices to contractors/subcontractors and the need to promptly pay contractors/subcontractors for work completed or materials delivered prior to termination. Both guidelines are included in “Guidelines for a Successful Construction Project” available for viewing or download at www.constructionguidelines.org.
Maryland Court Holds Employee Responsible for Not Paying Sub
In a July 13 decision, a Maryland Court of Special Appeals took a step rarely seen in any state, affirming that an individual employee was personally responsible for not paying subcontractors on a commercial project. The case, Walter v. Atlantic Builders, revolves around two sub-subcontractors that were not paid by a subcontractor for work performed on a public library. The sub-subcontractors were eventually paid by the general contractor that then sued the subcontractor and one of its managers under the state’s trust fund law. The 1987 law says that any monies paid to a contractor or subcontractor to pay for work performed by a lower-tier subcontractor shall be held in trust and that “managing agents” with direct control over the flow of money can be held personally liable if the money is used for any purpose other than to pay for work performed. The court awarded the general contractor damages out of the pockets of both the subcontractor and manager. For more information, contact ASA Director of Government Relations Freeman Smith at (703) 684-3450, Ext. 1321, or fsmith@asa-hq.com.
Federal Appeals Court Rules Employers Can’t Terminate Employees for Unresolved No-Match Letters In a major ruling interpreting the federal Immigration Reform and Control Act (IRCA), the 9th U.S. Circuit Court of Appeals said on June 16, 2008, that employers cannot terminate workers solely on the basis of unresolved no-match letters from the Social Security Administration. As a result of the ruling, subcontractors may need to re-evaluate their termination policies. The ruling also raises serious legal questions for the U.S. Department of Homeland Security’s recent rulemakings, which interpret the IRCA as requiring employers to terminate workers for whom documentation mismatches have not been resolved. SSA no-match letters are issued when a worker’s name, date of birth, and Social Security Number do not match government records. The case arose out of a grievance brought by the Service Employees International Union on behalf of 33 employees in Los Angeles who were terminated when they could not adequately resolve no-match letters. The court stated that there could be multiple causes of mismatches, including data entry errors and name changes, and that a mismatch, by itself, does not prove a worker is not authorized to work in the United States. The court concluded that the employer did not have the evidence necessary to terminate the employees, and ordered the employees reinstated to their positions with back pay. For more information, contact ASA Director of Government Relations Freeman Smith at fsmith@asa-hq.com or (703) 684-3450, Ext. 1321.
Downloading ConsensusDOCS Just Got a Whole Lot Easier!
ASA members now have the ability to download sample copies of the new, ASA-endorsed ConsensusDOCS family of model contract documents, free of charge, from www.ConsensusDOCS.org.
In order to download samples or purchase copies, log on to www.ConsensusDOCS.org first and create an account. After creating an account, click on “Purchase” at the home page. Next, click on “ConsensusDOCS Sample Contracts,” which is at the bottom of the window that pops up, and simply add the documents you want to your shopping cart. Once completed, proceed to checkout and follow the download instructions. The samples are absolutely free of charge. ASA members seeking to purchase ConsensusDOCS model contract documents can receive a discount of nearly 20 percent off the cover price by entering partner code ASA and promotion code 200.
To help answer any questions or problems encountered when attempting to download documents, ASA has created a new “How to Order ConsensusDOCS” guide. Available on the ASA Web site, this two-page PDF outlines a step-by-step process of how to order copies, or download sample copies, of the new ConsensusDOCS. Located in the ConsensusDOCS section of the “ASA Members Resources” page, the guide will help ASA members access these new and important model contract documents.
For more information, contact Communications Manager Matthew Cass at (703) 684-3450, Ext. 1317, or mcass@asa-hq.com.
Help Reduce Burden of Government Compliance —
Log On to Business.gov
ASA members can now take advantage of a new online resource for virtually all of their government compliance needs: Business.gov (http://www.business.gov) was set up by the U.S. Small Business Administration in partnership with 21 other federal agencies and is designed to provide employers with ready access to laws, regulations, forms and agency contacts. One feature of the site, “Permit Me,” allows a contractor to enter any desired zip code in order to see a list of all the permits, licenses and requirements needed to legally do business in that area. Other features of the site include an entire section dedicated to the construction industry, as well as business guides, links to state and local resources for employers, and information about programs for business owners. The site hopes to make a dent in the 8.2 billion hours spent each year on government compliance and paperwork.
HELPFUL STEPS TO COMPLY WITH REQUIREMENTS OF E-VERIFY PROGRAM By Julie A. Pace
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