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Philadelphia Construction Law Blog

CONSTRUCTION BACKLOG INDICATOR SHOWS OVERALL DIP

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

The Construction Backlog Indicator, or CBI, is a tool that measures backlog as an indicator of the health of the construction industry. The CBI is presently offering mixed signals to the market. While multi-national and large construction firms are showing the largest backlogs in history, this seems to correspond with a decrease in backlog for medium sized and small contractors.

Companies with annual revenue above $100 million have now reached a zenith of 14.06 months average backlog, surpassing the previous quarterly high of 12.23 months. With a dip for small construction companies, the overall CBI measure is down to 8.5 months nationally from 10.1 months in the first quarter of 2016.

Non-residential backlog growth, which has led the recovery in the construction economy, seems to be slowing overall. The problem appears linked to all the public money spent as part of the governmental stimulus packages. This money allowed larger contractors, particularly in infrastructure work, to gain more market share quickly. Smaller contractors received some of the trickle-down effect of this spending. Now that money has dried up and the larger contractors are maintaining the same market share without sharing as much of the available revenue.

Year over Year Backlog Indicators.pngThe northeast region has been hit harder than most. A splurge in construction backlog over the course of the last couple years was related to increased activity that has now slowed as a glut of office space has been put on the market. Of the 4 major regions measured, the northeast is the only one to lose ground in the CBI.

It seems unlikely that much will change, for the good or the bad, in the third or fourth quarter. With a pending presidential election, the government and companies traditionally sit on the sidelines until the next president is chosen. The construction industry, like most others, will likely maintain the status quo and then make an adjustment based on who wins.

Bucks County Contractor Sentenced to Jail for Fraud

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

A plethora of laws have been passed in recent years attempting to put more strict regulation on the construction industry - particularly residential construction - as it relates to payment and fraud. While there are voices on both sides of the debate as it relates to whether the laws are necessary and reasonable, there should be little doubt that the repercussions for failing to heed the recent trend are potentially serious.

As reported in the Bucks County Courier Times, Judge Clyde Waite of the Bucks County Court of Common Pleas sentenced unlicensed contractor John Michael New to 8-16 years in prison and imposed restitution in the amount of $163,000 earlier this week for taking payments on home improvement contracts and failing to do the work. Mr. New pled guilty in June to 8 counts of receiving advanced payments for services he failed to perform, one count of theft, and one count of insurance fraud. These charges relate to 8 jobs Mr. New took from 2010 to 2015.

The improper conduct for which he was charged related to taking deposits and failing to perform the work, relaying to customers that he was not using subcontractors when he in fact was doing so, submitting a false certification to get insurance coverage, and failing to register as a licensed contractor. Despite pleading guilty, Mr. New did very little between taking his plea and sentencing to repay the victims of his actions. In addition to his already poor conduct, Judge Waite and the prosecutor noted this in issuing the sentence.

Contractors should be aware of this situation and understand that the Court was trying to send a clear message in how it was handled. In the event there is any doubt, consider Judge Waite's comments at sentencing: "That should send every message that is necessary about what will be tolerated".

Kaplin Stewart Pleased to Once Again Support Army Navy Cup

Army Navy Cup V.jpgArmy-Navy Cup, the annual battle between the soccer teams from Army and Navy, is now in its 5th year. Kaplin Stewart is proud to return as a sponsor for the event for a third consecutive year.

At Kaplin Stewart, we understand the importance of giving back to the community in which we live and work. No one does more for the American people than the members of the United States military who place themselves in harm's way to defend all the freedoms we hold dear. It is the selfless sacrifice of people like this that allows us to run a business in this great country and serve our clients.

Union logo.pngArmy Navy Cup has become an annual event hosted by the Philadelphia Union of Major League Soccer. The men's soccer programs at the U.S. Military Academy at West Point and the U.S. Naval Academy will square off on Friday, September 23rd, for the 5th installment of what is quickly becoming one of the best college soccer events in the country. We hope you will join us this year as we honor America and her military personnel in this very unique way. Match time is 7:00 p.m.

WE HAVE A GREAT CONTRACT, SO WHY ARE WE STILL DEALING WITH CLAIMS IN COURT (Part 3 of 3)

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

In the first 2 posts of this series, we talked about why even the best of contracts don't prevent all litigation and provided some tips on how to manage risk in a way that minimizes the chances of seeing the inside of a courtroom. In reality, the best approach is an integrated one that includes preparing the most appropriate contract possible (understanding there is no such thing as a perfect one), providing good leadership, and managing the risk in the field. It is this last component that is the subject of this final post.

Construction companies too often think that the only way to manage their risk is to shift who is responsible for mistakes when they happen to another party in the contract language. This is a mistake on multiple levels. To begin, the law makes certain contract provisions unenforceable regardless of what the parties agree to in the written contract. For example, it is not possible to waive your lien rights in certain states - regardless of what is in the contract. Second, to assume the contract covers all scenarios encourages a false sense of security that can create a dangerous culture of indifference. Third, and perhaps more important, it overlooks the fact that the best form of risk management in most cases is simply making conscious choices about how best to manage projects.

The number of options available to manage risk on a project are only restricted by the level of creativity a company is willing to use to solve problems. With the impact of technology today, there are so many more options to manage risk on-site. Here are a just a few basic things to consider:

(1) Do your financial due diligence before the contract is signed. By the time payments are late and an issue has arisen, it can be too late to address the real problem: the owner does not have enough money to build the project. There are a number of factors to consider when doing such an investigation and the indicators are fluid depending on the nature of the project. For example, in some instances a single purpose owner entity would be cause for concern. On other projects, it may be perfectly normal.

OSHA Inspector.jpg

Football Season Is Upon Us: Will Temple Have Its Own Stadium?

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

One of the surest signs that fall has arrived is the start of the college football season. In a town that adores its pro team, the Philadelphia Eagles, college football is gaining a little more attention these days. One of the primary reasons for this is the return of Temple football, which was literally on the school's chopping blocks a short time ago, beginning to make noise at the top level on a somewhat consistent basis. The next step for the program seems to be moving into its own stadium.

Temple logo.pngThe Temple football team opens is 2016 season at Lincoln Financial Field against Army this Friday night. School officials have, however, been working on a plan to build a stadium on campus in North Philadelphia. The university's Board of Trustees recently approved the expenditure of $1.25 million for a feasibility study to determine if the project can move forward. The big questions appear to center on where to place the stadium given the size of the footprint it will create. Traffic and parking are a big part of this conundrum.

There is no timetable for when the decision will be made or where the stadium will be built if the project goes forward. If Temple goes forward with the project, however, it would be a boon to the local construction economy and a huge asset to Temple and North Philadelphia. We should no more later this fall after the details of the feasibility study become known.

Pennsylvania Supreme Court Explicitly Declares Attorneys' Fees and Penalty Provision of the Pennsylvania Prompt Pay Act Discretionary

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

In an opinion issued in July, the Pennsylvania Supreme Court categorically declared the award of attorneys' fees and penalties under the Pennsylvania Prompt Pay Act to be discretionary. While the statute itself contains language which suggests such an outcome, the Court's decision in Scott Enterprises, Inc. v. City of Allentown formally settles an issue which many construction practitioners understood differently and argued differently in litigation.

Road Construction.jpgIn the Scott Enterprise case, Scott entered into a road construction contract with the City of Allentown. After work started, it was discovered that the soil where construction was being performed was contaminated with arsenic. The City stopped work and undertook efforts to address the situation. It was eventually determined it would be safe to work if certain precautions were undertaken while the work was being done. Scott, as the contractor, refused to move forward with the work absent an agreement to cover the additional costs that would result since the City was aware that the soil may be contaminated before it originally started work on the project. An agreement could not be reached, Scott refused to return to the project, and suit was brought by Scott to recover its losses on the project.

The matter went to trial and the jury determined that the City of Allentown acted in bad faith when it refused to compensate Scott for the work. Scott argued that a verdict that the City acted in bad faith made the application of the attorneys' fees and penalties provisions of the Procurement Code mandatory. While the Court could exercise its discretion to determine what was reasonable according to Scott, it had to award something. The City, conversely, argued that no bad faith had been proved and that the Prompt Pay Act is in fact discretionary.

Celebrating Labor Day

Wishing all those who work so hard to help build this country and make her great a wonderful Labor Day. Thanks for all you do and for letting Kaplin Stewart be part of your great industry.

 

Construction Group Partner Josh Quinter to Speak at MetalCon 2016

We are excited to announce that Josh Quinter, a partner in our construction practice group, will be speaking at MetalCon 2016. He will be presenting his program entitled "Documenting Your Project to Get Paid" on both October 26, 2016, and October 27, 2016, to a national audience of owners, contractors, subcontractors, and suppliers in the metal building industry.

MetalCon logo.png

MetalCon is an annual gathering of professionals in the metal building industry. It includes course and program offerings on a multitude of subjects, floor exhibits to introduce new technologies and ideas in the industry, and networking opportunities to meet some of the most experienced and knowledgeable people in the industry.

Josh has become a regular on the speaking circuit because of his unique ability to explain complex issues in simple terms and then provide practical applications for the information offered in his programs. He has been asked to speak on a wide range of topics from leadership to project management to various construction law issues. We are certain the attendees will find his most recent offering both enlightening and entertaining.

OSHA Fines Increased As Of August 1, 2016

Posted by:  Josh Quinter  (jquinter@kaplaw.com)

President Barack Obama recently signed into law a bill that significantly increases the penalties relating to certain violations of the Occupational Safety and Health Act. Labelled as a "catch-up adjustment", the new law increases the maximum fines associated with OSHA violations by 78%. An adjustment to the fines was last made in 1990.

More specifically, the increase was measured as the difference between the Consumer Price Index in October 1990 and October 2015. This 15 year period explains the substantial increase. The statute also ties the maximum fines to inflation based on the Consumer Price Index going forward so that a new law does not have to be passed annually to increase the fines.

This change marks a significant adjustment in terms of gross dollars about which construction businesses should be aware. For example a "Serious - Other Than Serious Posting Requirement" violation goes from a maximum fine of $7,000 to $12,471. "Willful" or "Repeat" maximum fines go from $70,000 to $124,709.

These changes are part of OSHA's field manual already and are in effect. Accordingly, the ramifications for failing to meet OSHA standards are significantly more severe than they have ever been.

NEW PHILADELPHIA WAGE THEFT LAW TAKES EFFECT

Posted by:  Andy Cohn  (acohn@kaplaw.com)

A new Philadelphia ordinance, effective July 1, 2016, will have a significant effect on employers who fail to pay wages to their employees for work performed in Philadelphia. Titled Wage Theft Complaints, the ordinance provides for administrative and court remedies, and penalties for "wage theft", defined by the ordinance as any violation of the Pennsylvania Wage, Payment and Collection Law, Minimum Wage Act, or any other federal or state law regulating the payment of wages, for work performed in Philadelphia.

The ordinance applies to unpaid wage claims in an amount between $100 and $10,000. It allows a "claimant" to file a claim with a "Wage Theft Coordinator", a new administrative office to be administered by the City's Managing Director's Office. A claimant is defined as either an employee with an unpaid wage claim, or an "authorized organization" on behalf of the employee. An authorized organization can include a labor union or other organization or party acting on behalf of an employee. After the employer files an answer to the complaint, the Coordinator conducts an investigation and is to provide a written adjudication within 60 days, or 110 days after the complaint is filed, if no answer to the claim is filed.

The complainant's burden of proof is merely to present "sufficient evidence" to show the amount of work performed and the amount of unpaid compensation due. It meets its burden if the employer is required to keep records of hours worked and compensation paid, but does not do so, or if the records are imprecise or inadequate. Subpoena power is granted to the wage theft coordinator to subpoena documents from any party to the complaint.

If an adjudication of wage theft is made, a written order requiring payment will be issued, which includes findings of fact and conclusions of law. The adjudication may be appealed by either party to a court of competent jurisdiction within 30 days by filing a "new lawsuit". However, the ordinance provides that the investigative notes, documents, and complaint and answer will be provided to both parties on any appeal. Significantly, the ordinance also creates a private right of action, allowing a claimant to file an action directly in court to enforce rights under the ordinance, without first bringing a claim before a Wage Theft Coordinator.

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