Articles Posted in Construction Generally

Governor Edmund G. Brown Jr. declared the drought in California a state of emergency on January 1, 2014 and directed state officials to take all necessary actions to prepare for these drought conditions. In response, the California Contractors State License Board (CSLB), is doing its part, began expediting applications for C-57 Well Drilling Contractors and encouraging Class “A” General Engineering Contractors that are authorized to perform water supply projects (but not well drilling unless they possess a C-57 Well Drilling classification) to add the C-57 classification to their license. More recently, the CSLB voiced its concern that there may be “price gouging” “occurring in some California counties where the drought has taken a serious toll on individual residential water wells,” identifying by name Tulare and Kern counties. It reminds all contractors and, in particular, C-57 Well Drilling and C-61/D-21 Machinery and Pumps contractors to make sure the prices they are charging are within legal guidelines following the declaration of a state of emergency.

The CSLB cautions that “[t]he marketplace demand for drilling services is not justification for raising prices for the same services that would have been charged prior to the declared state of emergency.” It cites to Subdivision (a) of California Penal Code § 396, which states, in part: “While the pricing of consumer goods and services is generally best left to the marketplace under ordinary conditions, when a declared state of emergency results in abnormal disruptions of the market, the public interest requires that excessive and unjustified increases in the prices of essential consumer goods and services be prohibited.”

With specific respect to contractors, Subdivision (c) of Penal Code § 396 states:

“Upon the proclamation of a state of emergency resulting from an earthquake, flood, fire, riot, or storm declared by the President of the United States or the Governor, or upon the declaration of a local emergency resulting from an earthquake, flood, fire, riot, or storm by the executive officer of any county, city, or city and county, and for a period of 180 days following that declaration, it is unlawful for a contractor to sell or offer to sell any repair or reconstruction services or any services used in emergency cleanup for a price of more than 10 percent above the price charged by that person for those services immediately prior to the proclamation of emergency. However, a greater price increase is not unlawful if that person can prove that the increase in price was directly attributable to additional costs imposed on it by the supplier of the goods, or directly attributable to additional costs for labor or materials used to provide the services, provided that in those situations where the increase in price is attributable to the additional costs imposed by the contractor’s supplier or additional costs of providing the service during the state of emergency, the price represents no more than 10 percent above the total of the cost to the contractor plus the markup customarily applied by the contractor for that good or service in the usual course of business immediately prior to the onset of the state of emergency” (emphasis added).

A violation of Penal Code § 396 is a misdemeanor and could result in county jail imprisonment for up to one year or by a $10,000 fine, or both. Such a violation would also constitute an unlawful business practice and unfair competition under California Business & Professions Code §§ 17200 et seq. and could result in additional civil penalties.

Additional Resource: California Expediting Well Drilling Licenses During Drought

Recently, a California federal district court, in Taylor v. Shippers Transport Express, Inc., found that a class of current and former truck drivers had been misclassified as independent contractors and not employees by Shippers Transport Express, Inc. (STE). In granting the drivers’ motion for partial summary judgment, the court found that, notwithstanding that the drivers and STE’s agreement contemplated that the drivers were independent contractors, the drivers were STE employees premised, in part, on its findings that STE not only retained the right to exercise control over the manner and means of the truckers’ accomplishing the desired results, but it also exercised this control. The order was issued in Taylor v. Shippers Transport Express, Inc., CV 13-02092 BRO (PLAx) (C.D. Cal. September 30, 2014).

Plaintiffs represent a class of truck drivers operating out of STE’s yards in Carson and Oakland, California; Plaintiffs’ agreements with STE confirmed that they were independent contractors. STE is a trucking and logistics company that provides land transportation services for ocean containers to and from international ports in Los Angeles and Oakland, California; STE’s logistical operations, including scheduling the pick-up and delivery of containers, are performed by regular employees. Plaintiffs filed suit against STE, alleging employment-related claims, and later amended the complaint to add SSA Marine, Inc. (SSA). The amended complaint alleges seven causes of action under California law; six of the causes of action are premised on alleged violations of California’s Labor Code. On April 28, 2014, Plaintiffs filed a motion for partial summary judgment raising the sole issue that STE cannot, as a matter of law, satisfy its burden of establishing that the class members are independent contractors, as STE alleges in its second affirmative defense. Defendants opposed the motion and also filed a motion for summary judgment. The Court heard oral argument on both motions on September 29, 2014, and the Court issued its ruling on September 30, 2014, granting Plaintiffs’ motion for partial summary judgment and denying the Defendants’ motion for summary judgment.

In its order, the Court noted at the outset that, while typically determining whether an individual should be considered an employee and not an independent contractor is involves a factual inquiry that should not be determined on summary judgment, the Plaintiffs had established a prima facie case of employment and that they were employees under the common law analysis set forth in S.G. Borello & Sons, Inc. v. Department of Industrial Relations, 48 Cal. 3d 341 (Cal. 1989). The Court first focused its analysis on the amount of control that STE retained the right to exercise over the drivers. Relying on the express language in the Plaintiffs’ agreements with STE, the Court found that “STE retains the right under these provisions to terminate a Driver immediately if he or she breaches any provisions of the transportation agreement.” It further found that there was no limitation on STE’s right not to renew the Drivers’ contracts; instead, STE could decide not to renew the contract for any reason or for no reason at all. It ultimately found “that this power evidences a right to control that is ‘a substantial indicator of an at-will employment relationship.'” In addition, [a]fter considering the undisputed facts in the record, the Court determine[d] that the degree of control exercised by STE over the Drivers demonstrates that it has ‘retained all necessary control over the drivers’ work.'”

Applying the secondary Borello factors, the Court found the facts “militate in favor of finding an employment relationship to exist between STE and the Drivers;” the Borello factors, as applied in Air Couriers International v. Employment Development Department, 150 Cal. App. 4th 923 (Cal. Ct. App. 2007), include “some drivers had worked for the courier company for a number of years, which was ‘another factor inconsistent with independent contractor status’; the drivers were performing an integral and entirely essential aspect of the courier company’s business; the drivers were required to use the company’s forms in order to be paid; the drivers were paid on a regular schedule; the courier company sent the drivers to each delivery, provided deadlines, and required them to notify the dispatchers when the delivery was completed; the courier company provided placards for the drivers’ vehicles; the drivers delivered to the courier company’s customers, rather than to their own customers; and the courier company set the rates that were charged to the customers, billed the customers, and collected the payment.”

It also found that, in light of light of Dilts v. Penske Logistics, LLC, 12-55705, 2014 WL 4401243 (9th Cir. Sept. 8, 2014), Plaintiffs’ claims alleged in their first amended complaint are not sufficiently “related to” prices, routes, or services to be preempted by the Federal Aviation Authorization Administration Act, denying Defendants’ motion for summary judgment on this basis. This order follows the California Supreme Court’s recent order in The People ex rel. Kamala D. Harris v. Pac Anchor Transportation, Inc., Case No. S194388 (July 28, 2014), affirming that California’s unfair competition law, Cal. Bus. and Prof. Code §§ 17200 et seq., is not preempted by federal law, which appears to follow the Dilts decision; Supreme Court remanded the matter to the trial court to address the merits.

Additional Resource: U.S. Department of Labor, $10.2M awarded to fund worker misclassification detection, enforcement activities in 19 state unemployment insurance programs (Sep. 15, 2014); Employees and Independent Contractors and Day Laborers … Oh My!; Kansas Department of Labor, Independent Contractor or Employee Fact Sheet (Jun. 2012)

The Indianapolis Department of Code Enforcement (DCE), which is responsible for licensing persons and business organizations engaged in construction activity in the Consolidated City of Indianapolis, Marion County, is offering a new electronic submittal option for contractors’ license renewal applications.

Indianapolis DCE’s contractor license renewal process is as follows:

• Email your renewal application, insurance certificated and bond to DCE
• DCE staff will review your renewal application, update your information and add the appropriate fees to your contractor’s license ~ if additional information is required, you will receive an email identifying the additional information that is needed to process your renewal application
• Once its review of your renewal application is complete, you will receive an email from the DCE confirming that it is ready to re-new your license ~ the title of the email will be “Your License is Ready to Re-Issue” and it will include a link to the DCE website where you may pay the renewal fee
• You may pay the renewal fee online with a credit/debit card or eCheck
• After you pay the renewal fee, you will receive an email with your license card attached

This new process is expected to streamline contractors’ license renewals and to avoid licensees having to go into a DCE office to renew their contractors’ licenses.

If you have questions, contact the DCE or call (317) 327-1291.

Additional Resource: Indianapolis Department of Code Enforcement, Contractor License

Illinois Governor Pat Quinn recently signed into law Senate Bill 3023 (Public Act 98-764, amending the Illinois Mechanics Lien Act, 770 ILCS 60/ et seq., to provide protection against subordination of mechanics liens on Illinois construction projects. S.B. 3023 makes an express or implied agreement to subordinate a mechanic’s lien, where the agreement is in anticipation of and in consideration for the awarding of a contract or subcontract to perform work or supply materials for an improvement upon real property against public policy and unenforceable, except where the agreement to subordinate a mechanic’s lien to a mortgage lien that secures a construction loan if that agreement is made after more than 50% of the loan has been disbursed to fund improvements to the property. The new law was effective July 16, 2014. This new law represents the culmination of the Illinois legislative efforts over the past few legislative sessions to provide further protection to mechanics lien claimants.

Clients call from time to time with questions about liens that have been filed on their property, or about liens that they want to file. The questions follow a pattern. What is the deadline to file a lien? What about foreclosing? Can a lower tier subcontractor file a lien? Does the lien claimant have to file a preclaim notice? I got one of these questions recently and sent the in house attorney a card stock printout of our quick lien reference chart for the three jurisdictions closest to my office: Virginia, DC, and Maryland. She found it so useful that she put it on her bulletin board in her office.

Given how useful most clients find this information, we decided to post it. You can see it to the right under the “Resources/Links” tab. Our California construction lawyers prepared a similar chart a couple of years ago when California revamped its lien laws. They are going to convert that into a format that looks like the VA/DC/MD one. And then we’ll also prepare one for the northeast, where our New York area construction lawyers frequently answer similar questions.

So, check back for these quick reference charts. We think you’ll find them useful.

On September 30, 2014, the U.S. District Court for the District of Columbia rejected a challenge to the decision of the U.S. Fish and Wildlife Service (FWS) to withdraw a proposed listing of the Dunes Sagebrush Lizard, a species found in many oil and gas producing areas, as an endangered species under the Endangered Species Act. The case is Defenders of Wildlife, et al. v. Jewell. The District Court held that the decision of the FWS was lawful, and comported with the requirements of the ESA and the FWS’ and National Marine Fisheries Service’s (NMFS) 2003 Policy for Evaluation of Conservation Efforts When Making Listing Decisions (PECE) for the Evaluation of Conservation Efforts When Making Listing Decisions. Of particular importance were three conservation mechanisms–the BLM’s Resource Management Plan Amendment, the “New Mexico Agreement”, and the “Texas Plan”. The New Mexico and Texas plans are Candidate Conservation Agreements that the Service approved.

The Texas Comptroller and several oil and gas associations intervened as defendants to support the Service and their own conservation plans. This decision is likely to be appealed, but it certainly seems to strengthen the case for the measures that are being proposed (and challenged) to protect the Lesser Prairie Chicken, a species that was listed as threatened earlier this year.

On September 26, 2014, a divided panel of the U.S. Court of Appeals for the Third Circuit reversed the U.S. District Court of the Middle District of Pennsylvania, holding that Columbia Gas Transmission Company, an interstate natural gas company regulated by FERC, has the right of eminent domain granted by 15 U.S.C. § 717f(h) to obtain easements over the land of objecting landowners, even when such new easements would be located outside of the existing right of way, in order to replace a deteriorating pipeline that is now located in a heavily populated area of Pennsylvania. The case is Columbia Gas Transmission, LLC v. 1.01 Acres, More or Less in Penn Township, York County, Pennsylvania, Located on Tax ID# 440002800150000000 Owned by Dwayne P. Brown and Ann M. Brown, et al.

To obtain these easements, Columbia filed Complaints of Condemnation in federal court against four landowners. The District Court denied Columbia’s request, holding that the implementing FERC regulation was ambiguous, and the court therefore “looked outside the regulations” and determined that the agency’s interpretation was not entitled to deference. Columbia had received a “blanket” certificate of convenience and necessity from FERC, which the majority of the Court of Appeals held provided the holder of the certificate with the authority to conduct a routine activity of replacement without further authorization by FERC. According to the Court of Appeals , the applicable FERC rule was not ambiguous, and must be enforced, although the Court of Appeals also noted that this right was subject to certain limitations including environmental compliance. Referring to the Supreme Court’s recent decision in Utility Air Regulatory Group v. E.P.A., 134 S. Ct. 2427, 2442 (2014), the court held that the statute as a whole must be reviewed before its parts could be considered to be ambiguous. Finally, the Court of Appeals granted Columbia’s request for preliminary injunctions, allowing it to take immediate possession of these easements.

The dissenting opinion concluded with this observation: “It is disturbing and encouraging that, by today’s ruling, the Majority endorses a view of delegated sovereign power so broad that a private gas company, with no agency oversight or other significant procedural restraint, can take the property of other citizens far removed from that company’s original right of way”.

UPDATE: Applications for the Position of the Registrar of Contractors must be received by 5:00 p.m. PST on November 17, 2014 and must include all required information.

The California Contractors State License Board invites applications for the position of Registrar of Contractors. The Registrar of Contractors is responsible for, among other things, carrying out the policies of the CSLB and for planning, organizing, and directing CSLB activities in the areas of administration, enforcement, information technology, and licensure. The position is located in Sacramento, California. All submissions must be received by 5:00p.m. on October 15, 2014, and must include both email and telephone contact information. For additional information review the invitation or contact Eileen Fuller at (916) 574-8385.

The current Registrar of Contractors, Steve Sands, announced on April 24, at the CSLB’s quarterly board meeting, that he planned to retire at the end of the year, after being “at the helm” of the CSLB since January 1, 2001.

Additional Resources: California CSLB Registrar of Contractors Announces Departure