Articles Posted in Construction Generally

Beginning January 1, 2014, California has replaced the Enterprise Zone Hiring Credit with the New Employment Credit and the California Competes Credit, each of which may be used to offset the Personal Income Tax and Corporation Tax. For more information, today, Pillsbury attorneys, Jeffrey M. Vesely, Paul Casas and Annie H. Huang published their advisory titled Deadline Approaching for California’s New Employment Credit, which discusses the New Employment Credit.

Additional Sources: Pillsbury Advisory, GO-Biz Finalizes Proposed California Competes Tax Credit Regulations (Feb. 11, 2014); Pillsbury Advisory, GO-Biz Releases California Competes Tax Credit Draft Proposed Regulations (Dec. 4, 2013)

For taxable years beginning on and after January 1, 2014 and before January 1, 2025, the California Competes Tax Credit will be allowed against the net tax in the amount allocated by the California Competes Tax Credit Committee. A taxpayer must enter into a written agreement with the Governor’s Office of Business and Economic Development’s (GO-Biz) which sets forth the amount of credit to be allocated to the taxpayer. Taxpayers may negotiate the amount of credit, which is based a variety of criteria aimed towards expanding and retaining businesses in California.

On February 11, 2014, Pillsbury attorneys Jeffrey M. Vesely, Paul Casas and Annie H. Huang published their advisory titled GO-Biz Finalizes Proposed California Competes Tax Credit Regulations. The advisory discusses GO-Biz’s release of its final proposed regulations on the California Competes Tax Credit.

Additional Resources: Pillsbury Advisory, GO-Biz Releases California Competes Tax Credit Draft Proposed Regulations (Dec. 4, 2013); Governor’s Office of Business and Economic Development; State of California Franchise Tax Board; California Competes Tax Credit FAQ

UPDATE: CSLB, New C-22 Asbestos Classification Update; CSLB, Proposed New C-22 Asbestos Classification in the Works (Apr. 2, 2014)

The California Contractors State License Board (CSLB) recently posted notice of a proposal to add to its regulations located at Title 16, Division 8, Article 3 of the California Code of Regulations (CCR) sections governing an asbestos abatement contractor classification. Any person interested may present statements or arguments orally or in writing at the hearing to be held at the CSLB’s offices located at 9821 Business Park Drive, Sacramento, California 95827, at 11:00 a.m. on March 25, 2014. Written comments — including those submitted by mail, facsimile or email — must be received by the CSLB not later than 5:00 p.m. on March 24, 2014 or at the hearing.

As set forth in the notice, the proposal is to adopt regulations to establish a specialty classification for an asbestos abatement contractor, including the related scope of work. The proposed specific provisions of § 832.22 are:

 Subsection (a) establishes the scope of work for the C-22 – asbestos abatement specialty classification that shall be done in accordance with Division of Occupational Safety and Health (DOSH) requirements.
 Subsection (b) requires DOSH registration (or an active application for registration in process) for asbestos classification holders.
 Subsection (c) requires proof of DOSH registration within 90 days after the asbestos abatement contractor license is issued, if applicable.
 Subsection (d) establishes experience requirements for applicants for the asbestos abatement contractor classification.
 Subsection (e) requires proof of current DOSH registration as a condition precedent to the renewal of an asbestos abatement contractor license.
 Subsection (f) limits the scope of work of the C-22 – asbestos abatement classification to exclude other construction-related duties or hazardous substance removal or remediation unless the asbestos abatement contractor is otherwise duly licensed to do so.

The proposed specific provisions of § 833 are:

 Subsection (a) clarifies the stand-alone nature of the C-22 – asbestos abatement contractor classification.
 Subsection (b) clarifies that in order for a Class B – general building contractor to contract for any project that includes asbestos abatement work, he/she must hold the C-22 – asbestos abatement classification or the § 7058.5 asbestos certification and DOSH registration or subcontract with an appropriately licensed contractor.
 Subsection (c) clarifies the overlay nature of the § 7058.5 asbestos certification, in that it operates in conjunction with other classification(s) held by the licensed contractor.
 Subsection (d) allows for the waiver of the written trade examination for the C-22 – asbestos abatement contractor classification under certain

The proposed text of the regulations is:

Ҥ 832.22. Class C-22 РAsbestos Abatement Contractor.

(a) An asbestos abatement contractor performs abatement, including containment, encapsulation, or removal, and disposal of asbestos containing construction materials, as defined in Section 6501.8 of the Labor Code, in and on buildings and structures. All work performed and all documentation prepared by an asbestos abatement contractor shall be done in accordance with regulations and requirements of the Division of Occupational Safety and Health (DOSH) of the Department of Industrial Relations.

(b) The Board shall not issue an asbestos abatement contractor license unless the applicant or contractor is duly registered with DOSH pursuant to Section 6501.5 of the Labor Code or has an active application for registration in process with DOSH.

(c) Within 90 days after the asbestos abatement contractor license is issued, the contractor shall submit to the Board proof that he or she is duly registered with DOSH pursuant to Section 6501.5 of the Labor Code.

No asbestos abatement work shall be performed nor documentation prepared until the contractor has submitted proof of his or her DOSH registration to the Board. Failure of a licensee to provide proof of current registration with DOSH within 90 days after issuance shall result in the automatic suspension of the license or removal of the C-22 – asbestos abatement contractor classification at the end of the 90 days.

(d) Every applicant for the C-22 – asbestos abatement contractor classification must have had, within the last 10 years immediately preceding the filing of the application, not less than four years of experience as a journeyman, foreman, or supervising employee working for a licensed contractor who holds the C-22 – asbestos abatement contractor classification or the asbestos certification, as defined in Section 7058.5 of the Code, and DOSH registration.

(e) The Board shall require as a condition precedent to the renewal of an asbestos abatement contractor license that the licensee have on file proof of current registration with DOSH pursuant to Section 6501.5 of the Labor Code.

(f) This classification does not include any addition to or alteration, repair, or rehabilitation of the permanently retained portions of such buildings and structures. Hazardous substance removal and remediation, as defined in Section 7058.7 of the Business and Professions Code, are specifically not included in this classification.”

Ҥ 833. Asbestos Classification and Certification Limitations and Examination Requirement.
(a) The C-22 – asbestos abatement contractor classification shall operate as a stand-alone specialty contractor classification for asbestos abatement work, notwithstanding any other classification held by the licensed contractor.
(b) No general building contractor, as defined in Section 7057 of the Code, shall contract for any project that includes asbestos abatement work unless the general building contractor holds the C-22 – asbestos abatement contractor classification or the asbestos certification, as defined in Section 7058.5 of the Code, and DOSH registration or unless the general building contractor subcontracts with an appropriately licensed contractor.
(c) The asbestos certification, as defined in Section 7058.5 of the Code, shall operate in conjunction with other classification(s) held by the licensed contractor. No licensed contractor who holds the asbestos certification shall contract for any project that includes asbestos abatement work in a trade for which the contractor is not licensed, unless the licensee also holds the C-22 – asbestos abatement contractor classification.
(d) The Registrar may waive the trade examination, pursuant to Section 7065.3, for the C-22 – asbestos abatement contractor classification for a licensed contractor who holds the asbestos certification, as defined in Section 7058.5 of the Code, upon application and conclusive showing by the licensee that he or she possesses not less than four years journey-level experience in the C-22 – asbestos abatement contractor classification within the last 10 years immediately preceding the filing of the application.
The licensee shall have obtained the asbestos certification after having passed the written asbestos certification examination and shall have held the asbestos certification in active and good standing throughout the four-year experience period at a minimum.”

The proposed regulatory action will allow the existing asbestos certification to continue in its current state as an overlay to classification(s) held by the certification holder and will establish a stand-alone asbestos abatement classification with appropriate experience and examination requirements. It will also allow contractors who focus their asbestos abatement work in a limited number of classifications to remain with the existing asbestos certification and will allow contractors who specialize in asbestos abatement work throughout a building to obtain the new asbestos abatement specialty classification. Ultimately, the new regulations will expand the avenues through which a licensed contractor can be authorized to perform asbestos abatement work.

Inquiries or comments concerning the proposed administrative action are to be addressed to:

Contractors State License Board 9821 Business Park Drive Sacramento, CA 95827 Attn: Betsy Figueira (916) 255-3369 (916) 255-6335 (FAX)
Betsy.Figueira@cslb.ca.gov The backup contact person is:
Karen Robinson (916) 255-4298 (916) 255-6335 (FAX)
Karen.Robinson@cslb.ca.gov

Additional Sources: Contractors State License Board; California Contractors State License Board Confirms Asbestos Certification Does Not Authorize Universal Removal/Abatement

On February 6, 2014, Pillsbury attorneys Riaz A. Karamali and Didi S. Chow posted their advisory titled California’s New LLC Law: Next Steps for California LLCs. The advisory discusses the California Revised Uniform Limited Liability Company Act (New Act), which supersedes the California’s Beverly-Killea Limited Liability Company Act (Old Act), and a number of substantive changes under the New Act that may adversely affect existing California limited liability companies (LLC) unless they amend their operating agreements.

Additional Sources: Pillsbury Winthrop Shaw Pittman LLP, LLCs Can Finally Become Licensed California Contractors (Oct. 10, 2011)

On January 29, 2014, The Observer, a student-run, daily print and online newspaper serving Notre Dame and St. Mary’s, reported that Notre Dame “is hoping to begin massive construction of Notre Dame Stadium after the conclusion of the 2014 football season,” after interviewing University President Rev. John I. Jenkins, C.S.C. It confirmed that the “Notre Dame Board of Trustees has endorsed a plan to build three buildings totaling 750,000 square feet that will surround the Stadium.” The “Campus Crossroads Project” is expected to cost $400 millions, and to take 33 months to construct from start to finish. President Jenkins confirmed that, ideally, the University would make the decision to go ahead with the project in August and start building after Notre Dame’s home finale against Louisville in November.

President Jenkins, however, reportedly confirmed that Notre Dame still needs to raise funds for the project. Evidently, the University’s policy is to have 100% of the funding promised and 50% in hand before construction begins. Notre Dame is looking for benefactors who will support the Campus Crossroads Project and expects the rest of the funding to come from various sources, including revenue from premium seating tickets — 3,000 to 4,000 additional club seats.

Paul Browne, a spokesperson for the University, reportedly confirmed that the University expects to employ all construction trades locally, but it could also contract with some Chicago-area companies to help with construction. President Jenkins reportedly confirmed that Notre Dame expects to look first towards South Bend for construction companies, providing job opportunities to the local community.

Erin Hoffmann Harding, Vice President of Student Affairs, reportedly confirmed that Notre Dame has worked with architectural firms like 360 Architects, Slam and Workshop Architects so far on the project.

Additional Resources: ESPN; ABC News; USA Today; Chicago Tribune; South Bend Tribune; bleacher report

On January 17, 2014, the California Contractors State License Board issued Industry Bulletin – 1/17/2014 clarifying that the new law effective January 1, 2014 (Senate Bill 407) requiring replacement of plumbing fixtures with water-conserving models is not triggered by property “maintenance” or “repairs.” The new law requires anyone applying for a building permit for work that will “alter” or “improve” a single-family residence built in 1994 or earlier to replace all plumbing fixtures with water-conserving models. Replacement of the fixtures is a condition of receiving final permit approval from the local building department. Contractors are encouraged to verify requirements with their local building department before taking any action to maintain, repair, alter or improve a single-family residence. (The new law also requires, by 2019, water-conserving plumbing fixtures in multi-family dwellings and commercial properties when specific renovations are made.)

Although not binding legal authority, the California Building Officials (CALBO) group has interpreted the terms “alterations” and “improvements” to mean “any construction to an existing structure that enhances or improves the structure. Construction that is related to repairs or maintenance of the structure is not considered to be an alteration or improvement.” CALBO consider the following to be “repairs” or “maintenance” that do not trigger the requirements of the new law:

* electrical service change out * HVAC change out * sewer line replacement * siding or stucco * site work: retaining wall, fences, walkways, etc.
* water heater replacement * window replacement * other repairs, as determined by the state Building Code
Additional Sources: Contractors State License Board; CALBO’s Legislative Analysis; Tri-Chapter Uniform Code Committee Guidelines

Photo: Jesus Rodriguez, Taken Oct. 3, 2012 – Creative Commons

A recent report by the California Department of Industrial Relations (DIR) that the State of California does not collect between $800 million and $1.2 billion as a result of the “underground economy” could be a catalyst to the State increasing its efforts to combat what is commonly referred to as the underground economy and, in turn, to increase revenues payable to the State. The term “underground economy” refers to those individuals and businesses that deal in cash and/or use other schemes to conceal their activities and their tax liability from government, licensing, regulatory, and taxing agencies. This includes employers paying workers in cash, under-reporting wages paid to employees, failing to pay into the workers’ compensation fund, reporting employees as independent contractors, and underpaying taxes, tax evasion or engaging in tax fraud. It is also commonly referred to in slang terms as cash pay, tax gap, payment under-the-table and payment off-the-books.

The State of California Employment Development Department (EDD) has a charge to investigate businesses that avoid paying payroll taxes. The EDD’s Underground Economy Operations (UEO) organization was established in 1993 to implement and administer the activities of the Joint Enforcement Strike Force. The mission of UEO is to reduce unfair business competition to protect the rights of workers. It does so by (1) coordinating the joint enforcement of tax, labor, and licensing laws, (2) detecting and deterring tax violations, (3) conducting research on strategies to increase compliance with payroll tax laws, and (4) educating customers to increase compliance with payroll laws. Three of UEO’s program focus areas are the Employment Enforcement Task Force, Department of Industrial Relations, and Contractors State Licensing Board.

Additional Source: Sacramento Business Journal; State of California Employment Development Department ; CA Employment Development Depart Now Authorized To Share New Employee Information

Photo: Simon Cunningham, Taken on Dec. 18, 2013 – Creative Commons

Employers often would prefer an arbitral forum for employee-related disputes because they are perceived as a venue that typically delivers a fair, efficient and cost-effective resolution for such disputes. Employment agreements that require arbitration of claims on an individual basis, including Fair Labor Standards Act (FLSA) claims, have been subject to numerous challenges, including that such provisions violate the National Labor Relations Act. On January 1, 2014, the U.S. District Court for the Northern District of Texas, in Pacheco v. PCM Constr. Servs., LLC, N.D. Tex., No. 3:12-cv-04057, held that the seven disgruntled construction workers’ FLSA claims against their employer for unpaid overtime must be arbitrated. Including such a provision, including a waiver of the right to pursue claims as a class representative, in your employee contracts certainly is worth considering in light of the courts’ recent willingness to enforce such clauses.

The FLSA establishes, among other things, overtime pay standards affecting employees in the private sector as well as federal, state and local government employees. The construction workers claimed that there was a company-wide practice of not paying overtime in violation of the FLSA, and that there are 40 to 50 similarly situated employees. These workers had each signed employment agreements which required them “to submit any dispute between employee and the company, or any of the company’s employees, representatives, or agents, to mandatory, binding arbitration.” The construction workers argued that the arbitration provision was unenforceable because it restricted class arbitration, it was unconscionable and it didn’t permit an award of liquidated damages, as available under the FLSA, and that their employer had waived the right to compel arbitration. Judge Sam A. Lindsay rejected their arguments, compelling arbitration and dismissing the civil action with prejudice.

Note, however, that the Ninth Circuit Court of Appeals in Wal-Mart Wage & Hour Empl. Practices Litig. v. Class Counsel & Party to Arbitration, recently held that a non-appealability clause in an arbitration agreement that eliminates all federal court review of arbitration awards, including review under § 10 of the Federal Arbitration Act, is not enforceable.

Additional Sources: U.S. Department of Labor; National Labor Relations Board; US Supreme Court Gives Green Light To Class Action Waivers In Consumer Contracts; Rials v. Apex Bulk Commodities Inc., Los Angeles Superior Court Case No. BC527219 (Judge Johnson’s tentative ruling confirmed that she was going to enforce the arbitration agreement, leaving it to the arbitrator to decide if the plaintiffs’ claims could proceed as a class arbitration or as individual arbitrations because the contract contains no language on the matter)

Photo: Sam Greenhalgh, Taken on Sep. 8, 2007 – Creative Commons

On January 16, 2014, Pillsbury attorney John E. Jensen  published his alert titled Affiliates of Indicted Contractor May Face Longer Suspension, which discusses the U.S. Court of Appeals for the Eleventh Circuit decision in Agility Defense & Government Services, Inc. v. United States Department of Defense, No. 13-10757, 2013 WL 6850891 (11th Cir. Dec. 31, 2013). Among other things, the Court of Appeals confirmed that the Government has the ability to suspend “affiliates” of a suspended contractor, even though there is no allegation that the affiliates themselves had done anything wrong. This decision reversed the holding of an Alabama federal district court, which had held the affiliates’ suspension past 18 months impermissible.

Photo: Martin Bowling, Taken on November 16, 2011 – Creative Commons

On January 8, 2014, Pillsbury attorneys Jeffrey A. Knight and Alina J. Fortson, and Joseph Ferranti, Environmental Division Director of InDepth Corporation, published their alert titled Be Careful What You Look For: EPA Updates “All Appropriate Inquiries” Environmental Diligence Standard. The alert discusses the EPA’s recent amendment of its “All Appropriate Inquiries” rule. This rule sets out the standard for environmental due diligence in commercial and industrial property transactions in order to qualify for certain defenses to liability under the federal “Superfund” law.

Photo: TexasGOPVote.com, Taken on Feb. 14, 2011 – Creative Commons