Photo of Lori Wisniewski Azzara

Lori Wisniewski Azzara is Co-Editor of Construction Law Now and a Partner at Cohen Seglias. She practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes. Lori counsels clients, including owners, developers, contractors, subcontractors, architects and engineers, on a variety of both private and public projects and represents clients in various state and federal courts,

Lori can be reached at lazzara@cohenseglias.com or 412.434.5530.

Design professionals doing business in Kentucky beware: the Kentucky Court of Appeals recently held that a contractor may pursue a negligent misrepresentation claim against an architect for delays to a project resulting from allegedly defective plans and specifications. The Court permitted the contractor’s tort claim despite the absence of a contractual agreement between the parties and the fact that the contractor signed documents that waived its claims.  Continue Reading KY Contractors Can Now Assert Claims for Negligent Misrepresentation Against an Architect Despite Absence of a Contract

As we discussed last summer, the Occupational Safety and Health Administration (OSHA) issued a new Confined Space in Construction Standard, which went into effect on August 3, 2015 and required heightened training, continuous worksite evaluations and communication for all construction workers performing work in manholes, crawl spaces, tanks and other confined spaces not intended for continuous occupancy that are located on construction projects.  Enforcement of the new standard was postponed through October 2, 2015 for all contractors covered by the standard to provide additional time to train and acquire necessary equipment.  In October 2015, OSHA further extended the temporary enforcement delay through January 8, 2016, but this time limited the extension to contractors performing residential construction work, which includes those contractors working on single-family homes, duplexes and townhouses.  The extension did not apply to contractors working on multi-unit apartment buildings.  Earlier this month, OSHA issued a memorandum that again extended the delayed enforcement of the standard through March 8, 2016 for residential construction work.

Under the delay policy, OSHA will not issue citations to contractors engaged in residential construction work if the contractor is making good faith efforts to comply with the confined space standard, as long as the contractor complies with either the training requirements of the new standard, found at 29 CFR 1926.1207, or the former training requirements, found at 29 CFR 1926.21(b)(6)(i).

Factors considered by OSHA to determine if a contractor is engaged in good faith compliance efforts include:

  • If the contractor has not trained its employees as required under the new standard, whether the employer has scheduled such training;
  • If the contractor does not have the equipment required for compliance with the new standard, including personal protective equipment, whether the contractor has ordered or otherwise arranged to obtain such equipment required for compliance and is taking alternative measures to protect employees from confined space hazards; and
  • Whether the contractor has engaged in any additional efforts to educate workers about confined space hazards and protect workers from those hazards.

Full enforcement of the confined spaces standard for non-residential contractors remains in effect, and those contractors should continue to comply with the standard’s requirements.  We will continue to monitor the enforcement of the standard for residential projects.

Lisa M. Wampler is a Partner in the Construction Group of Cohen Seglias Pallas Greenhall & Furman PC. She has an active and diverse construction litigation practice and represents owners, general contractors, construction managers and the different trades in complex matters involving all phases of the construction process.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual dispute.

In late July, the West Virginia Purchasing Division of the Department of Administration issued an “emergency rule” that exempts construction contracts from a new law regarding change order approval. This new law, which went into effect on July 1, originally required that all change orders be approved by the Purchasing Division and the Attorney General prior to commencement of work. The emergency rule, which was adopted by the West Virginia Secretary of State, clarifies that change orders related to government construction contracts do not require prior approval. The rationale behind the exemption for government construction contracts relates to the lengthy work stoppages that would inevitably occur while waiting for the required preapproval. The Department found that these stoppages are “costly and unfeasible” and often lead to “increased costs for the taxpayer, state government agencies, contractors and countless others.” So as to avoid these delays and additional costs, contractors on public West Virginia projects must continue to work after submitting a change order request.

Contractors should be familiar with this change to the law’s applicability, as failing and/or refusing to perform work while a change order is pending approval may subject you to liability for any resulting delays to the Project’s completion and/or additional costs incurred by the government. Contractors faced with a change in their original scope of work should consult with an attorney prior to proceeding with the work to ensure that all rights to payment for performance of the new and/or additional work are preserved.

Last month, the Occupational Safety and Health Administration (OSHA) added a new rule that provides increased protections to those working in confined spaces on construction projects.  The new rule, which goes into effect on August 3, 2015, applies to manholes, crawl spaces, tanks and other confined spaces not intended for continuous occupancy that are located on construction projects.  OSHA predicts that the new rule will prevent approximately 780 serious injuries and 5 deaths each year.

Manhole without cover in the concrete block

Confined spaces are defined as those that (1) are large enough for an employee to enter; (2) have limited means of entry or exit; and (3) are not designed for continuous occupancy.  The rule provides construction workers in confined spaces with the same protections already afforded to workers in manufacturing and general industry but differs in several construction-specific respects.  “Unlike most general industry worksites, construction sites are continually evolving, with the number and characteristics of confined spaces changing as work progresses.  This rule emphasizes training, continuous worksite evaluation and communication requirements to further protect workers’ safety and health,” according to Dr. David Michaels, Assistant Secretary of Labor for Occupational Safety and Health.

The new rule requires a “competent person” to initially evaluate the project site and identify all confined spaces.  Employers must then train their employees on the existence, location and dangers posed by each confined space.  Workers not authorized to perform entry rescues must also be trained on the dangers of attempting such rescues.  Employers are further required to coordinate with emergency services before workers enter certain confined space.  After this pre-entry planning is conducted, employers must continually monitor the confined space for air contaminant and engulfment hazards.

Communication is heavily emphasized in the new rule.  Because multiple contractors are likely present on a project site, each with its own workers needing to enter the confined space, contractors are required to coordinate and share safety information with each other.  The controlling contractor, such as the general contractor, is responsible for ensuring compliance with the new rule by its subcontractors and visitors to the project site.

Contractors who have employees or subcontractors working in confined spaces should familiarize themselves with the new rule’s requirements and immediately start implementing them.  Significant fine and citations can be issued for each violation of the new rule.  Additional information and compliance assistance materials are available on OSHA’s Confined Spaces website.

Lisa M. Wampler is a Partner in the Construction Group of Cohen Seglias Pallas Greenhall & Furman PC.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

This month, West Virginia Governor Earl Ray Tomlin signed Senate Bill 361, which significantly adjusts the state’s calculation of prevailing wages to establish an amount more reflective of actual earnings in regions across the state.  As Governor Tomlin states, the new law will “address the concerns of hardworking West Virginians while establishing a common sense approach to continued investments in [the] infrastructure.”

Law gavel on a stack of American money.

Currently, all contractors on public projects pay wages calculated by the West Virginia Department of Labor.  When the new law goes into effect on April 13, 2015, economists at West Virginia University and Marshall University, as well as Workforce West Virginia, will be tasked with calculating those wages.

The most impactful aspect of the new law is that any West Virginia public project under $500,000 will be exempt from paying prevailing wages.  For projects over $500,000, before the public entity can advertise for bids, it must obtain from Workforce West Virginia the fair minimum rate of wages to be paid by the successful bidder to the laborers. This schedule of wages is to be made part of the construction specifications.

There is a July 1, 2015 deadline for the calculation of the new 2015 prevailing wages.  If, for any reason, Workforce West Virginia, together with West Virginia University and Marshall University, fail to determine the prevailing hourly wage rate by this date, no prevailing wages will be in effect until the determination is made.  There are provisions in the Bill that allow for an extension of time during which current prevailing wage rates would remain in effect, but if a determination is not made at the expiration of the extension period, no prevailing wages will be in effect until a determination is made.

West Virginia is one of a growing number of states enacting laws to narrow the types of construction projects affected by prevailing wages, and in some cases, to remove the law entirely.  We will continue to monitor the prevailing wage reform across the country, and, as always, we welcome your comments and questions.

Lisa M. Wampler is a Partner in the Construction Group of Cohen Seglias Pallas Greenhall & Furman PC.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

It is no secret within the construction industry that public-private partnership (P3) project delivery has recently become all the rage.  The demand for infrastructure repairs and improvements is high, and the public dollars needed to fund them are scarce.  P3 projects incorporating public and private funding have, therefore, become a creative delivery alternative that states like Ohio have adopted.  And with new delivery methods comes the need for new legislation to regulate and administer these types of projects.

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The Bonding Requirements

Last month, Ohio Governor John Kasich approved new amendments to the state’s public-private partnership (P3) legislation that could have drastic impacts on subcontractors and suppliers performing work on Ohio P3 projects.  The new law, which goes into effect this September, requires prime contractors to provide both performance and payment bonds on P3 projects in Ohio—a change that subcontractors and suppliers will likely be touting as it will help to secure the payment obligations of prime contractors to their subs.

The Catch

The catch is that the director of the Ohio Department of Transportation (ODOT), Jerry Wray, will have discretion to determine the amount of the bonds.  In other words, the director could fix a bonding amount that is less than the prime contract price, leaving potential bond claimants somewhat exposed to the risk of nonpayment.

The legislation also requires that the performance bond be conditioned on the private entity performing the work according to the agreed upon terms, within the time prescribed, and in conformity with any other terms and conditions that the director requires.  Similarly, the payment bond must be conditioned on the payment for all labor, work performed, and materials furnished in connection with the P3 agreement and any such terms and conditions that director requires.

What Do the Amendments Mean for the Future?

This bonding requirement is a major change to Ohio’s P3 legislation, which is currently silent on bonding.  The new bonding requirement, which gives the director considerable discretion, is markedly different from some of Ohio’s other legislation relating to public construction.   The Ohio Transportation Code, for instance, requires a payment and performance bond for 100% of the contract amount for transportation projects.

Depending on the amount specified by the ODOT director for the payment and performance bonds, starting in September of 2014, contractors farther down the chain on Ohio P3 projects may have little or no payment protection other than directly bringing an action against the contracting party directly upstream.  We will continue to monitor the implementation of the new P3 bonding requirement and how ODOT’s director decides to use his discretion.

Lisa M. Wampler is a Partner in the Construction Group of Cohen Seglias Pallas Greenhall & Furman PC.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

As we first reported back in January of 2012, the Pennsylvania Superior Court issued a decision in Bricklayers of Western Pennsylvania Combined Funds v. Scott’s Development Co. that significantly changed the meaning of the Pennsylvania Mechanics’ Lien Law. In its decision, the Superior Court expanded the Lien Law’s definition of “subcontractor” to include union members, giving the union trustee the ability to assert lien claims on behalf of its members for unpaid contributions to the union trust funds. This decision exposed contractors and owners to liability for a subcontractor’s failure to make benefit contributions, and we provided insight on strategies to avoid or limit such exposure.

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From a legal perspective, the Superior Court’s liberal construction of the Lien Law overturned decades of precedential case law that required contractors and subcontractors to comply strictly with the Lien Law requirements.

However, on April 17, 2014, the Pennsylvania Supreme Court unanimously reversed the Superior Court’s decision and held that union workers are not “subcontractors” under the definition in the Lien Law and that the union Trustees are not entitled to file a lien claim for unpaid benefit contributions.

It is worth noting that the Supreme Court did not weigh in on whether the Lien Law should be strictly interpreted and applied as it was prior to the subject case. Instead, the Court stated that the clear and unambiguous portions of the Lien Law should reflect the intent of the Legislature, while ambiguous provisions should be reviewed further.

What does this mean going forward? It is clear that union members do not have mechanics’ lien rights under the Lien Law and have thus lost a collection tool. With regard to the strict versus liberal interpretation of the Lien Law, we will have to wait for the Court to take another case raising that issue. However, given the reversal of the Superior Court’s ruling here, it can certainly be argued that the Supreme Court rejects liberal interpretations of the Lien Law. On the other hand, this ruling likely eliminates concerns that owners and general contractors had as a result of the Superior Court ruling. As always, we will continue to monitor any new developments.

Jason A. Copley is the Managing Partner at Cohen Seglias and a Partner in the Construction Group. His practice is focused on representing contractors, subcontractors and owners in the areas of construction and commercial litigation.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

While by no means a recent law, Section 508 of the Pennsylvania Public School Code, 24 P.S. § 5-508, is becoming one that school districts are repeatedly relying upon to avoid paying contractors for work performed outside the original scope of their contracts. Specifically, Section 508 requires a majority vote of all members of a district’s school board any time the district enters into “contracts of any kind … where the amount involved exceeds one hundred dollars ($100).” A school board’s failure to comply with this Section renders any agreement reached with the school district void and unenforceable.

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Application of Section 508 is mandatory not only to the underlying contract but also to any subsequent modifications to the contract that would increase the district’s indebtedness under that contract, i.e., change orders. Unless a contractor can satisfy the heavy burden of producing evidence that a majority of the school board approved a change order, there is no obligation on the part of the district to pay for the additional work, even on equitable claims of unjust enrichment and quantum meruit.

While it may be common and, at times, necessary under the project schedule for contractors to perform additional work first and submit a change order request later, under Section 508, unless a majority of the school board voted to ratify the contract to include that additional work, no payment is required, even if it was performed at the direction of the district’s superintendent or other representative.

Section 508 is a law that contractors are rarely aware of and one that can be difficult to defeat once in litigation, given its mandatory application. While the practical application of Section 508 may be burdensome, it is critical for contractors to demand executed written change orders prior to performing work outside the scope of the original contract. Addressing this requirement upfront in the underlying contract may also serve to protect a contractor’s rights. Otherwise, contractors run the risk of waiving their right to receive payment later for performing additional work.

Lisa M. Wampler is a Partner in the Construction Group of Cohen Seglias Pallas Greenhall & Furman PC.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

In recent years, concepts such as “green construction” and “renewable energy” seem to have become almost commonplace. In what is perhaps an effort to lead the world by example in these areas, President Barack Obama recently issued a Presidential Memorandum that calls upon federal agencies to increase drastically their use of renewable energy sources.

The Memo and Its Goals Green Bulb.jpg

The Memo outlines ambitious goals that seek to more than double the federal government’s current use. The Memo targets the use of renewable energy sources for 20% of the government’s energy needs by 2020. To achieve this goal, federal agencies must ensure that their renewable energy usage exceeds 10% of all energy usage by 2015, 15% in 2016 and 2017, and 17.5% in 2018.

Since the federal government occupies nearly 500,000 buildings across the country, the Memorandum zeroes in on building performance and energy efficiency. It prioritizes the installation of renewable energy sources directly on federal property as an ideal way to realize the targets set forth in the Memo.

Implementation and Measures

To measure the performance of federal buildings, energy and water meters are to be installed in all federal buildings where installation is cost-effective and appropriate. To promote and ensure compliance, transparency, and benchmarking, data collected from the meters is to be reported to the Environmental Protection Agency and Green Button.

Notably, the Memo is to be implemented in a manner consistent with Executive Order 13514, which was issued in October 5, 2009. This Executive Order requires new construction and major renovation on federal buildings to be considered “high performance” or “sustainable.”

What Does It Mean for the Construction Industry?

With these new goals and priorities in place, the sustainability and construction industries should expect to see an increase in the installation of renewable energy infrastructures across the country. In fact, a Presidential Memorandum dated December 2, 2011 authorizes and encourages federal agencies to enter into energy savings performance contracts for up to 25 years.

However, agency funding for energy projects remains a concern. Although many trade organizations and other industry activists have applauded the goals set by the Memorandum, the procurement processes, which have allowed large private companies to install renewable energy infrastructures through long-term power purchase agreements, are still unavailable to the federal agencies. With regard to new construction, it will be interesting to see whether and to what extent the federal government incorporates renewable energy sources into those projects.

All told, President Obama’s Memorandum gives reason for optimism within the industry, but that optimism should be guarded while funding and other implementation issues remain up in the air.

Lane F. Kelman is a Partner with the Firm and a member of the Construction Group and chair of the Green Building and Sustainability practice group. He represents developers, general contractors, construction managers and the different trades in complex matters ranging from bid protests, contract negotiations and claim prevention & management.

Jennifer R. Budd is an Associate with the Firm and a member of the Construction Group.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

As members of the construction industry know, to describe the relationship between a surety and the party to whom it issues a surety bond (the principal) as confusing would be an understatement.  In fact, many believe that the surety-principal relationship is similar, if not identical, to the insurer-insured relationship. In a recent federal court opinion – Reginella Construction Company, Ltd. v. Travelers Casualty and Surety Company of America – a contractor learned the hard way that the principal in a surety-principal relationship is not nearly as protected as the insured in an insurer-insured relationship.

The Case

In Reginella, the United States District Court for the Western District of Pennsylvania granted a surety’s motion to dismiss the claims brought against it by the surety’s principal, Reginella, finding, among other things, that a surety does not owe the kind of heightened duty to its principal that an insurance carrier owes to its insured (this heightened obligation is called a fiduciary duty, and we tend to see it in the insurer-insured, attorney-client, trustee-beneficiary, and guardian-ward contexts).  In Reginella, the surety, Travelers, issued performance and payment bonds on behalf of its principal, Reginella, for a school district project in Pennsylvania and a turnpike project in Ohio.

On the school district project, Reginella’s relationship with the owner broke down, and the project shutdown.  On the turnpike project, Reginella’s relationship with Travelers soured over a disagreement surrounding a lien filed by one of Reginella’s subcontractors.  Reginella alleges that Travelers failed to, among other things, (i) pay Reginella’s subcontractors in accordance with the payment bonds that Travelers issued, (ii) issue a bond to address a subcontractor lien, and (iii) generally act in the best interests of Reginella in a way that would facilitate payment from the project owners to Reginella.

Ultimately, Reginella sued Travelers for damages in excess of $15 million for lost business, goodwill, future earnings and residual value of its enterprise against Travelers for, among other claims, Travelers’ alleged breach of its fiduciary duty owed to Reginella in relation to the bonds issued on the two projects.  Travelers moved to dismiss the entirety of Reginella’s claims.  In applying Pennsylvania law, the Court granted Travelers’ motion and dismissed Reginella’s claims against Travelers, concluding that a Pennsylvania court would not impose fiduciary duties on a surety because a surety is a guarantor issuing a commercial guaranty, not an insurance carrier issuing an insurance policy.

What Does It All Mean?

The Court’s decision makes it clear that in Pennsylvania, a surety’s obligations to its principal are not the same as the heightened obligations that exist in fiduciary relationships.  In a fiduciary relationship, the fiduciary (e.g., an insurer) must act with the utmost fairness and refrain from using his position to the other’s detriment and his own advantage.  As the Court determined, however, surety relationships are ordinary arm’s-length commercial relationships where each party owes the other a less protected duty of good faith and fair dealing.  When entering into surety relationships, contractors need to be mindful of this distinction, especially when a surety begins communicating with project owners on its principal’s behalf.

Principals like Reginella should carefully monitor the surety’s activity and insist on being copied on all communications to and from the surety.

It is important to note that a couple of weeks ago, Reginella asked the Court to reconsider and alter its decision.  Therefore, the Court’s decision is not yet final, and we will continue to monitor the result.

John A. Greenhall is a Partner with the Firm and a member of the Construction Group. He can be reached at 215.564.1700 or jgreenhall@cohenseglias.com.

Lori Wisniewski Azzara is an Associate at Cohen Seglias Pallas Greenhall & Furman PC. Lori practices in the areas of construction and commercial litigation and has experience in contract negotiation, claims for delay and inefficiency, mechanics’ liens, and all types of contractual disputes.

Daniel E. Fierstein is an Associate in the Construction Group of Cohen Seglias and focuses his practice on construction law. Dan counsels clients at all tiers of the construction industry, including general contractors, subcontractors, owners, developers, and design professionals.