I’m a management-side employment lawyer. It’s my job to go to court and defend employers and executives accused of all different types of misconduct, including sexual harassment. Over the last 20 years, I have seen it all. Some of my cases involve relatively tame allegations, like telling dirty jokes around the watercooler. And I have also been involved with cases involving extremely serious accusations, including indecent exposure, unwanted touching, and sexual assault. I spent a fair amount of time watching the Kavanaugh hearings. Like everyone else I know, I have a strong opinion on whether or not the nomination should be approved, but I did not write this article to share my personal opinions. There are enough political commentators on cable news shows doing that already. From an employment litigation and human resources perspective, there are several important lessons to be learned.
In a recent U.S. Supreme Court case about pregnancy discrimination, Justice Breyer asked: “Why, when the employer accommodated so many, could it not accommodate pregnant women as well?” As an employer, that is a question you should now be asking when preparing, reviewing, or updating your company’s accommodation policies.
Many employers have policies and practices to ensure accommodation of disabled workers or those with temporary injuries or disabilities. However, employers may be overlooking their legal obligations to accommodate another group of workers: pregnant women who have pregnancy-related work limitations. Continue Reading Does your Employee Handbook stand up to the Supreme Court’s latest decision about accommodations for pregnant workers?
Last week, the Supreme Court of Pennsylvania issued a decision which has important consequences for all members of the construction industry involved with public works projects. In Clipper Pipe & Service, Inc. v. The Ohio Casualty Insurance Co., the Court held that the Contractor and Subcontractor Payment Act (CASPA), which is a statute that addresses when payments are to be made on construction projects and provides remedies for noncompliance, does not apply to public works construction projects. The Court’s decision means that, when working on public projects, the contractor-friendly remedies under CAPSA are not available to contractors and subcontractors, who must now rely exclusively on the less favorable and less certain relief under Pennsylvania’s Prompt Payment Act (PPA).
Prior to the Court’s decision, it was unclear whether CASPA applied to nonpayment claims on public works construction projects because the courts were divided. After the Supreme Court’s decision in Clipper Pipe, CASPA’s favorable remedies are no longer available to contractors or subcontractors on public works projects. Those remedies are only available on private construction projects in Pennsylvania.
By clarifying the applicability of CASPA, the Court’s holding has practical consequences for all construction project participants. CASPA and the PPA have important differences that affect the rights of owners, contractors, and subcontractors (which includes second-tier subcontractors/suppliers). The most important differences involve the penalty, attorney’s fees, and interest provisions of the respective statutes.
CASPA requires a court to impose a penalty of one percent (1%) per month on a party who has wrongfully withheld payments. The PPA provides a court with discretion to award an additional one percent (1%) penalty if the court determines that the nonpaying party acted in an “arbitrary” or “vexatious” manner in withholding the payment(s) in question. The CASPA penalty, unlike the PPA penalty, is not discretionary. Therefore, an unpaid contractor has a better chance of recovering additional damages under CASPA than under the PPA for wrongful withholding of payments.
CASPA also mandates an award of reasonable attorney’s fees to the substantially prevailing party in litigation or arbitration. The court is permitted, but not required, to award attorney’s fees under the PPA to the prevailing party, if the party withholding payment acted in bad faith. Although a contractor has a higher burden under CASPA (“substantially” prevailing party), if it meets that standard, the court must award attorneys’ fees. Under the PPA, if a contractor meets the lower standard (“prevailing party”), a court can still decide not to award attorney’s fees, even if the court determines that the nonpaying party acted in bad faith.
In addition to these remedies, under CASPA, unpaid contractors or subcontractors can recover interest at a rate of one percent (1%) per month on any unpaid amount that is considered late under the contract or statute. Conversely, the PPA’s rate is determined by the Secretary of Revenue and thus, is less clear and fluctuates (currently, the rate is .25% per month).
Given the differences between the two payment statutes, those defending against payment claims on public projects – which can include owners, contractors, or, in some instances, subcontractors – will view this decision as a good one because the more favorable CASPA remedies are no longer available. Those prosecuting such claims – which can include contractors or subcontractors – may perceive it as weakening their ability to induce payment.
It is important for owners, contractors, and subcontractors to know ahead of time what potential costs and legal standards apply to their construction projects. These legal standards affect the likelihood of recovering costly expenses such as attorney’s fees, which, in turn, influences business decisions involving payment disputes. While members of the construction industry will view this decision differently, they can all agree that the Court brought clarity to this previously unresolved issue.
Jason C. Tomasulo is Senior Counsel at Cohen Seglias Pallas Greenhall & Furman PC. He focuses his practice on construction law and represents owners, general contractors, subcontractors, suppliers and sureties.
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.
Patrick Cullen, a summer associate with Cohen Seglias, contributed to this post.
In April, the New Jersey Supreme Court agreed to review the case of Waste Management of New Jersey, Inc. v. Mercer County Improvement Authority. The matter concerns a defect in a bid submitted under the New Jersey Public Contracts Law (“LPCL”). This case proves, yet again, that it is critical to pay close attention not just to the requirements of the public bidding laws, but also to the requirements contained in the bid specifications.
The LPCL has five mandatory items that must be included in a bid: (1) a bid bond, (2) a consent of surety, (3) a disclosure of corporate ownership pertaining to shareholders owning 10% of more of the corporate stock, (4) a list of certain required subcontractors and (5) an acknowledgment of the bidder’s receipt of any revisions to the bid documents. Failure to include any of these five items is considered a fatal defect requiring rejection of the bid. For all other bid defects, the New Jersey courts consider whether the defect is material and non-waivable based on a two-part test: (1) whether the waiver would undermine the public body’s assurance that the bidder will enter into and perform the contract according to its requirements and (2) whether the waiver of the defect would adversely affect competitive bidding by giving one bidder an advantage over other bidders?
In Waste Management, the bid specifications required bidders to submit a legal opinion regarding the enforceability of the contract to be executed by the Authority and the successful bidder. The Authority included a form for this legal opinion in the bid documents, which consisted of three assurances: (1) the bidder had full corporate power to execute the contract, (2) the contract was binding on the bidder and (3) the contract was enforceable.
Republic Services of New Jersey, L.L.C. (“Republic”) was the low bidder. Waste Management was the second lowest bidder. However, with its bid, Republic’s counsel submitted a letter that addressed the three legal opinions and did not use the provided form. Additionally, for the third opinion in the letter, Republic’s counsel concluded that certain provisions of the contract might be unenforceable but those questionable provisions did not substantially interfere with the intended benefits of the contract. Due to the letter format and the additional language, the Authority considered Republic’s bid materially defective.
Because Waste Management failed to include the required disclosure of corporate ownership, its bid was also rejected. The Authority then re-bid the contract and Waste Management was deemed the low bidder. Both Republic and Waste Management challenged the Authority’s decision to re-bid the contract and the trial court held that the Authority properly rejected the bids.
On appeal, the Superior Court, Appellate Division held that rejection of Waste Management’s bid for failure to disclose of corporate ownership was proper. However, it reversed as to Republic. Applying the two-part test for materiality, the court determined that Republic’s legal opinion did not deprive the Authority of its assurance that the contract would be entered into and performed according to its requirements. Further, the court determined that the different letter format of the legal opinion would have no effect on competitive bidding. As such, the court directed that the contract be awarded to Republic. The Authority has appealed the Appellate Division’s ruling to the New Jersey Supreme Court, and we will report on the Supreme Court’s ruling when it is issued.
As should be evident from this article, the parties, including the public body, have spent thousands of dollars litigating what, to the outside, may seem like rather inconsequential details. Because of the competitive nature of public bidding, any defect contained in a low bid, no matter how trivial, will likely result in a challenge from another bidder; especially when millions of dollars in new work are at stake. As a result, it is critical to pay close attention to adhering not just to the required items under all public bidding laws, but also to the requirements contained in the provided bid specifications. If you are unsure if your bid complies with either the public bidding laws or the bid specifications, please contact us before you submit it so that we can assist you in order to ensure that your bid is compliant.
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.
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.
In the construction industry, mediation has become an extremely popular vehicle for resolving disputes that develop during and after projects. It is particularly appealing because (i) it can provide an early opportunity for the parties to resolve a case in lieu of more protracted and expensive litigation and (ii) if the case does not resolve, the communications, factual, and legal positions taken during the mediation will remain confidential and cannot come into play at trial.
Last month, the New Jersey Supreme Court handed down a decision that may profoundly affect these fundamental principles of mediation in New Jersey. In Willingboro Mall, Ltd. v. 240/242 Franklin Avenue, LLC, the Court addressed two key mediation issues: (i) whether verbal settlement agreements reached at mediation are enforceable and (ii) whether communications made in the course of such discussions are privileged from future disclosure. The Court issued two essential holdings that apply to mediations taking place in New Jersey. First, from now on, settlements reached at mediations that are not reduced to a written agreement and signed by the parties before the mediation comes to a close will not be enforceable. Second, while communications occurring during mediation ordinarily are considered privileged and confidential, that privilege can be waived by a party.
How Did The Owner Waive The Mediation-Communication Privilege?
In Willingboro, the owner of the Willingboro Mall sued a buyer over the terms of the sale. At the trial court’s direction, the parties mediated their dispute and, at mediation, agreed upon settlement terms verbally. When the buyer advised the Court that the parties settled, the property owner balked, sparking litigation over whether a settlement agreement was in place. The buyer asked the court to enforce the verbal agreement, and, in response, the seller asked the court to not to enforce it. In support of their arguments, both sides revealed communications that took place during mediation. The Supreme Court found that the owner waived the mediation-communication privilege by referencing the confidential mediation communications in its opposition to the buyer’s motion to enforce the settlement agreement. According to the Court, if the seller wanted to preserve the confidentiality of the negotiations that took place during mediation, it should have asked the court to strike the buyer’s motion without disclosing confidential mediation communications in its response.
What Are The Future Implications Of This Case?
Despite ruling that the parties’ verbal settlement agreement was enforceable, the Court held that, going forward, in order to be enforceable, settlement agreements reached at mediations in New Jersey will need to be executed in writing either before the completion of the mediation or immediately thereafter during an extension of the mediation “for a brief but reasonable period of time.” Since settlements are often reached and formalized during the days and weeks after a mediation session, parties in this situation would be wise to agree in writing that the mediation will remain open for a definitive time period so that a settlement down the road is not undermined by the Supreme Court’s ruling in Willingboro Mall. Interestingly, the Court seemed to suggest that an audio- or video-recorded agreement could meet the written agreement requirement.
With regard to the mediation communication privilege, while, as a general rule, communications between parties at mediation remain confidential and are not subject to disclosure, the Willingboro Mall case serves as a cautionary reminder that a party seeking the protection of the privilege invoke it before making a disclosure that could waive it.
Tony Byler is a Partner at Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group. As a trial lawyer, he focuses his practice on representing public and private owners, contractors, subcontractors and material men.
Kathleen M. Morley is an Associate with Cohen Seglias Pallas Greenhall & Furman PC and a member of the Construction Group.