On June 7, 2022, the Massachusetts Appeals Court issued an opinion of first impression regarding the Massachusetts Prompt Payment Act, G.L. c. 149 § 29E (the “Act”).  In Tocci Building Corp. v. IRIV Partners, LLC, Appeals Ct. Nos. 21-P-393, 21-P-733, the Appeals Court affirmed the decision of the Superior Court which held that when an owner objects to a contractor’s payment application, the owner must strictly follow the Act’s protocols in order to preserve its right to withhold payment.  The Act likewise applies to the contractor/subcontractor relationship.

The case concerned whether an owner had wrongfully withheld payment on seven of the contractor’s invoices because it failed to comply with the Act’s protocols, namely, that the rejection be timely, explain the factual and legal reasons for withholding payment, and expressly certify that the decision to withhold payment is made in good faith. The Appeals Court found that the Owner failed to timely respond to the seven applications at issue or, for those it did respond to timely, failed to include a certification of good faith. Accordingly, each pay requisition was “deemed approved by operation of law . . . and the defendants were not entitled to withhold payment as they did.”

A focal issue on appeal concerned whether the owner’s failure to reject the payment applications in accordance with the Act represented a waiver of both its right to withhold payment as well as its right to argue that the contractor’s work was defective.  The Appeals Court held that the owner’s noncompliance with the Act resulted only in a waiver of its right to withhold payment, not its right to later argue that the contractor breached an important contract obligation.  More specifically, the Court reasoned that while each of the contractor’s payment applications were, by operation of law, due and payable, the Owner’s right to assert claims for breach of contract are unaffected as “they may recoup any money they may be owed.” Joseph A. Barra, Esq., a construction attorney in Robinson+Cole’s Boston office submitted an amicus brief on behalf of the Associated Subcontractors of Massachusetts.

Below is an excerpt of an article published in Construction Executive on May 13, 2022 co-authored by Robinson+Cole Labor and Employment Group lawyers Abby M. Warren and  Kayla N. West .

After nearly two years of managing the workplace through the nationwide COVID-19 pandemic, employers are being impacted by another significant challenge: the “Great Resignation,” which is the recent trend of workers voluntarily resigning from their jobs en masse beginning in 2021 and continuing today. Employers across a number of industries, including construction, are facing the pressure of recruiting, hiring, onboarding, and integrating job candidates in record speed to fill vacancies and meet the operational needs of the business.

Employers have been forced to rethink their recruiting and hiring processes, including pre-employment screening processes that may impact the timing of offers of employment. At the same time, the laws across the country related to these processes have been changing dramatically over the last few years. In light of operational challenges and the shifting legal landscape, how should employers be evaluating their recruiting and hiring processes and what should they consider when doing so? Read the full article.

A recent decision serves as an important reminder to all in the construction industry about the dangers of using outdated contract forms. In Hillhouse v. Chris Cook Construction, LLC, 325 So. 3d 646 (Miss. 2021), the Supreme Court of Mississippi found an arbitration provision unenforceable where it designated that all claims “shall be submitted to arbitration before the Southern Arbitration and Mediation Association.” Unfortunately, not only was the Southern Arbitration and Mediation Association unavailable as a forum at the time of the underlying dispute and at the time the contract was drafted, but the organization had not in fact existed for approximately seventeen years prior. The Court ruled that the arbitration forum was a contract requirement and that the Court could not rewrite the contract to select a forum “unanticipated by either party.” Id. at 653. As such, the arbitration provision was unenforceable and the parties would have to spend the time and resources to resolve any claims before the appropriate court.

While this specific case is a homeowner case from Mississippi, it is worth noting that Mississippi has a statutory scheme similar to the Federal Arbitration Act (Miss. Code. Ann. § 11-15-101, et seq.). As such, the rationale of Hillhouse likely extends to other jurisdictions and the construction industry would be wise to heed two warnings from this case that apply generally, including to commercial construction in the northeast.

First: the contractor in Hillhouse used a form contract that was over twenty years old, serving as a good reminder to carefully review form contracts and make sure they are up to date. In addition to factual changes to contract terms, such as the status of other entities named in the contract, there are also changes in the law that may require revisions to form contracts. For example, states will periodically amend laws relating to prompt payment, indemnity, and retainage.

Second: owners, developers, contractors, and design professionals should pay particular attention to ADR provisions. Although most ADR provisions specify the American Arbitration Association (AAA) or JAMS as the forum for arbitration, it is worth making sure that arbitration provisions are up to date and do not specify a non-existent forum. Further, courts distinguish between arbitration clauses that simply require the parties “to arbitrate according to the rules of” a specified forum and those that instead require claims to be “administered by” a specific forum. The enforceability of the latter is dependent on the availability of the named forum, while the former might survive the unavailability of the named forum. As such, the precise language of ADR provisions in form contracts should be re-examined to confirm they are enforceable and serve their intended purpose.

This post was authored by Megan R. Naughton, who is the  co-chair of the Robinson+Cole’s Immigration Group

Foreign nationals account for 61% of the full-time graduate students in civil engineering programs in the United States, according to the National Foundation for American Policy NFAP Policy Brief, August 2021, International Students in Science and Engineering. As a result, more and more clients in the construction industry are seeking to fill professional roles in their companies with talent that is foreign-born and requires employer sponsorship to work in the United States. Both small and large entities in the industry are looking into what is required of them to sponsor a foreign candidate for H-1B status. Once a current or future employee is identified who requires sponsorship, an employer is obligated to do the following:

Offer a “specialty occupation” role

Only roles which require at least a bachelor’s degree in a specific field (and related fields) are eligible for H-1B status. For instance, Civil Engineer and Concrete Engineer roles requiring bachelor’s degrees in Civil Engineering or a related field would be appropriate H-1B roles. A role that does not require a bachelor’s degree or its equivalent, or a role requiring too broad a range of fields or body of knowledge would not be suitable. For example, a Superintendent role which does not necessarily require a bachelor’s degree would not be an appropriate H-1B case. The position and its qualification for H-1B status should be reviewed in advance of filing an H-1B petition.

Offer the “prevailing wage”

The U.S. Department of Labor requires payment of the higher of the actual or the prevailing wage for each H-1B employee. The DOL wage is determined by the type of role, the seniority of the role, and the worksite location. In addition, the H-1B employee cannot be offered less than similarly-situated U.S. workers. A discussion regarding the required wage should occur prior to the H-1B lottery registration process.

Get selected in the H-1B lottery

For F-1 foreign students, employers must register them for the H-1B cap lottery in March of each year for a chance to win an H-1B cap number and eventually convert their status to H-1B. Registered individuals have a less than 50% chance of being selected every lottery season, so it is not a guarantee that a person will be selected the first time, or even the second time, they participate in the lottery. A discussion regarding timing should occur as a part of sponsorship. Those already in H-1B status would not typically need to go through the lottery to be sponsored and timing is not usually as much of an issue.

Post Notice, which includes salary information

Once the employer is ready to move forward with the H-1B petition, the employer must post a notice at the worksite or on-line which discloses the salary or a range that includes the salary, as well as other identifying information about the role.

File the H-1B petition

The H-1B petition involves many USCIS forms, cover and support letters, and a certified application from the DOL. The USCIS filing fees can range from $1,710 to $5,330 depending on the size of the employer, whether there are dependent family members to include, and whether USCIS premium processing is requested. Most of these fees must be paid by the employer. Once filed, the USCIS could ask for evidence corroborating the position’s requirements. Once approved, the USCIS could conduct site visits to ensure that the person is employed at the worksite indicated on the petition and is being paid the prevailing wage.

Notify USCIS when the person terminates

If employment is terminated, the employer must notify USCIS of the event (by letter) within a reasonable time.

On November 15, 2021, President Biden signed into law the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA)which reauthorizes surface transportation funds and allocates $550 billion for new federal spending over the next five years. The $550 billion in new spending encompasses:

  • $73 billion for upgrades to the country’s electricity grid, including the ability to carry renewable energy; 
  • $66 billion for new rail lines and upgrades to existing ones, including a significant investment in Amtrak to address major maintenance backlogs; 
  • $65 billion to improve the nation’s broadband infrastructure and provide high-speed internet access to hard-to-reach populations, including Native American communities;
  • $47 billion for climate resiliency, which involves new funding aimed at combating wildfires and preparing coastal regions for more frequent hurricanes and flooding;
  • $21 billion for environmental projects, which includes investments in cleaning up abandoned mines, contaminated waterways, and other polluted sites overseen by the Environmental Protection Agency;
  • $15 billion to modernize water systems to address contaminated drinking water that has affected multiple large population centers;
  • $7.5 billion for electric vehicles, including the availability of charging stations across the country, which is part of President Biden’s pledge to build 500,000 stations nationwide; and 
  • $2 billion for a grant program aimed at expanding transportation projects in rural areas.

Use of the public funds to clear backlogs at the country’s ports, which are contributing to shipping delays and price increases in imported consumer goods, have already been announced. The remaining initial set of spending authorized by the IIJA will be issued towards two concerns prioritized by the current administration: improvement to access of broadband internet and replacement of hazardous lead drinking pipes.

The passage of the IIJA provides exciting opportunities for construction industry professionals, not just in the traditional sectors of road, bridge, and rail repair and construction, but also emerging sectors such as climate resiliency and electric vehicle infrastructure. The full distribution of IIJA funds and its impact on the construction industry will only gradually be felt by the industry over the next five years, as the administration plans to focus on determining and funding “shovel-worthy” projects in addition to funding “shovel-ready” projects. Continue to tune in to the Construction Law Zone for updates on this important new law.

This post was co-authored by Abby M. Warren and Emily A. Zaklukiewicz who are members of Robinson+Cole’s Labor and Employment Group.

Last month, President Biden issued an Executive Order which effectively imposes several COVID-19 safety standards and protocols, including mandatory vaccination, upon certain federal contractors and subcontractors. Specifically, the Executive Order directs federal agencies to incorporate a clause into all covered federal contracts which will require federal contractors or subcontractors to comply with guidance published by the White House’s Safer Federal Workforce Task Force (Guidance), and which was released on September 24, 2021.  Under the Executive Order and Guidance, certain construction and other companies doing business with the federal government will soon be required to mandate vaccination for their workforces and ensure compliance with masking and social distancing requirements, among other requirements. Continue Reading Mandatory Vaccination and Safety Protocols for Federal Contractors

While you may not have heard the term “slaughter clauses” to describe the provisions of a construction contract before, the metaphor makes sense when one considers the provisions to which the Connecticut Superior Court recently applied the phrase. In the recent case of Electrical Contractors, Inc. v. Lawrence Brunoili, Inc., et al., Docket No: X-07 HHD CV-20-6129731, the Superior Court considered many subcontractors’ least favorite contract provisions – those that impose limits on a subcontractor’s right to recover money, like strict notice provisions, payment limitations, and damages restrictions. Continue Reading Connecticut Superior Court Holds That “Slaughter Clauses” Cannot be Added to Public Works Subcontracts Under Connecticut General Statutes § 4b-96

Below is an excerpt of an article published in Construction Executive on September 9, 2021.

The prices of raw building materials have risen dramatically over the past year, primarily because of the global pandemic and trade policies implemented by the previous administration, thereby jeopardizing construction projects that did not mitigate the risks of material price escalation.

Material price escalation is not new to the construction industry, which has experienced historic periods of price escalation known as commodities supercycles, often referred to as periods of time when commodity prices rise above their long-term trends for at least 10 years followed by a downturn of similar duration until supply meets demand. The industrialization of the United States in the late nineteenth century, the post-war reconstruction of Europe and Japan in the 1950s, the oil embargos of the 1970s and the industrialization of emerging nations such as China in the early 2000s are identified as commodities supercycles.

Over the past few months, commodities traders and economists have debated whether a new commodities supercycle is underway as raw material prices continue to rise. The Producer Price Index for July 2021 published by the U.S. Department of Labor, Bureau of Statistics, reported for the 12 months ended in July on an unadjusted basis, that the final demand index increased 7.8%, the largest advance since such data was first calculated in November 2010 and that the final demand index less foods, energy and trade services rose 6.1%, the largest increase since such data was first calculated in August 2014.1

Over the past 12 months ended in July, the price of natural gas is up 146.7%, steel mill products are up 108.6% and crude petroleum and unprocessed energy materials are up 102.9% and 93.8%, respectively. The price of softwood lumber is now up 45.0% after decreasing significantly over the past two months.

While history and the market dictate that prices will eventually come down, it is unclear when or if they will not continue to rise as did the price of copper when it quintupled from 2000 to early 2011. Accordingly, it is in the best interests of all stakeholders – owners, contractors, subcontractors and suppliers – to mitigate risks associated with material price escalation on construction projects. Read the article.

While its ultimate passage remains unclear, on August 10, 2021, the United States Senate approved passage of the Infrastructure Investment and Jobs Act (H.R.3684) (“the Act”). According to the bill’s sponsors, the Act aims to accomplish the following: Continue Reading Public Works Construction Projects Set to Increase if Infrastructure Investment and Jobs Act of 2021 Becomes Law

Below is an excerpt of the “Legal Column” published in the Summer 2021 issue of PE Magazine, the flagship publication of the National Society of Professional Engineers (NSPE).

Prior to COVID-19, the term “design to budget” was probably not a scary concept. After all, modern designers always consider the client’s budget when putting our Leroy pens to paper. However, given skyrocketing material costs and the postpandemic challenges of the current labor market, the obligation to design to budget can be an unsuspected and sometimes overlooked source of exposure. In this article, we’ll look at some of the provisions in the standard industry contracts and consider how they can affect designers’ exposure for construction cost overruns. Read the article.