California Air Resource Board (CARB) issues new draft regulation for the Periodic Smoke Inspection Program (PSIP)

Below is an important message from the Construction Industry Air Quality Coalition (CIAQC). Emailing comments protesting proposed reporting requirements for diesel trucks by Friday, February 2nd could be critical in preventing the proposal from moving forward in its current form. 

NEW DEISEL TRUCK SMOKE TESTING RULES PROPOSED!

Attention Contractors and Diesel Truck Owners! Urgent Action Needed Now!

The California Air Resources Board (CARB) has issued a new draft regulation for the Periodic Smoke Inspection Program (PSIP) which will be costly and burdensome to the Construction Industry. The deadline for early comments prior to preparation of the Board package is this Friday, February 2nd. Once the Board package is released changes are less likely.

Attached are a draft copy of the proposed regulation and a CIAQC summary of the most onerous requirements. Please review them for their impact on your diesel truck fleet.

In short this proposal extends the reporting requirements to thousands trucks and fleets that have not previously been required to report. In addition it creates conflicts with CARB and DMV data that could create administrative violations due to inconsistent reporting.

It is important that contractors contact CARB to protest this approach to the smoke testing program.

Review the impact on your fleet and submit comments on the costs and administrative burdens to CARB at jason.hillfalkenthal@arb.ca.gov

Click here for the CIAQC Summary of Proposed Regulation

Click here for the Proposed Regulation from the California Air Resources Board 

Article courtesy of the Southern California Contractors Association

Reminder – OSHA 300A Summary Sheets

A friendly reminder about your OSHA 300A Summery Sheets. See the information below. 

The following is from www.oshatoday.com. Here is the link to the page with the message.

OSHA to employers: Injury, illness summary must be posted by February 1.

Washington — Employers required to keep and maintain an OSHA 300 injury and illness log must publicly post their 300A summary sheet from Feb. 1 to April 30.

Form 300A summarizes work-related injuries and illnesses recorded in 2017. OSHA states that the summary must be posted in work areas where employee notices are customarily placed.

The agency notes that employers with 10 or fewer employees or who work in certain low-hazard industries are not required to post the summary.

California Court of Appeal holds that "additional insured" endorsement for "ongoing operations" covers claims of buyers who purchased completed homes.

In a recent opinion, a California Appellate Court held that an "additional Insured" endorsement was sufficient to provide insurance protection to the owner of a residential construction project, against claims being made by claimants who purchased the homes after they were completed.

McMillin Management Services, L.P. and Imperial Valley Residential Valley Residential Builders, L.P. (collectively "McMillin") filed suit against numerous insurance companies, including respondents Lexington Insurance Company (Lexington) and Financial Pacific Insurance Company (Financial Pacific). McMillin alleged that it had acted as a developer and general contractor of a residential development project in Brawley and hired various subcontractors to help construct the Project. As relevant here, McMillin alleged that Lexington and Financial Pacific breached their respective duties to defend McMillin in a construction defect action (underlying action) brought by homeowners within the Project. McMillin alleged that Lexington and Financial Pacific each owed a duty to defend McMillin in the underlying action pursuant to various comprehensive general liability (CGL) insurance policies issued to the subcontractors that named McMillin as an additional insured. The trial court granted Lexington's motion for summary judgment, reasoning, that there was no possibility for coverage for McMillin as an additional insured under the policies "[b]ecause there were no homeowners in existence until after the subcontractors' work was complete[ ] . . . ." On appeal, McMillin contended that the fact that the homeowners did not own homes in the Project at the time the subcontractors completed their work did not establish that its liability did not arise out of the subcontractors' ongoing operations. The trial court granted Financial Pacific's motion for summary judgment, finding McMillin did not establish homeowners in the underlying action had sought potentially covered damages arising out of the subcontractors' drywall installation. The Court of Appeal reversed as to Lexington, and affirmed as to Financial Pacific.

“On appeal, McMillin contends that the fact that the homeowners’ did not own homes in the Project at the time the subcontractors completed their work does not establish that its liability did not arise out of the subcontractors’ ongoing operations. In support of this contention, McMillan argues that the endorsements “make no reference to when liability must arise.”  In contrast Lexington argues that “since the homeowners’ cause of action accrued after operations were completed, McMillin could have no liability to the homeowners during the [subcontractors] ongoing operations”. McMillin’s argument is supported by the text of the endorsements , while Lexington’s argument is not. The endorsements do not provide coverage solely for “liability…during the [subcontractors] ongoing operations”, but rather broadly provide for coverage for liability “arising out of” such operations. Thus the fact that there were no homeowners in existence at the time the subcontractors’ completed their ongoing operation does not establish that McMillin could not have potential liability to the homeowners “arising out of” the subcontractors’ ongoing operations.”

Accordingly, the summary judgment granted by the trial court was reversed.

Private Development That Relies On Public Construction Is Subject To The Prevailing Wage Law

In 2004, the City of Hesperia (“City”) began acquiring vacant property in its downtown to facilitate development of a Civic Plaza, which was to include a city hall, public library, other government buildings and complementary retail, restaurant, and entertainment establishments. In 2010, the City met with theater operator Cinema West, LLC (“Cinema West”) to discuss the construction of a state-of-the-art movie theater in the City. At the meeting, Cinema West articulated a plan to develop a new, twelvescreen digital cinema immediately west of the Civic Plaza. At the end of 2010, the City and Cinema West entered into a series of agreements for the development and operation of the theater. Under the agreements, Cinema West agreed (1) to purchase the theater site from the City at fair market value; (2) to develop the site with a 12-screen, 36,000 square foot movie theater; (3) to obtain financing for, and bear the costs of, construction of the theater and related facilities other than the parking lot; (4) to maintain the property; and (5) to operate the site as a theater for at least ten years. In exchange, the City agreed, among other things, (1) to develop a parking lot adjacent to the site for use by Cinema West and patrons of the movie theater; (2) to provide Cinema West reciprocal access and an easement for the parking lot; and (3) upon issuance of a certification of completion for the theater, to provide Cinema West an interest-bearing loan in the amount of $1.5 million forgivable over ten years and a one-time payment of $102,529 as consideration for operation of the theater. In 2012, as development of the theater was nearing completion, the International Brotherhood of Electrical Workers Local 477 (the “Union”) requested a public works coverage determination for the theater project from the Director of Industrial Relations (“DIR”). The Union asserted the theater was a public work subject to the Prevailing Wage Law. The Prevailing Wage Law provides that, with certain exceptions, the prevailing wage “shall be paid to all workers employed on public works.” (Lab. Code, § 1771.) A “public work” is defined as “[c]onstruction, alteration, demolition, installation, or repair work done under contract and paid for in whole or in part out of public funds.” (Id., § 1720, subd. (a).) Cinema West objected to a public works determination and argued the theater was a private development on the property for which Cinema West had paid fair market value. In 2013, the DIR found the construction of the theater and related facilities was a public work subject to prevailing wage requirements. In reaching this conclusion, the DIR first determined that the scope of the construction project included both the theater and the adjacent parking lot. “Given the very specific terms of the . . . agreements of the parties to construct all these improvements in tandem to serve the theatre complex there is no doubt the ‘Project’ . . . [is] to create a single complete and integrated theatre complex.” The DIR then identified three separate sources of public funds utilized on the project: the City’s one-time payment of $102,529 to Cinema West upon the filing of a notice of completion for the theater; the forgivable loan made by the City to Cinema West; and the construction of the adjacent parking lot and a water retention system for the theater and parking lot. Based on these “public subsidies,” the DIR concluded the theater development was a public work subject to the requirements of the Prevailing Wage Law. Cinema West challenged the DIR’s decision in the Superior Court. The trial court upheld the DIR’s decision. Cinema West appealed. On appeal, Cinema West argued that the construction of the parking lot did not transform the private theater into a public work. The Court of Appeal rejected Cinema West’s arguments and upheld the DIR’s decision. The Court first agreed with the DIR that the parking lot was necessary to the theater and that the theater, parking lot, and related amenities were part of a “complete integrated object.” The Court also agreed that the theater project was paid for, in part, with public funds. As the Court explained: “Cinema West indisputably received the benefit of a newly constructed, publicly funded parking lot adjacent to the theater, which, though owned by the City, is Cinema West’s and its successors’ to use for as long as they operate the movie theater. . . . [T]he parking lot was necessary to the development of the theater . . . . [and] the publicly funded parking lot was one of the ‘deal points’ in Cinema West’s proposal. The parking lot cost the City $1.5 million to construct, and even though Cinema West’s right to use it is non-exclusive the parking lot cannot be considered a de minimis contribution of public resources.” Cinema West, LLC v. Baker (2017) 13 Cal.App.5th 194.

The last time the Court's reached this sort of decision, it involved the construction of a fire station by a General Contractor for a public entity. The public entity apparently used its own funds and therefore did not require the contractor to pay prevailing wages. When challenged, the Court held that the Fire Station was a public works despite the public entity's use of its own funds and required the General Contractor to pay to the DIR the unpaid portion of the required prevailing wages. The Court left open the question if the general contractor could assert a claim against the ;public entity for additional compensation to cover the additional wages it had to pay.

In this situation, it remains unclear if the Cinema West can seek reimbursement for the additional wages it had to pay given the way the various contracts were set up. Cinema West purchased the land from the City ostensibly making the construction of the theater and adjoining facilities a private work of construction. It does not appear that Cinema West can look to the City for additional compensation given the manner in which the agreements were structured.

The morale of the story is that if you are a General Contractor constructing a project for a private owner which involves the participation of any public agency in any manner, you need to ensure that you have a clause in your contract to cover you if ultimately the Department of Industrial Relations deems the project to be a public work of construction and you are forced to pay prevailing wages despite what the actual contract states.

SUBCONTRACTOR'S GET ADDITIONAL HELP FROM LEGISLATURE

The decade's long battle between general contractors and their subcontractors over timely payment took a new turn this year with the passage of AB 1223, sponsored by the American Subcontractors Association and supported by twenty other groups.

   The bill was signed into law by Governor Brown October 8th and will go into effect January 1st. The new law requires, within 10 days of making a construction contract payment, a state or local agency to post the following information on its website:

  • The project for which the payment was made.
  • The name of the construction contractor or company paid.
  • The date the payment was made or the date the state agency transmitted instructions to the Controller or other payer to make the payment.
  • The payment application number or other identifying information.
  • The amount of the payment.

   The new law exempts from these provisions construction contracts valued less than $25,000 and specified progress payments published in the California State Contracts Register under existing law (Section 10262.3).

   This law will enable subcontractors to verify that public project owners have paid their general contractors and will allow subcontractors to enforce their right to be paid timely. The existing law generally requires a general contractor to pay any subcontractor within seven days of receipt of a progress payment. Therefore, it will also help subcontractors ascertain when general contractors have been paid and provide public notice that they can refer to when requesting payment within seven days as required under the existing law.

    This bill will enable construction subcontractors to verify that public project owners have paid their general contractors for work performed by the subcontractors. This will streamline the payments to subcontractors who, under existing law, are entitled to receive their payment within seven days of the general contractors receiving their pay.

Changes to Public Works Contractor Registration Fees and Small Contractor Exemption

The State of California Department of Industrial Relations (DIR) has implemented several changes that affect the Public Works Contractor Registration Fees. Registration fees paid by contractors on or before June 30, 2017 are not affected, however, effective July 1, 2017 any renewal or new registrations will be charged an increased rate of $400.00.

Additionally, beginning June 1, 2019, contractors will be provided the option of renewing their registrations for a 3-year term. Penalties and fees will be assessed for failures to register and as a reminder, registrations are due annually by June 30th. 

Small project exemptions are available for both the registration fees and electronic certified payroll reporting requirements. DIR has issued the following notice clarifying requirements for small project exemption. 

  • Small project exemption is applied based on the amount of the entire project, not a contractor's subcontracted amount of the project.
  • Small project exemption applies for all public works projects that do not exceed $25,000 for new construction, alteration, installation, demolition or repair; and $15,000 for maintenance.

To access further information and details on the rate increases and exemptions, please refer visit DIR's Public Works website.

Public Works Small Project Exemption Clarified

The Department of Industrial Relations (DIR) issued the following notice clarifying requirements for small project exemption under the Public Works Contractor Registration program:

  • Contractors who work exclusively on small projects are not required to register as public works contractors or file e-certified payroll reports.
  • However, prevailing wages must still be paid on projects with the small project exemption.
  • Contractors are still required to maintain certified payroll records and provide them to the Labor Commissioner's Office upon request.
  • Small project exemption is applied based on the amount of the entire project, not a contractor's subcontracted amount of the project.
  • Small project exemption applies for all public works projects that do not exceed $25,000 for new construction, alteration, installation, demolition or repair; and $15,000 for maintenance.

Further details on recent changes can be found on DIR's Public Works website.

AB 219 UPDATE- PREVAILING WAGES FOR CONCRETE HAULING AND DELIVERY DRIVERS to be enforced immediately

You were previously advised that the United States District Court had granted a Motion for Summary Judgment brought by a group of ready mix concrete companies who had filed suit challenging the constitutionality of AB 219, which applies prevailing wage requirements to concrete hauling and delivery. The District Court issued a permanent injunction blocking the enforcement of AB 219 in connection with the granting of the Summary Judgment. 

 The Department of Industrial Relations appealed the Judgment to the Ninth Circuit Court of Appeals, and concurrently requested a stay on the injunction blocking the Labor Commissioner’s enforcement of AB 219. On April 19, 2017, the Ninth Circuit granted the stay as requested by the Labor Commissioner. Therefore, until the Ninth Circuit Court of Appeals issues its ruling on the appeal, the DIR will be enforcing all prevailing wage requirements of AB 219.  The appeal could take more than a year to resolve.

 Pending the decision from the Ninth Circuit Court of Appeals, all contractors should insist on receiving certified payroll records establishing that proper prevailing wages have been paid to the drivers of concrete trucks and other delivery trucks in connection with the hauling and delivery of ready mix concrete on all prevailing wage jobs.