Are Your Employees Checking Email Through Mobile Devices? Are You Paying Them Overtime?

No long introduction required here.  With iPhones, Blackberrys and laptops, everyone in the 2009 workplace knows that work can follow an employee home and to vacation (ABCNews published a good overview of the issue).

Recently, however, terminated employees are seeking compensation for this “overtime” work through costly litigation with high-stakes for employers across the country.

What will the courts say?  It’s not clear.

The U.S. Fair Labor Standards Act was passed in 1938 with working conditions for factory workers in mind.   These workers punched into work, and out of work, with very little opportunity to continue their work duties after-hours while at home or on vacation.

But how times have changed.    And now, when you take the FLSA’s rule that workers must be paid overtime whenever they work 40+ hours (regardless of any permission from an employer), and apply it to the “after-hours” work performed by so many of the country’s workforce…the result is complicated.

In today’s economic client, construction companies are looking to be leaner and meaner, and that sometimes means less salary workers and more hourly employees.  It also means companies are working to maximize the return on each worker.

More and more, construction workers and project managers are being outfitted with mobile devices to communicate about the project through email and text messages…and even to take photographs of the jobsite and work through project management systems.  When the mobile devices go home or on vacation…is your company prepared to pay overtime?

Right now, the law on this issue is simply unclear, and the best practice for those in the construction industry is to discourage workers from working at home or on vacation (don’t bother them!), or to ask workers to log this time and turn it into your company for payment.

There’s no telling how the courts will decide this issue, but if it goes against employers, the failure to pay employees for out-of-office work could be expensive.

How Not To Recover on a Mechanics Lien

We’ve said it before, and we’ll say it again:  Mechanic Lien statutes (in all states) are hyper-technical.   Litigators familiar with the lien statutes must tread carefully when making lien claims…and those unfamiliar with the statutes must be more careful.

A 2007 Washington Appeals decision underscores this point.   In DBM Consulting Engineers, Inc. v. United States Fidelity and Guaranty  Company, a contractor won its suit against a defendant but was still unable to recover on the lien’s bond.   Why?   Because the contractor “failed to obtain judgment upon the lien, only obtaining a judgment on the breach of contract claim.”

The background to this suit is that a contractor filed suit against a client for its failure to pay a debt, and the client subsequently recorded a lien bond to free up the property for sale.  The contractor then won it’s lawsuit against the client…but when it moved to recover against the bond, its claim was denied.

The appeals court provided this pithy conclusion:

A lien bond does not eliminate a lien entirely. A lien bond releases the property from the lien, but the lien is then secured by the bond. While the applicable foreclosure process depends on whether the lien is secured by property (which can then be sold) or by a bond, in either situation, the lien must be foreclosed upon before the lienholder is entitled to recover on the lien. So in order to be entitled to payment on the bond, DBM needed to foreclose its lien. Because DBM did not obtain a judgment foreclosing its lien, Travelers is not obligated to pay on the lien bond.

A fellow construction firm in the Pacific Northwest, Carney Law, discusses the DBM decision on its website saying that the Court’s holding “is yet another application of the familiar canon that the mechanics’ lien statute is strictly construed to determine whether the lien attaches.” It is also another application of the canon that the statues are hyper-technical, with a slew of traps for the unwary.

While this example is from Washington, the same general principals hold true in Oregon, Louisiana and elsewhere:  wade through mechanics lien statutes carefully.

This article was originally posted on Express Lien’s topic-specific Construction Lien Blog.

Superbowl 2013 A Green Opportunity

It’s official:   New Orleans has the winning bid for Superbowl 2013.

The announcement came just weeks ago when the NFL owners agreed to provide the Crescent City with its 10th Superbowl, and represents a huge step forward for the city rebuilding after Hurricane Katrina.

The Superbowl award, however, brings more to South Louisiana than excitement.   The state and individual municipalities are already laying the groundwork for public projects to properly usher in the country’s biggest event – an example of which is embedded directly into the city’s Superbowl bid, whereby state leaders pledged a pre-game $85 million investment into the Superdome.

Perhaps the high-profile event will be an additional opportunity for Louisiana to build green – especially in light of 2009 state legislation designed to attract green technology and start-ups to the state.    Stay tuned.

Green Building Presents Legal Risks, But Shouldn’t Stop Builders

GreenBuildingElements.com recently posted a blog titled “Are There Any Risks in Building Green?”   The post mentions a survey conducted by the Marsh Green Building Team finding two things that play into builders’ reluctance to construct green projects: financial concerns and legal concerns.

Examining the Legal Risks

We’ll talk about the legal concerns (& have in the past), which the post summarizes as follows:

The idea of jumping into a supposedly “green-built” project, and then failing to reach LEED certification levels expected by others, is unnerving to think about. There’s also the worry in many constructions that standards of operation and new design features – especially those not covered by the insurance market – will fall short because contractors won’t be willing to take on those things.

Let’s face it – ordinary construction projects present enough legal challenges.   Throwing in unfamiliar green certification process programs and novel green technologies increases risk.   Here are some of the risk factors mentioned by the Marsh Green Building Team report:

  • Not obtaining the LEED certification expected;
  • Determining the appropriate standard of care used by green builders and professionals;
  • The competence of team members, subcontractors, laborers in green building technologies and requirements;
  • Untested contract language;
  • Concerns about contractors taking design responsibilities not covered by insurance.e

Managing Risk

The existence of risk should not stop owners, builders and designers from participating in a green building project.   As the Marsh Team analyzes and the Green Building Elements post discusses, there are many possible solutions for the legal risk factors identified.

Plus, as anyone in the construction industry knows, risk is absolutely everywhere.  A builder is in the business of managing and mitigating risk…and it’s possible to do this with green building.

  • Address Concerns in the Contract:   “Green Contracts” are largely untested, but that is no reason to not draft green contract language.   Before a project begins, have a lawyer experienced in green building projects draft language regarding the roles and responsibilities of each party in a green certification process, and properly allocate risk and liability for green building tasks.
  • Do Not Greenwash.  If you haven’t heard the term ‘Greenwashing,’ and you’re in the green business…it’s time to read up on it.   A builder or designer or supplier can avoid a lot of risk on a green building by simply avoiding vague and misleading advertising or labeling of services/products.
  • Insure.   Finally, it all goes back to insurance.   Insurance is a familiar product in the construction industry, and while policies protecting builders and designers from green building exposure is new…it is out there.   Talk to an attorney and/or your insurance agent about these products.

4 Years Post-Katrina Construction Outlook in New Orleans is Optimistic

Just last week, New Orleans marked the 4 year anniversary of Hurricane Katrina.  Coverage of the anniversary looked back on the somber experience, and then looked forward to the city’s continued progress.

Construction Outlook is Optimistic

The construction market in New Orleans has managed to largely avoid the national recession, giving Hurricane Katrina a silver lining.  As four years have now passed since the storm, many are wondering:  can the construction boom continue?

Fortunately for regional contractors, the answer seems to be yes.

In July, we reported at the Construction Law Monitor that the Army Corps of Engineers were seeking more contractors to perform federal levee projects.   Just last week, the Corps reported more good news for infrastructure projects in Louisiana stating plans to spend $1 billion to restore wetlands.

And while much has already been spent to rebuild the Crescent City, on Katrina’s anniversary President Obama vowed to speed the nation’s recovery effort.  In the New York Times article covering the topic, it was reported that the government has freed up “hundreds of millions of dollars in assistance that has not been distributed.”

Legal Information About Public Works Projects

There’s a lot to be optimistic about in the South Louisiana construction industry…but, most heavy spending projects are publicly funded.   Those who have experience working on public projects aren’t concerned about this, but many companies who ordinary focus on private work may be shaking in their boots.    There’s no need to be concerned.

While public contracts certainly have unique requirements and details, it doesn’t need to be foreign territory.   Here are some blog posts here at the Construction Law Monitor to help the private contractor better understanding public contracting:

  • The Public Contracting Category.   You can start by reading the articles posted in the “Public Contracting” category.
  • The Stimulus Package and Your Construction Business.   This blog posts discusses the difference between public and private contracts, and explains how your company can get federal and public work.
  • E-Verify.   A hot topic in federal contracting, your company should read and learn about the new e-verify requirements when preparing work on a federal contract.

If A Construction Lien is Bonded…Does that Circumvent Payment to an Claimant?

Typically, a construction lien is filed to have a number of desired effects:  (1) To prevent the sale or transfer of the property; (2) To hold multiple parties without contractual privity liable for the debt; and (3) To provide contractors with a faster and more direct remedy against parties in litigation.

But if a homeowner (or other interested party) files a bond in response to the lien, does that defeat the purposes of the lien itself?

Quite simply, no.

What is a lien bond?

Most mechanic liens statutes give property owners and other interested parties in a construction project the ability to file a bond in response to a party’s filing of a mechanic’s lien.   Most states require the amount of the bond to equal more than 100% the lien claim.

In Louisiana, for example, a lien bond must be 125% the amount of a claim.   In Washington, the bond must be 150% the claim amount.

The bond itself is deposited with the recorder or clerk’s office and theoretically “takes the place” of the lien. A filed bond, therefore, usually has the effect of eliminating any barriers to the sale or transfer of property and nullifying any rights to sue parties without contractual privity.

So, if a lien can be bonded and all of the lien’s benefits nullified…what’s the point of the lien?

The Bond’s Benefits

While the lien bond acts to nullify some positive aspects of a party’s claim of lien, it does not defeat the purpose of the lien statutes.   The claimant loses some benefits of the lien itself, but it gains the benefits of the bond.

Here are some benefits of the bond:

  • The entire amount in dispute (plus an additional amount – 25%, 50%, etc.) is filed with the court, and is securely awaiting determination of ownership.   This means that upon a court award, you won’t have to spend any money “collecting” the judgment.   The money is there.
  • The lawsuit to foreclose or enforce your lien becomes a lot less complicated.   Sometimes, a subcontractor’s lien claim can include a handful of parties (owners, GCs, suppliers, etc.).   The more parties in litigation, the more expense and procedural hurdles.   When a lien is bonded, it reduces the litigation to a one-on-one dispute and narrows the scope (and expense) of the action.

In short, while a bonded lien does not prevent the sale or transfer of property and may reduce the number of parties a claimant can sue….the bond also eliminates the need for those remedies.  It places the entire amount in dispute (plus sum) into the reach of the claimant, and the claimant can move forward in a clean and uncomplicated procedural action to recover the funds.

If your lien is bonded, it has already succeeded to some degree (it has produced the cash).  Now, it’s only a matter of proving that the cash is yours.

This article was originally posted on Express Lien’s topic-specific Construction Lien Blog.

Is Your Contractor’s or Subcontractor’s Certificate of Insurance Worthless?

If you look closely at your contractor’s or subcontractor’s certificate of insurance, you’re likely to find a disclaimer that reads something like this:

This certificate is issued as a matter of information only and confers no rights upon the certificate holder.   This certificate does not amend, extend or alter the coverage afforded by the policies below.

Normally, the certificate of insurance is produced specifically for the purpose of demonstrating that a particular party is a “certificate holder” or “additional insured.”  But the very document itself has a boldfaced disclaimer that the certificate cannot be relied upon.

This begs our question:  Is the certificate of insurance worthless?

Legally Speaking…Yes

It will be the burden of the insured (or the party claiming coverage) to prove the existence of a policy and coverage.  Tunstall v. Stierwald, 809 So.2d 916 (La. 2002).

There is clear case law that reliance on certificates of insurance may be easily misplaced.   In T.H.E. Insurance Co. v. City of Alton, for example, the US 7th Circuit held that a party “could not simply rely on the certificate [of insurance] for the terms and conditions of coverage.”  227 F.3d 802, 806 (2000).

A certificate of Insurance is not an insurance policy, and the certificate itself is not ordinarily issued by the insurance company.   Simply speaking, a party claiming coverage will likely not meet its burden of proving insurance coverage by pointing to a certificate of insurance only.

So, How Do You Confirm Insurance?

Our friends in Mississippi who run the Construction Law Toolbox blog posted last week asking “Can I Rely On My Subcontractor’s Certificate of Insurance?”   They provide a good analysis of the problem with certificates of insurance in their article, and they offer a “best practices'” for those in the construction industry:

The best business “policy” is to always obtain and read the actual insurance policy itself. In reviewing the policy, take into consideration the circumstances related to each particular project.

While this is more difficult than the ordinary receipt and filing of your contractor’s or subcontractor’s certificate of insurance, it’s the only way to confirm that the insurance policy required by your contract has been properly provided.

Options If You Have a Certificate, But No Insurance

What to do if you have a Certificate of Insurance…but no actual insurance?

While you may not have a perfect claim against the insurer, you have a number of alternative claims.   Some example claims:  A suit against the insurance agency for negligent or intentional misrepresentation, or for errors and omissions, or a suit for breach of contract against the person or entity who was required to provide insurance.

These claims may expire quickly, so if you a certificate of insurance (but, no actual insurance), it’s important to promptly seek the advice of counsel.

Louisiana Landlord / Tenant Law and Chinese Drywall

Not all victims of Chinese Drywall are homeowners.   Oftentimes, a tenant is living at a property with Chinese Drywall, or a property owner is a landlord to an apartment or home with Chinese Drywall.

Take, for example, a news story from the Baton Rouge’s Advocate about a tenant who was forced to move out of their rented home because of Chinese Drywall.   Or, a news story about a Florida landlord to an apartment complex housing low-income elderly people, who were evicted en mass because the complex had imported drywall.

These scenarios present interesting legal questions:

  • Can a tenant break a lease because of Chinese Drywall?
  • Can a landlord evict a tenant because of Chinese Drywall?
  • Is Chinese Drywall a “breach” of the lease?
  • Should landlords evict / move tenants when properties have Chinese Drywall to avoid responsibility for future health effects?

While the answer to this question will greatly depend upon the terms and provisions with the lease agreement, here is what that Louisiana Civil Code may have to say about the matter.

The Landlord’s Warranties

The landlord makes a number of warranties to its tenants through the Louisiana Civil Code, and it can be argued that the existence of Chinese Drywall at the leased premises is a breach of these warranties.

La. C.C. art 2696, for example, provides that the “lessor warrants…that the thing is suitable for the purpose for which it was leased and…is free of vices or defects.”   This warranty extends to vices “that arise after the delivery of the thing.”    The following code article (2697) indicates that the warranty encompasses vices or defects not known to the lessor.

The landlord may be liable to the tenant for any damages that result from the landlord’s breach in warranty.   These damages may include the cost for alternative accommodations, moving expenses, and sustained personal injury or health damages.

For landlords who are leasing properties with Chinese Drywall, it is important to consider the statutory warranties made to tenants.  The existence of Chinese Drywall may be a breach of their warranties, and if so, landlords are likely liable to tenants for any ensuing damages.

Statutory Termination of the Lease

In addition to the landlord’s warranties, another area of Landlord/Tenant law implicated by Chinese Drywall regards the statutory termination of leases.

La. C.C. art 2714 provides that if a thing is lost or totally destroyed, without the fault of either party, the lease terminates and neither party owes damages to the other.  In the case of partial destruction or “substantial impair[ment], that is not the fault of the lessor, the tenant may dissolve the lease or reduce their rent.   If the lessor is at fault, the tenant may also seek damages.

What’s The Rub?

Chinese Drywall presents some interesting issues for Louisiana Landlord / Tenant law.   Is the existence of Chinese Drywall a vice or defect that breaches the landlord’s warranty, or a partial destruction or “substantial impairment” to the property?    Are landlords entitled to damages, or just dissolution of the lease?    Should the landlord relocate tenants to mitigate its damages?

As is the case with most Chinese Drywall scenarios, as to landlord/tenant laws, there are more questions than answered here.    Landlords and Tenants with Chinese Drywall should seek the counsel and advice of an attorney.

This article was originally posted on Wolfe Law Group’s topic-specific Chinese Drywall Blog.