The Construction Advantage – Issue 9

In our ninth issue of The Construction Advantage, we provide you with a new case, a new statute and updated OSHA rules and requirements. We hope that this newsletter has been helpful and informative to you so far in 2014. Please feel free to let any of us know if there are specific issues that you want us to cover in the future. Happy fall!

Massachusetts Passes New Rule for Retainage for Private Construction Projects

By Mike Bosse

On November 6, 2014, a new Massachusetts statute will become effective that will regulate retainage payments on private construction projects. The statute, passed as “An Act Relative to Fair Retainage Payments in Private Construction” adds on to the existing Massachusetts Prompt Payment law which went into effect in early 2011.  The new Act, like the existing statute, applies to any construction project where the prime contract is $3 million or more and is lienable. The retainage must be limited to no more than 5% of each progress payment. After acceptance of substantial completion by the owner, the owner has to submit a punchlist to the general contractor within 14 days, identifying items that the owner believes are either incomplete or defective and other matters that are needed for final completion. The general contractor then informs the relevant subcontractors within 7 days regarding the punchlist work and then subcontractors must complete the punchlist items in order to be paid the retainage. General contractors and subcontractors can invoice retainage within 60 days of substantial completion with an indication of the completed punchlist items. Retainage must then be paid by the owner within 30 days of the invoice. 

This act will help regulate cash flows on projects and should make the distribution of retainage at the end of a project, and the punchlist process, more regulated and fair. The Act will only apply to prime contracts entered into after the effective date of November 6, 2014, so contractors and subcontractors have time to adjust their individual contracts to comply with the Act. Bernstein Shur’s construction lawyers can assist you in ensuring that your Massachusetts contracts will comply with the new retainage act.  

Texas Supreme Court Finds Direct Action for Homeowner Against a Plumbing Subcontractor

By Asha Echeverria

On August 22, 2014, the Texas Supreme Court in Chapman Custom Homes v. Dallas Plumbing Company, concluded that a homeowner had a cognizable negligence claim against a subcontractor plumber for water damage to a newly constructed home. Although at first blush this may seem self-evident, it is not always clear in residential cases what specific rights exist for owners against subcontractors and suppliers to a newly constructed home.   

The underlying Court of Appeals concluded that the homeowner did not have a claim directly against the subcontractor plumber because the owner was not a party to the subcontract between the plumber and the general contractor. The Court of Appeals had also held that the general contractor did not have a claim against the subcontractor because the general contractor did not own the property and thus did not suffer any damages. The Texas Supreme Court concluded otherwise and recognized a common law duty of a plumber to perform its services with the care and skill required to complete its work and that the failure to meet this implied standard could provide a basis for recovery in tort, contract, or both under appropriate circumstances. The Texas Supreme Court said that “to install a plumbing system in the house, the plumber assumed an implied duty not to flood or otherwise damage the [owner’s] house while performing its contract with the builder.” Thus, the Court held that the homeowner had a cognizable claim for a violation of the implied duty, and let the case proceed to the merits.   

This case is a reminder that it is not always clear what remedies a residential owner may have against downstream subcontractors or suppliers. Different fact patterns and the common laws of different states may dictate the particular outcome. In Texas and with these facts, the outcome was favorable to the homeowner.   

OSHA: New Recordkeeping Rule; New Reporting Requirements, Updated List of Exempt Industries

By Meredith Eilers

This month, OSHA announced two key changes to its recordkeeping rule that will take effect on January 1, 2015.  

First, all employers must report:

• All work-related fatalities within 8 hours.
• All work-related hospitalizations, all amputations, and all losses of an eye within 24 hours.  

Reports can be made by:

• Calling OSHA’s free and confidential number at 1-800-321-OSHA (6742).
• Calling your closest OSHA Area Office during normal business hours.

• ME:
  • Bangor: 207-941-8177
    • Aroostook, Piscataquis, Somerset, Penobscot, Washington, Hancock
  • Augusta: 207-626-9160
    • York, Cumberland, Oxford, Franklin, Androscoggin, Sagadahoc, Kennebec, Lincoln, Knox, Waldo
• New Hampshire: (603) 225-1629 (Concord)

Using the new online form that will soon be available.  

These requirements apply to all employers, including those who are otherwise exempt from the requirement to routinely keep records of work-related injury or illness.  

Only fatalities occurring within 30 days of the work-related incident must be reported to OSHA. Inpatient hospitalizations, amputations, or loss of an eye must be reported only if they occur within 24 hours of the work-related incident.  

Previously, OSHA required an employer to report only work-related fatalities and in-patient hospitalizations of three or more employees. The requirement to report single hospitalizations, amputations, or the loss of an eye is new.  

Second, OSHA has updated the list of industries exempt from the requirement to routinely keep injury and illness records.  The new rule retains the exemption for any establishment with ten or fewer employees, regardless of industry classification. All employers with ten or fewer employees at all times during the previous calendar year are exempt from routinely keeping OSHA injury and illness records.    

However, the list of industries to which this recordkeeping requirement otherwise applies has been expanded. Establishments in certain low-hazard industries are exempt from routinely keeping OSHA injury and illness records. The revised list of exempt industries is now classified by the North American Industry Classification System (NAICS) and is based on more recent data from the Bureau of Labor Statistics. Industries that include establishments newly required to keep records include, among others, building materials and supplies dealers, and commercial and industrial machinery and equipment rental and leasing. Follow these links for the complete list of exempt industries and the complete list of newly covered industries.   

Helpful Links:
Updates to Recordkeeping Rule

Brief Tutorial on Completing the Recordkeeping Forms

Recordkeeping Forms

Recordkeeping and Reporting Requirements

Online Form (not yet available; coming soon)

We hope that you have found these tips and pointers in the ninth issue of The Construction Advantage helpful to you in your daily business. Each of the attorneys in our Construction Law Practice is available to answer the day to day questions of your business as you work on projects over the fall months.