Month: June 2015

Insurance Coverage for Subcontractor Non-Compliance with Prevailing Wage Laws

One Court says there is at least a Duty to Defend

Authored by attorney Neil Lowenstein

Subcontractor non-compliance with prevailing wage laws is unfortunately not uncommon. But might that be covered by the General Contractor’s insurance? For one design-build project that included coverage for professional liability a federal court in Washington has said there’s at least a duty to defend on the part of the insurer under that particular policy. The case is Bayley Constr. v. Great American E & S Ins. Co. 980 F. Supp. 2d 1281 (W.D. Wash. 2013).

In reaching its conclusion, the court noted that the duty to defend was governed by liberal construction principles and that under those principles the General Contractor’s obligation to ensure subcontractor compliance with prevailing wage laws required professional skill and judgment, and so within that particular policy’s coverage. While results will necessary vary depending upon each policy, this case suggests any General Contractor required to address subcontractor prevailing wage law non-compliance should consider triggering policy coverage, and when in doubt timely notify its carrier of related claims per the terms of the contractor’s insurance policy or policies.

Asking about union affiliation deemed unlawful interrogation by NLRB

The word interrogation may give one the visual image of something akin to a police interrogation; but in a recent NLRB decision, the NLRB held that when a non-union shop subcontractor asked individual union member workers about their union affiliation in discussions about hiring those workers, the subcontractor violated the National Labor Relations Act. That decision is Euro Buildings, Ltd and International Union of Bricklayers & Allied Craftsworkers, Ohio-Kentucky Administrative Council, Local 22 Ohio, 2014 WL 5410010 (N.L.R.B. Div. of Judges 2014, adopted 2014 WL 6969677 (N.L.R.B. 2014).

The NLRB discussed that whether discussions amounted to interrogation required the NLRB to consider whether all of the associated circumstances of the discussions reasonably tended to evidence restraint, coercion, or interference with rights guaranteed by the Act. The NLRB identified related factors as including the identity of the questioner, the place and method of the questions, the background of the questioning, the nature of the information sought, and whether the employee is an open union supporter.

For that case, the NLRB judge found that the non-union subcontractor’s questions of the applicants about their union affiliation and membership was clearly coercive in nature and reasonably tended to coerce the applicants, and as such interfered with their rights under the Act. His decision seems to suggest any inquiry during the interview process about affiliation would similarly qualify as an coercive interrogation – the indirect threat being if you say you are affiliated as an applicant then you can’t get the job.

Prospective Waiver of Lien Rights by Subcontractors & Suppliers

Authored by attorney Jay Rixey

On April 15, 2015, the General Assembly enacted legislation amending Virginia Code § 43-3, providing that a subcontractor, lower-tier subcontractor, or material supplier may not waive or diminish his lien rights, right to assert bond payment claims, or the right to assert claims for additional costs in advance of furnishing any labor, services, or materials. Any provision in a contract that prospectively waives or diminishes such rights executed in advance of providing any labor, services, or materials is null and void. The amended provisions are effective July 1, 2015.

Previously, Section C of Virginia Code § 43-3 provided that any right to a lien may be waived in whole or in part, by any party, without exception. The revised Section C now provides, in relevant part (amended language in italicized bold):

“Any right to file or enforce any mechanics’ lien granted hereunder may be waived in whole or in part at any time by any person entitled to such lien, except that a subcontractor, lower-tier subcontractor, or material supplier may not waive or diminish his lien rights in a contract in advance of furnishing any labor, services, or materials. A provision that waives or diminishes a subcontractor’s, lower-tier subcontractor’s, or material supplier’s lien rights in a contract executed prior to providing any labor, services, or materials is null and void.

This revised statute now brings the Commonwealth of Virginia in line with the majority of states that find it against public policy to allow prospective waivers of certain rights, including lien rights. Ultimately, this revised statute protects subcontractors and suppliers by providing them with a stronger bargaining position during negotiations by knowing that any prospective lien waivers required in their contracts will be null and void after July 1, 2015.

It is important to point out that this statute does not cover general contractors. As a result, general contractors may still waive their lien rights by contract. Furthermore, the statute only prohibits the waiver ofprospective lien rights by subcontractors and suppliers, and does not prohibit the waiver of lien rights by subcontractors and suppliers after the provision of labor, services, or materials.

Insurance Coverage For Subcontractor Non-complaince With Prevailing Wage Laws? – One Court Says There’s At Least a Duty to Defend

Subcontractor non-compliance with prevailing wage laws is unfortunately not uncommon. But might that be covered by the General Contractor’s insurance? For one design-build project that included coverage for professional liability a federal court in Washington has said there’s at least a duty to defend on the part of the insurer under that particular policy. The case is Bayley Constr. v. Great American E & S Ins. Co. 980 F. Supp. 2d 1281 (W.D. Wash. 2013).

In reaching its conclusion, the court noted that the duty to defend was governed by liberal construction principles and that under those principles the General Contractor’s obligation to ensure subcontractor compliance with prevailing wage laws required professional skill and judgment, and so within that particular policy’s coverage. While results will necessary vary depending upon each policy, this case suggests any General Contractor required to address subcontractor prevailing wage law non-compliance should consider triggering policy coverage, and when in doubt timely notify its carrier of related claims per the terms of the contractor’s insurance policy or policies.

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