OSHA Settlement Set Aside Due to "Judge's error"

The Occupational Safety and Health Review Commission recently set aside a a settlement that had been approved by the administrative law judge despite the fact that the time to challenge the order had passed and the order had become final.  Apparently both the respondent and the Department of Labor (as well as the administrative law judge) failed to recognize that the settlement left one item on one of the citations open.  This resulted in the settlement not "fully resolving" all issues in the citations.  Thankfully for all involved, the OSHRC found justification for opening the order and remanding it for correction.

The case is a good reminder that mistakes happen and its always a good (great) idea to double check key documents to make sure they say what you think they say.  

The case was Secretary of Labor v. True Value Company.

Vincent T. Pallaci is the managing member of Kushnick Pallaci PLLC.  His practice includes defense of OSHA citations and other construction law issues.

Hope for contractors? Appellate Court Says Not Every Fall From Height Equals Strict Liability

New York's Labor Law drives up the cost of construction in New York because it drives up the cost of insurance in New York.  The main reason for this is the so called "strict liability" provided by the Labor Law when it comes to falls from heights.  But the Appellate Division recently reminded us that not every fall from a height results in automatic liability.

The case involved a fall of some 30 feet on the new World Trade Center.  Apparently a worker stepped on a pipe scaffold that gave way.   The plaintiff moved for summary judgment but the trial court denied the motion finding questions of fact.  Specifically, they questioned whether there were adequate anchor points from which the injured worker (who was wearing a harness with a double lanyard) could have tied off.  Sure the jury may ultimately find for the injured worker.  But cases like this provide a glimmer of hope for those trying to fight back against New York's Labor Law.

The case was Giordano v. Tishman Const. Corp.

Vincent T. Pallaci is the managing member of Kushnick Pallaci PLLC.  His practice includes defending contractors and owners against Labor Law claims and prosecuting claims against insurance companies that refuse to provide coverage to contractors and owners.

"Pay-when-Paid" provision struck down by Appellate Court

The District Court in Nassau County was faced with a claim by a contractor that sought to enforce a mechanic's lien and recover for alleged non-payment under a construction contract.   The contract at issue contained the following provision:

The obligation of Contractor to make any payment under this Agreement, whether a progress or final payment, or for extras or change orders, is subject to the express condition precedent of payment therefor by Owner and Owner's lender. Owner's and Owner's lender's determination of the percentage complete of Subcontractor's Work shall be final and binding and Subcontractor agrees that in no event shall Subcontractor receive payment from Contractor for a greater proportionate value of the Work than what is approved by Owner and Owner's lender.

The Appellate Term held that the provision was a "pay-when-paid" clause and thus, under long settled New York law, was void and unenforceable.  Unfortunately for this contractor-plaintiff the contract also contained a severability clause and six month limitations period.  Therefore, while the pay-when-paid portion was struck down, it did not void the entire agreement by virtue of the severability clause and the Court refused to strike down the six month limitations period.  Because the plaintiff failed to file its claim within six months, the claims were time barred and dismissed.  

The case was Polar Bear Mechanical, Inc. v. Walison Corp.

Supreme Court: Criminal Intent Required for Punitive Damages Under Article 3A

Lien Law Article 3A has become increasingly popular (or unpopular if you are the accused) in construction claims.  In general, Article 3A requires that contractors hold funds they are paid in trust for all beneficiaries of the project and that such funds not be used for a "non-trust purpose" until the claims of all beneficiaries are resolved.  Lien Law Section 77 vests the Court with the power to impose punitive damages in the appropriate case.  But not every case of a trust diversion warrants the imposition of punitive damages.

In Jorge v. Piola Property Management, the Nassau County Supreme Court was faced with a motion seeking to dismiss various portions of a home owner's claim against a contractor including a claim for punitive damages under Article 3A.  The Court granted the motion to the extend of dismissing the claim for punitive damages.  In doing so, it cited to controlling Second Department authority that says a trust diversion claim must include "criminal intent" in order to trigger punitive damages.  Essentially, this allows for a "good faith dispute" defense to the contractor.   Interestingly, the motion was a 3211(a)(7) motion to dismiss which appeared to have made while the case was in its infancy.  You have to wonder what the Court would do if facts come out in discovery showing that there was such "criminal intent."  Stay tuned...

The NY Prompt Payment Act: Can it help you get paid?

There is probably not a day that goes by that I don’t hear someone tell me that something that [insert name of person that owes them money] did that is a violation of the Prompt Payment Act.  It’s really quite amazing how all-encompassing the Prompt Payment Act (“PPA”) has become over the years…at least in the minds of those in the NY construction industry.  The truth is that the PPA is an effective (and under-utilized) tool, but it’s not always applicable and it doesn’t, despite what your buddy told you, cover everything and require you to be paid within ten days no matter what.  Here’s what the PPA does do:

When does it apply?

It applies to “construction contracts.”  Before you jump up and down, read the definition in the PPA.  A construction contract may not be what you think it is.  Better yet, see what it is not:  a construction contract is not a contract for public works nor is it a contract for the construction of a one, two or three family home.  You can almost hear the collective gasps.  I’ll bet more than half of the people that talk about what their customer must do under the PPA don’t realize that it doesn’t even apply to them. 

If it does apply…

You can still bargain for whatever you want in your contract and your contract will control over the PPA terms with limited exceptions.  If your contract does not cover a particular issue, then the PPA will control if you are, in fact, operating under a “construction contract.”  The PPA requires approval or disapproval of invoices within twelve (12) days of the time that all necessary documentation has been submitted.  Disapproved invoices must be explained in writing.  If payments aren’t made as required under the PPA then it provides for interest at the rate of 1% per month and expedited arbitration.  There are detailed procedures for invoicing and processing invoices.  Everyone that is in accounts receivable or accounts payable should read the PPA and know what they are required to do. 

Void Provisions?

The PPA makes the following provisions void so, even if they are in the contract, they cannot be enforced:  1) any provision that requires you to apply the laws of a state other than NY or to litigate or arbitrate any dispute arising out of the contract outside of NY (unless it’s a contract with a material supplier); 2) any provision that prohibits suspending work for non-payment; 3) any provision that says expedited arbitration, as provided in the PPA, is unavailable; 4) any provision that establishes payment provisions that differ from those in the PPA.