Archive for the ‘Construction’ Category

OSHA Gets a Bigger Stick

On August 2, 2016, OSHA’s maximum penalties will increase by 78%. The penalty hike is the result of an interim final rule issued by the U.S. Department of Labor. The increase is intended to bring OSHA penalties, which have not been raised since 1990, in line with inflation.

Under the rule, serious and other than serious violations will now be capped at $12,471 per violation, rather than $7,000. Failure to abate violations, which are calculated on a per day basis, will receive an identical increase—$7,000 to $12,471. The cap on substantial penalties for repeated and willful violations increases from $70,000 per violation to $124,709.

These changes become effective for all citations beginning August 2, 2016. No matter when the violation occurred or when the investigation began, all OSHA penalties after August 1, 2016 will be calculated according to these new maximums.

OSHA’s 2015 Field Operations Manual remains the latest guidance as to how it determines an appropriate fine for violations. The primary consideration in determining penalty amounts is the “gravity of the violation,” which is determined by examining the severity of the injury that could have resulted from a violation, along with the probability that an injury could have occurred. It also allows for reductions in penalties depending on the employer’s size, whether the employer lacks a history of violations, and whether the employer was acting in good faith (i.e., wasn’t purposefully breaking the rules and had an effective safety and health management system in place).

Of course, the cheapest OSHA fine is the one never issued. Having a safety program in place and making sure that employees receive regular training on best safety practices is advisable. Companies should strive to create a culture in which safety always comes first—the increase in OSHA penalties is just one more reason why.

Violation Type Old Max Penalty New Max After August 1
Other than Serious $7,000 $12,471
Serious $7,000 $12,471
Failure to Abate $7,000 a day $12,471 a day
Repeat $70,000 $124,709
Willful $70,000 $124,709

What’s Happening Now . . .

  • The U.S. Economy grew at 1.2% for the second quarter of 2016.
  • Growth hasn’t topped 2% since the second quarter of 2015.
  • The second estimate for the second quarter will be released August 26, 2016.
  • In 2013 and 2014, quarterly growth exceeded 2% in 6 of 8 quarters.

Source: BEA, U.S. Dept. of Commerce, News Release, Nat. Income and Product Accounts  (July 29, 2016).

Newsletter written by Jeffrey C. Bright, Esq., an attorney licensed in Pennsylvania and Maryland.  For more information, contact an attorney at Harmon & Davies, P.C.

This Newsletter is not legal advice.  Unlike this Newsletter, legal advice is specifically tailored to the facts, law, and objectives unique to each circumstance.

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As drones continue to get less expensive, construction companies may find it increasingly practical to use them for anything from roof inspections to aerial photographs of jobsite progress. Until recently, the Federal Aviation Administration (“FAA”) has only permitted such commercial use of drones on a case by case basis, granting exceptions only if the drone operator had a pilot’s license. Thankfully for businesses looking to take advantage of this emerging technology, the FAA recently passed new, much less restrictive regulations for the commercial use of drones that will go into effect on August 29th of this year.

Most significantly, the new FAA drone regulations no longer require a pilot’s license for commercial operation. Instead, for an estimated cost of $150—a relative bargain compared to the time and expense of acquiring a pilot’s license—drone operators will need to pass an “aeronautical knowledge test” at an FAA exam site or operate the drone under the direct supervision of someone that has. In addition to passing that test, a prospective drone operator will need to be at least 16 years old and receive vetting by the Transportation Security Administration. Those who already have a pilot’s license (not including a student pilot’s certificate) and have completed a flight review within the last two years will only need to pass an online test to receive commercial drone operation certification.

Beyond the certification process, the new regulations also include several rules for safe flying. The good news is that none of these requirements should place any real burden on a construction company’s most common uses of a drone.

The rules require that the drone weigh less than 55 lbs., which is a weight that nearly every commercially available drone is well under. As for the scope of operations, the rules require drone operators to fly their aircraft only during daylight hours, under 400 feet above ground level or 400 feet above a building, while not travelling more than 100 miles per hour. Additionally, the drone cannot operate over top of any person not directly participating in the flight that is not inside a structure or vehicle. The drone must also always remain within the visual line of sight of either the operator or a single visual observer. None of those restrictions should at all inhibit aerial photography—the most common use of drones in the construction industry.

Those eager to begin studying for the commercial drone operator exam, which will become available soon after the new rules take effect, can do so by taking the online test made for people who already have a pilot’s license. Though passing the exam without a pilot’s license will not certify you as a drone operator, the FAA does recommend it as a “self-study” resource for the exam that will.

This article is intended to provide general information, not a specific legal opinion or advice. Any particular questions should be directed to your legal counsel. If you do not have legal counsel, please feel free to contact Harmon & Davies, P.C.

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PA Workplace Misclassification Act

In March 2016 the Pennsylvania Department of Labor and Industry produced a white paper report on the “Administration and Enforcement of the Construction Workplace Misclassification Act in 2015.” Under the Act, the DLI investigates and penalizes construction companies that misclassify employees as independent contractors.

Here’s a quick snapshot from the Report:

pic for 4-29-16 blog

But in 2013, under similar circumstances, the Pennsylvania Commonwealth Court held that the general contractor’s payments to the subcontractor did not afford protection, and the Prompt Payment Act did not shield the contractor and the surety from liability. Berks Products Corp. v. Arch Ins. Co., 72 A.3d 315.

Those are the cases of Workplace Misclassification that the Bureau of Labor Law Compliance has investigated in the past five years. Notably, there were more investigations in 2015 than the previous four years combined. Also, the investigations netted $217,450 in penalties, which is a 1,612% increase from the 2014 penalty amount. In fact, the Bureau only collected $12,700 in penalties in 2014. Point being, DLI is emphasizing the enforcement of this Act, and all construction companies should take a very close look at how they supply manpower to their projects.

The Workplace Misclassification Act applies to all construction companies working on all types of projects—public, private, residential, or commercial. The Act sets forth a checklist of considerations that are scrutinized when determining if a laborer on a project is actually an independent contractor. If the laborer is misclassified as an independent contractor—when in fact he is really an employee—DLI will levy a fine. In some instances, DLI has the authority to seek criminal prosecutions.

To comply with the Act, every independent contractor must have a written contract. Further, every laborer should be analyzed with consideration of the numerous other requirements under the Act. DLI generally receives its leads from (1) complaints filed by laborers; (2) findings made during construction site visits; and (3) referrals from other government agencies, particularly the Office of Unemployment Compensation Tax Services. To avoid penalties, it is best to review your laborers and seek legal advice as necessary.

What’s Happening Now . . .

11.2 % Increase

  • Increase in construction spending for first two months of year, comparing 2015 to 2016.
  • Construction spending for January & February 2015 was $141.3 billion.
  • Construction spending for January & February 2016 was $157.1 billion.

Source: U.S. Census Bureau News, February 2016 Construction at $1,144.0 Billion Annual Rate, U.S. Dept. of Commerce (Apr. 1, 2016).

Newsletter written by Jeffrey C. Bright, Esq. , an attorney licensed in Pennsylvania and Maryland. For more information, contact an attorney at Harmon & Davies, P.C.


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Trumbull and Berks Products Payment Bonds

Pennsylvania’s Prompt Payment Act states that “once a contractor has made payment to the subcontractor . . . claims for payment against the contractor or the contractor’s surety by parties owed payment from the subcontractor . . . shall be barred.” The Contractor and Subcontractor Payment Act provides similar (but slightly different) language. This is referred to as the “safe harbor” clause.

In 2001, to the pleasure of the bonding industry, the Pennsylvania Commonwealth Court opined that the general contractor’s payments to the subcontractor barred a claim by the sub-subcontractor on the payment bond. Trumbull Corp. v. Boss Const. Inc., 768 A.2d 368. The court held that the Prompt Payment Act’s language absolved both the contractor and the surety of liability. Even though the subcontractor failed to pay a sub-subcontractor, the claim on the bond was dismissed.

But in 2013, under similar circumstances, the Pennsylvania Commonwealth Court held that the general contractor’s payments to the subcontractor did not afford protection, and the Prompt Payment Act did not shield the contractor and the surety from liability. Berks Products Corp. v. Arch Ins. Co., 72 A.3d 315.

The 2013 Berks Products case was widely seen as abrogating the Trumbull decision, and taking away the “safe harbor” provided by the Prompt Payment Act. But a close reading of Berks Products indicates that the Prompt Payment Act’s barring of claims will still be enforced—so long as the bond language is carefully written:

[T]he payment bond drafted by [Surety] . . . provided that the bond shall remain in full force and effect until such time as both [General Contractor] and any subcontractor . . . make full payment for any labor and/or materials . . . .

* * *

[Sub-subcontractor] was entitled to seek recovery under the Bond Law, and the “safe harbor” provision would generally be applicable to [General Contractor]. However, an issue arose as to whether the language of the payment bond . . . waived this provision.

Point being: the Prompt Payment Act’s “safe harbor” clause is still effective. But the bond should be written carefully, to reflect that payment from the Contractor will extinguish the bond obligations. If the bond states that payment by the Contractor and all Subcontractors will extinguish the bond, then, the court might treat it as a Berks Products bond, and hold that it waived the “safe harbor” provision.

When issues pertaining to payment bonds arise, it is best to seek legal advice early and often.


What’s Happening Now . . .

Residential Construction

  • Indicators of new residential construction were improved, comparing Feb. 2016 to Feb. 2015.
  • Building Permits: Feb. 2016 is 6.4% above Feb. 2015.
  • Housing Starts: Feb. 2016 is approx. 30.9% above Feb. 2015.
  • Housing Completions: Feb. 2016 is 17.5% improvement.

Source: U.S. Census Bureau News, New Residential Construction in February 2016, U.S. Dept. of Housing (Mar. 16, 2016).

Newsletter written by Jeffrey C. Bright, Esq. , an attorney licensed in Pennsylvania and Maryland. For more information, contact an attorney at Harmon & Davies, P.C.

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Construction Law Newsletter January 2016

What’s Happening Now . . .


  • Unemployment rate for December 2015.
  • Construction gained 45,000 jobs in December; a third straight month of job gains.
  • 263,000 construction jobs were gained in 2015.

Source: U.S. BLS, News Release: The Employment Situation – December 2015 (Jan. 8, 2016).


So You Want to Litigate – What Happens Next?

Going into a lawsuit, it is important to understand the process. Some clients think that once a lawsuit is filed, it is only a matter of time—perhaps days, or weeks—before the claim is resolved.

That happens sometimes. But not always.

Lawsuits generally have three phases: Pleadings; Discovery; and Trial. Each phase is distinct, but the timing of Pleadings and Discovery sometimes overlap.

In the Pleadings phase, the parties file written statements setting forth their narratives of the case. Each side files with the court a signed statement setting forth the facts upon which they claim to be entitled to a remedy (or defense).

In the Discovery phase of the lawsuit, parties develop the evidence to support their case. Parties can send written questions (interrogatories) and may request documents to be produced. Parties can also depose witnesses. While objections can be lodged to the discovery requests, parties should know that, generally, any documents, including emails, letters of correspondence, internal communications, and notes are likely to be discoverable and will be produced in the lawsuit. Communications between client and attorney, however, are confidential and privileged.

Once the parties have gathered sufficient evidence, the case is listed for trial. Leading up to trial, parties will identify the exhibits they intend to use and the witnesses they intend to call. The attorneys will write briefs setting forth summaries of their client’s positions. At trial, the parties use the written discovery responses, deposition transcripts, and documents to argue their case to the judge or jury. Cases usually take at least one year to resolve, and they often take several years

During each phase of the suit, there are natural points for settlement discussions. It is common to raise settlement negotiation after the close of Pleadings, or after an important deposition. Sometimes, an upcoming, expensive aspect of the lawsuit—such as a motion, or trial itself—will cause parties to negotiate a settlement in order to avoid the expense of the upcoming task.

As a general rule of thumb, settlements are most efficient early. The purpose of settlement is to avoid the costs of litigation and to limit the exposure to a potentially bad verdict. If the lawsuit has already been litigated through Pleadings and Discovery, many of the litigation costs have already been incurred; thus, settling the matter at that point cannot avoid the costs. When a lawsuit is pending, it is important to seek legal advice immediately to determine the best legal arguments and proper management of the case.

Newsletter written by Jeffrey C. Bright, Esq. , an attorney licensed in Pennsylvania and Maryland. For more information, contact an attorney at Harmon & Davies, P.C.

Employment          Construction           Business

2306 Columbia Ave. | Lancaster, PA 17603

T: 717.291.2236 |


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A Construction Law Newsletter Provided by Harmon & Davies, P.C.

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What’s Happening Now . . .


·         Increase in construction spending, year-to-date.

·         The first 10 months of 2015 have seen $888.1 billion in construction spending.

·         The first 10 months of 2014 were $802.3 billion.

Source: U.S. Census Bureau News, October 2015 Construction at $1,107.4 Billion Annual Rate, U.S. Dept. of Commerce (Dec. 1, 2015).

Mediation, Arbitration, and Litigation

Construction contracts often reference either mediation, arbitration, or litigation. But what’s the difference between these three?

Mediation is the use of a third-party to conduct an informal meeting for the purpose of resolving the dispute. There is no judge or jury. It is merely a mechanism to get all the parties in the same room.

Typically, but not always, the mediator is selected and hired by the parties to lead the settlement discussions. It’s also common for mediation conferences to start with all parties in a single room, discussing their grievances and desired outcomes. After the initial group discussion, it is common for each party to relocate to separate rooms, and the mediator will meet with each party individually, to facilitate points for discussion. Generally, a mediator is hoping to bring each party towards middle ground in search of a negotiated resolution.


It is important to ensure that mediation is conducted under the confines of 42 Pa.C.S.A. § 5949. This statute provides that the communications made in mediation are inadmissible as evidence in a court of law. This protection allows the parties to speak freely, in an effort to resolve the dispute. Settlement discussions are also inadmissible in a court of law, under Pa.R.E. 408. Best practice is for all parties to agree in advance, as a ground-rule of mediation, as to whether the statements are fair game for use in court at a later point.

Mediation does not result in a binding decision. It is merely an attempt to facilitate a negotiated settlement. Arbitration, on the other hand, is a formal procedure that results in a binding decision. Arbitration does not use a judge or jury. Instead, an arbitrator presides over the arbitration and acts as the “judge and factfinder.” Arbitrators are usually practicing attorneys who likely have a concentration or level of expertise in the specific area of applicable law. Arbitration is less formal than a trial in court; it is often held in a private office, or a conference room. Although less formal than a trial, the litigants must still present testimony and evidence, in a similar manner as if presenting their case in court.

Sometimes, people use the terms “binding” or “non-binding” arbitration. These are misnomers. By definition, all arbitration is binding. If it is “non-binding arbitration” then, it is better defined as mediation. When agreeing to participate in mediation or arbitration, make sure that it is fully understood and agreed that the process is either binding or non-binding. The best way to make this clear is to use the proper terms: mediation is a non-binding; arbitration results in a binding decision. This should be clarified in writing, between the parties, as a ground-rule for participating in the process.

Litigation, in contrast, is the use of the court process. At the time of entering the contract, and at the time of any dispute arising, it is important to know whether the contract requires mediation, arbitration, or litigation.

Newsletter written by Jeffrey C. Bright, Esq. , an attorney licensed in Pennsylvania and Maryland. For more information, contact an attorney at Harmon & Davies, P.C.

Employment          Construction           Business

2306 Columbia Ave. | Lancaster, PA 17603

T: 717.291.2236 |


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Legal Punchlist November 2015

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Click to read our Legal Punchlist Newsletter4-30-15 Legal Punchlist Newsletter (Apr. 2015)



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The U.S. District Court for the Eastern District of Virginia recently held that a laborer hired by a subcontractor cannot sue the construction project’s general contractor for same-sex harassment. In the lawsuit, Matthew Allen alleged that an unidentified man from another company made sexual advances towards him. After reporting the incident to the general contractor, D.A. Foster Company, Inc., the man who allegedly made the advances was ejected from the worksite. Allen alleged, however, that he was continually harassed by coworkers who had heard about the incident. Allen filed suit against the general contractor, and Barnes Excavating, the subcontractor, alleging, among other counts, discrimination, hostile work environment, retaliation, and retaliatory termination in violation of Title VII of the Civil Rights Act.

The court held that claims against an employer under Title VII may only be brought by an employee, not an independent contractor, against an employer. To determine whether the claimant is an employee or independent contractor, courts weigh several factors of the conventional master-servant relationship. While no one factor is determinative, several factors are considered, including: the workers skill required; who provides the tools required; location of the work; duration of the relationship; the hiring party’s right to assign additional projects to the hired party; the extent of the hired party’s discretion over working time and hours; the method of payment; and whether the work is part of the regular business activities of the hiring party.

In the case at hand, D.A. Foster was the general contractor who subcontracted excavating work to Barnes. Barnes directly hired Allen as a laborer and assigned Allen to work on the project supervised by D.A. Foster. Although D.A. Foster provided some guidance and training for the project, and the company does regularly perform work in this industry, the level of control over Allen did not rise to the extent necessary to establish an employee-employer relationship. The court held that, with respect to D.A. Foster, Allen was an independent contractor. Most tools were provided to Allen by Barnes Excavating, not Foster. Allen worked under the direct supervision of and was paid by Barnes. The court found that Allen could not reasonably believe that he was an employee of D.A. Foster. Thus, the court granted summary judgment in favor of D.A. Foster.

While in the case at hand the general contractor was not subject to liability on the claim, employers still need to be weary of the current trend to try towards expanding the definition of who is the “employer.” Particular attention should continue to be paid to the IRS independent contractor test and, in particular, the most recent movement of the NLRB to redefine joint-employer status. The consequences of misclassifying an employee as an independent contractor can be significant. The case should also serve as a reminder to all contractors that they need to take steps to make sure that their jobsites are free from any kind of harassment.

This article is authored by attorney Lori L. Buntman and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.


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