ASA President’s Letter

August 2018

Dear ASA Members,

As many of you know, the three pillars of our Association are advocacy, education, and networking. This edition of The Contractor’s Compass takes us back to “school” to continue our learning about several topics, such as Lean construction, employee training and development, E-Verify, OSHA inspections, and the dangers of distracted driving.

You may not have thought about it before, but we don’t typically call The Contractor’s Compass a magazine. We call it an educational journal. Each month, The Contractor’s Compass provides continued education on topics of most interest to you. ASA staff hand select experts from the construction industry to write feature articles and the Legally Speaking column to give you advice and tips, or simply broaden your knowledge about a particular subject.

The Contractor’s Compass now has its own Web site: http://contractorscompass.org, where reading articles may be easier on the eyes. The publication is still accessible via the ASA Web site, www.asaonline.com, and is still available as a pdf for those who wish to print it out, and as a digital flip-book for those who prefer to read it as a virtual publication.

Another way ASA provides continued education on subcontracting topics and issues is through education webinars. ASA recently announced its 2018-19 Webinar Series. Previously, ASA offered webinars in August through May, but this year we’ll have a webinar each month, from August through August.

Webinars will focus on marijuana use laws and restrictions, electronic takeoff software solutions, group captive insurance, improving communications between GCs and subcontractors, improving the change order process, work-in-progress reporting, the best and worst construction legal decisions of 2018, Lean construction, avoiding predatory wrap-ups, corporate and individual tax planning, human resources basics for small businesses, emerging technologies, and the skilled trades shortage.

To register for ASA webinars, click on “Register for an Event” on the ASA Web site, www.asaonline.com.

The third way ASA provides continuing business education is at ASA’s annual convention, SUBExcel. SUBExcel 2019 will take place March 6-9, 2019, in Nashville, Tenn. ASA staff are already hard at work scheduling top-notch speakers and planning another terrific event. Please save the dates and plan to join us in Nashville. Online registration via www.subexcel.com is expected to be available in September or October.

ASA is committed to providing you with the education opportunities you need to stay ahead of the curve. If you have ideas for future education webinars or workshops, I welcome your suggestions.

Best Regards,

Courtney Little

2018-19 President

American Subcontractors Association

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Construction in the Courts

August 2018

ASA Files Amicus Brief in Texas Court Case of Importance for Employers Related to Transportation of Employees to/from Workplace

by American Subcontractors Association

In a “friend-of-the-court” brief filed on July 31, ASA asks the Supreme Court of Texas to reconsider its underlying decision in a case of importance for all employers who pay employees whose normal duties do not include transportation any amount to transport other employees to and from the workplace.

ASA submitted the amicus brief in support of respondent Amerimex’s motion for rehearing in the case of Steven Painter; Tonya Wright, Individually and as Representative of the Estate of Earl A. Wright, III, Deceased; Virginia Weaver, Individually and as Next Friend of A.A.C., a Minor; and Tabitha R. Rosello, Individually and as Representative of the Estate of Albert Carillo, Deceased, (Petitioners) v. Amerimex Drilling I, Ltd., (Respondent).

In the underlying case, Steven Painter, J.C. Burchett, Earl Wright and Albert Carillo were working the night shift for Amerimex Drilling, drilling a well for Sandridge Energy on an oil and gas drilling rig in Pecos County. The prime contract between Sandridge and Amerimex provided that Amerimex was to perform the drilling and provide the drilling crews. Due to some Sandridge restrictions, the bunkhouse for the Amerimex crew was not as close as they normally would have been, located about 30 miles from the remote drilling site. The prime contract provided that the driller for each crew would receive $50 per day for transporting the crew between the bunkhouse and the drilling site.

On July 28, 2007, after the Amerimex crew’s shift ended, Burchett, the driller, was driving the crew back to the bunkhouse and on the trip, he fell asleep and the truck carrying the crew rolled over, ejecting all four members, injuring Painter and Burchett and killing Wright and Carillo.

Burchett received workers’ compensation for his injuries after the Texas Department of Insurance determined that his injuries were covered because, the department concluded, Burchett “was paid to transport his crew to and from the worksite and the company bunkhouse.” The trial court granted Amerimex’s motion for summary judgment, dismissing the claims because “Amerimex is not vicariously liable for the negligence of JC Burchett.” The Eighth Court of Appeals, El Paso, Texas, denied the appeal. However, in an April 13, 2018, opinion, the Texas Supreme Court reversed and remanded the case to the trial court, relying on workers’ compensation precedent holding that where an employee transports others to and from the place of employment as either part of the contract of employment or for payment by the employer, the work is within the scope of employment for purposes of the coverage and protections of the workers’ compensation statute. Citing that case law, the Texas high court reversed and remanded the lower courts for a determination whether Burchett was acting in the course and scope of his employment at the time of the accident.

In the brief, ASA explains that Amerimex is not vicariously liable for the actions of Burchett because even if Burchett was considered to be an employee at the time of the accident, he was outside the course and scope of employment. “An employer will only be held vicariously liable for the actions of its worker if: (1) the worker was an employee; and (2) was acting in the course and scope of employment. Neither requirement is satisfied in this case. If a worker is determined to be an employee, the question is whether the employee was within the course and scope of his employment. Even if Burchett was an employee at the time of the accident, he was not within the course and scope of his employment when driving crew back to the bunkhouse. This Court has stated ‘vicarious liability arises only if the tortious act falls ‘within the scope of employee’s general authority in furtherance of the employer’s business and for the accomplishment of the object for which the employee was hired.’’ Traveling to and from work, even though arguably for the employer’s benefit, has been consistently held to be outside the course and scope of employment.”

ASA adds that travel reimbursement does not create an exception to the “coming and going” rule. “The contractual $50 per day Driver’s Bonus paid to the driller of each crew was a travel reimbursement,” ASA writes. “Travel reimbursements create no exception to the ‘coming and going’ rule, which states travel to and from a job location is not within the course and scope of employment. The Driver’s Bonus was to reimburse workers for the costs associated with a remote drill site, similar to the $50 per day Subsistence Bonus that compensated crew for daily expenses and the $50 per day Bottom Hole Bonus available to crew who remained employed from the well’s spud date through its completion.”

“The lower courts,” ASA continues, “correctly applied the principle from Pilgrim [Pilgrim v. Fortune Drilling Co., Inc., 653 F.2d 982, 987 (5th Cir. 1981)] that an employer compensating travel does not create an exception to the coming and going rule. Similar to Pilgrim, Amerimex exercised no control and had no right of control over Burchett once he completed his shift. The remote location of the drill site does not affect the coming and going rule, and in fact lends support to the argument that Amerimex is simply trying to reimburse crew members for their added personal costs due to the remote well location. The Court made an unnecessary and incorrect distinction between: (i) a contract requiring Amerimex to hire drivers to provide transportation, and Amerimex deciding to offer that extra work to Burchett; and (ii) the actual contract contemplating that Amerimex would assign the driving task to specific individuals, the drillers.”

“While Amerimex had the right to control Burchett regarding his employment as a driller,” ASA writes, “once Burchett’s shift ended and Burchett left the well location, Amerimex no longer exercised control over him. The driving ‘job’ assigned to Burchett was wholly separate and unrelated to Burchett’s employment as a driller. It, therefore, must be analyzed separately to determine whether Amerimex exercised sufficient control over Burchett’s actions as a driver to impose vicarious liability on Amerimex. Even if Burchett was required to drive the crew back to the bunkhouse in the evenings, Amerimex exercised no control over Burchett completing this job. Amerimex had no right of control over the employees after their shift ended. They were not on the payroll and the company did not direct or instruct its employees in any regard as to how they commuted to and from work. Regardless of Plaintiff’s contentions, a travel reimbursement is not being ‘on the payroll’. At most, Burchett was an independent contractor, and an independent contractor’s negligence does not impose liability on an employer for respondeat superior purposes.

Brian K. Carroll, Sanderford & Carroll, P.C., prepared the brief for ASA. ASA’s Subcontractors Legal Defense Fund financed the brief. Contributions to the SLDF may be made online.

Contractor Community

August 2018

DOL Releases Videos Providing Guidance on Wage Laws

The U.S. Department of Labor’s Wage and Hour Division has released a series of instructional videos that provide assistance to employers about their responsibilities to comply with the Fair Labor Standards Act. The brief, plain-language videos are intended to help employers who simply want to understand what the law requires. Topics covered include:

  • Coverage: Does the FLSA apply to my business?
  • Minimum Wage: What minimum wage requirements apply to my business?
  • Deduction: Can I charge my employees for uniforms or other business expenses?
  • Hours Worked: Do I have to pay for that time?
  • Overtime: When do I owe overtime compensation, and how do I pay it correctly?

For more information about the FLSA and other wage-related laws, see www.dol.gov/whd.

 

ASA Calls for Sub Payment Protections on Water Infrastructure

ASA, in collaboration with three associations representing the surety industry, called on Congress to provide subcontractor payment assurances on projects financed through the federal Water Infrastructure & Innovation Act. WIFIA is used to provide loans and loan guarantees to finance water infrastructure projects across the country. Under current law, it is not clear whether existing federal policy to require performance and payment bonds on projects financed through federal grants applies to WIFIA-financed projects. ASA supports an amendment to pending water infrastructure legislation that would extend the tenets of the federal Miller Act, the existing law that requires a federal prime construction contractor to provide performance and payment bonds, to all projects financed through WIFIA. Without this clarification, construction subcontractors and suppliers on water infrastructure projects will not be assured of payment protections. The surety associations participating in this important effort are the American Insurance Association, the National Association of Surety Bond Producers, and The Surety & Fidelity Association of America.

 

OSHA Proposes Further Revisions to Crane Operator Qualification Rule

OSHA, on May 21, published a proposed rule intended to provide long-term clarity regarding crane operator certification requirements and to reinstate the employer duty to ensure that a crane operator is qualified to safely operate equipment. Indeed, approximately one-fifth of OSHA’s notice details the responsibility of employers in addition to having their operators certified. The proposed rule also addresses qualifications for trainers; expands the type of certification programs for crane operators; clarifies the requirements for operators-in-training; clarifies that employers are responsible for paying for certification programs for employees; and clarifies that duty-cycle cranes or cranes in the 5,000 to 35,000 lb. capacity are included. OSHA’s proposed rule also raises the specter of still another extension of implementation of the operator certification compliance date in order to provide OSHA with more time to complete rulemaking; the compliance date currently is Nov. 10, 2018.

 

ASA Helps Subs Evaluate the Environment Through a Public Policy Lens

Since its inception in 1966, ASA has been the principal advocate for the rights of construction subcontractors, specialty trade contractors and suppliers in the public policy arena. An ASA government advocacy tool, The Business Environment for Construction Subcontractors Through a Public Policy Lens: An Evaluative Tool, poses a series of questions on nine subcontractor issues. A subcontractor advocate’s responses to these questions will help him/her determine and prioritize their actions in the legislative, regulatory and judicial arenas. The issues addressed include:

  • Pay-if-paid clauses
  • Prompt payment on private work
  • Prompt payment on public work
  • Retainage on private work
  • Retainage on public work
  • Mechanic’s lien rights
  • Statutory payment bond rights
  • Subcontractor payment assurances on public-private partnerships
  • Risk allocation, including indemnity and additional insured

ASA has reference materials on each of the above issues, including legislative work kits, 50-state law reviews, fact sheets, white papers and more; these documents are available in the Member Resources section on the ASA Web site.

A subcontractor advocate also may want to consider issues not included in the questionnaire. For example, pre-contract disclosure of the terms of consolidated insurance policies, anti-forum selection requirements, procedures to limit bid shopping on public work, and contractor licensing are all issues of high interest to construction subcontractors. The evaluative tool, which was developed by the ASA Task Force on Government Advocacy, is available under “Contracts and Project Management” in the Member Resources section of the ASA Web site.

 

ASA Resource Answers Construction Subcontractors’ Questions About Pay-If-Paid

“Pay-if-paid” contract clauses can cause big problems for unpaid construction subcontractors and suppliers. Such clauses specify that a subcontractor or material supplier will not be paid for the work it performed or the supplies or services it provided “if” the general contractor doesn’t receive payment from the project owner. Pay-if-paid is not enforceable in all circumstances, however, and ASA’s Contingent Payment Clauses in the 50 States helps subcontractors and suppliers understand their risk.

This resource is of tremendous business value to subcontractors and suppliers, who need to know the risk of pay-if-paid. Pay-if-paid is enforceable in some, but not all states, and the states in which pay-if-paid is enforceable differ as to when a contract clause creates a true ‘condition precedent to payment’ threatening the right of unpaid subcontractors to be paid for satisfactory work.

Contingent Payment Clauses in the 50 States explains for each state:

  • Whether a “pay-if-paid” clause will be enforced in that state if it is unambiguously drafted.
  • Whether the state distinguishes between “pay-if-paid” and “pay-when-paid” provisions.
  • Whether “pay-when-paid” clauses allow a contractor in the state to only delay payment to its subcontractors for a reasonable time.
  • Key statutes and cases that describe the state’s position on contingent payment clauses.

ASA general counsel, Kegler, Brown, Hill and Ritter, Columbus, Ohio, prepared the manual. The manual is available to ASA members under “Contracts and Project Management” in the Member Resources section of the ASA Web site by logging in at “LogIn/Access Member Resources.”

 

ASA White Paper Provides Tips on Project Financing

Construction project insolvency is a major concern of construction subcontractors who provide a large amount of labor and materials to the prime contractor on credit. A 2015 ASA survey revealed that slow final payment, slow progress payment and pay-if-paid subcontract clauses are among the top concerns of ASA members. All three of these concerns can be traced back to the adequacy of project financing, at least absent predatory behavior by those controlling the cash flow.

ASA’s White Paper on Project Financing is intended to help ASA members understand the importance of the creditworthiness of their potential customers. The white paper addresses industry policies and practices, including a review of relevant clauses in contract documents published by ConsensusDocs and the American Institute of Architects.

The ASA Addendum to Subcontract, which is one of the documents in the ASA Subcontract Documents Suite, includes a provision that clarifies the contractor’s obligation to provide disclosures to the subcontractor as a condition precedent to the subcontractor’s performance. The white paper also provides tips on protecting your business, including arguments to make to the prime contractor and how to get information on project financing. The ASA White Paper on Project Financing is available under “Contracts and Project Management” in the Member Resources section of the ASA Web site.

 

OSHA Web Site Lists Trainers for 10- and 30-Hour Safety Training

The Occupational Safety and Health Administration’s Web site now lists Agency-authorized trainers who conduct 10- and 30-hour Outreach Training classes in construction, general industry, maritime or disaster site work. Under the Occupational Safety and Health Act of 1970, employers are responsible for providing a safe and healthful workplace. Training in the safe way for workers to do their jobs well is an investment that will pay back over and over again in fewer injuries and illnesses, better morale, lower insurance premiums and more. The 10-hour training program is intended to provide an entry level construction worker’s general awareness on recognizing and preventing hazards on a construction site. The 30-hour program provides additional training on specific hazards of the job. OSHA also provides other information on employers’ training requirements and offers free resources including publications, videos and other assistance to help employers to protect employees from injuries and illnesses.

 

Help ASA Advocate for Subcontractors in the Courts

While ASA and its chapters represent subcontractor interests before legislative and executive bodies at all levels of government, all too often the Association finds that the courts interpret the laws and regulations approved by these other government bodies. That means ASA also must muster the financial resources to represent subcontractor interests in the courts on issues like contingent payment, mechanic’s liens, indemnity, insurance coverage, and no damage for delay. Fortunately, ASA can tap its Subcontractors Legal Defense Fund and the Foundation of ASA’s Subcontractors Legal Research Fund to finance its briefs on important court cases. These two funds finance ASA’s advocacy on behalf of subcontractors before courts across the country. Both are funded entirely by voluntary contributions that are earmarked for precedent-setting cases where subcontractor rights are at stake. ASA can’t continue its work in support of subcontractors unless it has the funds to pay for participation in the court cases that matter most to subcontractors.  With the help of ASA members, ASA can marshal the financial resources needed to invest in precedent-setting litigation to establish subcontractor rights. You can make your contribution through the ASA online store. For more information, visit the ASA SLDF Web site at www.sldf.net.

Legally Speaking: Know the Basics of Mediation, Arbitration and Litigation

August 2018

by Timothy Woolford, Esq., Woolford Kanfer Law, P.C.

Dispute resolution provisions in subcontracts should not be overlooked. They are every bit as important as the payment terms, change order procedures and schedule provisions. All subcontractors must understand the important differences between the most common forms of dispute resolution—mediation, arbitration and litigation. If you sign a subcontract containing onerous dispute resolution provisions or procedures, it can be extremely difficult and expensive to enforce your rights.

Arbitration and litigation are both binding forms of dispute resolution. Decisions constitute final and enforceable rulings on the disputed issues. Mediation, on the other hand, is non‑binding and is essentially a formalized settlement meeting.

Mediation

Mediation involves a third-party (the mediator) who acts as a facilitator between the parties. The mediator does not decide which side’s position is correct. The mediator does not make a ruling or render a decision. The mediator’s job is to evaluate each party’s position, to point out the strengths and weaknesses in each party’s position and to try to get the parties to a negotiated resolution or settlement agreement. There are no witnesses who give testimony at a mediation and no exhibits introduced. It is not a hearing. However, a party to a mediation is encouraged to back up its arguments with project records and other evidence. This is usually presented in a mediation statement submitted to the mediator before the mediation conference. It can also be presented at the mediation conference. The point is to try and demonstrate that your position has merit so that your opponent believes it is best to settle out of court. Since mediation is an attempt to reach a settlement, nothing said during the mediation is admissible in court.

Mediation is not binding. Either party can walk away from the mediation process at any time. Mediations are often administered by the American Arbitration Association. Such mediations are usually held 60 to 90 days after the demand is filed, although it can vary depending on the complexity of the issues, the number of parties to the mediation and the schedules of the participants and the mediator. Many subcontracts state that mediation is a condition precedent to the next step of the dispute resolution process. This means that the parties must try to resolve the dispute through mediation before moving on to the next step in the dispute resolution process, usually litigation in court or arbitration. If the subcontract requires you to mediate before you can get to court or to arbitration, you may want to invoke mediation sooner rather than later since it will take at least 60 to 90 days (and perhaps longer) to complete the mediation process. Mediation can be expensive because the mediator has to be paid (usually in advance) and you are well-advised to invest in an experienced construction attorney to assist you the mediation statement and selecting the backup to support your positions. If the mediation does not result in settlement of the dispute, you will have invested a lot of time and money only to come away disappointed. However, even an unsuccessful mediation enables you to learn a great deal about your opponent’s position and the backup to support it. It is important to select a mediator that is experienced in construction and who has a solid track record of successfully bringing parties together. Without a good mediator who is willing to immerse himself or herself into the details of the disputed issues, the chances of reaching a settlement are diminished. Successful mediations often involve significant concessions or compromise by all parties.

Arbitration

Arbitration is an alternative to court in which the parties appoint a third party to decide their dispute. The arbitrator’s ruling is binding and enforceable by courts. Unlike a mediator, the arbitrator hears actual testimony from witnesses (which can include experts) and reviews exhibits. The arbitrator analyzes and weighs the impact of the evidence submitted and makes a binding ruling at the conclusion of the arbitration hearing. It is similar to presenting a case in court, but less formal. Arbitrators are not bound by the strict rules of evidence in the same way that judges in court are. There are very few grounds upon which to appeal an arbitrator’s ruling, so if a party believes the arbitrator made a mistake in his or her reasoning or ruling, or did not follow the law, it is almost impossible to overturn the ruling. Arbitrators often decide the case based on what they believe is fair and are not as constrained by legal precedents as are judges.

Some companies prefer arbitration of disputes because arbitration is less formal, usually moves much faster than a lawsuit in court and can be less expensive. An arbitration hearing is often conducted much more quickly than a trial in court. Getting a case to trial in court can take years. Arbitration, on the other hand, is usually completed in a matter of months (although it can vary depending on complexity, schedules and the amount of pre-hearing discovery permitted by the arbitrator). Because arbitration moves quickly, it can provide leverage to subcontractors pursuing payment from the general contractor. The customer cannot hide behind the sometimes cumbersome procedures inherent in the court system which often delay the trial and drive up legal expenses.

In this author’s experience, arbitration is almost always cheaper because it is less formal, expensive discovery processes are limited, and there is less paperwork that the lawyers have to prepare and file. In recent years, however, some participants have complained that arbitration hearings drag on as the arbitrator(s) sometimes bend over backwards to let each side present all evidence without limitation (which often results in duplication of evidence and unnecessary redundancy). Another knock on arbitration is that it can be expensive as the arbitrator is usually an experienced (but expensive) lawyer, architect or engineer, whose hourly fees, travel costs, etc., must be paid by the parties in advance. Exceptionally complex arbitration cases may even require multiple arbitrators. On the plus side, though, experienced arbitrators usually understand the complex construction issues that are at the center of most disputes. To many judges in the court system, the issues in complex construction disputes are completely foreign to them.

Litigation

Many subcontracts require all disputes to be resolved by litigation in court, rather than by arbitration. Litigation has been criticized because it can be expensive and lawsuits can drag on for years. Litigation often entails expensive pre-trial discovery, such as production of documents by the parties, subpoenas to third parties and depositions. Many subcontracts require litigation because the customer believes that it will be more costly and time-consuming for the subcontractor to pursue its claim. Many believe the subcontractor will eventually become frustrated with the time and expense of litigating a dispute through the slow-moving court system. Eventually, some subcontractors will either give up or settle the claim for pennies on the dollar. Also, judges and juries often have little or no expertise with complex construction issues. Few understand scheduling, scope issues, RFIs, shop drawings, payment applications, plans and specifications and other construction concepts that are often involved in construction disputes. On the other hand, if your position is not unduly complicated and will appeal to ordinary people (such as where you are not paid without any apparent justification), a jury of your peers may be more likely to award you a full recovery, plus attorney fees, interest and penalties (if permitted in your jurisdiction).

Juries like to pick winners and losers in construction disputes. Arbitrators, on the other hand, are less likely to be offended by the behavior of one side or the other, and do not usually award a full recovery to either side. Arbitrators have a reputation for “splitting the baby” (although that has not been this author’s experience in several dozen arbitrations). Court decisions can be appealed on many more grounds than can arbitration awards, but the appeals can be costly and time-consuming. Finally, beware of subcontract provisions requiring disputes to be resolved in the courts of an inconvenient location. If you must travel to an inconvenient location to litigate a dispute, it can result in significant legal costs. (See also ASA’s Anti-Forum-Selection Clauses in the 50 States)

In summary, every company should consider the types of disputes it is most likely to encounter (or has encountered in the past). If you are a company that is often fighting to be paid, immediate access to binding arbitration may be best because it eliminates the time and expense of mediation and allows you to apply immediate pressure on your customer. During contract negotiation, every subcontractor should carefully consider all aspects of the project, the contract and the key parties and decide what forms of dispute resolution makes the most sense. It is recommended that you consult with experienced construction counsel to decide what is best and to avoid agreeing to a process that will make it difficult to enforce your rights.

Timothy Woolford, Woolford Law, P.C., is a construction attorney in Pennsylvania that represents subcontractors and other construction professionals. He is also an adjunct professor of law at the Penn State Law School where he teaches construction law to second- and third-year law students. He can be reached at (717) 290-1190 or twoolford@woolfordlaw.com.

Distracted Driving—Create a Successful Prevention Program

Fleet Managers and Business Owners Have the Responsibility to Reverse Current Trends

August 2018

by David Galbraith, MS, CSP, AIM, Amerisure Insurance Company

As summer comes to a close, not only does the weather change, the roads do, too. Schools open their doors for another year of learning. This means more children are walking on or near streets, waiting at bus stops and exiting vehicles in heavy traffic areas. Many young adults are driving for the first time—and traffic volumes increase in residential and commercial areas—as parents drive children to school, college students commute to universities and after-school activities increase.

The increased activity level of many communities—combined with the national distracted driving epidemic—create an environment prone to accidents. In fact, more children are hit by cars near schools than any other location, according to the National Center for Safe Routes to School. The same organization also discovered that 33 percent of youth pedestrian crashes are caused by children darting out into the road.

Just like individuals, fleet drivers are at a greater risk for a distracted driving accident during the back-to-school season. Taking steps to track and enforce driver safety can effectively reduce distracted driving accidents during this crucial time.

What Is Distracted Driving?

Many people view distracted driving as a cellphone or handheld device problem. While the issue has grown exponentially since the advent of the cellphone, distracted driving existed prior to this innovation.

There are three main components that contribute to distracted driving:

  1. Visual distractions—any activity that causes the driver to take his or her eyes off the road. This can be reading a map, dialing a phone number, texting, looking in the glovebox, reading a billboard, etc.
  2. Manual distractions—any activity that causes the driver to remove his or her hands from the steering wheel. This type of distraction can include eating, drinking, reading, grooming, adjusting the radio, etc.
  3. Cognitive distractions—any activity that causes the driver to lose focus. The driver may be thinking about his or her work, stress, family issues or simply daydreaming.

Often, distracted driving does not take one form—it can include any combination of the above. For instance, talking with a passenger can be visual (the driver turns his or her head) and cognitive (the driver is focused on the conversation instead of the road).

An Alarming Problem

The most recent distracted driving statistics paint a bleak picture of an increasing concern for American drivers. Today, drivers are six times more likely to be involved in a distracted driving crash than a drunk driving accident.

Even more alarming, distracted driving is the leading cause of workplace death. Twenty percent of commercial fleet vehicles are involved in a crash annually. Of these crashes, one-fourth involves the use of cellphones.

On-the-job crashes create a myriad of problems for those involved. The efficiency of the workforce is compromised when vehicles need to be repaired. Moreover, employees who are injured in a crash may require recovery time, which decreases the size of the team and threatens the completion of projects according to schedule. The average cost for an on-the-job crash is staggering:

Property damage only—$6,000

Non-fatal injury—$65,000

Fatality—$670,000

A Responsibility to Change

As distracted driving exposures and losses continue to increase, fleet managers and business owners have a responsibility to reverse recent distracted driving trends. The reversal is critical to the safety of employees, the general public and the financial stability of the commercial automobile market. Most commercial fleet managers have felt the financial impact associated with the rising cost of insurance, vehicle repairs, loss of use, liability expenses and worker injuries.

The most effective way to combat distracted driving is to change the behavior of commercial drivers. Targeted behavioral change programs must include all employees who operate company vehicles and/or personal vehicles that are being operated for business purposes.

Improving Driver Selection

Driver selection is critical to place safe drivers on the road. Implementing an effective motor vehicle record check program helps ensure that drivers with safe histories are hired, and those with poor records are avoided. MVRs that indicate prior rear-end accidents, regular speeding, reckless driving and/or other distracted driving violations are indicators of future performance.

In addition to MVR checks, online safety behavior assessments can be used to identify the characteristics of a potential driver. The assessments take only minutes to complete and are easy to download or print. Results are immediately available and can be displayed in multiple languages. The assessments measure a potential driver’s critical behaviors that impact safe driving tendencies.

Some insights include:

  • How easily is the driver distracted?
  • How responsible or reckless is the driver?
  • How trainable is the driver?
  • How irritated will the driver become in adverse conditions?
  • How aggressive is the driver?
  • How compliant is the driver with laws and directions?

Combined use of MVR checks and online behavioral assessments can significantly improve the quality of the drivers organizations choose to place on the road.

Developing a Distracted Driver Policy

The second component necessary to effectively reduce distracted driving is a formal distracted driving policy. The policy should contain several critical elements that stress the importance of the program. When creating a distracted driving policy, the author should evaluate his or her authority, accountability and responsibility. An individual that is responsible and accountable must be in charge of the distracted driving program. The individual also must have the authority to implement change and enforce the disciplinary aspects of program violation.

Helpful items to consider when creating a distracted driving policy include:

  • Policy communication plan—the policy must be distributed, discussed, reinforced and signed by all employees. The policy must apply to all employees who operate company owned vehicles and/or personal vehicles for business purposes.
  • Definition of distracted driving—a description of visual, manual and cognitive distractions. The list will not be all inclusive, but will provide guidance for drivers.
  • Cellphone release policy—a signed policy form that gives the employer permission to obtain an employee’s cellphone records if he or she is involved in an accident while operating a company vehicle, or using a personal vehicle for business purposes. Records just prior to an accident can shed light on driver activities leading up to the crash. The cellphone release policy also indicates to employees that the policy is important and will be enforced.
  • Inclusivity of all handheld devices—employees should be made aware that the policy covers the use of all handheld devices (personal and business) while operating a vehicle for business purposes.
  • Inclusivity of all vehicles—the policy must apply to all vehicles operated for business purposes. This includes personal, company owned, rental and lease vehicles.
  • Disciplinary actions—specific progressive disciplinary policies and procedures must be in writing and clearly communicated to all employees. Violations must be fairly and consistently enforced with all employees.

Consistent Monitoring

The success of a distracted driving prevention program is dependent on changing the behavior of drivers. Several tools can be implemented to monitor driving behavior:

  • Accident investigations—a proper investigation will identify the root causes of an accident and be used to determine if distraction was a contributing factor.
  • Telematics—a widely accepted method of electronic vehicle monitoring, in response to driver behaviors. Telematics can identify hard braking, lane wandering and speeding, among many other vehicle responses. These behaviors are typical of distracted driving. Telematics dashboards enable fleet managers to monitor driver performance in real-time.
  • Cell monitoring/blocking—there are numerous, easily downloadable apps that can block/monitor cellphone use while a vehicle is in operation. The app warns the driver when he or she attempts to access a handheld device and in many instances, may block access. Each attempt to use the device is logged and reported in a dashboard.
  • Dash cams—small devices that can be used to monitor and record a driver’s behavior. Dash cam recordings can be used to monitor behavior over a designated period of time, document behavior leading up to an accident or to coach drivers when behavior needs to be altered.

Leading the Way for Safe Driving

The negative societal impacts of distracted driving are widespread. Distracted driving accidents affect individuals, families, businesses and communities. It is not acceptable for commercial businesses to contribute to hazardous roadways—there are too many affordable and effective tools available. Those who refuse to accept the status quo, and actively track and enforce driver safety, experience favorable results. Construction groups that participate in telematics programs generally see a reduction in speed and distracted driving related accidents. Insurance carriers often partner with emerging technology groups to offer services at a discounted cost. Working with their respective insurance carrier or agent, fleet managers can properly educate and monitor drivers—without breaking the bank. As more organizations proactively prevent distracted driving, the commercial sector can lead the charge for safer, distraction-free driving.

David P. Galbraith is the assistant vice president and risk management technical lead for Amerisure Mutual Insurance Company. He is responsible for the identification, research, development and implementation of risk management technology programs, and associated vendor management. He can be reached at (248) 426-7914.

E-Verify and Construction

August 2018

by Julie A. Pace and Heidi Nunn-Gilman, The Cavanagh Law Firm

Since November 1986, the Immigration Reform and Control Act has required that employers verify the identity and employment eligibility for all newly hired employees using the Form I-9. In construction, most companies completed the I-9 in paper form. Even with a fully complete I-9, many undocumented workers were able to obtain employment using false identities. To address this issue, the federal government launched E-Verify.

What Is E-Verify?

E-Verify is an internet-based program administered by the Social Security Administration and the Department of Homeland Security. Employers who are enrolled in E-Verify enter information from the employee’s Form I-9 into the E-Verify system. This information is then compared to information in the SSA and DHS records to verify identity and authorization to work in the United States.

If the information entered from the employee’s Form I-9 does not match the SSA and DHS records, then E-Verify provides a tentative non-confirmation. The employee can challenge the TNC and work with the SSA or DHS to correct the error in their records. If the employee does not challenge the TNC or is unable to resolve the discrepancy that caused the TNC, then E-Verify generates a final non-confirmation, informing the employer that the individual is not authorized to work in the United States.

E-Verify provides employers with a method that they can use, in addition to the Form I-9, to verify an individual’s identity and authorization to work in the United States and provide assurances of compliance. Unfortunately, however, no system is perfect and even the Government’s own reports show that a limited number of individuals can pass E-Verify using false documents. This occurs because people sometimes use documents to work that belong to a real person so that they can pass E-Verify. This situation has resulted in an increase in identity theft for purposes of gaining employment.

Who Is Required to Use E-Verify?

E-Verify is currently voluntary at the federal level, except for companies with federal contracts, who are required to use E-Verify. Additionally, there has been various legislation introduced in Congress that would make E-Verify mandatory nationwide. President Trump also included mandatory E-Verify in his 2019 budget proposal. Therefore, nationwide mandatory E-Verify is closer than ever.

Some states require all employers to use E-Verify, while others require public entities or companies who contract with the state public entities to use E-Verify. Companies should review the state laws in all states in which they operate to ensure that they are in compliance with any state E-Verify requirements.

Employers in states that do not require E-Verify have the option of whether to use E-Verify.

How Does an Employer Use E-Verify?

Employers Must Enroll in E-Verify Online & Agree to an MOU. A company desiring to use E-Verify has to enroll and complete a Memorandum of Understanding online at https://www.e-verify.gov/e-verify-enrollment. In the MOU, employers agree to follow the program requirements, including:

  1. The employer may not submit an inquiry to E-Verify until after an employee is hired and an I-9 has been completed and only for new employees, not for employees hired before the employer enrolled.
  2. The employer must not discriminate against employees based on national origin or citizenship status.
  3. The employer must post notices provided by DHS regarding its participation in E-Verify and must post anti-discrimination notices issued by the DOJ.
  4. The employer may not use E-Verify selectively. If used, it must be used for all new hires at the location using E-Verify.
  5. The employer may not use E-Verify to reverify the employment eligibility of an employee whose original work authorization documents have expired.
  6. The employer must provide the employee copies of the written Further Action Notice, if applicable, and the opportunity to resolve the TNC.
  7. The employer must not take adverse action against an employee while the employee is challenging a TNC, unless the employer obtains knowledge (as defined in 8 C.F.R. § 274a.1(1)) that the employee is not authorized to work in the United States.
  8. The employer must take steps to safeguard the information used for E-Verify and ensure it is not used for any purpose other than employment eligibility verification.

Companies may register to use E-Verify at individual work sites and not use it at the entire company. The central office can perform the employment verification for all sites or each site can perform its own E-Verify process.

Additionally, an employer can outsource employment authorization verification to a third party service provider called an E-Verify Employer Agent. However, if a company outsources its employment verification under E-Verify, it will still be required to sign a Memorandum of Understanding and be assigned a unique number that the service provider will use only for that company.

Employers Enter the Information from the Form I-9 and E-Verify Compares it to the SSA and DHS Records

Employers start the employment verification process in essentially the same way that they would if not using E-Verify; by completing a Form I-9. The I-9 cannot be completed until after a company hires an individual.

E-Verify places one limitation on the I-9. The E-Verify employer may accept a List B document to establish identity only if the List B document contains a picture. However, the employee still gets to choose whether to produce either (1) one List A document or (2) one List B and one List C document, and which document from the list to show, as long as the List B document has a photograph. If the employee presents a Permanent Resident Alien Card, a Form I-766 Employment Authorization Document, a U.S. passport or a U.S. passport card, the MOU requires the employer to copy and maintain a copy of the document to verify the photo against the DHS database.

The SSA first verifies if the name, date of birth, social security number, and citizenship status reported match the SSA’s records. Inquiries regarding non-citizens are routed to the DHS/USCIS to verify the work authorization of the employee. If the information entered matches the SSA and USCIS databases, then no further action is required. The employer is provided an “employment-authorized” confirmation and must retain a record of the confirmation with the Form I-9.

If the SSA or USCIS is unable to verify the information, the employer will receive either an SSA TNC or DHS Tentative TNC. The employer must provide the employee with a written notice entitled “Further Action Notice.” The FAN notifies employees that a tentative non-confirmation has occurred and gives them the option to contest it with DHS or SSA and explains the steps the employee must take to resolve the tentative non-confirmation. The employer must print the notice to review with the employee. Both the employee and the employer must sign the FAN. One signed copy of the notice should be given to the employee and one kept with the individual’s Form I-9.

If the employee is challenging the non-confirmation, the employer is required to select “refer case” and print a second notice called a “Referral Date Confirmation” that contains the date on which the referral is made and the date by which the employee must address the tentative non-confirmation. The employer should keep and provide a copy of the Referral Date Confirmation to the employee and keep one for its files, attached to the employee’s Form I-9. If the employee does not challenge the TNC, then the employer can close terminate the individual’s employment and close the case.

Employees Have Eight Working Days and Government Has 10 Working Days to Resolve Discrepancy

The employee has eight working days after receiving the referral letter from the employer to contact the SSA or DHS to try to resolve the discrepancy. The employee is to keep working during this time. The employer must treat this employee the same as it treats employees who received an automatic work authorization and cannot delay the employee’s start date or training opportunities based on a TNC.

The SSA or DHS has 10 working days to resolve the case after the employer has referred the case. If more time is needed, the employer will receive a “case continuance” notice. The entire procedure is designed to provide a final confirmation or final non-confirmation within 10 business days after the employer enters the information in E-Verify, but this does not always occur. After DHS or SSA finishes it review, it updates the results in E-Verify to be either “employment authorized” or “final nonconfirmation.”

If an employee does not challenge a TNC, the non-confirmation becomes final

After a non-confirmation becomes final, the employer must either terminate the individual’s employment or notify DHS if it continues to employ an employee after receiving a final non-confirmation. An employer is subject to fines of up to $1,500 for each failure to notify the DHS that it continued to employ an individual after a final non-confirmation. If the employer continues to employ an individual after a final non-confirmation, the employer is subject to a rebuttable presumption that it has knowingly employed an unauthorized alien.

What About Selectively Using E-Verify or Taking Adverse Action During a TNC?

Violations of the MOU may lead to legal liability under federal or state law, including Title VII of the Civil Rights Act of 1964 and the non-discrimination provision of the Immigration and Nationality Act. The Department of Justice Civil Rights Division Immigrant and Employee Rights Section enforces the non-discrimination provisions. Employees who believe that a company has used E-Verify in a discriminatory manner may file a complaint with the IER.

An employer could be subject to a discrimination charge if it uses E-Verify as a pre-screening tool to verify work authorization of applicants. It could also be subject to a discrimination charge for failing to provide the employee the notice of TNC and right to challenge the TNC, selectively using E-Verify, using E-Verify to verify work authorization of existing employees or taking adverse action based on a TNC. The IER has published an “E-Verify Employer Do’s and Don’t’s,” available at https://www.justice.gov/sites/default/files/crt/legacy/2014/03/14/e-verifydosanddonts3.pdf.

An employer is prohibited from taking adverse employment action against an employee who is contesting a TNC. The employee should continue to work until receiving a final result in E-Verify. The employer cannot treat the employee who is contesting a TNC any differently than the employee who gets an initial employment authorized result. If the employee is not challenging the non-confirmation, the employer should terminate the individual’s employment or report to DHS it is not terminating the individual’s employment after the non-confirmation.

An employee cannot face any adverse employment consequences based on a TNC. An employer may not delay the employee’s start date, delay training, or otherwise treat an employee with a TNC differently than an employee that received an instant confirmation. An employer cannot speed up an agreed-upon start date based on a confirmation from E-Verify, because this would be disparate treatment of employees based on results from E-Verify. If the employer generally offers training to employees in the first ten days of employment, it must provide the same training to the employee with the TNC. An employer may not discriminate against an employee with a TNC.

Julie A. Pace is a Senior Member with The Cavanagh Law Firm, Phoenix, Ariz. Pace concentrates her practice in the fields of employment law, immigration compliance, OSHA, health care, and construction. She defends claims of sexual harassment, employment discrimination, retaliation, whistleblower, and wrongful discharge, and against charges by the EEOC and ACRD. She handles matters involving OSHA, ICE, OFCCP, DOL, NLRB, Davis-Bacon, FAR, ADA, FMLA, and wage and hour laws, audits and issues. Pace also handles issues involving the Affordable Care Act and addresses the changes and options it presents to companies.  Her Davis-Bacon and prevailing wage practice includes counseling and training on state and federal prevailing wages and benefits requirements, coverage and applicability of prevailing wage laws, coverage exemptions, worker classification and pay issues, addressing wage determinations, wage surveys, and representation of employers before the Department of Labor Wage and Hour Division and similar state agencies. She can be reached at (602) 322-4046 or jpace@cavanaghlaw.com. Heidi Nunn-Gilman is a Senior Member in the Employment, Labor, OSHA, and Immigration Department with The Cavanagh Law Firm, Phoenix, Ariz. Nunn-Gilman’s practice focuses on human resource counseling and employment litigation.  She has extensive experience handling employment immigration compliance strategies, including I-9s, E-verify, ICE and worksite investigations and enforcement under the Legal Arizona Workers Act and similar state and local laws. She regularly advises clients on matters relating to labor and employment law, federal contractor compliance (including Affirmative Action, Davis-Bacon, and federal contractor E-Verify requirements), ADA, Title VII, FLSA, NLRB, FMLA, leaves, drug and alcohol, union matters, wrongful discharge, wage and hour laws for both public and private employers, employee handbooks, confidentiality and non-compete agreements, and executive agreements. She can be reached at (602) 322-4080 or hnunngilman@cavanaghlaw.com.

CASE STUDY: Beware the New Test in California—The ABCs of Independent Contractors

August 2018

by Roger Mason, Esq., and Rachael E. Brown, Esq., Sweeney, Mason, Wilson & Bosomworth

On April 30, 2018, the California Supreme Court issued a seminal decision in Dynamex Operations West, Inc. v. Superior Court adopting a new legal standard for determining whether a worker is an employee or an independent contractor. In addition to changing the definition of who is considered an employee, this decision clearly imposes an affirmative burden on the hiring entity to prove that independent contractors are properly classified as such.

Under the Court’s new “ABC” test, a worker is presumptively considered an employee under the California Wage Orders unless the putative employer can establish each of the following three elements:

  1. The worker is free from the direction and control of the hirer in connection with the performance of the work, both under the contract for the work and in fact;
  2. The worker performs work that is outside the usual course of the hiring entity’s business; and
  3. The worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.

Prong A is akin to the common law standard which examines whether the hiring entity has the right to control the manner and means of accomplishing the work at issue. This element requires the company to prove that the worker is free of the control a company typically exercises over its employees.

The most radical prong is Prong B—that the work performed is different and distinct than the company’s usual business. The court uses the example of a retail store that hires a plumber to repair a leak or an electrician to install a new electrical line. Such services are not part of the store’s usual business and as a result, the store would be able to demonstrate independent contractor status. By contrast, a clothing manufacturer that hires a work-at-home seamstress, or a bakery that hires a cake decorator, would typically not be able to make such a demonstration, since the work is part of the company’s usual business operations and accordingly, the worker’s role is more akin to that of an employee than that of an independent contractor.

Prong C seeks to identify workers who have created their own business independent from the business of the putative employer. This can be established by things such as the worker’s “incorporation, licensure, advertisements, [or] routine offerings to provide the services of the independent business to the public or to a number of potential customers.” If a worker has independently made the decision to go into business for themselves, they will likely satisfy this third prong. If, on the other hand, they are “simply designated as an independent contractor by unilateral action of a hiring entity,” there is significant risk the worker will be deemed an employee.

Misclassification of employees as independent contractors can result in significant liability for companies. Labor Code section 226.8 provides for penalties as high as $25,000 per violation. In addition, payroll tax, workers’ compensation premiums, overtime, and unemployment benefits are implicated. Prior to Dynamex, determining whether or not a worker was properly classified as independent contractor was particularly challenging, as a myriad of factors were examined, each afforded varying weight depending on the applicable analytical framework being used to evaluate the classification. Companies should immediately conduct a thorough evaluation of all workers currently classified as independent contractors to determine whether they are properly classified under the new legal standard.

You MUST be aware of this new law and its potential consequences on classification.  If you have any specific questions or would like more details, please do not hesitate to call our office and one of our experienced employment law attorneys will be happy to assist you.

Roger M. Mason is a shareholder with Sweeney, Mason, Wilson & Bosomworth, Los Gatos, Calif.  Since 1982, Mason has focused on labor and employment law, both transactional and litigation.  He has successfully represented businesses in multiple aspects of employment and labor law issues through negotiations, strikes. pickets, disputes, mediations, arbitrations and trials. He can be reached at (408) 356-3000 or rmason@smwb.com. Rachael Brown assists her clients in a variety of litigation matters, focusing primarily on employment disputes. She can be reached at (408) 356-3000 or REB@smwb.com.