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Andrews Myers
We Mean Business in Texas
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Construction
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A Cautionary Tale for Future Design-Build Work
by Carson Fisk   Design-build as a project delivery method has a number of advantages, including a single source of accountability for the owner, enhanced communication among project participants as they work together actively and collaboratively, and faster project completion times. While there are disadvantages with the design-build approach, with the recent passage of Senate Bill 1928 by the Texas Legislature—signed into law by the Governor—there may be some additional challenges faced by design-builders operating in Texas in the future.
 
Previously, “the plaintiff” was required to obtain a certificate of merit—a pre-suit affidavit signed by an appropriately qualified person—in order to pursue a claim arising out of the provision of professional services against an architect, a professional engineer, a professional land surveyor, a landscape architect, or their respective firms. In 2014, the Texas Supreme Court held that a third-party plaintiff need not obtain a certificate of merit as it is not “the plaintiff” and, in any event, requiring such would be illogical. Specifically, in Jaster v. Comet II Construction Inc., the Texas Supreme Court was faced with determining whether a certificate of merit was required of a third-party claimant when asserting claims against an engineer. One argument advanced by the engineer was that “construing section 150.002 [of the Texas Civil Practice and Remedies Code] to allow a party to bring third-party claims or cross-claims without filing a certificate of merit when a certificate of merit would be required if the same party filed the same claim as a separate suit achieves ‘an absurd result’ and ‘thwarts’ the purpose of the statute,” leading to the conclusion that the plain meaning of the statute should not be enforced. In holding that a certificate of merit was not required in the context of a third-party claim, the Texas Supreme Court noted as follows... Read more.
Factoring - Be Careful to Avoid Double Liability for the Same Labor or Materials
by Bill Davidson  A “factor” is a company that purchases the invoices of typically a subcontractor, usually at a discounted rate, in order for the subcontractor to obtain financing or improve cash flow.  This matters because if the general contractor is not careful, they could unfortunately end up being required to pay the same invoice twice. Once to the subcontractor, and again to the factor.
 
There appears to be an increasing frequency of typically smaller subcontractors turning to factoring companies – businesses that purchase the receivables of such subcontractors at a discounted price, in effect providing interim financing based on the strength of the account debtor (the upstream general contractor) rather than the entity due the payment. With the large volume of work available to subcontractors, their businesses are growing. When you take into account retainage, their need to stay current on payment to their material vendors and labor, and the time lag in the draw process, the subcontractors may be rich in accounts receivables but poor in cash flow. So, they sell their invoices/receivables to get fast cash.  While the subcontract may have an anti-assignment provision, section 9.406 of the Texas Business and Commerce Code essentially says any contract provision that prohibits the assignment of an account is ineffective. As such, do not rely on the subcontract and ignore a notice of sale or assignment.  Read more...
Roofing Contractors Beware Negotiating Insurance Claims
by Andrew Scott  Consider this scenario: You are a roofing contractor who is hired by an owner to re-roof its building after suffering hail or wind damage. As normal practice, you offer to negotiate the claim with the insurance company on their behalf. The insurance company subsequently pays you or the owner the negotiated amount. You perform the work, and the owner is happy because they received a new roof and didn’t have to hassle with the insurance company. All is seemingly well.
 
The problem with the above scenario is that Texas law requires a person acting on behalf of an insured who negotiates a claim under any policy of insurance to be a licensed public insurance adjuster. Yet in the roofing context, even a roofing contractor who is a licensed public insurance adjuster is prohibited from handling claims on behalf of an insured owner.
 
Since 2013, multiple Texas courts have reaffirmed the blanket prohibition of roofing contractors from handling owners’ roofing claims with insurance companies. The Texas Department of Insurance has even issued cease and desist orders to a few roofing contractors engaging in this type of activity.  Read more...

 
Real Estate
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Are the Sale of Mitigation Credits a New Texas Boom?
by Ryan Schmidt   By definition mitigation banking is: “the restoration, creation, enhancement, or preservation of a wetland, stream or other habitat area undertaken expressly for the purpose of compensating for unavoidable resource losses in advance of development actions, when such compensation cannot be achieved at the development site or would not be as environmentally beneficial.”
 
Mitigation banking was largely created to give land developers a way to offset the impacts of their land development.  When a developer is impacting certain natural resources, such as streams, rivers, wetlands, or habitat for an endangered species, they must obtain a permit from a federal agency, either the U.S. Army Corps of Engineers or the U.S. Fish & Wildlife Service. The developer may obtain the permit by performing a number of actions in order to compensate for the adverse impact.  One compensatory act is to purchase credits from a mitigation bank. The need for these credits in turn creates a market for private lands conservation.
 
Mitigation bankers and their partners restore, enhance, create and preserve water resources or other significant natural areas and assume responsibility for their long-term maintenance, earning mitigation credits, recognized by the regulatory agencies, for their efforts.  Units of restored, created, enhanced or preserved land are expressed as “credits,” which may subsequently be withdrawn to offset “debits” incurred at a project development site. Read more...
Jason Walker Wins NACM Award

Congratulations to shareholder and head of construction litigation, Jason Walker, for being recognized as the 2018 Credit Executive of the Year for Texas Statewide Construction Credit Group!
Employment
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EEO-1 Component 2 Portal is Open
by Tony Stergio   The EEOC Portal for filing 2017 and 2018 EEO-1 Component 2 Pay Data is now open and available. A link to the portal can be found here.  As you may recall, all employers with 100 or more employees are currently required to submit a 2017 and 2018 EEO-1 Component 2 report to the EEOC by September 30, 2019.  This report requires employers to compile and submit compensation data broken down by sex, race/ethnicity, job category, and compensation band.  The information collected is in two matrices: one covers hours worked, the other number of employees.  You can find sample forms here. Employer data can be directly uploaded from an employer-maintained report provided it is in the correct format. 
 
A frequently asked questions section has been set up by the EEOC, and can be found here.
 
If employers have specific questions concerning their Component 2 reports, we are available and ready to assist.
Update on Paid Time Off Ordinances 
by Elaine Howard   Three Texas cities have enacted paid time off ordinances – Austin, San Antonio and Dallas – and as of Tuesday, all are now facing significant legal challenges.
 
Although there are some minor differences between them, all of these ordinances would require employers with more than 5 employees to provide employees who perform at least 80 hours of work within those cities with one hour of paid leave for every 30 hours worked in that city, up to 64 hours per year for employers of more than 15 employees.  Employers have recordkeeping requirements to track accrual of hours and to provide employees with reports of accrued and used paid time off.  One of the complexities of these ordinances is that they do not pertain only to employees that work out of an office or facility in the city – any worker on any project in one of these cities can get swept up into the requirements, even if only temporarily working in Austin, San Antonio or Dallas.
 
Austin was the first city to pass this ordinance, so its ordinance was the first to be met with a legal challenge.  Andrews Myers filed an Amicus Brief describing the challenges this ordinance presents in the construction industry.  In late 2018, a Texas appellate court struck down the ordinance based on a finding that the requirements conflicted with the Texas minimum wage law.  This matter is now pending before the Texas Supreme Court.  Austin’s PTO ordinance will not go into effect without a decision from the Texas Supreme Court revising the lower court’s decision.  Read more...
           

8/7 Ben Westcott provides a State of Texas Legislative Update to ABC  Houston                         
Click here to register!
8/9 AM Sponsors the AGC CLC Golf Tournament
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