HPSS Construction Law Update

October, 2022

HPSS Construction Law News

GET FIRST-HAND LEGAL INSIGHT ON THE CONSTRUCTION INDUSTRY

The Department of Labor Proposes New Rule on the Misclassification Issue

On October 13, 2022, the Department of Labor (DOL) published its Notice of Proposed Rulemaking, stating its objective is, “to help employers and workers determine whether a worker is an employee or an independent contractor under the Fair Labor Standards Act.” This issue is commonly referred to in the construction industry as the misclassification issue.

According to the DOL, the proposed rule seeks to do the following:

Align the department’s approach with courts’ FLSA interpretation and the economic reality test.
Restore the multifactor, totality-of-the-circumstances analysis to determine whether a worker is an employee or an independent contractor under the FLSA.
Ensure that all factors are analyzed without assigning a predetermined weight to a particular factor or set of factors.
Revert to the longstanding interpretation of the economic reality factors. These factors include the investment, control and opportunity for profit or loss factors. The integral factor, which considers whether the work is integral to the employer’s business, is also included.
Assist with the proper classification of employees and independent contractors under the FLSA.
Rescind the 2021 Independent Contractor Rule.

Undoubtedly, by rescinding the 2021 rule in which the core factors of control over the work and opportunity for profit or loss carried greater weight among other factors, application of the proposed rule will tip the scales in favor of finding that a worker is an employee, rather than an independent contractor. This is particularly true in those instances where the worker is economically dependent on the employer and where the worker is performing work integral to the employer’s business.

Employers in the construction industry are on notice. Indeed, Principal Deputy Administration for the DOL Jessica Looman has stated the construction industry is one of the industries where the DOL has put emphasis on protecting “low-wage vulnerable workers” from misclassification as independent contractors. Notably, the Associated Builders and Contractors has publicly opposed the proposed rule.

Interested parties are encouraged to review the proposed rule and submit comments. Comments can be submitted via this link through November 28, 2022.

EEOC Releases Updated “Know Your Rights” Poster

On October 19, 2022, the U.S. Equal Employment Opportunity Commission (“EEOC”) released an updated “Know Your Rights: Workplace Discrimination is Illegal” poster. This is the poster that summarizes the laws that the EEOC enforces in regard to job discrimination (think of the laminated poster on the wall in the office breakroom). By law, covered employers must prominently display the poster in their workplace. Information on the new poster, and to obtain a copy for your workplace, is available through the following EEOC website, which can be accessed here.

The new poster is available in English and Spanish and includes several updates, including:

· Using straightforward language and bullet point formatting.

· Adding that harassment is a prohibited form of discrimination.

· Clarifying that sex discrimination includes discrimination based on

pregnancy, sexual orientation, or gender identity.

· Adding a QR code for employers to use to access the EEOC’s website.

· Providing information about equal pay discrimination for federal

contractors.

In addition to the physical poster, the EEOC encourages covered employers to post a digital version of the poster on their websites and states that the electronic posting supplements the physical posting requirement. The EEOC goes on to note that in some situations, the electronic posting may be the only posting (for employers with remote workers). The digital version is available on the EEOC website via the link above.

The EEOC has not announced a deadline for employers to replace their old posters with the new version that was released on October 19, but employers should go ahead and post of the new version as covered employers are subject to fines for noncompliance.

If you have any questions regarding the EEOC’s new “Know Your Rights” poster and your posting obligations, please call or email Ben Lowenthal. You can e-mail Ben by clicking here, or you can reach him directly at (404) 469-9177.

Use of the Current Form I-9 Extended

The current Form I-9 includes, in the upper right hand corner of the Form, an expiration date of October 31, 2022. In anticipation of the expiration date, and without a new Form I-9 ready for publication, the Department of Homeland Security (DHS) announced on October 12 that employers should continue to use the current Form after its expiration date. Employers are to continue to use the current Form after its expiration date until further notice.

DHS also announced that when a new version of the Form I-9 is available, a Federal Register notice will be published.

We will continue to provide you with updates concerning use of the Form I-9. When a new version is available, we will provide access to it through our E-blast. In the meantime, if you have any questions regarding proper completion of the Form I-9, please contact Philip Siegel. You can e-mail Philip by clicking here, or you can call him directly at (404) 469-9197.

OSHA Implements Changes to its Severe Violator Enforcement Program

On September 15, OSHA announced significant changes, which it refers to as “improvements”, to its Severe Violation Enforcement Program (SVEP). The changes, discussed below, will have very real consequences for employers in the construction industry.

Included among the changes implemented to the SVEP by OSHA is expanding the program criteria to include all hazards and OSHA standards. Prior to these changes, program criteria was limited to cases involving fatalities, three or more hospitalizations, high-emphasis hazards, and the potential release of a highly hazardous chemical, and enforcement actions classified as egregious.

Opening the program to all standards will increase the net of construction employers to be put into the program. Indeed, employers will be placed in the program if OSHA finds at least two willful or repeated violations or issues failure-to-abate notices based on the presence of high gravity, serious violations. Because most construction violations involve high gravity, serious violations, construction employers face an increased likelihood of being placed into the program.

Follow-up or referral inspections will now be conducted within one year, but no longer than two years, after the final order, under changes made to the SVEP by OSHA. Before the changes, there was no required time frame in which OSHA would conduct a follow-up inspection after the final order.

The SVEP now also provides that the potential for removal from the program begins three years after the date of verification that all SVEP-related hazards have been abated. Before the change, the potential for removal ran from the date a final order was issued.

OSHA did make a change to the SVEP that allows employers to reduce the amount of time they are in the program to two years if they consent to an enhanced settlement agreement that involves implementing a safety and health management system meeting OSHA’s recommendations.

Notably, employers are placed in the SVEP before their case is heard before an administrative law judge. OSHA places qualifying employers into its SVEP based on the allegations made in the Citation and Notification of Penalty. If you find yourself in OSHA's sights as it concerns the SVEP, please reach out to Philip Siegel. You can e-mail Philip by clicking here, or you can reach him directly at (404) 469-9197.

Virginia Bans Paid-if-Paid Clauses

Paid-if-paid clauses are ubiquitous in construction contracts throughout the country. A Pay-if-paid clause makes receipt of payment by a general contractor from an owner a condition precedent to the general contractor’s obligation to pay the subcontractor. In short, pay-if-paid clauses transfer the risk of nonpayment by the owner from the general or higher-tier contractor to a lower-tier subcontractor. Whether a particular paid-if-paid clause will be enforced varies from one jurisdiction to the next. Indeed, Georgia, Florida, Maryland, Colorado, Illinois, and Michigan have ruled that paid-if-paid clauses are valid and almost always enforceable. Other states like California, Delaware, New York, South Carolina, North Carolina, and Wisconsin have ruled paid-if-paid clauses to be against public policy and, therefore, invalid.

Recently, Virginia joined the ranks of states that have outlawed paid-if-paid provisions. In its 2022 legislative session, the Virginia General Assembly passed Senate Bill 550 (later signed into law by Virginia Governor Glenn Youngkin) changing Virginia law as it relates to payment of lower-tier subcontractors. Specifically, Senate Bill 550 amends Sections 2.2-4354 and 11-4.6 of the Virginia Code to prohibit pay-if-paid provisions while requiring prompt payment clauses in public and private construction contracts. In other words, stating January 1, 2023, contractors may not require payment by the owner as a condition to paying lower-tier subcontractors. In private construction contracts, however, a contractor is permitted to enforce a pay-if-paid clause if the owner is declared insolvent or a debtor in bankruptcy. Further, contractors will remain entitled to withhold payment for any nonconforming work.

Additionally, Senate Bill 550 establishes a fixed deadline for payment of invoices on private construction contracts. Starting January 1, 2023, project owners will have 60 days upon receipt of an invoice to pay a general contractor following satisfactory completion of the portion of the work for which the contractor has invoiced. On the other hand, contractors and subcontractors on private projects must pay lower-tier subcontractors by the earlier of (i) 60 days after receiving an invoice or (ii) seven days after receiving payment from the owner or higher-tier contractor for the work performed by the subcontractor pursuant to the terms of the contract.

If you have any questions about Virginia Senate Bill 550, or if you are looking to negotiate around a paid-if-paid provision in a contract, please contact Juan Rodriguez. You can e-mail Juan by clicking here, or contact him directly at (404- 469-9183.

H-2B Visa Cap Reached for First Half of 2023

USCIS has announced that petitions for H-2B visas for workers with an employment date stating before April 1, 2023 have reached the cap mandated by Congress. Businesses use the H-2B visa program to employ foreign workers for temporary non-agricultural jobs. Under current law, the H-2B cap is set at 66,000 per fiscal year, with 33,000 allocated for workers beginning employment between October 1 and March 31. With this announcement, employers cannot utilize the H-2B program for any additional workers starting employment before April 1, 2023, beyond any employees who have already received a visa.

The next window for H-2B visas relates to workers starting employment between April 1, 2023 and September 30, 2023. USCIS will also continue to accept petitions for H-2B visa to the extent they are exempt for the congressionally mandated cap. The most relevant exemption for contractors relates to current H-2B workers in the U.S. who extend their stay, change employers, or change the terms and conditions of their employment.

If you have any questions about the caps related to the number of visas granted or the H-2B visa process generally, please contact Scott Calhoun. You can e-mail Scott by clicking here, or you can reach him directly at (404) 469-9195.