Posts Tagged ‘President Obama’

Why An US Department Of Labor Investigation Can Ruin Your Year

Over the past few years, state and federal construction projects have been the bread and butter for the struggling construction industry. These projects are largely prevailing wage projects, and unfortunately, many contractors and subcontractors found themselves trying to understand compliance with these regulations for the first time.

At the same time, federal budget challenges and extra funding from the Obama Administration put more eyes at the US Department of Labor on prevailing wage violations.

The result is that many folks found themselves in the middle of a prevailing wage investigation, and learning about how frustrating and unfair these investigations can be.

This post gives you a glimpse at how these investigations work, and why an investigation – even without underlying wrongdoing – can really ruin the year (or more) for your company.

The Investigation Is Confidential

The first thing you’ll learn about a US Department of Labor Prevailing Wage investigation is that it is confidential. You will probably learn this at your first sit down with the investigator, as he or she explains to you all of the alleged violations. You’ll likely ask to see what the investigator is using to reach his or her conclusions, and that’s when you’ll be hit with the bombshell: you can’t see a thing.

The Department of Labor typically begins an investigation into a company or project after receiving a complaint. Any requests to see this complaint will be denied, as it is confidential to protect the rights of the complainant and to encourage complaints.

Then, the department will request you provide wage documentation and certified payroll, and will begin to interview laborers on the project. If you ask the department to identify who they interviewed or what was discussed, all of this will not be disclosed, as it is confidential.

The Complaint Against You Can Be Completely Meritless And Still Cause Problems

I was recently involved in a prevailing wage investigation where the Department of Labor was requiring a construction company to pay back wages on employees whose names were not even fully known, and who the department had no contact information on whatsoever. These partially named parties even appeared to be relatives of other laborers on the project.

So, for example, there would be an Alex Rodriquez on the project, and then a list of two or three other laborers like B. Rodriquez, C. Rodriquez and D. Rodriquez, all without any address or contact information, and with the department claiming these laborers were entitled to 10k – 20k each in back wages!

In other instances, I’ve seen the department of labor find laborers were working 60-80 hours per week when no one on the job was working those hours, or finding that folks who performed lower classified work (i.e. pure laborers) getting classified as plumbers or electricians.

And while these allegations may be completely meritless they are impossible to fight at the investigation level because the investigations are under seal, and an investigation you can’t see is an investigation you can’t fight.

So What Are Your Options?

This whole thing may seem a bit unfair, and from my perspective, it is unfair. Really unfair. However, courts have sided with these type of “under seal” investigations in the past, ruling that they protect the integrity of the investigation and the interests of complaints.

The reason these investigations have passed constitutional muster in the past is because a company can appeal the department’s findings to a federal court. Upon filing an appeal, the investigation materials become more of an open book.

This sounds fair from a theoretical viewpoint, it has practical challenges in reality.

First, the cost of appealing an investigation is quite high, as you will be hiring an attorney and paying a retainer of at least $10k – $20k.

Second, and more importantly, you’ll have lots of pressure on other folks on the construction project to resolve the issue. If you don’t resolve it, the investigator will go up the contact chain, all the way to the owner, with all parties being required to pay the back wages. This results in your money getting held up, and making it very difficult for you to continue on with work or a legal fight.

So, what do you do?

You can pay the back charges and try to learn from the experience, or you can lawyer up and fight the investigation findings tooth and nail…fight the good fight.

From a prevention standpoint, you’ll want to keep meticulous records and be extra careful to comply with wage determinations on these projects. Hire a construction attorney to advise you on how to comply with these requirements, and follow the regulations to the letter, keeping records you can use to prove your case in the event of an investigation…and, hope for a little bit of luck.

Posted in:     Prevailing Wages, Regulations  /  Tags: ,   /   Leave a comment

Is Obama’s “Better Buildings” Initiative Real or Rhetoric?

Earlier this month President Obama unveiled an initiative to make buildings more energy efficient in America. The Wall Street Journal simply summarized the President’s goals and rationale with the following:

[The program will provide] tax breaks and other proposal aimed at getting commerical-building owners to retrofit their structures to be more energy efficient, an initiate [the President] hopes to fund with higher taxes on oil and gas companies.

President Obama introduced the program with this statement:

[O]ur homes and businesses consume 40 percent of the energy we use…So the good news is we can change all that. Making our buildings more energy-efficient is one of the fastest, easiset and cheapest ways to save money, combat pollution and create jobs right herein the United States of America.

The plan for Better Buildings is outlined in a White House “Fact Sheet,” which you can view online here.  There is a lot of fluff in this fact sheet on the initiative’s ideas, and even more fluff on the White House’s Energy and Environment blog. I count 5 blog posts from February 3rd (the day the program was announced) touting this “Better Buildings” program. Administration officials, however, have yet to identify a cost for the program, or any specifics as to how anyone can utilize the program.

Obama says that all this information is forthcoming…can it be an important benefit to the green building industry?  We’ll soon see.  Here is a clip from the speech at Penn State when Obama announced the program:

Posted in:     Green Building, Law Changes & Updates  /  Tags: ,   /   Leave a comment

What is PACE Financing and Is It Doomed?

Started in the green revolution’s holy land, Berkley, California, PACE financing is shorthand for Property-Assessed Clean Energy Financing (Wikipedia entry).

The concept is simple:  cities loan money to property owners to install clean energy equipment.   The loans are then repaid to the city through annual property tax assessments.

As originally conceived, it’s a win/win/win situation really.   Property owners get funds to improve their property, paying back the loan with money saved in the the property’s reduced operating expenses.   Cities and communities benefit by upgrading its overall energy efficiency.   Businesses and efficient energy investors benefit because the market grows for its products.

All was going very well for PACE Financing.  PACE legislation was passing across the country, and President Obama’s administration wholeheartedly supported PACE programs.

This progress came to an abrupt halt in June 2010, when the Federal Housing Financing Authority (FHFA) dropped this news:   Properties with PACE loans cannot be purchased by mortgage giants Fannie Mae and Freddie Mac.

Why not?

Well, PACE loans create a lien against properties similar to a tax lien, meaning that the lien has priority over all other debts (including mortgages).   The value of these loans can be between $10,000 and $100,000, and sometimes more.   The problem for these mortgage holders is obvious, as they are losing priority on their collateral.

The news from the FHFA caused more than $150m in funding to get yanked by the US Department of Energy, and has some predicting the demise of PACE Financing as we know it.  And they may be right.

Can PACE Be Saved?

The question now is whether these PACE Programs can be saved.   While I believe they can be, I don’t think the programs will be unaffected by the FHFA determination.   Here is a few things that are happening to help PACE stage a comeback, and a glimpse at how this might affect the PACE Programs:

1)   California is Fighting It:   First, Sonoma County and the California Attorney General have both separately filed suit against the FHFA claiming that the determination is wrong, or that FHFA lacks jurisdiction to make the determination on behalf of states and counties.

2)  Legislation is Being Proposed:   The US Congress (as well as local reps and senators) are introducing bills aiming to protect PACE financing programs.   One such bill is the PACE Assessment Protection Act of 2010.

3)  Re-Thinking PACE: States may be ready to re-think the way they structure these PACE programs, and provide some protections for mortgage companies.   While not passed in response to the FHFA announcement, Louisiana’s new PACE egislation may have predicted these problems, as it greatly accommodated mortgage holders.   The PACE legislation from the 2010 session, for example, requires enough equity in the house to support the loan, and requires permission from the mortgage holder for commercial loans greater than $100k (talked about in this post)

4)  Commercial Focus:   The FHFA restriction really affects the residential markets only.  As such, many states and municipalities may be re-focusing their PACE programs on the commercial market.  One example of this is New Orleans, who anticipated launching a PACE district with the help of funding from the US Department of Energy’s America’s Solar Cities program.   The city says they plan on moving forward with the district, except it will only be for commercial PACE loans.

Hey, What Does This Have To Do With Construction?

The PACE Financing Programs has a lot to do with construction and construction law.   You may or may not know, but our firm publishes two blogs that focuses on green building laws:   The Louisiana Green Building Law Blog and the Northwest Green Building Law Blog.   I am also a LEEP AP, and focus part of my practice on green building issues.

I recently wrote a blog post called:  Think Green Building is Irrelevant?  Think Again. The post discussed a report published by NPR saying that green building accounts for 33% of new construction in the United States.  That’s a remarkable number.   And if these PACE Programs get off the ground, the existing construction green building numbers will be driven up significantly.

Stay tuned.

Posted in:     Construction News, Green Building  /  Tags: , , , ,   /   1 Comment

Around the Web in Construction Law – May 21, 2010

  • 29 States Add Construction Jobs Between March and April:    The Associated General Contractors of America released its report on the rise/fall of construction jobs around the country for the most recently reported month, and there is a mixture of good news and bad news (depending on where you are).   29 states splits the country directly in half, with some folks having a good month and some folks not.   The New Orleans City Business Blog chimed in to pass along word that Louisiana lost jobs during the period. Washington and Oregon gained jobs in the period, barely.   .01% and .02% respectively.
  • I subscribed to a new blog this week, Government Contracts Legal Forum, recently launched by Crowell Moring and focusing on….government contracting law.   Involved with this blog is our friend in green building law, Chris Cheatham, who works at Crowell Moring and will be posting on the new blog from time to time.   Chris runs the Green Building Law Update blog.   One of his firsts posts on the new blog points out an Obama Executive Order that will require more green building projects.
  • New Lead Based Paint, Renovation, Repair and Painting Rule is causing contractors to panic, as per Andrea Goldman’s Massachusetts Builders Law Blog.   Andrea has posted a great deal about the new RRP rules, and if you deal with lead-based paint in any way or you renovate homes or buildings with lead-based paint, you will want to pay attention to these important changes from the EPA.
  • Louisiana Construction Law Blog on Blogspot discusses “Initial Decision Makers” in construction projects.   While IDMs have been around for a while, there really became popular when the AIA incorporated the concept into its contract documents a few years ago.    This post from our friends up in Shreveport, Louisiana, offers a great primer on the concept.

Interested in more articles and blog posts around the web on construction law?   You can check out other articles I’ve shared over the past week on my Google Reader Shared Items Feed.

Posted in:     Around The Web  /  Tags: , , , , , , , , ,   /   Leave a comment

E-Verify Required Starting September 9, 2009. Is it Really Going to Happen?

E-Verify, a government web-based system that helps employers verify a workers legal status, has been in the news before.

Originally a George W Bush executive order, E-Verify was slated to become mandatory for federal contractors beginning January 15, 2009.   The change in executive administrations and a handful of lawsuits, however, pushed the requirement back indefinitely.

This week, the Obama administration chimed in on the subject, and announced that it would support the E-Verify requirement, and that it would take effect across the country starting September 8, 2009.   Appropriately, the day after Labor Day.

Any federal projects or businesses receiving money under the federal stimulus program will be subject to the rule, and required to register and use the E-Verify system.

Differences Between Obama E-Verify and Bush E-Verify

When comparing the Obama E-Verify requirement and the Bush E-Verify requirement, one difference stands out:   Obama has ditched the “No-Match” system.

As a result, for better or worse, the requirement going into effect this September will have substantially less teeth.

Ditching the “No-Match” component of the E-Verify requirement will benefit employers because they will not be required to terminate (on such a tight time-line) employees whose social security numbers do not match with the system.

It will benefit workers, too, because Obama will not allow the federal government to use mismatched SSN data to find illegal immigrants in the workplace.

Is It Really Going To Happen This Time?

The short answer:  Yes.

While it has been delayed repeatedly in the past year, and there’s always a possibility for more delay, it looks like the latest effective date will stick.

The Obama administration has reviewed the requirement, and is now standing behind it, and by ditching the most controversial aspects of the rule, there will be fewer legal and political challenges.

Beginning September 8, 2009, therefore, the government will award contracts only to companies in compliance.

Who Needs to Be Prepared?

A lot of people need to be prepared for this E-Verify requirement.

While the controversial components of the requirement have been removed by Obama, the scope of the rules applicability has actually gotten broader.   The requirement will not only apply to contractors and subcontractors on federal projects, but it will also apply to any business receiving money under the federal stimulus project.

With the influx in federal and state spending on construction projects, and the decrease in private work available, more and more contractors are being forced into bidding and working on public works.  And with the now wider reach of the E-Verify program, contractors and subcontractors need to prepare themselves.

In February 2009, we wrote a post here at the Construction Law Monitor titled “The Stimulus Package and Your Construction Business.”

The post discussed the differences between private and public works, and addressed some of the issues private contractors face when working on its first public project.

Add the new E-Verify requirement to the list, and the article is still a good read.

Is this Still Controversial?

Even with Obama’s backing of the system and some tweaks to its enforcement power, the E-Verify program definitely still has its detractors.

The San Bernardino Sun News just ran an article about how the E-Verify system puts Obama at odds with some democrats.

Despite the controversy, the E-Verify requirement will take effect on September 8th, and construction companies around the country must be prepared.

Posted in:     Federal, Labor Law  /  Tags: , ,   /   1 Comment