Gravel2Gavel Construction & Real Estate Law Blog

On February 6, 2014, Pillsbury attorneys Riaz A. Karamali and Didi S. Chow posted their advisory titled California’s New LLC Law: Next Steps for California LLCs. The advisory discusses the California Revised Uniform Limited Liability Company Act (New Act), which supersedes the California’s Beverly-Killea Limited Liability Company Act (Old Act), and a number of substantive changes under the New Act that may adversely affect existing California limited liability companies (LLC) unless they amend their operating agreements.

Additional Sources: Pillsbury Winthrop Shaw Pittman LLP, LLCs Can Finally Become Licensed California Contractors (Oct. 10, 2011)

On January 29, 2014, The Observer, a student-run, daily print and online newspaper serving Notre Dame and St. Mary’s, reported that Notre Dame “is hoping to begin massive construction of Notre Dame Stadium after the conclusion of the 2014 football season,” after interviewing University President Rev. John I. Jenkins, C.S.C. It confirmed that the “Notre Dame Board of Trustees has endorsed a plan to build three buildings totaling 750,000 square feet that will surround the Stadium.” The “Campus Crossroads Project” is expected to cost $400 millions, and to take 33 months to construct from start to finish. President Jenkins confirmed that, ideally, the University would make the decision to go ahead with the project in August and start building after Notre Dame’s home finale against Louisville in November.

President Jenkins, however, reportedly confirmed that Notre Dame still needs to raise funds for the project. Evidently, the University’s policy is to have 100% of the funding promised and 50% in hand before construction begins. Notre Dame is looking for benefactors who will support the Campus Crossroads Project and expects the rest of the funding to come from various sources, including revenue from premium seating tickets — 3,000 to 4,000 additional club seats.

Paul Browne, a spokesperson for the University, reportedly confirmed that the University expects to employ all construction trades locally, but it could also contract with some Chicago-area companies to help with construction. President Jenkins reportedly confirmed that Notre Dame expects to look first towards South Bend for construction companies, providing job opportunities to the local community.

Erin Hoffmann Harding, Vice President of Student Affairs, reportedly confirmed that Notre Dame has worked with architectural firms like 360 Architects, Slam and Workshop Architects so far on the project.

Additional Resources: ESPN; ABC News; USA Today; Chicago Tribune; South Bend Tribune; bleacher report

On January 17, 2014, the California Contractors State License Board issued Industry Bulletin – 1/17/2014 clarifying that the new law effective January 1, 2014 (Senate Bill 407) requiring replacement of plumbing fixtures with water-conserving models is not triggered by property “maintenance” or “repairs.” The new law requires anyone applying for a building permit for work that will “alter” or “improve” a single-family residence built in 1994 or earlier to replace all plumbing fixtures with water-conserving models. Replacement of the fixtures is a condition of receiving final permit approval from the local building department. Contractors are encouraged to verify requirements with their local building department before taking any action to maintain, repair, alter or improve a single-family residence. (The new law also requires, by 2019, water-conserving plumbing fixtures in multi-family dwellings and commercial properties when specific renovations are made.)

Although not binding legal authority, the California Building Officials (CALBO) group has interpreted the terms “alterations” and “improvements” to mean “any construction to an existing structure that enhances or improves the structure. Construction that is related to repairs or maintenance of the structure is not considered to be an alteration or improvement.” CALBO consider the following to be “repairs” or “maintenance” that do not trigger the requirements of the new law:

* electrical service change out * HVAC change out * sewer line replacement * siding or stucco * site work: retaining wall, fences, walkways, etc.
* water heater replacement * window replacement * other repairs, as determined by the state Building Code
Additional Sources: Contractors State License Board; CALBO’s Legislative Analysis; Tri-Chapter Uniform Code Committee Guidelines

Photo: Jesus Rodriguez, Taken Oct. 3, 2012 – Creative Commons

A recent report by the California Department of Industrial Relations (DIR) that the State of California does not collect between $800 million and $1.2 billion as a result of the “underground economy” could be a catalyst to the State increasing its efforts to combat what is commonly referred to as the underground economy and, in turn, to increase revenues payable to the State. The term “underground economy” refers to those individuals and businesses that deal in cash and/or use other schemes to conceal their activities and their tax liability from government, licensing, regulatory, and taxing agencies. This includes employers paying workers in cash, under-reporting wages paid to employees, failing to pay into the workers’ compensation fund, reporting employees as independent contractors, and underpaying taxes, tax evasion or engaging in tax fraud. It is also commonly referred to in slang terms as cash pay, tax gap, payment under-the-table and payment off-the-books.

The State of California Employment Development Department (EDD) has a charge to investigate businesses that avoid paying payroll taxes. The EDD’s Underground Economy Operations (UEO) organization was established in 1993 to implement and administer the activities of the Joint Enforcement Strike Force. The mission of UEO is to reduce unfair business competition to protect the rights of workers. It does so by (1) coordinating the joint enforcement of tax, labor, and licensing laws, (2) detecting and deterring tax violations, (3) conducting research on strategies to increase compliance with payroll tax laws, and (4) educating customers to increase compliance with payroll laws. Three of UEO’s program focus areas are the Employment Enforcement Task Force, Department of Industrial Relations, and Contractors State Licensing Board.

Additional Source: Sacramento Business Journal; State of California Employment Development Department ; CA Employment Development Depart Now Authorized To Share New Employee Information

Photo: Simon Cunningham, Taken on Dec. 18, 2013 – Creative Commons

Employers often would prefer an arbitral forum for employee-related disputes because they are perceived as a venue that typically delivers a fair, efficient and cost-effective resolution for such disputes. Employment agreements that require arbitration of claims on an individual basis, including Fair Labor Standards Act (FLSA) claims, have been subject to numerous challenges, including that such provisions violate the National Labor Relations Act. On January 1, 2014, the U.S. District Court for the Northern District of Texas, in Pacheco v. PCM Constr. Servs., LLC, N.D. Tex., No. 3:12-cv-04057, held that the seven disgruntled construction workers’ FLSA claims against their employer for unpaid overtime must be arbitrated. Including such a provision, including a waiver of the right to pursue claims as a class representative, in your employee contracts certainly is worth considering in light of the courts’ recent willingness to enforce such clauses.

The FLSA establishes, among other things, overtime pay standards affecting employees in the private sector as well as federal, state and local government employees. The construction workers claimed that there was a company-wide practice of not paying overtime in violation of the FLSA, and that there are 40 to 50 similarly situated employees. These workers had each signed employment agreements which required them “to submit any dispute between employee and the company, or any of the company’s employees, representatives, or agents, to mandatory, binding arbitration.” The construction workers argued that the arbitration provision was unenforceable because it restricted class arbitration, it was unconscionable and it didn’t permit an award of liquidated damages, as available under the FLSA, and that their employer had waived the right to compel arbitration. Judge Sam A. Lindsay rejected their arguments, compelling arbitration and dismissing the civil action with prejudice.

Note, however, that the Ninth Circuit Court of Appeals in Wal-Mart Wage & Hour Empl. Practices Litig. v. Class Counsel & Party to Arbitration, recently held that a non-appealability clause in an arbitration agreement that eliminates all federal court review of arbitration awards, including review under § 10 of the Federal Arbitration Act, is not enforceable.

Additional Sources: U.S. Department of Labor; National Labor Relations Board; US Supreme Court Gives Green Light To Class Action Waivers In Consumer Contracts; Rials v. Apex Bulk Commodities Inc., Los Angeles Superior Court Case No. BC527219 (Judge Johnson’s tentative ruling confirmed that she was going to enforce the arbitration agreement, leaving it to the arbitrator to decide if the plaintiffs’ claims could proceed as a class arbitration or as individual arbitrations because the contract contains no language on the matter)

Photo: Sam Greenhalgh, Taken on Sep. 8, 2007 – Creative Commons