ASSOCIATED GENERAL CONTRACTORS OF OHIO

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Between the Law and a Hard Hat




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This innovative page will provide our members beneficial information and knowledge related to all legal aspects of the construction industry here in Ohio and across the country.  We will provide you updates concerning technological developments impacting the industry, OSHA regulations, state statutes and ordinances, Ohio case law, contractual terms, provisions, and drafting issues, as well as a wide variety of other construction law insight.  Whether you are a large or small business, project owner, general contractor, subcontractor, design professional, or other member of our construction community, Between the Law and a Hard Hat has something for you. 

Please submit articles to editor@agcohio.com

  • July 13, 2016 2:59 PM | Anonymous member (Administrator)

    For the first time since 1990 OSHA is increasing penalties for standards violations by as much as 78%.  The new penalties will take effect after August 1, 2016.  However, any citations issued by OSHA after August 1st will be subject to the new penalties if the related violations occurred after November 2, 2015.

    The new penalty amounts are listed below.
    Type of Violation
    Current Maximum Penalty
    New Maximum Penalty
    Serious
    Other than serious
    Posting                         Requirements
    $7,000 per violation
    $ 12,471 per violation
    Failure to abate
    $7,000 per day
    beyond the
    abatement dates

    $ 12,471 per day beyond the abatement date
    Willful or Repeated
    $70,000 per violation
    $124,709 per violation


    OSHA does have the option to implement a lower adjustment if: (1) the agency determines increasing penalties by the maximum amount would have a “negative economic impact” or the “social costs” of the increase outweigh the benefits; and (2) the Office of Management and Budget agrees with the agency’s determination. 

    In addition to the catch-up adjustment this year, OSHA is permitted to continue raising fines annually to keep pace with inflation.

    You can read all about the penalty changes on OSHA’s website at https://www.usfosha.com/osha-articles/2016-osha-fine-increases.aspx.

    Andrew L. Smith is an attorney in the Cincinnati, Ohio office of Smith, Rolfes & Skavdahl Company, LPA who concentrates his practice in the areas of construction law and general litigation.  Andrew has extensive experience in state and federal court handling complex civil litigation matters and counseling businesses of all shapes and sizes.  He is also the co-host of BearcatsSportsRadio.com and an avid UC Bearcats follower.

  • June 14, 2016 3:12 PM | Anonymous member (Administrator)

    Because these clauses are contractual in nature they are subject to the basic common law rules of contractual interpretation.  By way of example, in Royal Electric Constr. Corp. v. Ohio State Univ., 10th Dist. No. 93AP-399, 1993 Ohio App. LEXIS 6181 (Dec. 21, 1993), two state agencies hired a contractor to complete two renovation projects. The contractor filed a breach of contract action against the state agencies for financial losses suffered as a result of delays. The trial court found in favor of the contractor.  However, the court refused to enforce a no damages for delay clause against the electrical contractor because the clause was ambiguous.

    In particular, the court analyzed the following clause:

    There is no liability for damages resulting from delay caused by third persons which is not the result of interference on the part of the State as a contracting party. Any liability that may ensue that is caused by the failure of any Contractor to finish its portion of the work at a scheduled time is the responsibility of that Contractor and its Surety.

    Because the contract did not define “third persons” the court held an ambiguity was present as to whom that term applied. In deciding the enforceability of this provision, the court in Royal recognized such clauses have been strictly construed against the drafter, and thus unenforceable in this instance.

    To the contrary, in Cleveland Constr. v. Reynoldsburg City Sch., 10th Dist. No. 96APE02-242, 1996 Ohio App. LEXIS 2751 (June 28, 1996), the court reached a different result in analyzing a very similar clause:

    Regardless of other provisions in the Contract Documents to the contrary, the Contractor will not be entitled to damages or additional compensation from the Owner or Architect or CM on account of delays caused by persons.

    Similar to the circumstance found in Royal, the term “persons” is used and, likewise, undefined. However, the court reasoned unlike the term “third persons” found in Royal, the term persons is defined numerous times in the Revised Code. Relying on the Revised Code, the court held a corporation constitutes a person and the defendant board of education was protected from suit for delay damages caused by another contractor’s abandonment of concrete work and the failure of the board to find a replacement contract.

    Therefore, like any other contractual provision, you must pay particular attention to the terms used in crafting a no damages for delay clause, including definitions, scope, and limitations.  This is especially true since the clause could later be construed against the drafter and deemed unenforceable in its entirety. 

    Affirmative Defense

                A no damages for delay clause defense is an affirmative defense subject to waiver if not properly and timely pled in an answer.  Gibbons-Grable-Goettle v. Northeast Ohio Reg. Sewer Dist., Eighth Dist. No. 49132, 1986 Ohio App. LEXIS 5368, *10-*12 (Jan. 23, 1986).

    Exceptions to Enforceability

         There are several exceptions to the enforceability of a no damages for delay clause. In Ohio, the exceptions apply to delay that:

    • 1)      Was not intended or contemplated by the parties to be within the purview of the provisions; or
    • 2)      Resulted from fraud, misrepresentation, or other bad faith on the part of one seeking the benefit of the provision; or
    • 3)      Has extended such an unreasonable length of time that the party delayed would have been justified in abandoning the contract; or
    • 4)      Is not within the specifically enumerated delays to which the clause applies.

    Digioia Bros. Excavating v. City of Cleveland, 135 Ohio App.3d 436, 450, 734 N.E.2d 438 (1999).

           Moreover, construction law practitioners have recognized the following additional exceptions to no damages for delay clauses:

    1)      “Cardinal” change in the scope or character of the work; or

    2)      First to breach defense (i.e. if the owner breaches its own contract first then the owner is precluded from relying on exculpatory provisions in the contract); or

    3)      The argument a no damages for delay clause is irreconcilable with a “time is of the essence” clause and neither clause should be enforceable; or

    4)      Inconsistency with other contract provisions such as “liquidated damages”, “changes”, “differing site conditions”, “compensable and non-compensable time extensions”, “time and material”, etc.; or

    5)      General waiver.

     

    Summary Judgment Concerns

    In Nix, Inc. v. Columbus, 111 Ohio App. 133, 145, 171 N.E.2d 197 (1959), the court found a no damages for delay clause would not be enforced when conditions arise which are not within the contemplation of the parties at the time the contract was made. Furthermore, in Royal, the court held “while a certain amount of delay in a construction project may be foreseeable, the accumulation of delays can be of such a magnitude that, taken together, the extent of delay becomes unforeseeable.” Id. at *15. 

    Considering the extent and magnitude of the accumulation of delay and foreseeability issues may present a question of material fact and prevent summary judgment for defendants in situations where the applicability of a no damages for delay clause otherwise appears obvious.  Likewise, evidence of bad faith, fraud, or other exceptions enumerated above present fact-intensive inquiries outside the general limits of summary judgment.

    Ohio Legislature and R.C. 4113.62(C)

    In 1998, the General Assembly declared no damages for delay clauses void and unenforceable as against public policy in certain circumstances.  In a nutshell, an owner or contractor cannot cause a delay, and then avoid the natural consequences for causing the delay by using boilerplate contract language. 

    Specifically, pursuant to R.C. 4113.62(C):

    • (1)        Any provision of a construction contract, agreement, or understanding, or specification * * * that waives or precludes liability for delay during the course of a construction contract when the cause of the delay is a proximate result of the owner’s act or failure to act * * * is void and unenforceable as against public policy.
    • (2)        Any provision of a construction subcontract, agreement, or understanding, or specification * * * that waives or precludes liability for delay during the course of a construction subcontract when the cause of the delay is a proximate result of the owner’s or contractor’s act or failure to act * * * is void and unenforceable as against public policy.

    (Emphasis added).

    “Delay” Defined

    The case of Cleveland Constr., Inc. v. Ohio Pub. Emples. Ret. Sys., 10th Dist. No. 07AP-574, 2008-Ohio-1630, examined the precise terminology and broad scope of R.C. 4113.62(C).  In the construction context, the term “delay” encompasses loss of efficiency, disruption, and hindrance.  Delay is the result caused when something is postponed, hindered, or slowed. Black's Law Dictionary (8 Ed.2004) 458.  “In construction litigation, a project owner’s delay can give rise to a number of different types of damages, including inefficiency costs, acceleration costs, loss of productivity costs, and unabsorbed home office overhead costs.”  Id. at ¶18.

    For instance, in the context of bond reduction in public improvements, a delay claim is a claim that arises due to default on provisions in a contract regarding the time when the whole or any specified portion of work contemplated in the contract must be completed.

    Proximate Cause

    Nevertheless, for the statute to apply and prohibit a no damages for delay clause, the delay in issue must be proximately caused by the party seeking to enforce the clause. 

    In J&H Reinforcing & Structural Erectors, Inc. v. Ohio Sch. Facilities Commn., 10th Dist. No. 12AP-588, 2013-Ohio-3827, the evidence establishes the site delay was attributable to unanticipated soil conditions. Because the project owner neither knew nor should have known about the poor soil conditions before the discovery of such conditions at the commencement of the project, the court upheld enforcement of the clause at issue prohibiting delay damages against the owner.

    Limiting Damages vs. Precluding Damages

    In addition, the statute does not prohibit the parties from limiting recovery of delay damages, but rather solely prohibits waiver or preclusion of delay damages. This is a fine line distinction. 

    In B.I. Chipping Co. v. R.F. Scurlock Co., 10th Dist. No. 04AP-1219, 2005-Ohio-6748 (Dec. 20, 2005), the court upheld a contract provisions limiting the recovery of delay damages to the amount recovered from the Ohio Department of Transportation claims process.  Indeed, according to the court, “because the contract allows appellant to recover for delays in the amount that appellee receives through the ODOT claims process, and thus does not preclude all liability for delays, R.C. 4113.62(C) does not apply and does not render any provision of the contract unenforceable.”  (Emphasis added)  Id. at ¶11.

    Points to Remember

    When evaluating a delay damage claim beware of no damages for delay clauses and consider the following:

    • Contracting parties are permitted to freely negotiate and potentially limit liability for delay damages. 
    • Pay particular attention to the exact terms and definitions contained in the no damages for delay clause.
    • Pursuant to statute, in Ohio an owner or contractor generally cannot cause a delay, and then avoid the natural consequences for causing the delay by using a no damages for delay clause. 
    • General exceptions to enforceability exist for certain delays as discussed above.
    Andrew L. Smith is an attorney in the Cincinnati, Ohio office of Smith, Rolfes & Skavdahl Company, LPA who concentrates his practice in the areas of construction law and general litigation.  Andrew has extensive experience in state and federal court handling complex civil litigation matters and counseling businesses of all shapes and sizes.  He is also the co-host of BearcatsSportsRadio.com and an avid UC Bearcats follower.
  • May 18, 2016 8:20 AM | Anonymous member (Administrator)

    The New OSHA Silica Rule   By Andrew L. Smith, Esq.
    The Occupational Safety and Health Administration (“OSHA”) has issued a final rule to curb lung cancer, silicosis, chronic obstructive pulmonary disease, and kidney disease in the construction industry by limiting exposure to respirable crystalline silica.   OSHA estimates that the rule will save over 600 lives and prevent more than 900 new cases of silicosis each year, once its effects are fully realized.

    According to OSHA, the final rule will improve worker protection by:

    • Reducing the permissible exposure limit for crystalline silica to 50 micrograms per cubic meter of air, averaged over an eight-hour shift.
    • Requiring employers to use engineering controls (such as water or ventilation) and work practices to limit worker exposure; provide respiratory protection when controls are not able to limit exposures to the permissible level; limit access to high exposure areas; train workers; and provide medical exams to highly exposed workers.
    • Providing greater certainty and ease of compliance to construction employers, including many small employers, by including a table of specified controls they can follow to be in compliance, without having to monitor exposures.
    • Staggering compliance dates to ensure employers have sufficient time to meet the requirements, e.g., extra time for the hydraulic fracturing (fracking) industry to install new engineering controls and for all general industry employers to offer medical surveillance to employees exposed between the PEL and 50 micrograms per cubic meter and the action level of 25 micrograms per cubic meter.

    All construction employers covered by the standard are required to:

    • Establish and implement a written exposure control plan that identifies tasks that involve exposure and methods used to protect workers, including procedures to restrict access to work areas where high exposures may occur.
    • Designate a competent person to implement the written exposure control plan.
    • Restrict housekeeping practices that expose workers to silica where feasible alternatives are available.
    • Offer medical exams, including chest X-rays and lung function tests, every three years for workers who are required by the standard to wear a respirator for 30 or more days per year.
    • Train workers on work operations that result in silica exposure and ways to limit exposure.
    • Keep records of workers’ silica exposure and medical exams.

    Construction employers must comply with all requirements of the standard by June 23, 2017, except requirements for laboratory evaluation of exposure samples, which begin on June 23, 2018.

    Andrew L. Smith is an attorney in the Cincinnati, Ohio office of Smith, Rolfes & Skavdahl Company, LPA who concentrates his practice in the areas of construction law and general litigation.  Andrew has extensive experience in state and federal court handling complex civil litigation matters and counseling businesses of all shapes and sizes.  He is also the co-host of BearcatsSportsRadio.com and an avid UC Bearcats follower.

       

  • May 13, 2016 5:17 PM | Anonymous member (Administrator)
    The New OSHA Workplace Injury Reporting Rule

    By Andrew L. Smith, Esq.

    On May 11, 2016, The U.S. Department of Labor’s Occupational Safety and Health Administration (“OSHA”) issued a final rule to modernize injury data collection to better inform workers, employers, the public, and OSHA about workplace hazards. The rule is designed to “nudge” employers to better prevent workplace injuries and illnesses.  Indeed, the Bureau of Labor Statistics reports more than three million workers suffer a workplace injury or illness every year.

    Under the new rule, all businesses with 250 or more employees in industries covered by the record keeping regulation must electronically submit to OSHA injury and illness information from OSHA Forms 300, 300A, and 301. Establishments with 20-249 employees in certain high-risk industries, including construction and manufacturing, must electronically submit information from OSHA Form 300A only.  The regulations will be phased-in over the course of the next two years.

    The final rule also does the following:

    • Requires employers to inform employees of their right to report work-related injuries and illnesses free from retaliation;
    • Clarifies the existing implicit requirement that an employer’s procedure for reporting work-related injuries and illnesses must be reasonable and not deter or discourage employees from reporting;
    • Incorporates the existing statutory prohibition on retaliating against employees for reporting work-related injuries or illnesses; and
    • Amends OSHA’s existing record keeping regulation to clarify the rights of employees and their representatives to access the injury and illness records.

    Uniquely, OSHA plans to post the injury and illness data it collects on its public website (www.osha.gov) in a fully searchable format.   Of course, OSHA will remove all personally identifiable information associated with the data before it is publicly accessible. 

    The agency likens the concept to public disclosure of kitchens’ sanitary conditions, which it says encourages restaurant owners to improve food safety.  “Since high injury rates are a sign of poor management, no employer wants to be seen publicly as operating a dangerous workplace,” according to Dr. David Michaels, Assistant Secretary of Labor. “Our new reporting requirements will ‘nudge’ employers to prevent worker injuries and illnesses to demonstrate to investors, job-seekers, customers and the public that they operate safe and well-managed facilities. Access to injury data will also help OSHA better target our compliance assistance and enforcement resources at establishments where workers are at greatest risk, and enable ‘big data’ researchers to apply their skills to making workplaces safer.”

    The new requirements take effect beginning January 1, 2017.   The complete rule can be found at 29 CFR Parts 1904 and 1902 and is 273 pages in length.

    Andrew L. Smith is an attorney in the Cincinnati, Ohio office of Smith, Rolfes & Skavdahl Company, LPA who concentrates his practice in the areas of construction law and general litigation.  Andrew has extensive experience in state and federal court handling complex civil litigation matters and counseling businesses of all shapes and sizes.  He is also the co-host of BearcatsSportsRadio.com and an avid UC Bearcats follower.
  • May 10, 2016 11:58 AM | Anonymous member (Administrator)

    Ohio Supreme Court Addresses Liquidated Damages
    By: Andrew L. Smith, Esq.

    In Boone Coleman Constr., Inc. v. Vill. of Piketon, 2016-Ohio-628, the Ohio Supreme Court revisited the concept of liquidated damages clauses, and confirmed enforceability of liquidated damages clauses must be viewed from the time the parties entered into the contract, and not in hindsight, regardless of the total amount of assessed liquidated damages.

    In that case, the village of Piketon, solicited bids for the “Pike Hill Roadway and Related Improvements” project. The project included the installation of a traffic light at the intersection of U.S. Route 23 and Market Street in Piketon and improvements to the roadway.  Boone Coleman Construction, Inc., submitted the lowest bid and was hired for the project.

    The parties entered into a contract in which Piketon agreed to pay Boone Coleman $683,300 to complete the work. The contract expressly provided the time for completing the project was “of the essence” and the project had to be substantially completed within 120 days of the date of commencement of the project. A liquidated-damages provision made clear Boone Coleman would pay $700 to Piketon for each day after the specified completion date the contract was not substantially completed.

    The date of commencement of the project was set for July 30, 2007, requiring the project be substantially completed by November 27, 2007. Piketon granted Boone Coleman’s first request for an extension, moving the completion date to May 30, 2008. But when Boone Coleman sought another extension, Piketon refused and notified Boone Coleman it would assess the contractually specified liquidated damages of $700 per day if the project was not completed by May 30, 2008.  Boone Coleman did not do so, and on July 7, 2008, Piketon informed Boone Coleman that it was assessing damages of $700 per day, as of May 31, 2008, until the completion of the project.  Boone Coleman did not complete the project until July 2, 2009, exactly 397 days after the parties’ extended completion date of May 30, 2008.

    Boone Coleman brought suit against Piketon in the Pike County Common Pleas Court. Among other things, it alleged that Piketon had improperly failed to pay $ 147,477 of the contract price.  The trial court granted Piketon’s motion and entered judgment in its favor, awarding Piketon $ 277,900 in liquidated damages.  The court of appeals reversed the decision. 

    Upon review, the Ohio Supreme Court stated Ohio’s three-part test to determine whether a contractual provision should be considered a liquidated damages provision or an unenforceable penalty is as follows:

    Where the parties have agreed on the amount of damages, ascertained by estimation and adjustment, and have expressed this agreement in clear and unambiguous terms, the amount so fixed should be treated as liquidated damages and not as a penalty, if the damages would be (1) uncertain as to amount and difficult of proof, and if (2) the contract as a whole is not so manifestly unconscionable, unreasonable, and disproportionate in amount as to justify the conclusion that it does not express the true intention of the parties, and if (3) the contract is consistent with the conclusion that it was the intention of the parties that damages in the amount stated should follow the breach thereof.

    Id. at ¶17-18.

    According to the Ohio Supreme Court, “the appellate court’s myopic focus on the reasonableness of the total amount of liquidated damages in application, rather than on the reasonableness of the per diem amount in the contract terms, was not proper.” Id. at ¶31.  The correct analysis looks at whether it was conscionable to assess $700 per day in liquidated damages for each day that the contract was not completed rather than looking at the aggregate amount of the damages awarded. 

    Here, the appellate court improperly engaged in retrospective analysis, i.e., it looked, with hindsight, to the aggregate application of the per diem liquidated damages to conclude that the provision was unconscionable. But it did not determine that the per diem amount was unconscionable at the time the parties entered into the contract. The question whether the liquidated-damages provision is conscionable “must be viewed by the court from the standpoint of the parties at the time of the contract, and not ex post facto when the litigation is up for trial. Contracts are always so construed and a stipulation for liquidated damages is no exception.”

    Id. at ¶37.

    Ultimately, the Ohio Supreme Court remanded the case to the court of appeals for further evaluation.  Boone is important in that the case confirms the enforceability of liquidated damages clauses must be viewed from the time the parties entered into the contract, and not in hindsight as attempted by the appellate court.

    Andrew L. Smith is an attorney in the Cincinnati, Ohio office of Smith, Rolfes & Skavdahl Company, LPA who concentrates his practice in the areas of construction law and general litigation.  Andrew has extensive experience in state and federal court handling complex civil litigation matters and counseling businesses of all shapes and sizes.  He is also the co-host of BearcatsSportsRadio.com and an avid UC Bearcats follower.

     

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Andrew L. Smith, Partner,  Smith, Rolfes & Skavdahl Company, LPA, Cincinnati, Ohio.

His practice is in the areas of construction law and general litigation.  Andrew has extensive experience in state and federal court handling complex civil litigation matters and counseling businesses of all shapes and sizes.
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Disclaimer: All content provided by these articles and blog is for informational and educational purposes only.  Neither AGC of Ohio nor Smith, Rolfes & Skavdahl Co., LPA make any representations as to the accuracy or completeness of any information on this site or found by following any link on this site.  The blog provides general information and a general understanding of the law, and is not intended to provide legal advice. By using these articles/blog, you understand no attorney-client relationship is created. These articles/blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

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