How Pending Legislation could have a Major Impact on Contractors
Sharon O'Malley | Construction Dive
March 2, 2015
Nevada took action last week on a long-standing law that has pitted homeowners against contractors, while Indiana is getting closer to repealing a measure that union members are fighting to keep.
The law that probably drags contractors into court most often allows homeowners and their associations to sue builders for construction defects—in some cases, up to 10 years after closing on a home.
Arizona, Colorado, Florida and Washington have legislation in the works to downsize their construction-defects laws, which some say have led to a flurry of frivolous lawsuits by homeowners looking for a payday from deep-pocketed builders. The builders, in turn, say some of those complaints are trumped up. And most say they would rather fix any defects in their work than get hauled into court.
Last week, Nevada did change its law. Gov. Brian Sandoval signed a revised Homeowners Protection Act last Tuesday that waters down the original 1995 version. The new rules more tightly define “defect”, strike the requirement for the losing party to pay the other’s legal fees, and require homeowners to be much more specific about the defects they claim.
The revised act also fixes the length of time a homeowner has to make a construction-defects claim at six years, down from the 10-year statute of limitations in the original law.
One Democratic legislator called the Republican-backed law the “homeowner rejection” act during a hearing on the bill. His fellow Democrats agreed that the new version restricts too many homeowners from filing legitimate claims against their builders.
However, state GOP Majority Leader Paul Anderson said the law had morphed from an effort to standardize the claims process and reduce court appearances to something quite the opposite. “The law is no longer a means to fix a problem but to exploit a problem,” he said during a February hearing on the bill.
In fact, homeowners filed so many claims under the law that in 2006, the state devoted three judges to oversee only those cases. And throughout the subsequent eight years, the trio has dealt with more than 100 claims a year.
The revised Nevada law took effect on Tuesday. Legislation in the other four states is pending and would change the rules there similarly. If the Colorado measure passes, homeowners will have to go through arbitration before they’ll be allowed to sue their builders. The proposal in Washington would require the owner making the claim to have a third-party professional inspect the defect before filing a suit.
Nevada builders have applauded the new law, saying they were burdened by the cost of insurance to protect them from going bankrupt over homeowners’ lawsuits.
Indiana is one vote away from repealing its 79-year-old common construction wage law, which allows communities to decide how much to pay contractors for public works projects.
The state’s House of Representatives voted to scrap the law, which ensures that local crews get taxpayer-funded construction jobs and the training to do them well.
Unions and Democrats generally support the law, but Republicans want to do away with it, even though it was Republicans who created it in 1935 in an effort to thwart the efforts of out-of-state contractors from winning Indiana’s public works contracts by severely underbidding the locals.
Advocates for repealing the law say it makes it hard for non-union workers—even locals—to win public works contracts, while the unions argue the effort to quash the practice is a direct shot at organized labor.
The common construction wage is set by local, five-member boards of contractors and taxpayers for each project worth more than $350,000.
Those who are pushing for repeal contend that allowing the free market to determine the prevailing wage will save local governments millions of dollars on the construction of schools and other government-funded facilities. Contractors respond that it will do that at the expense of quality, skilled workmanship and local employment.
The Republican-led state Senate is next to vote on the proposal, but it could hit a roadblock there, as some senators have said they want further study on the impact of a repeal before voting. Republican Gov. Mike Pence has said he will sign the bill into law if the Senate passes it.
The bill’s sponsor, state Rep. Jerry Torr, has said the process "sets up an artificial wage, and I just think it's better for us to go to the free market. If the committee set a higher wage rate [than the one a lowest bidder would accept], then the workers on the job benefit, but the taxpayers don't."
J.R. Gaylor, president of the anti-union Associated Builders & Contractors of Indiana and Kentucky, agreed: "Government should not be in the business of fixing prices and mandating wages. The market should be the solution to that."
Contractor Keith Rose, president of local firm Rieth-Riley Construction, defended the common construction wage. "It sets a minimum standard for quality, safety and efficiency," he said. "It provides a level playing field for union and nonunion contractors."
For the past several months, Republican legislators in 11 of the 32 states that have what most states call “prevailing wage” laws have introduced efforts to repeal the practice. A measure failed in West Virginia in November, and another is being debated in Michigan, where the Republican governor has said he would veto it if it passes.
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