Good Liens, Bad Documents and More Roads: Contractors Make their Case to Legislators
Feature Photo (above): A July 2017 screen shot of construction at the new Texas State Teachers Association headquarters building on Guadalupe Street, with the state capitol dome visible in the distance. Construction industry representatives were at the capital this week and will be there next week talking to representatives about industry-related issues Image: Google Streets.
by Edmond Ortiz
Austin (Travis County) — A delegation of the Associated Builders and Contractors of Texas was in Austin Feb. 5-6 for the industry group’s Legislative Days—a biennial exercise where members meeting with state lawmakers and discuss pressing issues.
Supporting funding for road projects. Modernizing the lien law. Expanding the right-to-repair law. Expanding worker protections.
These are some of the priority issues Texas construction trade organizations hope lawmakers will address during this 86th session of the state legislature
ABC Texas President Jon Fisher told VBX, “I got my materials out to forty legislators. We do get our positions and briefs out in front of everybody (lawmakers and aides).”
The morning will begin with a coffee and welcome, then proceed to an industry briefing, and a luncheon with a guest speaker. The afternoon is filled with meetings between organization members and legislators at the state capitol.
The fly-in concludes with a cocktail reception with lawmakers and capitol staffers. AGC-Texas’ head of Government Affairs, Steven Albright, told VBX that AGC-Texas’ fly-in usually concentrates on transportation funding, but does include other issues of interest to the organization.
“It’s a relationship-building exercise, but it’s also an opportunity for us to tell members of the legislature that we’re here as a resource for you,” Albright explained.
There are a number of issues that concern them for which no bill has yet been filed. March 8 is the final day to file bills, but here is what is on the table or likely to come up in the months ahead.
ABC South Texas Chapters members met with legislators this week. From left: Ben Davis, Beck Companies; Rep. Steve Allison, R-San Antonio; Bill Dawley, Markel Surety; Michelle Seward Davis, Joeris General Contractors. Courtesy: ABC South Texas.
Overhauling a state statute that covers liens has long been a goal for groups such as Associated Builders and Contractors of Texas (ABC-Texas), and Associated General Contractors-Texas (AGC-Texas).
A 2018 edition of Texas Merit Shop Journal, an ABC-Texas publication, summarized how contractor groups spent the last nine years working with key state lawmakers, such as District 22 State Rep. Joe Deshotel, D-Beaumont, toward comprehensive legislation to streamline and update the lien law.
State law currently permits the use of a pre-lien notice or preliminary notice of a debt, which project owners and prime contractors may see as a surprise at a time when a payment is sought. In this case, an owner withholds payment from a prime contractor until the contractor produces a lien release.
Lawmakers introduced a bill during the 2017 session that would have provided a new concept, early notice, or notice of furnishing. A notice of furnishing is an alternative and more proactive form of preliminary notice that informs all stakeholders—the owner, prime contractor, and the lender—that a subcontractor has started work or delivered materials on a particular date. So don’t be surprised when the bill comes due.
Rep. Joe Deshotel, D-Beaumont, is sponsoring legislation to reform lien law to help contractors and subcontractors get paid.
The 2017 proposal also would have let stakeholders electronically file the notice of furnishing. Notice of furnishing laws currently exist in four states—Michigan, Ohio, South Carolina and South Dakota.
The original bill encountered opposition from other industry stakeholders and never made it out of the House Committee on Calendars. A Committee Substitute bill became the basis for negotiations among stakeholders in meetings leading up to the current Legislature.
In December, Deshotel filed House Bill 589. District 67 State Rep. Jeff Leach, R-Allen, is to co-sponsor. ABC-Texas is hopeful HB 589 will be the basis for overdue comprehensive legislation.
However, Fisher told VBX that many developers remain opposed to such legislation, even though HB 589 or something like it would help to streamline and modernize the process, and eliminate uncertainty about whether a project stakeholder feels they could be subject to a lien.
“Right now we have two subsets of developers who are opposed to this bill because they’re scared of change or they’re just jaded,” Fisher said. “We’d prefer a system where there’s no liens, where people get paid.”
ABC-Texas is looking at other issues this legislative session, such as: design defects; maintaining consistency in local employment regulations; neutrality in state government contracting; right-to-repair; public employee dues deduction; and shortening the statute of repose.
Defective Plans and Specs
There was a bill addressing defects on architectural plans and engineering specs in the 2017 Legislature. It would have shifted liability to the project owners, and the architects and engineers that created the documents. It successfully made it through the 2017 Legislature, but was vetoed by the governor.
The issue was resurrected during a special session that followed and made it through the House but it died in the Senate.
Reformists point to Texas Supreme Court rulings from nearly one century ago that continue to make Texas the only state in the union that limits liability to contractors.
No bill speaking directly to defects in construction documents has been filed this session, but
Rep. Leach has pledged to revisit the issue.
“Despite the governor’s previous veto, this issue is not going away and diligent efforts are ongoing to fix this problem,” Leach wrote in a column to constituents.
Fisher said current liability rules are “based on bad case laws,” and that the burden of responsibility should change.
However, there is a bill on file that appears to be an attempt to protect architects and engineers.
Rep. Drew Darby, R-San Angelo, filed HB 1211, known as the Statutory Standard of Care bill. An amendment to the Texas Civil Practice and Remedies Code, it proposes that all contracts for engineering or architectural services include a provision requiring licensed engineers or registered architects perform services the professional skill and care expected of such licensed professionals.
But it includes language that states any promise in a construction contract is void if it requires an architect or engineer to defend or hold harmless the owner from liability for damage caused by the negligence “of a person other than the architect or engineer.”
Expanding Role for Right of Repair
There was no bill filed as of this week, but groups such as ABC-Texas and AGC-Texas hope this is the year that state lawmakers embrace expanding right to repair law.
Under current law, homeowners are required to give contractors notice of a defect and allow them the opportunity to fix the problem before they can file a lawsuit. The industry would like to expand right to repair law into other segments such as institutional construction.
No bill on this issue has been filed, yet. Fisher said ABC-Texas supports any legislation that advances the right of repair and extends it to public projects, such as school-related construction.
Additionally, ABC-Texas wants to ensure contractors are not punished if a worker whose employment eligibility is confirmed by E-Verify is later discovered as ineligible to work in the United States.
“If E-Verify tells you someone is good to go, you should be able to legally use that and should not have to be punished if later you find out that person isn’t here legally,” Fisher said.
ABC-Texas hopes to see a bill aimed at reducing the statute of repose, where contractors are liable for construction defects for 10 years.
Fisher said the average liability period in many states is five-years, and his group would like to see Texas fall in line with that number. But, he added, ABC-Texas is willing to back legislation that would shorten the existing state statute to seven years. Again, no bill had been filed on this issue, yet.
ABC-Texas also seeks legislation that requites neutrality in bidding and awarding construction contracts using state resources. Fisher said this would promote efficiency and open competition in state government contracting.
In support of this goal, District 9 Sen. Kelly Hancock, R-Fort Worth, has introduced Senate Bill 473, while District 63 Rep. Tan Parker, R-Flower Mound, has filed House Bill 985.
Members of the ABC-Central Texas Chapter attended Legislative Days this week in Austin. Courtesy: ABC-Central Texas.
Local Government Conflicts
Additionally, ABC-Texas hopes to soon see a bill filed requiring greater consistency in employment regulations. Fisher said his group, among other business organizations, are concerned about whether cities such as Austin and San Antonio are overstepping their bounds with ordinances affecting employer/employee relations.
The state Supreme Court ruled that Austin’s paid sick leave ordinance violated the state’s minimum wage law. Now, business groups are scrutinizing a similar ordinance enacted by the city of San Antonio last year.
“This needs to be handled at the federal and state level,” Fisher said. He added that local non-discrimination ordinances should be exempt from any legislation they wish to see with this issue.
AGC-Texas, too, backs legislation addressing right to repair, design defects, the lien law, E-Verify, and the statute of repose. Additionally, AGC-Texas supports legislation that would: require public school districts to spend settlement/verdict proceeds on repairs; and protect against price gouging during and after natural disasters.
While AGC-Texas monitor these and other topics this legislative session, Albright, government affairs director, told VBX that an overriding priority for his group is ensuring an adequate stream of funds for road infrastructure projects. Texas Department of Transportation and local planning agencies have enjoyed the new revenues resulting from state Propositions I and 7, both approved by voters in the last few years.
Both measures have produced $7.9 billion total in funds available and marked for road work statewide.
“Our top objective is to make sure those funds continue to be appropriated to TxDOT,” Albright said.
Albright declined to say how AGC-Texas views industry-related bills proposed thus far this legislative session. The group, Albright said, would rather wait for all of its chapters and members to digest information about such proposals before the main statewide group officially weighs in on them.
Mandatory Workers’ Comp Coverage
Texas has been an outlier state for years where worker’s compensation law is concerned. Unless the employer is a public agency, or some general rule applies, employers can opt-out of the state workers’ compensation insurance program. For decades, this has left many a laborer or skilled craftsman left in the lurch when seriously injured.
Two bills have been filed, HB 750 and SB 163, that would require coverage for employees of general contractors and subcontractors in the building trades.
Texas AFL-CIO is touting what it calls a “fair shot” agenda, applying it to proposed bills that affect the construction industry and other trades addressed by the labor union.
The organization is emphasizing issues it has not fully explored in past legislative sessions, including expanding access to college and apprenticeships; improving benefits, wages and health care access; justice for migrant workers; and looking at how technological advances affect the nature of work itself.
“The top-line question we will ask on every bill is whether it advances a fair shot for working families,” Texas AFL-CIO President Rick Levy said in a press release.
“Many bills will fall outside that test altogether. We will be laser-focused on supporting the bills that advance working families and opposing the ones that set us back.”
VBX did not hear back from Texas AFL-CIO officials about that organization’s stances on currently proposed legislation.
Edmond Ortiz is a San Antonio-based freelance reporter and editor. He has worked for the San Antonio Express-News and Prime Time Newspapers. He is a contributor to Virtual Builders Exchange and the Rivard Report. His Twitter handle is @satscribe.
Adolfo Pesquera (Reporter/Editor) is a veteran news journalist. He has worked for Hearst Corp., American Lawyer Media, News Corp and Freedom Communications. His work has been published in newspapers and magazines across the USA. He is a journalism graduate of UT-RGV. He writes, edits and creates digital pages for VBX.