Fairness in the construction industry should be taken very seriously because when all parties are acting in good faith, the industry operates at maximum efficiency. Local and state governments and agencies are starting to step in and step up to ensure that everyone is playing by the rules. This past year, we have seen a flurry of states passing amendments to expand protect construction parties financially. Recently this summer, state and local governments have been cracking down on corruption and attempting to weed out the bad eggs of the construction industry.
Big Brother to the Rescue
2015 has seen many state governments review and amend their construction laws to promote fairness and expand protection to parties in need. Virginia amended laws pertaining to lien waivers that now forbids suppliers and subcontractors from being forced into signing lien waivers and sacrificing their mechanics lien rights. California courts took a strong stance on prompt payment.
In the apparent conclusion of a case that has been being fought over a the course of a decade, a California court of appeals came down firmly on the side of fairness in payment, to the tune of a $9 million award. In the case, it was determined that a public school district retained and didn’t not promptly pay a little less than $700,000 even after stop notices delaying the payment of that money were released.
Even more eye-opening events have occurred this year. On June 15-16, the National Association of State Contractors Licensing Agencies headed a national sting operation spanning over nine states including Arizona, California, Florida, Nevada, Rhode Island, South Carolina, Texas, Utah and Washington. The sting resulted in 9 arrests, 5 civil citations, 16 warnings, 112 notices to appear, 159 administrative citations, and 97 cases opened for investigation.
Yes, the government takes fairness in the construction industry very seriously. Just ask the Manhattan District Attorney. The D.A. announced on August 5th that a multi-agency Citywide Construction Fraud Task Force will be formed and headed by the D.A.’s office. This initiative will completely change enforcement in NYC, implementing new compliance standards and having much more involvement in the industry. The hopeful result is that construction parties can spend less time worrying about unfairness in the industry and more time focusing on the work at hand. After all, New York City has a multi-billion dollar construction industry to protect. Anyone who has even spent a day in New York City can attest to how important the construction industry is to the Big Apple.
Why So Much Focus on Construction Fairness?
New York is just a piece of the pie. The national construction industry is valued at over a trillion dollars annually. In other words, the industry greatly affects many, if not all, aspects of our economy and daily lives. Of course, where there is money, there is crime and unfairness. The structure of the construction industry almost breeds bad faith business. Every party on a construction project is extremely dependent on one another in a financial sense. The way money trickles down the hierarchy of a construction project opens up the possibility for certain parties, usually the lower-tier, to be completely cheated out of hard-earned payment.
With new laws in place and government agencies stepping up the monitoring of corruption and unfairness, many construction parties can breathe a little easier. Protective laws are a good, but being proactively fair is the real goal. Good faith business practices are the key to keeping a construction project, and the industry as a whole, in tip-top shape. Construction laws should be viewed as a last resort. They are a safety-net, or sometimes even motivation, for parties to act cordially towards one another, but when laws and legal disputes come into play, situations can become expensive and tenuous.
How Can We Play Nice?
The simple answer would be to always have good intentions, be honest with the people and parties you work with, and follow the law. To be more specific, there are certain business practices construction parties can implement into their routines that would greatly improve business relationships and the overall efficiency of the industry:
- If a financial issue arises, be upfront about it so the issue can be resolved
- Make sure you monitor the parties you are contracted with and responsible for
- Be clear with your intentions – this can be achieved through proper drafting of contracts
- Hire the right professionals to handle work you can’t: i.e. accounting, legal, etc.
- Stay on top of deadlines
- Follow prompt payment guidelines
Some of these tips may apply to only higher-tier or lower-tier construction parties, but the message behind each tip is all the same. Fairness is paramount to success in the construction industry.