Consistency in Employment Regulations
Historically, Texas cities have restricted business regulation to core health and safety functions. Recently, however, some cities have begun enacting ordinances dealing with employer/employee relations.
For example, Austin adopted a Paid Sick Leave ordinance that has been found by the Texas Supreme Court to violate the Texas Minimum Wage Law. San Antonio has adopted a similar ordinance. A petition to adopt a similar ordinance in Dallas failed for lack of signatures.
There are several reasons why Texas has not already preempted such activities.
First and foremost, it has never occurred to most cities to engage in this overreach. Thus, many states where cities have made these attempts have already enacted statewide preemption statutes. Examples are Iowa and Michigan.
Second, outside groups trying to change Texas have had very limited success regulating employment practices at the state level and have turned to larger cities where they can build a political movement. Some call this trying to turn Texas into California.
In 2018, 15 business associations, including ABC of Texas, formed the Alliance for Securing and Strengthening the Economy of Texas (ASSET). The purpose of ASSET is to better inform the public of the dangers of allowing these practices by passing a statewide law preempting local governments from enacting piecemeal local employment and labor laws affecting private employer operational business practices such as employee benefits, scheduling and hiring practices.
Cities are as much the victims as are employers and employees. Most cities do not want to regulate private employer practices. Of course, employers oppose having to comply with different ordinances in every different jurisdiction. And, even employees are having their benefits dictated to them which could negatively impact wages, health insurance and retirement benefits.
ABC of Texas Position
ABC of Texas believes that employer/employee relations are best handled at the federal or state level so employers do not have conflicting requirements from city to city. ABC of Texas also believes that employer/employee relations are best handled by the employer and employee with as little government intervention as possible.
In the 1907 Texas Supreme Court case, Lonergan v. San Antonio Loan & Trust, the court held that bidding on a project implied acceptance of the sufficiency of the plans and specifications. In 1918, in a similar case before the U.S. Supreme Court, United States v. Spearin, the court held the owner that furnished the plans and specifications to the contractor, and required the contractor to construct to those plans and specifications, was responsible for their sufficiency. In 2012, the Texas Supreme Court affirmed Lonergan in the El Paso Field Services v. MasTec decision. Thus, Texas is the only state in the union deviating from the Spearin doctrine which has been affirmatively decided in 37 states.
Since 1907, construction plans have become increasingly complex. In 1907, there were no complex construction projects as exist today. In Texas, only architects and engineers are licensed to prepare construction plans and specifications. Contractors are not licensed to do that. Because of Lonergan, a person who is not allowed by law to draft plans and specifications is required to warranty those documents even if that person had no responsibility in the preparation of the plans and specifications. On major construction projects today, the plans may be hundreds of pages long with thousands of pages of specifications. It is imperative that a contractor be able to rely on the plans and specifications when preparing a bid for the owner.
Further, contractors are unable to acquire insurance for this risk which could easily exceed a company’s net worth. And, this implied warranty of constructability is passed via contract to subcontractors.
Thus, in Texas, if a contractor relies on plans and specifications prepared by licensed design professionals hired by the project owner, if the work proves to be defective due to an error in the plans and specifications, the contractors bear the liability for the defective plans and specifications.
ABC of Texas Position
ABC of Texas believes that the contractors should not be liable for defective plans and specifications furnished by the owner.
Lien Law Modernization
Quite simply, the Texas Lien Law is too complicated. It is arguably the most complex lien law in the nation. In working with other construction trade groups ABC of Texas has tried to develop a simplified approach that can be embraced by most if not all stakeholders. Of course, the devil is in the details and this project faces considerable barriers if a proposal is perceived to create a significant new disadvantage to any large stakeholder. The goal has been to simplify the preservation of lien rights and eliminate complicated tripwires without upsetting the balance in the current scheme. The goal of modernization is not to encourage liens, but to avoid the need to file liens by ensuring that contractors and suppliers are paid.
This is attempted through a system known as prior notice (or opting in) which is the most common form of notice nationwide. The current Texas scheme provides for notice to an owner after a bill has not been paid. This proposed system allows the owner to be able to check to see if payments have been made to avoid the possibility of liens. While it does require some effort to make sure payments are made, most likely that task will end up being the responsibility of the prime contractor since typically, under the current system, the prime contractor has his payments cut off until the owner gets a lien waiver (after he is notified that someone did not get paid). That also means the prime contractor of higher tier subcontractors can end up paying twice under the current system.
Another advantage to the proposed change is the use of the internet and real time notices which is authorized on a voluntary basis. There are incentives for its use since, under the proposal, if the owner does not use the web-based system, the “notices of furnishing” (the prior notices) do not have to be sent until 45 days after the furnishing (and any notice sent later only covers the 45 days preceding the notice). But, if the web-based system is used, that period shrinks to 15 days.
Resistance to change and fear of the unknown will be the most likely obstacles to any attempt to modernize the lien laws.
ABC of Texas Position
ABC of Texas supports efforts to modernize and simplify the Texas Mechanics Lien Law.
HISTORIC POLICY POSITIONS
E-Verify (Safe Harbor) - If any mandatory E-Verify bill is passed, ABC of Texas wants language assuring employers that the employer will not be penalized if the employer is a victim of fraud AND that an employer is protected from a discrimination lawsuit if the employer relies on E-Verify.
Workers' Compensation (Sole Remedy) - ABC of Texas seeks to eliminate third party lawsuits for which its members general indemnify owners. Such a change would likely require other changes in the system and are unlikely to even be initiated without a broad coalition. Any attempt to mandate Workers' Compensation for the construction industry should be used as an opportunity to advocate sole remedy.
Employee Misclassification - The construction industry has been criticized for rampant worker misclassification (classifying employees as contractors). Of course, this type of misclassification is not unique to any one industry and may even be more rampant in others. To address the fact that worker misclassification gives violators a competitive advantage over those following the law, ABC of Texas has been willing to address the issue provided that contractors are only responsible for their own hiring decisions, legitimate use of individuals as contractors is protected, and employers are not subject to increased penalties for good faith mistakes or arbitrary agency decisions.
State Breach of Contract Cleanup - Legislation was passed in 2013 to provide a waiver of sovereign immunity for state governmental entities for breach of construction contracts. While an important first step, this legislation did not provide the same coverage as the waivers for other governmental entities in Texas. This statute needs to be consistent with the waivers of sovereign immunity for construction contracts with other governmental entities in Texas including recovery of attorney's fees.
Retainage/Trust Funds – ABC of Texas supports a means of assuring that statutory retainage (which protects project owners from liability in excess of the retainage) is available to contractors and subcontractors in the case of a default. Unfortunately, the common practice appears to be to have the lender withhold the amount of the retainage, meaning the money never becomes construction trust funds. Arguably, this practice does not protect the owner since the money was not retained, but the practice most likely only becomes a problem when there is a foreclosure by the lender and the contractors and subcontractors are left with no real lien rights.
Public Employees Dues Deduction - Currently, governmental entities can legally collect dues from their employees for labor unions and employee associations. ABC of Texas believes that governmental entities should not be engaging in this practice which, in some instances, means the collectors are funding entities which have funded the campaigns of members of the governing body. In many cases, the funds collected are used to fund campaigns against businesses. This means that governmental entities are indirectly helping fund anti-business activities.
Right to Repair - In Texas, contractors are liable for construction defects for 10 years. This is out of line with other states and lends itself to predatory practices by plaintiff attorneys (waiting until year 9 and contracting with a governmental entity to perform an inspection, splitting anything recovered with the governmental entity). Texas should be in line with other states and provide a Statute of Repose closer to 5 years.