Monthly Archives: March 2013

L&I drops proposed change to fringe calculation

In response to concerns raised by AGC and ABC, L&I will not be proceeding with a proposed change to how it calculates employer fringe benefit contributions on prevailing wage jobs.  The proposal, had it taken effect, would have increased payroll costs and taxes for many contractors and, potentially, would have exposed some contractors to retroactive payments.

The technicalities of L&I’s proposal involved the calculation of the value of the employer contributions to bona fide fringe benefits on public works projects, in particular defined contribution pension plans. Washington contractors with a defined contribution retirement plan calling for immediate employee vesting have long been able to take dollar for dollar credit for such contributions since the employees’ right to those dollars immediately vests based on their public work hours. This conforms to federal Davis Bacon regulations as well as the state prevailing wage laws and practices of most states. However, L&I was proposing that the value of the employer contribution to defined contribution pension plans with immediate vesting be divided by the total employee hours on both private and public works, typically 2080 hours, in order to arrive at the “true value” of the contribution which will count toward satisfying the prevailing wage rate.

L&I has long practiced this so-called “annualization” policy for employer contributions to health and welfare plans, vacations, and holidays, and AGC has no quarrel with this annualization since the employer contributions are “earned” by employees on all work; in other words, the employer monthly premiums are for all hours worked, not just public work. However, L&I’s proposed application of the annualization policy to contributions to defined benefit plans missed the fact that contributions into these plans are triggered only by work time on public works so that annualization is unwarranted. The upshot is that contractors participating in such plans would have their hourly contribution watered down and would have to make up the difference with higher wages with resulting increased labor burden.

The good news, though, is that L&I dropped the proposed annualization policy.  In its policy letter on the matter, L&I said, in part:

“Usual benefits are credited on an hourly basis and are expected to accrue at a regular rate.  Employers many not count benefits associated with public and private work as if they were only associated with public works projects.  L&I will generally apportion or annualize benefit contribution or costs to all hours worked over the course of a year unless an employer provides an alternate schedule and can document hours worked.  Certain defined contribution pension plans (DOL exception) do not need to meet this annualization requirement.”

Click here to see the complete five-page, L&I policy letter.

Economic News Turns More Positive – At Least for Now

The construction industry added 48,000 jobs in February—the largest monthly increase since March 2007. Year over year, the industry has added 140,000 jobs, or 2.5 percent, according to the March 8 employment report by the U.S. Labor Department. The construction industry unemployment rate declined to 15.7 percent in February, down from 16.1 percent the previous month and down from 17.1 percent from one year ago.

The nonresidential building sector added 6,200 jobs for the month and has added 20,600 jobs, or 3.1 percent, during the last 12 months. Nonresidential specialty trade contractors added 14,600 jobs last month and the segment has added 23,000 jobs, or 1.1 percent, during the past year. Heavy and civil engineering construction employment increased by 8,200 jobs in February and is up by 32,100 jobs, or 3.7 percent, compared to February 2012.

Residential building construction added 2,300 workers in February, but has only added 400 jobs, or 0.1 percent, compared to the same time one year ago. Many of the jobs added during the past year show up in the residential specialty trade contractors segment, which gained 17,100 jobs in February and has added 63,800 jobs, or 4.3 percent, during the past 12 months.

“Despite worries over automatic sequestration, high gas prices, the end of the payroll tax increase and a number of tax increases, the U.S. economy appears to be gaining momentum,” said Associated Builders and Contractors Chief Economist Anirban Basu. “Thanks to rising home and corporate equity prices, total U.S. household wealth appears to have established an all-time high.

“Corporate earnings remain solid, and for the most part balance sheets remain healthy,” added Basu. “Data also indicate that lending standards are easing, including with respect to commercial real estate. After today’s jobs report release, U.S. stock futures climbed higher.

“Perhaps even more surprising than the overall employment report was the performance of the construction industry, which ranked second in terms of job growth behind only professional and business services in February,” Basu said. “Job growth was reported in every significant construction segment, with specialty trade contractors responsible for approximately two out of every three jobs added last month.

“Heavy and civil engineering, often thought to be a leading indicator for the overall nonresidential construction sector, added 8,200 jobs in February, which represents a meaningful acceleration over prior months,” said Basu. “With the broader economy still gathering momentum and with leading indicators for both residential and nonresidential construction remaining positive, there is reason to believe that further construction job growth is ahead.

“This is not to suggest that the economy is completely out of the woods,” Basu added. “The effects of automatic sequestration, which represents roughly $44 billion in federal spending cuts during the next seven months—and then additional cuts beyond that—will gradually seep into the economy and potentially cause it to decelerate during the second quarter.
“But for now, economic performance is exceeding expectations and overall job creation is becoming more brisk even as the nation continues to trim aggregate public sector employment,” said Basu.

Dead end for workers’ comp reform?

Things started out so well.  The State Senate, way back in February, passed a package of bills to tweak the state’s workers’ compensation system.  The Senate was responding to concerns from employers who are facing the prospects of $110 million in surcharges for each of the next ten years in order to build up the system’s reserves.  Building reserves is important, but it does not have to be done by hitting employers with huge surcharges just as the economy is finding its way out of the great recession.

The Senate-passed bills included one that would have allowed more workers to accept lump-sum payments instead of lifetime pensions.  The number of lifetime pensions provided in Washington State is waaayyy above the national average, and allowing the lump-sum payment option as 44 states do is one way to reduce costs for the system and to build reserves.  SB 5127 would have lowered the age of injured workers for whom lump-sum payments is an option from 55 to 40.  Younger workers may be interested in using upfront money to set up a new way to make a living…the choice would be theirs.

Of all the workers’ comp reform bills passed by the State Senate, SB 5127 passed with the most bi-partisan support,suggesting it had a shot in the House.  However, the House leadership reportedly won’t even give the bill a hearing.  Who knows what sort of political brinksmanship will occur toward the end of the legislative session that could resurrect a bill like SB 5127, but for now, the idea seems to have run into a dead end.

 

The State Legislature Should Fully Fund the Public Works Trust Fund?

Over the past few budget cycles, the Legislature has greatly reduced the amount of funds available in the PWTF through budget transfers and legislation diverting certain revenue streams. Because the PWTF is a revolving loan fund, such actions continue to undermine the PWTF over time, even though the program is a national model that is widely supported throughout the state. These actions negatively impact job growth, economic development, and regulatory compliance in Washington State. During the recent application process, local governments and special purpose districts submitted over $1 billion in project requests for the available $685 million – even the available funding is inadequate to cover the demand for these basic infrastructure loans.

State investment in basic infrastructure is a strong and necessary foundation for economic growth, and the construction industry has yet to fully recover from the recession. The current mission of the PWTF—to fund essential infrastructure including water, wastewater, road, bridge, and solid-waste and recycling projects—is a vital part of the state’s overall economic-development strategy. According to the Department of Revenue, every dollar invested by the PWTF in basic infrastructure yields an additional $3.60 in statewide economic activity. The more than $2 billion total investment by the PWTF has generated $10.7 billion in gross construction-related economic activity.

These benefits of PWTF investment in basic infrastructure include construction contracts; production, transportation, and purchase of equipment and related goods and services; and purchases made by workers employed on PWTF-financed projects. Without this infrastructure funding, many Washington communities could not sustain, expand, and attract businesses vital to economic development, and could not meet the variety of regulatory requirements under the Growth Management Act, Clean Water Act, and other laws.

The PWTF is one of the rare programs in state government that has broad support from the full spectrum of stakeholder interests – business, labor, local government, and the environmental community.

Bill Radically Redefines ‘Employer’ and ‘Employee’

House Bill 1440 would completely change the independent contractor law and redefine employer and employee.

Ostensibly this bill supplants the current seven-part independent contractor test with a three-part test. However, buried in this is language that says an individual is an employee if the party for whom the services are performed exercises or has the right to exercise general control over the individual’s physical activities. This language belies the fact that there is actually a one-part test and it is entirely problematic for all employers, but especially contractors.  Ever since the Supreme Court’s decision in Stute, general contractors have a non-delegable duty to direct the general activities or all construction workers on a jobsite for safety purposes.  What effect would this declarative language have on general contractors and the complex interactions that occur daily between general contractors and subcontractors and all individuals working on construction sites?

In addition, the bill’s definition of employer is broad enough to include the principals of a corporation and an employee would be anyone whom an employer exerts even “general indirect control over their physical activities”.  These definitions are then spread over all aspects of labor law – prevailing wage, wage payment act, minimum wage act, and unemployment compensation.

The bill provides organized labor with legal standing to enforce the bill’s provisions on behalf of any individual, and creates new private rights of action and provides that violations of certain aspects are presumed to be a gross misdemeanor.  The bill also has severe civil penalties and punitive damages clauses.  Lastly, the bill provides for new lien rights against the personal and real property any employer against which an award is made.

The bill has been passed out of both the Labor and Workforce Development and Finance Committees.  It awaits further action in the House Rules Committee.

Skanska helps with ASC competition

 

A team led by local Skanska employees pitched in again this year in the Associated Schools of Construction Student Competition in Nevada.

The employees developed a problem statement on sustainable building and LEED that 11 student teams answered with written proposals and oral presentations.

The winning teams and their prize money were: Virginia Polytechnic Institute and State University (first place, $1,500); California State University, Fresno (second place, $1,000); and the University of Washington (third place, $500). Arizona State University won $500 for best presentation.

Skanska’s group consists of 12 employees from Washington, Oregon and California. It collaborates from October to February to develop a problem statement. This is the eighth year the employees have helped out.

Pictured on the UW student team are: (back row, left to right) Matt Watson, Kevin Marck, Eddie Baker and professor John Schaufelberger; (front row) Melody Lian, Michael Abbate and Ben Leventer.