WE ARE PROUD OF OUR LEGISLATIVE SUCCESSES!
This legislation requires that prior to litigation, a public entity must obtain a report detailing alleged construction defects and share the report with the contractors. Not later than the fifth day after the date a contractor receives the report, the contractor must provide a copy of the report to each specialty contractor whose work is subject to the defect claim. All contractors will then have 30 days to inspect and 120 days to repair damages if they so choose.
House Bill 1734 increases oversight of construction defect litigation by school districts and requires that proceeds from such litigation be used to repair the construction defects.
This new law places restrictions on local governments and school districts wishing to enter into contingency fee contracts for legal services. The new restrictions are similar to those currently in effect for state agencies and include requirements such as a requirement that the entity make a public statement setting forth the reason for hiring, the qualifications or the attorney and a reason why the matter cannot be pursued with in-house attorneys.
This bill provides that a contractor who contracts with a governmental entity on a transportation project is not liable for defects, or the consequences of defects, in the adequacy, accuracy , sufficiency or suitability of plans, specifications, or other design or bid documents provided by the governmental entity, or for any errors, omissions or negligent acts of the governmental entity or a third party, in the rendition or conduct of duties arising out of or related to the project specifications.
This legislation amends existing statutes governing immunity from lawsuit by governmental entities and allows the recovery of attorney fees in lawsuits for breach of contract claims under $250,000.
This bill establishes when state mandatory background checks will apply for school construction projects. Under the measure, workers on school construction projects will no longer be required to submit to a criminal background check if they are working on greenfield projects, non-instructional facilities or secure job sites at existing schools.
Prior to the passage of this of this legislation, Texas gave a general contractor and specialty contractor the ability to void a clause in a construction contract that required disputes to be decided under the law of another state, or for the dispute to be heard in another state, if the project is located in Texas. The law didn’t apply to all project participants. This bill broadens the coverage of the law to include all project participants, including architects, engineers, suppliers and equipment rental companies.
A recent evaluation of the effectiveness of the state’s current tech-prep education program determined that while student performance in certain areas had improved, more needed to be done to improve student postsecondary achievement and labor market outcomes. This legislation will address this issue by establishing a Pathways in Technology Early College High School Program for students who wish to participate in a work-based education program.
This legislation authorizes school districts or the governing body of an open-enrollment charter school to obtain accident, liability or automobile insurance coverage to protect a business or entity that partners with the school district or charter school to provide students career and technology education (CTE) training, as well as the district or school that participates in the CTE program.
Additional legislation was passed to allow CTE teachers without baccalaureate degrees to teach in charter schools, to add flexibility for apprenticeship programs in school districts, and to add options for alternative programs for workforce development for at-risk students. In addition, a bill was passed that will require more Texas Workforce Commission information to be shared with high school students, including CTE partnerships with businesses and field-based learning opportunities for students.
Effective January 1, 2016, principals of a CIP will be required to provide certain information about the CIP to a contractor who is to be enrolled in the CIP not later than 10 days before the date the contractor enters into a construction contract. This information will allow the contractor to compare the coverage provided by the CIP to the contractor’s own insurance and will allow the contractor to make an informed decision on whether or not to enter into the construction contract. In addition, a contractor may request in writing from the principal a complete copy of the insurance policy that provides coverage under the CIP.
In 2011, legislation was passed that established a process for governmental entities to contract with private entities to construct, finance, and operate a variety of facilities, including ports, pipelines, parking garages, hospitals, schools, and other public works projects. State highways were not included. Performance and payment bonds are required to be in place before the start of any public-private partnership project. The new law establishes a center for alternative finance and procurement within the Texas Facilities Commission to consult with governmental entities regarding best practices for procurement and financing of qualifying public-private partnership projects to assist governmental entities in the receipt of proposals, negotiation of interim and comprehensive agreements, and management of qualifying public-private partnership projects. The creation of the center will hopefully lead to an increase of public-private partnerships in Texas.
A new law is in place that will restrict condominium unit owners’ associations in condominiums that have eight or more units from filing lawsuits or initiating arbitration proceedings to resolve a claim relating to the construction or design of a unit on behalf of all of the owners unless the owners’ association obtains an inspection and independent third-party report that identifies and describes the condition of the specific units or common elements that are subject to the claim and obtain approval from unit owners holding at least 50 percent of the total votes in the association at a special meeting in order to file a lawsuit or initiate arbitration proceedings.
The State of Texas can no longer hide behind sovereign immunity for breach of a written construction contract in disputes of $250,000 or more. For claims of $250,000 or more, state district court will be an option for resolution of the claim. For disputes under $250,000, the state office of administrative hearings, commonly known as SOAH, will be the venue.
Public schools in Texas now have curriculum flexibility in high school graduation requirements that, in part, will pave the way for career and technical education programs in schools to train and prepare students for various certifications in the different segments of the construction industry as well as in other Texas industries, professions and careers.
The Texas Labor Code now requires that employers awarded a contract for public works must ensure that any individual performing services under the contract for that employer is properly classified as an employee or independent contractor. Any employer who misclassifies is subject to a $200 fine for each individual misclassified.
Specialty contractor payments related to real property improvements and remediation projects can now be excluded in determining the taxable entity’s total revenue for purposes of the franchise tax.
Under the revised rule, taxpayers may include as Cost of Goods Sold both direct labor costs and those indirect labor costs, other than service costs, that are subject to capitalization under Internal Revenue Code Sec. 263A and its regulations.
The enforceability of broad form indemnification and related additional insured endorsements for general construction work has now been limited by the legislature. While there are some exceptions in the bill for types of projects and certain types of indemnity agreements, the bill’s overall effect is to make unenforceable indemnification agreements that require a person to be responsible for another’s negligent acts. There is a similar restriction on additional insured endorsements on the indemnitor’s insurance policy. This legislation capped decades of work by the subcontracting industry in its repeated attempts at relief from indemnifications for negligence of others.
The first successful legislative inroads into this area of insurance provides that a general liability policy issued under a consolidated insurance program must provide a minimum of 3 years of completed operations coverage.
Many people believe that the mechanic’s lien on real property for amounts retained on a construction project is the most difficult one to perfect due to statutory perquisites, of which some are very difficult to achieve. The legislature saw fit to remove the harsh impediments in the law to give lien claimants a more reasonable path to placing a lien, while still maintaining the protections for property owners.
The legislature passed a bill that prescribes conditional and unconditional statutory lien waiver forms for construction payments. Additionally, in most all cases, a person cannot waive a right to a mechanic’s lien prior to receiving payment for work performed or materials supplied.
As a bill advanced this session, and finally passed, that establishes a process for governmental entities to contract with private entities to construct and operate a variety of facilities, TCA proposed an amendment that was accepted by the legislature to require performance and payment bonds to be in place before the start of any projects under the new law.
A measure limiting the use of broad form indemnity and additional insured clauses passed the Texas Senate 30 to 1, the House Committee 8-0, but died at the top of the Major State Calendar in the last days of the Legislative Session when a filibuster involving an unrelated issue prevented consideration of it and scores of other bills on the calendar.
Fees Legislation passes providing that if a contractor or supplier prevails in a suit involving a construction contract with a local governmental entity, the contractor or supplier is entitled to recovery of its attorney fees from the governmental entity.
Act was amended to provide that funds subject to the Act are not subject to seizure by a claim by a bankruptcy trustee for an upstream payor who files bankruptcy. The Act was also amended to overturn an appellate court decision that limited a claimant’s remedies for nonpayment on a public project to the payment bond. The language change included providing that the remedies under the TCTFA and other remedies are in addition to any remedy provided by a payment.
Because of the broad language contained in the Texas Fraudulent Lien Act, an innocent mistake or error expose the claimant to significant civil and criminal penalties. Many specialty contractors and suppliers were reluctant to file liens because of this exposure. The Act was amended to provide that a violation of the act involving a mechanic’s and materialman’s lien required the showing that the claimant filed the lien with an intent to defraud.
TCA supported legislation that treated public entities and contractors the same in the recovery of attorneys’ fees by the prevailing parties in a dispute. If public entities can recover attorney fees under the terms of the construction contract, the clause is only effective if the contractor can also recover attorney fees.
The Texas Senate passed legislation banning the use of broad form indemnification clauses and additional insured clauses in construction contracts. The measure failed to pass the House. This was the first time that this legislation had passed either chamber of the legislature.
SB 324, the contingent payment bill, was passed and signed into law. This measure provides that a contingent payment clause is not effective 1) when the specialty contractor does the work properly and the owner withholds payment because of actions of the general contractor or another or specialty contractor; 2) the owner/general contractor relationship is a sham; and 3) the enforcement of the contingent payment clause would otherwise be unconscionable. The clause is effective when the owner does not pay because the owner is insolvent. A specialty contractor can give notice to the general contractor after payment is not made in accordance with the act that the clause is not effective for future work performed after the event of non-payment.
An amendment was inserted in the tax bill at the request of TCA allowing the full deduction from its gross revenue calculation for a specialty contractor’s payments to lower tiered specialty contractors.
TCA worked with the Governor's Task Force and the legislative sponsors of the legislation that made a major revision in the business franchise tax during a Called Session of the 79th Legislature. At the request of TCA, the sponsors included a provision that allowed the construction industry to deduct the costs of materials as well as their labor costs when calculating the new business tax, often called the Margins Tax. This one change will save contractors and suppliers an amount equal to 1% of their material costs each year that they would have otherwise paid in franchise taxes. If a contractor spends $1,000,000 per year in material costs, the savings in franchise taxes would total $10,000 for that year.
TCA, working with other groups, helped to prevent the imposition of an onerous payroll tax on construction companies as a method to finance the public schools.
TCA provided input on a bill that made significant and substantially changes to the workers’ compensation law.
A measure that restricts a local governmental entity from providing construction services to other governmental entities passes.
A TCA supported measure passes that prohibits the assertion by any local governmental entity of a sovereign immunity defense in a construction contract dispute. This includes school districts, municipalities, community college districts and other special districts.
Stopped several efforts to dilute specialty contractors’ and suppliers’ rights under Texas mechanic’s lien statute.
Bill passes that overturns Texas Supreme Court ruling that gave counties sovereign immunity.
Bill passes that amends the public work prompt pay act. The bill provides a right to suspend work if the owner does not pay.
Good faith response to bond claims and surety contact information bills pass.
Passed to comptroller sunset bill that provides limitations on indemnification for state agency construction projects.
Amendment to the private work prompt pay act passes.