Kegler Brown • Construction Law Newsletter

December 1996

In This Issue

Tort Reform Bill Includes New Statute of Repose
Contractor Convicted of Bid Rigging
Fairness in Construction Contracting Bill Runs Out of Time
Design Professionals May Be Liable for Site Safety
City May Use Design-Build
City Violates Multi-Prime Bidding Statute
Waiver of Bond Rights Unenforceable
Contractors Using "Independent Contractors" Beware
Non-Union Contractor Wins Round in Job Targeting Battle

Tort Reform Bill Includes New Statute of Repose

Donald W. Gregory
Construction
Law chair

As reported in a previous issue (February, 1995), the Ohio Supreme Court threw out as unconstitutional Ohio's long-standing "statute of repose" which had prevented lawsuits from being filed against design professionals, contractors or subcontractors more than ten years after the project was completed. This new found open-end liability is a nightmare for those in the construction industry faced with defending claims years after the fact when records, employees and memories have been lost.

In an effort to find a solution that the Ohio Supreme Court might consider constitutional, the Ohio General Assembly in the 1996 Tort Reform Bill (An. Sub. H.B. 350) has instituted a fifteen (15) year statute of repose. This new law will become effective on January 27, 1997. While not providing as much protection as the construction industry would have desired, Ohio will at least have a "statute of repose" in place limiting suits on old projects.

Contractor Convicted of Bid Rigging

A former branch manager of a Toledo, Ohio contractor has pled guilty to criminal charges of bid rigging on certain federal construction contracts. He allegedly discussed with other competitors which company would be the low bidder for certain federal contracts.

This felony prosecution and conviction reinforces the serious dangers associated with any discussion between competitors of bids and prices on prospective bids prior to their submission.

Fairness in Construction Contracting Bill Runs Out of Time

As reported in a previous issue (October, 1996), the Senate passed legislation (S.B. 106) designed to remedy inequitable construction contracting practices, with the bill prohibiting "no damage for delay provisions," waiving bond rights by contract, waiving pending claims byreceipt of final payment, as well as making modifications to the anti-indemnity statute. The legislation also would allow subcontractors to file lien and bond claims despite "pay if paid" clauses and make the notice of furnishing a prerequisite for perfecting bond claims.

Unfortunately, due to the limited time left in this legislative session and the objections by certain utilities and public owners fond of such practices, S.B. 106 did not pass the House of Representatives this session. The bill will be reintroduced in the next session of the General Assembly.

Design Professionals May Be Liable for Site Safety

In an apparent case of first impression here in Ohio, an Ohio Court of Appeals has stated that architects or engineers may have tort liability for a subcontractor's injured or killed employees when the A/E had actual knowledge of the hazardous condition, or actively participated in the construction at issue or assumed responsibility for safety procedures. Nicholson v. Turner/Cargile, 107 Ohio App. 3d 797 (1995). While the Court went on to find that the architect and engineer had no liability on the facts of this particular case, the language of this decision may open the door to A/E liability for workplace accidents and makes the A/E responsible to a similar degree as general contractors for accidents injuring subcontractor employees.

City May Use Design-Build

An Ohio Court of Appeals has ruled that a city could place municipal construction work out for competitive bidding under a design-build format without violating Ohio's public bidding laws. Greater Cincinnati Plumbing Contractors' Ass'n. v. City of Blue Ash, 106 Ohio App. 3d 608 (1995). The Court ruled that the city, a charter municipality, could use its latitude under the "home rule" provisions of the Ohio Constitution to implement the design-build process without violating the state's competitive bidding statutes.

City Violates Multi-Prime Bidding Statute

Ohio Revised Code §153.50 requires that a municipality solicit separate bids for each distinct trade on the project to be constructed. The City of Mentor was found to have violated Ohio's multi-prime contractor bidding procedures by soliciting and accepting a single-prime bid on a construction project, where the City had not passed an ordinance allowing a single-prime bid in advance. Natl. Elec. Contrs. Assn., Inc. v. Mentor (1995), 108 Ohio App. 3d 373. However, the Lake County Court of Appeals stated that if the City, under "home rule," had adopted a charter provision authorizing single-prime bidding, that this charter provision would control over the state statute mandating multi-prime bidding. This decision provides municipalities with greater bidding flexibility and leaves contractors on public works with less bidding uniformity statewide.

Waiver of Bond Rights Unenforceable

In a landmark victory for Ohio subcontractors, Judge Cain of the Franklin County Common Pleas Court has ruled that a subcontract provision purporting to waive payment bond rights on an Ohio public works project is unenforceable in that it conflicts with Ohio's bond statutes. North American Specialty Insur. Co. v. Farrell Construction, Case No. 95CVH-05-3281. Don Gregory and Bill Nicolozakes of the Firm wrote the winning brief in the case.

Contractors Using "Independent Contractors" Beware

Sub. H.B. 245 has become effective and is designed to prevent contractors on public and private projects from using improper "independent contracting" to avoid the payment of worker's or unemployment compensation premiums. Laborers hired as "independent contractors" must satisfy at least 10 points of a "20 point test" (i.e., whether the person's services are available to the general public) to be considered a true independent contractor. If contractors or subcontractors violate this law they will be unable to initiate a court action seeking payment, but owners will still be able to enforce the contract against the offending contractor. Therefore, contractors and subcontractors are strongly cautioned to make sure that any independent contractors hired truly meet the 20 point test or plan to pay worker's or unemployment compensation premiums on their behalf.

The law also gives creative owners the ability to self-insure large construction projects for worker's compensation claims on behalf of contractors and subcontractors and perhaps save money for the project owner.

Non-Union Contractor Wins Round in Job Targeting Battle

There has been considerable litigation in recent years between non-union contractors, who maintain that union "job targeting" programs violate Ohio's prevailing wage law or competitive bidding statutes, and unions and union contractors who defend such programs. There have been two Ohio Court of Appeals decisions holding that state courts are powerless to rule on the validity of job targeting because these issues are pre-empted by federal law, and in particular the National Labor Relations Act (NLRA). However, on October 4, 1996, the Fourth Appellate District in a lengthy opinion ruled that prevailing wage issues raised by "job targeting" programs are not pre-empted by federal law. J.A. Croson Company v. J.A. Guy, Inc., Case No. 95CA10. Unless the Ohio Supreme Court takes the case and reverses this decision, the trial court will then be forced to rule on the merits of whether the plumber's job targeting program violates Ohio's prevailing wage law. Ron Mason of the Firm successfully argued the appeal for J.A. Croson Company.

Credits

Kegler, Brown, Hill & Ritter's Construction Law Newsletter is prepared by Donald W. Gregory for the Construction Law practice group.

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