HawaiiConstructionLaw.com

New poll on rail project released

A new Hawaii News Now and Star Advertiser poll reveals that by a 50-43 majority, more Oahu residents would rather see construction on the rail system stopped than proceed.  In the meantime, rail construction continues, and new rail contracts continue to be signed.  Today it was announced that the Rail Electrification business unit of Siemens Infrastructure & Cities Sector (which also includes Siemens Mobility) was awarded a contract to provide the electrification for the under-construction rail rapid transit system. 

New ICA Case Discusses Okada Trucking

The Okada Trucking decision issued by the Hawaii Supreme court in January 2002, changed drastically the scope of work that could be legally self-performed by general contractors licensed in the State of Hawaii.  Whereas formerly, general contractors could self-perform nearly all of the work covered by C-specialty licenses with some notable exceptions (work that required a special permit such as asbestos removal, electrical, or elevator work, for example), the Hawaii Supreme Court ruled that general contractors were only legally licensed to self-perform work that was within the scope of the specialty licenses automatically awarded to the general contractor with its general contractor license.  Thus, for example, a general contractor who one day was licensed to construct a house from the bottom up (but for certain trades such as electrical and plumbing work), suddenly found himself "unqualified" to self perform the painting, masonry, or carpentry work he had been performing for decades. 

The decision caused quite an uproar, and despite multiple efforts to address the decision through legislative amendments or through rule changes at the contractor license board, wholesale reversal of the decision was never achieved, and the industry continues to work through the repercussions of the case, even today, some ten years after the decision was first issued.

Today another such decision was handed down by the ICA:  District Council 50 of the International Union of Painters and Allied Trades v. Lopez, No. 28762. 

The case originally arose out of a DAGS project involving the installation of 10,390 vinyl slats and 476 aluminum jalousie windows.  The State put the job out to public bid, and awarded the contract to Allied Pacific Builders, Inc.  The appellants filed a petition for declaratory ruling with the administrative hearings offices, arguing that a C-22  specialty  glazing and tinting license was needed for the work.  Allied possessed a C-5 specialty license for renovations.

The hearings officer rules against Appellant, finding that the jalousie window replacement was related to and necessary for the completion of the renovation work and as such was incidental and supplemental to completion of the project.  The administrative hearings officer found no license violation, and on appeal the Circuit Court agreed.  Appellant sought further review at the ICA.

At the ICA, Appellant relied heavily upon the Okada Trucking decision, claiming Okada Trucking precluded use of the "incidental and supplemental" language to override a general contractor's prohibition on taking on work that would require it to act as a specialty contractor in an area where the general had no such license.

However, the ICA ruled that Appellant's argument did not hold in this case, where the hearings officer so clearly reviewed and found that the work in question was "incidental and supplemenetal" to the C-5 work.  The court held that the officer's findings, and the Board's approval of such findings, were entitled to deference unless plainly erroneous, which in this case they were not.  The decision was affirmed.

 

 

Did Hawaii's Legislature Insert a Statutory Pay When Paid Provision into Private Construction Contracts?

Reviewing legislative updates for the past session, I checked on the status of an act I previously noted was making its way through the legislature -- the bill was HB 1969, and as originally crafted, did not make a lot of sense.  HB 1969 was intended to apply the  prompt payment provisions currently applicable to public contracts, to private contracts.  Under the prompt payment statutes, on public projects, contractors are required to pay their subcontractors in a timely manner.

Subcontractors complained that the prompt payment provisions of the procurement code were not enough because contractors were still not making timely payments on private jobs.  They wanted the legislature to require contractors to make payments to their subs on private jobs, and crafted a bill that required payment within a set time after receipt of an invoice, stated that the contractor "may" obtain  a payment/performance bond (presumably to be paid for by the Owner?), and if the bond was not obtained, the Contractor (and Owner?) would be subject to a 1 1/2 per month interest charge on overdue subcontractor payments.  This bill made no sense -- it was part of the licensing statute, but imposed all kinds of restrictions on private contracts between owners and contractors.  How such a law would be enforced, given that the licensing statute assigns such enforcement and interpretation to the Contractors License Board, was unclear.  The bill was ultimately deferred in March, but a different iteration of the private prompt payment act, appears to have passed and become law.

The law that made it through to the governor is S.B. 2412, and the operative language is as follows:

"A contractor shall pay the contractor’s subcontractor for any goods and services rendered within ten days after receipt of an invoice by the subcontractor that goods have been delivered or services have been performed and includes any supporting documents as required by the terms of the subcontract and after receipt by the contractor of payment from the owner for the subcontractor’s work, whichever occurs later. The subcontractor shall be entitled to receive interest on the unpaid amount at the rate of one and one-half per cent per month from the date payment is due; provided that this section shall not apply if the delay in payment is due to a bona fide dispute between the contractor and the subcontractor concerning the goods and services contracted for."

The statute changes the due date for payment from 60 to 10 days after receipt of the invoice, and increases the interest rate for non-payment to 18%, but importantly, adds the language that payment is only due upon payment from the owner.  This language wasn't in the original iteration of the statute, so as a compromise position it is a pretty nice addition from the general contractors' perspective -- it effectively inserts a default pay when paid clause into private contractor/subcontractor agreements that did not exist prior to this change in the law, and is not a standard provision in industry form contracts.  And, the statute is only imposed if there is no bona fide dispute as to payment, and  if the subcontractor submits all required paperwork with its invoice. 

New Hawaii Case Upholds Theft Indictment for Unlicensed Contractor

Hawaii's contractor licensing laws already make it a criminal misdemeanor to act as if one is a licensed contractor without a contractors' license.  However, the penalty is up to one year in prison and it is not, as stated above, a felony.  In a recent ICA decision, the court upheld a trial court's indictment of an unlicensed contractor who extracted monies from an owner by, inter alia falsely representing himself as a licensed contractor.  The case, found here, is State v. Atwood, 127 Haw. 241 (Haw. Ct. App. 2012). 

The facts of the case are not cited in detail, but it appears that Atwood falsely represented himself as a licensed contractor to two homeowners, and upon the strength of that lie, entered into a construction contract, took their money, started construction, then used the start of construction to demand more monies.  He then basically pocketed the money.  Atwood was indicted for theft at the trial court level, and sought interlocutory appeal of the indictment.   Atwood argued that the trial court's indictment was predicated upon civil claims for fraud, and were improperly used to claim theft.  Atwood also argued that unlicensed contracting is already policed by regulatory agencies and further convictions outside the prescribed criminal penalties identified in the licensing statute, are now allowed.

The ICA upheld the indictment and rejected Atwood's arguments, holding that Hawaii's contractor licensing laws already recognize acting as an unlicensed contractor as a criminal act, and that nothing in the statute precludes further conviction for crimes committed by the unlicensed contractor.  Here, Atwood obtained monies from the homeowners through his false licensing representations, then obtained further sums by continuing the falsehood.  This was enough to support the indictment.  Moreover, even though the  trial court couched its language in civil terms, the actions complained of were properly laid out as a crime of theft by deception, thus the indictment must stand.

Many times when clients complain about unlicensed contractors who have stolen money from them, they want to approach the police and demand that the contractor be criminally prosecuted for his actions.  In most instances, where there is a civil dispute, the police will not get involved and take criminal action.  This case provides a vivid example of what can happen when they do -- most unlicensed contractors find themselves brought before the contractors license board and required to pay restitution plus a fine for their actions -- actual time served for unlicensed activity is rare.  But in this case, the unlicensed contractor is now subject to a felony claiim for theft, and serves notice that the State of Hawaii takes unlicensed contracting very seriously, especially when it involves homeowners. 

Residential Construction up for Second Consecutive Month

Spending on private residential construction increased for the second consecutive month in May as spending on both single-family and multifamily construction edged higher during month resulting in double digit gains for both compared to a year ago according to the U.S. Census Bureau.

Overall, the Department of Commerce released the Construction Spending report this morning. The report shows a 0.9% increase to $830 billion in spending for May. Analysts had expected to see a 0.2% increase in spending.