Legislative Activity Affecting Contractors and the Construction Industry – What You Should Know

Contractor Licensing Act Could Cause Confusion

Currently under consideration by the state legislature is an Act, entitled the Fair Contracting Act, providing for the licensing of contractors.   The Act defines a contractor as anyone who, for compensation, offers to undertake, undertakes to construct, alter, repair or demolish any nonresidential building, highway, road, railroad including the erection of scaffolding.  Contractor also includes a construction manager.  The Act further defines subgroups of contractors including electrical, general building, general engineering, HVAC, piping, plumbing and specialty contractors.

The Act specifically exempts certain categories of entities or individuals including one who furnishes materials or supplies without fabricating or consuming them in the construction project (this definition does not answer the question of whether a steel fabricator or other manufacturers of specialty equipment would need to be licensed even though their product is installed by others); a person who personally performs work on property they own or lease; a person who is licensed or registered as a professional under the control of any other board whose primary business is real estate sales, appraisal, development management and maintenance (not sure it is appropriate to exempt real estate agents who perform construction work); registered architects or engineers whose primary purpose is to prepare construction documents; a residential contractor; work done by a employee of the Commonwealth or other municipal corporation; work performed by owners of agricultural or farming enterprises on their property; public utility companies; and work performed by a contractor’s regular employees on property owned by the employer which is not intended for speculative sale or lease.  The last exemption may conflict with the general rule which only requires an officer of a firm, partnership, corporation or association to hold a license. 

In order to carry out the licensing of contractors, the Act establishes a board consisting of the Secretary of Labor and Industry, the Director of the Bureau of Consumer Protection, a contractor from each of the above defined groups of contractors and two public members. Under the Act the Board is given the power to promulgate regulations for the licensing of the various contractors, to establish the minimum qualifications for licensing, to enforce its regulations, to maintain a publicly accessible database over the internet on information concerning licensees and to conduct examinations.

Although the regulations developed will spell out the detailed requirements for licensing, the Act does generally direct the Board to create regulations that require an applicant to submit an application, pay an application fee (not to exceed $200) demonstrate appropriate amount of work experience, honesty, trustworthiness, integrity, and proof of financial responsibility.  The applicant must also maintain workers compensation insurance and be a U.S. citizen.

Licenses issued must be renewed yearly which will include a yet to be determined renewal fee.  In order to qualify for renewal, the applicant must have completed four hours of continuing education dealing with applicable national codes and state laws and regulations regulating the license holder.  The actual content of the courses will be approved by the Board.

The Board has the authority not to renew, suspend or revoke a license if it finds that the license is negligent or incompetent; willfully or repeatedly violated the Act; committed fraud or deceit; had a license suspended or revoked or received disciplinary action in another state; acted in a manner, with respect to contracting, that presents an immediate and clear danger to health, safety or property; or possessed, used, acquired or distributed a controlled substance.

As currently drafted, the Act provides a general understanding of things to come and the future potential for confusion which may or may not be remedied through amendments or the adoption of clear and concise regulations.  We will need to wait and see the fate of Contractor Licensing in Pennsylvania.  At the time of this writing the bill was still in house committee with public hearings schedule for July and August.  Even if acted on by the House of Representatives after the summer break, action would still be required by the Senate for passage.  Although time is limited, anything can happen.

Construction Industry Independent Contractor Act – Employee /vs/ Independent Contractor

This Act provides for definitions to distinguish between employees and independent contractors.  For the purposes of the Minimum Wage Act, Wage Payment and Collection Law, Unemployment Compensation Law, and the Workers’ Compensation Act an individual engaging or performing services in the commercial or residential construction industry are presumed to be an employee, unless that individual is free from control or direction of performance, and is in a customarily separate trade.  To be presumed an independent contractor the individual must comply with all of the following, must have a separate business location; operates under written contracts which articulate the scope and cost of work; reports income and losses for services on income tax schedules; incurs expenses related to the work; is liable for the completion of the work; individuals business success depends on income and expenses; has assets to perform the work; makes services available to other entities; has recurring business expenses; and performs the work through an entity in which they have an ownership interest.  The Act is an attempt to eliminate the improper classification of employees as independent contractors to evade compliance with Federal and Sate laws including Social Security, overtime pay, and other benefits.

New False Claims Act

HB2509  Similar to the Federal False Claims Act, the Pennsylvania legislature has introduced legislation allowing for the imposition of damages equal to three times the amount of damages the Commonwealth sustains as a result of a person knowingly submitting a false claim or record in an attempt to have the claim paid.  The same holds true if the individual conceals or avoids information which would decrease an obligation of the Commonwealth.  Commonwealth is defined broadly to include any governmental unit performing a governmental or proprietary function.

Under this Act the Attorney General is responsible for investigating and prosecuting such allegations of false claims and provides the Attorney General with broad subpoena power to investigate such allegations.