Legal-Ease for Mediators Symposium - Construction Syllabus
Sponsored by the Los Angeles County Bar Association Dispute Resolution Service DRS Southern California Mediation Association (SCMA)
March 7, 2009
March 7, 2009
Houses, apartments, factories, offices, schools, roads, bridges and dams are only some of the products of the construction industry. This industry’s activities include the building of new and the remodeling of existing structures, including site preparation, as well as additions and modifications to existing ones. The industry also includes maintenance, repair, and improvements of these structures and the manufacturers and suppliers of an endless list of building materials and products.
In the State of California, contractors are regulated by the Contractors State License Board (CSLB) and are classified in accordance with the Business & Professions Code into three major classifications, or license categories:
A - General Engineering Contractor 1
§7056. “A general engineering contractor is a contractor whose principal contracting business is in connection with fixed works requiring specialized engineering knowledge and skill, including the following divisions or subjects: irrigation, drainage, water power, water supply, flood control, inland waterways, harbors, docks and wharves, shipyards and ports, dams and hydroelectric projects, levees, river control and reclamation works, railroads, highways, streets and roads, tunnels, airports and airways, sewers and sewage disposal plants and systems, waste reduction plants, bridges, overpasses, underpasses and other similar works, pipelines and other systems for the transmission of petroleum and other liquid or gaseous substances, parks, playgrounds and other recreational works, refineries, chemical plants and similar industrial plants requiring specialized engineering knowledge and skill, powerhouses, power plants and other utility plants and installations, mines and metallurgical plants, land leveling and earthmoving projects, excavating, grading, trenching, paving and surfacing work and cement and concrete works in connection with the above mentioned fixed works.”
B - General Building Contractor 1
§7057. (a) “Except as provided in this section, a general building contractor is a contractor whose principal contracting business is in connection with any structure built, being built, or to be built, for the support, shelter, and enclosure of persons, animals, chattels, or movable property of any kind, requiring in its construction the use of at least two unrelated building trades or crafts, or to do or superintend the whole or any part thereof.”
“This does not include anyone who merely furnishes materials or supplies under Section 7045 without fabricating them into, or consuming them in the performance of the work of the general building contractor.”
(b) “A general building contractor may take a prime contract or a subcontract for a framing or carpentry project. However, a general building contractor shall not take a prime contract for any project involving trades other than framing or carpentry unless the prime contract requires at least two unrelated building trades or crafts other than framing or carpentry, or unless the general building contractor holds the appropriate license classification or subcontracts with an appropriately licensed specialty contractor to perform the work. A general building contractor shall not take a subcontract involving trades other than framing or carpentry, unless the subcontract requires at least two unrelated trades or crafts other than framing or carpentry, or unless the general building contractor holds the appropriate license classification. The general building contractor may not count framing or carpentry in calculating the two unrelated trades necessary in order for the general building contractor to be able to take a prime contract or subcontract for a project involving other trades.”
(c) “No general building contractor shall contract for any project that includes the "C-16" Fire Protection classification as provided for in Section 7026.12 or the "C-57" Well Drilling classification as provided for in Section 13750.5 of the Water Code, unless the general building contractor holds the specialty license, or subcontracts with the appropriately licensed specialty contractor.”
(Amended by Stats. 1997, Chapter 812 (SB 857).)
C - Specialty Contractor 1 (commonly referred to as subcontractors or “subs.”)
7058. (a) “A specialty contractor is a contractor whose operations as such are the performance of construction work requiring special skill and whose principal contracting business involves the use of specialized building trades or crafts.”
(b) “A specialty contractor includes a contractor whose operations include the business of servicing or testing fire extinguishing systems.”
(c) “A specialty contractor includes a contractor whose operations are concerned with the installation and laying of carpets, linoleum, and resilient floor covering.”
(Amended by Stats. 1991, Chapter 1160 (AB 2190).)
Construction usually is conducted or coordinated by general contractors, who specialize in one type of construction such as residential or commercial building, yet there are exceptions. General contractors customarily take full responsibility for the complete job, except for specified portions of the work that may be omitted from the general contract.
Although general contractors may do a portion of the work with their own crews, they often subcontract most of the work to heavy construction, mechanical, electrical or specialty trade contractors.
Subcontractors usually do the work of only one trade, such as painting, carpentry, or electrical work, or of two or more closely related trades, such as plumbing and heating. Beyond fitting their work to that of the other trades, specialty trade contractors have no responsibility for the structure as a whole. They obtain orders for their work from general contractors, architects, or property owners. Repair work is almost always done on direct order from owners, occupants, architects, or rental agents.
Construction is heavily dependent upon business cycles. Changes in interest rates and tax laws effect individual and business decisions related to construction activity. State and local budgets effect road construction and maintenance. Changes in regulations can result in new construction delays or stop planned projects. The effects of these various influences can be short term or long term.
1 Source: Contractors State License Board. Business & Professions Code, Division 3, Chapter 9. Contractors, Article 4. Classifications
REGULATION OF CONTRACTORS IN THE STATE OF CALIFORNIA
Created in 1929, the Contractors State License Board (CSLB) is the California consumer protection agency charged with licensing construction contractors who work in the State, resolving consumer complaints, and enforcing State laws pertaining to contractors. CSLB licenses or certifies contractors in 46 categories and registers home improvement salespersons.
The California Contractors State License Board has published the “California License Law and Reference Book” which describes the many legal requirements effecting contractors. It delineates the laws, rules and regulations effecting the day-to-day operations and procedures required for the business of construction contracting.
The “California License Law and Reference Book” is an amalgamation of numerous State laws or codes, such as the Business & Professions Code, Health & Safety Code and the Civil Code which all contain provisions that regulate the activities of all persons constructing buildings in the state whether they are licensed or not. In the case of the “Owner-Builder,” they are not required to be licensed to construct or remodel their own home, but they must contract with licensed subcontractors to perform the work. (See Business & Professions Code, § 7044.)
To further add to the plethora of laws and codes we also have the building codes and standards which regulate the “means and methods” which form requirements for the conduct of building construction. The aforementioned amalgamation of “Codes” are updated annually and incorporate changes signed into law by the Governor and take effect on the first day of January, each year.
The Building Codes and Standards, however, are published every three years and are known as the California Code of Regulations (CCR), also referred to as the California Building Code (CBC).
The California Codes -
– Part 1: California Building Standards Administrative Code
– Part 2: California Building Code, Volume 1
– Part 2: California Building Code, Volume 2
– Part 6: California Energy Code
– Part 7: California Elevator Safety Construction Code
– Part 8: California Historical Building Code
– Part 10: California Code For Building Conservation
– Part 12: California Referenced Standards Code
The current adopted edition of the California Building Code is the 2007 Edition (as of this writing), while the previous edition was the 2001 Edition (this is the exception to the three year rule). The California Codes are the minimum adopted “Standards” and depending upon which jurisdiction a particular project is located, the construction work may be subject to additional code and zoning regulations which are more restrictive than the California Codes. Examples of this would be the City of Los Angeles and the City of San Francisco which have their own indigenous codes, standards and ordinances.
By now you are probably beginning to see the complexities of the business of construction. It gets even more complex. The framers of the building codes are a professional organization known as the International Code Council (ICC) (formerly called the International Conference of Building Officials [ICBO]). The ICC utilizes other engineering and professional associations for research, peer review and specialized testing and reporting of building products such as the American Society for Testing and Materials (ASTM), the American National Standards Institute (ANSI), and of course CAL-OSHA.
MEDIATING THE LITIGATED CONSTRUCTION CASE
As with any matter before the mediator, there is one resounding factor which is critical to the success of the process and that is: “KNOW THE SUBJECT MATTER BEFORE YOU.”
Construction is an extremely complex subject and is fraught with highly technical terminology which is unique only to the industry. The construction mediator will be confronted by not only the lawyers, insurance adjusters and other involved parties, but the contractor as well.
The most prevalent type of construction case that will be referred through the ADR office of the Los Angeles County Superior Court is that of homeowner v. contractor disputes. Typically, these issues would consist of defective workmanship, water intrusion, mold, schedule delays, cost over-runs, change orders and over payment to the contractor.
The “nature of the beast” is that contractors are engaged in a uniquely rough-and-tumble type of business, wherein the contractor must first get a lead for the project, provide a free estimate and usually be the lowest bidder. In the case of residential construction and in particular home remodeling (improvement), contractors most commonly available for this type of work are small business operators (either sole-proprietors or they may even be a corporation, other than an LLC).
Unfortunately, there is a growing segment of UNLICENSED people representing themselves as being licensed contractors, which creates another other set of issues very often leading to financial disaster for the homeowner.
The mediator in construction disputes must be ready for the nature of the construction contractor. Contractors are profit motivated and must be the driving force for their projects. The contractor must either hire subcontractors to perform the specialty work or hire their own (hopefully) skilled employees to perform the work. In doing so the contractor is constantly confronted by multiple personalities, levels of skill and willingness to perform, the weather, finances, building code regulations, building inspectors, and on it goes. These factors are ripe for confrontations and disputes.
This confrontational nature common to the construction personality may make them difficult to deal with, especially if the mediator is not accustomed to “in-your-face” personalities, or does not speak ‘CONSTRUCTION-ESE.” As indigenous with most professions, construction has its own language and terminology that dates back to ancient times and has evolved through the ages with new technologies.
The mediator whose main style is “Transformative” may often have difficulties with the contractor, as contractors are not interested in the “touchy-feely” or “feel-good” approaches. This has been referred to as “combat in drag.” Construction people will most often respond more favorably to the “Evaluative” approach wherein the mediator holds up a “mirror” reflecting the factual issues being disputed in technical terms which the contractor can best understand. Before the mediator launches into the area of “DOLLARS” they must first understand the nature of repair methodologies and how the repair methods and sequences can not only mitigate the issues, but how they can have a direct effect upon the issues of cost.
Once the mediator can successfully break through the technical and factual issues which underlie the disputed issues at hand, the mediator can then move into the “Facilitative” mode and facilitate the parties to move toward resolving the issues actually being disputed and then reach agreement on the remediation methods which translate directly to cost.
It is imperative for the mediator to have not only the knowledge of the subject matter at hand, but to draw from their own life’s experiences and apply common sense in their approach to which the parties can relate.
Reliance on case law is not enough when dealing with construction disputes. The mediator should be aware of what the industry is comprised of and how it is intended to work within not only the prevailing laws, building codes and standards concomitant with the timeline of the issues, but the relevant technologies as well.
While it is not entirely necessary for the mediator to be a consummate expert or authority on the subject, having a solid knowledge base of how the processes are supposed to work, nomenclatures used, technologies and materials relevant to the issues would help considerably in achieving a quicker and successful resolution.
Michael S. Poles, GC, CM, RCI, DABFET, ACFE is the founding executive of MPGroup.
Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.