ISA News

Author: David S. Wagner, 317.237.1213, david.wagner@bakerd.com

On June 28, 2010, in a 5-4 vote, the Supreme Court ruled that the Second Amendment of the U.S. Constitution applies against the States. The case, McDonald v. Chicago, involved a challenge to Chicago's handgun ban. In ruling against the city, the Supreme Court determined that the Second Amendment applies not only against the federal government, as its recent decision in Heller explained, but that it also applies against States and their political subdivisions—like cities. Today's ruling effectively means that, in addition to state constitutional provisions, there is now a federal constitutional right to bear arms that cannot be infringed by state and local governments, although the scope of this new right will have to await subsequent court decisions.

The ruling is significant because it comes in the midst of a growing debate about gun rights and employers' property rights. This is particularly true in Indiana, where a new law takes effect on July 1, 2010, that prevents employers from prohibiting employees from bringing guns onto the employer's property, provided the guns are kept out of sight in the employees' locked vehicles. The Supreme Court's ruling will, in all likelihood, provide further momentum to the gun rights movement, emboldening proponents to seek additional protections under state law. It also means that employers will be forced to explain their gun policies in the context of both state and federal constitutional law. In sum, today's decision and the Indiana gun law taking effect July 1st are, in all likelihood only the opening arguments in a long debate over the scope of employers' property rights and individuals' right to bear arms.

Article by Carl Pebworth of Baker & Daniels, LLP

We have all seen the clauses – they are sometimes referred to as "pay if paid" or "contingent payment" clauses.  They typically say something like "subcontractor has no right to payment until contractor receives payment from owner for work performed by subcontractor", or "contractor's receipt of payment from owner is a condition precedent to contractor's obligation to pay subcontractor."  What does that mean and is it enforceable?

Based on long standing Indiana case precedent, if payment of an existing debt is contingent upon the happening of an event (such as payment by a third party, an owner for instance), the law will require payment within a "reasonable time" instead of permitting the debt to be avoided "eternally."  Courts in many other states have taken the same approach, reasoning that the subcontractor normally has entered into a contract with the general based on the general's reputation and financial ability to pay, not the owner's.  Therefore, unless the contract language makes perfectly clear that the subcontractor intended to assume the risk of the owner's non-payment, the language will be interpreted to mean payment within a reasonable time.

However, if a pay if paid clause is worded precisely, making it clear beyond doubt that payment by the owner to the general is a "condition precedent" to the general's obligation to pay the sub, and that the subcontractor expressly assumes the risk of the owner's non-payment notwithstanding any actions of the general contractor, the clause will likely be enforced in this state.  A carefully worded clause may be enforced even if there is no dispute as to the subcontractor's work or right to have payment made otherwise under the subcontract, and it is the contractor and the owner that are in a dispute regarding the general contractor's actions.

Notwithstanding the way in which courts interpret pay if paid clauses, subcontractors in Indiana do have options.  Because mechanics' liens are statutory creations, Indiana law provides that a general contractor's receipt of payment from a "third person", an owner, may not be a "condition precedent", limit, or be a defense to a mechanics' lien claim.  Even if the subcontract with the general contractor has an enforceable "pay if paid" clause, and for whatever reason the owner has failed or refused to pay the general, the subcontractor can still file and enforce a mechanic's lien for the full value of the work it performed.  Most owner – general contracts impose an obligation on the general to keep the project clear of liens, and, while the general's subcontract form will typically attempt to impose the same obligation on the sub through the operation of a "flow down" clause, the sub's statutory lien rights may help convince the general to make payment sooner than it might otherwise do.

For subcontractors, the moral here is, if you have the leverage to do it, insist that the payment wording be confined to "pay when" paid if you want to avoid having to wait for payment until the general and owner spend a lot of time resolving an independent dispute through arbitration or, worse, litigation.  But in that event, assuming you are not on a public project and are still within your time to file your notice, you can still lien the project and normally recover your attorney's fees to boot.
 

Local CPA Firm Ranks Tenth in Small/Medium Company Category

May 7, 2010 – Indianapolis, IN – Indianapolis’ 5th largest public accounting and professional services firm, Somerset CPAs, has ranked 10th in the small to medium sized business category in the 2010 “Best Places to Work” in Indiana awards.  Somerset previously was named a Best Places to Work in 2008, 2007 and in 2006.  (Somerset did not participate in the 2009 awards.) 

Established by the Indiana Chamber of Commerce, the Best Places to Work award program is designed to recognize and honor the best workplaces in Indiana through employer reports and employee evaluations.  Somerset is being honored for their dedication to creating a positive work environment for their employees through promoting teamwork, employee happiness and success.

“Somerset CPAs strives to create a culture of teamwork where all employees share in the success of the company.  We truly care about the well being of our employees and embrace an environment of growth and development by providing the appropriate tools our employees need to be successful,” says Donna Butler, Human Resources Manager. “We understand that our industry can be very demanding during certain peak periods, so we try to implement meaningful benefits and perks to create a balance for employees.  We have created various affinity groups to ensure our employees have a voice in all facets of our organization.” 

This year marks Somerset’s 50-year anniversary.  Somerset is made up of approximately 130 professionals, including 24 principals. Client service professional designations include certified public accountants, certified management accountants, certified fraud examiners, certified financial forensics, certified financial planners, certified valuation analysts, chartered financial consultants, chartered life underwriters and others.  Somerset provides assurance, business consulting, financial forensic, information solutions, litigation support, tax, valuation and wealth management services to businesses and individuals. Somerset has industry specialized service groups dedicated to Construction & A/E, Dealerships, Dental, Entrepreneurial, Health Care, Manufacturing and Distribution, Not for Profit and Real Estate.

Somerset CPAs and all 70 winning companies of the 2010 Best Places to Work in Indiana awards are listed in a special section of the May/June issue of the Indiana Chamber’s BizVoice magazine and at www.indianachamber.com.

About Somerset CPAs, P.C.
Somerset is a full-service certified public accounting and professional services firm made up of CPAs, business advisors and financial analysts who work to solve the business and individual challenges of their clients. With over 130 professionals, Somerset CPAs, P.C. is one of the ten largest accounting firms in the Indianapolis area. Learn more about Somerset at www.SomersetCPAs.com.

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Today is Monday.  You have a $110,000 construction project on a federal government building starting today.  You have hired 10 new employees who will supplement your current workforce.  Your new employees just reported to the office to fill out their new hire paperwork.  Connie Clerical, who is responsible for getting this done, tells your new employees to photocopy their driver's license and social security card and give her the copies.  She then has them fill out the top of the I-9 Form and staples the photocopies to the forms.  One employee says he forgot his social security card.  She tells him to bring it in next week when you have a project meeting.  Another employee tells her that he doesn't have a social security card, but he has a Mexican passport with a work authorization stamp.  She tells him that anyone authorized to work in the United States must have a social security card and that he needs to get one.  She told him to get the social security card and bring it to next week's project meeting.  After she gets the new employees' I-9 forms, she puts them in a file folder, marks it "I-9 forms," and puts the file in her "to do" pile.  She is out sick the rest of the week. 

Connie reports to work the next Monday morning.  Andy Agent, an Immigration and Customs Enforcement ("ICE") agent, shows up ten minutes later and asks to see the I-9 forms for current employees.  Connie has the file with new employees' I-9 forms in it and gives it to Andy to get him started.  Andy says he will come back on Thursday to get the rest of the forms.  A week later, you receive a letter from Andy saying he has completed his audit and is fining you $42,600.  

Here is the itemization of violations and fines:

Ten I-9 forms with three non-technical errors each (failure to complete Section 2 List A or List B& C; failure to attest to having viewed original acceptable documents; failure to complete Section 2 within 3 days of hire):  $10 x 3 x $1110 = $33,000

One employee not authorized to work in the U.S.:  1 x $3,200 = $3,200

Discriminatorily requiring two employees to provide social security card rather than any acceptable document:  2 x 3200 = $6400

Andy's letter states that this is just the preliminary fine, as he has not yet reviewed the I-9 forms for the rest of your workforce.  Then the final death knell.  The letter says that, because you are a federal contractor and you did not use E-Verify to ensure your workers were authorized to work in the United States, Andy has reported your noncompliance and your company may be debarred from performing any federal contracts for up to 10 years.

Do you think this scenario is farfetched?  Until recently, employers may have had reason to feel that this risk was remote because ICE's predecessor, INS, rarely did I-9 compliance audits.  Instead, immigration enforcement efforts largely involved raids in ethnic neighborhoods.  The Obama Administration, however, is no longer primarily targeting illegal aliens but, instead, is going after their employers to fight unlawful immigration.  To this end, ICE has hired additional enforcement agents and those agents are hard at work.  In July 2009, ICE sent out 652 Notices of Inspection and in November, it sent out another 1000 Notices.  These Notices tell employers that they are coming in, generally within 72 hours, to audit their I-9 forms.  It is common for ICE to take information gathered during the audit to obtain a warrant to conduct a workplace raid.  ICE decides who to target based on complaints and industry.  The construction industry is a prime target.

So what can you do to protect your company?  Here are some tips: 

1.)        Make sure at least two of your employees at each location where new employees complete paperwork are well trained in all aspects of I-9 form compliance so that, if one is absent, the other can ensure prompt and accurate I-9 completion.

2.)        If you are a federal contractor or subcontractor, check your contract to determine whether you are required to comply with E-Verify.  There are dollar thresholds and, aside from not requiring compliance for small contracts and even smaller subcontracts, exceptions are very limited.

3.)        E-Verify is a computerized process used to verify that the social security numbers and other identifying characteristics of your employees are consistent with government records.  Four states currently require that all employers comply with E-Verify, even if they are not a federal or state contractor.  Consult legal counsel to find out if any of the states in which you do business require that you utilize E-Verify.

4.)        Periodically conduct I-9 form audits to ensure ongoing I-9 form completion compliance.

5.)        Establish a method to notify existing and future subcontractors to comply with federal I-9 requirements.

6.)        If you are a federal contractor or do business in states that require E-Verify, develop a process to notify your subcontractors of requirements that they use the E-Verify system.

By following these simple steps, you will be far more prepared than most of your competitors and should be able to survive an I-9 audit unscathed.

On Thursday, February 25, approximately 400 guests awaited the results of the coveted ISA GC of the Year Award." By the evening's end, congratulations were due to many, but none more than Pepper Construction Company of Indiana, LLC and Kettelhut Construction Inc., each of whom won the "GC of the Year Award" in their respective categories.

Pepper Construction won in the category for general contractors with over $100 million in annual revenue and was recognized for their focus on building relationships with subcontractors and their commitment to increased diversity in the construction market. Mike McCann, Sr. Vice President and COO for Pepper, commented in an interview that Pepper has found tremendous benefit in ISA and appreciates the important role it plays in the industry. Picture: Pepper President, Bill McCarthy [far right] and members of his staff holding their Nomination, finalists and GC of the Year Awards)

Kettelhut Construction won in the category for general contractors with under $100 million in annual revenue. Steve Habben, President of Kettelhut commented after the event, "This award really means a lot to me and our employees. It signifies the positive relationships we have with the subcontractor community. Without their help through the positive relationships we've built, 2009 would not have been as great of a success as it was." Kettelhut was recognized at the event as being dedicated to positive subcontractor relations and as a key player among Indiana's General Contractors. (Picture: Kettelhut President, Steve Habben [far right] and members of his staff holding their Nomination, Finalists and GC of the Year Awards)

The 11 general contractors nominated for the award are all considered by ISA to be the "best of the best" in Indiana, with 6 having the high honor of winning their respective categories and thus being finalists in the "GC of the Year" balloting.

Those companies nominated for GC of the Year were:

• Under $100 Million of Annual Revenue
• Charles C. Brandt Construction Co.
• Kettelhut Construction Co.*
• Brandt Construction, Inc.
• Wurster Construction, Inc.*
• Meyer Najem, Inc.
• RL Turner Corporation*

• Over $100 Million of Annual Revenue
• Shiel Sexton Company, Inc.
• Pepper Construction Co. of Indiana, LLC*
• Messer Construction Co.*
• F.A. Wilhelm Construction Co.
• The Hagerman Group
• Turner Construction Company of Indiana, LLC*

* Denotes this company was a finalist for the GC of the Year Award in their category.

Also, awarded were three special awards:

Included in the presentation, Ringham updated attendees on the newly announced construction management team headed by ISA member and 4 time ISA GC of the Year recipient Pepper Construction Company of Indiana. Other ISA members on the Construction management team will be:

• The Hagerman Group
• Keystone Construction
• Shiel Sexton Company, Inc.
• Smoot Construction

Being the first major presentation for Indiana's construction industry to hear the construction plans for this project, Ringham and Modugno provided a 3-D overview of the land and the 5 buildings that will eventually complete the new hospital. In doing so, they were able to layout a schedule of when the major portions of the project will be out for bid while indicating that there was much work to be done with the construction management team to detail how each major portion of the project will be specifically bid such as electrical and mechanical packages for a particular building.

Kevin Blankenship, ISA Education Committee Chairman and Director of Business Development for Cardinal Contracting, remarked at the conclusion of the event, "This was a great opportunity for Wishard to provide the construction community with information on such a vital project to Indiana."

The Indiana construction industry, especially ISA members, will have the opportunity to again meet representatives of the Wishard project during the ISA's Fourth Annual Construction Networking Event of the Year on February 25, 2010 at the Indiana Convention Center.