In every session the Florida Legislature enacts laws that affect those in the construction industry. Sometimes those provisions are helpful and other times they are not. This year's session was generally helpful, but not completely. Passing the laws is only the first step in a complicated process. The governor may veto any of the laws passed. He has ten days to do this after the bills are received by his office. The bills are not sent to the governor immediately. They are released over a period of several weeks allowing time for the governor's office to analyze them and to decide whether to veto. The governor has "line item" veto power which means he can veto part of a bill. However, this type of veto power is limited to appropriations. As a result he must accept or reject these bills in their entirety. It does not appear that any of the bills discussed below are candidates for veto but that can change.
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Senate Bill 870. Certain provisions
of chapter 218 relating to payment by local government
entities, generally known as the Prompt Pay Act
were modified. It's application was previously
limited to counties and municipalities. This bill
adds school boards, school districts, authorities,
special taxing districts and other political subdivisions
of the to the entitles covered by the Act.
The Act was also amended to clarify
that construction services were included in its
coverage. "Payment request" was defined to fit
the normal practice of the industry and it was
clarified that the project architect or engineer
or any person acting on behalf of the local government
entity is their agent.
Previously, there were no limitations
on how long the architect or engineer could hold
the pay request and no time limit was running.
The time to respond was increased from 20 to 25
days but it starts on the date on which the payment
request is stamped as received by the architect/engineer
or the entity itself. If no architect or engineer
is required to approve it, payment is due 20 days
after the date on which it is stamped as received.
In any event, the governmental entity is now required
to pay undisputed portions of any pay request.
When the party contracting directly
with the governmental entity (usually the general
contractor) receives payment, it is required to
make payment to its subcontractors and suppliers
within fifteen (15) days after receipt of payment.
The subcontractor, in turn, is required to make
payment to its subcontractors and suppliers within
fifteen (15) days after its receipt of payment.
The statute does allow withholding of disputed
amounts provided that the contractor or subcontractor
notifies the party whose payment is disputed,
in writing, of the amount of dispute and the actions
required to cure the dispute. Again, the contractor
and subcontractor must pay all undisputed amounts
due. Payments not made in accordance with this
Act bear interest at the rate of 1% per month
or the rate specified in the contract, whichever
is greater.
Payment of interest is mandatory
and this revision provides that the local government
entity may not have a contract for construction
which prohibits the collection of interest. In
the most contested section, the statute was modified
to allow attorneys' fees to the prevailing party.
However, the court must find that the non-prevailing
party withheld the portion of the payment without
any reasonable basis in law or fact. The effect
of this is to reduce substantially the opportunity
to collect fees. The governmental entity is also
required to go through a dispute resolution procedure
as well.
Remember that the Act requires the
contractor to bill for the additional Interest.
The unpaid interest compounds monthly with any
portion of a month treated as a full month. The
limitation to 12 months interest was also eliminated.
Hopefully, this will lead to quicker payment by
the affected governmental entities. The effective
date of the revisions is July 1, 2001.
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Senate Bill 428 was the catch-all
bill for matters affecting the construction industry.
Chapter 489 which regulates contracting activities
has been modified to require for the first offense
of unlicensed contracting a Notice of Noncompliance.
The fine for anyone found guilty of unlicensed
contracting Construction Industry Licensing Board
has been increased from $5,000.00 to $10,000.00.
In addition, investigative and legal costs for
the prosecution of the violation may be collected.
DBPR is also directed to create a web page dedicated
to listing known information concerning unlicensed
contractors.
In a modification to the statute
dealing with statute of limitations it was clarified
that actions against a payment bond must be brought
within one year. Chapter 713 which covers construction
liens had some minor changes . Section 713.01
was changed to add temporary help firms to the
definition of a subcontractor. Under Section 713.02,
it stated that no lien shall exist unless the
contractor, subcontractor or sub-subcontractor
is licensed. This section was clarified to refer
only to those who are required to be licensed.
This clarifies what had been existing practice.
This bill also set in motion the
elimination of faxes as a method of service of
notices under this Chapter. The references to
fax numbers in the Notice of Commencement have
been deleted. All use of faxes for service is
eliminated as of July 1, 2002 An added provision
allows service of notices by overnight or second
day delivery services such as FedEx.. Section
255.05 relating to bonds on public projects was
amended as to the Preliminary Notice primarily
to cover practices of notice services. It is sufficient
that the notice service maintain a log of registered
or certified mail. This brings it in line with
similar provisions for liens. The notice provision
was also modified to specifically include partnerships
and providing that service on a partner is sufficient.
Section 713.23 relating to payment
bonds now permits a claim for unpaid finance charges
due under the contract. This had previously been
allowed for a Claim of Lien, so this harmonizes
the two provisions. Some additional requirements
were added for the use of a Conditional Payment
Bond. The bond must now be listed in the Notice
of Commencement as a Conditional Payment Bond
and the words "Conditional Payment Bond" must
appear in the title of the bond at the top of
the front page.
Last year the Legislature modified
Section 725.06 relating to indemnities in construction
contracts. It had essentially voided any indemnification
for a person's own negligence. This created quite
a ruckus and Southern Bell led a charge to have
that provision nullified. It was partially successful
and the section has been modified to provide that
indemnity must contain a monetary limitation on
the extent of the indemnification that bears a
reasonable commercial relationship to the contract
and must be part of the project specifications
or bid documents. The monetary limit provided
to the owner of real property by any party in
privity of contract (usually the general contractor)
cannot be less than $1 million per occurrence
unless otherwise agreed to by the parties. The
other limitation is that the indemnification may
not be required for gross negligence, willful,
wanton or intentional misconduct, statutory violations
or punitive damages. It then excepts out statutory
violation of punitive damages which are caused
by or result from any acts or omissions of the
indemnitor or any of its subcontractors or suppliers.
The changes set out above are applicable
only to private contracts. The indemnify limitations
enacted last year are now applicable only to contracts
with a public agency or in connection with a public
agency's project (meaning subcontracts). As a
result, there may be a need to consider having
two different indemnity agreements for public
and private work. These changes take effect July
1, 2001 except for the elimination of use of faxes
for service.
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Senate Bill 1516 provides that a
public entity, including specifically a school
board, may not require a contractor to obtain
a surety bond from a specified agent or bonding
company. This is the only part of the attack on
theowner-controlled insurance programs which made
it through the Legislature.
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Senate Bill 428 continues implementation
of a state-wide building code. It enacted the
recommendations of the Florida Building Commission
providing for a state product approval system
and other related matters. The effective date
of the Florida Building Code is delayed and will
now take effect on January 1, 2002, along with
the state-wide Fire Safety Code. The bill also
contains provisions relating to water well contractors,
construction of swimming pools, technical amendments
to the Florida Building Code and calls for a study
of the necessity for universal elevator keys for
emergency personnel. The bill also allows cities
and counties to require one electrical journeyman
be present on large commercial construction projects.
This is defined as projects in excess of 50,000
square feet. It also adds the requirement of licensing
for elevator contractors and certificate of competency
for elevator mechanics and inspectors.
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This is essentially the non-controversial part of the workers' compensation changes that were attempted. The controversial part, which primarily called for elimination of all exemptions for workers' compensation in construction, did not pass. Some of the changes included in this bill are:
1. Allows employers to choose whether or not to use managed care to deliver workers' compensation medical benefits.
2. Revises or repeals various reporting requirements.
3. Grants qualified rehabilitation providers access to claimant's medical records.
4. Provides procedures for lump sum settlements.
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There were several bills that were
supported by most construction industry organizations
that did not pass. For example, the prohibition
of union-only project labor agreements failed
at the last minute. The senate bill reached the
floor and was up for its final vote. At this point,
amendment required a two-thirds vote. An amendment,
which exempted 70% of the State from the provisions
of the bill, was added at that time. This essentially
gutted the bill. There was an attempt to prohibit
owner controlled insurance programs. As noted
above, only the prohibition of directed suretyship
for public entities passed.
There appeared to be fairly strong
support for eliminating exemptions to workers'
compensation in construction. The dispute fell
into whether or not they would be eliminated immediately
or over a period of time extending out to 2004.
The House and Senate could not agree on the language
and time ran out. Single tier licensing for electricians
failed. The concept is that on a day certain,
no additional registered electrical licenses would
be issued. All registered contractors would receive
a local certified license and for a period of
five years, local certified contractors could
grandfather into a state certified license if
certain requirements were met.It is expected that
these issues along with others will be raised
again in next year's session.
If you need additional information, please contact
our office and we will be happy to assist
you.
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