Policies that could affect your bottom line

– By Mark Ward –

To contractors erecting a barn or self-storage facility or church in the rural reaches of the American heartland, the world of Washington politics can seem far away.

Yet Geoff Burr, vice president of government affairs for the Washington-based Associated Builders and Contractors (ABC), reports, “Out of our 21,000 members, the average member fits the profile of Rural Builder readers.”

For that reason, Burr continues, the issues on which ABC lobbies federal and state legislators and policy makers “are issues that impact your ‘average’ builder, not just the big contractors and not just the big cities. In a sense, your average small-business builders are even more vulnerable because they may lack the resources to figure out increasingly complex laws and regulations.”

That sentiment is echoed by Brian Turmail, senior executive director of public affairs for the Associated General Contractors (AGC) of America. Also based near Washington, D.C., the association represents some 6,000 general contractors and 10,000 specialty contractors across the country. “Take an issue like the growing shortage of construction workers,” he states. “It’s an issue that affects builders of every size and location—and it takes legislative action to increase funding for training programs.”

What goes on in legislative committees and regulatory bodies can impact a builder’s everyday operations, concurs Timothy Royer, PE, president of Timber Tech Engineering in Denver, Pennsylvania. “Building codes are a great example of work that often draws little attention,” he explains. “Yet when new standards are developed, and when they eventually get written into state and local codes, even rural builders will feel the effects.”

Labor Issues Top Agenda
Two issues, both about labor standards, are currently at the top of the priority list for ABC’s Burr. The first is a ruling this summer by the National Labor Relations Board (NLRB) in the case of Browning-Ferris Industries of California. The Board’s decision reversed a standard, in place for 30 years, which held employers responsible only for those employees that they directly control.

The new “joint employer” standard now holds an employer jointly responsible with a staffing firm for temporary workers obtained through the firm. ABC and AGC fear the NLRB ruling will also be interpreted to mean that contractors and subcontractors are jointly liable for the latter’s work forces.

In turn, cautioned Burr, such a standard could jeopardize “responsible contractors who have established sound workplace protocols, together with their subcontractors, by deeming them both joint employers of the subcontractors’ employees. Contractors may find themselves vulnerable to increased liability, making them less likely to hire subcontractors—most of whom are small businesses.”

For post-frame builders the impacts of the NLRB ruling may be particularly worrisome. Post-frame builders often act as general contractors on behalf of the owner and may potentially subcontract the site preparation, concrete pad, building erection, building systems, and interior finishing. Under the Browning-Ferris standard they could be held jointly liable for the work forces of the specialty contractors they hire.

To combat the NLRB ruling, ABC and AGC have joined forces with more than a dozen other trade groups in a Coalition for a Democratic Workplace. The group represents a broad spectrum of interests including construction, retail, restaurant, hotel, hospital, human resources, food service, franchise, wholesale distribution, and small business.

Another top priority for ABC is opposing an NLRB ruling that permits what the association calls “ambush” union elections. Formerly, a waiting period of 25 to 30 days was required from the time workers filed a petition to form a union before an election could be held. The new standard took effect in April and removes the waiting period, shortens the time in which the employer must furnish the union a list of eligible voters, and increases the amount of workers’ personal contact information the employer must disclose to the union.

Contractors will have less time to rebut union claims, Burr believes, and workers less time to make informed decisions. “We’ve already had builders who’ve been impacted by this rule,” he adds. Two ABC chapters in Texas, together with that state’s National Federation of Independent Business affiliate, have filed suit to overturn the NLRB action. At the same time, ABC and other allies succeeded in getting the U.S. House and Senate to each pass joint resolutions decrying the new rule.

At the Associated General Contractors, Turmail says a number-one legislative priority also concerns labor—namely “dealing with the growing shortage of skilled construction workers. Over the past 30 years we’ve dismantled the nation’s vocational education system and, today, construction has become a ‘last resort’ career for young people. We lost skilled workers due to the recession and downturn in construction. Despite the recovery, they haven’t come back.”

Potential remedies include reauthorization and improvement of the Perkins Act, which provides federal funds for career and technical education, and reforming federal antitrust laws so that firms can establish joint worker training programs. AGC also lobbied for the passage last year of the Workforce Innovation and Opportunities Act. The law is designed to streamline the nation’s federal workforce development program and give more say to state and local boards in tailoring programs to local workforce needs.

On the Offensive
Both ABC and AGC are also active on issues, such as taxation and employer-provided healthcare, which affect employers generally. Both ABC’s Burr and AGC’s Turmail noted that most contractors are Subchapter S corporations or Schedule C sole proprietors and thus pay taxes at individual rather than corporate rates. While many in Washington favor reducing corporate tax rates, the two construction industry lobbies are urging legislators not to forget the thousands of small businesses who would not be helped by such reforms.

“There’s been a lot of conversation about tax reform,” reports Burr, “and how the U.S. has the least competitive corporate tax rates. But construction is tied with retail as the industry that pays the highest tax rates—just over 30 percent—because 80 percent of contractors are Subchapter S or Schedule C firms that pay at individual tax rates.”

On the federal level, Burr admits, “When it comes to regulatory activity, we’re more on the defensive. On things like occupational health and safety, previous administrations took a more cooperative approach with employers to prevent problems. But the Obama administration has pushed a more prescriptive approach that focuses on enforcement and using the regulatory hammer.”

AGC’s Turmail makes the same observation. “There are still good people at the field level in these federal agencies who take a cooperative approach to compliance,” he states. “But on a political level, the Obama administration’s attitude toward regulation has been a ‘cops and robbers’ approach that’s more about punishment than prevention.”

Nevertheless, Burr says ABC is “on the offensive at the state level.” The association, which represents nonunion or “merit-shop” contractors, has seen a growing number of states adopt “government neutrality” laws that bar “protective labor agreements” (PLAs) as a condition of performing work on publicly funded construction projects. Since 2009, to counter an executive order issued by President Obama that encouraged PLAs, the number of states with neutrality policies has grown from four to 23.

Keeping Up with Change
Challenges that face advocates for the construction industry include not only changing politics. Changing technology can likewise be a conundrum for those who favor sensible laws and regulations.

For example, Timothy Royer of Timber Tech Engineering, a consulting engineering firm that specializes in design of wood-frame buildings, points out that advances in building materials have spurred nontraditional uses for agricultural buildings.

As advanced materials and processes have permitted clear-span buildings “to become higher and wider,” Royer reports, “we’re seeing structures like riding arenas, ostensibly built for breeding animals, used for public events. We’re seeing barns used as facilities for special events like weddings or farmers’ markets, or by farmers who set up small manufacturing facilities to generate more income.”

Code officials and builders are left in a quandary. “When does an agricultural project become a commercial project?” asks Royer. “And so, for example, do you need to put sprinkler systems in riding arenas? Do you need a new code category for ‘commercial farm buildings?’ And what is the trigger for ‘commercial’ use?”

Then, too, advances in building materials mean that ever-larger agricultural structures must withstand increased wind and snow loads. “Bigger buildings serve a purpose,” Royer points out, “since you can be more efficient in your square-footage-per-animal while also improving air flow. But sometimes agricultural buildings are built to lesser load standards than equivalent commercial buildings.”

States and local code officials wrestle with such issues, especially if a building failure draws attention to a deficiency or loophole in a code. “After that,” Royer continues, “trends in code changes go from more populated states to less populated states. New Jersey, New York and Michigan have looked at commercial uses of agricultural buildings,” so that other states may follow suit and take up the issue in the future.

Technological advances in building systems also present challenges to code officials and regulatory bodies. “As the technology for ‘smart’ buildings becomes more widespread,” Royer speculates, “how will building codes deal with, say, ‘smart’ alarm systems as an aspect of building safety?”

ABC’s Burr believes that new technology is an emerging regulatory issue for another reason. “Given the construction industry labor shortage,” he suggests, “builders may be turning to more technological solutions. For example, aerial drones could help in managing a building site. So we hope that government regulators don’t step in and promulgate a lot of rules before we even have a chance to see how drone technology can be used by contractors.”

Turmail of AGC points to high-profile hacking incidents that have prompted calls for government action on data security. “But at the same time,” he says, “new regulations could affect the construction industry in unforeseen ways. Project delivery methods are changing. We’re seeing more design/build and CM [construction management] projects. For these methods to work, the different parties must be able to freely share project data with one another.”

But if new cyber-security regulations limit data that can be stored in the cloud, Turmail asks, “How can you do a design/build or CM project, since the parties need to share that data? It just illustrates how legislative and regulatory advocacy for contractors and builders is always a moving target.” RB

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