For decades, employers have depended on the rule that transferring or reassigning an employee would not give rise to an actionable discrimination claim, as long as such an action did not “significantly” change an employee’s pay or benefits. Employers, however, may no longer rely on that rule following the Supreme Court’s recent decision in Muldrow v. City of St. Louis, 601 U.S. ____ (2024).

As of last week, an employee seeking to demonstrate that their employer transferred or reassigned them in violation of Title VII of the Civil Rights Act of 1964 need show only that such an action produced “some” harm or disadvantage to an identifiable term or condition of their employment. Changes in schedule, decreased opportunities to work on important projects, alteration of responsibilities, and the loss of position-related perks, such as losing access to a company-owned vehicle—which courts previously disregarded as mere de minimis workplaces issues insufficient to establish employer liability—may now be actionable discrimination under Title VII.

What the Supreme Court did not do is explain whether there are some harms that are simply too trivial or minor to support a Title VII discrimination claim. Employers and employees alike will have to define the contours of the Supreme Court’s decision in Muldrow through future litigation. 

Following Muldrow, employers should consider exercising caution before transferring or reassigning an employee to a different position, even if it does not appear that such an action will alter the employee’s pay, benefits, or significantly injure the employee.

For guidance on this development and its impact on your organization, please contact Hahn Loeser’s Labor & Employment team.

On April 23, 2024, the Federal Trade Commission voted 3-2 to issue a final rule that bans most worker noncompete agreements. See Fed. Trade Comm’n, Non-Compete Clause Rule, RIN2084-AB74 (Apr. 23, 2024). The final rule, which becomes effective September 4, 2024, provides that it is an unfair method of competition for employers to enter into non-compete agreements with workers. 

The final rule defines “non-compete clause” as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (1) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (2) operating a business in the United States after the conclusion of the employment that includes the term or condition.” In addition, the final rule defines “worker” as “a natural person who works or who previously worked, whether paid or unpaid, without regard to the worker’s title or the worker’s status under any other State or Federal laws, including, but not limited to, whether the worker is an employee, independent contractor, extern, intern, volunteer, apprentice, or a sole proprietor who provides a service to a person.” Importantly, the final rule does not apply to non-competes entered into by a person pursuant to a bona fide sale of a business entity. Moreover, the final rule does not apply where a cause of action related to a non-compete accrued prior to the effective date.

With respect to existing non-compete restrictions, specifically, non-compete restrictions entered into before the final rule’s effective date, the Commission adopts a different approach for senior executives versus other workers. Existing non-compete restrictions with senior executives may remain in force, as the final rule does not cover such agreements. The final rule defines “senior executive” as “a worker who: (1) was in a policy-making position; and (2) received from a person for the employment: (i) total annual compensation of at least $151,164 in the preceding year; or (ii) total compensation of at least $151,164 when annualized if the worker was employed during only part of the preceding year; or (iii) total compensation of at least $151,164 when annualized in the preceding year prior to the worker’s departure if the worker departed from employment prior to the preceding year and the worker is subject to a non-compete clause.”

For workers who are not senior executives, existing non-compete restrictions are no longer enforceable after the effective date. Notably, employers must provide these workers with existing non-compete restrictions notice that the non-compete restriction is no longer enforceable. The final rule includes model language that satisfies this notice requirement.

Within 24 hours of the Commission’s vote on the final rule, two lawsuits were filed challenging the Commission’s authority. At present, no court has made a ruling that would prevent the final rule from going into effect. Hahn Loeser’s labor and employment team is monitoring the status of the lawsuits and will update this alert if a court issues an injunction that stops the final rule from going into effect.

On April 23, 2024, the U.S. Department of Labor (DOL) announced that effective July 1, 2024, the salary threshold for the overtime exemption for employees employed in a bona fide executive, administrative, or professional capacity will increase from $684 per week ($35,568 per year) to $844 per week ($43,888 per year). The salary threshold will increase again on January 1, 2025, to $1,128 per week ($58,656). To keep pace with changes in employee pay and to remain effective in helping determine exemption status, the DOL will update the salary threshold every three years, beginning July 1, 2027, to reflect current wage data.

The salary threshold is one of three factors which determines whether an employee falls within the executive, administrative, or professional exemption from federal overtime requirements. To be considered exempt, the employee must:

  • Be paid a salary;
  • Be paid at least the specified weekly salary level; and
  • Primarily perform executive, administrative, or professional duties, as provided in DOL regulations.

The DOL also announced that the salary threshold for highly compensated employees will increase to $132,964 per year effective July 1, 2024, and to $151,164 per year, effective January 1, 2025. The salary threshold for highly compensated employees will likewise be updated every three years.

With the proliferation of wage and hour litigation, employers should take this opportunity to review employees’ primary duties to confirm continued compliance with the standard duties tests, in addition to compliance with the new salary threshold.

If you have questions regarding your wage and hour compliance, including classification of employees, please contact a member of Hahn Loeser’s Labor and Employment Practice Group.

Warranties provided to project owners are often some of the most-negotiated provisions in a construction contract.  What will the warranties cover?  How can they be enforced?  Perhaps most importantly: how long will they be in force? Arguments regarding one recent construction project in Ohio demonstrate the importance of knowing whether contractual language does, or does not, create a warranty—and how long the project owner can attempt to enforce it.

Ohio, like many states, has enacted a statute of repose applicable to construction matters: R.C. 2305.131.  In essence, the statute of repose bars a party from bringing claims for injury or property damage arising out of defective construction later than ten years from the date of substantial completion of the project.  See R.C. 2305.131(A).  The statute serves an important public policy goal of preventing “stale litigation” where availability of evidence may be problematic, documents may no longer be preserved, and memories may have faded due to the passage of time.  See, e.g., Board of Education of Martins Ferry School District v. Colaianni Construction, Inc, et al., 219 N.E.3d 1021, 2023-Ohio-2285, ¶ 17 (7th Dist.).  As with many statutes, however, the devil is in the details because R.C. 2305.131 contains several exceptions.  Of interest here, R.C. 2305.131(D) states that the ten-year statute of repose does not prevent an action against “a person who has expressly warranted or guaranteed an improvement to real property for a period longer than [ten years after substantial completion] and whose warranty or guarantee has not expired as of the time of the alleged bodily injury, injury to real or personal property, or wrongful death in accordance with the terms of that warranty or guarantee.”  (Emphasis added.)  Thus, if the contractor provided a warranty lasting more than ten years from the date of substantial completion, that warranty trumps the statute of repose.

In Board of Education of Martins Ferry School District v. Colaianni Construction, Inc, et al., the project at issue involved construction of two new school buildings for the Martins Ferry School District (the “District”).  The District claimed that the roofs of the buildings at issue had been defectively constructed and required complete removal and installation of new roofs.  Although the project at issue was substantially completed in 2008, the owner did not file its complaint until 2019 (i.e., beyond the statute of repose’s ten-year cutoff).  The District therefore attempted to use the exception provided in R.C. 2305.131(D) to escape application of the statute of repose.  The District argued that the project had been designed according to the requirements of the Ohio School Design Manual (“OSDM”), including, but not limited to the requirement that “[s]chool building structures and exterior enclosures shall be designed and constructed of materials which will perform satisfactorily for 40 years with only minor maintenance and repairs, and for 100 years before major repairs or replacement of primary structural or exterior enclosure elements is required.”  Id. at ¶ 45 (emphasis added).  The District also argued that one of the specification sections for fiberglass shingles required the contractors to “[p]rovide manufacturer’s 40-year transferable warranty with the first five years non-prorated and the remaining time prorated, and a 40-year guarantee for all roofing products installed under this Section.”  Id. at ¶ 93 (emphasis added).  The trial court rejected those arguments in a summary opinion without significant analysis, and the District appealed the ruling to the Seventh District Court of Appeals.

The Seventh District Court of Appeals affirmed the ruling of the trial court.  The opinion addressed many different arguments asserted by the District in its attempt to avoid application of the statute of repose, but as relevant here, the opinion explained why it rejected the arguments relating to the warranty exception in R.C. 2305.131(D).  As to the OSDM argument, the Seventh District reasoned that the design contracts only required the architects to “endeavor to ensure” that the designs complied with the OSDM, which was insufficient under Ohio law to incorporate all the requirements of the OSDM—including the alleged 40- and 100-year warranties—into the design contracts.  Id. at ¶ 92.  As to the specification argument, the Seventh District reasoned that the specification referenced only a manufacturer’s warranty and, since the District was complaining that the products installed were incorrect (as opposed to being defective), that warranty did not come into play.  Id. at ¶ 94.  The District chose not to appeal the ruling of the Seventh District Court of Appeals to the Supreme Court of Ohio, meaning that the Seventh District’s ruling became final.

Martins Ferry v. Colaianni Construction is important because it provides certainty for roofing contractors and architects under the specific OSDM provisions and specifications at issue in that case.  It also provides a useful lesson for the industry as a whole.  Contracting parties must look beyond the provisions clearly labeled as “warranties” or “guarantees” in their contracts and consider whether other provisions—although not labeled as such—could be interpreted as warranties or guarantees.  When negotiating contracts, contracting parties should consider clarifying such provisions to expressly state whether they constitute a warranty or guarantee.  After all, succession planning at any company is difficult enough—it shouldn’t require also passing on knowledge of potential risks posed by extended warranty periods that the company entered into decades ago.

This article was previously published as “Statute of Repose Warranties” in the April 2024 issue of Properties Magazine.

When it comes to risk mitigation for property investors, title insurance may be the best kept secret in the industry. While the concept of title insurance is well known and most investors understand the basic coverage offered by a title insurance policy, many don’t know about the optional – and valuable – coverage that may be available to them. Litigation over property rights occurs daily, and often the risk at issue could have been covered by title insurance.

Even if you haven’t purchased a title policy for your own benefit, if you have a mortgage, you have purchased title insurance for your lender. For even the simplest transactions with the smallest of real estate collateral, lenders routinely require specific endorsements to their title coverage. Clearly, banks and other financial institutions are on to something. So, what is it that your lenders know that you don’t?

Simply put: Lenders know to take advantage of any chance to minimize risk. They know that extended title insurance policies with appropriate endorsements may cost a bit more at closing (usually on buyer’s dime), but will save them money in the long run. From insuring that a building conforms to applicable zoning ordinances, to removing the arbitration provisions from the title policy itself, there are many ways that title endorsements can change a title policy. For instance, if you are buying an LLC in order to obtain a parcel of land, the prior owner’s knowledge of defects could be imputed to you as the new shareholder – even if you had no idea about the issue at hand. However, a non-imputation endorsement would prevent the title company from assigning that knowledge to you as a defense against your claims.

The American Land Title Association, (ALTA), is primarily responsible for creating forms of standard endorsements which states may choose to adopt. In Ohio, most endorsements available are ALTA form endorsements.   However, ALTA does not have a monopoly on title policies or endorsements in the United States. While ALTA is still the industry standard, many states have adopted their own endorsements. California, for example, issues California Land Title Associations (CLTA) endorsements in addition to ALTA endorsements. Of those states that have adopted ALTA endorsements, not all ALTA endorsements are available in each state (looking at you Florida), and some states don’t issue ALTA policies or endorsements at all (yes, of course it is Texas).

In whatever state you are in, endorsements can transform your title insurance coverage. For example, if there is an easement that runs through your property and the prior owner constructed a garage that encroaches into that easement, the easement and the encroachment would appear as exceptions to the title policy. However, you could still get coverage through endorsements over both the easement and the encroachment. With an ALTA 28.1 for instance, if the other party to the easement sued to force you to remove the garage, you could make a claim with the title company causing the title company to step in to defend you against the claim and, if their defense fails, to cover your damages.

Although title insurance is generally thought to be insuring over mistakes of the past, with certain title insurance endorsements, you can also insure the future of your property. If you are purchasing a vacant parcel of land with the express intent of building a multifamily apartment complex, there isn’t much to insure as there would be no potential encroachments, violations of restrictions or zoning issues at the time of purchase. However, if it is the future improvements that you would want to insure – you can, in fact, insure them. Through land under development endorsements, you can ensure that your planned improvement is in compliance with zoning ordinances, doesn’t violate any restrictions on record, and will not cause an encroachment (among other things) to avoid any unwanted surprises at the completion of your project. 

All investments come with a degree of uncertainty. Since 2020, real estate investments have become even more uncertain and volatile. Regardless of the security of the investor, walking away from the type of insurance offered by today’s title companies would be a mistake. Do yourself a favor: the next time you review a commitment to issue title insurance, ask what endorsements and additional coverage your insurer can provide to your project. It just may save you in the long run.  

February 2024, Properties Magazine, Pages 58-60

On January 26, 2024, the U.S. Department of Labor’s (“Department”) Office of Solicitor (“SOL”) published its FY2023 Enforcement Report (“Enforcement Report”). The report provides an insight into the Department’s labor and workplace safety initiatives and enforcement focus. The messaging in the Enforcement Report is consistent to what Hahn Loeser & Parks LLP has seen and been communicating to its clients for the past several years—the Department, under the current administration, is focusing on announcing enforcement goals and then compelling proactive compliance through enhanced enforcement measures. The 2022 National Emphasis Programs on Heat and Trenching are perfect examples of this approach.

In 2023, the Department’s enforcement priorities included: combating workplace retaliation, employee misclassification, child labor, and protecting immigrant and migrant workers. Of significance, the Enforcement Report also highlighted several OSHA cases demonstrating the increasing number of criminal referrals. The Department views criminal prosecution as an effective enforcement tool and believes the threat of criminal liability encourages increased compliance.

The Department’s Enforcement Toolkit in 2023 Included:

Corporate Veil Piercing

  • The SOL successfully pierced the corporate veil of a Maine contractor to hold its owner personally liable for $1.5 million in monetary penalties. The monetary penalties arose from the falling death of an employee. Prior to the fatality, the Contractor repeatedly failed to ensure the use of fall protection on its Projects. The Contractor’s prior violations and wanton disregard for employee safety allowed the SOL to pursue such action against an individual.

Criminal Referrals

  • The U.S. Attorney for the Southern District of New York charged a roofing contractor for willfully violating OSHA regulations following a criminal referral from OSHA and SOL. The New York roofing contractor had a history of willful OSHA violations following the death of two employees. The roofing contractor had received 24 willful OSHA citations between 2019 and 2023, including willful egregious fall protection citations in August 2022 and February 2023.
  • A Nebraska roofing contractor was held in criminal contempt for failure to appear at a hearing regarding the appropriate penalties and sanctions.
  • SOL assisted the U.S. Attorney’s Office of the Eastern District of Kentucky in a prosecution that successfully held a coal company and its dust examiner criminally liable for submitting false samples. The company was sentenced to two years of probation and to pay a $200,000 fine, and the certified dust examiner was sentenced to six months in prison followed by six months of home detention.

Increased Monetary Penalties

  • The Department reached a corporate-wide settlement agreement with Dollar Tree, which operates 16,000 Dollar Tree and Family Dollar stores across 48 states. The settlement required the payment of $1.35 million in penalties and put in place measures to ensure prompt abatement of safety hazards that included blocked exists and access to fire safety.

Looking Forward in 2024

We forecast that in 2024, the Department will continue its recent trend of announcing its enforcement focus and then compelling compliance through increased inspections, citations, assessment of monetary penalties, and criminal liability.

Areas of Focus:

  • Continued protection of “vulnerable workers”;
  • Continued enforcement of specific standards such as Trenching, and Fall Protection; and
  • Continued use of the General Duty Clause as it relates to Heat.

These enforcement trends are likely to continue throughout 2024 but could change depending on the results of the 2024 Presidential Election. As we’ve seen, the Department’s strategy and focuses depend largely on the interests of the presidential administration.

Conclusion

A single OSHA investigation can lead to expensive fines, loss of productivity, a damaged reputation, and even criminal liability. Therefore, employers must be cognizant of not only their own employment practices and workforce details, but also the actions of their subcontractors and even sub-subcontractors.

If you have any questions about OSHA compliance, please call or email Hahn Loeser’s Construction and OSHA Team.

Full Article in Properties Magazine

At the most basic level, contracts serve to assign, allocate, and mitigate risk. Parties—unsurprisingly—are typically unwilling to adopt greater risk than required, and often look to assign most of the risk to the other contracting party. While understandable, this approach may have unintended costs.

For the most part, the general risks associated with a construction project are commonly understood and accounted for in broad form provisions. Such provisions alone, however, may not effectively address the unique risks associated with the rise in material escalation, volatile supply chains, increased labor demand, and skilled labor shortages. In turn, disputes related to the foregoing procurement and delivery issues are on the rise.  Even when resolved, contractors and owners alike have been equally dissatisfied.

It is unreasonable to believe that all risk can be identified and assigned from the outset. However, including provisions that require proactive planning, early procurement meetings, and early deliverables may mitigate the chances of procurement issues, and certainly reduce the negative impact should they arise. The risk of the unknown does not have to be solely allocated to one party or another. Encouraging a project centric approach, obligating all parties to engage and share risk, will benefit all parties who choose to adopt such a perspective. Below are some early planning and procurement procedures/concepts that can easily be incorporated into contract terms and/or early engagement project activities.

What can Owners and their Design Teams / Consultants consider doing?

  • Foster early engagement – find a way to create a true collaborative partnership between all members of the team as early as possible:
    • This could be driven by the type of project, but is important to have ALL team members involved as early as possible, including early engagement of the construction team; and
    • For scenarios or projects where the owner is hesitant to engage team members too early for potentially losing pricing competitiveness, there are various ways for an owner to maintain cost confidence from the whole team throughout the entire process.
  • Understand the environment – look for multiple options and rely on input from all team members throughout the process:
    • Establish an environment with open communication being a critical focus piece;
    • Avoid playing the “blame game” and be understanding when difficult news is communicated to encourage continued open and transparent flow of information in real time from all parties; and
    • When soliciting for proposal requests or bids, encourage real-time feedback from contractors, subcontractors, and their material vendors.
  • Be flexible and understanding – be ready for and open to potential alternative options for final product selections:
    • Encourage a streamlined substitution process – perhaps even cater to the project and work ahead with the Design Team / Consultants so decisions can move efficiently and effectively;
    • Wherever possible, avoid sole-source manufacturers or closed-spec materials. Limiting available options in current market conditions can be a recipe for disaster; and
    • If a change is necessary, seek diligent back-up documentation so that decisions can be made quickly with reliable and appropriate information.

What can Contractors consider doing?

  • Encourage open and often communication from the outset, and continue through the entire project;
  • Offer current-trending material procurement information during the bidding process;
  • Create options for team members to evaluate – both time driven and product driven;
  • Provide potential temporary solutions that offer workarounds to achieve substantial completion with minimal, non-intrusive come-back work;
  • Include detailed assumptions and clarifications – part of winning the work is showing the commitment of your team up front, so be sure to include information to help the Owner make a selection, knowing you are the right add to the team; and
  • Evaluate if and potentially recommend that a project would benefit from lower-tier design-assist involvement for an even stronger finger on the pulse of the current market.

Working collaboratively across all disciplines from the early project development phases all the way through substantial completion will help to flush out issues driven by product availability.  It will also help to encourage alternative solutions, whether its flexibility in various materials, multiple design options for specific elements, or temporary construction solutions until those selected materials are available for final installation. 

Many organizations and projects have already adopted early strategy sessions to overcome these and other types of project issues.  With the ultimate goal in mind of mitigating risk across all interested parties, it is important to memorialize the outcome of those sessions.  For instance, consider incorporating agreed upon strategies with an amendment to the contract or a no-cost change order.   The real key is nothing new.  It goes back to what is at the core – teamwork, communication, planning, and execution.  Encouraging this throughout the entire project will create and foster an environment for overall project success with the entire team.

Full Article in Properties Magazine

Allocating the Risks and Benefits of Green Construction

Sustainable (or “green”) construction practices and the trend toward green buildings are here to stay, driven not only by federal, state, and local legislation, tax credits, and incentives, but also by consumer, corporate, and shareholder demand.  If they haven’t already, owners, architects, developers, and construction companies will be required to make use of new technologies, new materials, and new practices to keep pace with increasing demand for green construction – and to reap the economic and reputational benefits of green construction.  It is estimated that residential and commercial buildings account for approximately 40% of U.S. carbon dioxide emissions, and that figure does not include other building-related emissions, such as those from the manufacture, transport, and assembly of building materials such as wood, concrete, and steel. 

Simply put, climate change strategies must and will continue to involve finding ways to reward green construction practices and green buildings and discourage or penalize environmentally inefficient practices and features

A variety of incentives are already in place to encourage green construction, such as tax credits and carbon offsets.  Who receives the benefits of these types of incentives is a matter that often can – and will – be subject to contract negotiation.  Similarly, certain types of risks that are common to all construction contracts may be increased when certain standards are required, or when new materials or practices are being used. 

Risk and reward travel together.  It is critical, therefore, when dealing with all these new and continually evolving issues, to make sure you carefully consider and negotiate your construction contracts to ensure that the risks and benefits of green construction are properly allocated amongst the parties.

  • Who gets the incentives?

At the federal level, billions of dollars in incentives are being made available to encourage and reward projects and buildings that meet recognized green building standards.  For example, the Inflation Reduction Act of 2022 created new tax incentives for energy efficiency and clean energy investments for both residential and commercial buildings.  It also made available tens of billions of dollars in grants, rebates, and various forms of financing. 

Other programs allow the purchase of carbon credits or offsets to permit companies to exceed otherwise applicable caps on carbon dioxide emissions.  And the incentives to go green do not stop with the federal programs.  An array of incentives are being offered at state and local levels. And the positive publicity that comes with meeting green building standards continues to increase.  

This wide array of incentives and benefits raises the issue of who gets to claim them, particularly where, as in the case of carbon offsets, the benefits can be bought and sold, or otherwise allocated by contract.  Carefully considering who should get the benefit of a subsidy, offset, or other benefit is both a matter that requires an understanding of the applicable law and regulations, and should, where more than one party to a transaction might claim a right to the benefit, be clearly spelled out during the contracting process.

  • Be mindful of the supply chain.

One lesson learned from the COVID-19 pandemic, the invasion of Ukraine, and ongoing instability in the United States’ relationship with China, is that allocating the risk of cost and availability of building materials is of paramount concern.  This point is particularly relevant for green construction, where domestic production may not presently be able to meet the supply demands. 

Solar panels are a prime example.  China controls more than 80% of the solar panel supply chain, and while there is much discussion about increasing production in the U.S., current domestic production simply cannot keep up with demand.  This can result in limited supply, and at times, gridlock, like those experienced recently in connection with the implementation of the Uyghur Forced Labor Protection Act (UFLPA), banning the importation of goods made with forced labor.

The problems that supply chain issues can cause are well known and cannot be ignored when entering into construction contracts.  Who bears the risk of delays, unforeseen circumstances, and price escalation, must be carefully negotiated with an understanding of the particular materials and technologies that must be used to complete a project.  Failing to plan is planning to fail when it comes to supply chain instability.

  • Defining the scope and reach of certifications and warranties.

Supply chain concerns may be further complicated if a contract requires a building to meet certain certification standards.  Examples of common certification standards applicable to construction projects and building products include Energy Star certification (appliances), FSC Certification (lumber), GreenGuard Certification (building products and indoor fixtures), and GreenSeal Certification (building products and materials).  Procuring building materials that meet specified certification requirements, and ensuring that a structure is designed to satisfy certification standards, requires careful coordination and planning amongst all parties to a construction project.

Additionally, all parties to a construction contract need to carefully review the warranties being offered, or demanded, before signing a contract.  For green construction, that may include defining – and understanding – the scope of the warranties for new and emerging technologies.  It is critical to define the consequences of breaching a warranty, what actions will void a warranty, which party has the right to enforce the warranty, and the consequences if a warrantee attempts to self-repair. 

* * *

These are just a few examples of issues to consider when entering into contracts for green construction. The key point is that when implementing new technologies, new practices, and new standards, it is important to carefully review your contracts and make sure that the terms of your standard forms account for the risks and rewards of green construction.  Good contracting practices do not stop with good forms, however, so it is also important that those who are responsible for negotiating and implementing your contracts are trained and understand how to use and when to revise those forms to meet the particular needs and demands of each project. 

On August 1, 2023, U.S. Citizenship and Immigration Services (USCIS) released a revised Employment Eligibility Verification form, commonly referred to as the I-9 form. To download a copy of the new I-9 form click here. While the new I-9 form may be used immediately, employers have until October 31st to implement changes necessary for the use of the new I-9 form. After October 31, 2023, employers who fail to use the new I-9 form will be subject to penalties enforced by U.S. Immigration and Customs Enforcement and the Department of Justice. Employers should not ask current employees who have a properly completed I-9 form on file to complete the new I-9 form.

Changes to the I-9 form make the form much more user friendly. Immediately noticeable is that Section 1, completed by the employee, and Section 2, completed by the employer, have been reduced to a single sheet. The Preparer and/or Translator Certification now appears on a separate Supplement A that employers can use when necessary. Similarly, Reverification and Rehire, formerly Section 3, appears on a separate Supplement B that employers can use when necessary. Separating the Preparer and/or Translator Certification and Reverification and Rehire from Sections 1 and Section 2 should significantly reduce unnecessary completion and stray marks and signatures.

Also, with the new I-9 form, fields may be left blank when they do not apply or are not appropriate. This includes in Section 1, for which employers are subject to fines for failing to ensure that an employee entered “N/A” in an inapplicable Section 1 field on prior versions of the I-9 form. Another helpful revision is the identification on the Lists of Acceptable Documents page of acceptable receipts which may be presented in lieu of certain documents for a temporary period.

In addition to the release of a new I-9 form, USCIS announced a final rule permitting an optional alternative procedure to the physical examination of documents presented by employees to establish their identity and employment authorization. Starting August 1, 2023, employers who are participants in good standing in E-Verify have the option of conducting a “remote” review of an employee’s documents. The “remote” review procedure requires that employers (or a third party on the employer’s behalf):

  • Examine the front and back of the document(s) (one document from List A or one document from both List B and List C) transmitted by the employee to ensure that the document(s) presented reasonably appears to be genuine;
  • Conduct a live video interaction with the employee, who presents during the live video interaction the same document(s) they transmitted to ensure that the document(s) relates to the employee;
  • Indicate on the I-9 form by completing the corresponding box that an alternative procedure was used to examine the document(s). This is done by marking the checkbox found under Additional Information in Section 2 on the new I-9 form and by writing “Alternative Procedure” in the Additional Information field on the existing I-9 form (issuance date of October 21, 2019); and
  • Retain a clear and legible copy of the document(s) submitted by the employee (front and back sides if the document is two-sided).

Employers who are participants in good standing in E-Verify may, but are not required to, use this alternative document review procedure; however, if an E-Verify employer chooses to offer the alternative procedure to some employees at a hiring site, it must do so for all employees at that site.

USCIS previously announced that employers who performed a remote examination of an employee’s document(s) under the COVID-19 flexibilities between March 20, 2020 and July 31, 2023, are required to physically examine the employee’s I-9 documents in the employee’s physical presence no later than August 31, 2023. With the announcement of the final rule, employers enrolled in E-Verify are not required to complete the physical examination if they (1) were enrolled in E-Verify at the time they performed the remote examination; (2) created an E-Verify case for that employee (except for reverification); and (3) performed the remote examination between March 20, 2022 and July 31, 2023. Employers who conducted remote examinations under the COVID-19 flexibilities and who do not meet these requirements must complete the physical examination of I-9 documents (and notate the I-9 form accordingly) no later than August 30, 2023, as previously announced.

If you have questions regarding your I-9 form obligations, please contact a member of Hahn Loeser’s Labor and Employment Practice Group.

Under Ohio’s Prompt Pay Act, a general contractor could end up paying more for the subcontractor’s attorneys’ fees than the general contractor owed to the subcontractor. That was the ruling by the Ohio appellate court in Atlas Piers NEO v. Summit Construction Co., Inc., 2021-Ohio-2024 (9th Dist.). In Atlas Piers, the general contractor hired a subcontractor to provide “services that help stabilize buildings constructed in poor soil conditions.” Id. at ¶ 2. In particular, the subcontractor installed helical screws and piers in a series of buildings to be built for the Akron Metropolitan Housing Authority. Id.

A dispute later arose regarding the piers and the subcontractor’s work on the piers. The subcontractor sought a change order for work that the general contractor instructed the subcontractor to perform. But the general contractor refused to issue a change order because “it believed one was not necessary.” Id. at ¶ 9. When the subcontractor refused to act without a change order, the general contractor terminated the subcontract.

The subcontractor then filed a lawsuit against the contractor, seeking “money for lost time, extra work performed, lost profits, and” retainage that had not been paid by the contractor. Id. at ¶ 10. The subcontractor also sought damages and attorneys’ fees under Ohio’s Prompt Pay Act because the general contractor “failed to timely pay” the subcontractor in violation of Ohio Rev. Code § 4113.61. Id. at ¶ 11. Following a bench trial, the trial court found that the contractor owed the subcontractor approximately $20,000, plus 18% interest, as well as attorneys’ fees. Id. at ¶12.

Next, the court held a hearing to determine the amount of attorneys’ fees that should be awarded to the subcontractor. The court rejected the contractor’s arguments that the subcontractor “failed to satisfy the factors in the” Prompt Pay Act and that the subcontractor should only recover fees relating to the Prompt Pay Act claim. All told, the court awarded the subcontractor $64,974.88 in attorneys’ fees—more than three times the amount owed to the subcontractor.

On appeal, the contractor raised several arguments in an attempt to throw out the attorneys’ fees award. But the appellate court rejected each of those arguments. In particular, the court disagreed with the contractor’s argument that the attorneys’ fees award was “disproportionate and unreasonable in light of the sum recovered by” the subcontractor. Id. at ¶ 34. The appellate court explained that “[n]othing in the statute . . . indicate[s] that it is per se unreasonable for an award of attorney fees to substantially exceed the funds recovered by the prevailing party. While it is true that [the subcontractor] did not recover a large proportion of the money it sought, it was nonetheless successful in its litigation.” Id.

The Moral of the Story

Attorneys’ fees could make a Prompt Pay Act claim much more costly for a contractor. Those fees could greatly exceed the actual amount owed to the subcontractor. Plus, courts could assess those fees even when the subcontractor does not recover the total amount that it claims that it is owed. Therefore, contractors should pay particular attention to Prompt Pay Act claims made by their subcontractors and consider the potential award of attorneys’ fees in evaluating those claims.