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President’s Message As we enter the 2nd Quarter of 2014 we have not seen much progress in NJ towards improving our quality of life and business climate. In order for NJ to move forward and not hinder the growth of business in NJ we need to make investments in the state’s aging and out of date infrastructure. Recently, there has been a lot of news with different legislators proposing a gas tax. Truth is a gas tax is just one piece of a many-part solution to the broken Transportation Trust Fund. NJ businesses and taxpayers could realize as much as $3.9-$4.1 billion per year in travel time savings and operating cost savings each year compared to current conditions, based on proposed various funding levels. For one of the smaller states in our country, NJ has the second longest average commuting times in the nation. We are 37 percent above the national average. These conditions significantly affect a workers productivity and quality of life causing unnecessary strain on people and economic stability. On average every commuter adds 37.5 hours a year, and collectively our 39 million commuters are being stuck in a car 35 million minutes each day. I’m sure the NJ tax payers have a better idea of what they would like to do with their time. Improvements would also reduce operating costs to maintain roads by as much as 7 percent and reduce emissions by as much as 36 percent when all improvements are done over a ten year period. The reduced congestion would improve these conditions allowing NJ businesses to grow and move goods and personnel easier with less stress on people and lower costs to do business within this state. Not to ignore the fact that this would greatly affect the safe travel on our roads, with 52.7 percent of our roads currently in poor condition. Unfortunately, in 2011 over 627 people in NJ lost their lives on our roads. What would this mean to an industry like trucking? Travel time costs would decline for the nearly 3.2 million trucks registered in NJ by as much as $1.4 billion annually as the improvements are implemented. This number does not include delay costs for trucks travelling to and through our State to deliver and export goods. As these costs decrease it would only spur economic growth. NJ businesses would save an estimated $1.3 billion annually in trucking costs. The average NJ driver would also realize significant cost savings. There are currently 6 million registered drivers in NJ operating over 4.4 million vehicles. These drivers would save nearly $844 million annually in travel time costs and $653.3 million in operating costs. In total, NJ drivers would save over 60 million hours in travel time annually. In addition to providing user and business benefits, this highway, bridge and transit construction activity under the baseline scenario proposed at appropriate funding levels would also support economic activity throughout the NJ economy. Proper funding levels would support nearly 90,000 jobs throughout the state in all sectors, such as manufacturing, retail trade, service, health care, tourism, food service and construction. These employees would earn nearly $3.7 billion in annual wages. The purchases made by NJ construction firms, their suppliers and employees would support a total of $12.2 billion in economic output throughout all sectors of the economy. This would contribute over $6.4 billion annually to the NJ gross state product. As the State invests more money in projects,such as the raising of the Bayonne Bridge, the result will be an increase in commerce by allowing larger ships into Port Newark. To fully realize such an investment the infrastructure surrounding it has to be able to support 2

the increased demand into the area. A well invested highway, bridge and rail transportation network will be needed to realize the full benefit of such an investment. When large firms locate in a particular area, they attract business that supports their operations and local economies thrive. The tax revenue generated from this type of economic activity will fuel growth. In the recent past, NJ has lost manufacturing jobs and companies due to the high cost of doing business in this state. Business logistics is a huge factor in the cost of goods getting to market. With NJ’s prime location, logistics should be a plus and can be. With most businesses working on tight margins, location is a key factor in keeping them here and competitive. Some quick facts on industries impacted by transportation in one way or another. · Advanced Manufacturing -$35 billion in net exports, 3400 firms, 18 firms account for over 100,000 workers, of these firms half are classified small business. · Defense Industry-$38 billion net exports, $426 billion in freight value, and 44 firms within NJ with 12,000 workers. · Finance Industry- 164 Financial Firms, over 183,000 workers, 43 firms small business employing up to 499 workers, at least one employs between 5000-9999 workers. · Health Care Industry- accounted for $48 billion in net exports, 40% of NJ freight shipments, total of $445 billion worth of goods traveled on NJ highways. 276 Firms. · Life Science Industry- $49 billion net exports, over $516 billion in freight shipments on NJ highways, 139 firms with over 122,000 workers. · Technology Industry- $35 billion in net exports, $342 billion in goods transported on NJ highways, 289 firms with over 245,217 workers. · Transportation Logistics- Net export of freight shipments over $77 billion, over 243 billion in good moved over our highways,778 firms, 620 firms with up to 499 workers and 95 with over 100 and five between 5000 to 10,000 workers. · Tourism Industry- had $11.2 billion in revenue, over $243 billion of value related to travel on NJ highways, 239 firms, 189 employing up to 499, 47 over 1,000, 13 over 10,000, and the largest nearly 33,000. As we digest the economic impact reviewing these numbers we realize just how large the issue is. The Transportation Trust Fund is an issue bigger than just the construction industry in NJ. It affects Jobs and quality of life for every tax payer in the state. As we raise our families, our quality of life should be our utmost concern. Every New Jersey resident works hard to create a spot for our families to grow and prosper. Our Legislature and its lack of action and vision towards the growth potential of this state should not be taken lightly. As our families’ futures depend on a strong economy, please contact your local and State legislators to support the repair of the Transportation Trust Fund. It’s not often we get to help celebrate a 90 year anniversary for a company and the UTCA would like to recognize our friends and colleagues at Joseph Jingoli and Son for their 90th year in business. Also reaching a milestone this year is WithumSmith+Brown, longtime supporters of the UTCA. Their accounting firm is celebrating their 40th year in business. Congratulations.

Best regards,

Harry Chowansky Utility and Transportation Contractor, APRIL 2014


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APRIL 2014 Volume XXXIX, Number 2

Contents Features

Published Bimonthly During 2014

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Office Address: 1670 Route 34 North Farmingdale, NJ 07727 Mailing Address: PO Box 728 Allenwood, NJ 08720 (732) 292-4300 FAX: (732) 292-4310 www.utcanj.org

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Publisher: Robert A. Briant, Jr.

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Editor: Michael DeVito

Joseph Jingoli & Son, Inc. Completes Ninety Years In Construction Four Corners Millennium Project Will “Transform” Newark The Battle Over The Highway Trust Fund Is Just Beginning Got Teeth? Gain Control Over Your Health Care Expenses Now! WithumSmith+Brown Celebrates 40 Years In Business Beware Of These Unusual But Costly Insurance Claim Scenarios

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Editorial Contributors: Michael DeVito Evan Piscitelli Dan Neville Advertising Manager: Helene Nasdeo Photographer: Michael DeVito Cover Photo: Image Up Production/Graphics: Lauren Hagan Helene Nasdeo Circulation: Helene Nasdeo

Departments 2 22 33 51 58 67 70

President’s Message Safety Perspective Legal Dig Labor Relations Accounting Corner Legislative News Financial Overview

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Printed By: American Plus Printers Affiliations: ARTBA Clean Water Construction Coalition Water Infrastructure Network UTILITY AND TRANSPORTATION CONTRACTOR (ISSN 0192-4843) is published six times a year by the Utility and Transportation Contractors Association of New Jersey, 1670 Highway 34 North, Farmingdale, NJ 07727. Periodical postage paid at Farmingdale, NJ and additional mailing offices. POSTMASTER: Send address changes to UTILITY AND TRANSPORTATION CONTRACTOR, PO Box 728, Allenwood, NJ 08720.

Cover Pictured on the cover, from left to right are Patrick Reager, Phil Sheperd, Paul Ryan, Michael Jingoli, Mike Burdalski, Frank DiCola, Joe Jingoli, Dennis Mockaitis and Robert Reager.

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Cover Story

Joseph Jingoli & Son, Inc. Completes Ninety Years In Construction Contractor Excels In Multiple Areas Of Construction

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hen a company reaches a significant milestone of twenty, thirty or even forty years in business, the owners of that firm should look with pride on the accomplishments the firm has achieved. However, when a firm has been in business for ninety years and weathered the Great Depression and multiple economic downturns, this event must be celebrated. Such is the case with Joseph Jingoli & Son, Inc., a longtime UTCA member. The firm was established in the 1920’s by Joseph Jingoli, an immigrant from a small village near Rome, Italy. He began his career in construction as a laborer and advanced to become a foreman and eventually a superintendent. With this experience, the enterprising gentleman established the underground utility firm in Trenton, New Jersey that bears his name. By the early 1950’s, the founder’s grandson, Joseph R. Jingoli, Sr., joined the firm and extended its fields to include land development and industrial construction in the Mercer and Burlington County areas. In 1987, Joseph Sr.’s sons, Joseph Jr. and Michael, purchased the family business from their father and have expanded the business to become a nationally ranked contractor servicing power, industrial, healthcare, gaming and educational clientele.

Jingoli crew performs a wet tap at Sands Bethwork’s Casino in Bethlehem, Pennsylvania.

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In 2000, DCO Energy, LLC was formed as an independent energy development company specializing in the development, engineering, construction, operation, ownership and financing of Central Energy Centers (CEC), Renewable Energy Projects and Combined Heat, Chilling and Power (CHCP) Production Facilities. Currently, Joseph R. Jingoli, Jr. serves as Chief Executive Officer, while Michael Jingoli is the Chief Financial Officer and Chief Operations Officer. Robert Reager, P.E., President of Joseph Jingoli & Son, Inc., has been employed with the company for 32 years. Robert also served on the Board of Directors for the UTCA for a number of years. Frank DiCola, P.E. is the Chairman of the Board as well as President and Chief Executive Officer of DCO Energy, LLC and Paul Ryan, P.E., who has been with the Jingoli organization for 24 years, serves as Executive Vice President of Engineering and Construction for DCO Energy. Further key Jingoli supervisory personnel include Dennis Mockaitis, Senior Vice President of General Construction, Michael Burdalski, Senior Vice President of Construction Management, and Patrick Reager, P.E., Senior Vice President of the Civil/Mechanical Division. Combined, these three have over 100 years of construction experience between them. The Jingoli organization takes great satisfaction in the fact that many employees have had long tenures with the company. In fact, a number of staff members began with the company as interns and have risen through the ranks to a supervisory level. Also, the firm has made its safety initiatives a strong priority under the oversight of Director of Safety, Robert McGee, Jr. He has been instrumental in the organization receiving the NJ Department of Workforce Development’s, as well as the UTCA’s, Annual Safety Awards on numerous occasions. While Jingoli has expanded its profile over the last 90 years it still prides itself on performing underground utility work. One of its recent projects includesthe installation of 63,000 LF of 24 inch HDPE for a Pennsylvania Power and Light cooling water discharge line. Several installation methods and techniques were used to install the pipeline under 26 stream crossings, 3 railroad crossings and 10 state road crossings. In addition to the complexities presented by the different crossings, Jingoli installed the pipeline through Utility and Transportation Contractor, APRIL 2014


Additional power projects, which were completed by JingoliDCO are Atlantic County Utilities Authority Landfill Gas to Energy Project, Burlington County Resource Recovery Complex Site, Essex County Correctional Facility Combined Heat & Power Plant, Salem County ImprovementAuthority Landfill Gas to Energy Project and Warren County LandfillGas to Energy and Solar Project along with

Pictured is the installation of HDPE Pipelines at GROWS Landfill in Morrisville, Pennsylvania.

wetlands, farmland and small towns. The pipeline terminates with a diffuser 100 feet into the Susquehanna River. At the Sands Bethworks Casino, Jingoli was the contractor for all site improvements associated with the project. Encompassed within the work scope, Jingoli installed 6,300 LF of fire loop, 1,000 LF of domestic water, 12,500 LF of storm piping along with 135 catch basins and manholes. Sanitary pipe consisted of 3,200 LF of varying diameters up to depths of 25 FT. Jingoli recently completed the installation of a deep leachate pipeline and dual pump stations at Tullytown Resource Recovery Facility in Tullytown, PA. The project consisted of installing two pump stations and multiple HDPE dual contained pipelines in a 500 LF sheeted trench at a depth of 20 FT. Also recently completed, Jingoli installed a mile long energy distribution system through the center of campus at Montclair State University. This system consists of 16 inch ductile iron chilled water supply and return piping along with 16 inch steam and 6 inch condensate piping. The project was completed while school was in session making scheduling and logistics a very important factor in maintaining student safety. As part of this project, Jingoli-DCO also completed the Combined Heating, Cooling, and Power Facility. This facility provides natural-gas fired electric generation, chilled water and steam for heat. The steam, condensate and chilled water are delivered to and returned from campus buildings via the new energy distribution system. The majority of the campus’ electricity requirements are satisfied by the onsite plant, which will be designed to operate continuously producing electric power of approximately 5.4 megawatts.

Steel erection takes place for the District Energy Facility at Montclair State University.

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Excavation takes place for deep leachate lines at the GROWS Landfill project.

many other large scale projects in Pennsylvania, Maryland, Rhode Island, Nevada and California. Jingoli was the General Contractor for the Bristol Myers Squibb Child Health Institute and Children’s Hospital in New Brunswick, NJ, a six-level multi-disciplinary building. These two structures consist of 277,000 SF that includes two laboratory floors, a pediatric clinic, vivarium and a sixty-bed facility that offers inpatient and outpatient care for children with burn, brain and spinal cord injuries. The facility also provides outpatient care for children with learning, behavioral or developmental disabilities. Recently, Jingoli served as the Construction Manager for the $786 million expansion and renovation of the existing Pennsylvania Convention Center located in the heart of Center City, Philadelphia. The new 930,000 square foot expansion includes a dramatic 120foot tall glass curtain wall entryway along Broad Street with full height atrium, 540,000 square feet of contiguous exhibit hall space, a new 55,000 square foot ballroom, meeting rooms, offices, new mechanical room and associated utility and support spaces. Joseph Jingoli & Son, Inc. is a firm on the cutting edge of innovation which has spent more than 90 years developing the knowledge and expertise needed to provide a total delivery system. The organization is a highly diversified company with a common purpose: to act as a single-source supplier for state-of-the-art service at any level. Today, Joseph Jingoli & Son, Inc. has hundreds of employees worldwide and is headquartered in Lawrenceville, NJ with regional offices in Mays Landing, NJ, Highland, MD and Las Vegas, NV. 5


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FOUR CORNERS MILLENNIUM PROJECT WILL “TRANSFORM” NEWARK By: Chris Colabella, Construction Information Systems The Four Corners Millennium Project (FCMP) is set to transform Newark’s downtown commercial district into a residential and retail center, breathing new life into a part of the city once considered to be the epicenter of commerce in North Jersey.

200+ New Construction Jobs To Be Created! Construction for the fiveblock, multi-use redevelopment project will create more than 200 new construction jobs, according to Tim Lizura, president and chief operating officer of the New Jersey Economic Development Authority (NJEDA). “The Four Corner Millennium Project will add to the significant construction activity already underway in the City of Newark, “ he said. The redevelopment of the area is being divided into project phases. Work on the first phase, which is expected to begin this summer, will include construction of a hotel and parking spaces. Residential and retail space will be built on the site of the once popular Paramount Theater. The FCMP is near Newark Penn Station, Gateway Center, City Hall and the Prudential Center, as well as the internationally renowned NJPAC. More than 675 apartments will be built out of vacant and dilapidated office and warehouse space. An additional 220 residential units will be

constructed over street-level storefronts. Planners hope the project will create a go-to area at Market and Broad streets where people will be able to live, work and play. In all, the project aims to transform five street blocks and includes 12 retail storefronts ranging in height from two to 16 stories. The entire FMCP consists of approximately 1.2 million gross square feet, including: * 135,000 square feet of retail, * 70,000 square feet of hotel (130 rooms), *900,000 square feet of residential space (studios, one, two and three bedroom units), and * 603 structured and below grade parking spaces.

boost the economy. The FCMP will receive $33 million in tax credits and $19.5 million in funding from the Economic Redevelopment and Growth Program (ERG). “The project represents a significant investment in the city’s historic center and will serve to further transform the commercial hub of Downtown Newark,” Lizura added. “From Four Corners to Springfield Avenue, state incentives have been critical to transforming the city’s vacant and blighted sites into areas of economic opportunity and growth.”

CORRECTION CIS’ article, “$105M Port Authority Initiative to Upgrade Roads,” published in the February 2014 issue of the UTCA’s Utility and Transportation Contractor magazine, included an error in fact. The correct estimated cost of the Bayonne “Raise the Roadway” project is $1.2 billion. CIS regrets the error. About The Author: Chris Colabella is the president of CIS, Inc., New Jersey’s only local construction lead service. For more information, visit www.cisleads.com or call 800247-1727 to arrange for a free demo of CIS leads.

Construction might have gotten started sooner, but RBH Group, owner of the project, was initially turned down when it first applied to the NJEDA for tax credits under the Urban Transit Hub Tax Credit Program (UTHTCP). The state agency denied RBH Group’s application last year, confirmed Lizura, because the company wasn’t able to provide commitments for the bulk of the $410 million in capital needed for build-out. However, with those commitments in hand, RBH Group reapplied and was informed in January that the project received one of the very last grants awarded under the UTHTCP. That program is now part of the larger umbrella economic initiative known as the Economic Opportunity Act. The NJEDA oversees the state’s economic initiatives aimed at incentivizing companies to stay in New Jersey or move here to create jobs and

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THE BATTLE OVER THE HIGHWAY TRUST FUND IS JUST BEGINNING By: Pete Ruane, ARTBA President & CEO As I write this column on January 31, I’ve been flabbergasted, to say the least, at what took place during the first three weeks of the year. Several groups purporting to represent certain transportation industry sectors and no less than three widely-read construction trade publications have sent up smoke signals that the battle over one of the most significant threats facing the U.S. transportation design and construction market in decades is already finished. What’s even more alarming to me is that the “white flag waving” came before we even have had a serious fight. Specifically, I am referring to the reauthorization of MAP-21 and the crisis facing the federal Highway Trust Fund (HTF)—the source, on average, of 52 percent of all state highway and bridge capital investments. Unless Congress and the President act by October 1, the HTF will not be able to support any new projects in fiscal year 2015. Such an outcome could devastate the American economy, jeopardize hundreds of thousands of jobs, and throttle market development activities for many ARTBA and non-ARTBA member firms. At least nine states already are warning of adverse impacts on their construction programs if the uncertainty drags on. One construction publication didn’t even mention MAP-21 or the HTF in its wish list of top construction business issues for 2014, and it called for shifting the focus away from Washington, because it viewed the chance of consensus as low. Another publication opinion piece slammed the politicians in Washington, and said the only way to go was to toll everything. While ARTBA certainly supports tolling as part of the solution, it is not the panacea, and the political hurdles to establishing national tolling are arguably even higher than other new revenue options. It’s easy to bemoan Washington political and policy gridlock, and to argue that nothing will get done. But, it’s the wrong message to be sending to transportation design and construction professionals whose livelihoods depend, in large part, on what happens on Capitol Hill. The fact is that when it comes to infrastructure policy issues, there is common ground to be ploughed. How quickly we have forgotten that MAP-21 passed the House of Representatives 37352 and the Senate 74-19—the same legislation many naysayers said would never get done. How many other bills garner such overwhelming support these days? Federal highway and transit investment will be more than $50 billion in fiscal year 2014. It speaks to the importance of the federal government role in transportation policy and also explains why shifting focus out of Washington would be unwise for at least two more reasons. First, the nearby chart shows that from 2008-2013, state and local highway and bridge spending dropped cumulatively about $18 billion from pre-recession levels. By contrast, over the same period, federal investment, thanks in part to the 2009 stimulus law, increased by nearly $17 billion and helped keep the market afloat. Utility and Transportation Contractor, APRIL 2014

Second, over 40 percent of the $11 trillion in domestic truck freight shipments in 2011 were sent out of state, according to Federal Highway Administration data. Over 23 percent of that total was sent to non-neighboring states, which is more evidence of a national transportation network’s importance to moving products and supplies critical to economic growth. This network cannot be built and sustained through a patchwork of state programs. Given these realities, now is the time for every industry professional concerned about the future of their business to get ready to fight over the next few months. Take your message directly to Washington. Call your representativeand senators via ARTBA’s Action Hotline (888-4482782) today and tell them to do their bloody jobs by fixing the Highway Trust Fund and completing action on MAP-21’s reauthorization as soon as possible. Download the “Transportation Construction Advocate” app from the iTunes or Google Play stores to access the information you need to connect with your elected officials. And plan to be in Washington June 9-11 for the ARTBA Federal Issues Program and Transportation Construction Coalition Fly-In. The work ahead will not be easy, but it never is when it’s truly worth fighting for. When it comes to the imminent battle over the Highway Trust Fund and our industry’s future, surrender is not an option! Pete Ruane is president & CEO of the Washington, D.C.-based American Road & Transportation Builders Association. ### The preceding article has been reprinted with permission from the American Road & Transportation Builders Association (ARTBA). UTCA is an affiliate of ARTBA. For more information, visit www.artba.org.

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Safety Perspective

UNDERSTANDING GLOBALLY HARMONIZED SYSTEM By: Herb Strong, HazTek, Inc. What is the Globally Harmonized System (GHS)? GHS stands for the Globally Harmonized System of Classification and Labelling of Chemicals. GHS is a system that defines and classifies the hazards of chemical products, and communicates health and safety information on labels and material safety data sheets (called Safety Data Sheets, or SDSs, in GHS). The goal is that the same set of rules for classifying hazards, and the same format and content for labels and safety data sheets (SDS) will be adopted and used around the world. An international team of hazard communication experts developed GHS. Why is global harmonization necessary? Currently many different countries have different systems for classification and labelling of chemical products. In addition, several different systems can exist even within the same country. This situation has been expensive for governments to regulate and enforce, costly for companies who have to comply with many different systems, and confusing for workers who need to understand the hazards of a chemical in order to work safely. GHS promises to deliver several distinct benefits. Among them are: · Promoting regulatory efficiency. · Facilitating trade. · Easing compliance. · Reducing costs. · Providing improved, consistent hazard information. · Encouraging the safe transport, handling and use of chemicals. · Promoting better emergency response to chemical incidents. · Reducing the need for animal testing. 22

What is the scope of GHS? The GHS system covers all hazardous chemicals and may be adopted to cover chemicals in the workplace, transport, consumer products, pesticides and pharmaceuticals. The target audiences for GHS include workers, transport workers, emergency responders and consumers. What are the two major elements in GHS? The two major elements of GHS are: 1. Classification of the hazards of chemicals according to the GHS rules: GHS provides guidance on classifying pure chemicals and mixtures according to its criteria or rules. 2. Communication of the hazards and precautionary information using Safety Data Sheets and labels: Labels - With the GHS system, certain information will appear on the label. For example, the chemical identity may be required. Standardized hazard statements, signal words and symbols will appear on the label according to the classification of that chemical or mixture. Precautionary statements may also be required, if adopted by your regulatory authority. Safety Data Sheets (SDS) - The GHS SDS has 16 sections in a set order, and minimum information is prescribed. What are some key terms in the GHS Vocabulary? · SDS - Safety Data Sheet. SDS is the term used by GHS for Material Safety Data Sheet (MSDS). · Hazard group - While not given a formal definition, GHS divides hazards into three major groups - health, physical and environmental.

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· Class - Class is the term used to describe the different types of hazards. For example, Gases under Pressure is an example of a class in the physical hazards group. · Category - Category is the name used to describe the sub-sections of classes. For example, Self-Reactive Chemicals have 7 categories. Each category has rules or criteria to determine what chemicals are assigned to that category. Categories are assigned numbers (or letters) with category 1 (or A) being the most hazardous. · Hazard Statement - For each category of a class, a standardized statement is used to describe the hazard. For example, the hazard statement for chemicals which meet the criteria for the class Selfheating substances and mixtures, Category 1 is Self-heating; may catch fire. This hazard statement would appear both on the label and on the SDS. · Signal word - There are two signal words in the GHS system Danger and Warning. These signal words are used to communicate the level of hazard on both the label and the SDS. The appropriate signal word to use is set out by the classification system. For example, the signal word for Self-heating substances and mixtures, Category 1 is Danger while Warning is used for the less serious Category 2. There are categories where no signal word is used. · Pictogram - Pictogram refers to the GHS symbol on the label and SDS. Not all categories have a symbol associated with them. What is meant by the GHS hazard groupings and building block concept? Within the GHS classification system, there are three major hazard groups: · Physical hazards. · Health hazards. · Environmental hazards. Within each of these hazard groups there are classes and categories. Each of these parts is called a building block. Each country can determine which building blocks of the GHS system it will use in their different sectors (workplace, transportation, consumers). Once the building blocks are chosen, the corresponding GHS rules for classification and labels must be used. What are the classes within the Health hazard group? Criteria for classifying chemicals have been developed for the following health hazard classes: · Acute toxicity. · Skin corrosion/irritation. · Serious eye damage/eye irritation. · Respiratory or skin sensitization. · Germ cell mutagenicity. · Carcinogenicity. · Reproductive toxicity. · Specific target organ toxicity - single exposure. · Specific target organ toxicity - repeated exposure. · Aspiration hazard. In addition, there are specific classification rules for chemical mixtures for each health hazard class. What are the classes within the Physical hazard group? Criteria for classifying chemicals have been developed for the following physical hazard classes: · Explosives. Utility and Transportation Contractor, APRIL 2014

· Flammable gases. · Aerosols. · Oxidizing gases. · Gases under pressure. · Flammable liquids. · Flammable solids. · Self-reactive substances and mixtures. · Pyrophoric liquids. · Pyrophoric solids. · Self-heating substances and mixtures. · Substances and mixtures which, in contact with water, emit flammable gases. · Oxidizing liquids. · Oxidizing solids. · Organic peroxides. · Corrosive to metals. What are the classes within the Environmental hazard group? Criteria for classifying chemicals have been developed for the following environmental hazard class: · Hazardous to the aquatic environment (acute and chronic). · Hazardous to the ozone layer. In addition, there are specific classification rules for chemical mixtures for each environmental hazard class. Deadline: June 1, 2016 (Employers – Construction and Manufacturing) By this date, employers must be fully compliant with OSHA’s adoption of GHS. They must complete any necessary updates to their hazard programs and workplace labeling procedures, and all affected employees must be trained on any new hazard or safety procedure identified during the chemical reclassifications done by manufacturers and distributors. Note:As with the employee training on how to read GHS formatted SDSs and labels, employers may not wish to wait until the deadline before getting into full compliance. Either way, at no time will employers be exempt from complying with either the old Hazard Communication System or the new (or some combination of the two). In other words, employees must not lose any of the protections they had under the old HCS. Conclusion (Start Now): Finally, employers should have mostly their entire MSDS library swapped out with GHS-formatted SDSs. While it is not necessary for employers to seek out new safety data sheets for old products where the manufacturer is out of business or from whom the employer no longer receives shipments, it is incumbent upon the employer to ensure it has updated SDSs for every product it receives from manufacturers after the June 1, 2015 date. The SDS must be in hand before employees are exposed to the product. There is a lot of work to do over the next couple of years. While June 1, 2016, may seem a long way off, it is likely to come more quickly than employers will want. By starting now, there should be plenty of time for manufacturers, distributors, and employers to transition safely and efficiently to GHS 2016 compliance. Furthermore, employers still using paper-based solutions to manage SDSs might want to consider the ways an electronic system can provide additional resources for tracking and flagging GHS documents and producing workplace labels in the OSHA-preferred GHS format. 23


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GOT TEETH??

By: Allan Berkin, Delta Dental Many will remember the old ad dairy campaign “Got Milk?”, but the more important question for the new millennia is becoming “How are your teeth and gums?” Why is this so important today? There is a growing body of evidence that poor dental hygiene may be related to heart disease. Healthy teeth and gums may keep you and your employees healthier in the long run and reduce their medical expenses. As UTCA members, you have had access to a comprehensive dental program with Delta Dental of New Jersey since 1989. These plans provide coverage for annual cleanings, x-rays, fillings, crowns, gum treatments, and even orthodontic benefits. Unlike other plans offered by some competitors, Delta Dental doesn’t impose waiting periods for their benefits, so once you are covered all of the benefits are immediately available. And while you can use any dentist under the UTCA program, the Delta Dental system has the largest nationwide network of participating dentists, so your provider is probably already participating. Like other carriers, Delta Dental of New Jersey has multiple networks of Utility and Transportation Contractor, APRIL 2014

providers, but as UTCA members you get access to both the Premier and PPO networks, Delta Dental’s two largest networks. While you can choose any dentist you want, going to a participating dentist guarantees that you’ll receive pre-negotiated charges so you’ll start saving money from your very first visit. This makes your benefits go further! And the benefits don’t stop there! Delta Dental has included their Carryover MaxSM benefit in your programs. This allows you and your employees to accumulate additional benefit dollars for future years when you only use a portion of your annual maximum benefit in any particular year. Delta Dental has a different philosophy about dental health than other companies. They want you and your employees to take care of your teeth. So, to get the Carryover Max benefit you have to get your teeth cleaned at least once a year. Delta Dental covers you for cleanings twice a year. Call: The VanPalmer Group, LLC, 65 Willowbrook Blvd, Wayne NJ 07470 @ 973-837-2522 for details. 29


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Legal Dig

A PREVAILING WAGE STORY WITH A HAPPY ENDING By: Steven Brawer, Association Legal Counsel All New Jersey public contractors know that compliance with the prevailing wage statute is a legal prerequisite on all public work projects in the state. Implementation of that law, however, can present some challenging questions. One such issue which arose over the past few months is whether individual corporate officers properly may be held responsible for non-payment of prevailing wages by subcontractors engaged by a corporate general contractor. That question was presented when a UTCA contractor member was informed by the New Jersey Department of Labor’s Division of Wage & Hour Compliance (“Division”) that corporate officers of a GC firm, as well as the general contractor itself, would be subject to collection efforts by the Division on behalf of employees of the a sub who were not paid the requisite prevailing wages. Because of its industry-wide repercussions UTCA staff and counsel became directly involved in responding to the Division’s assertions. The position that officers of a general contractor (and not just the corporate GC itself)were potential targets for non-payment of prevailing wages to employees of a sub that fails to meet its obligations under the Prevailing Wage Act (N.J.S.A. 34:11-56.25, et seq.)(“Act”) rested upon a number of points. First, the term “employer” as used in the Act is defined as “any individual, partnership, association, joint stock company, trust, corporation, the administrator or executor of the estate of a deceased individual, or the receiver, trustee, or successor of any of the same, employing any person in this State. For purposes of this act the officers of a corporation and any agents having the management of such corporation shall be deemed to be the employers of the employees of the corporation” (emphasis supplied). Based upon the highlighted language added to the statute in 1991, the Division took the expansive posture that “officers of a corporation and any agents having the management of the corporation” fall within the scope of the term “employer” as defined in the referenced section. In conjunction with this interpretation the Division also relied upon Utility and Transportation Contractor, APRIL 2014

the published trial court decision in Serraino v. Mar-D, Inc., 228 N.J. Super. 482 (Law Div. 1982), which held that a general contractor was liable for a subcontractor’s failure to pay prevailing wages to its (the sub’s) workers based upon the remedial purpose of the Act and the strong public policy in favor of protecting the entitlement of all tradesmen to receive prevailing wages for work performed on public jobs. Under its interpretation of both the statutory language and the case law, the Division claimed that a GC’s officers, in addition to the general contracting firm itself, were liable for a subcontractor’s prevailing wage deficiencies. However, this position fails to take into account the final phrase of the amended language highlighted above, which says that “officers * * * shall be deemed to be the employers of the employees of the corporation” —NOT the “employers” of employees of a subcontractor! Moreover, there is nothing in the Mar-D decision which directly imposes individual liability on a GC’s corporate officers, and that case was decided in 1988, three years before the statutory definition of “employer” was amended in the manner described above. Based upon these considerations, the UTCA argued that the Division’s application of the Act was overly broad and did not justify imposition of individual liability even if a general contracting firm could be held liable for the non-payment of prevailing wages to a subcontractor’s workers under the Mar D case. Following a meeting with the contractor and Association staff and counsel, the Division revisited the issue of corporate officers of general contractors bearing personal liability as a result of their subcontractor’s failure to fulfill its prevailing wage obligations and determined that it would not pursue individual officers of the GC. This change in position represents an important achievement for the industry and reflects a much appreciated willingness on the part of the Division to keep an open mind and act cooperatively to accommodate legitimate contractor concerns. 33


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GAIN CONTROL OVER YOUR HEALTH CARE EXPENSES NOW! A New Option For Small Group Health Insurance in 2014

By: Nancy Damato, Partner, RDA Benefit Services

DISCOVER. COMPARE. DECIDE It almost goes without saying that employee benefits are expensive to provide. And with all the new rules and regulations under the Affordable Care Act, the cost to provide these benefits to employees has seen a drastic increase in 2014. With the political debate on healthcare in overdrive, is there any relief in sight? RDA Benefit Services LLC is now offering a cost-saving alternative to traditional group health insurance — SELF-FUNDED health plans that are designed for groups of 5 to 50 employees. Get all the advantages of self-funding and none of the worry or hassles. Now, you don’t have to choose between a QUALITY NETWORK and cost. This gives you the BEST of both worlds!

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Key Features of these self-funded health plans include:

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PPO provider networks, which typically are not available to the small group market. This extensive network gives you access to care on a nationwide basis. Perfect for those groups that have employees in multiple states or employees that travel from state to state! The plans that are offered with this program include both Traditional and H.S.A./H.R.A. plan designs. You choose the deductibles, copay options and out of pocket limits, so that the plan can be designed to fit your group’s individual needs. Maximum self-funding costs for the year are determined up front—and they are guaranteed for a 12 month period, subject to enrollment changes. You pay a flat monthly premium each month.

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Part of your monthly premium covers stop loss insurance which protects you from any large, unexpected claims. Administration is handled all in one place, including billing and claims. They can also take care of COBRA, as well as H.S.A. and H.R.A. reimbursement. In order to provide such competitiverates, Medical underwriting is required to determine the group’s final rates. And these plans allow 1099 employees to participate in the coverage! These plans are quoted using 4-tier composite rates, where every employee within the same tier (single, employee/ spouse, employee/children and family) pays the same rate. If your group’s actual claims for the year are less than the amount set aside in the claim fund, there is the POTENTIAL FOR CASH BACK at the end of the year. You will never pay more than your monthly premium over the course of the plan year for your benefits.

These plans are currently available in New Jersey and Pennsylvania and are offered by an industry leader in the small group insurance market which is a Fortune 500 company, rated A(Excellent) by A.M. Best Company. GAIN CONTROL OVER YOUR HEALTHCARE EXPENSES NOW! Find out if these plans are right for your company! Contact Nancy Damato, RDA Benefit Services LLC, toll-free at 855-693-0772 or e-mail at ndamato@rdabenefits.comfor more information and to get a quote today! 37


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Featured Article

WITHUMSMITH+BROWN CELEBRATES 40 YEARS IN BUSINESS Successful CPA Firm Maintains Commitment to Clients, Employees & Communities

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he U.S. has seen numerous changes to the country’s financial reporting, IRS tax code and industry regulations over the past 40 years. With these complexities and oftentimes confusing details, businesses would benefit from utilizing the services of a world-class accounting firm such as WithumSmith+Brown (WS+B). The CPA firm is celebrating its 40th anniversary in 2014 and attributes this milestone success to its clients, employees and communities served. Founded in 1974 by Frederick Withum, Leonard Smith and Ivan Brown, WS+B now employs approximately 500 people at 13 office locations in six states. WS+B’s corporate culture cultivates passionate, talented individuals who are dedicated to the growth and success of their clients.The firm has experienced revenue growth every year since its inception, a testament to WS+B’s commitment to providing clients world-class service by its loyal and talented professionals.

Pictured from the left at the Red Bank office are Ron Martino, Lou Sandor, Paul Kuhl and Kristen Celii.

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Serving more than 20 UTCA member firms, WS+B puts the success of its clients as its highest priority and is grateful for the valued relationships it has formed over the years. In addition to traditional tax, accounting, attestation and consulting services, WS+B serves several niche areas within the marketplace. Some of these industry-specific areas of expertise include construction, real estate, architectural & engineering, law firms and litigation support which consists of forensic accounting, business valuations and insolvency services, amongst others. WS+B’s Construction Services Team (CST) has been serving the needs of the construction industry including contractors, subcontractors and suppliers to the industry for 40 years. With over 20 construction experts dedicated to the industry, the CST is spearheaded by two Certified Construction Industry Financial Professionals (CCIFP), Lou Sandor and Ron Martino, and a former CFO of a large construction company, Paul Kuhl. The CCIFP credential was established by the Institute of Certified Construction Industry Financial Professionals to promote the highest standards of construction financial management. Lou Sandor, III, CPA, CCIFP ® is a partner in the firm’s Red Bank office and the practice leader of the CST. Ron Martino, Jr., CPA, CCIFP ® is also a partner out of the Red Bank office and CST team leader. Located in WS+B’s Princeton office, Paul Kuhl, III, CPA is a senior manager and team leader of the CST. Kristen Celii, Marketing Communications Manager, has been with the team for nine years and has been the direct contact for the firm with the UTCA. The CST represents a range of disciplines including accounting and auditing, tax, litigation support, marketing and insurance services. Servicing clients, small to large, the team focuses on the most relevant, up-to-date information on the changing tax and accounting regulations, while constantly seeking innovative ways to help construction clients increase profitability. Utility and Transportation Contractor, APRIL 2014


Pictured from the left are Tom Hoberman, Rebecca Machinga, Paul Gergel and Bill Sansone.

Although WS+B devotes a full division to the construction practice, other industries are not overlooked. Paul Gergel, CPA, CFP®, Partner, is the practice leader of the firm’s Professional Services Group, where he specializes in serving architects and engineers. Bill Sansone, CPA, Partner, is also a member of the Professional Services Group and is team leader of law firm services. In fact, WS+B services five of the top 20 law firms in New Jersey. Rebecca Machinga, CPA, Partner, is the practice leader of the firm’s Real Estate Services Group. Tom Hoberman, CPA, ABV, CFF, Partner, is the director of Litigation/Valuation/Forensic Accounting Services at WS+B. All of these niche areas offer a multitude of industryspecific services and have experienced staff dedicated to serving this growing client base. With 13 office locations in six states, WS+B brings clients the benefits of a larger organization without sacrificing the attention and personal service of a local business. The firm has offices in Red Bank, Morristown, New Brunswick, Paramus, Princeton, Toms River, NJ; Philadelphia, Newtown, PA; Orlando, Palm Beach, FL; New York, NY; Aspen, CO; and Silver Spring, MD. It should come as no surprise that in 2014 the firm was named among the best places to work in the State of New Jersey for the tenth consecutive year. In 2013, WithumSmith+Brown was ranked as the 31st largest

Employees assisted in the clean-up and rebuilding efforts for homes devastated by Hurricane Sandy.

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accounting firm in the nation by Inside Public Accounting and ranked in the Top 10 of accounting firms in the Northeast. WS+B’s continual growth is one indicator of success. Another is recognition from within the profession and the business community. The Construction Services Team is active in many industry organizations that are focused on educating, improving and protecting the construction community. The firm has even assisted various trade organizations with sponsorships to promote their growth. WS+B is an active member of a number of associations including the Utility & Transportation Contractors Association (UTCA), the National Association of Home Builders (NAHB), the New Jersey Builders Association (NJBA), the Shore Builders Association of Central New Jersey (SBACNJ), the Construction Financial Management Association (CFMA), the Associated Construction Contractors of New Jersey (ACCNJ), the NJ Alliance for Action and the Monmouth-Ocean Development Council (MODC). Through these organizations, WS+B maintains a constant understanding and respect for the guiding principles that shape the construction industry.

WithumSmith+Brown employees volunteer at a local food bank.

WithumSmith+Brown is also widely known for its charitable and philanthropic work. Giving back and fulfilling its social responsibility has been woven into the moral fabric of the firm for 40 years and is an essential part of WS+B’s unique culture. The firm’s 80 partners donate their time and talents, serving on 160 different boards and committees of charitable organizations. In 2011 the firm established its annual “Withum Week of Caring” encouraging employees to donate a small portion of their time to their communities, in lieu of working in the office. Taking place the three days leading up to Thanksgiving, staff members volunteer a minimum of four hours during these days to help various charities and nonprofit organizations in need of assistance during the holiday season. WS+B has volunteered at numerous organizations including children’s hospitals, social service organizations, animal shelters and soup kitchens. Following the devastation of Superstorm Sandy, the firm established the WS+B Staff Hardship Relief Fund. The purpose of this fund is to financially assist the staff and their families who are experiencing a temporary hardship due to a significant life event, such as losing a home in a natural disaster or incurring financial burdens due to the illness of a family member. Since its inception in November of 2012, partners and staff members have donated more than $150,000 to the cause, with every donation matched dollarfor-dollar by the firm. The term “leading by example” is clearly evident by these numerous programs and generosity. WS+B has demonstrated a sustained commitment to clients, employees and communities served for 40 years, and the root of the firm’s success stems from the strength of these relationships. 41


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BEWARE OF THESE UNUSUAL BUT COSTLY INSURANCE CLAIM SCENARIOS By: Carl Bloomfield, The Graham Company Most construction companies are fairly successful at keeping their employees safe and managing their overall risk because they smartly focus their claims management programming on mitigating the greatest sources of everyday risk. Despite best efforts, claims can still be somewhat unpredictable, and you may be surprised by the actual source of your biggest claims. The purpose of this article is to uncover a few unusual and often overlooked claim scenarios that could be very costly to your business. In my experience as a professional insurance broker, I have seen an increase in the type of claims I discuss below and I hope bringing these few scenarios to your attention encourages you to continue evaluating where your company is potentially exposed and take the necessary steps to mitigate these risks before a claim happens. Caution! Risk Scenario 1: Uninsured Subcontractors It has been a long, tough road for many in our industry. Hopefully, your company hasn’t experienced this with your subcontractors, but the instances of lapse in insurance coverage and outright cancellation of coverage for non-payment of premium have increased steadily over the past few years. Unfortunately, this problem is likely to worsen before it gets better because as workflow (hopefully) increases, cash flow gets tighter, especially for companies that already have been stretched thin. So how does an uninsured subcontractor impact your insurance program? For starters, you may be charged additional premium by your own insurance company if during your annual year-end audit it is determined that an uninsured subcontractor worked for you. Insurance companies charge you a discounted General Liability rate and nothing for Workers Compensation insurance for work that you subcontract to others because the expectation is that the subcontractor has its own insurance, but if those subcontractors don’t have insurance, you will ultimately pay the full rate as if you didn’t subcontract out the work and performed it yourself. 44

The second and much more costly way an uninsured subcontractor impacts you is that you would be responsible for paying for claims with your own insurance that should have been covered by your subcontractor’s insurance. This includes both Workers Compensation losses because of injuries to your subcontractor’s employees and liability claims that would have been covered either directly by your subcontractor or contractually transferred to your subcontractor. As you know, insurance companies take into account a minimum of a five-year loss history when determining pricing, so even a single claim from an uninsured subcontractor could impact pricing for years to come. Most companies simply collect Certificates of Insurance at the beginning of a project that requires notice of cancellation. The latest version of the ACORD form says that notice of cancellation will be delivered to the Certificate Holder in accordance with policy provisions. However, very few insurance companies will actually provide a policy endorsement that notifies a Certificate Holder of a subcontractor’s policy cancellation, so you are effectively relying on that subcontractor or their broker to notify you themselves that coverage has been cancelled – which is very unlikely to happen. In addition, Certificates of Insurance are not legally binding documents, so in the event of a claim, the only thing that matters is the policy itself. Other Precautions In addition to a Certificate of Insurance, you could also require your subcontractors to provide copies of their policies’ Declarations pages showing the actual effective date. This is not bulletproof either, but at least it is another verification step in determining that coverage was in fact in place at a particular point in time. For Workers Compensation, you can verify online that coverage was placed for a subcontractor. Each state has a portal in which anyone can verify the Workers Compensation Insurance Company, Utility and Transportation Contractor, APRIL 2014


policy number and effective date of coverage. For New Jersey, this information can be obtained from the NJ Compensation Rating & Inspection Bureau website, which is at http://pcov.njcrib.com. On jobs of longer duration, it may be appropriate to require subcontractors to provide updated Certificates of Insurance showing that coverage is still in place. You may even consider requiring Certs on a monthly basis or before each payment is made to a subcontractor. Finally, one of the most definitive ways of determining if coverage is in place is calling the subcontractor’s broker. Caution! Risk Scenario 2: Independent Owner Operators The topic of insurance requirements for owner operators is complex. Some of the biggest claims I have seen stemmed from a contractor’s use of independent owner operators who were not properly insured. One major area of concern is that most owner operators do not carry their own Workers Compensation coverage. In fact, the only insurance they do carry most often is an auto policy that may not have much of any coverage in it. The challenge in New Jersey is that sole proprietors are not required to carry Workers Compensation coverage, and many of your owner operators are probably sole proprietors. But in a situation where a sole proprietor who works exclusively as a trucker for you gets into a serious accident, you can bet they will pursue you for the benefits provided by Workers Compensation–and they are likely to succeed. This is because the courts will deem you are the trucker’s statutory employer because you control and direct their activity. Therefore, your Workers Compensation policy will pay for the owner operator’s medical costs and loss of wages that will have at least a five-year impact on your insurance rates, including impacting your Experience Modification Factor. To mitigate this scenario, consider requiring owner operators to purchase Occupational Accident insurance. This is a quasi-Workers Compensation type policy that pays for injuries suffered in the workplace, but the coverage provided by these policies vary greatly since they are not statutorily regulated. This means you could still be left holding the bag for medical and indemnity benefits for your injured owner operator. There are numerous benefits to using owner operators in your business, but having to pay unanticipated Workers Compensation benefits for owner operators negates much of this benefit. Caution! Risk Scenario 3: Related Company Lawsuits It is common knowledge that Workers Compensation is usually an injured worker’s sole remedy, and it is what bars the injured worker from suing their employer. However, this is not always the case, and the industry is seeing more situations where an injured worker does sue their employer. Here’s the scenario – an employee works for ABC Paving, Inc., which is a street and road contractor that owns multiple material plants, including quarries. The asphalt plants and quarries are owned by a separate company called Materials Company, Inc. An employee working for ABC Paving, Inc. at one of the quarries gets injured and reports a Workers Compensation claim. The injured employee receives medical treatment and payment for loss of wages from ABC Paving’s Worker’s Compensation insurance company. The employee, not satisfied with his Worker’s Compensation settlement, hires a lawyer and sues Materials Company, Inc., the owner of the quarry where he was working, for pain and suffering. Unfortunately, the injured employee of ABC Paving is not barred from suing Utility and Transportation Contractor, APRIL 2014

Materials Company because that is not technically their employer even though both companies are owned by the same people and insured on the same policies. Now the employee stands to collect twice from the same injury – first from ABC Paving’s Worker’s Compensation policy, and possibly from Material Company’s General Liability policy. I say possibly because this type of suit may not be covered by Material Company’s General Liability policy if the policy includes an Insured exclusion, assuming that both companies are insured on the same policy. Simply put, even if the lawsuit is not covered by insurance, the employer would be responsible out of their own pocket for defense costs and any settlement the employee may be granted. There are some things you can do proactively to reduce the likelihood of these types of lawsuits. You should speak with your insurance broker and employment lawyer to implement the best strategy to minimize this unusual but costly claim scenario from occurring. In addition, you should make sure your General Liability policy is negotiated correctly to provide coverage for this scenario in case you cannot proactively prevent this type of lawsuit. Caution! Risk Scenario 4: Employee Participation in Recreational Activities If you are like me, after the winter we have had, I’m dying to get outside and be active again. For some employers, this time of year means the beginning of the season for the company softball team. Unfortunately, my body doesn’t move like it used to, and I’m sure the same is true for some of your employees. So what happens when your lead estimator rips a line drive down the right field line and tears his hamstring trying to stretch a double into a triple for the company-sponsored softball team? Is your estimator entitled to Worker’s Compensation benefits? The answer is maybe. Consider these questions: * Did the company pay the team’s registration fee? * Did the company gain any goodwill or business benefit by supporting the team? * Did the employees on the team feel compelled to play? * What is the relation between the time and place of the games to the employee’s actual work schedule? These are some of the questions that the courts have asked to determine compensability of these types of claims, and there are mixed results. One thing we all know in New Jersey is that the courts go to great lengths to protect injured employees. This possible claims scenario is not solely limited to sporting events, but it includes any company-sponsored recreation. One way to reduce the possibility of being faced with paying this type of claim is to have employees who participate in company-sponsored sporting events or recreation sign a waiver. You should speak with your insurance broker and attorney to develop the best strategy to reduce the likelihood of this type of claim affecting your company’s loss record. About The Author: Carl Bloomfield is a Producer at The Graham Company, the largest property and casualty insurance brokerage in the Mid-Atlantic region. As a leader of the Construction Division, Bloomfield spearheads The Graham Company’s involvement in several construction industry organizations, including the Utility & Transportation Contractors Association, Associated General Contractors, General Contractors Association of New York, New Jersey Asphalt Pavement Association, the Contractors Association of Eastern Pennsylvania and the General Building Contractors Association of Pennsylvania. Carl can be reached at cbloomfield@grahamco.com or 215-701-5420. 45


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Labor Relations

PRESIDENT OBAMA’S OVERTIME EXECUTIVE ORDER’S IMPACT ON SALARIED MANAGERS By: Jill Tobia Sorger, Esq., Partner, Tobia & Sorger President Obama recently issued an executive order directing the expansion of overtime protections for “millions of workers”, including “salaried” managers. The executive order mandates that the United States Department of Labor (USDOL) create new overtime protections aimed at closing a perceived “loophole” in wage and hour laws that permit employers to exempt many salaried managers from overtime requirements. According to the Obama administration, the current exemption of managerial employees is unfairly allowing employers to classify a manager as ineligible for overtime pay even when a significant amount of the manager’s work is the same as non-managerial employees. This executive order can be expected to spur USDOL inquiries into the classification of managers and their right to receive overtime pay. Even preceding the issuance of this executive order, New Jersey District Courts have experienced an influx of overtime pay lawsuits in recent months in a broad range of occupations from the financial industry to the food service industry. UTCA Contractors, therefore, can also expect that the construction industry will face an increase in overtime pay litigation. Overtime Exempt Classification: The Fair Labor Standards Act of 1938 (FLSA), which requires that workers be paid time and one half for work over forty (40) hours, currently exempts certain employees such as managerial, supervisory, executive, administrative and Utility and Transportation Contractor, APRIL 2014

professional workers. In determining whether this exemption is applicable, both a salary test and a job duties test are applied. As the law stands now, salaried employees who make less that $455 per week must be paid overtime. President Obama has stated that he is seeking to raise this minimum threshold to somewhere between $550 and $970 per week. Additionally, for salaried employees over the minimum, the duties test is a subjective test designed to assess several factors, including the ability to hire, fire, promote or assign, to determine whether the employee exercises independent authority in his or her job functions so as to be exempt from overtime requirements. With the mandate of the executive order as support, it can be anticipated that the Labor Department will seek to strictly review all such overtime exempt classifications in an effort to expand the amount of overtime paid to salaried employees. Advice for UTCA Contractors: UTCA Contractors should review their salaried exempt manager classifications in an effort to discern whether the classifications will be able to withstand a Labor Department review. While it remains to be seen how far the executive order will go in expanding overtime pay, it will certainly increase the focus placed on such inquiries. Accordingly, being proactive now in addressing this issue may save a UTCA Contractor the time and expense of a Labor Department audit or employee lawsuit in the near future. 51


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Accounting Corner

WHAT CONTRACTORS SHOULD CONSIDER BEFORE ENTERING A JOINT VENTURE By: Scott Derco, CPA, SaxBST As the construction industry continues its slow and sluggish recovery, more and more contractors are considering joint venture agreements to grow and be competitive. A joint venture is an arrangement in which two or more contractors combine their talents and resources to better compete in a particular market. While there are potential benefits associated with forming a joint venture, many possible drawbacks also can make this an unprofitable arrangement for a contractor. ADVANTAGES OF HAVINGA JOINT VENTURE PARTNER Local contacts. When a contractor considers bidding on work in an unfamiliar area, it is advantageous to leverage the knowledge of the joint venture partner that has an understanding of this market. The joint venture partner may have experience in dealing with local subcontractors, suppliers, and unions, while also having a better understanding of local business rules and practices. This can lead to more accurate bidding and estimating. Additional working capital and resources. The formation of a joint venture may allow the combined entity to have a stronger capital base from which to draw, such as additional cash, financing, and capital contributions from each joint venture partner. In addition, joint venture partners can pool their talents, work forces and equipment, while sharing the risks involved in completing the project(s). Increased bidding power and bonding capacity. The resources of the combined entity may provide more bidding power and bonding 58

capacity than the individual entities could, thus allowing the combined entity to bid on larger projects. POTENTIAL ISSUES TO AVOID Unclear responsibilities. In order to avoid future disputes regarding the responsibilities of each joint venture partner, all aspects of contract administration should be specifically outlined in the joint venture agreement. This agreement should be drafted by an attorney experienced in the construction industry prior to the start of the joint venture. Performance bonds. Typically, the bonding company provides a performance bond in the name of the joint venture. However, in a “silent joint venture agreement,� one of the joint venture partners may provide the performance bond in its name for the joint venture. In the event that the joint venture cannot complete the project, the bonding company will look to the contractor that supplied the bond to complete the contract before stepping in. In this situation, it would be beneficial to the stronger contractor if the weaker partner supplies the performance bond. Costs charged to the joint venture. It is standard practice for the joint venture partners to provide equipment, materials, and services to the new entity. However, problems may arise when one partner believes that the other is charging excessive rates or prices for these items. To avoid this problem, a standard billing rate structure should be included in the joint venture agreement. Utility and Transportation Contractor, APRIL 2014


Distributions. When the project is in the early stages and is profitable, it is very tempting to take out cash distributions. This practice should be avoided because if the job encounters problems in later stages, the partners may have to make cash contributions to ensure there is an uninterrupted workflow. Cash management considerations. Problems may arise when certain partners borrow cash from the joint venture for their personal use or to cover cash shortages on their own projects. This can be a very risky practice. To avoid cash flow problems, it is critical that a cash management plan be developed early in the relationship. Due to the significant risks associated with the formation of a joint venture, it is imperative that a contractor learns everything possible about its potential partner’s business practices, reputation in the industry, financial condition, as well as its ability to complete the proposed project(s).

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The type of insurance that will be carried by the joint venture should be specified.

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Separate bank accounts should be established in the name of the joint venture, as well as authorized individuals designated to make transactions, such as check signing, deposits, and withdrawals.

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Separate books and records should be maintained for the joint venture.

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The rights of each joint venture partner to examine the books and records should be specified.

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An outside accountant should be designated to perform an analysis of the books and records.

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In the event that one of the joint venture partners enters bankruptcy or becomes insolvent, the party involved may be entitled to accounting at the completion of the project to determine their proportionate share of profits or losses; however, they should no longer have authority to make decisions relating to the day-to-day operations of the joint venture.

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Written permission must be given by all joint venture partners for a partner to assign its rights under the agreement.

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If controversies arise, procedures for settling the claim with an independent arbitrator should be established.

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The agreement should establish the state jurisdiction under which the law is interpreted.

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A vote of the board of directors or other adequate body of authority should be used to execute the agreement.

The following issues should be considered when preparing the joint venture agreement, and designating administrative tasks for the new entity: * An understanding of the responsibilities and level of control of each partner should be reached. * An agreement on how profits, losses, and liabilities will be shared by each partner. * Terms and conditions should be established for each participant with regard to initial capital contributions, the obligations of each participant to provide additional working capital, conditions under which excess working capital may be withdrawn, and penalties if a partner fails to provide additional contributions or defaults. * How will the joint venture be administered? Who will provide accounting services? Who will have check writing authority? Who will control the management of the project and run the day-to-day operations in the field? * If one partner is to provide accounting and main office support to the joint ventures, how will payment be rendered for these services? *

Specific wording should be included that details how a party can voluntarily terminate from the entity, as well as how the remaining parties will administer the continuing obligations of the joint venture.

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A standard billing rate schedule should be established to avoid a situation in which one partner is overcharging the joint venture for construction costs such as equipment rentals, materials, and labor.

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Clear and specific wording should be included to define construction costs of the joint venture, as well as what costs are reimbursable to each partner.

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Although joint venture arrangements provide contractors with many opportunities to expand their businesses and spread risk, there are pitfalls and issues that should be considered when entering into such an arrangement. Contractors should use caution, address the issues, and come to a clear understanding with their venture partner(s) to increase the likelihood of success. About The Author: Scott Derco, CPA is a Manager in the

Construction Industry Service Group at SaxBST, based in Clifton, New Jersey. The firm is a leading accounting, tax and advisory firm with a sizeable construction practice. Scott has more than 20 years of experience providing tax, audit, and consulting services for construction clients which include some of the country’s largest construction firms, including general contractors, heavy highway, and various specialty trade contractors.

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Legislative News

FEDERAL & STATE UPDATE By: Evan Piscitelli, UTCA Consultant With winter unrelenting in its stormy grip, springtime feels like it might never arrive. The political calendar, however, is far less in question as it does not pay much attention to the snowfall and arctic blasts that we have become accustomed to. The spring legislative session is beginning, regardless of the polar vortex, and like every year, the focus will be on the state’s budget. Aside from advocating for robust funding for infrastructure construction during this period, UTCA continues to lay the groundwork for the approval of its infrastructure bank legislation. At the same time, Association staff will be working on an initiative designed to improve the bidding process at the local level. An alarming number of local governments continue to require the submission of financial statements in order to bid on a project. There is nothing in the law that specifically permits or requires a town, county, or authority to make this private information a mandatory bid item, nor is there any standardization as to the form and type of documentation that must be submitted. It is not surprising, then, that this gray area in the law holds up projects, increases the frequency of bid challenges, and creates a paperwork nightmare for many businesses trying to bid on public work. Financial statements are unnecessary and onerous when it comes to bidding. They are costly and time consuming to generate and deal with confidential information that could become public through the bidding process. A contractor Utility and Transportation Contractor, APRIL 2014

already has to go through a lengthy process to secure a bid bond for a project. The financial capability that must be demonstrated to secure bonding should be proof enough that they can handle the work. Representatives from our Association have raised the issue with the Department of Community Affairs and other groups representing public owners and purchasing agents over the years. In those discussions, the consensus has been that while these statements are oftentimes required, they are rarely looked at, rarely understood, and even more rarely used to qualify or disqualify a bidder. It seems the requirement persists not as a result of something being gained from the process, but simply because of past practice. Responding to the frustration of our members, UTCA has developed a pro-business and bipartisan measure that will protect a company’s private financial information and their ability to take part in the bidding process at the local level. A1794 is sponsored in the Assembly by Assemblymen Jason O’Donnell (D) and Rob Clifton (R), while S-1048 is sponsored in the Senate by Senators Kip Bateman (R) and Jeff Van Drew (D). The case against financial statements should prove to be compelling in both the Legislature and Governor’s Office as both branches of government are looking at ways to make New Jersey more business friendly. We hope to have this legislation approved by the end of the year.

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Pictured from the left are Evan Piscitelli, Harry Chowansky, Assemblyman Dave Rible and Joe Walsh at a recent UTCA Legislative Committee Meeting. Utility and Transportation Contractor, APRIL 2014

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Financial Overview

WHEN IT COMES TO FINANCIAL REPORTING IT PAYS (CONTRACTORS, BANKS AND SURETIES) TO BE GOOD By: William J. Ruckert, Provident Bank Between detailed paperwork, receipts, bank and credit card statements and the reconciliation of income and expense transactions, careful bookkeeping can be an overwhelming process. But the importance of high quality, timely financial reporting for contracting businesses cannot be overstated. Financial statements provide a record of a business’s financial transactions and an analysis of its financial position. Because of the information they provide to banks, investors, creditors and suppliers, they are critical to your company’s health. The Three T’s Good financial statements should be the three T’s: transparent (honest and accessible), timely (relevant to the company, its supporting entities and the reporting period, e.g. quarterly or annually), and typical (follows prescribed reporting models and generally accepted accounting principles (GAAP)). You may prepare financial statements in-house — sophisticated accounting systems, such as QuickBooks, American Contractor, Timerline and Peachtree, can help manage and generate reports of your organization’s finances. Although economical, they limit your single job and aggregate capabilities. Conversely, financial statements that are reviewed or audited by a CPA familiar with the construction industry hold more weight with sureties, especially for projects larger than $250,000. The Benefits The benefits of superior financial statements are numerous, not only for your business, but for your bank and surety. This, it seems, is a win-win-win situation. 70

Contractors Maintaining good current financial records is imperative for a contracting business. With these reports in place, you’re gifted with the intelligent control and big-picture insight required to better run the day-to-day operations of the company. They provide you with the data to make informed decisions, helping you to plan, budget, make adjustments and forecast with more accuracy. Banks Banks use your financial statements to assess your company’s ability to repay loans; in fact, those reports may determine whether a bank will lend to you at all. If your statements engender the bank’s confidence, you may receive better interest rates, payment terms and, in the incidence of default, more flexibility. But banks, too, have a stake in good financial statements. They enhance open lines of communication, providing the bank with a more holistic, refined understanding of your company’s current and projected financial position. They also justify the existing — or an expanded— borrowing relationship. In addition, the process of renewing your existing credit facilities or providing new ones is simplified. If you don’t provide quality financial statements in a timely fashion, the bank considers it a red flag, which may impact your company’s borrowing capacity. Sureties As surety underwriting grows increasingly restrictive and the number of projects that require bonding continues to rise, superior financial statements are more and more crucial to securing bonds. The bonding process relies largely on your relationships with the Utility and Transportation Contractor, APRIL 2014


bank and the surety agent, and good financial statements improve those relationships by benefitting all parties. Good financial reporting enhances your credibility, better enabling you to secure bonds. It also mitigates the surety’s risk and streamlines the bonding process, lowering the interest rate and reducing the financing costs. This paves the way for smooth and easy underwriting in the future. A Mutually Beneficial Relationship Good financial statements are a necessity. And the mutual benefits to you, your bank and your surety are undeniable. Certainly, they are an invaluable tool to help your business thrive in an uncertain economy. Contractors take note: It pays to be transparent, timely, and typical! For more information about the importance of quality and timely financial reporting, please contact William Ruckert of Provident Bank at william.ruckert@providentnj.com.

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Utility and Transportation Contractor April 2014