Construction Exam Flashcards

Indemnification Law and Legal Definition

• To indemnify means to reimburse another for a loss suffered because of a third party's or one's own act or default.

• It can also refer to a promise to reimburse another for such a loss or to give another security against such a loss.

• For example, insurance companies indemnify their policyholders against damage caused by such things which are specified by the terms of the contract between the company and the insured.

• The right to indemnity and the duty to indemnify commonly comes from a contractual agreement, which generally protects against liability, loss, or damage.

Patent Defect

• A patent defect is an obvious flaw in a product or a document.

• Example: leaving out the property description in a deed.

Business Entities

Sole Proprietorship

• Defined: Companies owned, operated, and managed by a single person.

• Employees: May have any number of employees, but only one owner (the sole proprietor).

• Formation: Simplest form of ownership, can be started and terminated without formal documentation.

• Taxation: Taxed at the individual level based on personal income and earnings.

• Disadvantage: The owner is personally liable for all losses; debts exceeding company assets must be paid with the owner's private funds.

Partnerships

• Defined: A business entity owned by two or more people.

• Ownership: Determined by legal agreement, which may be based on money, hard assets, or skills brought into the company by each partner.

• Termination: Outlined in the legal agreement; death of a partner legally terminates the partnership unless prior terms were included in the agreement.

• Taxation: Similar to sole proprietorships, taxed at the individual level.

• Liability: Owners are personally liable for losses, with the amount of liability based on the percent and type of ownership.

Corporations

• Defined: Independent, legal business entities.

• Formation: Requires filing documentation and paying fees to the state.

• Governance: Must hold formal meetings for all major decisions.

• Ownership: Individual owners are stockholders; percent ownership is determined by the amount of stock or number of shares.

• Voting Power: The greater the percentage of shares, the greater the voting power.

• Liability: Stockholders are not personally liable for company losses; only assets belonging to the corporation may be used in settlements, except in cases of extreme negligence or illegal activity where the corporate shield can be pierced.

• Continuity: The company is not terminated if a stockholder dies; the stock passes to the heirs.

• Taxation: Profits are taxed twice: once at the corporate level and again when distributed as dividends at the individual level.

• Decision Making: Large corporations may face challenges in making decisions that must be approved by all stockholders.

Limited Liability Company (LLC)

• Defined: A hybrid type of business entity with limited liability for individual owners (similar to a corporation) and tax/operational benefits similar to sole proprietorships and partnerships.

• Membership: Owners are called members; an LLC may have one or more members.

• Formation: Members must file an "Articles of Organization" with the state and pay associated fees.

• Taxation: Taxed only once at the individual level.

Joint Ventures

• Defined: An agreement between two or more individuals or companies formed to complete a single business enterprise.

• Structure: May be a new business entity or a collaborative agreement.

• Benefits: Parties combine strengths and share assets, revenues, expenses, and risks.

• Construction Industry: Often temporary arrangements, e.g., a small local contractor partnering with a large national firm.

• Design-Build: Often a joint venture between a designer and contractor.

Business Entities - Study Questions

1. Under which legal entity are the most amount of total taxes paid?

   • C. Corporation

2. In the construction industry, which legal entity is often a temporary arrangement?

   • D. Joint ventures

3. Which is an advantage of forming a corporation?

   • A. Reduced personal liability of shareholders

Insurance and Bonds

• Purpose: Used to protect owners and/or contractors against risks.

• Difference between Insurance and Bonds:

  • Insurance: The insurance company is responsible for the cost of the claim.

  • Bond: The bonding company fulfills the contractor's obligation for payment but holds the contractor responsible for payments made on their behalf.

• Protection:

  • Insurance: Protects the party purchasing the policy.

  • Bond: The purchaser (contractor) is paying to protect another party (owner).

Insurance Types

• Required by law and/or by the project documents.

  • Worker's Compensation: Compensates a worker for a portion of their lost wages (commonly 67%) and medical expenses for injuries that occurred at work; in exchange, employees forgo their right to sue their employer for tort negligence.

    • Regulated by the state.

    • The rate employers pay can be adjusted by an employer's Experience Modification Rate (EMR). $EMR = Multiplier \; that \; adjusts \; the \; premium \; based \; on \; past \; work \; record$

      • Standard multiplier is 1.

      • EMR below 1: Indicates a track record of safe operation, lowers premiums (e.g., 0.8 lowers premiums by 20%).

      • EMR above 1: Indicates a history of accidents, increases premiums (e.g., 1.2 increases premiums by 20%).

  • Builder's Risk: Protects builders from building damage that occurs while under construction and typically includes temporary structures (e.g., trailers and storage containers).

    • Specific damage indemnified against: fire, storm, theft, and vandalism.

    • Typically does not cover flooding or earthquakes unless a rider policy is purchased.

  • General Liability: Protects the contractor from claims by a 3rd party of bodily injury, injury to person, and property damage as a result of ongoing operations.

    • Example: Protecting the contractor if a steel beam fell and crushed the building official's car.

  • Errors and Omissions: Protects designers from incomplete, incorrect, and faulty design documents.

    • Contractors typically do not have this insurance unless they are providing design services, such as with a design-build contract or performance specifications requiring them to design a portion of the work.

Value Engineering (VE) and Life Cycle Costing (LCC)

• Services commonly provided during preconstruction.

• Value Engineering (VE): A function analysis that seeks to lower cost alternatives for the services provided by the building.

  • Goal: Provide the owner the same function without sacrificing any quality or building services.

  • Example: Replacing the structure of the building from block to tilt-up concrete panels due to the cost savings from an accelerated schedule.

• Scope Reduction: Not value engineering; provides less building services to the owner.

  • Example: Substituting motorized overhead doors for manually opened doors because a project was over budget.

• Contractor Incentive: Contractors are often incentivized to provide VE suggestions by the owner sharing with the contractor a portion of the reduced costs.

Sub-Contract

A contract in which one party involves a third party to carry on a portion of its responsibilities.

Methods of Payment

There are 3 methods of payment common in the construction industry:

• Lump sum

• Unit price

• Cost plus

Arrangement of Project Delivery

There are several methods to deliver a project in the construction industry:

• Design/Bid/Build

• Design/Build

• Turn Key

• Construction Management

Contract Types

• Joint: A contract in which a number of individuals are represented as one party, and forgiveness of any individual by the plaintiff implies forgiveness of the rest of the individuals making that party.

• Several: A contract in which a number of individuals are represented as one party, but forgiveness of any individual by the plaintiff does not imply forgiveness of the rest of the individuals making that party; the plaintiff can select and choose.

Contract Definition

A contract is an agreement to do or not to do certain thing.

Enforceable Contracts

For any contract to be enforceable in a court of law, it must have the following 4 elements of legally enforceable contracts:

• Capacity to contract

• Legal subject matter

• Mutual consent

• Consideration

Four Corners Rule

The FOUR CORNERS rule is a contract law doctrine that “the meaning of a document is to be gathered from the entire (all four corners) document.”

• The doctrine applies to any agreement including Contracts, Subcontracts, insurance policies, bonds, lending consent agreements, etc.

• Another commonality is to sign Subcontracts when the competition stops to avoid erosion of our position.

Ending a Contract

The two conditions for ending a contract are:

1. Performance of the contract

2. Termination of the contract

Substantial Completion

Definition: The completion stage at which the owner can use the project for its intended purpose.

• Architect determines Substantial Completion.

Termination for Convenience

• A contractual right given to the owner, but the contractor is paid for work in place.

• To end the contract at no fault of the contractor.

• This right is usually exercised when:

  1. The owner faces financial problems.

  2. The need for the project is eliminated.

Termination for Default

• It is a contractual right given to the owner to end the contract because of the contractor’s breach (violation) of contract terms.

• This termination entitles the owner to:

  • Withholding all money due to the contractor

  • Seizing contractor’s materials and equipment on site

  • Holding the contractor liable for increased costs

Types of Damages

• Compensatory damages

• Liquidated damages

• Actual damages

Compensatory Damages

To compensate for losses incurred by the non-breaching party and place it back in the same economical position prior to the breach.

Liquidated Damages

• Unique to construction contracts.

• They compensate the owner for losses due to late completion of the project caused by the contractor.

• $/day$ for every day past the contract completion date

Design-Bid-Build

• Project flow and relationships between parties (Owner, Architect/Engineer, Prime/General Contractor, Subcontractors, Suppliers, Bonding Company, Construction Lender).

General Contractor (GC) Functions

• Serves as one point of responsibility to the owner

• Facilitates Interpretation of documents for subs

• Coordinating the work and the schedule to ensure timely completion of the project

• Responsible for the jobsite safety

• GCs usually self-perform 0-20% of the total scope of work; the rest is performed by the subcontractors.

Subcontractors

• Subcontractors are mainly the specialty trades: Mechanical, Electrical, Fire, Glazing, Painters.

• Lower tiers of subs and suppliers: subcontractors may subcontract parts of their scope to other subs and suppliers.

Design-Build

• Project flow and relationships between parties (Owner, E/C Firm, Subcontractors, Suppliers, Bonding Company, Construction Lender).

Payments

• Pay if Paid: Is a condition precedent. Owner must pay for GC to have the obligation to pay subs. This makes subs and the GC both liable for owner insolvency. With such legal verbiage a sub may not get paid due to issues other than its own performance.

• Pay when paid: Courts have interpreted this as payment required of GC and when is only a question of timing.

Lien Statutes (Mechanics & Materials Liens)

• Allow parties providing labor or material to obtain security interest in the owner’s property.

• Labor and material has improved the value of the owner’s property, and therefore the providers should look to the property as the security for their eventual payments.

• A fully perfected lien (a lien that satisfied all the required steps by the Statute) is like a mortgage on a property.

• It must be paid before a clear title to ownership is provided to the project owner.

Bid Shopping

The exercise in which a GC is unfairly pitting bidders against one another to get each to lower its price.

• During the bidding time no subcontracts are executed.

• Subcontracts are executed later only after the contractor is awarded the contract.

• This can create problems because it corrupts the bidding process and fair action on a low bid.

Promissory Estoppel

If a party relies to its detriment on the promise of another party, the other party must be held responsible to its promise to avoid harm to the first party.

• A sub will be forced to honor its price or pay the resulting extra cost if it backs out of an offer.

• This is not based on breach of contract since there was no contract formed at the time of the offer (price quotations).

• The problem in enforcing this doctrine is to prove reasonable reliance on the sub’s price.

• The sub may have not submitted an “unequivocal” bid/price by making it conditional on some contingencies.

• To lock in prices received from subs a prudent contractor should promptly send a written notification to the subs confirming receipt of price, informing that the price is used in the bid, and stating reliance on the price.

• Protects contractors from the harm of key subs backing out. However, a prudent contractor should not promise execution of subcontract at this time because the contractor is still not obligated to the subs.

Warranties

• The contractor’s warranty usually lasts for one year and begins at Substantial Completion or project final acceptance.

• Problems are more likely to occur when a contractor is forced to use certain subs or suppliers due to proprietary spec or law requirements.

• Generally, suppliers do not extend the same warranty as committed by the contractor. Suppliers often use standard disclaimer clauses which are enforceable by the UCC.

• The best a contractor can do is not to acknowledge the supplier’s terms and to create uncertainty regarding what terms really govern the sale to have a chance to recover.

• Guarantee of performance during a set period of time.

Invitation to Bid

Methods of Invitation

• Open invitation

• Closed invitation

Open Invitation vs. Closed Invitation

• Open to all responsible bidders.
  $\text{Responsible} = \text{having financial ability, experience, and required resources}$

• In the private sector, both prequalification (i.e., before bidding) and post-qualification (i.e., after bidding) are common.

• In the public sector, only pre-qualification is acceptable to avoid possible disputes with the apparent lowest bidder that is missing other requirements.

• The invitation is usually posted as an advertisement in newspapers, national journals (e.g., ENR, Dodge report, AGC Daily News, etc), regional journals (e.g., construction news).

• State laws dictate where, how many times, how long each ad should run.
  *Appendix 2 provides an example of a letter format of a complete invitation to bid. Appendix 3 provides examples of public advertisement.

Bid Form

The non-collusion affidavit is a written document stating that the bidder did not collaborate/cooperate/share any specifics of its bid with other bidders.

• Appendix 6 provides an example of a Proposal Form.

Bonds

Bonds are used to protect the owner in cases where the contractor fails to perform in accordance with the contract. Bonds are three-party agreements between an obligee (owner), a principal (contractor), and the surety (bonding company). General contractors often require their subcontractors to obtain a bond as well. In the event that the principal is in default, the surety is responsible for upholding the principal's obligations to the obligee. This could be to financially support the contractor through completion or to take over the project with another contractor.

• Bid bond: used to ensure that the principal will honor their bid and enter into a contract with the obligee for the bid amount after the bid opening. The bid bond usually covers the difference between the low bid and the second lowest bid typically up to 10% of the bid price.

• Performance bond: a guarantee ensuring the obligee that the principal will perform all work in accordance with the terms of the agreement.

• Payment bond: also known as "labor and material bonds," guarantees the obligee that the principal will pay their bills for labor and materials provided on the project.

Subcontractor Default Insurance (SDI) or "Subguard"

An alternative to bonding is Subcontractor Default Insurance (SDI), commonly referred to by Zurich Insurance Group's trade name "Subguard."

• SDI is an insurance policy, purchased by the prime contractor, to protect themselves from subcontractor default.

• Unlike with a bond which is a three-party agreement, SDI is a two-party agreement between the prime contractor and the insurance company.

• Under the SDI policy, the subcontractors are required to be prequalified, effectively lowering the risk of default.

• In general, SDI is lower cost, more flexible, and has claims processed faster when compared to a surety bond.

• Advantages to bonds over SDI policies include:

Bid Bond Definitions

• Surety bond: Written document given by principal & surety to oblige guaranteeing a specific obligation

• Principal: Party under obligation (contractor)

• Surety: Party guaranteeing principal’s performance (bonding comp)

• Obligee: Party benefiting from the bond (owner)

• Indemnity agreement: Between principal & surety where the principal pledges assets that the surety can obtain to offset any expense or loss on the bond.

Agreement Form

• Standard forms by professional societies, government agencies, institutes, trades

• Standardization: save effort, assure completeness; acceptability; familiarity

• Modification must be coordinated with GC

• AIA (A101, A201) & EJCDC (#1910-8-A-1): Standard statements + blanks to be filled for specifics of a contract

• Appendix 8 – lump sum contract & Appendix 9 – cost plus contract

Methods of Specifying

Descriptive Specs

• Provide details: material, properties, inst.

• Example: Concrete mix 4:2:1:0,5 (3000 psi)

• Specifier assumes performance liability

• Being used less

• Sometimes the only choice

Proprietary Specs

• Contents:

  • Manufacturer’s name

  • Brand name

  • Model #/ catalogue #

  • Type & other designations

• Types:

  • Closed

  • Open proprietary

Performance Specs

• Detail the results required

• State verification methods

• Relatively new & expanding

• Needs:

  • Flexible design concepts

  • Reduced construction time & cost

  • Alteration overnight

• Translation to specs:

  • Structural system spanning 2 rooms

  • HVAC system compatible with changes

  • Ceiling & lighting systems

  • Movable interior partition system

• Clear expression of requirements

• Clear definition of satisfactory performance

• Clear definition of verification tests

Bidding Document

Bidding Document Breakdown:

• Bidding Requirements
  Invitation; Instructions; Information; Bid Form; Bid Bond

• Contract Forms
  Agreement; Performance Bond; Payment Bond; Certificates

• Contract Conditions
  General; Supplementary

• Specifications
  Div. 1 General; Div. 2 Site Work; Div 3 Concrete; Div 4 Masonry; Div. 5 Metals; Div. 6 Wood and Plastics; Div 7 Thermal and Moisture; Div. 9 Doors and Windows; Div 9 Finishes; Div 10 Specialties; Div 11 Equipment; Div 12 Furnishings; Div 13 Special Construction; Div 14 Conveying Systems; Div 15 Mechanical; Div 16 Electrical

• Drawings

• Addenda

• Contract Modifications

Organization of Specs

3-Part Format

• Part 1: General

• Part 2: Products

• Part 3: Execution

CSI 16-Division Format - Organization of Specs

Fixed framework: Standard title, sequence, # ; Appendix 12-CSI master format

• DIVISION: basic grouping of related information

• SECTION: COVERS ONE ITEM IN A DIVISION, RELATED SECTIONS; MAKE A DIVISION

• Flexible system:

  • 5 digits = full section number

  • 2 digits = refer to division number

  • 3 digits = broad, mid, narrow scope

  • Example:

    • 05200 metal joists (broad scope)

    • 05210 Steel joists (medium scope)

    • 05211 Open web steel joists (narrow)

    • 05212 Steel joists girders (narrow)

• Select only applicable divisions and sections.

• No need for all broad, mid, narrow scopes for simple projects could be all broad or mix as needed

• Divisions & sections do not follow:builder

  • Construction sequence, and individual trades

CSI MasterFormat - Divisions

Pre-2004

Before November 2004, MasterFormat was composed of 16 Divisions:

• Division 01 — General Requirements

• Division 02 — Site Construction

• Division 03 — Concrete

• Division 04 — Masonry (Ex. Concrete block)

• Division 05 — Metals (Ex. Beams)

• Division 06 — Wood and Plastics

• Division 07 — Thermal and Moisture Protection

• Division 08 — Doors and Windows

• Division 09 — Finishes

• Division 10 — Specialties

• Division 11 — Equipment

• Division 12 — Furnishings

• Division 13 — Special Construction

• Division 14 — Conveying Systems

• Division 15 — Plumbing & Mechanical

• Division 16 — Electrical

Post-2004 (Examples)

• Site and Infrastructure Subgroup:

  • Division 30 — RESERVED FOR FUTURE EXPANSION

  • Division 31 — Earthwork

  • Division 32 — Exterior Improvements

  • Division 33 — Utilities

  • Division 34 — Transportation

  • Division 35 — Waterway and Marine

  • Division 36 — RESERVED FOR FUTURE EXPANSION

  • Division 37 — RESERVED FOR FUTURE EXPANSION

  • Division 38 — RESERVED FOR FUTURE EXPANSION

  • Division 39 — RESERVED FOR FUTURE EXPANSION

• Process Equipment Subgroup:

  • Division 40 — Process Integration

  • Division 41 — Material Processing and Handling Equipment

  • Division 42 — Process Heating, Cooling, and Drying Equipment

  • Division 43 — Process Gas and Liquid Handling, Purification and Storage Equipment

  • Division 44 — Pollution and Waste Control Equipment

  • Division 45 — Industry-Specific Manufacturing Equipment

  • Division 46 — Water and Wastewater Equipment

  • Division 47 — RESERVED FOR FUTURE EXPANSION

  • Division 48 — Electrical Power Generation

  • Division 49 — RESERVED FOR FUTURE EXPANSION

Changes to Construction Documents

• Bid documents: Addenda

• Contract documents: Change Order

Change Order Definition

Written instructions to the contractor signed by owner and A/E authorizing:

• Addition, deletion, or revision of work, or adjustment of contract sum/time after execution of the contract

Change Order - Change Clauses

Two important provisions:

1. The notice requirement

   • When C receives instructions/orders if constitute a change, must promptly give written notice to owner

   • If worked without notice cannot claim $$$

   • Not given owner a chance to stop the change

2. Written requirement

   • Changes and extras must be pre-authorized therefore be in writing
     $\rightarrow \text{ENFORCEABILITY!!!}$

   • Owner may waive by act-gives oral instructions & grant them
     $\rightarrow \text{Will be considered only if owner suffers economic harm or prejudice}$

AIC Code of Ethics

The "AIC" designation that our constructor members use after their names is a symbol of their dedication to the Code of Ethics and the elevation of the profession through individual excellence.

1. A member shall have full regard to the public interest in fulfilling his or her responsibilities to the employer or client.

2. A member shall not engage in any deceptive practice, or in any practice which creates an unfair advantage for the member or another.

3. A member shall not maliciously or recklessly injure or attempt to injure, whether directly or indirectly, the professional reputation of others.

4. A member shall ensure that when providing a service which includes advice, such advice shall be fair and unbiased.

5. A member shall not divulge to any person, firm, or company, information of a confidential nature acquired during the course of professional activities.

6. A member shall carry out responsibilities in accordance with current professional practice, so far as it lies within his or her power.

7. A member shall keep informed of new thought and development in the construction process appropriate to the type and level of his or her responsibilities and shall support research and the educational processes associated with the construction profession.

Subcontractors and Subcontracts

• Since the only construction contract is with the general contractor, it is only the general contractor from which performance is expected.

• No contractual relationship exists with any of the other subcontractors. Coordination must be through the general contractor.

• General contractor is an independent contractor hired by the owner. The general contractor must communicate any subcontractor concerns to the owner as if they were the general contractor's concerns.

• Subcontractors are independent contractors hired by general contractors. They have no direct contractual obligation to or relationship with the owner.

• Sub-subcontractors generally do not have the right to file mechanic's liens when working as a sub to a subcontractor. Sub-subcontractors are independent contractors hired by the subcontractors. They have no direct contractual obligation to or relationship with the general contractor.

Owner-Subcontractor Relationship

Contractually, the subcontractor will enter into an agreement with the general con- tractor. In the subcontract, the general contractor will establish a relationship with the subcontractor so that the subcontractor is an independent contractor. This con- tractual association does not include the owner. Therefore, the subcontractor has a direct responsibility to the general contractor but not to the owner. At the same time, the work of the subcontractor must be approved by a representative of the owner. In effect, the work of the subcontractor is presented to the owner as if it were the work of the general contractor When doument is made for the work nor

Subcontractor Is Bound by the Terms of the General Contract

One common provision of subcontracts is to have the subcontractor bound by the terms of the general contract. The following provision is an example:

In consideration therefor, the Subcontractor agrees to be bound to the Contractor by the terms of the said Main Contract and to assume toward the Contractor all the obligations and responsibilities that the Contractor, by these documents, assumes toward the Owner (including every part of and all the General Provisions, General and Special Conditions, Drawings, Specifications, and Addenda), in any way applicable to this Subcontract, and also to be bound by the Subcontract General Provisions and the Subcontract Special Conditions attached hereto, which are hereby referred to and made part of this Subcontract.

Contract Termination - Additional Work

Delays on construction projects can be devastating for some contractors and subcontractors. This issue is often addressed in subcontracts. The following wording is typical:

Should the Subcontractor be delayed in the prosecution or completion of the work by the act, neglect, or default of the Owner, of the Architect, or of the Contractor, or should the Subcontractor be delayed waiting for materials, if required by this contract to be furnished by the Contractor, or by damage caused by fire or other casualty for which the Subcontractor is not responsible. . . the work shall be extended the number of days that said Subcontractor has been thus delayed, but no allowance or extension shall be made unless a claim therefor is presented in writing to the Contractor within 48 hours of the occurrence of such delay, but under no circumstances shall the time of extension exceed the time that the Owner grants the Contractor.

Indemnification Clauses in Subcontracts

One common provision of subcontracts is to have the subcontractor bound by the terms of the general contract. The following provision is an example:

In consideration therefor, the Subcontractor agrees to be bound to the Contractor by the terms of the said Main Contract and to assume toward the Contractor all the obligations and responsibilities that the Contractor, by these documents, assumes toward the Owner (including every part of and all the General Provisions, General and Special Conditions, Drawings, Specifications, and Addenda), in any way applicable to this Subcontract, and also to be bound by the Subcontract General Provisions and the Subcontract Special Conditions attached hereto, which are hereby referred to and made part of this Subcontract.

Important Definitions

• agency shop: a business that permits nonunion personnel to be hired but requires all employees to pay union dues.

• closed shop: a business that requires union membership as a condition of employment. Closed shops are now illegal under federal laws (except in the construction industry).

• double breasting: a practice by which a contractor operates union and nonunion construction firms simultaneously.

• employer association: a counterpart to unions that allows management interests to be represented. For example, the Associated General Contractors represents management concerns in labor negotiations.

• enterprise: an economic organization or business.

• merit shop: a business whose labor relations are not governed by a labor agreement. The employer, rather than a negotiated labor agreement, dictates how labor relations decisions are made (see open shop).

• minority business enterprise (MBE): a business that is at least 50 percent owned and managed by minority group members (blacks, Hispanics, Native Americans, et al.).

• open shop: a business whose labor relations are not governed by a labor agreement. Employees are not required to be or become union members as a condition of employment.

• right-to-work law: a state law that prohibits prehire agreements. States that have enacted such laws are known as right-to-work states. These laws are found only in states in which union strength has been diminished.

Labor Dispute Definitions

• primary boycott: a pressure tactic used by unions involving a union and an employer, while a secondary boycott is a boycott of companies that are doing business with an employer with whom the union has a grievance.

• collective bargaining: the process by which representatives of employers and employees hammer out a labor agreement. The representatives of employers negotiate with the representatives of a union about wages, hours of employment, work practices, safety, and the like.

• featherbedding: a work rule provision in labor agreements that dictates an inefficient and often costly way of carrying out specified tasks. An example would be a project where two workers are required to perform a task that could easily be performed by one. Another example occurs when the maximum productivity level for a task is prescribed.

• good faith: adherence to standards that are honest and fair when involved in bargaining.

• injunction: a judge's order to a person or group of persons (such as a union or

Labor Definitions (Cont.)

• lockout: a tactic used by employers that denies employment to employees involved in a labor dispute.

• national agreement: an agreement between a labor union, usually the building trades, and either a contractor or an employer association. This agreement permits a contractor to move its operations into geographical areas covered by different local union bodies without being required to negotiate separate agreements. Usually, the contractor agrees to abide by the rules of the local union in conjunction with a firm that is a signatory to a national agreement.

• picketing: as related to labor disputes, a gathering of union members near the entrance to a place of employment of an employer with whom the union has a grievance. The purpose may be to interfere with the normal operation of the business establishment (construction project) or to inform others about the nature of the labor dispute. Other union members will generally honor a picketed entrance by not passing through it.

• prehire agreement: an agreement between a contractor and a union in which the contractor agrees to hire workers who will become members of the

Labor Acts

• Sherman Antitrust Act of 1890: the first law that made all contracts, trusts, and conspiracies that restrain trade or commerce illegal. Although the law did not specifically mention labor unions, court decisions determined that unions were covered.

• Clayton Act of 1914: a law that specifically removed unions from falling under the Sherman Antitrust Act. Under this law, it was specifically stated that people are not a commodity and that the Sherman Act should not be construed as forbidding the existence or operation of unions. Thus, unions are not regarded as being in restraint of trade. Under this law, no restraining order could be granted simply because a dispute concerned the terms of employment, unless it was intended to prevent personal injury or property loss. In other words, no injunctions could be placed against unions for striking. Court decisions did, however, define activities by workers other than district union members as being in restraint of trade. Consequently, the actions of a sympathetic union, such as a boycott, could result in an injunction being sought by an employer. Previously, such injunctions could be obtained only by a U.S. district attorney. In effect, only the employees of a company could legally boycott that company. The courts defined peaceful picketing as consisting of a single picket, with greater numbers warranting an injunction.

• Davis Bacon Act of 1931: a law that states the prevailing wages for an area shall be paid on all federally funded and federally assisted projects valued above $2,000. Under this act, workers are paid on a weekly basis. The primary purpose is to protect the local wage rates and economy of each community. This law has the effect of putting union and nonunion contractors on a nearly equal competitive footing in bidding on federal work. Many states and municipalities have enacted similar requirements known as Little Davis Bacon laws. This law is frequently under attack, and attempts to repeal it are common. Critics state that the law is inflationary, while others contend that repeal of the law would result in more work going to open shop contractors, because the prevailing wage is often defined as the union wage. Minority groups feel that repeal of the law would result in increased exploitation of workers.

• Norris-LaGuardia Act of 1932: an act whose primary purpose was to