Volume 2, Issue 2
Newsletter of the Rees Broome Construction Law Group
Fall 2013

     


Obamacare and You: How to Ensure Your Business Complies

By Maureen Carr

Like it or not, the federal Patient Protection and Affordable Care Act of 2010 (more commonly known as “Obamacare”) is here to stay, having survived the House Republicans’ recent attempt to dismantle it and an ensuing government shutdown.  Obamacare affects virtually all U.S. residents and businesses, including those in the construction industry, albeit to varying degrees.  Businesses should pay close attention to the ever-changing healthcare landscape to ensure compliance with Obamacare.

Obamacare has two primary components: (1) the “individual mandate,” which goes into effect on January 1, 2014 and requires nearly all U.S. residents to have health coverage or face a tax penalty; and (2) the “employer mandate,” which goes into effect on January 1, 2015 and requires certain employers to provide health coverage to their employees or face a tax penalty.

Pursuant to the employer mandate, all employers with 50 or more full-time employees or “full-time equivalent” employees (total of employees working at least 30 hours per week, except for seasonal workers, plus a proportionate number of part-time employees) must “play or pay” – meaning that they must offer “affordable” healthcare plans to all full-time employees or pay a stiff penalty of $2,000 per year for each full-time employee after the first 30.  The penalty is a per-month fee that will be due annually on an employer’s federal tax returns starting in 2015, and is not tax-deductible.

The 50-employee threshold is met when an employer has an average of at least 50 full-time employees during the preceding calendar year unless the workforce exceeded 50 for 120 days or less during that year or the workers in excess of 50 were seasonal.  Accordingly, employers will have to take a hard look at their 2014 workforce numbers to evaluate whether the employer mandate will apply to them in 2015.

 

  • Bruce Titus
  • Joe Kasimer
  • Steve Annino
  • Mark Graham
  • Andy Felice
  • Joe Pierce
  • Maureen Carr
  • Gina Schaecher
  • Alison Mullins
  • Jordy Murray



Issue Highlights

Obamacare and You: How to Ensure Your Business Complies  
   
Bidder Beware - When is a Mistake Really a Mistake in a Public Contract Bid?  
     
Profiles:
Joe Pierce
Maureen Carr
 


 
     
 


Employers should be wary of attempting to alter their business structures to avoid the employer mandate.  Businesses with “parent-subsidiary” relationships (where one company owns at least 80% of another company) or “brother-sister” relationships (where five or fewer people control both companies), and “affiliated services groups” (i.e., where one business provides management services for another) may be treated as a single “employer” for Obamacare purposes, meaning that their employees are combined for “play or pay” purposes.  These complex regulations draw from tax law and are intended to prevent employers from avoiding Obamacare by artificially dividing their business into “separate” entities.

To comply with Obamacare, employers must provide healthcare plans that are “affordable” (meaning the employer must pay at least 60% of the expenses and employees must not be required to pay more than 9.5% of their family income for coverage) and provide certain “essential health benefits” such as ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance abuse services; prescription drugs; rehabilitative/habilitative services/devices; laboratory services; preventive and wellness services; chronic disease management; and pediatric services, including oral and vision care.  Obamacare also prohibits pre-existing condition exclusions for children and lifetime/annual limits, and requires dependent care coverage up to age 26.

Employers with fewer than 50 full-time employees (such as many design professional entities) may elect to comply with Obamacare’s requirements, and complying businesses with 25 or fewer full-time employees who pay average annual wages of $50,000 or less may be eligible for federal tax credits.  In fact, Obamacare may actually benefit certain small businesses by allowing them to buy health coverage on the new “exchange” (also known as “marketplace”) where employees will be pooled together with all of the other individuals on the exchange, spreading the risk more broadly and – at least hypothetically – reducing costs.  Employers with fewer than 50 full-time employees can access part of the exchange called “the SHOP” (Small Business Health Options Program) to buy health coverage.

The federally-facilitated marketplace (healthcare.gov) opened for enrollment on October 1, 2013 and will remain open until March 31, 2014.  The Obama Administration has announced that the well-publicized glitches with the website should be fixed by the end of November 2013.  Certain states (including Virginia) utilize the federal marketplace, whereas other states (including Maryland and the District of Columbia) operate their own exchanges.

Although the employer mandate does not go into effect until January 1, 2015, employers must meet certain Obamacare requirements now.  In particular, all employers that are covered by the Fair Labor Standards Act (generally any employer with two or more employees engaged in interstate commerce and with annual gross sales of at least $500,000) were required to provide written notice to employees regarding Obamacare’s “health insurance marketplace” by October 1, 2013.

Because various government departments and agencies are in the process of implementing regulations and providing guidance to the public, businesses should carefully monitor the complex, ever-changing landscape that is Obamacare.  It is advisable that businesses work closely with their accountants, lawyers, and health insurance providers to ensure compliance with Obamacare.


Bidder Beware - When is a Mistake Really a Mistake in a Public Contract Bid?
By Gina Schaecher

Mistakes happen, but when a contractor is bidding on a public contract, not every mistake allows can be remedied.  Most mistakes are characterized as unilateral mistakes, meaning one party has an incorrect belief that is not shared by the other party.  In public contracts, this usually means that the contractor was mistaken because the governmental entity is not likely to admit a mistake.

In order for a bidder to be relieved from the effects of the bidder’s unilateral mistake, the bidder must prove:  1) a mistake in fact occurred prior to the contract award; 2) the mistake was a clear-cut clerical or mathematical error or a misreading of the specification; 3) prior to the contract award, the government knew or should have known that a mistake had been made; 4) the government did not request bid verification; and 5) proof of the intended bid.  Although these criteria would appear to be fairly straightforward, courts are reluctant to let a contractor out of a bad bid.

Historically, courts have made it difficult for bidders to claim even an error in computation as a basis for escaping from a bid noticeably lower than the competition’s agency.  However, it is not impossible to prove the elements necessary for relief for a unilateral mistake.  In recent cases, some courts have held that the information available to the agency’s contracting officer at the time of bid should have put the agency on notice of a possible mistake in the bid, and thereby alerted the agency for the need for bid verification.

Additionally, in recent cases, courts have come to recognize that numerous mistakes, besides simple mathematical errors, can result in the contractor submitting a bid which does not embody its intent and thereby prevents a true meeting of the minds.  Many mistakes involve mixed errors of fact and judgment, and drawing too fine a line between the two can produce harsh and unnecessary results.  The modern trend is for courts to afford equitable relief to mistakes which render the bid incompatible with the true intent of the bidder and which can be clearly and convincingly demonstrated by objective proof.

There are certain types of mistakes, such as underestimating the cost of labor and materials, which are purely judgmental and generally do not entitle a bidder to equitable relief.  Pure errors of judgment are considered inherent business risks assumed by contractors in all bidding situations.  The proof as to whether a mistake of this type has occurred is so completely within the control and power of the contractor that the public body is helpless to refute it.  If the contractor is able to demonstrate by clear and convincing evidence that it made a clerical error, the contractor will be accorded equitable relief.  If the mistake is one of mixed judgment and an error of fact, the trend is to excuse the contractor from its bid.  Only pure errors of judgment do not permit the contractor to withdraw its bid.

Courts have held that a decision to guess at the last minute, and to submit a bid, rather than forego the possibility of submitting the winning bid, is purely judgmental mistake.  It is this type of mistake which can only be substantiated by a subjective inquiry into the state of the bidder’s mind and therefore does not warrant remedy to the bidder or release of the contractor.

Bidders seeking relief from a mistake of fact in their bids (clerical errors or mixed questions of fact and judgment) must immediately place the agency on notice of the mistake.  Prompt notice is essential to avoid prejudice argument by the government.  The contractor must be prepared to demonstrate the error clearly and convincingly by use of the bid estimate sheets and work papers.


Profiles

Joe Pierce

Joe has been practicing construction law since 1999 and represents contractors, subcontractors, and owners in a variety construction disputes in Virginia, Maryland, and Washington DC.

He has extensive experience with mechanic’s lien law and also provides representation to clients in employment matters. In particular, he has successfully represented clients in cases involving alleged discrimination and overtime compensation. Joe is currently the chair of the Heavy Construction Contractors Association human resources committee.

Except for the years he spent in college and law school at the University of Virginia, Joe has been a resident of Northern Virginia since 1980 and currently lives in Arlington. Outside of work Joe enjoys exercise and outdoor recreation as well as music and travel.

Maureen Carr

Maureen Carr has practiced in Rees Broome’s Construction Law, Litigation, and Employment Law Groups for seven years.  Maureen represents individual and business clients in state and federal court litigation involving a variety of business, construction, employment, insurance, and warranty disputes, and counsels clients on a variety of employment matters.  In particular, Maureen has worked with design professionals to defend against professional liability claims, litigate contract claims, enforce intellectual property rights, and develop employment policies and agreements.  Maureen prides herself on taking a practical approach to litigation and developing creative solutions to resolve disputes outside of the courtroom.

Maureen has received an AV® Preeminent Rating in Litigation, Construction Law and Contracts from Martindale-Hubbell, which is the highest rating available and is based on evaluations from other attorneys and judges.

Maureen lives in Arlington with her husband, two-year-old son, and dog.  She enjoys house projects, trips to the Bethany Beach, and Notre Dame football (sometimes).

 

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