Trent Cotney, CEO of Cotney Attorneys and Consultants, recently joined our podcast to discuss potential regulatory changes for coatings contractors in 2021.
Topics discussed on the episode include the impact of a new U.S. administration and what it means for OSHA and other agencies; changes to the COVID-19 landscape and its effects on contractors; and what market segments within the coatings industry could be poised for growth in the months ahead.
For more information, visit cotneycl.com.
Ben DuBose: Trent, good afternoon. How are you?
Trent Cotney: Doing great. How are you doing?
BD: Doing well. Glad to have you back on the series. Rather than me just read off the background for Cotney Construction Law, if you could, give us a 30,000-foot overview, for anyone who isn’t familiar, what your work scope is and how you all fit into the coatings contractors’ world.
TC: We are an international law firm with more than 20 offices throughout the U.S., Canada, and we also have an office in South Africa. We are dedicated to representing the construction industry. In particular, we have a large segment that is dedicated to roofing, waterproofing, and coatings. We serve as general counsel for the National Roofing Contractors Association as well as about 20 other roofing and waterproofing associations throughout the U.S. and Canada. We are a full-service law firm that handles almost any needs that anybody in the industry would have.
BD: Of course, we tend to use you as an expert when there’s some sort of legal issue of significance — or potential legal issue, I should say. We talked to you last right when COVID-19 was starting to become an issue for the industry in the spring of 2020. Now, COVID is still an issue in 2021. We’ll get to that in a little bit.
I think a good place to start is with the new U.S. administration because, as we’re talking at the beginning of February, this is less than two weeks old. This is very new. This is on the forefront of everyone’s minds. You have a new administration. You have a Congress that’s shifted from Republican controlled, at least in the Senate, to now, considering the tie breaker, Democratic controlled. Between the new U.S. administration, changes in the backdrop of Congress, what does that potentially mean for the coatings industry? What are some of the themes that we could see emerge in 2021 as it pertains to coatings contractors?
TC: Ben, that’s a great question, and that’s something that we’ve been fielding a lot, basically since last year moving into this year. What does a Biden administration hold for the coatings industry? I think there’s both good and bad. From a good perspective, the Biden administration has already signaled that it will be looking heavily into renewable and sustainable energy. Along those lines, you can expect that further stimulus money that is directed toward vertical infrastructure improvement will have a heavy leaning toward anything that involves renewable or sustainable energy.
I think coatings are prime to capitalize on cool roof systems and other things of that nature that may assist in being able to take advantage of a lot of those federal and state funding. In addition, I think that there’s going to be some favorable immigration policy for construction. One of the biggest threats to the coatings industry is lack of skilled labor. It may be possible that we have the ability to create a legal way to obtain workforce outside of the U.S. in the event that demand continues to keep on pace where it is right now.
From a potential issue for the industry, one of the things that I’m always focused on is government regulation. Sometimes it’s a good thing, but sometimes it can be bad. There’s a couple of things that we’re seeing right now that we’re tracking. One is the Biden administration has signaled that it will put a renewed emphasis on misclassification. A lot of coatings contractors out there, oftentimes what they will do is sub out labor. They will sub out a portion of the labor to perform jobs. The Biden administration has said, “We’re going to take a close look at that relationship and see if they are truly independent contractors or if they are just your employees but you're not calling them that. You’re not taking out payroll tax. You're not doing the kind of things that you need to be doing.”
That, from an industry standpoint, that’s something that I’m really clued into. I’ve talked to our employment division, and I’ve said, “This is going to be a hot-button topic.” We need to make sure that we’ll being proactive in getting as much information out there on how to beef up your subcontracts, how to make sure that you've got the right SOPs in place to ensure, to do as much as you can to ensure that independent relationship.
The other thing that I’m clued in on is increased OSHA rulemaking, investigations, and citations. I believe this year, we will see a couple of significant rulemaking efforts, one with regard to COVID-19 and infectious diseases. Right now, there is not a specific standard that is based on COVID-19 or infectious disease. There are other ones that OSHA is using to kind of circle the wagon. But at the end of the day, that’s probably going to be first. Then I anticipate that there’s going be a more robust, revised heat illness and injury standard. That’s something that, although it isn’t necessarily going to affect coatings contractors right now, it is going to affect them in the summer. Making sure that they stay abreast of what the latest changes are, implement proper training, and adjust their manuals is going to be critical moving into 2021.
BD: Generally speaking, what are some of the implications from OSHA? You touched on that. Now that you have a Biden administration rather than a Trump administration at the top, does that signal any potential change in terms of how aggressive they might be with their enforcement?
TC: Yes. We currently, as of this morning, we have active OSHA cases either on the federal level or on the state equivalent in 29 different states. One of the things that remains consistent, regardless of who is at the top, is usually the rank and file is fairly consistent from administration to administration. What does change is their operating, how they go about engaging in investigations, their initiatives, and things that they’re focused on. I absolutely anticipate that there will be heightened regulation. There’s going to be more inspections and more enforcement.
We saw — if you look back at the Obama administration, there was significant rulemaking. We had the silica standard, we had the beryllium standard for general industry, we had the inflation schedule, we had electronic recording, a lot of other things that came out during that administration. During the Trump administration, very, very little. I think we’re going to return back to an Obama administration type OSHA where it is heavily involved in rulemaking, inspections, and enforcement.
BD: Let’s transition from OSHA specifically to the recent economic aid act that is being put in place by the new administration, providing close to $2.85 billion — I have in my notes — in funding for new PPP loans. However, the act also has some new qualification rules. The application deadline is March 31, 2021. What does that potentially mean for coatings contractors, that economic aid act? What are some of the new rules that they need to be mindful of if they’re trying to go down that path of PPP loans?
TC: That’s a great question. That’s something that we get a lot here. I’ve been working closely with our corporate finance and tax group to navigate a lot of these issues. To a certain extent, there is a lot of backfilling that both the SBA and the Department of the Treasury is doing with regard to the PPP loans, just to help supplement what’s already out there. The Coronabus Bill, which it’s commonly referred to [as], came out, I believe, December 21st, and in that what they did is, like you said, they allocated additional funding to the Paycheck Protection Program. They did a variety of different things. One, they added more money for first-time applicants, so if you haven’t applied yet, it’s possible that you may have the capability of doing that.
Second, as I said, and this is what I think listeners should pay attention to, Ben, is that you have the possibility of getting a second dip. Meaning that if you already got a first go at it, you could potentially go back and get more, but here’s the catch. You have to show a 25% loss, quarter over quarter, year over year. So you have to be able to show that, in 2020, let’s say you pick third quarter, you have to show a 25% loss compared to 2019. I do anticipate, and we’ve already seen some press out there on that, that if you go for a second dip, you can anticipate that there’s going to be some scrutiny there. I’ve always said, be wary of any free handouts from the government. I think this is one of those issues where you really need to make sure you have the accounting paperwork to back up whatever it is that you're seeking to do.
Some other interesting things that came out of that. They opened up PPP funds for 501(c)(6)s, which they hadn’t previously done. They made it clear that they can get that. They expanded some of the expenses that can be used for Paycheck Protection Program funds. And not necessarily PPP related, but tax related, and this is interesting, especially for business owners, of which I’m one, they said meals can be counted as a 100% deduction in 2021 and 2022. Normally what happens, Ben, is that if you — let’s say you're down in the Tampa area and I take you out for BBQ. I would submit that as a business expense, and I’d get 50% credit of that. Now, I get 100% credit. They did that to encourage people to dine out and go to restaurants, but it’s a big benefit to a business owner, especially those coatings professionals that have a sales crew that have to wine and dine and engage in that kind of stuff. Interesting side note. Nobody really pays attention to that, but as a business owner, I definitely noticed it.
BD: I can imagine. We teased to this earlier, the COVID-19 dynamics and what’s changing in 2021 now that, hopefully, the pandemic starts to ease in the next few months. I supposed we’ve already seen some progress the last couple of weeks in terms of case loads going down. I think there’s a couple of issues as it pertains to coatings contractors. I can give this to you as a two-part question. One, what do contractors need to be aware of as far as potential OSHA inspections on the COVID front? That’s something that could be fairly imminent, I would think, now that we’re in the middle of the pandemic.
Secondly, as we start to come out on the other side, and the vaccine rollout reaches the general public in the spring or summer of this year, what are potentially the requirements for a coatings contractor? Can, for example, a client require that a coatings crew be vaccinated? I suppose, let’s start with the OSHA inspections angle because I think that’s something that’s relevant now. Then, if you could, talk a little bit about what the requirements realistically could be for coatings contractors in a few months when it comes to potentially. having crews vaccinated.
TC: You came to the right place, Ben, because this is something that we’ve had to navigate. With regard to the first one, we have seen an uptick in COVID-19-related citations, especially in state plans, and I would say specifically in Oregon, Washington, and California. All three of those states are heavily regulated. I guarantee by the time we get off this call, California’s probably enacted another regulation that affects coatings contractors. The inspections that we’re seeing are failure to train, failure to comply. We’ve seen similar type inspections and citations issued in Michigan and Virginia.
I would anticipate that if you are in one of those plans that has a heavy regulatory framework, that you can absolutely anticipate there is going to be more inspections and more enforcement as the Biden administration continues to roll out and OSHA gets into full gear under this administration. That is going to be something that you’re going to look for enforcement. It is — from an enforcement standpoint, it is an “easy kill” for an inspector. If you don’t have a mask on, if you're not doing what you're supposed to do, if you're not socially distancing, you don’t have to get out of your truck to figure that one out, right? I do anticipate that that is going to be something that is going to be focused. What concerns me, Ben, is that even though the vaccine is rolling out, we’ve seen that these variant strains are troublesome. I anticipate we may be in COVID world for a little bit longer than everybody originally thought.
With regard to the second question, this is one that we’ve had to navigate. There are really two situations that I want to talk to the listeners about. The first one is what if you have an existing contract and, as part of that existing contract, the customer turns to you and says, “I don’t want anyone on my roof or anywhere in my building engaged in putting on any type of coating unless they can demonstrate that they have a vaccine.” The question is, Can they do that? Really what you do is you look to the contract. If it’s not required by the contract, and there is no federal, state, or local requirement that you be vaccinated, then the simple answer is, No, they cannot require that. You can obviously submit a change order or something seeking to recover the cost or you may have additional downtime. We’ve had some people who have had some fevers or adverse reactions where they’ve had to take some time off. You need to be compensated for that. But at the end of the day, contractually, they cannot necessarily enforce that.
That leads to the second option, which is, What if your customer —. You are bidding a project now. Let’s say you are in the process of negotiating a contract and they say, “We want your whole crew and anybody that comes on this jobsite to be vaccinated.” Well, the answer is yes, they can absolutely do that. They can require that. What you need to do is understand that, if that is the case, you’ve got to have a sufficient amount of crew members to handle production. Let’s say you have a 10-man crew that does commercial coatings. You need to recognize that if you get a couple people down, it’s not as easy to replace them unless you have others that are vaccinated that can join the fight. There’s nothing necessarily wrong with that, but factor it in. Factor it into your bid, factor it into your potential production and workflow problems.
What becomes a lot trickier is trying to enforce your employees to get vaccinated. Mandatory requirement that your employees get vaccinated has a lot of legal issues. It’s something that we’re recommending that you kind of move to a voluntary program rather than a mandatory program because you might potentially run into either discrimination or disability type issues related to religion or things of that nature. Also from an employee morale standpoint. A lot of different issues here, Ben. This is something that I expect that we will continue to see throughout 2021.
BD: I can imagine. As you said, especially with the variants, I don't think that the COVID dynamic is going away anytime soon. It’s something that is going to be around for a while. The fact that you have these variants and then the vaccine rollout, it’s only going to get more complex in the months ahead. I think you guys could potentially be a very good resource. Trent, I want to ask you specifically about the roofing market. While I know you represent coatings contractors as a whole and you have a lot of specific knowledge for the industry, I know that roofing is sort of your wheelhouse. That’s where you came up. What’s new on that side of the contracting industry in 2021? What are some of the themes to watch as it pertains to roof coatings contractors?
TC: What I’m telling anybody that will listen is there is opportunity out there. There is significant opportunity out there. What the Biden administration has signaled is a marked change from the fossil fuel, oil and gas type economy to the renewable energy-based, carbon capture, solar, wind, hydro collection type mentality. Along those lines, I think this is an opportunity for any coatings contractor to diversify its lineup and to make sure that it’s capitalizing on these potential new initiatives. Green sells. That’s the bottom line.
Regardless of what you think about it, at the end of the day, if you're concerned about revenues, then there’s not only going to be stimulus money there that you can potentially pitch to your owners, but it also gives you an opportunity to differentiate yourself from your competition. In the roofing market, what we’re suggesting is make sure that you combine solar, you really look at green roof systems, not just for pretty flowers and vegetation but for biofuel. That you look toward cool roof systems and waterproofing-type mechanisms that could potentially take into account energy reduction.
But also, we’ve seen some interesting materials out there with regard to carbon capture. There’s a lot of opportunity out there. That’s why I’m excited for 2021. I know it’s kind of easy to get down when you hear about pandemics and riots and all this other stuff. At the end of the day, I always feel a setback is a setup for a greater comeback, and I think this is a great example of that. There is opportunity out there, especially for the coatings industry. You guys are primed to capitalize on where I think the next, where this administration is going. That’s how I look at it. Again, this is not a political statement. I’m not red, blue, or anywhere in between. I’m just saying, opportunity is there, let’s take advantage of it.
BD: I think that’s a great outlook for it. Trent, as we wrap up the podcast, what else is new in 2021, and what resources do you all have available for any contractor listening to this podcast that wants to get in touch with you guys or just wants more information on these subjects? I know you guys have a wealth of information at the website, social media, and such. What’s on the horizon for you all over the next few months?
TC: We’re really excited. We have combined and merged our companies together. We have Cotney Consultant Group and Cotney Construction Law, and we’re now moving forward as Cotney Attorneys and Consultants. On the legal side, I always say we’re a full-service law firm that caters to the industry. But on a consulting side we have operations, estimating, unique software solutions, and a lot of other great things that we’re doing. As far as resources, we put out content on a daily basis on all of our platforms. We’re on LinkedIn, Facebook, Instagram, Twitter. You can always go to our website, www.cotneycl.com.
If I am a coatings contractor this year, one of the things that I would really want to focus on is making sure that my contract contemplates delays and suspensions for COVID-19. We represent a lot of coatings contractors, installers, and independent sales reps that have failed to account for the delays in their contract and have lost a significant amount of money as a result. The typical delay provisions that you have in there are not effective necessarily. What I really encourage any contractor out there or anybody listening is take the time now, maybe when it’s cold and work isn’t as prevalent, take the time to look at your policies, your manuals, your contracts. Make sure they’re up to speed. Do your due diligence now so that, when work starts flowing again full stream, you’ve got everything that you need.
BD: Before we go, what’s the specific website and social media handles that folks can look for, again?
TC: www.cotneycl.com. And then social media, you can go to Cotney Construction Law on Facebook, @cotneycl on Twitter. You can always look me up. I also publish stuff. I’m just Trent Cotney. Come see us. Anytime you’ve got a question, ask me. I’m always happy to answer.
BD: Sounds great. Trent, thanks again for joining us.