ADA ISSUES AFFECTING RETAILERS

By Peter Leichtfuss
[Spring 2003]

The Americans with Disabilities Act of 1990 was enacted to recognize and protect the civil rights of people with disabilities. Title III of the ADA addresses physical access for the disabled to commercial facilities and places of public accommodation. That title provides that no individual "shall be discriminated against on the basis of disability in the full and equal enjoyment of goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation." 42 U.S.C. § 12182(a); C.F.R. § 36.201. By their very nature, retail establishments are places of "public accommodation" pursuant to the ADA, and retail operators and landlords must comply with its accessibility provisions.

Given the Act's broad implications, three practical rules are instructive:

1. All public accommodation new construction commenced after 1990 must be ADA accessible.
   
   
2. Owners and lessees of existing buildings are required to remove architectural barriers to the disabled when it is "readily achievable" to do so.
   
   
3. Where barrier removal is not readily achievable, the ADA expressly requires a public accommodation to make its goods, services, facilities, privileges, advantages and accommodations available through alternative methods where such methods are "readily achievable."

Because nearly all new construction requires ADA compliance at the permitting stage, the majority of lawsuits brought under Title III are related to whether a property owner or lessee has taken all "readily achievable" steps to remove architectural barriers to the disabled or provide alternate methods for access.

Retail establishments throughout the nation have encountered difficulty when addressing whether alterations are "readily achievable." To add to this problem, many retail leases fail to address ADA requirements altogether or do so in an ambiguous manner. This poses a two-fold question: 1) is an alteration readily achievable?; and 2) if so, who bears the financial responsibility for completing the alteration - the landlord or the tenant?

As many retail establishments have learned the hard way, the line between "too expensive" and "readily achievable" is not a bright one - this despite the fact the vast majority of retailers endeavor to accommodate the disabled by all practical means. Moreover, allocation of ADA compliance responsibilities within a retail lease offers little comfort once a lawsuit is brought against both the retailer and its landlord.

In the past several years, the number of private ADA lawsuits has grown dramatically. Most of these cases involve access to stores, parking lots or garages, restrooms, and lack of proper signage. Though the plaintiffs are generally unable to show any intent to discriminate, the lawsuits nevertheless seek injunctive relief, money damages (treble damages in some states pursuant to state law), punitive damages, and reimbursement for attorney fees and costs. Of the damages sought, the recovery of attorney fees and costs may prove the most troubling for retailers and their landlords: plaintiff's lawyers can solicit clients with a promise of no legal fees unless there is an ultimate recovery on their behalf. Moreover, this promise of attorney fee recovery can serve as a hindrance to early, good faith settlement of cases.

As the surge of ADA lawsuits against retailers continues, it is prudent to conduct a good faith assessment of your establishment's ADA compliance and determine whether your lease properly allocates the burden of ADA compliance. Various architectural and consulting firms offer ADA access assessments, and the money spent will go a long way toward defending any future claims. At the very least, retailers should consult with legal counsel to help them determine whether all "readily achievable" steps have been taken to provide disabled access at their sites. As ADA suits against retailers increase, those retailers that have taken steps to ensure disabled access to their facilities not only protect themselves from expensive litigation, but also ensure that their products and services are available to all.

Employee Paycheck Deductions: A Trap for the Unwary Employer

By Kathy Dent
[Spring 2003]

Employers who deduct money from their employees' paychecks to pay for the employees' meals, lodging, uniforms, equipment, laundering, breakages, cash shortages, etc. may find themselves in violation of state and federal wage laws. These laws generally limit the circumstances under which an employer can take such deductions and impose significant monetary penalties on employers who violate these laws.

Although every state's law is different, here are some tips for helping you to minimize the risk that you will be sued for making improper deductions from wages:

• Obtain the employee's written consent. Consent must be voluntary and obtained before the deduction is taken.
  
  
• Maintain records. All deductions should be recorded on your books.
  
  
• Include an itemized statement with every paycheck. The statement should identify the date, amount and purpose of each of the deductions.
  
  
• Do the math. Will the deduction take the employees' wages below the minimum wage? If so, the deduction may violate state and federal minimum wage laws.

As an employer, you are expected to know and follow state and federal laws regarding deductions from wages. If you have questions about whether a particular deduction is proper, consult a lawyer before making the deduction. The money you spend on sound legal advice will go a long way toward avoiding employee claims for improper deductions from wages.

Addressing Toxic Mold Risks in Retail and Commercial Property Transactions

By Peter Sergienko
[Spring 2003]

High profile lawsuits involving claims for property damage and personal injury arising from toxic mold have received significant publicity in recent months. A Texas jury awarded Melinda Ballard and Ron Allison a total of $32 million in damages arising out of toxic mold contamination in their 22-room mansion. Erin Brockovich purchased a home with a bad mold problem and litigation followed. Although many of the highest profile cases have involved residences, commercial buildings have also been the subject of toxic mold contamination and resulting litigation.

The legal issues associated with toxic mold are complicated primarily by the natural presence of molds in indoor environments and scientific uncertainty concerning toxic molds and their causal connection to adverse health impacts. Molds occur naturally and there are hundreds of thousands of varieties of molds and fungi. Molds produce tiny spores to reproduce and mold spores waft through indoor and outdoor air continually. When mold spores land on a damp spot indoors, they may begin to grow and to digest whatever they are growing on in order to survive. When excessive moisture or water accumulates indoors, mold growth will often occur, particularly if the moisture problem is undiscovered or discovered but not addressed. There is no practical way to eliminate all molds and mold spores in indoor environments. Fortunately, most molds are harmless aside from their tendency to produce mild allergic reactions in allergy suffers, but certain molds produce mycotoxins that can adversely affect human health.

From a regulatory perspective toxic mold has received mixed attention from federal and state regulators. In 1994, OSHA proposed rulemaking for standards addressing general indoor air quality in work environments. The proposed rulemaking considered exposures to toxigenic fungi and mycotoxins, but at least partially in recognition of the difficulty of developing a comprehensive regulatory regime for indoor air quality in all work environments, OSHA withdrew its proposed rulemaking on December 17, 2001.

California has adopted the Toxic Mold Protection Act of 2001. This law requires a task force to be convened to develop permissible exposure limits to mold, to asses the health threats posed by the presence of molds, and to set standards for the assessment, identification and remediation of molds. The law became effective on January 1, 2002 and the task force must report its progress on developing permissible exposure limits by July 1, 2003. The Act will eventually impose disclosure requirements to potential buyers and tenants, but owners will not be required to conduct air or surface tests to determine whether molds exceed permissible exposure limits.

Given the increased attention to toxic mold, owners and tenants of commercial buildings and their attorneys are starting to address mold prevention and remediation directly in leases and purchase agreements. And, due to the current lack of scientific knowledge and regulatory uncertainty, the focus should be on risk assessment and prevention of mold problems.

Tenants and purchasers considering a transaction should have an assessment for toxic mold performed by a competent consultant with experience in industrial hygiene, mold sampling and mold remediation. This protocol should become part of their due diligence process. An assessment of indoor air quality for the presence of toxic molds will establish baseline conditions and, if necessary, allow the parties to correct a pre-existing mold problem.

Practices and customs for assessing toxic mold risk and indoor air quality are still developing. Some building owners may develop protocols for regular testing and may provide results to prospective tenants or purchasers. However, most retailers contemplating a lease or purchase transaction will likely have to request permission to perform a toxic mold assessment.

Although a matter for negotiation, it is likely that the retailer will pay the initial expense of an assessment. If a problem is identified, contractual provisions addressing the next steps should be considered:

• Will the building owner be required to perform remediation and to what extent?
  
  
• Who will control the consultant performing the assessment work and who will own the consultant's work product?
  
  
• Will the work product be confidential?

Because toxic mold problems can require expensive and intrusive remediation work, and negative publicity associated with a mold problem could result in serious financial and legal consequences, savvy owners will seek to control the information flow and to avoid making any open-ended commitments to resolve mold problems identified during the due diligence process. Such provisions are reasonable as long as the prospective tenant or purchaser can evaluate baseline conditions and the prospective tenant or purchaser is protected from disclosure obligations and non-disclosure liability should the assessment reveal a problem that could cause adverse health affects.

Once a decision to proceed with a transaction is reached, addressing ongoing responsibility for mold is important in leases (in purchase transactions where toxic mold issues are not resolved prior to closing, transaction specific provisions would be required), and this presents some challenges for drafters. As previously noted, molds thrive in moist environments where excess water is present and mold spores move through indoor air constantly. Thus, a small roof leak in a tenant space could lead to a moisture problem with resulting mold. In a multiple tenant building, the mold could spread from one tenant space to other tenant spaces. Disputes and possible litigation could result.

For single structure retailers, building owners are, over time, likely to require tenants to hire qualified consultants at tenant expense to perform periodic assessments for the presence of mold, to provide the assessment results to the building owner, and to perform remediation if necessary. Owners may also seek access to the premises to verify test results or to perform independent analysis. Although a regular assessment regime adds costs, it is sensible prevention and it may provide liability protection to retail tenants. Some retail tenants may find it advantageous to adopt a testing regime even in the absence of a lease requirement. The main issues for lease negotiation are responsibility for remediation and reasonable limits to owner access. If the cause of the mold problem is a latent construction defect as opposed to a tenant failure to perform required maintenance or repair, it may be appropriate to allocate remediation responsibility to the owner. As with other owner access to perform or verify a mold assessment should, if possible, be conditioned upon reasonable prior notice and limited to times when the space is dark.

Addressing mold issues in leases of space in multi-tenant buildings should also focus on prevention of conditions that can lead to mold and prompt remediation in the event of a mold problem. If the owner assumes the general repair and maintenance obligations for the building exterior and all building systems, tenants should require the owner to perform periodic mold assessments - whether or not the owner recovers its costs as a common expense. Indeed, because a mold problem could originate in one space but manifest itself in another or other spaces, there is tenant incentive for comprehensive landlord oversight of mold prevention.

Where tenants are responsible for maintenance and repair of their interior space only, owners will want some right of inspection to the extent that the maintenance and repair involves building systems that could lead to moist conditions or mold growth. Additionally, tenants may want the owner to promise to oversee all tenant-performed maintenance to make sure that compliance is reasonably uniform. As with single tenant buildings, leases should also address responsibility for remediation costs and acceptable times of access.

While owners and prospective purchasers and tenants always have competing interests, there is considerable common interest in devising appropriate contractual provisions to avoid complex and costly litigation resulting from a toxic mold problem. Retailers with concerns about toxic mold should consult with their counsel to minimize these risks.

ALTERNATIVE CONSTRUCTION APPROACHES

By Dean Phillips
[Spring 2003]

In many instances in the retail and restaurant industry, the question is not whether to build or not to build, but what method of contracting will achieve the best contractor for the best price. As the construction industry has matured, so have the available contracting methods.

The traditional approach of "design-bid-build" has left much to be desired in the face of ever-shrinking schedules and construction budgets. This method usually results in a separate contract between the owner and an architect, resulting in the development of construction documents, including plans and specifications detailing the work that is to be constructed by the contractor. A separate contract then is entered into between the owner and the contractor, which incorporates the design documents developed by the architect during the design phase. While the traditional approach may still be effective in many instances, much of the opportunity for cost savings is lost or unrealized because of the owner's inability to get back much of the costs once a contract has been negotiated with the construction contractor.

Another part of the traditional method is the construction manager/agent approach. Under this arrangement, the construction manager (presumably someone with extensive construction experience) "steps into the shoes" of the owner and acts as the owner's agent with respect to the design and construction aspects. The construction manager can be inserted into the process at any time during the design and/or construction phases. Presumably, the earlier the construction manager steps in, the more opportunities the owner would have to effect cost savings.

Over the years, alternative methods of construction have developed which help save on design time plus provide a greater opportunity for cost savings during the construction process. This article deals with two of the more common alternative contracting methods used by owners in an effort to save construction time and dollars.

Construction Manager/General Contractor (CM/GC)

Under this approach, the owner will contract with a contractor typically through a Request for Proposal (RFP) or Request for Qualifications (RFQ) prior to or during the design phase. This method is generally referred to as a CM/GC approach. The RFP or RFQ includes qualifications-based criteria to allow the owner to make a choice between competing contractors. The purpose of this contract is to obtain preconstruction services during which the contractor will review the architect's design work and advise the owner and architect regarding constructability and practicality of alternative design approaches, value engineering and other possible cost savings, cost estimating, scheduling, approaches to subcontracting, availability of skilled workers during various schedule alternatives, and other similar issues.

While the CM/GC contract provides for the preconstruction services compensation, it does not provide for the construction costs, as those cannot be determined at the early design phases. The owner and contractor will typically provide that at a predetermined point during the design, or upon completion of design, that the contractor would offer a contract price which generally results in a Guaranteed Maximum Price (GMP). If the parties agree on a price (usually a GMP), the contractor continues with the construction. If they cannot agree, the owner can negotiate a contract with another contractor based on the design or bid the work. In that case, the contractor only receives compensation for the preconstruction services. This approach has been increasingly utilized in Oregon in recent years, and has become popular particularly in the public contracting arena. However, it is also becoming more and more popular in the private contracting arena because of its advantages.

The second alternative which, in reality, is not a new alternative but has become to be used with more frequency, is the "design-build" approach. Under this approach, the owner enters into a single contract with a design-builder to both design and build the project. Given the streamlined management structure of the design-build approach, lines of responsibility and accountability are especially clear, and project communication and coordination can be expected to be effective. This approach is probably most appropriate for projects where there are many likely changes or difficulties with the construction site and projects with very sensitive schedules and virtually no "float."

The Advantages of Alternative Contracting Methods

There are some distinct advantages to alternative contracting methods, although they should not be deemed a panacea for every construction problem or potential problem. In selecting between the available alternative methods, careful consideration should be given to all of the factors involved in a particular construction project because each construction project is unique to its particular locale and end result desired by the owner.

The following are seen as advantages to alternative contracting methods:

1. will likely lead to faster project completion;
   
2. project costs are likely to be reduced;
   
3. more discretion in contractor's selection;
   
4. constructability and practicality issues are addressed earlier in the process, allowing for more opportunity for cost savings;
   
5. selection of a contractor will still be made based on selection, but will be based upon evaluation criteria other than price alone.

The following disadvantages are seen in these alternative contracting methods:

1. the contract amount will not necessarily be the lowest price;
   
2. the selection process takes more time than a bid process;
   
3. issues have not been fully clarified in a design-build situation relating to the contractor's licensing requirements as an engineer/architect.

Conclusion

As can be seen from the above description, there are a number of alternative contracting methods available to an owner making a decision to build or expand an existing facility. Each of these alternative methods should be reviewed with each construction project to determine the best method for the particular project.

This Retail & Restaurant Advisory is a publication of the Retail & Restaurant Department of Davis Wright Tremaine LLP. Our purpose in publishing this Advisory is to inform our clients and friends of recent developments in retail & restaurant law. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may only be given in response to inquiries regarding particular situations.

Copyright © 2003, Davis Wright Tremaine LLP.

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