NTCA offers UofCTS online courses for thinset standards, and basics of ceramic tile and stone

Business Tip – September 2018

Failed tile installations are not only disappointments and inconveniences to owners, and very expensive problems to installers, both in terms of out-of-pocket costs as well as in reputation. They also hurt everyone in our tile and stone industry in a major way. What do you think people do who have a problem with something that they spent a lot of money on that may have resulted in additional costs, lots of inconvenience, and perhaps is a daily eyesore? They complain to others (negative advertising) and they probably select something else the next time. All of this costs our industry in sales and reputation, which affects all of our livelihoods regardless if we are a manufacturer, a distributor or an installer.

Our industry has grown tremendously over the last 20 years, and the skilled labor hasn’t been able to keep up with the demand and market changes. Plus, our tile products, installation products, and construction conditions and requirements have changed. Unfortunately many installers don’t learn their trade and skills at a trade school; they learn on the job taught by others, which may or may not be consistent with the current industry installation standards. Many tile installers don’t have the opportunity to easily receive continued education to learn about new standards and products. Installers often don’t have an opportunity to learn all of the industry standards or to fully understand the complexity of their work without having to miss work and spend a lot of time and money. 

Industry standards are based on the experience and mistakes of those who have gone before us – family members, manufacturers, and others who then serve on industry committees to develop standards. If tile installers follow industry standards and manufacturers’ directions, they can avoid failures and have successful tile installations to perpetuate and grow our businesses and industry. Tile installer training is an investment that everyone in the industry benefits from because when there is a problem it doesn’t matter who is at fault, we all will pay one way or the other with our time, money or reputation. 

UofCTS online course endorsed by NTCA

That is why the University of Ceramic Tile and Stone (UofCTS) developed the new online Tile Installer Thin-set Standards (ITS) Verification course and why NTCA endorses and is making it available to its members and the industry. This course focuses on standards for thinset application in terms of the required substrate conditions, proper preparation of substrate and tile, proper thinset application, proper installation methods, and proper quality control steps that all tile installers should incorporate into their work.

The ITS Verification course applies to and covers ceramic tile, glass tile, stone tile or any other type of adhered tile product whether thin-set mortar, epoxy or mastic adhesives are used. By making this training course on thinset standards readily available to tile installers throughout North America at an affordable cost without any travel expenses or loss of income, we are helping our industry grow, while avoiding tile problems. Tile installers who take the ITS Verification online self-paced course and pass it with a score of 80% or better will receive a Certificate of Completion indicating that they learned the industry standards and demonstrated that they understood what they learned. Having completed the ITS Verification course – or using the ITS designation next to their name – doesn’t guarantee that the tile installer has the skill set to do good work or will do good work, but it does verify they know the standards, and knowing the standards is the first stepping stone to avoiding tile installation problems. The ITS Verification certificate expires after two years and the updated ITS Verification course must be taken every other year to remain ITS Verified and current. This is a great continuing education opportunity for tile installers, so they can easily keep up with the changes in our standards and products. 

Online training works in tandem with hands-on instruction

Online training is not intended to replace hands-on training or classroom training, but rather supplements live instruction and makes training more accessible and affordable, so a larger number of installers can be trained in a relatively short period of time. Online training of this type, utilizing the technology of a Learning Management System (LMS), is not only a very effective approach to training, but it is very practical. The students have 24/7 access and can take interactive courses at their convenience, at their own pace, as long as they have a computer and an internet connection. There are no travel expenses or lost productivity incurred by the student or the trainer. There are management reports available to employers, so they can monitor the progress and results of their tile installers.

UofCTS, founded in 2002, utilizes the latest Learning Management System (LMS) technology to deliver online training, which is the same as that used by higher education institutions. The UofCTS self -paced courses are interactive and loaded with pictures, video clips, animations and are professionally narrated. Some courses are taught in both English and Spanish to accommodate the large Hispanic workforce in the tile industry.

UofCTS courses are based on industry standards and manufacturers’ requirements, utilizing the knowledge of industry experts. UofCTS professional instructional designers, who have degrees in adult education, organize the course content utilizing the latest educational methodologies to maximize learning and retention. UofCTS professional technology developers utilize the most advanced technology tools to convert the instructional designer’s storyboards to professional courses that are not only effective for training, but are interactive and enjoyable for the student. 

Once a student is registered for a course they receive automated email notices from the campus to give them instructions on how to access the courses, reminders to complete the courses, a final congratulations/passing notice with instructions on how to print their diploma and a link to download a student handout that summarizes the key course content for them to refer to later. The student is given 14 days to complete the five-hour course with 24/7 access. 

NTCA is encouraging architects, designers, general contractors and manufacturers to require that the professional tile installers on their projects are ITS Verified and/or be a Certified Tile Installer through CTEF to help prevent problems and to incentivize installers to become ITS Verified. NTCA also encourages tile installers to become ITS Verified to differentiate themselves as a professional installer or installation company, allowing them to generate more jobs and profit, and to avoid costly problems. NTCA is offering NTCA members special course tuition discounts as another benefit for being a member of the NTCA. 

NTCA also offers the UofCTS Understanding the Basics of Ceramic Tile course and the UofCTS Understanding the Basics of Natural Stone course that can be purchased on the UofCTS website. Both courses go into depth on how tile and stone are produced, utilized, installed, selected and maintained. The course is taught with a sales emphasis on professional consultative sales techniques and points out key industry standards, which is an ideal course for installers, architects, salespeople, designers or anyone interested in tile and stone.

To watch a short video preview of the Tile Installer ITS course or the other courses to get a preview of what to expect, visit https://www.tile-assn.com/page/CTS.

The latest with Green Squared® – Certified Product Searchability

Earlier this year at Coverings, the Tile Council of North America (TCNA) announced a partnership with Ecomedes, creator of an online database of product information relating to environmental attributes and certifications. The objective of this partnership is to establish ways for designers, purchasers, and users of tile and related installation materials to more easily obtain product information needed to help fulfill their environmental goals. 

The immediate deliverable of the TCNA-Ecomedes partnership is a Green Squared Certified® product search page which has been incorporated into the Green Squared website. Previously, searching for Green Squared Certified products involved contacting approved Green Squared certification agencies or inquiring with manufacturers. Now, an up-to-date listing of certified products is housed in one place and managed by Ecomedes, who interfaces regularly with participating manufacturers and their Green Squared certification agencies. Plus, each entry within the Green Squared Certified database contains valuable product information that is especially relevant to green building project leaders, architects and designers. These include downloadable certificates, EPDs (environmental product declarations, if available), and additional educational resources from WhyTile.com. Users of the library have the option to filter Green Squared Certified products by manufacturer, certification agency, or Green Squared Certified products that additionally have EPDs.

For sure, establishing a flagship library of Green Squared Certified products is important, but the benefits don’t end there. Green building specifiers and purchasers use a variety of broader construction product locator tools. If Green Squared Certified tiles or installation materials aren’t ‘on the menu’ of any given tool, they will not be considered, regardless of their eligibility, the quality of information provided, or how well-known the products are. With Ecomedes hosting the Green Squared Certified product library, the tile industry is well-positioned with a partner that can facilitate an increased number of eligible products being ‘on the menu’ for consideration in North American green building projects.

All information within the Green Squared Certified product database is syndicated with Ecomedes’s master database, Fulcrum (fulcrum.ecomedes.com), which is the green product library used by many of the largest architectural firms and purchasing organizations in the US. Furthermore, Ecomedes has partnered with some of the largest purchasing organizations in the country, including the GSA and California Energy Commission, to develop proprietary libraries that contain only products that satisfy a particular purchaser’s needs. As an example, Ecomedes is the exclusive host of the online product library used by Federal purchasing officials to find certified green products: https://sftool.ecomedes.com/. With Green Squared Certified products entered into Ecomedes’s database, there is inherent uptake into libraries created proprietarily by Ecomedes for purchasers. 

In today’s day and age of database positioning, information partners are extremely important. According to Ecomedes, they “connect buyers and sellers with better data to make a purchasing decision and get the right information needed for projects.” To that end, they are a leader in green building, and the tile industry is well-positioned having them as a partner in Green Squared.

Oh, and in case you haven’t noticed, the Green Squared website recently received a facelift. For more information about the program and direct linkage to the Green Squared Certified product library, visit GreenSquaredCertified.com.

OSHA issues RFI to consider expansion of construction tasks and silica control measures

Business Tip – July 2018

In a recent article concerning the lack of leadership for OSHA as nominee Scott Mugno awaits Senate confirmation, authors Leah Kaiser and Avi Meyerstein of Husch Blackwell LLP reported that OSHA has moved ahead with its Spring 2018 Unified Agenda of Regulatory and Deregulatory Actions, outlining the current status of both pending and anticipated rulemaking efforts. OSHA looks as though it will have its hands full with twenty agenda items, up from fourteen on the Spring 2017 list.

In a new request for information (RFI), OSHA wants to determine if it should expand its list of construction tasks and associated control measures that construction workers can use to comply with its 2016 silica rule for construction. Table 1 of the rule listed dust control methods that employers could use for common construction tasks.

The purpose of the table is to provide a clear path for compliance. It spares construction employers from verifying exposure levels (with data and monitoring) if they employ accepted methods for controlling silica dust. Per OSHA: “Employers who fully and properly implement the engineering controls, work practices, and respiratory protection specified for a task on Table 1 are not required to measure respirable crystalline silica exposures to verify that levels are at or below the PEL for workers engaged in the Table 1 task.”

OSHA intends to use the additional information it gains in response to the RFI to revise Table 1 if deemed appropriate. OSHA currently classifies this rulemaking agenda item as “substantive, nonsignificant,” so it is unclear whether we should expect substantial movement in the near future.

Construction Wages: skilled workers command higher pay

Business Tip – June 2018

In the TileLetter Weekly digital enewsletter disseminated on March 7, 2018, a recent study of wage data from the American Community Survey (ACS), analyzed by author Sasha David and published on BuildZoom (buildzoom.com) caused quite a stir. The analysis of the study was to determine which jobs pay the most – and the least – and why. The full story, with supporting charts and tables, can be found at http://tileletter.com/2018/02/construction-wages-who-makes-the-most-and-where/ or at http://bit.ly/2oqMLeO or at BuildZoom at http://bit.ly/2osxF8B.

The Bureau of Labor Statistics (BLS) charts annual mean wage by area.

The controversy centered around the statistics that show concrete and terrazzo workers in this study make $35,000/year and brick masons, block masons and stone masons – as well as carpet, floor and tile installers and finishers make $30,000/year – which are said to be a far cry from elevator installers and repairers at $80,000 annually, or construction and building inspectors at $55,000. 

The upshot of the story was that location (workers in urban centers generally command higher wages than those in rural settings) and the skill/training level of the workers are the two main factors in higher paying positions, which David attributed to roles like supervisors, engineers and inspectors. 

The BLS statistics paint a different picture of tile and marble setter wages.

However, some TileLetter Weekly readers took umbrage at how tile setters were characterized and how figures may have been obtained including small sample sizes (15 for cement, concrete and terrazzo workers, 19 each for brick masons, block masons and stonemasons and carpet, floor and tile finishers and installers).

Rod Owen

“I dislike this occupational study and the way they group tile setters in with carpet/flooring. It requires greater skill to be a hard tile setter than it does to be a resilient/carpet installer,” said Rod Owen, of NTCA Five Star Contractor C.C. Owen in Jonesboro, Ga. “In fact, the word ‘installer’ irritates me because it associates a tile setter with a less-skilled trade of simply installing products rather than having to perform precision work with less forgiving materials like tile and stone…If all I had to offer was a median of $30k after achieving tile setter status I might as well quit trying to find long-term stable employees.”

Skill makes a difference

David did make the point that skilled “blue collar” positions also can bring in more robust salaries, but she did not identify tile setters as part of that elite group. 

“People tend to associate white-collar or office jobs with higher salaries compared to blue-collar or manual labor, but the rankings show that this is not necessarily the case,” she said. “Working with elevators or boilers requires physical work, but these are among the highest paid jobs in the industry.”

David pointed out, “The highest-paying occupations often require specialized apprenticeships, licenses or certifications that demonstrate an understanding of the trade and command a premium in the market, such as a grounding in mechanics for elevator technicians, circuitry for electricians, or water systems for boilermakers. Of course, licensing can also serve as a means for controlling the number of people practicing and by reducing the supply of those tradesmen, increase their wages.

“Towards the bottom of the list are trades that generally have lower barriers to entry,” she said, adding fuel to the fire. “Floor installers, construction laborers, drywall installers, painters and roofers are listed on the Bureau of Labor Statistics as having ‘no formal education credentials’ required, while professions with average pay including pipelayers, sheet metal workers, glaziers, insulation workers, and carpenters typically require ‘a high school diploma or equivalent.’”

Woody Sanders

Woody Sanders, founder of D.W. Sanders Tile & Stone Contracting in Marietta, Ga., a fellow NTCA Five Star Contractor, took exception to the way tile contractors were characterized, saying, “We should highlight and make the case for what the professional ‘TILE’ contractors are paying and doing. I would agree with Rod, we have to detach our trade from carpet, vinyl, LVT. I understand that some of our members are in the floor covering business, but that is neither our charter nor our trade. Our message should be clear that we are a highly skilled trade that offers a career path.

“Interesting enough, as I got [the digital enewsletter], I was entering the pay rate for a new hire,” he added. “Having no experience, knowing nothing about the tile, I started him in the high $20Ks, with a chance to go even higher once he makes it out of his probationary period.” 

Varying statistics

In fact, The Bureau of Labor Statistics (BLS) page of the U.S. Department of Labor states the median pay for flooring installers and tile and marble setters in May 2017 was $40,250 per year and $19.35 per hour, quite a difference than the BuildZoom study. These figures, from the BLS Occupational Employment Statistics survey, exceed $37,690 – the median pay for all workers in that time period.

Further analysis of the BLS data paints a different picture from the BuildZoom story. In May 2017, the BLS said tile and marble setters brought in a median wage of $41,680, compared to carpet installers at $38,830, floor layers (except carpet, wood and hard tiles) at $40,040 and floor sanders and finishers at $36,950. The lowest 10% of earners in the flooring installers and tile and marble setters category (which the government does lump together) made less than $23,590 and the highest 10% earned more than $73,990. 

Training

As part of its occupational analysis, the BLS includes a section called “How to Become a Flooring Installer or Tile and Marble Setter” at https://www.bls.gov/ooh/construction-and-extraction/tile-and-marble-setters.htm#tab-4 or https://bit.ly/2rf5RoM. In terms of education – as David pointed out – the BLS states, “There are no specific education requirements for someone to become a flooring installer or tile and marble setter. A high school diploma or equivalent is preferred for those entering an apprenticeship program. High school art, math, and vocational courses are considered helpful for flooring installers and tile and marble setters.” 

However, the BLS continues in its training section with information about on-the-job training for flooring installers and tile and marble setters, adding that some flooring installers and tile and marble setters learn their trade via a two-to –four year apprenticeship. 

“This instruction may include mathematics, building code requirements, safety and first-aid practices, and blueprint reading,” the section states. “After completing an apprenticeship program, flooring installers and tile and marble setters are considered to be journey workers and may perform duties on their own.”

And certification programs figure prominently in the BLS’s Certification section, which names industry programs that test installer and setter skills and offer certification credentials. At the top of the list is the Ceramic Tile Education Foundation and the Certified Tile Installer (CTI) certification, and the Advanced Certifications for Tile Installers (ACT) program and requirements for taking the exam:

“Certification requirements include passing both an exam and a field test,” the site states. “Workers must also have either completed a qualified apprenticeship program or earned the CTI Certification to qualify for testing.” The program offers certifications in seven specific areas of tile installation:

  • Grouts
  • Large-format tile and substrate preparation
  • Membranes
  • Mortar (mud) floors
  • Mortar (mud) walls
  • Shower receptors
  • Thin porcelain tile.

The site also names voluntary certification programs for floor finishers and sanders by the NWFA, CFI’s certification for flooring and tile installers and the INSTALL comprehensive flooring certification program for flooring and tile installers. 

Important qualities that flooring installers and tile and marble setters need to exhibit are also listed, which include: color vision, customer-service skills, detail oriented, math skills, physical stamina and physical strength. 

So while it is true that anyone can enter the field without formal training, there is more than a nod given to certification programs, skill credentialing for skills of installers and setters and specialized qualities that enable them to execute their jobs. 

Bart Bettiga

“These products are not meant to be put in by an untrained workforce,” said Bart Bettiga, NTCA Executive Director. “Tile and stone are most often selected because they are considered to be a permanent finish. For this to be the case, we need to have a highly trained and highly compensated workforce.

“For the past several years, the NTCA has been developing its online apprenticeship curriculum,” he added. “We have worked with several of our members to help them use this educational tool to recruit new people into the trade and to train their current staff. It is our hope that this program can be integrated with supervised and field-related training.

“The reason this is so important is that we believe that tile installation is a highly skilled craft that takes several years to master,” Bettiga continued. “Why is this important? Because we have a big job to do, and it is perfectly illustrated in this paper. We must raise the wages of our trained tile installers if we are going to recruit talented young people into our trade. We cannot continue to be grouped with other flooring trades that quite frankly are not as complex, nor do they take as long to master. Tile installers should be making wages like other trades that are considered to be highly skilled.”

Clearly, CTIs, ACT-certified tile setters and NTCA Five Star Contractors exhibit “the specialized apprenticeships, licenses or certifications that demonstrate an understanding of the trade and command a premium in the market” that David indicated is a prerequisite for higher wages. Getting the word out to end users to look for those craftspeople with credentialed skills is an ongoing initiative in this industry.

Worried about OSHA silica compliance? Not if you’re in one of these five states

Business Tip – May 2018

With the Occupational Safety and Health Administration’s (OSHA) silica standard already in effect for the construction industry and about to go into effect in June of 2018 for general industry, many employers are anxious about whether their programs will pass muster with federal and state OSHA officials. But if you’re in Maryland, worry not. Two years after then-Secretary of Labor Tom Perez heralded the issuance of a final rule on Occupational Exposure to Respirable Crystalline Silica at the International Union of Bricklayers and Allied Craftworkers’ John J. Flynn BAC/IMI International Training Center in Bowie, Maryland, the “Old Line State” has still not adopted a corresponding silica standard.

Section 18 of the Occupational Safety and Health Act (OSH Act) provides that states may choose to develop and enforce their own occupational safety and health standards. Localized oversight of workplace safety is permitted so long as the state occupational and safety health plan is “at least as effective in providing safe and healthful employment and places of employment” as the federal standards. Though state health and safety standards often simply emulate corresponding federal health and safety standards, states can seek to implement standards that are more stringent than their federal counterparts. California’s recently enacted Process Safety Management for Petroleum Refineries is one example of a more stringent state standard. But what happens when states fail to implement any corresponding health and safety standard?

Maryland’s decision

Not much, apparently. In the case of OSHA’s silica standard, the administration gave states six months from the March 25, 2016, issuance date to adopt their own respective silica standards. Noting the numerous delays announced by OSHA in the enforcement date of the construction silica standard, Maryland adopted a wait-and-see approach before taking any action. Maryland was also apparently awaiting a decision from the United States Court of Appeals for the D.C. Circuit on industry challenges to OSHA’s silica standard. The United States Court of Appeals for the D.C. Circuit issued a decision in December 2017 that rejected all industry challenges but remanded the standard back to OSHA for consideration of whether to include a medical removal provision, a challenge raised by labor unions. After OSHA complained to Maryland about the delay in implementing a silica standard, Maryland safety and health officials responded that the state agency was waiting on OSHA to issue an amended standard to include medical removal provisions.

Arizona, Hawaii, Utah, Wyoming also delay in adopting a corresponding standard

Maryland is not alone, either. Arizona, Hawaii, Utah, and Wyoming have also failed to adopt a corresponding standard. These states may lack the financial resources and manpower to develop and promulgate a corresponding safety standard on their own. If a lack of resources is a problem, however, the state could simply choose to enact a mirror image of the federal standard or promulgate a short 30-words-or-less regulation that adopts and incorporates OSHA’s silica standard. None have done so.

Until last month, Washington State had also neglected to adopt a silica standard. In Washington, the issue appeared to be a matter of priorities. Washington recently adopted its silica standard on March 23, 2018.

OSHA’s recourse

Theoretically, a failure of a state occupational safety and health plan can allow OSHA to exercise its authority under Section 18(f) of the OSH Act to rescind the state’s occupational safety and health plan and have the federal government take over enforcement of workplace safety laws and regulations. This is considered the “death penalty” option and is a time-consuming and litigious process. But OSHA may take a shot across Maryland’s bow and send the state a “show cause letter” asking why a proceeding to reconsider the state’s final approval status should not be commenced. That is what OSHA did with Arizona in 2014 when the state adopted different fall-protection requirements for residential construction.

Impact on employers

For employers that work within these five states – and only these five states – there is no silica standard with ancillary requirements such as exposure assessment, medical surveillance, and specific housekeeping measures. These five states still have older airborne contaminant requirements that cover silica, so employers should still ensure that their employees are protected from levels of respirable crystalline silica above the permissible exposure limit.

For employers that work in multiple states that include one or more of these five states and one or more of the remaining 45 states, the lack of silica standards in these five states can create confusion and complicate compliance efforts. Do you adopt a program where the company “turns off” its silica program in these five states? While this may ease compliance expenses in the short term, employers may not want to take this approach; crews could get confused and forget to “turn on” the program when they cross state lines. Such a program could also worsen employee morale. Employees would likely notice their employers easing up on silica compliance efforts in states where they don’t have to comply. Employers focused on long-term compliance may want to adopt a consistent silica program that treats compliance as applicable in all 50 states. Employees will likely appreciate the company’s position, and besides, the current “free ride” on silica offered by Arizona, Hawaii, Maryland, Utah, and Wyoming won’t last forever. In its existence, OSHA has never allowed a state plan to forego adopting a standard the agency deems essential to workplace safety.

Change or be dragged: How to reinvent yourself when life demands it

Business Tip – Coverings 2018

Paul G. Krasnow, author of The Success Code: A Guide for Achieving Your Personal Best in Business and Life (J & K Publishing, 2018, ISBN: 978-0-692-99241-8), approaches the personal and professional changes that life inevitably brings our way as opportunities to reinvent ourselves – and thrive. 

“When you face a setback in your life, you have two choices,” Krasnow said. “Remain stuck or move forward; it’s that simple. Life is too short to spend it stuck and miserable. Take action now to change your life or get ready to watch life pass you by.”

Krasnow’s book tells the story of Krasnow’s journey – from his modest beginnings in 1940s Los Angeles, to starting over again after business failure, to his epic career rise as a financial representative at Northwestern Mutual Life Insurance Company.

Krasnow offers the following tips on embracing change and creative reinvention when life demands: 

• Realize it’s never too late. During the course of your lifetime, you will be called upon to reinvent yourself, time and time again. Don’t let yourself stay stuck in what you know. Make the most of the resilience you now have under your belt with overcoming previous challenges and strive for new horizons. As you envision this new version of yourself, what are some steps you can take today to put that new self into action?

Take an honest look at your life. Muster the courage to look at your life and figure out where you’ve gone wrong, and the changes you need to make to get back on track. Own up to the mistakes you have made and take responsibility for the part you played in getting yourself stuck. Krasnow points out that this kind of brutal honesty is not for the faint of heart. It requires courage to take full responsibility for your life and most importantly for the failures in your wake. But if you can sit down and face your own mistakes, you will free yourself up to learn from the painful consequences you are facing today.

Move forward; just do it. “Change is not rocket science,” said Krasnow. “We all have a tendency to make life so complicated when it doesn’t have to be. Simply make a decision to move forward. Don’t try; just do it. People say they’re going to try to change. Try? There is no such thing. There’s doing it or not doing it. ‘Try’ is a word that you should eliminate from your vocabulary right now.” 

Dream big. The only real challenge in creating the life you’ve always wanted is your inability or unwillingness to free up your imagination to envision your dream in all of its glory. In other words, you are only as successful as your perceived limitations. How often do you limit yourself when envisioning the success you are capable of achieving? Don’t settle for the limited vista of your present-day life. Instead, allow yourself to be willing to travel well beyond the bounds of the landscapes you may not be able to imagine today. 

Stay focused. “Once you decide to make a change in your life, it’s time to get serious and focus on your goals,” said Krasnow. “Think of life as a journey in a train that travels on a track. Each track leads to a specific destination. Make a point of staying on the track of your choice, without getting distracted and switching tracks. If you stay focused, you will certainly reach your desired destination.” 

Pace yourself. Making a major life change requires a steady pace. You work at it each day and keep at it (and then keep at it some more). Remember that extraordinary creations are not built in a day through occasional bursts of effort, but rather are crafted over long periods of time with daily, steady tasks. It’s a marathon; stop exhausting yourself by sprinting from place to place. Instead, stay on course with your goals and remain consistent. 

Know that failure is not an option. “When you realize that failure is not an option, it becomes clear that there is no stopping at the first obstacle you encounter along the way,” Krasnow said. “There is an opening, even in the most stubborn of barricades. Where is the opening in your current wall of obstacles? Is there a secret passage you had overlooked but is now emerging in front of you? Take that hidden path and forge ahead. Just keep your eye on where you want to go and you might find that a setback along the way was actually a shortcut to your desired destination!”

“We all know that change is not the most comfortable part of our lives,” concluded Krasnow. “But know that the process of transformation is a gratifying experience, providing you find the courage to do it. You can adapt. You can take a new path in your life. And you will undoubtedly be better for it in the long run.”

For more information, please visit www.paulkrasnow.com.

Tax reform: yes, it is a big deal

Business Tip – March 2018

Tax reform legislation raced through Congress at lightning speed. So quickly, in fact, analysts are still digesting its contents and assessing its impact. Critics say it favors the rich. Proponents promise it will unleash the American economy. Others worry about the long-term impact on the national debt. Yet, the truth is, nobody really knows for sure how this legislation will reshape the economy or our society at large.

From the perspective of corporate taxation, we can say for certain, passage of the Tax Cut and Jobs Act of 2017 is a big deal. For years, the United States has clung to an outdated 1986 era corporate tax code and a 1960s system of taxing “worldwide” income that most other countries abandoned long ago. At 35%, the U.S. corporate rate towered over other developed countries’ rates. In a global economy, where companies can choose where to produce and invest, these features pushed many companies and trillions of dollars overseas. Bold structural changes were needed. And, the new law does just that.

Already, as of mid-January, over 220 companies have responded, either by providing bonuses, wage increases, or both to employees. AT&T gave $1,000 bonuses to 200,000 hourly employees and announced they will boost capital spending in the U.S. by $1 billion in 2018. Starbucks employees received wage increases and expanded benefits. Some dismiss these gestures as little more than window dressing with no real impact. Yet, others see this as an early indicator of positive things to come as the consequences of tax reform work their way through the economy. (Ed. Note: Conversely, since the reform has been enacted, we’ve seen major retailers close hundreds of store locations, and lay off thousands of workers. Whether coincidental timing or deliberate scheduling, the effects on discretionary income are yet to be seen.)

The new 21% corporate tax rate and the switch to a territorial system of corporate taxation are key changes. But these are not the only ones. Other changes include:

100% Expensing: The bill provides a full and immediate write-off of most machinery and equipment purchased for use in a trade or business, including both new and used property.

Increased “Luxury” Auto Depreciation Limits: The bill increases limits on passenger vehicle depreciation – commonly referred to as the “luxury vehicle depreciation limit.” The limits are increased from $3,160 to $10,000 in the first year; from $5,100 to $16,000 in the second year; from $3,050 to $9,600 in the third year; and from $1,875 to $5,760 in the fourth and later years.

Limit on Interest Deduction: For companies with more than $25 million in gross receipts, the bill limits the deduction for corporate interest paid. The deduction cannot exceed the sum of i) business interest income plus ii) 30% of the adjusted taxable income of the corporation.

Entertainment Expenses: No deduction will be allowed for entertainment expenses, although the company can still deduct 50% of the cost of meals for employees on work travel.

Credit for Family and Medical Leave: In 2018 and 2019, employers can claim a tax credit of 12.5 to 25% for wages paid to employees while on paid family and medical leave.

A new deduction for pass-through entities

One of the most intriguing and complicated changes is the new tax benefit for “pass-through” entities, which includes S-corporations, partnerships, sole proprietors and most LLCs. The essence of the new Section 199A is a deduction of 20% of the entity’s Qualified Business Income (QBI). The potential tax savings is prompting many business owners to rethink their operation. Here’s how it works:

Let’s say Joe owns a tile installation business, called Tile LLC, where the income is taxed as a sole proprietor on Joe’s individual tax return. In 2018, Tile LLC has a profit of $250,000, which is reported on Joe’s Form 1040, Schedule C. Subject to certain income restrictions, Joe will receive a $50,000 deduction (20% of his Qualified Business Income) on his individual tax return!

However, the restrictions on the QBI deduction add a great deal of complexity:

First, there is an income threshold to consider. If Joe is married and files a joint tax return, he and his wife’s taxable income must be less than $315,000 to claim the full 20% QBI deduction (less than $157,500 for single taxpayers). For incomes over $315,000, a partial deduction is allowed for joint taxable incomes up to $415,000.

If the entity is a personal services business (accounting, legal, consulting, and any other trade or business where the reputation or skill of one or more of its employees is the reason for the revenue, except for engineering or architectural services), no QBI deduction is allowed for pass-through income if the individual taxpayer’s taxable income is greater than $415,000 for joint filers.

For entities that are NOT personal services corporations and the pass-through income exceeds the income threshold described above, a QBI deduction is available, but may be limited. In this circumstance, the QBI deduction is the lesser of 20% of QBI or 50% of the W-2 wages paid to all employees by the entity; or, alternatively, 25% of W-2 wages plus 2.5% of the original cost of tangible depreciable assets.

For Subchapter S corporations, the rules requiring employee/owners to be “reasonably compensated” still apply. So, if Tile LLC is a Subchapter-S corporation, Joe would pay himself a reasonable salary of, say, $70,000 and receive a W-2 for that amount, leaving a pass-through profit of $180,000. The 20% QBI deduction would be $36,000.

Generally, an estate or trust is also able to deduct up to 20% of business income from a pass-through entity.

Yes, it’s complicated. Tax planners are eager to see guidance from the IRS to provide more detail on how this provision will be implemented.

But with change comes opportunity. And the opportunities created by the Tax Cut and Jobs Act of 2017 are indeed significant. While no company should rush headlong into a major restructuring, every company should explore whether their current structure continues to make sense. Almost overnight, we find ourselves in a new environment. Navigating this changed landscape will take skill, and the guidance of a knowledgeable accountant, but it will be well worth the effort.

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Be prepared before making the leap from installing tile to teaching tile installation

Business Tip – February 2018

Recently, NTCA trainer/presenter Robb Roderick fielded a question from an installer who was inquiring about the best way to transition from installing tile to teaching or training others in tile installation. Robb’s experienced response follows:


In response to your question of how to move from installing tile to teaching or training tile installation, I would give you two pieces of advice: increase your credentials, and increase your exposure. 

Increase your credentials

There are many ways you can increase your credentials. One way is to become certified as a Certified Tile Installer (CTI) with the Ceramic Tile Education Foundation. After successfully passing the CTI exam, I would suggest taking as many of the ACT (Advanced Certifications for Tile Installers) tests as possible. Complete the online NTCA University courses. Attend as many NTCA and or manufacturer workshops as possible. Investigate training and education offered by your local union hall. The Ceramic Tile Institute also has some training and programs that may
benefit you.

Increase your exposure

To increase your exposure, I would encourage you to attend trade shows, conventions and conferences and network with as many people as possible. A few to attend would be TISE West/Surfaces, Coverings, and Total Solutions Plus. Also getting involved with Facebook could help you to meet more people who may help you with your endeavor. I would suggest joining and being an active part of sites like NTCA Members Only, Tile Geeks, Global Tile Posse, Tile Love 2.0, etc.

The NTCA website (www.tile-assn.com) now has Career Center page, which includes both employers and job seekers. This is a place where you can create an account and post your resume, and search possible employment opportunities. Many manufacturers also have employment opportunities listed on their website.

It’s said that success is when preparation meets opportunity. Hopefully the information above will help you prepare for your opportunity.

Cyber Insurance: can you afford to ignore it?

Business Tip – January 2018

If you’re in business, here are five reasons why you really do need cyber insurance

Think identity theft and cyber crime can’t happen to you? Think again. Read on for reasons cyber insurance protects you, your business and your customers.

1. Everyone has and uses a computer

Cyber insurance (also known as cyber liability insurance) was unheard of 15 years ago. Today, it’s as necessary as worker’s comp. If you lived in a flood plain would you not purchase flood insurance?

If you rely on a computer – in any way – to run your business, you need cyber insurance. Consider what would happen if your computer was hacked, and someone gained access to the private information of all of your customers, including their credit card details? Even if you do not do credit card transactions, your data is at risk.

The fallout could put any operation out of business, which is especially scary given hacking is a significant and real risk.

2. You don’t have an IT department or a risk management team

Big corporations can have whole departments dedicated to creating policies and action plans, which deal with potential risks, including cyber crime. If you’re a small or even a medium-sized business, chances are you don’t have a risk management team.

A good cyber insurance policy bridges the gap for businesses that don’t have the luxury of a risk management team. Many carriers offer preventive guidelines and services that will help reduce the chance of a cyber attack. In addition, they will be there to provide the necessary people and specialists and more importantly supply the funds should you have a breach.

3. Your general liability policy will not cover cyber crime

Most general liability policies do not include losses incurred due to the Internet. A comprehensive cyber insurance policy fills this important gap.

You might be wondering why a general liability policy doesn’t cover you for cyber-related injury. A general liability policy covers your legal liability for 3rd party property damage and personal injury. This means someone needs to be identified as responsible for the loss, and some physical damage needs to occur.

As electronic data is not considered to be “physical property”, it cannot be physically damaged. Cyber insurance offers tailored coverage for your business for 1st party and 3rd party losses, breaches to the Privacy Act and loss of profits following the insured event.

4. You may be responsible for data, even if you use a 3rd party cloud provider

If you have information stored on a cloud database, you may be surprised to know that in many cases, you are still legally responsible for how this information is handled.  Your 3rd party vendor has very little protection for you, and at the end of the day it is your responsibility to get a problem fixed and pay for the damages.

This is why it is important to read the fine print of your cloud hosting contracts. If you do find that your cloud provider is not responsible for mistakes or breaches to your data, at least you are protected.

5. It’s affordable

Securing a cyber liability policy doesn’t have to break your budget. With the right broker, such as NTCA Affiliate Member Schechner Lifson Corp., and partner insurers, you can secure affordable coverage that will provide the level of protection that is needed in today’s fast-paced world.

In fact, Schechner Lifson Corp., has been helping NTCA members for years for cyber security issues and a range of other business-related issues as well. For instance, Marci Miller of Infinity Floors recently praised the work of this company and its staff:

“I have been a member of NTCA for several years,” Miller said. “We take advantage of our annual rebates, we learn from the newsletters and TileLetter, on a few occasions we have even called and spoken with someone for technical support regarding installation.

“Recently we experienced the most valuable benefit of all. We were having a terrible issue with our workman’s comp – that is a problem that can cripple any tile contractor,” she added. “We had a broker who was completely useless and refused to help. I contacted NTCA to see if there was a comp policy or agency available to members. I was given the name of Schechner Lifson Corp. I called and was put in contact with Roseanne Gedman. We stayed with the same insurer, but had Schechner Lifson become our broker. Roseanne has worked with me and has been amazing! They are extremely professional and understand the market and the client’s needs. I highly recommend them to all NTCA
members.”

Schechner Lifson Corporation is a large regional insurance and financial company, based in New Jersey. Its mission is to provide superior insurance and financial services to customers through a diverse, highly creative and intellectual staff of over 40 associates who have the unique capacity to deliver a total insurance and investment program to customers. As both broker and agent, Schechner Lifson Corporation writes all forms of property and casualty coverage, life and group insurance, supplemental compensation plans, business continuation programs and qualified plans. For more information, contact Marc Rosenkrantz, CRM, CIC, AAI, President, Schechner Lifson Corporation, (w) 908-598-7813, (c) 973-766-3914 or email
[email protected]

Using magic words: understand Pay-If-Paid vs. Pay-When-Paid clauses in construction agreements

Business Tip – December 2017

There are countless ways for a construction project to go awry. The first claims that come to mind are those based on delays or defective workmanship, but perhaps even more common are the potential claims that arise when a general contractor does not receive payment from the owner, but remains potentially liable to its subcontractors for work performed. Like most construction disputes, the answer to the question of whether or when a general contractor is liable for payment to its subcontractors starts (and often ends) with the language of the contract.

Case study

Beal Bank Nevada v. Northshore Center THC, 64 N.E.3d. 201, 407 Ill. Dec. 823 (1st Dist. 2016) is a recent case from the Appellate Court of Illinois (First District) discussing this issue, and providing guidance to understanding payment risks in a construction agreement in the context of pay-when-paid vs. pay-if-paid clauses.

The facts of the Northshore Center are simple. Northshore Center THC, LLC (“Owner”) borrowed funds from BankFirst to develop real estate in Northbrook, Illinois. The Owner entered into an agreement with a General Contractor, FCL Investors, Inc. (“General Contractor”), to perform certain construction work at the Northbrook site. The General Contractor then entered into a subcontract with Lake County Grading Company, LLC (“Subcontractor”) to provide excavation work, sewer line installation, and other construction services. The Subcontractor performed its work and issued several invoices to the General Contractor, which the General Contractor submitted to the Owner. The Owner failed to pay the General Contractor, who in turn didn’t pay the Subcontractor.

When the parties were unable to resolve their differences, a lawsuit ensued. The main issue between the General Contractor and the Subcontractor concerned whether the subcontract required the General Contractor to pay the Subcontractor’s invoices even though it was undisputed that the Owner had not yet paid the General Contractor. The relevant portions of payment clause in the subcontract provided that:

The Contractor will make partial payments to the Subcontractor in an amount equal to 90 percent of the estimated value of work and materials incorporated in the construction and an amount equal to 90 percent of the materials delivered to and suitably and properly stored by the Subcontractor at the Project site, to the extent of Subcontractor’s interest in the amounts allowed thereon and paid to Contractor by the Owner, less the aggregate of previous payments, within five (5) days of receipt thereof from the Owner.

The trial court reviewed this payment clause and ruled that payment by the Owner was a condition precedent to the General Contractor’s obligation to pay its Subcontractor:

[T]he provisions outlined in the subcontract at issue clearly make the receipt of payment from the Owner to [the General Contractor] the condition precedent to the [Subcontractor’s] payment. The condition precedent has not been satisfied as [the General Contractor] has not received payment from Owner.

Therefore, because the Owner had not paid the General Contractor, the trial court determined that the General Contractor could not have breached the subcontract by failing to pay the Subcontractor.

The Subcontractor appealed. The Appellate Court reversed the trial court and found that the payment clause in the subcontract did not contain a condition precedent requiring the General Contractor to be first paid by Owner. Instead, the Appellate Court ruled that the payment clause in the subcontract governed only the amount and timing of payments, not the threshold obligation of the General Contractor to compensate the Subcontractor (even if the General Contractor had not been paid by the Owner).

In so holding, The Appellate Court applied the following “useful framework” for distinguishing between pay-if-paid clauses and pay-when-paid clauses in construction agreements:

A pay-when-paid clause governs the timing of a contractor’s payment obligation to the subcontractor, usually by indicating that the subcontractor will be paid within some fixed time period after the contractor itself is paid by the property owner…. In contrast, a pay-if-paid clause provides that the subcontractor will be paid only if the contractor is paid and thus ensures that each contracting party bears the risk of loss only for its own work.

Applying that framework, the Appellate Court determined that the contractual provision in the subcontract was a pay-when-paid clause, which governed only the timing of payment, and not a pay-if-paid clause, which would have governed the General Contractor’s obligation to pay. In other words, in this case, the Court concluded that there was no condition precedent to payment; the General Contractor had to pay the Subcontractor whether or not the Owner had paid.

Lessons learned 

Northshore Center is an illustrative case study on the importance of payment provisions in construction agreements being drafted so that they are particularly clear and unambiguous with respect to their pay-if-paid intentions. In our experience, many subcontract agreements in Illinois have payment provisions that do not sufficiently identify that payment by the owner is a condition precedent. As demonstrated by Northshore Center, even language as clear as “to the extent” is inadequate. Without the “magic word,” i.e. “if,” that makes it clear that the general contractor’s payment obligation to its subcontractor exists only “if” payment is made by the owner to the general contractor, the general contractor will likely bear the risk of payment even where the owner doesn’t pay the general contractor. The first and best protection against such unnecessary payment risk is a well-written contract. Pay-if-paid clauses offer greater protection to general contractors and should be a consideration on all sides during the drafting process.

A copy of Beal Bank Nevada v. Northshore Center THC, 64 N.E.3d 201, 407 Ill. Dec. 823 (1st Dist. 2016) is available here at http://bit.ly/2pDSg8w.

Contact 

If you have any questions about this HWH Legal Alert, please feel free to directly contact Daniel Dorfman at (312) 662-4609 ([email protected]). This legal alert is provided by Harris Winick Harris LLP for educational and informational purposes only and is not intended, and should not be construed, as legal advice.

Daniel Dorfman is a construction lawyer in Chicago, Illinois, with the law firm of Harris Winick Harris LLP. Daniel has a national construction practice, representing owners, developers, engineers, architects, designers, general contractors, subcontractors, specialty trades, and construction suppliers in all types of commercial construction disputes. Daniel is licensed to practice in the State of Illinois, United States District Court for the Northern District of Illinois, and the United States Court of Appeals for the Seventh Circuit. Daniel received his J.D., cum laude, from Northwestern University School of Law.

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