Who Will Inspect the Inspectors? Implications of Winkler v. State Board of Examiners of Plumbing, Heating and Fire Sprinkler Contractors on the Construction Industry

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On September 20, 2016, certain construction trades entered into a Wild West era of deregulated inspection services. Inspections of already installed plumbing, heating and air conditioning, and fire sprinkler systems appear no longer to be subject to North Carolina regulatory oversight. In Winkler v. State Board of Examiners of Plumbing, Heating, and Fire Sprinkler Contractors, the North Carolina Court of Appeals reversed an order from the State Board of Examiners of Plumbing, Heating, and Fire Sprinkler Contractors (“State Board”) revoking Dale Winkler’s heating contractor license. In reaching its decision, the North Carolina Court of Appeals held that “inspections and evaluations are simply not covered by North Carolina General Statute [Chapter 87,] Article 2,” which governs plumbing, heating, and fire sprinkler contractors and provides the authority for the State Board to govern and regulate the industry. While the Court of Appeals’ decision only held that the State Board did not have the authority to discipline Mr. Winkler, the court’s statutory interpretation may have much wider implications.
 
Under North Carolina General Statute. § 87-21(c), Article 2 applies to “all persons, firms, or corporations who engage in, or attempt to engage in the business of plumbing heating, or fire sprinkler contracting, or any combination thereof as defined in this Article.” Article 2 defines the business of plumbing and heating and air conditioning contracting as “any person, firm, or corporation, who for valuable consideration, (i) installs, alters or restores, or offers to install, alter or restore either plumbing, heating group number one, or heating group number two, or heating group number three.” Missing from this language is any reference to inspections.
 
The Court of Appeals questioned the North Carolina legislature’s decision not to include inspections of already installed systems in the coverage of Article 2. However, based upon a strict interpretation of the statute, precedent forced the Court to focus on the text of the statute and the conduct it regulated, not on the underlying objectives and general principles for enacting the statute. According to the Winkler Court, the terms “repair” and “replace” do not encompass the terms “inspection” and “evaluation” and when strictly construing Article 2 it is clear that Article 2 simply does not cover inspections or evaluations. Therefore, according to the Winkler Court, the State Board lacked statutory authority to govern the acts of people inspecting and/or evaluating already installed heating and air conditioning systems. The Winkler opinion focused on the heating industry. However, the same statute defines engaging in the business of both  plumbing contracting and heating contracting. The same statute also defines the business of fire sprinkler contracting, but includes laying out, fabricating, or offers to lay out and fabricate within the definition of that industry.
 
What are the practical applications of Winkler on the construction industry? The Winkler decision appears to affect the construction industry more broadly than its holding suggests. In North Carolina, state administrative agencies may only act pursuant to statutory authority. They may not alter or add to the jurisdiction granted to them under a law. With that in mind, any rule or regulation created by the State Board under Article 2 that concerns strictly the visual inspection or evaluation of an already installed plumbing or heating and air conditioning system exceeds the authority granted by statute according to Winkler. This may potentially apply to the visual inspection and/or evaluation of a fire sprinkler systems as well.
 
Until the law is changed it appears that after Winkler, the State Board can no longer require plumbing and HVAC contractors to obtain licensure in order to conduct purely visual inspections and/or evaluations of already installed plumbing and heating and air conditioning systems or discipline them for doing such activities. Because Winkler determined that Article 2 does not apply to inspections and evaluations, fire sprinkler contractors and inspection technicians may be able to perform strictly visual inspections and/or evaluations of fire sprinkler systems without a license as well.
 
The State Board’s Administrative Rules require that all companies who engage in the business of fire sprinkler contracting who perform or are performing independent testing and inspections of fire sprinkler systems consistent with NFPA-25 to hold a Fire Sprinkler Inspection Contractor license and additionally mandates that a license in the Fire Sprinkler Technician classification is required of the technician who carries out periodic inspection of fire sprinkler systems consistent with the NFPA-25. The State Board indicates that its authority creating a Fire Sprinkler Inspection Contractor and Fire Sprinkler Technician license is the same statute that the Winkler Court held did not apply to inspections or evaluations. While NFPA-25 requires testing procedures—e.g. removal and replacement of fire sprinkler heads for independent testing—that would likely be considered altering, modifying, or restoring, the Winkler decision casts doubt on whether the State Board has authority to create rules and regulations governing the practice of inspections and evaluations at all. For that reason, visual inspections and/or evaluations of already installed fire sprinklers may no longer be considered fire sprinkler contracting. Note, following the Court’s rationale in Winkler, an inspection or evaluation could arguably not be considered laying out, fabricating, installing, altering or restoring, or offering to lay out, fabricate, install, alter or restore fire sprinklers, or any combination thereof.
 
The Winkler Court’s interpretation of the North Carolina General Statute could impact other industries as well. For example, North Carolina defines the business of electrical contracting, as “engaging or offering to engage in the business of installing, maintaining, altering or repairing any electrical work, wiring, devices or equipment.” This language, like Article 2, appears to require some affirmative act greater than just visually inspecting or evaluating—e.g. installing, maintaining, altering or repairing—in order to give rise to that licensing board’s jurisdiction.
 
Aside from plumbing, HVAC, fire sprinkler, and electrical contractors, the Winkler decisions does not appear to apply to the following trades:

  • architects;
  • engineers; and
  • landscape architects.

The statutes defining the practice of these industries use terms—e.g. consultation, evaluation, investigation and performance of services—that appear to clearly encompass inspections.
 
As a practical matter, the following are important considerations moving forward:

  • Know that any person you or your company hires to perform inspections of already installed plumbing, heating and air conditioning, or fire sprinkler systems may no longer be required to obtain licensure from North Carolina.
  • Any inspection or evaluation involving hands on repair or alteration to already installed plumbing, heating and air conditioning, and fire sprinkler systems may be considered engaging in plumbing, heating and air conditioning, or fire sprinkler contracting.
  • Ensure that any contractor hired by you or your company to perform inspections and/or evaluations of already installed plumbing, heating and air conditioning, or fire sprinkler systems has adequate insurance and is bonded.
  • Ensure that any contractor hired by you or your company to perform inspections and/or evaluations of already installed plumbing, heating and air conditioning, or fire sprinkler systems holds the licensure necessary to perform any repairs, if needed, to your systems.

Spilman will continue to monitor this situation and provide you with updates should there be an appeal of Winkler or subsequent amendments made by North Carolina’s legislature expanding Article 2 to cover inspections of plumbing, heating and air conditioning, and fire sprinkler systems.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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