If you have turned on the television, listened to the radio, or picked up a newspaper recently, then you’ve probably been inundated with coverage of the Vancouver Winter Olympics. Unfortunately, the 16-day period that is generally regarded as one of the most joyous in sports began on a very sad note. During a training run, Georgian luger Nodar Kumaritashvili had a horrific accident that resulted in his death.
While Olympic officials and many commentators cited athlete error for the unfortunate event, many felt that the luge track was too fast–that designers and builders created a course that simply allowed its users to reach unsafe speeds.
I live in Texas, where luge is an event that is watched every four years (and not too often in between) and luge track building is a construction niche that never enters the mind. However, I have seen construction projects in other fields lead to unfortunate accidents and even deaths. For that reason, everyone in the construction industry can use this Olympic tragedy as a learning moment.
Every builder should ask themselves this question: "What happens if someone is severely injured or, heaven forbid, killed on a project I’m working/worked on?" If you don’t know the answer, then you need to immediately start doing some homework.
If the project is still in the midst of construction, you should be sure you are taking all the safety precautions needed to project your own crews. First, it is the right thing to do, and secondly, companies do not want OSHA conducting an investigation only to find your company liable for a preventable accident.
Assuming the project is post-construction, the first thing any builder or contractor should do when they hear about an accident is grab their contracts. These will lay out if there is indemnity to you from another party, or if you were a named insured under another contractor’s insurance policy. If you do have indemnity, you can breath a little easier as another party will be responsible for your defense and all settlements/judgments.
Conversely, if you are the party providing indemnity to another, it is imperative that you immediately notify your insurer of this incident. Insurers are typically not obligated to provide coverage until their insured ask for a defense. Also, third party notification is not sufficient–the actual insured needs to demand coverage and defense from their carrier.
Once these preliminary steps are taken, the case will probably turn into an investigative matter on causation. In other words, what caused the injury or death, and who was responsible for that cause. In the Georgian luger death, most commentators who did not blame the athlete cited the course design (that it was designed to be too fast for even elite lugers to safely navigate). That is an element that would most likely fall to the architect and engineers. There have not been allegations of defects in construction, so the parties swinging the hammers would probably not be the target.
On other projects, however, the design might be just fine, but the execution flawed. In those situations, the general contractor and subs would probably be the parties facing potential liability.
It is indeed a shame that the Vancouver Winter Olympic Games began on such a sad note. This Georgian luger’s death should remind us how fragile life is and how much we should treasure every moment. But let it also be a reminder to all in the construction industry to follow best practices. Protect your own crews and provide a safe working conditions for others. Know your indemnity obligations, and make sure they are enforceable. Stay in close contact with your insurer and do not give them any basis to deny coverage. And thoroughly investigate the true cause of accidents to defend current claims and prevent future ones.
Monday, February 22, 2010
Wednesday, January 27, 2010
Lien Waivers: Caveat Contractor!
Ok, my Latin may be lacking, but one thing I do know is that contractors should beware when lien waivers enter into construction contract negotiations.
Frequently, lien waivers are thought of in the mid-project, payment context. Basically, where a contractor or sub-contractor gets paid and signs a release of their lien rights. In this context, lien releases are harmless because the party has been paid. There is no reason, and in fact, no legal basis to file a lien. In this setting, lien releases actually serve an important role in getting a project to completion. At the end of the day, owners and developers need a building/structure/etc. that is relatively free and clear of encumbrances when they have paid those to whom they owe payments.
Where lien waivers get a little riskier is when they become an up front contractual requirement instead of post-payment documentation. In short, in these pre-construction lien waivers, upstream parties require downstream parties to prospectively waive their lien rights in advance. By entering into this type of arrangement, the downstream party essentially forfeits one of their most powerful tools to ensure payment for labor and materials–the mechanics lien/materialman lien.
Why have prospective lien waivers become an issue? From an owner’s or lender’s perspective, they are a great deal. Owners and lenders are able to limit the pool of potential parties who could place an encumbrance on a property should payment issues arise. This becomes even more attractive on larger projects where there are more subcontractors (i.e. the potential for more mechanics lien claims) and the property at issue is high value.
Lien waivers are not such a good deal for the downstream contractors and subcontractors, however. One of the best tools contractors have to make sure they get paid is the mechanics lien/materialmans lien. Companies become insolvent, financing falls through, but real property does not go away. And without payment, neither does a lien.
Contractors who enter into construction contracts that include prospective lien waivers should realize what they are agreeing to in advance. If the contract is lucrative enough, this risk may be worth taking on, given the potential profits. However, at a minimum, contractors should hedge their risk by insisting on a payment bond. This is common on larger projects, but payment bonds are not always incorporated into smaller ones. If a party is asking you to waive lien rights, they should at least provide some assurance that you will have a remedy if payments are not made.
Of course, lien waivers are deal points, like so many other things (including price). They can be negotiated. At the end of the day, if you are going to accept the risk that you will forfeit your lien rights, insist on some sort of consideration in return.
Frequently, lien waivers are thought of in the mid-project, payment context. Basically, where a contractor or sub-contractor gets paid and signs a release of their lien rights. In this context, lien releases are harmless because the party has been paid. There is no reason, and in fact, no legal basis to file a lien. In this setting, lien releases actually serve an important role in getting a project to completion. At the end of the day, owners and developers need a building/structure/etc. that is relatively free and clear of encumbrances when they have paid those to whom they owe payments.
Where lien waivers get a little riskier is when they become an up front contractual requirement instead of post-payment documentation. In short, in these pre-construction lien waivers, upstream parties require downstream parties to prospectively waive their lien rights in advance. By entering into this type of arrangement, the downstream party essentially forfeits one of their most powerful tools to ensure payment for labor and materials–the mechanics lien/materialman lien.
Why have prospective lien waivers become an issue? From an owner’s or lender’s perspective, they are a great deal. Owners and lenders are able to limit the pool of potential parties who could place an encumbrance on a property should payment issues arise. This becomes even more attractive on larger projects where there are more subcontractors (i.e. the potential for more mechanics lien claims) and the property at issue is high value.
Lien waivers are not such a good deal for the downstream contractors and subcontractors, however. One of the best tools contractors have to make sure they get paid is the mechanics lien/materialmans lien. Companies become insolvent, financing falls through, but real property does not go away. And without payment, neither does a lien.
Contractors who enter into construction contracts that include prospective lien waivers should realize what they are agreeing to in advance. If the contract is lucrative enough, this risk may be worth taking on, given the potential profits. However, at a minimum, contractors should hedge their risk by insisting on a payment bond. This is common on larger projects, but payment bonds are not always incorporated into smaller ones. If a party is asking you to waive lien rights, they should at least provide some assurance that you will have a remedy if payments are not made.
Of course, lien waivers are deal points, like so many other things (including price). They can be negotiated. At the end of the day, if you are going to accept the risk that you will forfeit your lien rights, insist on some sort of consideration in return.
Monday, January 4, 2010
Top 10 New Year’s Legal Resolutions for Everyone in Construction
10. Know who you’re contracting with, and make sure they are financially viable (or have a bonding or insurance company that is).
9. Treat your employees and staff fairly and they will (usually) treat you fairly in return.
8. The best defense to an OSHA investigation is to prevent an OSHA investigation.
7. Prevent costly personnel ambiguities by having well defined, fair, written policies in place in advance–and communicate those policies to all employees.
6. Don’t agree to any indemnity provision unless you’re willing to financially be on the hook for another party’s own negligence.
OR
6a. If you negotiate indemnity from another party, make sure the indemnity provision in the contract is actually enforceable.
5. Do not include heavy-handed, punitive liquidated damage provisions in your contracts–courts will not enforce them.
4. Old emails never die–if you wouldn’t put it on paper, don’t type it and hit "Send."
3. Limitations of liability are serious stuff–if you use them, use them correctly.
2. Have good billing practices, know your lien deadlines, and stick to them!
And the #1 New Year’s Legal Resolution...drumroll please....
1. Read your contracts. Understand your contracts. Enforce your contracts!
9. Treat your employees and staff fairly and they will (usually) treat you fairly in return.
8. The best defense to an OSHA investigation is to prevent an OSHA investigation.
7. Prevent costly personnel ambiguities by having well defined, fair, written policies in place in advance–and communicate those policies to all employees.
6. Don’t agree to any indemnity provision unless you’re willing to financially be on the hook for another party’s own negligence.
OR
6a. If you negotiate indemnity from another party, make sure the indemnity provision in the contract is actually enforceable.
5. Do not include heavy-handed, punitive liquidated damage provisions in your contracts–courts will not enforce them.
4. Old emails never die–if you wouldn’t put it on paper, don’t type it and hit "Send."
3. Limitations of liability are serious stuff–if you use them, use them correctly.
2. Have good billing practices, know your lien deadlines, and stick to them!
And the #1 New Year’s Legal Resolution...drumroll please....
1. Read your contracts. Understand your contracts. Enforce your contracts!
Friday, December 11, 2009
What Does Tiger Woods Have To Do With Construction Law?
You cannot turn on the TV, pick up a newspaper, read a magazine, or listen to the radio these days without hearing the latest chapter in the Tiger Woods saga. We have been inundated with the most private details of Tiger’s personal life, from text messages and voice mails to web streamed confessions and (supposedly) intimate photos. Conversations that were supposed to be hidden have been splashed all over the news for the world to view.
"Yeah, but what does that have to do with construction law?" you may be asking yourself.
Quite a bit.
The construction world (just like any industry), and every construction project in general, is full of casual communications. From emails and voice mails to red-line changes to Word documents and Excel spreadsheets, a significant portion of our communications is done digitally. Which means somewhere, on some computer or some server, there is a copy of that communication. Or, someone else, who we do not control, has a copy of that document that never completely goes away.
In other words, virtually everything pounded out on a computer or left on a digital messaging system has the potential to end up in front of a jury.
Most construction projects of any significant size almost always entail some sort of disputes, such as delays, cost overruns, punch list items, and payments. The majority of these are worked out between the parties, but a few end up in litigation. And when that happens, all those emails become discoverable. So do electronic drafts of documents, and faxes with your scribbled notes. All of a sudden, your private email conversations about a project are being read by an opposing lawyer and could quite possibly end up as Exhibit 1 for a jury to view. Claims against a subcontractor for delay damages are really weakened by a hasty email to a co-worker that admits you were slow in approving change orders because your office was overworked and understaffed.
It has been stated many times before, but it is worth stating again–take the same precautions in sending emails and creating electronic documents that you would take in creating paper communications. Just because you deleted that email, and then emptied your "Deleted" folder, does not mean that communication has gone away. It still probably rests on a server or in the hidden world of slack space on a hard drive.
Just as communications have gone digital, so have lawyers. Attorneys know to ask for emails and images of hard drives (so that the techies can cull through the slack space) because so often, that is where the dirt is. And it is very easy to see the edits and changes in many Word documents, not to mention metadata such as when the file was created and by whom.
Like it or not, our data has a longer life now than it ever has before. Tiger Woods never imagined that his most intimate text messages would end up in a David Letterman monologue, but they have. Don’t make the same mistake with your communications. Before hitting that "Send" button, think whether you would mind having your thoughts displayed as a trial exhibit for a judge, jury, and whole world to read.
"Yeah, but what does that have to do with construction law?" you may be asking yourself.
Quite a bit.
The construction world (just like any industry), and every construction project in general, is full of casual communications. From emails and voice mails to red-line changes to Word documents and Excel spreadsheets, a significant portion of our communications is done digitally. Which means somewhere, on some computer or some server, there is a copy of that communication. Or, someone else, who we do not control, has a copy of that document that never completely goes away.
In other words, virtually everything pounded out on a computer or left on a digital messaging system has the potential to end up in front of a jury.
Most construction projects of any significant size almost always entail some sort of disputes, such as delays, cost overruns, punch list items, and payments. The majority of these are worked out between the parties, but a few end up in litigation. And when that happens, all those emails become discoverable. So do electronic drafts of documents, and faxes with your scribbled notes. All of a sudden, your private email conversations about a project are being read by an opposing lawyer and could quite possibly end up as Exhibit 1 for a jury to view. Claims against a subcontractor for delay damages are really weakened by a hasty email to a co-worker that admits you were slow in approving change orders because your office was overworked and understaffed.
It has been stated many times before, but it is worth stating again–take the same precautions in sending emails and creating electronic documents that you would take in creating paper communications. Just because you deleted that email, and then emptied your "Deleted" folder, does not mean that communication has gone away. It still probably rests on a server or in the hidden world of slack space on a hard drive.
Just as communications have gone digital, so have lawyers. Attorneys know to ask for emails and images of hard drives (so that the techies can cull through the slack space) because so often, that is where the dirt is. And it is very easy to see the edits and changes in many Word documents, not to mention metadata such as when the file was created and by whom.
Like it or not, our data has a longer life now than it ever has before. Tiger Woods never imagined that his most intimate text messages would end up in a David Letterman monologue, but they have. Don’t make the same mistake with your communications. Before hitting that "Send" button, think whether you would mind having your thoughts displayed as a trial exhibit for a judge, jury, and whole world to read.
Wednesday, November 18, 2009
Consistent Contract Drafting Will Keep You from Fighting the Same Dispute in Both Arbitration and Litigation
Opinions on arbitration as an alternative to traditional litigation are as varied as there are contractors and lawyers who draft the contracts. There are certainly benefits and drawbacks to both forms of dispute resolution. However, prudent contractors should decide which form is appropriate for the job and make sure all contracts within that project are consistent. Otherwise, you run the risk of having to fight the same battle in both litigation and arbitration at the same time.
Let me provide an example on the importance of consistency in dispute resolution forums. You’re the general contractor on a project, and the owner insists on an arbitration clause in your contract whereby all disputes between you and the owner will be sent to arbitration. You aren’t particularly a fan of arbitration, but it was a big deal to the owner, so you went along with it. With the prime contract in place, you execute contracts with all the subcontractors that are needed to bring this project to life. Since these contracts are for smaller dollar amounts, they are simpler, more form-based, and do not include arbitration agreements. So far, this probably sounds like a pretty common scenario. However, by this point, the potential for problems has already been created.
Things are going well on the project until the electrical contractors make a mistake (sorry to pick on the electricians in this hypothetical). They are willing to fix their mistake, but it has added 3 weeks to the project. They also blame the mistake on an ambiguity in the engineer’s plans and have requested a significant change order on the pricing for this correction. Unfortunately, by the time this mistake has been corrected and is ready for inspection, the engineer has gotten extremely busy and cannot make it to the project site for the inspection for another 2 weeks.
Then bad weather delays inspection by another week. All of a sudden, the project is 6 weeks off schedule. The owner is upset at the delay, you’re mad at the electrical contractors for getting the project off schedule, and the electricians are not happy because you’ve withheld payments because of their delay (which they blame on the engineer). Before you know it, you’ve been sued by the electrical contractor for payments, and the owner has begun arbitration proceedings to recover delay damages. You’d like to consolidate these disputes into one case–however, the owner has a valid arbitration clause and refuses to go into traditional litigation, and you have no basis to force the subcontractor out of court and into arbitration. So you’re left fighting two battles at twice the cost, twice the time, and twice the headache.
At some point, every contractor will have a project that involves both upstream and downstream disputes similar to this hypothetical scenario. So how can a builder avoid being torn in two directions? The key is through good planning at the contracting stage. Have a careful eye to the dispute resolution forums in your contracts. If the contract is silent on this issue, then that means any dispute will be traditionally litigated through the courts. If there is a valid arbitration agreement, then that is where any disputes will likely be determined.
To prevent being dragged into both arbitration and litigation at the same time, make sure all your contracts on a project are consistent on the dispute resolution forum. If one contract has an arbitration clause, make sure all your contracts contain a similar provision. Conversely, if the "upstream contract" makes no mention of arbitration (meaning litigation would be the dispute resolution forum), keep your "downstream contracts" silent as well.
As with any construction project, the key is good advance planning. Adding a little forethought to your contract will help avoid being torn in two directions later should disputes arise.
Let me provide an example on the importance of consistency in dispute resolution forums. You’re the general contractor on a project, and the owner insists on an arbitration clause in your contract whereby all disputes between you and the owner will be sent to arbitration. You aren’t particularly a fan of arbitration, but it was a big deal to the owner, so you went along with it. With the prime contract in place, you execute contracts with all the subcontractors that are needed to bring this project to life. Since these contracts are for smaller dollar amounts, they are simpler, more form-based, and do not include arbitration agreements. So far, this probably sounds like a pretty common scenario. However, by this point, the potential for problems has already been created.
Things are going well on the project until the electrical contractors make a mistake (sorry to pick on the electricians in this hypothetical). They are willing to fix their mistake, but it has added 3 weeks to the project. They also blame the mistake on an ambiguity in the engineer’s plans and have requested a significant change order on the pricing for this correction. Unfortunately, by the time this mistake has been corrected and is ready for inspection, the engineer has gotten extremely busy and cannot make it to the project site for the inspection for another 2 weeks.
Then bad weather delays inspection by another week. All of a sudden, the project is 6 weeks off schedule. The owner is upset at the delay, you’re mad at the electrical contractors for getting the project off schedule, and the electricians are not happy because you’ve withheld payments because of their delay (which they blame on the engineer). Before you know it, you’ve been sued by the electrical contractor for payments, and the owner has begun arbitration proceedings to recover delay damages. You’d like to consolidate these disputes into one case–however, the owner has a valid arbitration clause and refuses to go into traditional litigation, and you have no basis to force the subcontractor out of court and into arbitration. So you’re left fighting two battles at twice the cost, twice the time, and twice the headache.
At some point, every contractor will have a project that involves both upstream and downstream disputes similar to this hypothetical scenario. So how can a builder avoid being torn in two directions? The key is through good planning at the contracting stage. Have a careful eye to the dispute resolution forums in your contracts. If the contract is silent on this issue, then that means any dispute will be traditionally litigated through the courts. If there is a valid arbitration agreement, then that is where any disputes will likely be determined.
To prevent being dragged into both arbitration and litigation at the same time, make sure all your contracts on a project are consistent on the dispute resolution forum. If one contract has an arbitration clause, make sure all your contracts contain a similar provision. Conversely, if the "upstream contract" makes no mention of arbitration (meaning litigation would be the dispute resolution forum), keep your "downstream contracts" silent as well.
As with any construction project, the key is good advance planning. Adding a little forethought to your contract will help avoid being torn in two directions later should disputes arise.
Tuesday, November 10, 2009
Recent Andorran Bridge Collapse Should Make Contractors Double Check Risk-Shifting Contract Provisions
Question: If/when a catastrophic accident hits your job site, what is your immediate response? What if the accident happens to your subcontractor or a third party, then how do you respond (or does it make a difference)?
Unfortunately, construction crews in the tiny Pyrenees principality of Andorra are now having that conversation. Recently, five workers died and six more were injured when they fell 50 feet as bridgework they were on collapsed.
This tragic accident serves as an obvious reminder that safety should always remain job #1. However, it should also be a wake-up call to contractors to make sure their risk-shifting and risk management is up to date.
If or when that catastrophic accident hits your job site, your contract documents–believe it or not–should be one of the first things you look at. In fact, they may be the thing that guides your next move. Why? Because they will be probably be the documents that determine if you or some other party will be responsible for the defense and indemnification of the injured worker’s claims.
Most construction contracts contain some sort of risk shifting provision, whether it be an indemnification clause, a limitation of liability provision, or an additional insured requirement. Prudent contractors include these in their favor in anticipation of a catastrophic accident. These contractual provisions essentially shift potential liability away from you and place the risk of loss on another party.
When a serious construction injury occurs, rest assured that every company remotely connected to the accident site will be brought into the claim and, perhaps, into litigation. Before this happens, contractors should carefully analyze their contract documents to determine if another party owes them indemnity or if a third party’s insurance will cover them. Conversely, contractors should determine whether they owe indemnity or insurance to a third party.
Shifting the defense and indemnification for a claim to a third party, particularly in catastrophic accident situations, can result in significant savings (depending on a contractor’s own insurance). It could lead to the savings of a deductible, a large self-insured retention amount, and even premiums. All of a sudden, those seemingly mundane deal points are worth a whole lot. But these provisions must be explicitly stated in the contract documents.
The tragic Andorran bridge collapse should remind contractors to be vigilant in their contract negotiations and not to ignore risk shifting mechanisms such as indemnity clauses and additional insured provisions. Just like any construction project, proper planning and attention to detail will pay off down the road when your company is dealt a curve ball.
Unfortunately, construction crews in the tiny Pyrenees principality of Andorra are now having that conversation. Recently, five workers died and six more were injured when they fell 50 feet as bridgework they were on collapsed.
This tragic accident serves as an obvious reminder that safety should always remain job #1. However, it should also be a wake-up call to contractors to make sure their risk-shifting and risk management is up to date.
If or when that catastrophic accident hits your job site, your contract documents–believe it or not–should be one of the first things you look at. In fact, they may be the thing that guides your next move. Why? Because they will be probably be the documents that determine if you or some other party will be responsible for the defense and indemnification of the injured worker’s claims.
Most construction contracts contain some sort of risk shifting provision, whether it be an indemnification clause, a limitation of liability provision, or an additional insured requirement. Prudent contractors include these in their favor in anticipation of a catastrophic accident. These contractual provisions essentially shift potential liability away from you and place the risk of loss on another party.
When a serious construction injury occurs, rest assured that every company remotely connected to the accident site will be brought into the claim and, perhaps, into litigation. Before this happens, contractors should carefully analyze their contract documents to determine if another party owes them indemnity or if a third party’s insurance will cover them. Conversely, contractors should determine whether they owe indemnity or insurance to a third party.
Shifting the defense and indemnification for a claim to a third party, particularly in catastrophic accident situations, can result in significant savings (depending on a contractor’s own insurance). It could lead to the savings of a deductible, a large self-insured retention amount, and even premiums. All of a sudden, those seemingly mundane deal points are worth a whole lot. But these provisions must be explicitly stated in the contract documents.
The tragic Andorran bridge collapse should remind contractors to be vigilant in their contract negotiations and not to ignore risk shifting mechanisms such as indemnity clauses and additional insured provisions. Just like any construction project, proper planning and attention to detail will pay off down the road when your company is dealt a curve ball.
Thursday, September 17, 2009
An Ounce of Prevention Beats a Pound of Cure: Why Every Contractor Should Pay Close Attention to Personnel Policies
"Have the design plans been approved by the architect or engineer?"
"Is financing in place?"
"What are the codes that have to be complied with?"
These are among the many questions that are asked before almost any construction project begins. And prudent contractors make sure they have the answers in advance, so they don’t run into any uncertainties down the road.
While most contractors make sure they know the answers to those construction-related questions, what about questions concerning their own business.
"What happens to accrued vacation pay when an employee voluntarily leaves?"
"What is the policy for reporting and investigating sexual harassment?"
"What kind of employee behavior is grounds for immediate termination?"
If you had to scratch your head and think about the answers to these questions, then your company could be exposing itself to needless risk that could largely be avoided.
Given the high number of layoffs and reductions in force the construction industry has faced in the last 18 months, there are ample opportunities for former employees (or current ones) to try and squeeze out a few more dollars with claims or threats of litigation. Maybe they didn’t use all their vacation time and now feel they should be compensated for it. Or maybe they feel that a few off-color jokes around the water cooler actually arose to sexual harassment. With the right policies and practices in place, a lot of these headaches can be minimized.
Every employer, whether in the construction industry or otherwise, should have an employee handbook in place that lays out the company’s policies and procedures. It lets employees know what they can expect out of their employer, but it also lets them know exactly what is expected out of them. And it helps prevent the gray areas from which disputes often arise.
Many contractors allow employees to use company vehicles. What happens when your employee stops by the bar on the way home while driving a company van? Should an accident ever happen, you can rest assured the claimant will be looking at the name on the side of the van first. You may not be able to completely eliminate potential headaches, but with appropriate alcohol and drug policies in place, you can at least mitigate them and minimize your potential liability.
What about overtime–are employees entitled to it even if it was not approved in advance? What if you did not even know the employee was working overtime until they submitted their hours? This is another matter that can be addressed by having clear policies in place in an employee handbook that both employer and employee can reference.
These are just two of the many employment issues that affect contractors in a real, tangible way. Having policies in place via an employee handbook doesn’t just save time in trying to determine what the company policy actually is (often times after the fact), it also saves money. If you have a policy that employees forfeit any accrued vacation pay upon termination of employment (voluntary or otherwise), you will know exactly how to respond when a former employees seeks payment for the two weeks of unused vacation he left behind.
It’s no secret that the last 18 months have been difficult on the construction industry, and contractors are looking for any ways they can find to save costs. In personnel and employment matters, prevention and good planning are the keys. The old adage really is true–an ounce of prevention beats a pound of cure.
"Is financing in place?"
"What are the codes that have to be complied with?"
These are among the many questions that are asked before almost any construction project begins. And prudent contractors make sure they have the answers in advance, so they don’t run into any uncertainties down the road.
While most contractors make sure they know the answers to those construction-related questions, what about questions concerning their own business.
"What happens to accrued vacation pay when an employee voluntarily leaves?"
"What is the policy for reporting and investigating sexual harassment?"
"What kind of employee behavior is grounds for immediate termination?"
If you had to scratch your head and think about the answers to these questions, then your company could be exposing itself to needless risk that could largely be avoided.
Given the high number of layoffs and reductions in force the construction industry has faced in the last 18 months, there are ample opportunities for former employees (or current ones) to try and squeeze out a few more dollars with claims or threats of litigation. Maybe they didn’t use all their vacation time and now feel they should be compensated for it. Or maybe they feel that a few off-color jokes around the water cooler actually arose to sexual harassment. With the right policies and practices in place, a lot of these headaches can be minimized.
Every employer, whether in the construction industry or otherwise, should have an employee handbook in place that lays out the company’s policies and procedures. It lets employees know what they can expect out of their employer, but it also lets them know exactly what is expected out of them. And it helps prevent the gray areas from which disputes often arise.
Many contractors allow employees to use company vehicles. What happens when your employee stops by the bar on the way home while driving a company van? Should an accident ever happen, you can rest assured the claimant will be looking at the name on the side of the van first. You may not be able to completely eliminate potential headaches, but with appropriate alcohol and drug policies in place, you can at least mitigate them and minimize your potential liability.
What about overtime–are employees entitled to it even if it was not approved in advance? What if you did not even know the employee was working overtime until they submitted their hours? This is another matter that can be addressed by having clear policies in place in an employee handbook that both employer and employee can reference.
These are just two of the many employment issues that affect contractors in a real, tangible way. Having policies in place via an employee handbook doesn’t just save time in trying to determine what the company policy actually is (often times after the fact), it also saves money. If you have a policy that employees forfeit any accrued vacation pay upon termination of employment (voluntary or otherwise), you will know exactly how to respond when a former employees seeks payment for the two weeks of unused vacation he left behind.
It’s no secret that the last 18 months have been difficult on the construction industry, and contractors are looking for any ways they can find to save costs. In personnel and employment matters, prevention and good planning are the keys. The old adage really is true–an ounce of prevention beats a pound of cure.
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