Contractors, It's Time to Put That House in Order
OverviewWhat a difference a year makes. Invitations to bid are flying. Estimators are in short supply. The phones are ringing, and backlogs are sizes we have not seen since fall 2008.
We construction lawyers are happy again, too, because we are doing deals rather than presiding over distressed projects. While we are by no means out of the woods, there definitely is a spring in the industry's stride, and it looks like this summer will be the best one in five years.
And while there are more opportunities to pursue, contractors should be mindful that many rules of the game have changed – adding workers can have unintended consequences. Now is the time to get the house in order, and to set the table to seize the opportunities coming in a healthy and less risky way.
Health care reform is at the front and center of many small and medium employers' minds. Now that the Affordable Care Act is law, both the feds and the state regulators are tackling the difficult chore of implementing this confusing area of the law.
Given that health care administrators and professionals are being challenged to understand how the new law will be implemented, it is practically impossible for many new and "emerging" contractors to understand this technically challenging environment, and more importantly, secure affordable coverage at the most competitive rates. What is clear under the new law is that those employers who already qualify as a "large group" will have more flexibility and opportunity (and likewise a competitive advantage).
With the costs of health care becoming a serious part of the overall labor cost, those who are small or "emerging" may be at a distinct competitive disadvantage. The good news is that certain trade organizations are addressing their health care plans, and may be in a position to qualify as bona fide plans and provide similarly attractive rates to its members.
Now is an excellent time for contractors who have never been part of a trade association (or dropped their association membership because of cost during the recession) to reconsider their membership status.
Employers naturally will be adding employees to their operations. Small business owners should be aware that many laws and regulations impose requirements on employers. For example, employers who obtain more than five employees will be subject to the requirements of the Oregon state counterpart to the Americans with Disabilities Act, those who obtain more than 20 will be subject to additional requirements under this act, and those employers who obtain more than 24 employees will be subject to the Oregon Family Leave Act and the Oregon Military Family Leave Act.
These acts impose heightened duties and responsibilities on employers. And with the competition for labor growing, employers naturally will be concerned about employees leaving and either soliciting work or competing directly against the former employer. Trade secrets will be shared, and in certain circumstances, intellectual property will be developed.
Employers would be wise to review their employment manuals and employment agreements with qualified professionals to ensure that obligations are being met and opportunities are being protected. It is not wise to pull that prerecession employment manual off the shelf and assume that it is in tune with current Oregon law.
And hopefully, most contractors are dusting off their old portfolio of construction contracts. The financing, bonding and insurance environments have all changed radically. New case law has modified the breadth and scope of indemnity and contribution rights. New legislation in debate in Salem may change payment requirements and retainage allowances on both public and private projects. A new set of industry standard construction forms have been implemented over the last four to five years.
Owners who have not performed a legal audit of their forms in some time should do so now, before the cascade of projects overwhelm their contracting staff (and their attorney).
And most importantly, let's not forget many of the lessons learned since the last downturn. Growing too fast and taking work outside typical competencies is risky, and many contractors grew too fast to keep up with their administrative requirements. Don't be afraid to consult with insurance, bonding and legal professionals who were in the unfortunate position of cleaning up some of these wrecks. Use these improving conditions to build a strong and sustainable move forward.
Darien Loiselle is a construction attorney in the Portland office of regional law firm Schwabe, Williamson & Wyatt. He represents owners, general contractors, designers and engineers, and specialty contractors. Contact him at 503-796-2069 or firstname.lastname@example.org.
As published, Daily Journal of Commerce, May 8, 2013.