The Contractor's Compass September 2017

THE

ASA’s

THE OFFICIAL EDUCATIONAL JOURNAL OF THE AMERICAN SUBCONTRACTORS ASSOCIATION

WWW.ASAONLINE.COM Yes, Sir, Can I Have Another? How Organizations Hurt Their Operations Team Without Even Knowing It

by Gregg M. Schoppman, FMI

Professional Development—It Begins with Workflow Definition

by Stephane McShane, Maxim Consulting Group

A How-To Guide for Women in Construction Project Management

by Mary Beth Kingsley and Sandy Palmerton, Shapiro & Duncan, Inc.

Self-Funded Healthcare: A Better Option for Contractors

SEPTEMBER 2017

Workforce and Professional Development

by Mike Bechtol, Redirect Health

Employee Training and Development: The Importance, the Employer Neglect and the Cost to the Organization

by Jamie Hasty, SESCO Management Consultants

Optimize Your Workforce with On-Screen Measurement

by Adam Khemiri, eMeasure

Use of Arrest and Conviction Records in Employment May Be Discriminatory

by Laura Lapidus, Esq., CNA

Inflexible Leave Policies: Automatic Termination May Violate the ADA

by Laura Lapidus, Esq., CNA

The Americans with Disabilities Act— Important Resources to Assist with Compliance

by Laura Lapidus, Esq., CNA

Has Unethical Behavior Reached a Breaking Point? Criminal Prosecution of Bad Acts in the Construction Industry

by Bruce R. Demeter, Esq., American Institute of Constructors

Game Winning Strategies to Ensure Your JV Performs at the Varsity Level

by Fielder Martin and Jodi Taylor, Baker Donelson

Unforeseeable Employee Misconduct Defense to an OSHA Citation

by Philip J. Siegel, Hendrick, Phillips, Salzman & Siegel

Legally Speaking: Five Boilerplate Terms to Negotiate in Your Next Subcontract

by James R. Lynch, Ahlers & Cressman, PLLC

TM

AMERICAN

SUBCONTRACTORS ASSOCIATION

SAVE THE DATE! February 28 – March 3, 2018

TEMPE MISSION PALMS HOTEL & CONFERENCE CENTER | TEMPE, AZ

THE

September 2017

EDITORIAL PURPOSE The Contractor’s Compass is the monthly educational journal of the Foundation of the American Subcontractors Association, Inc. (FASA) and part of FASA’s Contractors’ Knowledge Network. The journal is designed to equip construction subcontractors with the ideas, tools and tactics they need to thrive.

Features Yes, Sir, Can I Have Another? How Organizations Hurt Their..................................8 Operations Team Without Even Knowing It

by Gregg M. Schoppman, FMI

The views expressed by contributors to The Contractor’s Compass do not necessarily represent the opinions of FASA or the American Subcontractors Association, Inc. (ASA).

Professional Development—It Begins with Workflow Definition........................... 10

EDITORIAL STAFF Editor-in-Chief, Marc Ramsey

by Mary Beth Kingsley and Sandy Palmerton, Shapiro & Duncan, Inc.

MISSION FASA was established in 1987 as a 501(c)(3) taxexempt entity to support research, education and public awareness. Through its Contractors’ Knowledge Network, FASA is committed to forging and exploring the critical issues shaping subcontractors and specialty trade contractors in the construction industry. FASA provides subcontractors and specialty trade contractors with the tools, techniques, practices, attitude and confidence they need to thrive and excel in the construction industry.

FASA BOARD OF DIRECTORS Richard Wanner, President Letitia Haley Barker, Secretary-Treasurer Brian Johnson Robert Abney Anne Bigane Wilson, PE, CPC SUBSCRIPTIONS The Contractor’s Compass is a free monthly publication for ASA members and nonmembers. Subscribe online at www.contractorsknowledgedepot.com.

ADVERTISING Interested in advertising? Contact Richard Bright at (703) 684-3450 or rbright@ASA-hq.com or advertising@ASA-hq.com.

EDITORIAL SUBMISSIONS Contributing authors are encouraged to submit a brief abstract of their article idea before providing a fulllength feature article. Feature articles should be no longer than 1,500 words and comply with The Associated Press style guidelines. Article submissions become the property of ASA and FASA. The editor reserves the right to edit all accepted editorial submissions for length, style, clarity, spelling and punctuation. Send abstracts and submissions for The Contractor’s Compass to communications@ASA-hq.com.

ABOUT ASA ASA is a nonprofit trade association of union and non-union subcontractors and suppliers. Through a nationwide network of local and state ASA associations, members receive information and education on relevant business issues and work together to protect their rights as an integral part of the construction team. For more information about becoming an ASA member, contact ASA at 1004 Duke St., Alexandria, VA 22314-3588, (703) 684-3450, membership@ASA-hq.com, or visit the ASA Web site, www.asaonline.com.

LAYOUT Angela M Roe angelamroe@gmail.com © 2017 Foundation of the American Subcontractors Association, Inc.

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by Stephane McShane, Maxim Consulting Group

A How-To Guide for Women in Construction Project Management....................... 13 Self-Funded Healthcare: A Better Option for Contractors..................................... 17

by Mike Bechtol, Redirect Health

Employee Training and Development: ...................................................................20 The Importance, the Employer Neglect and the Cost to the Organization

by Jamie Hasty, SESCO Management Consultants

Optimize Your Workforce with On-Screen Measurement.......................................22

by Adam Khemiri, eMeasure

Use of Arrest and Conviction Records in Employment.........................................24 May Be Discriminatory

by Laura Lapidus, Esq., CNA

Inflexible Leave Policies: Automatic Termination May Violate the ADA................26

by Laura Lapidus, Esq., CNA

The Americans with Disabilities Act—Important Resources ................................27 to Assist with Compliance

by Laura Lapidus, Esq., CNA

Has Unethical Behavior Reached a Breaking Point?..............................................28 Criminal Prosecution of Bad Acts in the Construction Industry

by Bruce R. Demeter, Esq., American Institute of Constructors

Game Winning Strategies to Ensure Your JV Performs at the Varsity Level..........30

by Fielder Martin and Jodi Taylor, Baker Donelson

Unforeseeable Employee Misconduct Defense to an OSHA Citation....................32

by Philip J. Siegel, Hendrick, Phillips, Salzman & Siegel

Departments CONTRACTOR COMMUNITY....................................................................................................... 4 LEGALLY SPEAKING..................................................................................................................... 34 Five Boilerplate Terms to Negotiate in Your Next Subcontract

by James R. Lynch, Ahlers & Cressman, PLLC

Quick Reference ASA/FASA CALENDAR...................................................................................................................37 COMING UP........................................................................................................................................ 37

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CONTRACTOR COMMUNITY Contractors Must Be in Compliance with OSHA Silica Rule by Sept. 23 Construction contractors with more than 10 employees have until Sept. 23 to comply with OSHA’s final rule regulating employee exposure to respirable crystalline silica. Under a rule issued by OSHA on March 25, 2016, construction employers must comply with all requirements of the standard

by Sept. 23, 2017, except requirements for laboratory evaluation of exposure samples, which begin on June 23, 2018. The rule requires construction employers to limit worker exposure to silica and to take other steps to protect workers.

Crystalline silica is a common mineral found in many naturally occurring materials and used at construction sites. Inhaling very small crystalline silica particles can cause multiple diseases, including silicosis, lung cancer, chronic obstructive pulmonary disease and kidney disease. Respirable silica is generated by high-energy operations like cutting, sawing, grinding, drilling and crushing stone, rock, concrete, brick, block and mortar.

Activities such as abrasive blasting with sand; sawing brick or concrete; sanding or drilling into concrete walls; grinding mortar; and cutting or crushing stone generate respirable dust.

Under the OSHA standard, construction employers can either use a control method, as laid out in Table 1 of the standard, or they can measure workers’ exposure to silica and independently decide which dust controls work best to limit exposures to the permissible exposure limit in their workplaces. Regardless of which exposure control method is used, all construction employers covered by the standard are required to: • Reduce the permissible exposure limit for respirable silica to 50 micrograms per cubic meter of air,

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averaged over an eight-hour shift.

• Use engineering controls, such as water or ventilation, to limit worker exposure to the PEL. • Provide respirators when engineering controls cannot adequately limit exposure.

• Establish and implement a written exposure control plan that identifies tasks that involve exposure and methods used to protect workers, including procedures to restrict access to work areas where high exposures may occur.

• Designate a competent person to implement the written exposure control plan.

• Restrict housekeeping practices that expose workers to silica where feasible alternatives are available.

• Offer medical exams, including chest X-rays and lung function tests, every three years for workers who are required by the standard to wear a respirator for 30 or more days per year.

• Train workers on work operations that result in silica exposure and ways to limit exposure.

• Keep records of workers’ silica exposure and medical exams.

ASA, in collaboration with 22 other construction associations, has initiated a lawsuit to prevent OSHA from implementing its rule. In addition, ASA, as part of the Construction Industry Safety Coalition, has filed a petition with OSHA requesting the agency to stay and reopen the rulemaking. In the meantime, ASA urges construction employers to take steps to be in compliance by the OSHA deadline.

For more information, see the ASA Fact Sheet on OSHA’s Rule on Respirable Crystalline Silica, the ASA Frequently Asked Questions on the OSHA Standard on Respirable

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Crystalline Silica, and the free ASA video-on-demand, “OSHA Silica Rule—Applications for Subcontractors” (Item #8101), presented by Gary Visscher, Esq., Law Office of Adele L. Abrams, P.C.

Crane Operator Certification: Two Months and Counting “Employers have only two months to ensure their crane operators are certified according to OSHA requirements,” ASA Chief Advocacy Officer E. Colette Nelson reminded subcontractors.

The Occupational Safety and Health Administration published a rule on Aug. 9, 2010, that requires employers to ensure that crane and derrick equipment is in safe operating condition via required inspections and that employees in the work zone are trained to recognize hazards associated with the use of the equipment and any related duties that they are assigned to perform.

The rule takes effect on Nov. 10, 2017.

Who needs to be certified or qualified? Any person engaged in a construction activity that is operating a crane covered by the cranes and derricks rule, except: sideboom cranes, derricks, equipment with a rated hoisting/lifting capacity of 2,000 pounds or less. (Operators of the listed equipment must meet the criteria for minimum expertise described elsewhere in OSHA rules.)

Are operators of digger derricks required to be qualified or certified? Yes, unless the digger derrick is being used to auger holes for poles carrying electric or telecommunication lines, place or remove the poles, or handle associated materials to be installed on or removed from the poles.

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What is required in the testing for certification? Certification has two parts: (1) A written examination that includes the safe operating procedures for the particular type of equipment the applicant will be operating and technical understanding of the subject matter criteria required in the rules. (2) A practical exam showing the applicant has the skills needed to safely operate the equipment, including, among other skills, the ability to properly use load chart information and recognize items required in the shift inspection.

Does an operator need more than one certification? With respect to certification from an accredited testing organization, an operator must be certified for the type and capacity of crane he or she is going to operate. Each accredited testing organization develops its own categories for crane type and capacity.

How is an operator certified or qualified? There are four ways that an equipment operator can be qualified or certified to meet OSHA requirements: 1. A certificate from an accredited crane operator testing organization.

2. Qualification from the employer through an audited employer program.

3. Qualification by the U.S. Military (only applies to employees of the Department of Defense or Armed Forces and does not include private contractors).

4. Licensing by a state or local government (if that licensing meets the minimum requirements set forth by OSHA). When a state or local government requires a crane operator license, the crane operator must be licensed accordingly to meet OSHA requirements.

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See OSHA’s Web site on Cranes and Derricks in Construction for more information.

What’s Really Going on with Federal Tax Reform?

As the Senate rushed through a series of votes on healthcare reform, the White House and the Congressional Republican leadership issued a joint statement setting forth the key principles that they have agreed upon for tax reform. Perhaps the big news in the announcement is an agreement not to pursue the introduction of a border adjustment tax.

“Without the savings that would have been generated by healthcare reform and the $1 trillion in new revenue projected from BAT, Republicans will need to make some hard decisions on how to proceed,” reports ASA Chief Advocacy Officer E. Colette Nelson.

She set forth three options: 1. An alternative revenue raiser to offset the cost of tax cuts. House Ways and Means Committee Chair Kevin Brady (R-Texas) has made it clear that he sees no low-hanging fruit that could be plucked to generate significant revenue. Indeed, the lack of alternative revenue raising options is the reason that House Speaker Paul Ryan (D-Wis.) continued to back the BAT for so long despite its controversy. Absent a major new source of tax revenue, the only alternative to make the bill anywhere close to tax neutral is to chip away at tax credits and deductions.

2. Smaller tax cuts than promised.

According to estimates, under the current tax reform proposal but without the revenue raised by the BAT, the lowest the corporate rate could go while keeping things revenue neutral would be

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somewhere between 26 percent and 28 percent. The House’s latest proposal calls for a 20 percent corporate rate; President Trump has called for a 15 percent corporate rate.

3. Enact bigger cuts on a temporary basis. Because Republicans are trying to pass tax reform through reconciliation, any tax cuts must be offset by revenue in order to be permanent. If provisions increase the budget deficit, they will sunset at the end of the budget window, which currently is 10 years. There has been some talk about the option of extending the budget window. However, that would be an unusual move and still wouldn’t change the fact that the provisions would ultimately sunset.

The Republican leadership stated that they “are confident that a shared vision for tax reform exists, and are prepared for the two committees to take the lead and begin producing legislation for the President to sign.”

Nonetheless, as they did with healthcare reform, the Republican leadership is hammering out the details behind closed doors without input from other legislators. In the meantime, ASA, in collaboration with the Small Business Legislative Council, submitted recommendations to the Senate Finance Committee, which among other things: 1. Urged Congress to pursue greater parity in the tax rates for pass-through entities and C corporations while avoiding providing an opening for complex rules and systems.

2. Advocated for the preservation of the business interest deduction.

3. Stated support for immediate expensing.

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4. Encouraged Congress to maintain the step-up in basis while repealing the estate tax.

5. Pushed for the preservation of deductions for health insurance premiums and retirement plan contributions.

DOL Requests Information Regarding Overtime Exemptions Under FLSA The Wage and Hour Division of the U.S. Department of Labor published a Request for Information regarding overtime regulations under the Fair Labor Standards Act. DOL invited comments on the 2016 revisions to the “white collar” exemption in the FLSA, including whether the standard salary level set effectively identifies the employees who should be exempt, or whether there should be a different methodology used to set the standard salary threshold.

DOL also is seeking feedback on whether small entities encountered any unique challenges posed by this rule, and if they faced any economic and non-economic impacts.

Under the FLSA, most workers are entitled to minimum wage and overtime pay for hours worked over 40 hours. However, there is a “white collar” exemption in the FLSA for certain executive, administrative, professional, outside sales and computer employees; qualifying for this exemption requires that these employees earn no less than a standard salary threshold and other criteria.

In May 2016, DOL finalized a rule that changes the standard salary

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threshold for this exemption, from $23,660 to $47,476. In November 2016, the rule was enjoined by a federal court before it became effective.

Interested parties can submit comments at www.regulations.gov, the federal government’s regulation portal, on or before Sept. 25.

ASA and SBLC Call for Tax Reform to Preserve Retirement Plan System ASA, in conjunction with the Small Business Legislative Council, submitted comments to the Senate Finance Committee that call for preserving the small business retirement plan system as part of planned tax code overhaul.

“Most small business owners are motivated to establish plans, and to make contributions for their employees, by a desire to save for their own retirement,” SBLC said. “If the tax laws are changed to reduce the ability or appeal of saving in a retirement plan, small business owners will be much less likely to continue an existing plan or start a new plan.” So as not to disturb the current small business retirement system, SBLC urged Congress to: • Reject attempts to decrease the amount that can be saved in a qualified plan. If the amount that small business owners can save in a qualified plan is reduced, small business owners will be motivated to freeze or terminate plans once they themselves have hit that cap.

This will mean that fewer small business employees will be offered a plan.

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• Avoid changes that would quickly

force savings out of a plan after the owner’s death or otherwise do anything to make owners concerned about saving too much in a retirement plan. If a small business owner is concerned about his/her descendants who inherit the plans assets will be forced to take the money out over a short period of time and therefore face negative consequences, the owner is likely to save less in the plan, which will not only impact his/her retirement security but that of the other employees of the business as well.

• Protect the deductibility of employer contributions. If the deduction for the employer contribution is eliminated, an employer will be far less likely to contribute toward an employee’s retirement savings.

• Reject proposals to try to limit how much can be saved in a defined contribution plan pre-tax (i.e., to force some or all of the defined contribution retirement plan system towards Roth IRAs). If employees are taxed on contributions to a plan, they will be less likely to save, which, given that people are far more likely to save in employer-sponsored retirement plans than in any other vehicle, would reduce retirement savings overall.

SBLC is a permanent, independent coalition of more than 40 trade and professional associations that share a common commitment to the future of small businesses. ASA Chief

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Advocacy Officer E. Colette Nelson is a past chair of SBLC and currently serves on its board of directors.

ASA-Endorsed Change Order Reform Bill Introduced in U.S. House “The ‘Small Business Payment for Performance Act,’ when enacted, will help protect the cash flow of small contractors and subcontractors,” said ASA Chief Advocacy Officer E. Colette Nelson.

H.R. 2594, introduced by Rep. Brian Fitzpatrick (R-Pa.) on May 23, would require a federal agency to make interim partial payments to its construction prime contractor for work performed under a directed change order.

“This is a best practice concept embodied in the changes clause in ConsensusDocs and brought to the attention of federal legislators

by ASA and other members of the Construction Industry Procurement Coalition,” Nelson said.

Today, when a federal agency unilaterally requires a prime construction contractor to perform extra work, a prime construction contractor may request an equitable adjustment— an increase in fee—for the additional work. The request must be made in a timely manner and must specify the estimated amount it cost to perform the extra work required by the agency.

Under H.R. 2594, once it receives a request for an equitable adjustment from a small business construction contractor, a federal agency would have to make an interim partial

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payment of at least 50 percent for the additional work performed, within the time frame specified by the Prompt Payment Act. The provisional payment would not prejudice the rights of either party in finalizing the contractor’s request for an equitable adjustment during subsequent negotiation or failing to reach mutual agreement, any further resolution pursuant to the disputes clause in the Federal Acquisition Regulation.

As under the existing Prompt Payment Act, a federal prime construction contractor would have to pay its subcontractors and suppliers within seven days of receipt of payment from the federal agency.

Ask your Representative to co-sponsor H.R. 2594 by using the ASA Legislative Action Center.

ASA Invites Subcontractors to Apply for Certificate of Excellence in Ethics ASA, upon the recommendation of the ASA Task Force on Ethics in the Construction Industry, has renamed the ASA Excellence in Ethics Awards Program as the ASA Certificate of Excellence in Ethics to better reflect that the program is not an awards competition, but rather a certification program that determines whether a subcontracting firm has met certain qualifications demonstrating its commitment to professionalism and sound business practices.

The ASA Certificate of Excellence in Ethics recognizes subcontractors that demonstrate the highest standards of internal and external integrity.

Applicants still must meet a number

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of critical milestones before the Dec. 15, 2017, deadline, particularly those who have not yet developed a documented ethics program. ASA provides a timeline to help applicants keep on track. Each applicant is also required to respond to questions concerning the firm’s corporate ethics policies and procedures, its construction practices, and its general business practices. Each applicant must submit detailed documentation, including sealed letters of recommendation from a customer, a competitor, and a supplier.

Applicants can learn more about the judging criteria and submission requirements in the program brochure, download an application, and access a resource guide to help them prepare and submit an application.

This guide contains model documents, such as sample recommendation letter requests and model policies on topics ranging from competition and conflicts of interest to internal procedures and whistle blowing.

Apply for the ASA Certificate of Excellence in Ethics by Dec. 15, 2017. Certificate recipients will be announced during an awards ceremony held in conjunction with SUBExcel 2018, which will take place Feb. 28-March 3, 2018, in Tempe, Ariz.

Be sure to save the dates on your calendar! Online registration is expected to be made available this month.

Information about this certificate is located under “About ASA” on the ASA Web site.

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Feature Yes, Sir, Can I Have Another? How Organizations Hurt Their Operations Team Without Even Knowing It?

by Gregg M. Schoppman, FMI Sometimes we hurt the ones we love the most. For construction organizations, the project managers often wear targets the size of a barn door and they don’t even realize it. When one considers the impact a great project manager has in an organization, it is a great deal like that of the bluechip quarterback. The team rises and falls with each reception or interception thrown. The same can be said of the project manager. The nexus of all information, decisions, communication and most importantly projects success and failure is the project manager. If this person is so important, why do we hurt them the most? Of course, no one is consciously beating their project quarterback. Like many football programs, firms’ like to think they protect their assets like a quarterback wearing the red “non-contact” jersey. What is said and what is done are entirely two different things.

No Offensive Line One of the first critiques of many firms is the lack of resources available to the project managers. Seriously examine the team you have and look at how much they have on their plate.

Firms constantly hear about the new constraints, regulations, procedures, etc., that their operations teams have to accomplish, yet they staff them with the same personnel and general conditions that were used 10 to 20 years in the past. Obviously there is a fine line that separates competitiveness and being “fat,” but too often firms err to the side of incredibly conservative, breaking their general conditions into

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fractional components (i.e. 50 percent of a project manager, 35 percent of a superintendent). While it may work in the estimating war room, managers are suffering through projects that are inappropriately staffed, leading to project overruns and losses. In the end, the project manager looks like the quarterback who suffered the loss, but in reality the statistic that was buried on the scorecards was 10 sacks he/she took during the game.

No Training In their haste to avoid squandering a resource, executives constantly shove new resources on the field long before they are ready. Has your organization ever said the following: • “We tend to throw people to the wolves …”

• “We throw new associates right into the fire …”

• “New project managers sink or swim quickly …”

It is clearly understandable that management wants to see an immediate return on its investment. However, there are plenty of rookies that could use some time on the farm system or even ride the bench to learn how to execute appropriately. Even for a more seasoned veteran, there should be nuances that are exclusive to the firm that requires training, orientation, education, etc. So many managers are talented but lack an understanding of that firm’s playbook or operations manual.

This does not mean that a new engineer or manager must sit out for two or three building cycles, but it is a

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strong recommendation that firms inculcate their new associates with the semblance of a real training program.

No Playbook As the team rushes onto the field, and the quarterback starts calling plays, no one has a clue on what play is being called. So many project managers are hurt by a firm’s lack of consistency in operations. When every project and every client, requires a different set of operational tools, it is impossible to gain traction and even drive a project successfully. It is as if the plays are being written as the game is being played, much a like a group of kids playing in the sandlot. Meeting agendas are frantically assembled. Logs of critical data are generated ad hoc and as needed. Close-out happens at a cadence by someone other than the project manager. Proactive gives way to reactive, leaving the offense to play defense. Why reinvent the wheel with each new associate? Is your organization hurting itself by leaving operations to chance?

No Depth or Structure There have been a few great players in history that were tagged with the moniker of “Slash.” They were great passers/runners/receivers. Double- or triple-threat players are outstanding and some organizations thrive on having that level of ambiguity in the play calling. Construction organizations are somewhat contrarian to that. There are always great project managers that can be tasked with managing incredible workloads, governing the field, estimating with accuracy, and cultivating

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superior client relationships. On the other hand, there are many position players that do parts and pieces of the above list very well. Some organizations create disjointed organizational charts that segregate talent disproportionately, leading to resource problems, misalignment amongst customers and managers and more importantly workloads that may be off kilter (i.e. putting all of the work on one “Slash”). There will always be A+ superstars and those that are not.

However, organization should be striving to drive toward more consistent structures by establishing the right playbook, standardizing performance and holding personnel accountable.

It is great if a quarterback is throwing 500 yards a game, but it is all for naught if the rest of the team fumbles 16 times.

Project managers are not more important than estimators or superintendents or any other associate within a firm. The main difference is how project managers are positioned and their direct or indirect impact on costs and overall profitability. For some firms, the quarterback is the superintendent, while others it is the project manager. There has to be a primary play caller for any project. However, just like within the parallels of a football team, coaches and executives can set their play caller up for failure. There are few firms that fall within the realms of being sadists, but in their zeal to “run lean” or “be cost conscious” they forget some of the critical infrastructure that enables even the most pedestrian quarterback to look like Brady.

As a principal with FMI, Tampa, Fla., Gregg Schoppman specializes in the areas of productivity and project management. He also leads FMI’s project management consulting practice. Prior to joining FMI, Schoppman served as a senior project manager for a general contracting firm in central Florida. He has completed complex and sophisticated construction projects in the medical, pharmaceutical, office, heavy civil, industrial, manufacturing, and multifamily markets. He has also worked as a construction manager and managed direct labor. Furthermore, Schoppman has expertise in numerous contract delivery methods as well as knowledge of many geographical markets.

He can be reached at (813) 636-1259 or gschoppman@fminet.com.

2017 ASA CERTIFICATE OF EXCELLENCE IN ETHICS ASA will honor selected firms that demonstrate the highest standards of internal and external integrity during an awards ceremony at the ASA annual convention, SUBExcel 2018, Feb. 28 —March 3, 2018, in Tempe, Arizona.

Online Resources: • Watch the Video.

• Download the 2017 ASA Certificate of Excellence in Ethics Brochure.

• Download the 2017 ASA Certificate of Excellence in Ethics Application.

• ASA provides useful model documents to help with your submission and your ethics program. View the 2017 ASA Certificate of Excellence in Ethics Resource Guide.

• ASA’s Certificate of Excellence in Ethics Program Q&A LinkedIn Group—a forum for getting answers to your questions about the application process. This forum includes current recipients who have been through the application process and who are willing to help guide new applicants through their application process.

• Recipients of the ‘2016 ASA Excellence in Ethics Award’ may re-apply for the 2017 ASA Certificate of Excellence in Ethics using the Re-Certification Form.

• Download the 2017 ASA Certificate of Excellence in Ethics Timeline.

APPLICATION DEADLINE: DECEMBER 15, 2017 T H E

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Feature Professional Development— It Begins with Workflow Definition

by Stephane McShane, Maxim Consulting Group In many organizations, it seems that the method of promoting someone to a new position entails putting them into that position and “hoping” that they come up to speed quickly.

In the construction world, hope is a risky, and costly, strategy. Many who grew into promotions in their career will share stories of being kicked off the deep end of the pier into a new job, with those around them watching to see if they could dog paddle fast enough to keep up with the changes.

Culturally and operationally, this strategy is fast-becoming obsolete. It is distasteful and frustrating to those who have been identified as promotable.

For professional development to be engaging, productive, and meaningful, the contractor needs three things: A value-stream map to develop defined system and process for how you do business, strong mentorship and leadership to provide the proper learning environment, and training that is created in the platform that will take us far into the future. This article will utilize simplified, illustrated example to depict the path for structured professional development and employee retention.

TRADITIONAL METHOD:

That said, this is simply not how the most progressive firms define workflow. This example has processes that define the workflow that spans multiple departments so that the processes define the path, not the operational positions inside of the company. This is a very simplified example, but makes the point of transference between departments.

PROCESS DEFINED WORKFLOW:

Workflow Definition One of the many challenges many organizations face is that their workflow is defined into functional silos.

That is, the workflow is only defined within the silo of the department in which that person resides. The silo approach does not outline how a specific position is to receive information, transform it, and transmit it forward across functional groups. This method can create some negative culture and competition between departments, instead of the synergy that is so highly desired.

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Until the firm is able to process map into a defined-value stream map, drafting the roles and responsibilities for each position will be very difficult.

However, if the time is taken to perform this critical function, the staff can become familiar with the expectations of their positions, what their role is in each process, how their performance will be measured, as well as the ability to look forward at the responsibility of future positions. At this point, you can easily create a career path map with the employee to engage them in their own success, and allow them input about where they would like to go based upon the requirements of the desired position.

Mentoring and Leadership The benefit of the transparency defined in the roles and responsibilities cannot be realized without the ability to have mentoring and leadership.

In what intervals do you meet with your employees to discuss their current performance, review their learning plans, and discuss their work goals?

Developing greatness in performance does not stop at definition, but must be cultivated consistently.

Many performance evaluations are quite subjective. This means, the definition behind the terms “below average,” “average,” “above average,” and “excellent” have not been defined.

With this method, the employee is relying on the opinion of the evaluator and no specific skill set mastery definitions have been identified in order to achieve higher marks. Current performance should be an evaluation on whether the individual roles and responsibilities have been taught, used infrequently, used frequently, and mastered. For instance, if a project manager has specific roles in the preconstruction planning process, the specific task mastery involved in the process should be evaluated using the same definition of scale across all like positions, driving consistency into the process. An example of a performance evaluation matrix immediately follows.

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Policy & Procedure

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Always follows company policy and procedure

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Usually follows company policy and procedure

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Makes an effort to understand and follow policy and procedure

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Understands what to do but does not always follow suit

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Gives little regard to established policy or procedure

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Utilizing this type of objective criteria, it would also allow you to create levels within a larger organization as specific stages of mastery (point levels) have been achieved. An example would be titles such as Project Manager I, II, and III. In this way, the employee drives their own success in reaching the next level, because they understand the metrics in which they are being evaluated and can strive to meet and exceed those goals. This creates a win-win for the employee and the organization as the best practices have been defined, the employee owns their own progression which is influenced and encouraged by leadership, and the resulting behavior is incentivized by promotion and compensation.

Education and Training The platform utilized to train today and into the future looks quite different than the methods of the past. Does anyone remember the days of the job manual? Many of the manuals still sitting on the shelves in construction offices are out of date, do not contain the latest information, and are rarely referenced. There is a reason.

Process Flow Charts Many of our employees are visual learners, yet many organizations have not updated their process definitions and translated them to visual media.

Remembering that the future of our industry lies in technology, it would make sense that our training and education methods would follow suit.

During the value-stream mapping process, it would be easy to identify specific processes, including where they begin and end. An example of a very simplified Job Startup Overview is

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shown on the next page. With a swim lane flow chart such as this, it depicts the process and shows who owns each task. Each of the three horizontal lanes in the center represent a job title who is responsible for that action.

The swim lane up top is reserved for the metrics or evaluation of whether or not this was completed. The lane on the bottom is reserved for examples of documents, templates, or to embed video training as necessary. This creates a repeatable, measurable process that can be saved and used during onboarding of new staff or promotion of individuals into a new position.

Video Education So much of our work in construction is on the computer. Whether the construction organization is large and can retain the services of online training producers, or the firm needs to perform this in house, video education provides tremendously beneficial results.

Considering the depth and detail needed in training for specific processes, especially those tasks done on our devices, video becomes one of the easiest methods of capturing the needed information, while still making it a human interface. For example, in reviewing the flow chart above, there is a task to “open the start-up cost codes with 1 hour and a quantity of 1” so that they are active and available for immediate use. The contractor could simply use any online resource which would allow us to record an online meeting to capture voice and screen contents to follow someone doing this exact process.

Take someone who is familiar with this task, have them start the meeting,

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share their screen, record the session, then simply talk through each step and option of the task while they are doing it. Once the recording is stopped, it can be converted into a video file, renamed appropriately, and stored in a training repository on the contractor’s network. A link to this video could also be embedded into the contractor’s process flow chart for ease in training use.

It’s quite easy as many of us now have two monitors (or more), and can have the training video up on one screen, and the software or program up on the other screen. They can watch a segment, then do that segment, and repeat.

This should not replace training and mentoring in person. However, it is understood that if the process or task is not done frequently after the training, the in-person session education is lost.

Another method of utilizing video is to record the training so that the employee can refer to it over and over again, in lieu of asking for multiple rounds of in person training. This would certainly avoid duplication of effort and give a strong platform for others to use.

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Outside of large, progressive firms who have staff dedicated to professional development, educational resources and career-path mapping can be fairly slim or simply non-existent. The end goal is to set our teams up to succeed, and understand how to accomplish their goals. With the speed of change in our industry, the structure and methods of training in the past has been replaced with value-stream mapping, process definition, and roles and responsibility clarification. The contractor must also allow for the mentorship and leadership to guide in the educational process by providing attainable milestones, objective evaluations of performance, free access to education, and technology solutions to measure and track the change. External training resources are available should the contractor require help developing their own programs, bringing external paid trainers in-house, or sending their staff to courses offered through associations or other groups. In short, effective professional development is the greatest opportunity to inspire growth

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and loyalty in our employees and, more importantly, put the ability to excel into their own hands.

Stephane McShane is a director at Maxim Consulting Group responsible for the assessment and implementation processes with our clients. McShane works with construction-related firms of all sizes to evaluate business practices and assist with management challenges.

With a large depth of experience working in the construction industry from the field to executive leadership, McShane is keenly aware of the business and, most specifically, operational challenges firms’ face. Her areas of expertise include leadership development, organizational assessments, strategic planning, project execution, business development, productivity improvement, and training programs. McShane is an internationally recognized speaker, mentor, author, and teacher. Her ability to motivate, inspire, and create confidence among your work groups is extremely rare and very effective.

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Feature How-to Guide for Women in Construction Project Management

by Mary Beth Kingsley and Sandy Palmerton, Shapiro & Duncan As project managers for a large mechanical company, we enjoy being part of a team working toward a common goal and the satisfaction of completing a project from the ground up.

We relish seeing real progress and no two projects are ever the same. A “desk job” was never going to work for either of us—we like to change our workplace settings and enjoy project-managing onsite.

As women, we defy the stigma that the construction industry is only for men.

We have been fortunate to work alongside women in important project leadership roles such as architects, engineers, senior project managers, owner’s representatives, site superintendents and safety managers. We have also worked on projects with female electricians, carpenters, sheet metal installers, pipe welders, heavy equipment operators and masons.

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Attitudes are changing and the days of any stigma related to the acceptance of women in the construction industry are fading fast, in our opinion. There is no reason why the construction industry should be any different from other sectors in terms of equality. Seeing other women in leadership roles and working in the field has helped us build confidence, provided an unspoken camaraderie, and showed us the diverse opportunities that are available to women in the industry.

Challenges No doubt, in the construction industry women are put under the microscope more so than males. There is a perception often associated that women are emotional and incorporate their feelings into their work.

It is important to act professionally and demonstrate your level of expertise without feeding the perception.

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The key is to be aware of your self-confidence level, your overall demeanor and to stay consistent.

Another gender-based challenge is that women tend to hold themselves up to a higher level of self-scrutiny than our male counterparts. Small details matter that much more to us.

At the same time, our work is more closely scrutinized. We have more to prove. Yet everybody makes mistakes.

While no business professional enjoys making an error, the real value to your employer (whether you are male or female) is demonstrating self-growth by learning from those errors.

It’s not a question of whether it is fair or unfair. It is our responsibility and our obligation to uphold a professional image. That’s why we always prepare thoroughly for meetings. Ultimately, if you show up for work, do your job and do it to the best of your ability, there is

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no place for gender bias. If you don’t make gender a big deal and let it affect your job performance, then others are more likely to perceive it in the same way. As long as you are meeting or exceeding your job responsibilities, gender quickly disappears as a job-related issue.

Top Tips for Success In a project management role, balancing a heavy workload and keeping all the balls juggling can be stressful.

But creating and working from lists is one way to stay focused and gives a feeling of accomplishment when an item is crossed off.

Here are more project management success tips. Some are gender-based, and some aren’t.

No one person has it all. Don’t be afraid to delegate to your fellow team members and reach out when their expertise is needed. Learn from them. Accept praise and positive feedback when it is given. Try to avoid the (sometimes) female tendency to say, “Oh, it was nothing.” Be clear and concise in your communication.

Always remain assertive and present yourself in a confident manner. Neither of us has a hard time speaking up or voicing our opinions in a room full of men. The sooner you decide your gender is not a factor in performing your job, the sooner others will reach the same conclusion.

In those very rare instances where we have sensed hesitation from an “old timer” who is maybe unaccustomed to working with a female, once that relationship of familiarity and trust is established, working together becomes second nature.

Understand women inherently want to please other people. If you’re inclined to take a stab at an answer that you are not totally familiar with, that can get you in trouble.

If you don’t know something, answer honestly and say, “I’m not sure. Let me do some homework and get back to you.” On the other hand, if there is a topic on which you are knowledgeable, do not be afraid to speak out.

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Mentor the people around you. Share teachable moments to strengthen co-workers. Demonstrate a willingness to teach, because this builds a better team. Some people are afraid to share information because of job security worries, but reality shows that there are over 500,000 current skilled trade positions to fill in the industry and that number is expected to approach 2 million by 2022. Our industry is in need of qualified project managers and in our view, we have an obligation, now more than ever, to mentor assistant project managers and project coordinators.

Remain approachable and open-minded. For managers, it is critically important to know how your employees and clients perceive you. Obtain feedback and build on processes to get better results. Take a look around you—look at clients, subcontractors and foremen. Feed on their strengths to get the results you need.

Realize what is hot and critical. Be organized. Prioritize. What has to go out today? In construction project management, attention to detail is a fundamental success trait—for men and women.

Treat everyone—owner, architect and subcontractors—with respect.

Don’t present yourself as a know-it-all. Have an open mind, be willing to learn new things and hear new ideas. Seek out professional and career development opportunities. The industry is evolving every day.

Key Takeaways Women employed in male-dominant industries, possess the tools to change stereotypes and break gender barriers by remaining professionally passionate, by staying hungry for excellence, by executing assigned tasks with care and by taking initiative to be a self-starter.

Stay focused on the finish line until completion is achieved. Then, ask your superiors for your next task or

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project—don’t wait for them to figure it out. We would like to think that our current project manager positions have been obtained, and maintained: • By our respective willingness to accept the obstacles of the industry; • Our respective interest in learning new technologies; • Our dedication to upholding ethical treatment of clients and co-workers; and finally, • Our commitment to delivering results.

Although both of us were on initial paths to enter the workforce in predominately female roles, both of us shifted gears and instead chose a career in a predominately male industry. We have zero regrets. Like a lot of other people, we didn’t choose our profession. We grew into it.

Yes, over the years both of us have been mistaken for the secretary or the accounting manager—but we don’t take it personally. We are always quick to hold our heads high and (politely) set the other person straight. Once that individual realizes that we are in a leadership role, the initial shock wears off and they expect the same results from us as they would a male counterpart.

Our advice to women considering the construction industry is the same advice we would give to anyone entering the field—find solidarity through networking, accept all opportunities to further your education and training, ask questions, speak up for yourself, and treat everyone equally and with respect. Simple tools to live by, no matter what career path you choose!

Mary Beth Kingsley and Sandy Palmerton are project managers at Shapiro & Duncan, Inc., a third-generation family-owned mechanical contracting business serving customers in the Washington, D.C., area since 1976. Shapiro & Duncan is the “Provider of Choice” for complex commercial, government and institutional design-build projects that require first-rate performance, work quality and customer service.

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So You Want to Be a Female Project Manager in a Male-dominated Industry? It Takes a Team

by Mary Beth Kingsley, Shapiro & Duncan

Jerry and Sheldon Shapiro, president and CEO, respectively, of Shapiro & Duncan, gave me the nudge to take on my first mechanical project in 2003. Starting off as receptionist for their company in 1996, they decided to back me 100 percent, so I could take the next steps to further my career. After working as project coordinator and assistant project manager, I became the first female project manager in their company. The contract value of my first project, a middle school, 15 years ago was $500,000. Last year, I completed a complex, fast-track healthcare project with a contract value of $24 million.

Each (sometimes reluctant) step up the ladder has been backed by my Shapiro & Duncan teammates—who, by the way, are predominately male. Many individuals have served as mentors to me and provided support aiding in the success of my career.

In particular, Shapiro & Duncan project executive Ron Chazin, my team leader, has been and continues to be instrumental in my career. He serves as a sounding board, assists me as I work through project hurdles, and lends his technical experience while always teaching. Never one to just give me the answer, Ron encourages research, independent thinking and confident decision making.

Shapiro & Duncan’s greatest strength is our people. Our team atmosphere promotes and fosters the success of the individual and the project—gender notwithstanding!

Four Years Later, A New York Minute

by Sandy Palmerton, Shapiro & Duncan

“Sandy, we need your resume for a bid that is due today, and we also need you to provide a listing of (county) schools you have worked on recently.”

I am asked this via email late in the afternoon on the day the bid is due. After our company successfully makes it through the first round of pricing submissions, an internal meeting is called to discuss technical interview approaches for the bid to bring 100-plus schools into code compliance.

That evening, while I am driving home after we receive notice that we are awarded the work, the anchor of reality and challenge takes hold. This is an open format project; the owner expects the successful contractor to engineer, design, schedule, install and close out mechanical construction in more than 100 schools—with no owner-provided project manager or liaison.

A team approach is instituted. Although I have a heavy hand in creating and implementing the processes and procedures, the jump start comes from my surrounding professional supervisors and coworkers with years of experience. Constant support and constructive feedback help keep things moving.

Four years and 167 schools later, achieving completion is equal to sitting atop a red Harley moving 80 miles an hour on a bright sunny day. Looking back, the sense of accomplishment is reinforced by confidence to move forward progressively. No matter how large the project, I feel equipped to reproduce the project management processes with renewed spirit.

Would I do it all over again? In a New York minute!

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Caught your attention, didn’t it?

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Feature Self-Funded Healthcare: A Better Option for Contractors

by Mike Bechtol, Redirect Health The past several years have been marked by dramatic ups and downs in healthcare. From the decline in insurer participation in healthcare exchanges to multiple attempts at “repeal and replace” legislation, the future is full of uncertainty.

Business owners are especially impacted by the instability of our nation’s healthcare system. Despite the ongoing political discourse about improving healthcare, all signs indicate that health insurance costs will continue to skyrocket. For contractors who want to offer an employer-sponsored health plan, it’s a Catch 22. Insurance rates increase every year—often by double-digits—cutting deeply into their profits and threatening the stability of even the most established companies.

But cost isn’t the only issue facing contractors. Even among those companies offering healthcare, many workers can’t afford to pay their portion of a traditional insurance plan and opt out of the coverage. For these employees, workers’ compensation becomes their only option for healthcare—even for issues sustained outside of the workplace. It’s no surprise, then, that workers’ comp claims can easily spiral out of control, cutting into the bottom line and damaging the company’s eMod scores.

Despite all of these challenges, there is a solution that’s beginning to take hold in the construction industry— and it’s proving to be a silver bullet for employers who want to provide quality healthcare and keep their workers’ comp claims in check, but simply can’t afford the cost of traditional medical insurance.

Misperceptions: Fully Funded Medical Insurance The majority of small and midsized businesses offering healthcare benefits provide a traditional, fully insured plan

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with premiums, deductibles, copayments or coinsurance. However, few employers understand the rate structure of their plans. Most assume that their rates will stay the same or even decline if their company’s claims are low. It’s a reasonable assumption, but it’s not at all true.

No matter how low their utilization, the insurance carrier will pool their company with other businesses of the same size and in the same geographic area. At that point, their utilization hardly matters—it’s a drop in the bucket of the risk pool—and it’s far more likely their rates will increase, year after year.

Likewise, few business owners understand that the insurance company will keep all of the money they’ve paid into the plan, even if their claims costs fall far below their cash outlay.

Self-Funded Healthcare: A Better Way In a self-funded health plan, employers create their own benefit plan for their employees, pay health claims directly or through a third-party administrator (TPA). Businesses can choose from a wide variety of plan designs, including partially-self funded and level-funded insurance plans. For employees, the health plan may look and operate exactly the same.

Benefits may include medical, dental, vision, prescription medications and workers’ compensation. In addition, companies that self-fund can tailor their package to address the specific needs of their workers. For contractors, this may mean providing more coverage for injury and chiropractic care. Fully insured medical plans aren’t nearly as flexible. Moreover, employers can determine how they will fund their plan and whether their staff will pay a percentage of the claims costs.

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From a cost perspective, a welldesigned self-insurance plan yields significant savings. Cash flow improves because employers don’t pre-pay for coverage—they only pay when claims are incurred. They keep any extra money they’ve put into their claims bucket—it doesn’t line the pockets of their insurance carrier.

Moreover, businesses aren’t on the hook for insurance companies’ marketing costs or profit margins, a savings estimated at 10 percent to 25 percent in non-claims expenses. Self-funded plans are also exempt from state health insurance premium taxes—a savings that equals 3 percent of the total premium dollar value of a traditional plan.

For contractors, a strategic plan has also shown to bring down workers’ comp costs and provide lower-wage employees with an appropriate avenue to seek healthcare.

Creating a Smart Self-Insurance Plan In today’s broken healthcare system, the promises of self-funding sound too good to be true. Even so, a welldesigned plan may well be the solution for drastically reducing health costs while providing employees with robust benefits.

Simplifying access for employees, helping them navigate the health care system, and understanding the factors that impact costs are key to realizing the benefits of a self-funded plan.

Simplifying Access: Most traditional health plans include deductibles and copayments, meaning employees pay money (on top of their monthly premium) every time they see a doctor. Obviously, this creates a barrier; many people, especially low-wage earners, choose not to seek treatment because the money is an issue.

This may result in extra sick days or

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Complimentary Human Resource Staff and Services for ASA Members

As a member of the American Subcontractors Association, your organization is eligible to receive complimentary Human Resources services: Member Service Agreement – ASA member companies can establish a service agreement with SESCO Management Consultants to provide ongoing professional services.

Free Telephone/Email Consultation – SESCO staff is available to answer your human resource questions on a daily basis at no charge. Whether it be a federal or state employment compliance question, such as wage and hour, FMLA, COBRA, insurance, Equal Employment, etc., SESCO staff stands ready to assist you! In addition, staff assists in research, handling difficult people problems such as terminations, disciplinary actions, substance abuse or other day-to-day issues that arise.

Free Handbook Review – SESCO staff will review and analyze your current employee handbook or policies to ensure compliance with federal and state employment regulations.

Human Resource Compliance Manual – The SESCO staff has prepared a custom compliance manual for ASA members and the industry. It is over 200 pages and contains sample policies, forms and SESCO staff recommendations!

Discounted Employee Satisfaction Survey Program – Employee morale is at the core of whether a company is profitable and successful. SESCO offers a discounted employee satisfaction survey program to help ASA-member companies identify employee relations issues that may be impeding optimum productivity and quality customer services.

Discounted Consulting Services – The SESCO staff is available to provide consulting services as requested.

Contact a SESCO consultant at (423) 764-4127 or sesco@sescomgt.com

reduced productivity while on the job. In some cases, health issues left untreated may become dramatically worse—and much more costly.

A smart self-funded plan builds in routine health services at no cost to the employee. Treatment of common conditions like sinusitis, flu, cough and colds, conjunctivitis and minor injuries is inexpensive for the business, but highly valuable for employees. For contractors, this also provides employees with an alternative to workers’ comp for minor injuries requiring only first aid.

Stop Loss Insurance: To mitigate their risk, self-funded companies often purchase a stop-loss insurance policy for catastrophic illnesses and accidents. With this coverage, the business pays employees’ health claims up to a certain dollar amount, protecting the company from unexpected financial loss.

Care Coordination: Most companies that self-fund hire a TPA to help administer the plan. Employers who want to realize the full benefit of selfinsurance may also consider partnering with a third-party organization to help manage the coordination of care for their employees.

The healthcare system is complicated and confusing—for business owners and their staff. In many cases, people don’t know what to do when they’re sick or injured, but a third-party care delivery coordinator can help employees navigate a cumbersome system, ensuring they get the care they need, at the most appropriate site of service and at a fair price. A partner organization protects businesses from overpaying while serving as a healthcare concierge for employees.

Care Management: In the healthcare system, 10 percent of patients spend 90 percent of the money, but costs can be controlled by providing a higher level of care management to people who suffer from diabetes,

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hypertension, heart disease, cancer and other chronic or complex diseases.

For example, simply ensuring diabetics are taking their insulin as directed can prevent serious and costly episodes. Building in care management, either directly or through a care coordination partner, will yield significant savings for companies that self-insure.

Fair Pricing: Most self-funding plans use reference-based pricing to ensure costs are fair. Medicare is considered the standard in fair pricing.

For example, the fair price to deliver a normal, healthy baby in a hospital is $5,000; the going rate in a traditional insurance plan is $15,000. This cost is baked right into premiums and reflected in high deductibles.

By negotiating fair pricing and selffunding the cost (either directly or through their care coordination partner), a business whose covered employees and dependents deliver seven babies in one year will save $70,000.

Interestingly, many traditional insurance carriers offer self-funded plans, but their reference prices are much higher than Medicare. For example, their reference price for an MRI may be as high as $1,500, while the fair price for the service can be as low as $300. For a construction company with a total of 20 MRIs in one year, negotiating fair pricing saves $24,000. It doesn’t make sense that an insurer would set such high reference rates, but it’s just a symptom of a much larger issue. Nothing in today’s health system makes sense.

Place of Service: When it comes to managing costs, the place of service has the single greatest impact on healthcare spending. While an MRI may cost $4,000 at a hospital, the exact same MRI is just $300 at an offsite imaging center. There is no difference in quality. The same is true of X-rays, blood and urine tests, and other common procedures. In general,

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hospitals charge five to 20 times more than independent labs or doctor’s offices.

Moreover, a visit to the emergency room averages about $3,000—a big hit to a company’s health claims budget— but the majority of people who seek care at an ER are at the wrong place.

They need a primary care provider to treat a respiratory infection, or an X-ray for an injured arm. By eliminating 10 unnecessary ER visits each year, companies will save up to $30,000 in claims costs. When employers truly understand the impact of place of service, they take action to ensure their employees seek the right care at the right place.

Pharmacy Costs: Dramatic cost variations are true at the pharmacy, too. Prices of common antibiotics vary greatly depending on the pharmacy, the insurer and the way the doctor writes the prescription. A simple medication may cost $40 at a corner store pharmacy—but just $10 at a supermarket pharmacy. If a company’s employees fill 500 prescriptions each year, this $30 difference adds up to $15,000.

It’s a clear and simple choice to order prescriptions through a lower-cost pharmacy—and an easy way for selffunded companies to protect themselves from overpaying.

Self-insurance might just be the best-kept secret in healthcare. A welldesigned plan provides companies and their employees with real benefits without breaking the bank.

Mike Bechtol is director of Care Logistics for Redirect Health, a Gold ASA sponsor. For more information about self-funded health plans, contact Redirect Health at (888) 995-4945 or nextsteps@redirecthealth.com.

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Feature Employee Training and Development: The Importance, the Employer Neglect and the Cost to the Organization

by Jamie Hasty, SESCO Management Consultants When considering all the aspects of neglected management, most often organizations identify development planning as an area of important need.

Development planning truly aids your employees in shaping not only the future of their careers, but also the future of the organization. For a variety of reasons, the valuable activity of employee training and development often goes ignored or becomes an afterthought by management. With this comes the ultimate price: the loss of top talent or future hopefuls.

We often hear from management that not enough time was spent on the development of direct reports or others in a managerial role. In retrospect, management regrets the lack of engagement in the training in development piece as well as consistency and thoroughness via mentorship and/or coaching. Further identified is the benefit that upper management gains from mentorship and professional growth from others in middle level managerial positions.

These general observations and notations were also confirmed in Harvard Business Review. The Review identified a study based on analysis of international databases of over 1,200 high achievers and concluded that many of the high-performing employees are not receiving the career development support they desire. The study stated: “Dissatisfaction with some employeedevelopment efforts appears to fuel many early exits. We asked young managers what their employers do to help them grow in their jobs and what they’d like their employers to do, and found some large gaps. Workers reported that companies generally satisfy their needs for on-the-job development and that they value these opportunities, which include high-visibility positions and significant increases in responsibility. But they’re not getting much in the way of formal development, such as training,

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mentoring and coaching—things they also value highly.”

Why is employee training and development a chronic problem in many organizations and why should it not be? Based on SESCO’s 72-year human resource experience, the following reasons explain why training and development planning often goes ignored and how that can be a costly mistake for an employer of any size. Consider:

Why is training and development planning put on the back-burner?

1. Organizations and management tend to focus most on the present.

Organizations or management often serve in frenetic state of change, realignment of goals/priorities and trying to do more with less. In this environment, management naturally tends to focused on the essential day-to-day operations and less interest in longer-term activities perceived as having less return on investment such as training and development.

2. The training and development exercises are done but rarely acted upon.

We often see many corporate management individuals spend a significant amount of time trying to label certain employees or place them into nondescript or confusing matrices. For example, XYZ organization creates a training matrix with labels such as Super Shining Star, Diamond In The Rough, Underdog, so on and so forth. The challenge with such matrices is that often management is merely concerned with completing the exercise that employees can be misplaced or left out of the mix because they simply do not fit within the overly convoluted label or box.

3. There is most certain a benefit in utilizing a training and development matrix so long as it is usable and understandable to all involved in the

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process. Management should accurately identify the categories and label appropriately, explaining why and how the individual has been placed. Further, the matrix should then be integrated into the human resource training and development program, which should allow for measurable growth and development of the employee.

4. Management simply states there is no time for training and development. This is and will continue to be the worst excuse of all. There will always be time for important activities for growth and development if that time is prioritized by management. As a valuable function of management, carve out the time and integrate the training and development opportunities into daily function. Keep in mind that training and development should be done incrementally to allow for on the job application of the new skill sets.

Why does training and development planning make good business sense?

1. Employees, particularly those of the millennial generation, want to see management take a genuine interest in their future and career. It is important to note the emphasis “genuine.”

Training and development planning should involve a manager taking a personal interest in the actually employee needs or career path both inside and outside the organization.

The program should never be simply a human resource-driven mandate, but a collaborative effort between the manager and human resources to create proper growth and development of employees.

2. A solid training and development program builds loyalty and commitment, not only to the organization

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but also to the manager. In turn, that same loyalty and commitment increases productivity and employee engagement/satisfaction. Referring back to the point noted above, taking a genuine interest in the employee builds loyalty. Loyal employees are more engaged. Engaged employees are more productive.

3. Engaged and talented employees naturally aspire to advance within the organization and appreciate meaningful support in the process.

As the Harvard Business Review study showed, capable and ambitious employees strongly desire training, mentoring and coaching. They want to gain valuable career skills sets to further move up in the organization. They look to become more versatile and valuable to an organization, which aids in retention rates and return on investment. Years ago the emerging trend for organizations was to assist employees with their education with tuition

reimbursement or assistance. We regularly see where this type of investment in the employee’s education (or skill set) provides valuable support, as well as fosters that loyalty and commitment.

On the contrary, if there is no incentive provided by management or the organization for employee education or training and development, employees will go elsewhere to find such resources.

In summary, training and development planning doesn’t have to be elaborate or costly. At the core of every program is good management taking the person-to-person time to understand employee needs and desires, recognizing skills and training needs and collaborating with the employee and human resources to fill any existing gaps. If training and development is executed well, the payoff for the organization can be substantial in terms of long-term loyalty, retention, engagement and productivity. If there is a training and development void,

organizations substantially risk valuable employee assets and long-term talent.

Jamie Hasty is the vice president of SESCO Management Consultants. Under an arrangement with ASA, SESCO provides results-oriented human resource consulting services to ASA members.

SESCO provides a special “retainer” relationship that provides a free “hotline” to ASA members to discuss day-to-day employment issues such as policy development, employee challenges such as disciplinary actions, terminations, or workers’ compensation issues, compliance to federal and state employment regulations, and many other management and human resource matters.

Hasty can be reached at (423) 764-4127 or jamie@sescomgt.com. SESCO offers a variety of online and classroom training for employees and managers, customized to meet your organization need and budget. Contact a SESCO consultant to explore training and development opportunities for your organization.

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1.

Get your financial books in order with accurate and up-to-date entries.

3.

Understand your lien rights and stay compliant.

2.

Understand your financial risks before you provide a proposal or enter a contract.

4.

Improve your cash flow.

Take the next step today to ensure your businesses financial success by partnering with CapitalPlus for all your bookkeeping, back office and financial needs.

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Get at C O more N T Rinformation A C T O R today ’ S C (865) O M P670-2345 A S S

or www.capitalplusfinancial.com/capitalplus.

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Feature Optimize Your Workforce with On-Screen Measurement

by Adam Khemiri, eMeasure As any business expands, it eventually reaches a critical point.

Processes must be optimized before further growth. For estimators, handling manual plans is cumbersome and wasteful. Moving to on-screen measurement will dramatically improve productivity in many ways.

Let’s take a look at some of the main advantages.

Go Faster

Of course, one of the main advantages of on-screen measurement compared to paper plans is the speed. Instead of using a ruler to measure each wall, an on-screen measurement program lets you use your mouse to measure areas, lengths and counts in a flash! If your plan is CAD (or vector PDF), some systems have the ability to take advantage of the polylines added by architects. This means you can take off a whole room in one click. Plus, with traditional takeoff by ruler you would have to manually aggregate all of the individual measurements into one total using a calculator, or possibly a spreadsheet. This is time consuming and potentially prone to errors, whereas an electronic takeoff system

automatically extends and aggregates all dimensions to quickly give an accurate overall total. Studies have shown that when using an onscreen measurement system, takeoff speed will increase by up to 80 percent!

More Accurate With a ruler, you’re relying on the steadiness of your hand to ensure you don’t make any mistakes. Plus, when you’re taking off from a paper plan, you’ll often be making notations of measurements. These have to be crystal clear, or else they’ll be read incorrectly by someone else.

These two factors mean that sometimes, accuracy can be in question.

With most on-screen measurement systems, measuring a dimension inputs it directly into an organized list. This ensures you’re able to refer to it later with no confusion. Some systems will even show you where a measurement comes from when you click on the figure. This gives you a great reference point and makes sure you know what’s been measured where. When your plans are on-screen, you can zoom in easily, making sure you’re taking the most accurate measurement possible. And again, if you receive CAD or vector PDFs, use an on-screen measurement system with polyline compatibility. With one click, your dimension will be measured exactly as the architect, designer or drafter intended it. Any software costs are quickly recouped by savings in increased accuracy.

Everything in One Place If you’re measuring manually, you may have a bunch of different plans relating to the one project.

Not only do you have to pay for printing costs, but this can be very annoying for storage purposes.

Over time, it continues to add up and you can feel like you’re drowning in blueprints! You couldn’t possibly carry all of the paper plans for all of your projects around with you, too, so referring back easily is difficult. Plus, if you happen to lose or misplace one of the plans, it can become a big issue. With an onscreen measurement system, you can load all your plans into the one program. That means you’ll have everything you need in one place.

You can easily keep track of the project and optimize your processes.

With the program installed on your laptop, all of your marked-up drawings and corresponding quantity takeoff go with you wherever your laptop does! And by simply toggling between the different plan views, you’ll be able to see what’s been measured where! Previously, you would have had to move huge plans around a tiny desk to try to compare.

Ready for Revisions

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We’ve all been there. The initial estimate is done, but you then get revised plans back from the architect, designer or draftsperson.

However, it’s unclear where the changes have been made. You have to spend considerable time scrutinizing the plan to see where the differences lie. This is a huge timewaster. To eliminate this frustration, on-screen measurement systems allow you to overlay plans so you can see the differences instantly.

This is a huge time-saver. You’re able to update necessary measurements quickly, without having to measure the whole plan again.

See the Bigger Picture

When you’re estimating from plans, it can be extremely difficult to try and visualize how the end result is supposed to look.

With an on-screen measurement system, you can view your measured dimensions in 3-D. This allows you to see what’s been measured where, and if you’ve missed anything. You can also visualize the end result more accurately. It’s a great advantage that paper plans simply can’t give you.

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Bonus: Integrates with Excel

So many of us use Microsoft Excel every day for estimating. If you’re taking off from paper plans and using Excel, you know the feeling of having to type those figures into Excel one by one. And it can be so easy to type one figure wrong—a mistake that lets down your whole project! Some on-screen measurement systems actually integrate with your Excel spreadsheet. This allows you to directly drag and drop those measured dimensions into Excel. Not only does this mean the chances of getting a figure wrong are dramatically reduced, but it’s a huge time-saver. You can even set up templates so that when figures are measured, they are automatically input into the spreadsheet. The power of a fully-blown estimating system, but all in familiar Microsoft Excel.

Overall, it is clear that if you want to take your business to the next level and develop your workforce, you need to invest in an on-screen measurement system or risk being left behind. Give your business the best advantage it can have, and move on-screen today!

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Adam Khemiri is the business development manager at eMeasure. eMeasure is the latest software offering from Exactal Group, a low cost, high quality on-screen measurement solution intended for those who want rapid and accurate Excel®-linked takeoff at an affordable price. Intuitively designed with a learning curve of under an hour, eMeasure allows estimators to painlessly takeoff quantities with just a few clicks. Users can load in digital plans, calibrate and rotate, measure up, and then when done, just drag and drop the quantities straight into their spreadsheet with the Excel® add-in. eMeasure is a Bronze ASA sponsor. For more information, visit www.emeasure. com or email sales@emeasure. com. Use the code ASA211 when purchasing to get special discount deals—or rent per month for a great price!

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Feature Use of Arrest and Conviction Records in Employment May Be Discriminatory

by Laura Lapidus, Esq., CNA

“Should employers have blanket policies that prohibit employing individuals with criminal conviction records?

The Equal Employment Opportunity Commission says they should not.”

In April 2012, the EEOC issued Enforcement Guidance No. 915.002, “Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964” (“Guidance”). It warns that blanket policies and practices that exclude all individuals with any type of criminal conviction record from employment may be discriminatory and in violation of Title VII.

One Size Does Not Fit All Criminal background checks have long been an important part of the hiring process. These routine checks are valuable in mitigating the risk of negligent hiring claims. They can help prevent employers from hiring a worker charged with sexual harassment or who had a recent criminal conviction for sexual assault. Criminal record checks may also ensure that individuals, who were recently convicted of theft or fraud, are not hired as bank tellers.

However, background checks can lead to unintended consequences. For example, a decades-old marijuana possession conviction may preclude a perfectly capable, reformed, 50-year-old person from earning a job in which he or she may excel.

Blanket policies may result in “disparate impact discrimination,” a neutral policy or practice that has a discriminatory effect on a protected class or classes, even though no intent to discriminate exists. The EEOC references research indicating certain protected classes, such as African American and Hispanic men, have higher rates of criminal convictions. Thus, disqualifying an individual based upon a

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criminal conviction could have a disparate impact on those protected classes, and would violate Title VII unless an employer can prove that its policy is “job-related and consistent with business necessity.”

Background Checks and Screening Process—EEOC Guidance Background checks remain legal and critical to the hiring process. But, rather than maintaining a blanket policy against employing individuals with conviction records, the EEOC encourages employers to develop narrowly tailored policies and targeted screens based upon each particular job to ensure exclusions are job-related and consistent with business necessity. The screening process, according to the EEOC, should focus on the: • Nature and dangers of the crime in question.

• Time elapsed since the crime was committed.

• Nature and risks of the particular job.

The EEOC further proposes that individuals with criminal records be offered individualized assessments.

Such reviews would allow the individual to provide information employers may consider in determining whether the factors excluding those individuals from employment are, indeed, job related and consistent with business necessity.

The Guidance also indicates that the EEOC will defer only to federal laws that prohibit individuals with certain criminal convictions from holding certain jobs. Any employer that follows

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a state or local law which prohibits an individual with certain criminal convictions from holding a particular job must still demonstrate that its policy is job-related and consistent with business necessity. An employer cannot rely solely on a state or local law to provide justification for such an exclusion from employment.

The EEOC cautions that “convictions” and “arrests” are not the same. An arrest does not prove criminal conduct occurred, so excluding an individual from employment based solely upon an arrest record will not be job related or consistent with business necessity, and therefore, a violation of Title VII. However, an employer may make an employment decision based upon the conduct underlying the arrest if, after a factual inquiry, the employer determines the conduct that occurred renders an individual unfit for the position being filled.

Risk Control Recommendations To comply with the Guidance and to mitigate the risks inherent in hiring: • Avoid across-the-board policies that automatically prohibit the employment of an individual based upon any criminal conviction.

• Write narrowly tailored policies and procedures to govern the use of criminal background checks.

• Review job descriptions and determine which specific criminal convictions that may render an individual unfit for a particular job.

• Determine whether certain criminal conduct may be excused after a given time period, and if so, how many years should be relevant.

• Document the justification for the policy and procedures, including consultations and research considered in crafting the policy and procedures.

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• Consider individualized assessments of applicants with criminal backgrounds.

• Consider removing questions regarding criminal arrests and convictions from employment applications. Such questions may be asked in another form once a criminal background check is completed.

• Focus on the dangers of particular crimes and the risks in specified positions when discussing criminal records with applicants.

• Train hiring officials, managers and others involved in the recruitment and hiring process about Title VII prohibitions against discrimination, and train them to implement the employer’s policy and procedures.

Since the Guidance is not law, it remains unclear the extent to which the courts will agree with the EEOC’s position, although courts typically defer to

the EEOC’s interpretation of Title VII. What is clear is that an employer should consult with an employment attorney to review and revise its policies and practices regarding criminal convictions before such policies and practices are challenged by the EEOC. Discrimination is against the law, and blanket policies that prohibit the employment of individuals with conviction records are more likely to be held as discriminatory, exposing employers to costly claims.

Additional Resources • EEOC Enforcement Guidance, “Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sec. 2000e et seq.” No. 915.002 (4/25/12).

• What You Should Know about the EEOC and Arrest and Conviction

Records: http://www.eeoc.gov/eeoc/ newsroom/wysk/arrest_conviction_ records.cfm • Questions and Answers about the EEOC Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII: http://www. eeoc.gov/laws/guidance/qa_arrest_ conviction.cfm Laura Lapidus, Esq., is CNA’s Management Liability Risk Control Director and provides risk control support to all of the insurance products which provide management liability coverage, with a focus on Employment Practices Liability insurance coverage. Lapidus has more than 25 years of experience in employment law. She has taught dozens of CNA’s School of Risk Control Excellence courses and webinars and has written various articles on employment practices issues.

New On-demand Videos from FASA When it comes to managing your business, the Foundation of ASA is your partner in education. View and listen to FASA’s on-demand videos at an individual workstation or in a conference room for group training. Your order includes access to the on‑demand video any time, and as many times as you’d like! These are just two of the on‑demand videos available through the FASA Contractors’ Knowledge Depot to meet your business management training needs.

“Is Your Cash Working for You? Understanding the Competitive Advantage of Cash Management” (Item # 8095) For subcontractors, effectively managing cash is an ongoing and high-stakes challenge. In this on-demand video, presenters Kevin Jacobs and Aaron McFarland, Moss Adams, LLP, outline steps subcontractors can take to adjust their allocations so they have cash on hand when they need it, while earning a return on their long-term reserves.

$65 ASA members | $95 nonmembers

“School of Risk Control Excellence: Employment Practices Liability” (Item # 8108b)

Employment practices liability is a serious exposure for all business owners, and coverage is not included in a standard general liability policy. In this on-demand video, presenter Laura Lapidus, Esq., CNA, discusses federal employment law, current trends and statistics, claim scenarios and risk control practices. CNA and Scirocco Financial Group offer an EPLI program exclusively for ASA members. Log-in under “LogIn/Access Member Resources” and click on the ASAdvantage Program for more information.

Free for ASA members and nonmembers

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Feature Inflexible Leave Policies: Automatic Termination May Violate the ADA

by Laura Lapidus, Esq., CNA

The Equal Employment Opportunity Commission has stated its position with respect to employee leave policies.

Once employees have exhausted their leave, their employers must determine whether they are considered disabled under the Americans with Disabilities Act and, if so, whether a “reasonable accommodation” is necessary to help them return to work. Inflexible leave policies that automatically terminate employees upon exhaustion of a maximum medical leave period, and in the absence of an individual assessment of whether an accommodation is necessary and possible, may violate the ADA and potentially result in litigation and consequent loss.

ADA Requirements

no bright-line test exists to determine what length of unpaid leave constitutes a reasonable accommodation. Whether a request for a longer leave would be considered an undue hardship depends upon individual circumstances, such as the size of the company and the position held by the employee requesting leave.

EEOC Settlements The EEOC has aggressively pursued organizations that maintain inflexible leave policies. For example, one company paid more than $4.8 million to settle leave-related claims alleging that it automatically terminated hundreds of employees who could not return to work after exhausting their 12 weeks of leave. The EEOC asserted that this policy violated the ADA because it did not allow for consideration of reasonable accommodation, such as additional unpaid leave. The agency also contended that the company’s policy of prohibiting employees from returning to work if there were any restrictions placed upon them violated the ADA. According to the EEOC, such a blanket prohibition precluded consideration of a reasonable job accommodation that would permit employees with restrictions to return to work in some capacity.

EEOC actions against companies with inflexible leave policies have resulted in a number of significant damage awards and settlements, ranging into the millions of dollars. The loss potential of these lawsuits is high, as claimants often include many past and current employees.

Many companies’ leave of absence policies provide for termination of employment if the employee fails to return to work within a fixed period of time, typically ranging from 12 weeks to one year. While such a policy may satisfy an employer’s obligation to provide unpaid leave under the Family Medical Leave Act or other similar laws, it does not necessarily comply with the ADA. The EEOC has stated that if the employee is a qualified individual with a disability, the employer must engage in an interactive post-leave process to determine whether reasonable accommodation is possible. Any policy that automatically terminates employment at the end of a set period, regardless of its length, prevents consideration of reasonable accommodation and will likely be viewed by the EEOC as a violation of the ADA. Risk Control Measures The EEOC and courts have stated that an employer may accommodate a The following strategies can help qualified disabled employee by grantemployers mitigate the risk of potential ing additional unpaid leave beyond ADA violations: the requirements of the employ• Understand the ADA and its reguer’s policy and other laws, such as the lations, especially the mandate to FMLA. Although a general consenengage in an interactive process sus has emerged that indefinite leave designed to explore reasonable is not a reasonable accommodation, accommodation.

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• Review policies and procedures to ensure they allow for consideration of a reasonable accommodation for qualified individuals with disabilities who have exhausted their initial leave. Options, which should be examined on a case-by-case basis, include additional unpaid leave, modification of job functions or reassignment to an open position.

• Eliminate rigid policies and/or procedures that authorize automatic termination upon exhaustion of leave, or that limit employees’ ability to return to work unless they have “no restrictions” or are “100 percent able.”

• Document discussions with employees regarding their needs and potential accommodations in order to demonstrate that an interactive process has occurred.

• Retain an employment attorney to review any changes to policies and/or procedures prior to their implementation.

• Educate managers regarding the ADA and its regulations, as well as the company’s own policies regarding leave and reasonable accommodation.

By following these simple guidelines, organizations can minimize leaverelated risk and help ensure that their policies and procedures are both legally compliant and fair to employees.

Laura Lapidus, Esq., is CNA’s Management Liability Risk Control Director and provides risk control support to all of the insurance products which provide management liability coverage, with a focus on Employment Practices Liability insurance coverage. Lapidus has more than 25 years of experience in employment law. She has taught dozens of CNA’s School of Risk Control Excellence courses and webinars and has written various articles on employment practices issues.

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Feature The Americans with Disabilities Act—Important Resources to Assist with Compliance

by Laura Lapidus, Esq., CNA

An employee tells one of your managers that a medical condition is interfering with the employee’s ability to do his/her job. Does your manager know what to do? Do you understand your obligations under the disabilities laws?

The federal Americans with Disabilities Act, 42 U.S.C. § 12101, as amended by the ADA Amendment Act, Pub. L. No. 110-325, 122 Stat. 3553 (2008) requires employers to provide reasonable accommodations to “qualified individuals” with disabilities. Under the ADA, a qualified individual with a disability is an individual who satisfies the employer’s requirements for the job and can perform the essential functions of the job, with or without reasonable accommodation. The primary purpose of the ADAAA was to expand the definition of “disability” enabling more individuals to obtain protection under the ADA. As a result, in determining whether an employer has complied with the ADA, the focus has shifted from whether or not an individual is disabled under the law to whether or not the employer has engaged in an “interactive process” to determine what, if any, accommodation should be provided, and whether or not the employee’s disability can be reasonably accommodated without undue hardship to the employer.

Accommodating employees with disabilities may at first appear to be a daunting task, but there are many resources available to assist an employer. The Job Accommodation Network, a confidential service offered by the Office of Disability Employment Policy of the U.S. Department of Labor, provides useful information regarding implementation of the accommodation process. JAN’s Web site, www.askjan.org, provides employers with a number of resources, both written and multimedia, which can be used to train managers regarding

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the ADA and the employer’s obligation to provide reasonable accommodation. JAN has an online search system, the Searchable Online Accommodation Resource, which an employer can use to research various types of disabilities and potential accommodations. JAN also provides complimentary telephone consultations to assist employers in understanding the ADA and the accommodation process.

Employers and others with human resources responsibilities may wish to bookmark www.askjan.org on their computers for useful information about workplace accommodations and ADA compliance.

Job Accommodation Network Resources • Contact via telephone, live online chat, email or social media—http:// askjan.org/links/contact.htm • SOAR database—http://askjan.org/ soar/index.htm • Training, including webcasts and podcasts—http://askjan.org/training/ index.htm • Online training regarding the interactive process—http://webcast.askjan. org/process • Written handout regarding the interactive process—http://askjan.org/ media/eaps/interactiveprocessEAP. doc • Accommodation and Compliance Series: The ADA Amendments Act of 2008—http://askjan.org/bulletins/ adaaa1.htm#resources

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Additional Accommodation Resources • The ADA National Network—The ADA National Network is a national network of 10 regional ADA centers that provide, for employers, up-to-date information, referrals, resources and training on the ADA. www.adata.org; (800) 949-4232.

• U.S. Equal Employment Opportunity Commission—The EEOC’s Web site contains articles, checklists, a glossary, and links to useful disability resources to assist in complying with the ADA. www.eeoc.gov.

• Questions and Answers on the Final Rule Implementing the ADA Amendments Act of 2008—http://www. eeoc.gov/laws/regulations/ada_qa_ final_rule.cfm • Questions and Answers for Small Businesses: The Final Rule Implementing the ADA Amendments Act of 2008—http://www.eeoc.gov/laws/ regulations/adaaa_qa_small_business. cfm • The Americans with Disabilities Act: A Primer for Small Business—http://www. eeoc.gov/eeoc/publications/adahandbook.cfm Laura Lapidus, Esq., is CNA’s Management Liability Risk Control Director and provides risk control support to all of the insurance products which provide management liability coverage, with a focus on Employment Practices Liability insurance coverage. Lapidus has more than 25 years of experience in employment law. She has taught dozens of CNA’s School of Risk Control Excellence courses and webinars and has written various articles on employment practices issues.

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Feature Has Unethical Behavior Reached a Breaking Point? Criminal Prosecution of Bad Acts in the Construction Industry

by Bruce R. Demeter, Esq., AIC

Elizabeth Perino was recently sentenced to one year and one day in federal prison for allowing her firm to be used as a payroll pass-through for a general contractor. Perino owns Perdel Contracting Co., a WBE concrete and carpentry firm. Perino allowed the general contractor of a $7 million O’Hare International Airport runway repair project, Diamond Coring Company, to list several of its employees on Perdel’s payroll. Perdel also reported buying several street sweepers from Diamond for use on the project. Perdel performed no work on the project but received an 18 percent commission from Diamond on labor costs and $20 an hour for street sweeper use. Through this deceptive and unethical practice, Diamond was able to report compliance with the project’s DBE/WBE requirements.

Stories involving the criminal prosecution of construction companies, company officials and individuals are appearing with increasing frequency in the news, ENR and other construction industry publications. Not too long ago, an offending party would have been fined or barred from bidding public work for a certain period of time as punishment for an ethical transgression. For many those actions were considered to be no more than reprimands that did not outweigh the potential benefits of committing an unethical act. The call to impose more stringent punishments for unethical behavior is on the rise because it is perceived as the most effective means of ensuring ethical behavior at this time.

Many of us remember the backlash that grew in the 1970s and 1980s against the construction industry and contractors especially. Surveys listed contractors as one of the most unethical professions in the United States.

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Project delays, cost overruns, bid shopping, onerous contracting practices, lassie faire attitudes and various unsavory practices left the construction adjacent to the used car industry in the public’s perception of those individuals who had the least amount of moral fiber.

The reaction to the public’s outcry was aggressive action taken by the industry to clean up its act. Codes of ethics were drafted and instituted by companies and trade associations.

Bid procedures designed to prevent bid shopping preceded the enactment of anti-bid shopping laws. “Whistle blower” protections were instituted.

A plethora of seminars discussing acting ethically were created, and ethics became a key component of industry university degrees and trade educational programs.

Despite the industry’s significant efforts and gains in the area of ethics, many construction companies and individuals continue to act unethically. As a consequence commercial, residential and governmental clients still believe that contractors, subcontractors and design professionals care more about making money than performing quality work on time and on budget. They are convinced that harsher punishment is necessary in order to protect the public and overcome an inability of the industry to significantly abate unethical behavior on its own. The criminal prosecution of construction companies and individuals is a trend that is gaining momentum.

Laws, regulations and rules continue to be enacted that make acting ethically a construction contract obligation and a potential criminal act. For example, under the civil False Claims Act, contractors and their personnel face civil prosecution and treble

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damages criminal prosecution, and debarment from federal contracting under Federal Acquisition Regulation Subpart 9.4. Suspension and debarment actions include contractors and their employees.

In addition to listing Diamond employees as Perdel employees, Perino also teamed up with another general contractor, McHugh Construction Co., to circumvent federal and state DBE requirements on several other projects. It is estimated that Perino allowed McHugh to pass $40 million through Perino’s other company, Accurate Steel Installers, from 2004 to 2011. These activities came to light after a McHugh project manager, Ryan Keiser, started a whistle blower lawsuit. While Perino is going to jail, McHugh settled with government for $12 million and an agreement that it would revamp its DBE procedures, which included its hiring of an oversight supervisor to manage its subcontracting procedures in coordination with McHugh’s general counsel.

Perino may be one of the latest construction industry individuals to be criminally prosecuted, but she is not the only. Wilmer Cueva, a construction foreman for Sky Materials was sentenced to three years in prison as a result of a 2015 trench collapse that killed Carlos Mancayo and endangered the lives of several others. Mancayo was working in a 13-foot deep trench that was not properly shored. Inspectors repeatedly warned Cueva, and the general contractor, that the trench was in danger of collapsing. Cueva and the general acted unethically by not taking any steps to correct the unsafe condition. After the trench collapsed, Lower Manhattan District Attorney Cyrus Vance Jr. charged Cueva with negligent homicide and the general contractor with

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manslaughter. Both Cueva and the general contractor were found guilty.

Using a relatively unused Pennsylvania consumer protection act, James Carpenter III, a residential contractor, was criminally convicted of defrauding two homeowners. Carpenter was sentenced to up to 23 months in prison; 400 hours of community service and up to seven years of probation. He was also order to repay $100,000 to the homeowners he defrauded.

Also in Pennsylvania, a general contractor and excavator operator were found guilty of six counts of involuntary manslaughter. On June 5, 2013, a building undergoing demolition collapsed into an adjacent building being operated as a Salvation Army Thrift Store. The collapse killed six people and injured 14 others. The Philadelphia District attorney said that the structural supports of the collapsed building had been improperly removed because the contractor was trying to do the job as cheaply as possible. The District Attorney noted that competing bids for the project were two to three times higher than the amount being charged by the contractor. Griffin Campbell, the contractor, was sentenced to 15 to 30 years in prison. The excavator operator, Sean Benschop, received a prison sentence of 7.5 years to 15 years.

Some will argue that the elimination of unethical behavior is not possible. They point to the fact that there are some individuals who inherently lack the ability to act ethically. They also argue that not all people see some acts as being unethical, which will prevent their acting ethically. For example, there are many people who still consider bid shopping to be an acceptable practice.

They ask, “How can you ensure that the owner will receive the best bids for the project if the general contractor cannot shop bids?” To them, bidding shopping is an intelligent and effective means of doing business.

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However, more than ever, contractors, subcontractors and construction workers are facing a multi-pronged attack against unethical behavior.

Civil penalties will continue to be imposed against those acting unethically. Criminal prosecution for the same bad acts will continue to rise unless we, the collective construction industry, can demonstrate an increased compliance with rules, regulations, laws, and, most importantly an industry-wide code of ethical conduct. Acting ethically is not always the easiest course of action to pursue. But it becomes easier if everyone takes responsibility for

acting ethically, and imposing sanctions against those who do not. Until this occurs we will see others trying to control industry ethics through the imposition of civil, criminal, and administrative actions.

Bruce R. Demeter, Esq., American Institute of Constructors, is the author of AIC’s “Mr. Ethics” column. He is former construction litigator. He has published construction industry articles and has been a featured speaker at various national association and organization meetings. He can be reached at brucedemeter@gmail.com.

Construction Subcontractors Are Learning How to Minimize Risks of an Employment Practices Liability Claim with New FASA Video-on-Demand

by American Subcontractors Association Employment practices liability is a serious exposure for all business owners, and coverage is not included in a standard general liability policy. Construction subcontractors are learning about federal employment law, employment practices liability (EPL) exposures and the techniques they may consider to help minimize the risk of a claim with a new video-ondemand from the Foundation of the American Subcontractors Association.

In “School of Risk Control Excellence: Employment Practices Liability,” presenter Laura Lapidus, Esq., CNA, discusses federal employment law, current trends and statistics, claim scenarios and risk control practices.

“School of Risk Control Excellence: Employment Practices Liability” (Item #8108b) is free for ASA members and nonmembers. This and other on-demand videos are available through FASA’s Contractors’ Knowledge Depot.

CNA and Scirocco Financial Group offer an EPLI program exclusively for ASA members. Log-in under “LogIn/Access Member Resources” and click on the ASAdvantage Program for more information. To become a member, visit the ASA Web site.

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Feature Game Winning Strategies to Ensure Your JV Performs at the Varsity Level

by Fielder Martin and Jodi Taylor, Baker Donelson Although the air may not be cool and crisp yet, it is August, and in the South, that means football season is just around the corner. Perhaps it is “football brain” that drove our thoughts in presenting recommendations for creating and running a successful joint venture, resulting in the analogies discussed below.

However, we believe it is more than that. A successful joint venture, much like a successful football program, requires thoughtful planning during the inception phase, strong leadership with well-defined roles, and careful risk management. Cointoss, kick-off, and read on to learn effective ways to make your JV perform like it is playing on the varsity team.

Get in Formation A JV may be created informally through oral agreements or through conduct of the entities involved.

Even if the entities did not intend to create a JV, in those instances, both JV partners will be liable for the other’s actions. The better practice is to enter into a formal JV agreement any time your company engages in conduct that could arguably be seen as a joint engagement with another company.

Formal JV agreements, clearly defining the material terms, allow clarity at the inception of the project and later should any problems

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arise. Federal government contracts require that JV agreements are in writing, and that each participant sign the contract and all bid documents. In further example, forming the JV prior to bidding on government jobs is a necessity; creating a JV after a bid is awarded will invalidate the award because the JV would create a distinct legal entity from the bidding entity.

It is also important to determine the corporate structure best suited for the JV—such as contractual, corporation, LLC, partnership, or limited partnership. This selection depends on the tax implications for all entities involved, liability and risk tolerance of the participants, complexity of the project, size of the participating entities, and Disadvantaged Business Enterprise participants and requirements. Unless otherwise defined, JVs are usually treated as general partnerships. In those instances, all participating entities will be responsible for the actions and conduct of the other JV entities. Defining the JV otherwise is preferred to limit the liability of all JV members, but it must be done through a formal agreement.

Who Is Calling The Plays?

Football games become a mess when the offensive coordinator, special teams and head coach

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get their wires crossed about who is handling what, and leadership of a JV is no exception. The JV Agreement should define the roles, responsibilities, and decision-making ability of each entity forming the JV. The project will be disjointed, and the schedule may be affected, if the members of the JV cannot agree on how to make decisions affecting the project and there is no mechanism in place for determining how critical path items will be decided.

Also, most government projects require that a DBE JV member assert majority control of the JV. If not, there is a chance the JV will lose the opportunity to bid or win public work. During the formation process, these types of requirements must be considered and addressed to ensure that the JV is able to procure its intended project.

Staying Off the Injured Reserve The JV may have been necessary to win the work, bond the project, or adequately manage the construction process. A well-documented JV agreement will likely provide the most protection for the additional risks associated with the JV as discussed above. The agreement should also include a dispute resolution plan for managing the JV among the entities forming the JV. Further, it is imperative that all

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members of the JV be included as named insureds on the JV’s commercial general liability insurance policy. Most CGL policies contain an exclusion for liability that is arising out of the conduct of any partnership or JV of which the insured is a party or member. In short, JV entities not listed are not covered.

Team Roster Staffing the JV is fundamental to the successful completion of the project. However, this can create additional liabilities. It must be clear that the employee is working for the JV, not the individual entities forming the JV. Best practices include having the employees who will

work on the JV fill out new employment paperwork, such as I-9s, W-2s, etc., the distribution of company policies, handbook, and other company documents containing the JV name and logo, and employee email addresses, accounts, and signature lines should identify the JV entity. Paychecks should be issued through the JV, and paystubs should be written from the JV account on JV checks (whether paper checks or electronic deposit).

The human resource departments of the JV members should be involved in integration to ensure that the JV workforce is trained on their roles within the JV.

Game On! The JV Agreement, or playbook, has been signed, managerial roles defined, liabilities accounted for, and the starting players selected— you are ready to drive down the field for a successful project.

This is a snapshot of the issues surrounding JV construction projects. For more information on whether a JV is right for your next project, and counsel on how to implement a JV Agreement suited for your needs, contact Fielder Martin at fmartin@bakerdonelson.com or Jodi D. Taylor at jtaylor@bakerdonelson.com in Baker Donelson’s Atlanta office.

2017 ASA BEST PRACTICES AWARDS ASA offers national recognition to prime contractors that are committed to superior business practices like prompt payment.

ASA’s annual “National Construction Best Practices Awards,” developed by the Task Force on Ethics in the Construction Industry, recognize elite prime contractors that uphold best practices and refuse to do business according to the “lowest common denominator.” The deadline for prime contractors to submit applications is Nov. 3, 2017. The application fee is $495. Each prime-contractor applicant must supply three sealed businesspractices recommendations from specialty trade contractors that have worked for it in the past year, along with a copy of its standard subcontract, with its application. ASA will honor recipients during an awards ceremony at the ASA annual convention, SUBExcel 2018, Feb. 28-March 3, 2018, in Tempe, Arizona.

APPLICATION DEADLINE: NOVEMBER 3, 2017 T H E C O N T R A C T O R ’ S C O M P A S S

Helpful Links: • Watch the National Construction Best Practices Awards video.

• Prime contractors: Download the 2017 National Construction Best Practices Award application form.

• Specialty trade contractors: Download the 2017 National Construction Best Practices Award “Form for Evaluating the Applicant’s Business Practices.

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Feature Unforeseeable Employee Misconduct Defense to an OSHA Citation

by Philip Siegel, Hendrick, Phillips, Salzman & Siegel A contractor who has established, implemented and enforced a safety program may be able to successfully defend an OSHA citation based on the defense of unforeseeable employee misconduct. The Occupational Safety and Health Review Commission and the U.S. Circuit Courts of Appeal recognize that employee misconduct may be a valid defense to an OSHA violation.

Contractors have successfully been able to defend themselves against OSHA liability in many cases based on showing “unforeseeable,” “unpreventable” or “isolated” employee misconduct. The unforeseeable employee misconduct defense is primarily geared toward violations over which employees have individual control. The rationale in support of the employee misconduct defense is that the employee’s misconduct was unpreventable or unforeseeable or was an isolated incident, atypical of the contractor’s normal operations. Even though there has been a violation of an OSHA regulation, the contractor will be able to avoid liability if he can show that the contractor’s conduct is such that he is entitled to rely upon the employee misconduct defense.

In order to be able to rely on the employee misconduct defense to vacate an OSHA citation, an employer must satisfy four requirements that have been enunciated in decisions rendered by the Review Commission to show that the employee misconduct occurred despite the employer’s efforts to require safe work practices. If any one of the four requirements is lacking, the defense fails and the contractor will be liable. If a contractor is committed to safety and avoiding OSHA liability, the contractor can reduce the likelihood of accidents and potential OSHA

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liability by actively managing his or her company in such a way that each of the four requirements is satisfied.

The four requirements that a contractor must show in order to vacate an OSHA citation based on employee misconduct are: 1. The contractor established work rules to prevent the violation from occurring.

2. The contractor adequately communicated the work rules to employees.

3. The contractor took steps to discover violations of its work rules.

4. The contractor effectively enforced its rules and took action when there were employee violations.

Contractor-Established Work Rules to Prevent the Violation The first requirement to invoke the employee misconduct defense is for the contractor to show that it adopted work rules, consistent with OSHA requirements, that were intended to prevent the violation for which the contractor has been cited. The Review Commission has defined a work rule as “an employer directive that requires or proscribes certain conduct and that is communicated to employees in such a manner that its mandatory nature is made explicit and its scope clearly understood.” There is no requirement that the work rule be written, but the rule must be clear and protect against the specific hazard addressed by the standard. The work rule must be designed to foster compliance with the cited standard and should not be general and open to interpretation.

The best practice is for a contractor to develop specific written work rules that are distributed to each employee

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in a safety manual and orally reviewed from time-to-time at job site meetings or tool-box talks. A contractor is likely to meet this requirement by adopting a safety program in accordance with OSHA regulations applicable to the contractor’s operations.

Contractor Adequately Communicated the Rules to Employees The second requirement is to communicate the work rules to employees. The contractor must be able to show that the employee, whose conduct was in violation of the contractor’s work rules, had previously been told of the work rule. This requirement can be satisfied by conducting for all employees regular safety training programs that cover the OSHA regulations most applicable to the work being performed. Every employee must be provided safety training prior to being allowed to work. Periodic training should be conducted to make sure that employees are reminded of the contractor’s safety program and work rules. Safety videos are an excellent means to communicate work rules. Contractors must emphasize to all employees, and especially foremen and superintendents, that compliance with fall protection rules is required at all times and that safety should not be compromised to increase productivity.

Contractor Took Steps to Discover Violations The third requirement—that the employer take steps to discover violations—can be satisfied by the contractor’s conducting regular job-site monitoring to check that the safety rules are being followed. There is no rule that job-site monitoring be

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conducted with any particular frequency. The employer must establish that it exercised reasonable diligence in detecting workplace hazards. The criteria will be satisfied if the contractor can show that it took reasonable steps to determine whether its jobs were being run in compliance with safety rules. If there is little correlation between the work rules and what takes place regularly in the field, the employee misconduct defense will fail.

An effective safety program requires “a diligent effort to discover and discourage violations of safety rules by employees.” A failure to discover a safety violation that occurs in a short period of time is not evidence that the employer was not diligent in its effort to discover violations.

Contractor Effectively Enforced the Safety Rules and Took Disciplinary Action When Violations Were Discovered A contractor can meet the fourth criteria by establishing and enforcing a disciplinary program directed at employees who do not follow the safety rules. First, a disciplinary program should be established and communicated to all employees. When an employee is seen violating the work rules, the employee must be disciplined. Often, the key to establishing the employee misconduct defense is proving that the employer has a regularly enforced disciplinary program for safety violations. If employees feel free to violate work rules, there is not unforeseeable or isolated employee misconduct.

Disciplinary action could include verbal and written reprimands, suspension, demotion, removal from a safety incentive or bonus program, and

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termination. Written evidence of disciplinary actions taken should be maintained by the contractor to show that the contractor enforced its safety rules and took disciplinary action against employees who did not follow the rules. Formal records of the disciplinary action should be maintained indefinitely. The disciplinary program should be structured as a progressive program, so that an employee who continues not to abide by company safety rules receives a harsher penalty, culminating in termination of employment. If the contractor has not disciplined the employee whose misconduct led to the citation and there is little evidence of prior disciplinary action within the company, the employee misconduct defense will not be accepted.

Several factors can negate the employee misconduct defense, such as placing an untrained employee on the job or failing to provide the needed safety equipment.

Supervisor Misconduct When the employee who is involved in the violation of a safety rule is a supervisor, the proof of unpreventable employee misconduct is more rigorous and the employee misconduct defense is more difficult to establish. A supervisor’s conduct is imputed to the employer and the supervisor has the duty to protect the safety of employees under his supervision. In addition, the “fact that a supervisor would feel free to breach a company safety policy is strong evidence that the implementation of the policy is lax.”

“When the alleged misconduct is that of a supervisory employee, the employer must also establish that it took all feasible steps to prevent the

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accident, including adequate instruction and supervision of its supervisory employee.” The Review Commission has held that the failure to give specific instructions on how to accomplish a job can amount to a lack of reasonable diligence.

Nevertheless, there have been cases where contractors have been able to rely on the employee misconduct defense, even though the employee who engaged in the misconduct was a supervisor, by showing compliance with the four criteria.

In L.R. Willson and Sons, Inc. v.

OSHA, 18 BNA OSHC 1129, 134 F.3d 1235 (4th Cir. 1998), the Review Commission concluded that because a supervisory employee committed the violation, knowledge of the violation should be imputed to the employer and the employer bore the burden of establishing that it had made a good faith effort to comply with the fall protection standards. The Fourth Circuit Court of Appeals reversed this decision and held that OSHA bore the burden of proving that the supervisory employee’s actions were neither unforeseeable nor unpreventable.

Philip Siegel is a partner and shareholder with the firm Hendrick, Phillips, Salzman & Siegel, P.C., whose practice focuses on labor and employment matters within the construction industry. Siegel has an undergraduate B.B.A. from the University of Michigan, and he earned his law degree from Emory University School of Law. Siegel can be reached at (404) 4699197 or pjs@hpsslaw.com.

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Legally Speaking Five Boilerplate Terms to Negotiate in Your Next Subcontract

by James R. Lynch, Esq., Ahlers & Cressman, PLLC Whether you negotiate your own subcontracts or rely on your lawyer to do the heavy lifting at contract time, a savvy subcontractor should understand the basic purpose of common subcontract provisions, and be prepared to negotiate for fair and commercially reasonable terms. While most sophisticated subcontractors are skilled at negotiating the core terms of a subcontract—scope of work, price, and time—a few simple but less obvious tweaks to common subcontract terms and conditions can go a long way to protect a subcontractor from unfair results when a dispute arises.

From the desk of an experienced construction lawyer, below are my top five “boilerplate” provisions that subcontractors too often overlook during contract negotiations, along with tips on language to include and to avoid.

Delay/Liquidated Damages Contrary to popular belief, liquidated damages are not a penalty for late performance. In fact, in many cases the consequence of late performance can be much higher without a liquidated damages provision than with one. Below is a checklist of points to negotiate a fair liquidated damages provision to benefit all parties: 1. Clearly define when liquidated damages will apply. This can be based on a specified duration or a date certain. Clearly state all assumptions supporting the contract time. Where feasible, the general contractor’s schedule should be attached to your subcontract to establish your baseline schedule.

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2. Negotiate a Reasonable Rate. This requires a project-specific inquiry, considering factors such as daily project burn rates, anticipated management/consultant costs, extended overhead, upstream liquidated damages, and subcontract scope and size.

3. Make it Exclusive. Negotiate for express language indicating the specified liquidated damages are the exclusive remedy for late performance. An example is as follows:

Subcontractor’s payment of liquidated damages as specified in this section shall be the sole and exclusive remedy for any delay by Subcontractor in the performance of the work or completion thereof.

4. Caps. Consider negotiating a cap on the aggregate liquidated damages. The cap may be an amount equal to your fee, the total contract price, or any other justifiable amount.

Payment Terms Use Net Payment Terms, and Clarify Pay-When-Paid Provisions. In a subcontractor’s ideal world, payment would always be due within a defined time period after each application for payment (e.g. “Net 30”). Some subcontractors can achieve this by specifying “net” payment terms in their proposals. More often, however, general contractors will not commit to pay subcontractors until they receive payment from the project owner.

As such, “pay-when-paid” provisions have become commonplace, with contractors agreeing to pay

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subcontractors within X days after receipt of funds from the owner. As a subcontractor presented a pay-whenpaid clause, you should negotiate for language calling for payment within a “reasonable time” if the owner fails to pay, and specify what time will be deemed “reasonable” if there is a significant payment delay. At a minimum, this will clarify the issue is only one of the timing of your payment, not your right to payment. That is, your “pay-when-paid” provision will not be misconstrued as a “payif-paid” provision, under which you are not entitled to any payment if the owner fails to pay.

Pay-if-paid or “conditional payment” terms are unlawful in some states, and require specific language to be effective in others. As a subcontractor, you should strike pay-ifpaid language wherever possible, and many general contractors are willing to negotiate to convert pay-if-paid into pay-when-paid terms.

Negotiate for a Right to Stop Work for Nonpayment. Absent from most contractor forms, insert a provision that you may suspend work if you are not timely paid all undisputed amounts. For example: In the event Subcontractor does not receive payment of all undisputed amounts within thirty (30) days after submission of an application for payment, then upon seven (7) days’ written notice to Contractor, Subcontractor may suspend work until all undisputed amounts are paid.

For purposes of this paragraph only, an “undisputed amount” means any

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amount or portion thereof specified in Subcontractor’s application for payment, including any payment items, changes, and claims therein, to which Contractor has not provided specific written objection. The subcontract time and price shall be equitably adjusted to reflect any shutdown, delay, and start-up pursuant to this paragraph.

You can usually cleanly insert such suspension language directly into the section governing the timing of payments, the provision for suspension of work (if any), or the terms governing continuation of work during disputes (if any).

Never Give Up Your Lien Rights.

This is unlawful in many states. A subcontractor’s lien rights are a powerful source of leverage and a possible last resort on a financially distressed project.

Indemnity An indemnity provision comes into play when the general contractor or owner incurs some liability as a result of a subcontractor’s work.

Your overarching goal as a subcontractor is simple: You should only be required to pay for liabilities to the extent caused by your fault, and covered by your commercial general liability (CGL) insurance. Otherwise, you could be required to pay for a claim even if you did nothing wrong, and even if you had no reasonable way to manage and price for the risk of that claim.

Generally, your CGL insurance will only cover claims by third parties for bodily injury or physical property damage caused by your negligence.

As such, you should always negotiate for an indemnity provision limited to the following:

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1. Third party claims 2. For bodily injury or physical property damage 3. To the proportionate extent caused by your negligence As a practical matter, these points can often be incorporated through relatively simple redlines. For example, the following broad-form indemnity provision that could require you to defend and pay for a claim not caused by your fault (or pay a grossly disproportionate share) and not covered by your insurance: Subcontractor shall defend, indemnify, and hold harmless Contractor and Owner from and against any and all claims, liabilities, or obligations of any kind whatsoever, arising out of or relating to Subcontractor’s work.

The subcontractor’s indemnity checklist above can be inserted through simple edits: Subcontractor shall defend, indemnify, and hold harmless Contractor and Owner from and against any and all claims, liabilities, or obligations of any kind whatsoever by third parties for bodily injury or physical property damage, but only to the proportionate extent arising out of or relating to negligence by Subcontractor in the performance of Subcontractor’s work.

Many state-specific laws may affect the indemnity provision—and you should consult your legal counsel on this complex issue—but these basic points will go a long way to avoid turning your company into the project’s insurer.

Changes & Claims Beyond a basic reminder to read and confirm that the change and claim processes align with the process the parties actually intend to

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use—a point too often missed by subcontractors and generals alike— the following negotiating points and questions can help you achieve more fair and practical procedures, and ease the consequence of technical failures.

Strike Forfeiture Language. While it is not unreasonable for the general contractor to require early notice and an opportunity to address potential change orders and claims with reliable information, it is not reasonable to strip a subcontractor of an otherwise valid claim for extra time or compensation simply because the subcontractor has not strictly complied with the often complex, overly technical, overlapping, and sometimes conflicting provisions governing written notices and claim documentation. To avoid this result, you should search for and strike terms such as “strict compliance,” “condition precedent,” “waive,” and “forfeit,” and consider adding a provision such as the following: Notwithstanding anything to the contrary, a party’s failure to provide any notice strictly in the time and form required shall not result in a waiver of an otherwise valid right or claim unless, and only to the extent that, the party entitled to receive such notice demonstrates actual harm resulting from such failure.

Require Executed Change Orders for Extra Work. A strict pre-work Change Order requirement protects the general and owner against claims for extras after the work is completed.

It also protects the subcontractor from being directed to perform extra work without prior agreement on the cost and time adjustments. However, it can also be a trap where the subcontractor performs time-sensitive extra work in good faith based

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on clear direction, but the contractor later denies the requested Change Order. As a subcontractor, this means it is important for you to be firm in requiring signed Change Orders before you perform any extras. If you cannot agree on your entitlement or cost, demand a formal Change Directive.

Include a Clear “Change Directives” Procedure. A good “Change Directive” process will require a written Change Directive when Change Order terms cannot be agreed, specify how interim compensation will be determined, and dovetail with the Claims provision. Again the key for you as a subcontractor is to demand that the general follow its own procedures and issue a formal directive before you commence any extra work.

Remove Advance Change Order Limitations. Does a signed Change Order automatically waive all related rights and claims? What about cumulative impacts, which might only arise or are only identifiable when change orders become excessive? Is there any limitation on the time or money you may receive for certain types of changes? As a subcontractor, you should any such advanced limitations in the subcontract documents where possible, and instead address specific issues in the individual Change Orders to be issued during the work.

Dispute Resolution While there are many other important subcontract terms that come into play more often, the Dispute Resolution provision makes the Top 5 here because most subcontractors overlook it as a possible item for negotiation, yet it can have important long-term consequences.

Keep It Simple. As a general rule, the more mandatory steps in the dispute resolution process, the more costly it will be for you to enforce

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your rights as a subcontractor. While it may be desirable to try to resolve disputes initially at the project level, then through direct executive negotiations, and then by mediation before finally commencing litigation or arbitration, each of those steps takes time and costs money. Where feasible, you should negotiate to make these aspirational, not mandatory prerequisites you must fulfill before litigation or arbitration.

Litigation vs. Arbitration. While there is no one-size-fits all option, you should understand the differences between litigation and arbitration and recognize that this is often a negotiable term.

Arbitration is a private resolution process where an experienced lawyer, industry professional, or panel hears the case and renders a binding decision. Generally, the parties agree on the arbitrator or panel’s qualifications, if not the individual arbitrator(s).

The arbitration hearing typically occurs within six to 12 months of filing. Discovery is usually more limited than litigation. The process is less formal. The proceedings are not public. Appeals are usually more difficult than in court.

By contrast, litigation is an open public process where a judge and/ or jury decides the case. Judges are generalists and not usually construction specialists. Trial is often scheduled 12 to 18 months from filing. The discovery process is formal and can be extensive. All filings and proceedings are public, unless sealed by court order. Appeals are relatively common and can take years to resolve.

The important point here is to consider which process best suited to the types of disputes most likely to occur on your project, and negotiate for that process when appropriate. On a complex project with novel means and methods where the most likely disputes will be highly technical,

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arbitration may be a better option for all parties. On a simple but financially risky project where the most likely disputes relate to payment issues, the formality of the litigation process may be more desirable.

While you should always read your subcontract carefully and understand your rights and obligations, engaging in active negotiation with a general contractor on key terms such as those above can not only reduce your risk as a subcontractor, but it can also help all parties avoid potential disputes down the road, and set a beneficial tone of professionalism and conscientiousness to carry forward into a successful project.

James R. Lynch represents and advises property and project owners, general contractors, trade contractors/ subcontractors, and design professionals on a variety of matters, including contracts and claims, litigation and arbitration, alternative dispute resolution, risk evaluation and management, real estate transactions and disputes, procurement, bid protests, and insurance coverage matters. He additionally provides general outside counsel to several closely-held Pacific Northwest companies. Since joining Ahlers & Cressman in 2011, Lynch has recovered millions of dollars for clients on construction and real estate claims, and successfully defended his contractor and developer clients from millions more in potential liability. He can be reached at (206) 287-9900 or jlynch@ac-lawyers.com.

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Coming Up

ASA/FASA Calendar

in the October 2017 Issue of ASA’s

September 2017

26 — Webinar “How to Have a Multi-Million Dollar Impact by Asking ‘One More Question’” presented by Eric Anderton, Professional Leadership Coach and Trainer

October 2017 10 — Webinar “Technology and Transparency—Part 2” presented by Stephane McShane, Maxim Consulting Group 20–21 — ASA Legal & Advocacy Meetings, Santa Ana Pueblo, N.M. 24 — Webinar “Using Drones: What Subcontractors Need to Know” presented by Brian Esler and Seth Row, Miller Nash Graham & Dunn LLP

THE

22–24 — ASA Executive Committee and Board of Directors Meeting, Baltimore, Md.

Theme: Networking • Relationship

Building from a Bond Producer’s Perspective

• Networking

November 2017 14 — Webinar “Employment Law Mistakes Most Commonly Made by Subcontractors” presented by Philip J. Siegel, Hendrick, Phillips, Salzman & Flatt

• Building

Business Relationships

December 2017

• Networking

12 — Webinar “Ownership Succession Planning” presented by Stephen Bonebrake, Maxim Consulting Group

• Questions

January 2018 9 — Webinar “Indemnity and Hold Harmless” presented by Lee B. Brumitt, Dysart Taylor Cotter McMonigle & Montemore, P.C. 23 — Webinar “How the Difference Between Extra Work and Additional Work Can Impact Claims for Payment” presented by Stephen Moore and James Morris, Galloway Johnson Tompkins Burr & Smith

February 2018 13 — Webinar “Getting Better Subcontracts” presented by Eric Travers, Kegler, Brown, Hill and Ritter 28–March 3 — SUBExcel 2018, Tempe Mission Palms Hotel, Tempe, Ariz.

April 2018 10 — Webinar “Lien & Bond Claims” presented by Timothy Woolford, Woolford Law, P.C.

Strategies

Is a Mental

Game to Ask Your Broker That Can Save you Money in 2018

• Legally

Speaking: Indemnity and Hold Harmless

Look for your issue in October.

PAST ISSUES: Access online at www.contractors knowledgedepot.com

May 2018 8 — Webinar “Change Orders” presented by Joe Katz, Huddles Jones Sorteberg & Dachille, P.C.

June 2018 12 — Webinar “Cash Management” presented by James L. Salmon, Benjamin, Yocum & Heather, LLC

Contact information for ASA/FASA events and programs: www.asaonline.com, education@asa-hq.com.

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