THE OFFICIAL EDUCATIONAL JOURNAL OF THE AMERICAN SUBCONTRACTORS ASSOCIATION
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NOVEMBER 2020
Small Businesses
1004 Duke Street, Alexandria, VA 22314 | (703) 684-3450 | www.asaonline.com | communications@asa-hq.com
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NOVEMBER 2020
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. 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). MISSION FASA was established in 1987 as a 501(c)(3) tax-exempt 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 Courtney Little Richard Bright Anthony Brooks Brian Cooper Jack Austhof SUBSCRIPTIONS The Contractor’s Compass is a free monthly publication for ASA members and nonmembers. For questions about subscribing, please contact communications@asa-hq.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 full-length 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 © 2020 Foundation of the American Subcontractors Association, Inc.
F E AT U R E S Survival Strategies Amid COVID‑19................................................................................... 7 by Michael McLin, Maxim Consulting Group Well-written, Clearly-defined Contracts Make for Successful Outcomes........................................................................................................9 by Walter J. Adams, Berkley Alliance Managers The Keys to Survival for Small Companies... From Those Who Are Doing It............................................................................................14 by Michelle Turner, Procore Three Ways Technology Helps Small Businesses Improve Safety and Compliance....................................................................................... 17 by Jessica Meno, Writer Five Helpful Tips for Small Construction Businesses............................................20 by Patrick Hogan, CEO, Handle.com Eight Ways Small Businesses Can Use Security Cameras Effectively.............................................................................................. 22 Why Do General Contractors Prefer to Hire Insured Subcontractors?...................................................................................................... 24 by Hannah Sullivan, Pogo Insurance Mask-on Communication Tips .......................................................................................... 26
D E PA R T M E N T S ASA PRESIDENT'S LETTER..................................................................................................5 CONTRACTOR COMMUNITY..............................................................................................6 LEGALLY SPEAKING: Buy-Sell Agreements: An Important Tool for Small Business Planning........12 by Joseph M. Kanfer, Esquire, Woolford Kanfer Law, P.C.
QUICK REFERENCE Upcoming Webinar..................................................................................................................28 Coming Up...................................................................................................................................28
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PRESIDENT ’S LE T TER Dear ASA Members, November is always a time of gratitude, and I want each of you to know how grateful I am for the hard work and dedication that all of our ASA members put in every day to strengthen this industry. In the midst of a year like no other, you have stepped up to every challenge and met it head on. I could not be prouder of the work you all have done in 2020. As we get closer to 2021, I have never been more excited for the future. ASA’s leadership is constantly working to fight for the needs of the subcontracting industry. Our Chief Operating Officer, Richard Bright, recently sent a letter to Secretary Scalia at the Department of Labor regarding the Department’s Notice of Proposed Rulemaking (NPRM) to revise the interpretation of independent contractor status under the Fair Labor Standards Act (FLSA). With this letter, we hope that the Department of Labor can work toward a clearer definition of an "independent contractor," which in turn will influence how the payment taxes are handled on a job site. These efforts hope to level the playing field for many ASA members who are constantly striving to stay competitive. ASA leadership is here to fight for you! October was an exciting month at the ASA with the kickoff of Chapter Engagement Month, featuring in-person and virtual Chapter visits by Government Relations Director Mike Oscar. Throughout the month, Mike met virtually with the members of ASA of North Texas and New Jersey and in-person with members of the ASA
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of Idaho, Southwest Florida, and Greater Baton Rouge. In-person meetings were held following all COVID‑19 regulations at the state and local level. These Chapter visits included an update on ASA’s federal legislative and regulatory priorities along with an update on the political landscape heading into the November General Election. Chapter Engagement Month was highlighted each week in ASA Today, featuring each Chapter’s state legislative priorities and membership initiatives and offered important insight on the work being accomplished by some of ASA’s larger Chapters, including North Texas, while also highlighting the impressive building blocks in place to grow our newer Chapters including ASA of Southwest Florida and Idaho.
Chapter Engagement Month also featured a visit from two Florida State House candidates during the ASA of Southwest Florida meeting along with a visit from Rep. Garret Graves (R-LA) at the ASA of Greater Baton Rouge luncheon. Rep. Graves, a member of the House Transportation and Infrastructure Committee, discussed many important issues pending in Congress that impact construction subcontractors, and listened to our members outline ASA’s legislative priorities. The ASA extends thanks to the following Executive Directors who organized their Chapter meetings in conjunction with Chapter Engagement Month: Beverly Reynal of ASA of North Texas, Jenae Sexton of ASA of Idaho, Buddy Freund of ASA of New Jersey, LaRae Davenport of ASA of Southwest Florida, and Angie Weidel of ASA of Greater Baton Rouge. Once again, I want to thank you all for the continued hard work for our industry. Our future has never been brighter, and I am excited to see where it takes us. God Bless, Brian Cooper ASA President 2020-2021
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CONTRACTOR COMMUNIT Y NGA Welcomes Courtney Little, others as Board Members On October 29, the National Glass Association announced four new board members who will begin their terms immediately for the 2020-21 term. Joining the board are Denise Bardwell Baker, Spring Glass & Mirror, Spring, Texas; Chris Dolan, Guardian Glass, Auburn Hills, Mich.; Silas Koonse, Koonse Glass Co. Inc., Columbia, Mo.; and Courtney Little, Ace Glass, Little Rock, Ark. Learn more about NGA leadership.
FONN Announces Platinum Sponsorship with American Subcontractors Association
Fonn is excited to announce the decision to become a Platinum sponsor of the American Subcontractors Association. The announcement, made by Fonn CEO JT Grindheim, comes shortly after the company signed the agreement with ASA management on October 30, 2020. Fonn is a cloud-based construction management solution providing a new way to manage your construction projects. Fonn has moved drawing storage, documents, progress tracking, on site communication and off-site monitoring to one platform. “We are thrilled to be a part of ASA and anticipate being very active in the organization,” says Eric Crawford, the key point of contact between Fonn and ASA. “Subcontractors have not gotten as much attention in the construction technology space, and we hope that our easy to use tool will bring a real value to documenting all of the work that is put in by this part of the industry. It is important for subs to have their own piece of mind that the work was done correctly, and that you can prove it.” Fonn was started in 2016 by CEO and Founder JT Grindheim with the thought that a product built for the construction industry should have the field staff in mind to achieve the greatest value. “We did not build a software that construction workers
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need to figure out how to use, but rather thought about how their day could be made easier, and built a software around that,” says JT Grindheim. Fonn has made the pledge to be a Platinum Sponsor for, and are thrilled to be partnered with such an influential organization. “We look forward to starting and growing our partnership with ASA. Our goal is to be a longstanding, cornerstone partner of this great group of builders,” confirms Eric Crawford. “Working together with the Association and the membership will be instrumental in creating a new way of efficiently getting the job right.”
Rep. Graves Visits ASA of Greater Baton Rouge
The ASA of Greater Baton Rouge was pleased to host Representative Garret Graves (R-LA) on Friday, October 30th during the chapter’s annual membership luncheon! In the 116th Congress, Rep. Graves serves on the House Transportation and Natural Resources Committees and is the Ranking Member of the Subcommittee on Aviation and along with the new Select Committee on the Climate Crisis. ASA National and ASA of Greater Baton Rouge greatly appreciate Rep. Graves visiting with our members and discussing critical issues facing construction subcontractors. ASA Government Relations Director Mike Oscar also attended the Greater Baton Rouge luncheon to brief members on ASA’s legislative and regulatory agenda in Washington, D.C.
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ASA of Greater Baton Rouge is led by Chapter Executive Director Angie Weidel and was instrumental in arranging for Rep. Graves to meet with her chapter members. ASA National looks forward to supporting ASA of Greater Baton Rouge as they continue to grow and fight for construction subcontractors in Louisiana!
OSHA Issues Guidance on Frequently Cited Standards Related to COVID‑19 This article is from our friends at SESCO Management Consultants, ASA's Human Resource partner through the ASAdvantage program. To learn more about his and all of the other member benefits available through ASAdvantage, click here.
OSHA issued guidance to help employers better understand the most frequently cited standards during coronavirus-related inspections to better protect their workers from workplace hazards. OSHA based these documents on data from citations issued, many of which were the result of complaints, referrals, and fatalities in industries such as hospitals and healthcare, nursing homes and long-term care facilities, and meat/poultry processing plants. OSHA’s guidance and the accompanying one-page summary document can be found on SESCO's COVID‑19 Resource Center page under COVID‑19 General Other Resource Forms/Templates by clicking HERE.
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F E AT U R E Survival Strategies Amid COVID‑19 by Michael McLin, Maxim Consulting Group
Introduction The COVID‑19 pandemic has had far reaching impacts on the U.S. economy. Companies in once successful industries across the United States have felt the immediate impact of the current pandemic in the most devastating ways. Since March 2020, many companies have come to a complete and total shutdown, displacing more than 25 million Americans from their jobs. Other industries, such as the healthcare and medical research fields, have seen excessive stress placed on them not only in terms of resources and equipment, but also on the personal lives of the professionals administering these
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services. These are truly unprecedented times that were unforeseen just one year ago. The federal government has tried to do its part to care for the unemployed, the small businesses, and even some large industries that have been most noticeably impacted by the governmentdirected shutdowns and forced isolations of our population. The CARES Act has gone a long way to help start bridging the gap from today toward recovery. However, unemployment remains high with nearly one million people a week claiming unemployment benefits. It could be months or, in some cases, a few years from the start of this pandemic
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until we see construction companies fail. It will happen because they have no clear channel for equitable adjustment and have been contractually mandated to continue operations. The new normal being created from pandemic-driven health and social modifications is being seen all over the construction industry. There is also widespread belief in the industry that pandemic liability will be pushed down contractually leaving the burden on the very businesses needed to complete complex construction projects. The construction industry thrives on challenge and innovation and will continually improve to deliver products
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safely to owners. In time, firms will adjust to this new normal and price the contracted work appropriately. However, in the near term, the industry’s financial burden from the social restrictions placed on it may be so great, that many companies will not survive to compete in the future.
Economic Fallout Multiple studies completed by Maxim Consulting Group and commissioned by ELECTRI International and New Horizons Foundation have discovered a nearly 20% negative impact on contractor productivity. Both studies are available for download at no cost on the ELECTRI and New Horizon Foundation websites. A rule of thumb for selfperforming contractors is a 10% decline in productivity equates to a 100% decline in profitability. This puts the magnitude of a 20% productivity loss attributable to COVID‑19 into perspective. The strong economic runup to the pandemic means many contractors have solid balance sheets. That hard-earned financial strength quickly erodes when matched against the magnitude of the impacts on the MEP Trades discussed. Most contractors have indicated they expect minimal amounts of COVID‑19 related cost recovery. Few owners are reimbursing them for costs incurred due to COVID, so general contractors and subcontractors have limited options. Further, cost recovery is a much more sensitive topic with negotiated clients than in the hard-bid world. For many contractors, PPP Loans helped keep their staff employed and protected the balance sheet and profitability of the organization, however, the loans are largely consumed and expected to be forgiven. Making matters worse, construction is a lagging industry that tends to feel economic impacts 18 to 24 months after the general economy. The stock market’s performance is nothing short of remarkable considering the looming economic impacts from extended closures and underutilization.
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Contractors are seeing project opportunities dry up and backlogs shrink. This pipeline of business is felt most severely within smaller organizations that tend to have a smaller average project size. Larger contractors anticipate big projects will carry them through 2021, but opportunities for 2022 are dwindling. ITR Economics released their October 2020 economic forecast recently (shown in Figure 1) and it is clear the widespread decline is expected to continue into 2021 which will impact backlogs on a broad basis.
Survival Strategies To survive the impending downturn, contractors should consider a variety of strategies. No single strategy is likely to be the answer, so it may well be a combination of approaches. Some options to consider include:
• Prepay anything you can. For
example, rent, utilities, property taxes, software licensing fees, personal protective equipment, professional services, disposable tools like battery drills, etc. Anything you can pay for now while you have the cash should be considered.
• Align your overhead to your volume
demand curve. Contractors have historically been notoriously late cutting overhead costs when volume is dropping.
• Get LEAN. Eliminate waste,
streamline your business processes, and prepare to do more with less.
• Retrench and wait out the storm. • Add a new service line, particularly
anything that helps companies and industries address COVID‑19. An example would be for HVAC Contractors to offer facility air quality analysis for potential system upgrades or changeouts.
• Offer customer incentives to proceed with planning maintenance of capital expenditures. This might include extended warranties, first year of maintenance included, multi-year
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maintenance agreements, and other like strategies.
• Consider a merger or an acquisition
with a firm that offers complimentary services. Ensure the cost efficiencies are leveraged through back office department consolidation.
• Add a geographic region to expand your customer base.
• Consider joining an industry-focused
peer group where the “wisdom of crowds” can effectively evaluate your plans and provide advice. There is little doubt the economic fallout is coming. There is widespread discussion of a GDP Decline approaching 6% in 2020. To get a sense of the level of decline, one must only think back to the great recession of 2008 when GDP dropped 4.8%. Many contractors are having record years in 2020 thanks in part to PPP loans and a strong backlog, but unfortunately this is not sustainable.
Conclusion COVID‑19 has created new and very unique challenges for contractors. Adjusting to the new normal will require changes in strategy and a recognition of the timing of the economic decline for contractors. Act now while all your options are available to avoid getting caught later.
About the Author Michael McLin is the Managing Director of Maxim Consulting Group responsible for leading the business and guiding the strategic direction. Michael works with construction related firms of all sizes to evaluate business practices and assist with management challenges. Michael is a nationally recognized, dynamic public speaker and published author. If you have additional question, you can contact Michael at michael. mclin@maximconsulting.com or www. maximconsulting.com.
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F E AT U R E Well‑written, Clearly‑defined Contracts Make for Successful Outcomes by Walter J. Adams, Berkley Alliance Managers Once again, the American economy is in flux. We’re all now in a waitand-see game with a virus that is endangering the wellbeing of both individuals and businesses worldwide. For some contractors, the projects scheduled before COVID‑19 will move forward without delay. Others will be placed on hold or cancelled which will jeopardize the incomes and livelihoods of our nation’s contractors, subcontractors, engineers and architects. As a result, the written contracts agreed upon between all parties have never been more important. Given the unpredictability shadowing the entire construction industry, plus state and federal regulations and mandates changing daily, every detail of every project should be clearly defined. Agreements that carefully state the risks, roles, responsibilities and rights of every participant, including subcontractors, are essential for ensuring successful, profitable outcomes during the best of times, let alone when circumstances are uncertain at best.
It's All in the Details In order to avoid discrepancies, primes and their subcontractors should consider the standard form contracts published by reputable and credible organizations like the American Institute of Architects (AIA) and the Engineers Joint Contract Documents Committee (EJCDC). These forms are carefully integrated, cross-referenced and coordinated with other agreements to provide
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basic form agreements that outline the parameters of most projects. However, it must be remembered that even these documents often require the thorough review of industry experts as well as the possible modification of terms and conditions made under the guidance of qualified professionals. In addition, when working with non-standard agreements, always make sure subconsulting agreements are consistent with the wording of other contracts outlining specific project responsibilities, services and deliverables. And, regardless of the relationship with the prime, subcontractors should never start work without a signed, written contract or interim agreement. In fact, here are some of the terms and conditions that subcontractors should consider before entering into their next contractual agreement:
Billing and Payment Billing and payment issues are the sources of major disputes. All agreements should define payment schedules, billing cycles, the invoice approval and payment process, due dates, and interest and penalties in the event of late payments.
Dispute Resolution All agreements should include dispute resolution terms. This includes spelling out how the dispute will be resolved by the parties as well as within the courts. Clauses should also be written carefully to define the terms of termination and the subsequent financial and liability responsibilities.
Indemnities Should be Mutual and Based on Comparative Fault
All of the services performed by the subcontractor during the scope of the project should be clearly-defined within the agreement. This includes the basic fees for these activities as well as the costs for completing additional mutually-agreed services.
In other words, the prime and the subconsultant should agree that each party will reimburse the other party “to the extent that each party is responsible for such damages, liabilities, or costs to the extent caused by such party’s negligent errors, omissions,” or breach of the agreement.
Scheduling
Legal Action Time Limits
The Scope of Services
A detailed schedule of services and deliverables is essential for ensuring positive, mutually-agreed upon outcomes. The ability to flexibly accommodate new circumstances and requests should also be carefully worded and added into the contract with as much forethought as possible.
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The length of time by which a claim can be filed against the subcontractor should be clearly defined in the contractual agreement. Three-to fiveyear time periods are typical for most projects. Furthermore, when in doubt seek the consult of reputable, certified
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professionals that possess in-depth construction industry experience as well as a deep knowledge of your firm’s specific services and specialties. Unfortunately, there’s often no going back after the agreement is signed and the challenges start to mount. Information provided by Berkley Alliance Managers is for general interest and risk management purposes only and should not be construed as legal advice nor confirmation of insurance coverage. As laws regarding the use and enforceability of the information contained herein will vary depending upon jurisdiction, the user of the information should consult with
an attorney experienced in the laws and regulations of the appropriate jurisdiction for the full legal implications of the information. About the Author
Walter J. Adams, Jr., is vice president and assistant claims manager at Berkley Alliance
Managers, a Berkley Company. Walter has more than 20 years of professional liability claims experience managing architects and engineers and contractor’s professional liability claims. He is a licensed attorney in the state of New York and practiced law at a New York law firm where he handled professional liability, general liability and environmental coverage matters, as well as, construction coverage litigation. Walter holds a J.D. degree from Fordham University School of Law and a Bachelor’s degree from the State University of New York at Oswego. Walter can be reached at wadams@berkleyalliance.com.
Contracts in a Nutshell Select prime consultants with care
When you contract with a prime contractor, that firm becomes your “client.” And just as primes should prudently select their clients and projects, subcontractors also need to answer some key questions about a prospective prime contractor: • What is the prime’s reputation for providing high quality projects and technical expertise? • Is the prime known for fair treatment of its subcontractors? • Does the prime have the necessary technical qualifications, staff resources and leadership to successfully complete the project? • Is the prime financially stable? Does the firm pay its bills on time? • Does the prime have a good relationship with the client? • Does the prime communicate openly and frequently?
Find out as much as you can about the project and the owner Your contract may be with the prime, but it’s critical for you to understand key factors that will likely impact you and your ability to be successful: • Does the owner have experience with this type of project? • Are the owner’s project requirements, goals and expectations realistic and clearly defined? 10
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Does the owner develop quality projects? Is the owner financially viable? How is the project being funded? Does the owner have a reputation for being litigious? • How was the prime contractor be selected?
Be a team player
Billing and payment terms
If you run into trouble, if you’re not going to meet a deadline or if you become aware of an issue on the project, advise the prime as soon as possible (and your insurer, if the situation could evolve into a claim), so you can work together to resolve it. If a problem related to your services becomes a dispute, vow to actively participate in the defense of your professional actions. If you stand with the prime in tough times, the more likely the prime will want to work with you again. Use a checklist to review subconsultant agreement terms and conditions Key areas should address the project’s: • Flow-down of obligations and rights of the owner-prime agreement • BIM, CAD, digital practice protocols, if any • Schedule • Compensation, payment terms • Insurance requirements • Dispute resolution • Suspension and termination • Waiver of consequential damages
• • • •
• When should you invoice and how soon can you expect to be paid? • Will the prime require a pay-when-paid or even a pay-if-paid arrangement? • What happens if the project is delayed? • What is your recourse if the prime doesn’t pay you on time…or at all?
Review the related agreements
Obtain and review other contract documents referenced by your subconsulting agreement— the owner-prime agreement in particular. The terms should be unambiguous, consistent and not written to pass along the prime’s risks or responsibilities onto subcontractors.
Communicate and document
Engage in ongoing communication with the prime and other project team members, as appropriate. Seek and give continuous feedback. Have a plan to memorialize in writing anything that pertains to the quality, schedule, or cost of a project. Retain those records in a safe place.
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Cultivate good relationships with the prime and other subconsultants. Foster a collaborative, problem-solving approach that facilitates common goals.
Lean into problems
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Control your security Have peace of mind that only the email of the intended recipient can be used to register and access your data. You may revoke
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For more information about the fees and benefits or to sign up for a webinar, please contact info@compass-app.com or call 1-800-689-6819
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L E G A L LY S P E A K I N G Buy-Sell Agreements: An Important Tool for Small Business Planning by Joseph M. Kanfer, Esquire, Woolford Kanfer Law, P.C. Buy-sell agreements are an important part of planning for subcontractors as well as other small businesses. A buysell agreement controls when and how owners of a company may sell their interests in the company to each other and to third parties. Buy-sell agreements can be used with corporations, LLCs, and partnerships. In the case of LLCs and partnerships, buy-sell provisions are sometimes included in the company’s operating agreement or partnership agreement rather than in a separate agreement.
Buy-Sell Agreements Can Serve Many Purposes For many subcontractors, the owners of the business are also the people responsible for running its day-to-day operations. In these types of businesses, the dynamic among the owners is important and allowing an outsider to become an owner of the business could destroy that dynamic. This is particularly true for the many subcontractors that are family-owned businesses. Buy-sell agreements often restrict the business owners from selling their interests in the company to third parties without the agreement of the other owners in order to prevent this from happening. Many small business owners find themselves wanting to gradually allow employees to buy into the company for a number of reasons. Granting an employee an interest in the company can motivate the employee to work harder because it gives the employee a personal stake in the business. However, that purpose can be defeated if an employee is able to resign his or her employment and remain an owner of the business. A buy-sell agreement can avoid this situation by requiring that the employee
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sell his or her interest if his or her employment is terminated. Buy-sell agreements can also protect the business from changes in the owners’ lives that could otherwise impact the company. In many states, a married owner who gets a divorce can create headaches because the spouse may have a right to some or all of the interest in the company as part of the divorce proceedings. Similarly, if an owner files for bankruptcy, the owner’s creditors may be able to go after the owner’s interest in the company. And when an owner dies, the owner’s interest becomes part of the owner’s estate and is subject to distribution under the owner’s will or, if there is no will, under state law. A buy-sell agreement can protect the company in all of these situations by preventing ex-spouses, creditors, and heirs from becoming owners of the business.
Buy-Sell Agreements Can Help Keep Outsiders from Becoming Owners Most buy-sell agreements contain certain common provisions. For example, almost all buy-sell agreements contain some restrictions on owners selling their ownership interests to outsiders. These restrictions can take several different forms. One option is an outright restriction on transferring the interest without consent from the other owners. Alternatively, the agreement can include a right of first refusal where an owner who wishes to sell must first notify the other owners of the proposed sale and provide them (or the company) the opportunity to purchase the owner’s interest on the same terms, or even at a price determined by a valuation method in the agreement. This latter approach
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can make it easier for a dissatisfied owner to leave the company, but it also creates risk if the other owners are unwilling or unable to buy the outgoing owner’s interest.
Determining How to Value Your Company is an Important First Step Buy-sell agreements also frequently contain provisions governing the terms for the sale of an owner’s interest in the company to other owners. For example, the buy-sell agreement usually provides a method for valuing the owner’s interest. This is often one of the most controversial and important provisions in the agreement and requires careful consideration. Valuation provisions generally contain a mechanism for determining the value of the company and, therefore, the selling owner’s interest. Some buy-sell agreements contain a simple formula to be used to determine the value of the company. For example, it is common for buysell agreements to value the company based upon the company’s most recent year EBITDA (earnings before interest, taxes, depreciation, and amortization) times a multiplier. However, there are disadvantages to this approach. If a company has a particularly good or bad year, the EBITDA approach can result in the company being under- or overvalued. EBITDA can also be manipulated and does not take into account unusual, one-time circumstances. However, having a set formula that is clearly stated in the agreement can avoid disputes over the correct value of the company. Another approach is to have a valuation of the company prepared each year by the company’s accountant. This approach can reduce the risk of
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a good or bad year skewing the value and avoid the risk of an owner “gaming” the valuation calculation. However, annual valuations can be expensive, and disputes can arise over the identity of the appraiser and errors in the appraiser’s calculation. A third approach is to have a valuation prepared when an event occurs that triggers the buy-sell agreement. Some buy-sell agreements have provisions providing a procedure for the departing owner and the other owners to have separate valuations prepared when the buy-sell agreement is triggered, with the value of the company being equal to the average of the two. If the two valuations are very far apart, a third, independent appraiser might be retained to provide a “tie-breaker” valuation. This approach is more expensive and time-consuming, but it also minimizes the risk of an error in the valuation affecting the valuation of the company.
Careful Consideration of Payment Terms Is Critical Once you determine how your company will be valued, the next step is to decide upon payment terms. One common approach is to provide for the purchase price to be paid in equal monthly installments over a period of years, with or without a down payment. Sometimes the installment payments are interest-only, with a deadline to make the full principal payment at the end. Other times, it may make sense to require the full payment in a lump sum. If the payments are going to be funded using distributions from the company, it may make sense to allow a temporary forbearance if the company’s financial performance does not meet certain specified metrics. Whatever payment terms are selected, it is important that they be reasonable so that the purchasing owner can satisfy them.
Trigger Events Determine When Your Buy-Sell Agreement Takes Effect Another critical part of preparing a buy-sell agreement is determining
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what events will trigger the buy-sell process. Buy-sell agreements often include a provision allowing an owner who wishes to leave the company to voluntarily invoke the buy-sell process, but these agreements also usually include a number of involuntary triggers. As discussed above, divorce and bankruptcy are common triggers to prevent ex-spouses and creditors from obtaining an interest in the company. In the case of an owner’s death, it is common for a company to take out life insurance policies on its owners and then provide for the proceeds from that policy to be used to buy out the owner’s interest. Other common triggers include resignation or termination of employment, disability, and an attempted impermissible transfer. Of course, these provisions may not always be appropriate depending upon the succession plans for the company. For example, it may be appropriate for a major owner’s interest to pass to his children upon his death to preserve the family’s interest in the company. As with all provisions of a buy-sell agreement, the triggers used must be carefully selected to ensure that they meet the company’s needs and goals.
Buy-Sell Agreements Must be the Product of Careful Consideration and Ongoing Reevaluation There are many different considerations that go into a buy-sell agreement. A buy-sell agreement should be the product of careful discussion and consideration of the company’s values, goals, and plans for the future. A subcontractor should never try to prepare a buy-sell agreement without input from its legal counsel and accountant to ensure that the agreement is carefully drafted, the consequences of the agreement are understood, and the agreement meets the needs of the company. A poorly drafted buy-sell agreement, or one that is wrong for the company, can be worse than having no buy-sell agreement at all and can generate costly litigation.
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Moreover, a buy-sell agreement is not a one-time task. The agreement should be the subject of periodic review and reevaluation to determine whether it still makes sense for the company as its needs change. If you do not have a buy-sell agreement in place, now is a great time to begin thinking about one. If you do have an agreement already, you should re-evaluate it at least yearly to make sure that it still makes sense for your company. While updating your buy-sell agreement regularly may seem like an unnecessary headache, ensuring that your agreement aligns with your company’s goals and needs as you grow can prevent expensive litigation or costly unexpected consequences later on.
About the Author Joseph M. Kanfer is a partner at Woolford Kanfer Law, P.C., with experience litigating a wide range of complex business, construction, and other disputes in both state and federal courts. He has also argued cases before the Superior Court of Pennsylvania, the Commonwealth Court of Pennsylvania, and the United States Court of Appeals for the Third Circuit. Woolford Law provides a wide range of legal services to its diverse client-base, which includes general contractors, subcontractors, homebuilders, real estate developers, municipalities, design professionals, health care professionals, manufacturers, distribution companies, professional services firms, retailers, and communications firms. Click here for more information on Woolford Kanfer Law PC.
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F E AT U R E The Keys to Survival for Small Companies... From Those Who Are Doing It by Jack Rubinger, construction industry writer
U.S. workers are steadily gaining confidence, according to LinkedIn’s Workforce Confidence Index from November 2. The index — which measures how Americans are feeling about their job security, finances and careers — is the highest it’s been since April: +33 on a scale from -100 to +100. The upturn can be attributed to rising optimism in most industries, with the strongest gains in health care, public administration, media, consumer goods and entertainment. Only three industries — construction, energy and mining, and recreation and travel — significantly lost confidence in
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the past month. Why the dip from the construction industry? And do small constructionrelated companies have it better — or worse? Has the pandemic or our shaky economy have any impact on small construction businesses?
Customer Service Focus Jason Simon, President at Denver Companies, LLC put it very succinctly, “Honestly, it’s all about hard work and great service. Jobsite success is what we do.That's what we say, breathe, and deliver. We help to make our customers
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more successful and they reward us with more business.” There were about 11.2 million people working in the construction industry in 2018, according to the Bureau of Labor Statistics. As of 2017, there were 454,367 small and medium sized specialty trade contractor businesses. On the flip side, The five-year survival rate for construction businesses is 36.4%
Watching Your Cash Flow Unfortunately, 82% of businesses fail because of inconsistent or insufficient
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cash flow, according to Fundera, an online small business financial advisor conglomerator. Construction companies are among the toughest businesses to manage, as their extremely high failure rate suggests. While 75% manage to survive their first year, the majority can’t seem to push past the five-year mark. Many believe in the importance of getting an accountant specializing in small business. Denise Duncan’s phones aren’t ringing. Things are slow and quiet at her shop, which specializes in hazardous dust collection systems. She attributes the economy and overzealous environmentalists to her situation, but she remains upbeat. Early business challenges faced (and overcome) by Duncan included cash flow, credit and accounting. “When you first start out, you wear a lot of different hats and you work long hours,” said Duncan. “Growing the business enough to gradually hire others also leads to personnel and employee issues.” For Duncan, the growing awareness of combustible dust, generated by a global combustible dust database, really brought a lot of awareness to the topic. When Duncan told people that they make wet dust collectors, everyone’s eyes would glaze over. She had to rethink how she communicated what they made and its purpose. Duncan believes that is important to clearly define your business and what it is you want to do. Be specific. Just saying you’re in construction doesn’t communicate what it is you do. Getting referrals from other small business owners is smart, simple and personal. Don’t be afraid to ask. No one else will do it for you.
Know Who You Are Define your company culture. What kind of people do you want
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representing your company? What kind of people do you want to be the face of your business when you can’t be there? Join a small business group. This is so critical for all small business owners. Be around like minded who completely understand the challenges of being a business owner. You’re also kept informed about laws and regulations that affect and impact small business. Once you find the right group the benefits are invaluable. Gae Callaway is a small business owner and a consultant to small businesses. She works with companies from 1-100 employees. She uses gosmallbiz.com as a resource for her clients. There are two important lessons Callaway believes every small business owner should know: • Have a power of attorney to address who’s going to take over the reins. • Have a good relationship with banks, attorneys and consultants
Embrace Technology Smartly Terry Drabiuk, a vocational training expert, said he sees his small business evolving over the next five years with more on-line training and meetings, and less travel. He believes companies can achieve success with being nimble with adversity by using technology. Then, there’s Debra Hilmerson. Hilmerson rolled out two fall protection products about 2 1/2 years ago — a safety rail system and a barrier fence system. “In my humble opinion, the key to staying alive is being vigilant to industry needs and challenges,” she said. “Be in a position to be agile enough to be able respond quickly to meet your customer needs.” “Cash is Cow,” she said. “Manage it precisely. Minimize overhead and be willing to do four people's job as one if you are a sole owner. Don't jeopardize quality or integrity, and do whatever it takes to exceed customer expectations. Don't be afraid to ask for help from
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experts or mentors.” Though many B2B companies have traditionally been slow to adopt social media tactics, the construction industry is catching up, with 75 percent of businesses present on social platforms, according to fitsmallbusiness.com. Strategic marketing and social media helps attract new customers, nurture current customers and respond to industry trends and shifts in the economy. Social media is also costeffective, compared to other forms of advertising. Other small business tips include: • Be active in trade associations like Oregon’s SafeBuild Alliance, which supports, advises and educates small and large construction companies. • Research the best ways to bill for your time. Does it make sense to bill by the hour or by the project? • Consider finding an intern. Being a mentor to someone new in their career has many rewards. • In some cases it may be possible to barter for goods and services. It doesn’t hurt to ask. • Be frugal. Flashy vehicles and fancy clothes don’t mean much in the long run. • Companies that run seasonal businesses encounter cash flow problems more frequently than others. Timing invoices and analyzing cash flow statements can help fix this problem. About the Author Jack Rubinger is a freelance writer, with more than 10+ years of workplace safety and construction industry research and writing experience. Looking for an article on a specific construction topic? Contact: jackrubinger814@gmail.com or call 503-964-4877.
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F E AT U R E Three Ways Technology Helps Small Businesses Improve Safety and Compliance by Jessica Meno, Writer
Staying safe and compliant is the top priority on any construction site. From potential falls to electrical hazards, there are many protections you need to put in place to keep workers safe—not to mention all the new safety risks and protocols added for COVID‑19. How can you best ensure (and prove) your crews are following the necessary safety precautions without putting an excess drain on your resources? Proper documentation that can help streamline your processes at the same time is key, especially for small businesses. Here are three ways you can improve safety and compliance using technology. 1. Make it easy for the field to provide daily updates By providing data straight from the field, daily reports are one of your best sources of visibility into your projects, as they cover everything from work completed and materials used to weather conditions. It’s no secret that daily reports are crucial for running more efficient projects. After all, the more you know about what’s going on at the jobsite, the better you can support it. But when daily reports aren’t filled out completely (or correctly), it’s difficult to know when incidents or potential risks occur on a project. Better daily reports and daily updates start with the field. By making it easy for your crews to complete and send them quickly, you’ll get them home faster—and get cleaner, more accurate data. A point solution for daily reporting like Raken lets your crews write notes and upload photos and videos as they walk the jobsite. Then, once they sign off their dailies, you’ll get a PDF with all the info you need to increase compliance. Plus, you can see any notes and updates in a real-time insights dashboard. More visibility, less paper shuffling. 2. Digitize custom safety checklists One of the best ways to improve
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safety documentation is by filling out construction safety checklists. These checklists make sure your workers are meeting safety and health protocols in the field. The process for checklists usually goes like this: • The office sends a form to the field. • The field prints it out and completes it on the site. • The field scans it and sends it back to the office. • The office reviews the completed checklists to ensure high compliance and quality. Pen and paper is the historical tried-andtrue way in construction, but it takes more time and effort for everyone to track. Plus, if checklists are missing information—or not filled out correctly—it’ll take even more time to complete the big picture. And when it comes time to find the documentation, digging through papers and binders isn’t ideal. Instead, give your workers the power to create and complete digital checklists from their mobile devices. When things come up on the jobsite, they’ll have the tools they need to update you. And, the easier it is to fill out a daily safety or inspection checklist, the more likely it is they’ll complete it. Having employees use a customizable digital checklist is more flexible for your specific needs, too. When it comes to storing your completed checklists, consider a cloud solution. That way, you have everything in one (digital) place—and can easily find the documentation you need, across all your projects, when you need it. 3. Bring toolbox talks to the cloud Toolbox talks are an important way to help promote a culture of safety throughout your company. They educate and refresh your crews on important safety topics like jobsite hazards and precautions— and ensure everyone is informed and committed to keeping safety top-of-mind.
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Toolbox talks are an essential part of safety documentation to help you maintain compliance, and prove your teams are following the necessary protocols. And like checklists, they can be even easier and more efficient when made digital. Raken makes it easy to upload your safety topics and bulk schedule them from the office. You can even choose from our library of pre-uploaded talks—ranging from chainsaw safety to fall prevention. Once your crews attend, they can digitally sign the completed toolbox talk and it’s stored directly in Raken. By uploading your toolbox talks and safety data to the cloud, you can see all your safety records at a glance. Then, you can quickly search and locate them as documented proof whenever you need to— without having to remember where exactly you put a loose form. Better safety documentation, less wasted resources Especially now, small businesses can get ahead of the construction industry by embracing technology to streamline processes. At first, it may seem easy to shy away from change. But when it comes to safety and compliance, businesses should do whatever they can to keep their workers safe—and make it easy to document any and all proactive measures.
About the Author Jessica Meno is a writer for Raken, the cloud-based software that was built to connect the field to the office. Raken helps boost productivity and safety by streamlining workflow processes such as daily reporting, time cards, production tracking, and safety management. Start improving your jobsite safety and documentation today by scheduling a demo with Raken (it even comes with a 15-day free trial).
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F E AT U R E Leveraging Technology for Operational Efficiency by Rob McKinney, eSUB Small businesses in the construction world and other field/office settings are in a major state of flux right now. COVID‑19 is accelerating a lot of trends that were already starting to take root, and the need to digitize field workflows is a perfect example. Many companies relying on legacy systems and strategies were forced to adapt when meeting in person was either out of the question entirely or had to be kept to an absolute minimum. With this said, some subcontractors are still either debating digitization or trying to figure out how to implement it best. Here are insights on how to execute digitization for a more productive, efficient operation.
Data-Driven Daily Reports Information and data is power in the business world, and this is arguably the area where digital workflow is most important. As a subcontractor, you may be compiling essential information regularly that the general contractor could use for future reference and troubleshooting specific issues. Recording project details on paper is both inefficient and risky, because they require additional labor to be entered into a digital platform and could end up lost in transit Also, there’s a limit on what you can cover with a handwritten or typed method. For example, how do you account for activity on the part of the worksite that you cannot see? Construction project management software is a crucial digitization tool because it helps you capture projectspecific data and makes it easily presentable and accessible. How much information has been lost in conventional reports simply due to bad handwriting? The ability to capture worksite data and add your notes in real-time helps drive information into field activity and track labor productivity. It’s also possible to create separate versions, one to share
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with a general contractor and one to only share internally.
Field Notes The old cliche says that a picture is worth a thousand words, and indeed when communicating between field and office teams, there needs to be that visual element. For example, a field team may need visual evidence to corroborate their statement about an on-site issue. However, context is important here. This is where digital tools can be effective for . Not only is it possible to save important photos/visuals in the cloud, but you can also annotate it with details and additional notes. This is critical when it comes to iterative improvement. You need to have an easily organized internal record to track the history of a specific issue. Digitization makes this infinitely easier, both with deeper and more accessible insights.
Communication Control On the topic of iterative improvement, there’s nothing more frustrating than trying to dig in one’s inbox trying to find a specific email. You could argue that this is technically already a digital area, but the fact is that there is still room for improvement. Rather than simply relying on your email account, there are digital tools that make it possible to track certain documents and information and how these are distributed. This cuts down a lot of the worry on whether or not a particular document or directive was distributed to everyone that it needed to be. Another alternative is cloud storage, where you can set certain documents to be accessible by all parties. Just be mindful of web security when going with this route.
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it. You need to keep in mind a few main points while you are talking to vendors about what options to use. Compatibility: In some cases, you may just want one piece of software to complement your suite of other options. If this is the case, you need to be sure that it is compatible to avoid wasted money and major headaches. Modular purchases: This is something worth considering because, in some cases, you only need to digitize one aspect of operations for the time being. A module purchase keeps you from dealing with software bloat. Support: Having support for troubleshooting is an obvious example, but support for onboarding matters as well. This can mean courses and demonstrations, whichever suits your needs best. Digitization has turned from a luxury to a necessity. The good news is that there are more tools than ever to help make a smooth transition. By purchasing the right software, you have all the means to increase the visibility of your daily operations. In turn, this makes it possible to create a data-fueled analysis of where you need to approve, down to single teams and tasks.
About the Author Rob McKinney is one of the newest members of the eSUB team. He is focused on business development efforts to educate and connect the construction industry about the benefits of using technology to improve their production tracking efforts. Rob is a co-founding member of the ConTechCrew podcast and ConTechRoadshow. When he is not on the road at events he enjoys spending time with his family in the outdoors, trying out a new BBQ recipe or sampling a local craft brew!
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F E AT U R E Five Helpful Tips for Small Construction Businesses by Patrick Hogan, CEO, Handle.com Managing a small construction business could seem daunting, especially when you consider the huge amount of work it requires. When you are running a construction business, you work through all the important stages of a project, from bidding through planning all the way to closing. Along the way, small business managers may encounter common issues such as payment disputes and schedule delays, among other problems. Construction management is no easy task, and small business contractors must learn to be resilient to succeed. In this article, we lay out 5 management tips for small businesses in the field of construction.
1. Study your contracts thoroughly Having good, iron-clad contracts is very important in construction management. Right from the get-go, you should establish rapport with your client by ensuring that you are on the same page with respect to the terms and conditions stipulated in your contract. Take your time to go over your contracts before signing them. Clarify the payment terms, and look for potential provisions that could put you at a disadvantage. For example, be wary of any item that could be interpreted as a possible waiver for your lien rights. If payment disputes come up, you want to be able to record a mechanics lien to improve your leverage during negotiations. You should also look into provisions that could be potentially ambiguous. If there are items that you are not quite comfortable with, raise your concerns to your client and clarify them as early as possible. Remember that failing to study your contracts carefully can be one of the gravest mistakes you as a small business owner can make.
2. Take the planning stage seriously This one goes without saying, but it needs to be reiterated. Many issues in construction may be mitigated through
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proper planning and thorough risk analysis. Prevention is better than cure, and coming up with a solid plan is the best way to prevent problems that can potentially raze your business to the ground. During the planning stage, always remember to be realistic. This means that your budget must be reasonable, and it should consider the necessary costs for all materials, labor, and other equipment needed to complete a project successfully. You should also be realistic as regards your schedule, and be sure to come up with a reasonable timeline. Furthermore, the planning stage should include proper delegation of tasks. Assign specific people on your team that will be responsible for the completion of certain deliverables, and also remember to set your intended project milestones.
3. Train your employees well Small businesses bank on skilled, reliable, and talented employees. Contractors and subcontractors must invest in their employees and make sure that they are properly trained. There is an ongoing labor shortage in the construction industry, so being a company that cares for your people can potentially attract talented workers. Furthermore, ensuring that your employees are welltrained and properly compensated can also help your company retain your best workers. Training and investing in your employees is one of the best ways to keep your business running. It can improve the quality of your services and make task delegation easier, especially if you trust that you are working with the best workers in the industry.
4. Track your data and finances Construction management requires solid organization skills. Not only should you be able to track your inventory, for example, but you should also know where your finances stand. You can do this effectively if all your documents and data are organized, and if they are consistently updated.
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Tracking your data means knowing what goes on in your business day in and day out. You need to know what services were performed in a day, check the deliverables you completed versus the goal, and track the invoices that you sent out and which among them have been paid. Most importantly, you also need to be constantly studying your cash flow. It is imperative that you know how much money you have and how much is going out. Having this information allows you to prepare and mitigate potential losses. Running a small construction business involves a lot of paperwork and accounting, so make sure that you have the best people to help you with those.
5. Ensure proper communication among all parties Disputes in a construction project can stem from miscommunication. This is why it is very important to ensure that proper communication channels are established right at the beginning of a project. Communication lines must be opened among all stakeholders in a project. One way to do this with a property owner is to serve a preliminary notice when you begin working on a project. You should also understand which parties you must report to for which tasks, and be sure to have their contact details. Set clear designations so the members of your team will know whom to communicate with when there are issues or questions regarding their respective tasks. About the Author: Patrick Hogan is the CEO of Handle.com, where they build software that helps contractors, subcontractors, and material suppliers with late payments. Handle. com also provides funding for construction businesses in the form of invoice factoring, material supply trade credit, and mechanics lien purchasing.
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F E AT U R E Eight Ways Small Businesses Can Use Security Cameras Effectively This article is from a blog written earlier this year by Mobile Video Guard, and is edited and reprinted with their permission. To learn more, contact Mobile Video Guard or set up a free consultation to learn how the system can save your business significant amounts of money over time.
Small business owners have put their heart and soul into building their businesses, and they deserve to have top security and peace of mind just like the big boys. A security and CCTV system can be a significant expense, but it is one that pays off in the long run for small businesses. What are some reasons that small businesses
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should use security cameras effectively, and what are some of the benefits for their business?
Security Systems Prevent Loss The number one reason to have a system is to protect your inventory, assets, and property. Here are just
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a few reasons why extra security is an expense that will actually end up saving you money. Keep Your Small Business Assets Safe Your inventory is the life of a business, and it is vitally important to keep it safe. Employees can do inventory checks, but it is not the
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same as having your eyes on your assets at all times. A security camera offers remote viewing of inventory and assets through your smartphone, and it records data if a theft ever occurs. Prevent Crime Since there is no way anyone can be at their business 24 hours a day, 7 days a week, your security system is a way to deter crime when you and your staff are not there. A camera system makes thieves think twice before targeting your business, and if someone does break the perimeter, there are strong deterrents like a siren and flashing lights. If you are notified of a perimeter breach through the phone app, you can speak to whoever is there remotely through the camera system. Legal Proof for Claims If there is ever a liability or accident claim, you will have proof of what happened on your property with security cameras. The Mobile Video Guard system records video for 24-hour playback, so you can present evidence of events that occurred at your business with confidence. This will save you many headaches and expenses if someone claims something happened that is not true. Monitor Employees These security camera systems allow you to see what is happening at your business when you’re not there. That means you can have eyes on your employees at all times, monitoring their performance and behavior. This is helpful when deciding who to promote, and you can also see which employees are a drain on your business by not doing their jobs or acting inappropriately. If your managers have reported an employee being difficult or not doing their job, you can monitor the situation without having to be there in person. Added Layers of Security Small businesses can add extra layers of security without spending
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very much money. Lighting is one important thing you can do to make your business more secure. Add floodlights over doorways and entry points, put lights in hallways, and add timed lighting to make the business look occupied. Another cheap way to add security is by using signs advertising your security system. Put these signs in prominent places both inside and outside your business so thieves know their every move is being recorded. Simple things like lights and signage go a long way towards protecting your business and are not expensive to add.
The Top Benefits of Security Cameras Both interior and exterior video cameras can keep your small business safe and secure with a 24-hour security camera system. Loss prevention and employee monitoring are only the beginning. Eyes and Ears When You’re Not There You can set up a Mobile Video Guard system inside your business to give you the ability to see your space from many different angles. You can set it so you have a 360-degree view of your retail location, or mount a unit that can look in four directions at once. This means fewer expenses because you can use one camera to cover a large area. Smartphone Viewing of Your Business The Mobile Video Guard system is a modern surveillance camera system that is connected to an app. This allows you to remotely view your business from anywhere in the world with the touch of a button. This gives business owners instant access to a real-time view from every camera you have installed at your property or business. You will get alerts if the perimeter is breached, and you get a valuable
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way to keep tabs on your business no matter what time of the day or night. Recorded Evidence If anything ever happens at your business, no matter what time of the day or night it is, the security cameras will record it. Managers and owners can easily pull up the footage of the last 24 hours for a review. Business owners can use these recordings for evidence of crime, workers comp claims, grounds for employee termination, safety checks, and quality control.
Additional Benefits of Small Business Security Today’s advanced mobile video units have several additional features to help keep your business safe and secure. Every camera features up to 4 different camera angles for a 360-degree view of what is happening. Cameras can record 24 hours a day, 7 days a week if there is any movement on the property. These are some of the additional benefits you want to look for when checking out cameras: • Live monitoring at night, 6 PM until 6 AM • 24-hour weekend coverage available • 24-hour holiday coverage available • A loudspeaker to talk remotely to people on the premises • Flashing red and blue strobe lights to deter any criminal activity • Immediate alerts sent to your phone • Optional license plate readers for outdoor cameras • Optional thermal cameras to detect fire There are many reasons and benefits of a small business investing in security cameras. An efficient security camera system helps deter theft, lets you keep an eye on employee performance, and discourages theft.
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F E AT U R E Why Do General Contractors Prefer to Hire Insured Subcontractors? by Hannah Sullivan, Pogo Insurance job, they could be found responsible, as they are the hiring party. Workers’ comp claims include medical bills, lawsuits, and lost wages. If you get injured while working and you do not have workers’ comp coverage, your GC will be responsible for paying for those claims. Additionally, GCs want the subs they hire to have their own insurance because workers’ comp premiums are based on payroll. If they hire you, and you don’t have insurance, they’ll be charged for hiring you when the workers’ comp carrier audits them at the end of the year. If a general contractor hires a subcontractor with their own policy, they won’t get charged for that payroll. One of the great debates among the contractor community is in regard to workers’ compensation insurance. Who’s responsible for providing it -the general contractor (GC) or the subcontractor? In the United States, workers’ compensation coverage is mandatory for W-2 employees once a business has reached a certain size. This number of employees varies by state. As a subcontractor, when you are hired by a GC, you are not technically an “employee.” You work independently “with” the GC, not “for” the GC as a traditional employee. General contractors are not actually required to provide subcontractors workers’ comp insurance, and because of this, they typically prefer to require subcontractors to provide their own workers’ comp coverage.
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Why are subcontractors expected to get their own workers’ comp? General contractors require subcontractors to have their own policy to reduce their own liability. Your policy will pay out if an accident occurs, instead of theirs. Workplace incidents can happen at any time, especially when you’re working with dangerous equipment and tools. Common jobsite injuries include muscle strains, lacerations, or even ladder falls. And most general contractors don’t want to be on the hook, or pay for extra insurance coverage, if something happens. That’s why most require subs to provide a Certificate of Insurance before they start the job. If a GC contracts with an uninsured subcontractor and they get hurt on the
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Can general contractors add subs to their own workers’ comp policy? Although general contractors can technically add subs to their policy, it’s not as common. In some cases, they’ll add subcontractors to their policy as an “additional insured.” An additional insured is a person of entity who may be added to an existing party’s workers’ comp policy with respect to work performed on a specific job. If you’re listed as an additional insured, you’ll get workers’ comp protection while you’re working for the general contractor. This includes medical bills, defense coverage, and third-party lawsuit coverage. Keep in mind, being listed as an additional
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insured for one party does not mean you have coverage while working for other parties.
Why don’t more general contractors list subcontractors as additional insureds? Simply put, it’s all about the money. The more payroll a general contractor has, the more expensive the workers’ comp policy. When a GC hires a sub that has their own insurance, they are not charged for that payroll, resulting in a more affordable workers’ comp policy for themselves. Not only that, but if an accident happens, it can impact the general contractor’s loss history. If a claim occurs, it will raise their experience modifier. The higher the mod, the higher their insurance will cost.
Why do subcontractors need workers’ compensation? It doesn’t matter if you’re working as a one-person operation or as a team. If you’re on a jobsite, you should have workers’ comp. This form of commercial insurance protects you in the event you get injured or fall ill due to work-related activity. Your workers’ comp policy will cover medical bills related to things like wounds, broken bones, asbestos poisoning, and more. Additionally, if you or an employee require time off work to recover from an illness or injury, the lost wages will be supplemented by your policy. Many providers also offer back to work programs to help you and your employees return to work faster. Medical bills and lost wages aren’t the only benefits of workers’ comp insurance. If you face a lawsuit regarding claims of negligence or an
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unsafe work environment, court costs, legal fees, and settlements are taken care of through your policy. Without workers’ comp, you would have to pay for any financial damages out of pocket. But a good policy will pay for the cost of claims. Learn more about workers’ comp for subcontractors.
What are workers’ comp requirements? Every policy is different because every subcontractor is different. The main question is: Do you have employees? If you are a subcontractor working on your own with zero employees, you may be eligible for a ghost policy. This is essentially the most affordable form of workers’ comp on the market, as you are only paying the minimum premium as dictated by the state. It does not provide workers’ comp coverage, however, it does still provide you with your Certificate of Insurance. It’s an affordable way to get hired, but it can be more of a risk because if something happens you will not have the financial protection from your policy. If you do have employees, you will need a standard workers’ comp policy where you have the choice to include or exclude yourself from coverage. Your employees are covered either way.
How much does subcontractor insurance cost? There are several factors that dictate the price of your workers’ comp policy. Location is a big factor. Workers’ comp is a state-regulated coverage, which means each states’ rates are different.
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The greater the risk, the greater the rate. For example, a subcontractor that specializes in cabinetry has a much lower rate than someone involved with roofing. The number of employees also plays a role in determining the cost of your workers’ comp policy. This is largely due to the fact that premiums rely on payroll. The greater the payroll, the greater the cost of the policy. Your loss history is another factor that determines the cost of your workers’ comp. If you have had claims in the past, your premium tends to be higher than someone who has not experienced losses. As an example, if you are a sole proprietor with no employees and purchase a ghost policy, in many states you will find rates as low as $750 annually. Check out this subcontractor insurance cost guide to learn more on how much subcontractors might pay for workers’ comp insurance.
Where should subs purchase workers’ compensation insurance? There are a variety of ways to find workers’ comp. You may contact an insurance agent, a broker, or insurance carrier. In some cases, you may be able to purchase workers’ comp from the state directly. About the Author Hannah Sullivan is VP of business development for Pogo Insurance, a company that provides cost and coverage comparisons from dozens of top insurance providers by analyzing workers’ comp rates. Learn more about subcontractor insurance and get free estimates from multiple carriers.
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Mask-on Communication Tips You wear your mask, keep six feet between yourself and others, and are committed to safety. But the measures that help minimize your risk of COVID‑19 can also have an impact on your interactions with others. “The physical barrier actually changes the sound waves that are reaching your ear,” says UNC Health audiologist Patricia Johnson, AuD. “High pitches aren’t able to make it through the material, so you start losing access to consonants, particularly ‘f,’ ‘s,’ ‘sh,’ ‘th,’ which carry a lot of the weight in the clarity of the words that we hear.” If you want to increase understanding with a masked individual, you should look them in the eyes – which may be easier said than done. Eye contact triggers selfconsciousness, consumes extra brain power and becomes uncomfortable after only three seconds. But bear in mind, eye contact can also make you appear more intelligent and trustworthy.
Body Language
You might be surprised how much information is conveyed by the body itself. For instance, when someone is happy, they stand up straighter and lift their head; when
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they are sad, they slouch and drop their head; and when they are angry, their whole body tenses up. Learning how people use their bodies to convey emotion may help reduce the uncertainty you feel when communicating with someone in a mask. Become aware of your own body language, too. When engaged in a conversation, you can appear more attentive by turning your body toward the individual, leaning in or nodding. To let another person know you want to start speaking, straighten your posture, hold up your index finger or nod more frequently. Finally, be aware that imitating the posture of another person can increase how much they like you and even agree with you.
The Voice
Don’t forget the impact of your voice. It’s not just what you say, it’s how you say it. Along with the actual words, you also use volume, tone, pauses and fillers to convey your message. For instance, a lower-pitched whisper may denote sadness or insecurity, whereas a higher-pitched shout could show anger or intensity. If you feel the need to speak louder, just be aware that raising your voice can alter the
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message you are trying to send. Changing the tone of your voice can change the whole conversation, so instead of increasing volume, try improving enunciation. Use your body and voice to convey the emotions you fear your mask might hide. Maybe most importantly, don’t expect it to go perfectly. Just like any conversation, mistakes will be made. When someone can’t understand you, try rephrasing your statement, saying it a bit more slowly and enunciating more. If you are struggling to understand someone else, try to ask close-ended questions, like “Do you want to go to the park?” instead of open-ended ones, like “Where do you want to go?” More Resources: https://www.asha.org/public/ communicating-effectively-while-wearingmasks-and-physical-distancing/ https://www.aacn.org/blog/what-didyou-say-tips-for-communicating-whilewearing-a-mask
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The Devil's in the Details—But That’s What You’re Good At! Get Recognized for Your Excellence Are you proud of your company? It’s policies and practices? Do you want to show the world that despite COVID-19, you’re doing things right? Then apply and be proud to the whole world of your company. Yes, you’re busy. But a little each day, and you’ll have no problem getting your application in by December 31st. The ASA Certificate of Excellence in Ethics, is not an awards competition, but rather a program recognizing subcontractors for their commitment to ASA values like quality construction and a safe and healthy work environment. Each applicant is required to respond to questions concerning the firm’s corporate ethics policies and procedures, its construction practices, and its general business practices. Each applicant also is required to submit detailed documentation, including sealed letters of recommendation from a customer, a competitor, and a supplier. ASA will honor selected firms and individuals that demonstrate the highest standards of internal and external integrity during an awards ceremony to be livebroadcast on February 25, 2021.
• Watch the Certificate of Excellence in Ethics Video. • Download the 2020 ASA Certificate of Excellence in Ethics Brochure • Download the 2020 ASA Certificate of Excellence in Ethics Application. • ASA provides useful model documents to help with your submission and your ethics program. Download the 2020 ASA Certificate of Excellence in Ethics Resources Guide.
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• Download the 2020 ASA Certificate of Excellence in Ethics Timeline. • ASA’s Certificate of Excellence in Ethics Program Q&A LinkedIn Group—a forum for getting answers to your questions about the awards and application process. This forum includes current award recipients who have been through the application process and are willing to help guide new applicants through their application process. (Be sure to log-in to your LinkedIn account first.) • Recipients of the 2019 ASA Certificate of Excellence in Ethics may re-apply for 2020 using the Recertification Form. Download the 2020 Recertification Form. • Download the ASA Model Code of Ethics for a Construction Subcontractor.
Application deadline: Dec. 31, 2020. Don’t Forget Other ASA Awards: There are many more awards available through ASA, and more information about all of them can be found by clicking here. ASA Awards winners will be honored by ASA National. We highly encourage all ASA members to get involved in our awards program. These valuable recognition opportunities are only available to ASA members.
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Coming Up
Complimentary Webinars
in the December 2020 Issue of ASA’s
Presenter: Joe Reynolds, Assistant Vice President in National Environmental and Construction Professional Liability Practice, RT Specialty It’s not covered under your GL policy and it’s not covered under most professional liability forms, so where od contractors get coverage for accidental issues of faulty workmanship that arise on the job? Joe Reynolds from RT Specialty talks through the issues that can mean the difference between a profitable job and an unprofitable one and what potential insurance solutions are available in the event you’re caught in a claim for faulty work. This webinar will cover: What is faulty workmanship? Where is it covered and where is it not? What solutions are available in today’s marketplace and for how much? War stories of real life faulty workmanship claims. Joe Reynolds is responsible for securing environmental and constructionrelated professional liability coverage forms for companies representing the architectural, engineering and real estate marketplace. Register here. For all upcoming ASA events, go to www.asaonline.com
Election Results: What Do They Mean? • Election 2020 and the Lame Duck Session of Congress • Construction and the Next Four Years • COVID, HR and Construction
Look for your issue in December.
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TUESDAY, DECEMBER 8, 2020, 1:00 PM - 2:00 PM EST Faulty Workmanship Coverage: A New Insurance Solution Especially Designed for Subcontractors
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ASSOCI ATION
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DEFENDING OUR FUTURE
SUBCONTRACTORS LEGAL DEFENSE FUND ASA's SLDF supports critical legal activities in precedentsetting cases to protect the interests of all subcontractors. FIGHTING FOR THE RIGHTS OF THE CONSTRUCTION SUBCONTRACTOR COMMUNITY NATIONWIDE ASA underwrites the legal costs of filing "friend-of-the-court" briefs to inform the Court regarding the broader impact of relevant cases throughout the country. We have won dozens of these cases since 1997, vindicating subcontractor rights today and into the future!
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WE NEED YOUR SUPPORT Funding YOUR Legal Defense
Each year, courts across the country hand down hundreds of decisions on federal and state laws, as well as court-made or "case" law, that apply to subcontractors' businesses. Many of the decisions impacting subcontractors interpret the contract provisions of subcontract agreements—provisions like pay-if-paid, holdharmless, duty-to-defend, and no-damages-for-delay. Some of these decisions are precedent-setting and carry significance for subcontractors across state lines. ASA's Subcontractors Legal Defense Fund supports ASA's critical legal activities in precedent-setting cases to protect the interests of all subcontractors. ASA taps the SLDF to fund amicus curiae, or "friend-of-thecourt," briefs in appellate-level cases that would have a significant impact on subcontractor rights.
From its inception, the SLDF has been involved in many landmark decisions, starting with its first case in 1997, Wm. R. Clarke Corporation v. Safeco Ins., which prohibited pay-if-paid clauses in California.
Your financial support keeps the SLDF in operation PLEASE DONATE TODAY To make a contribution to this vital fund, visit http://www.sldf.net or send an email to soscar@asa-hq.com for more information!
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American Subcontractors Association 1004 Duke Street | Alexandria, VA 22314 703.684.3450 T H E C O N T R A C T O R ’ S
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