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Contractor Checklist: What To Do If You Are Sued

Posted by Shawn McCadden on Thu, May 19,2016 @ 05:00 AM

What contractors should do if sued

Owning a business can be uniquely rewarding, but rewards do not come without risk.  Perhaps the most dreaded of those risks is a lawsuit.  While some contractors who get sued keep that worry in the back of their minds, others avoid thinking about legal issues altogether, or worse; they assume it can’t happen to them.  But contractor law suits do happen. Often.  While you can’t guarantee that you won’t be sued, you can prepare yourself by having a plan of action in the event of a lawsuit.

Here are the steps contractors should take if they get sued:

  • Take notes about service of process.  Each jurisdiction has rules governing service of process (how you were informed of the law suit). Take note on how you were served so that you or your lawyer can determine whether there are grounds to challenge service.
  • DO NOT ignore the Complaint! Do not throw the Complaint in a drawer and try to forget about it. Failing to respond to a Complaint could result in default judgment against you or your company. The sooner you act, the more control you have over the situation.
  • Review the Complaint. Read the Complaint to gather some basic information about the suit. Who filed the suit?  Is the plaintiff suing your company, you, or both?  Why has the plaintiff filed suit? How much money is the plaintiff demanding? 
  • Checklist for contractors who get suedContact a lawyer. Do not attempt to engage the plaintiff on your own. Contact an attorney experienced in construction law.  Your attorney will help you analyze and understand your risks. If the amount in controversy is small, your attorney can advise you on how to best represent yourself. After consulting an attorney, you will be able to make an informed decision about how to proceed with the lawsuit.
  • Contact your insurance company.  If you think that you may have insurance coverage for the plaintiff’s claims, contact your insurance company immediately, since most insurance companies require prompt notification of the claim. Your attorney can also assist you in reviewing your policy and obtaining coverage.
  • Collect and preserve documents: Collect all documents, photographs, correspondence, etc. (electronic or paper) related to the case so that you can review them with your lawyer. Do not delete or destroy anything.  Hiding information from your lawyer can only hurt your case.  You could also face severe sanctions from the court for destroying or withholding information during the case.
  • Be careful who you speak to.  Your conversations with your attorney are generally privileged. However, anything you say to a third party could make its way to the other side.
  • Consider whether you can settle the case right now.  The vast majority of lawsuits end in a settlement.  Settling the case at an early stage can save a lot of cost and

 

You can’t guarantee that you won’t ever be sued but you can prepare yourself by having an action plan in the event of a lawsuit.

 

Note: This article is for informational purposes only and is not intended to serve as a substitute for consultation with a legal professional.

 

Renee Schwerdt Construction attourney Pittsburgh PAGuest Blogger:  Renee Schwerdt, Esq., Owner/Attorney at Plumb & True Legal Consulting and Representation.  Renee is an attorney and the owner of Plumb & True Legal, a law firm that serves contractors, architects, vendors and others in the construction industry.  Her new blog, Level Up, is available here.

 

Topics: Legal Related, Contracts, Guest Blogs, Customer Relations, Insurance Considerations

Think Twice Before You Use Subs or 1099’s Who Can’t Speak English

Posted by Shawn McCadden on Wed, Feb 24,2016 @ 01:10 PM

Think Twice Before You Use Subs or 1099’s Who Can’t Speak English; Here’s 2 Simple Reasons Why


Subs who don't speak EnglishThe government has recently been cracking down on improper classification of workers as subcontractors.  Understanding the difference, at least in the eyes of the government, can help a remodeler avoid challenges as well as the fines and penalties that come with misclassification.  I recently became aware of an additional consideration as a result of reading an article in Remodeling magazine titled “Se Habla Ingles + No = No Deal? Get Real!”   After reading the article, but particularly the reader comments, that new consideration jumped out at me.  Using subcontractors and or 1099 workers who do not speak English can put your remodeling business at risk in at least two costly ways.



Two simple ways the language barrier can put your remodeling or construction business at risk


#1: Customer service can be compromised leading to loss of repeat work and referrals.  


Let’s face facts here; if a worker cannot speak English there will definitely be communication challenges.  This is clearly demonstrated by the comment left at the article I mentioned above.  The comment was by Perry, an actual consumer who personally experienced the challenges and disappointments caused both by the workers who could not adequately understand English as well as the business that hired them:


“It's difficult to quantify or fully explain in this comment the magnitude of problems we've had on our current job, but approximately half the problems can be traced directly back to a communication problem with the workers at the site.  I witnessed our job supervisor explaining what was needed (in as good a Spanish as he could muster), the worker acknowledging his understanding, and hours later when the completed work is inspected, it's clear the worker did not understand exactly what was needed.  This has happened repeatedly, with some of the mistakes far more costly than others.”

 

Stressed remodeling customersWhen a customer experiences what Perry speaks to its not likely the contractor performing the work will ever get future business or referrals from the disappointed customer.  Remember, quality is not just determined by the final outcome.  Quality is also determined by the experience the consumer has as the product is being delivered.

 


#2: Risk of the government deciding they are employees


Contractors should be using fixed scope contracts with subcontractors.  Subcontractor agreements should detail the work to be completed, the expected outcome, when it has to be completed and include a fixed price for the services performed.  If a subcontractor and or his/her workers cannot read a written work order due to a language barrier someone outside the subcontractor’s business will have to explain what is to be done and how it is to be done to the subcontractor.   And in the absence of the subcontractor at the jobsite someone will need to explain and direct that sub’s employees.    This type of relationship with a sub and or the sub’s employees demonstrates control by the business that hired the subcontractor.

Independent contractor oremployee questions
The IRS will consider a worker to be an employee unless independent contractor status is clearly indicated by the relationship between the worker and a remodeling business.   The way the IRS sees it an employee is a worker who performs services at the direction of an employer.  Subcontractors are considered to be in business for themselves and work under their own direction.  So simply stated anyone who performs services for a remodeler is an employee if the remodeler can and or does control what will be done and how it will be done.  Explaining things to a worker and orally directing how and in what order to perform their work therefore makes the worker an employee.

The fines and penalties for misclassification can ruin your business

As I pointed out in a previous blog post the determination by the government of misclassification of workers can be caused by many reasons.  Plus when it happens the government assumes you to be guilty until you prove your innocence.   If you cannot create a written subcontractor agreement, in the Penalties for construction worker misclassificationlanguage of the subs you work with which details the scope of work they are to perform independently, you and or your business will be forced to orally direct the work of the subs.  Once you do that the government no longer classifies them as subs, but rather as employees.  That is therefore misclassification.   According to an article at workcompcentral, in Tennessee a company by the name of Aguilar Carpentry was caught misclassifying workers and was fined $73,000In another article posted to WTNH.com a CT contractor was fined $20,240 for misclassification. Those fine amounts would put most remodelers out of business.

 

Still unsure about your relationship with sub? Here are three possible options

For a quick answer perhaps just take the quiz Remodeling Magazine recently offered titled:  "Take the Quiz: Are You Misclassifying Your Subcontractor?"  Answer the questions honestly and then see if the government would call them subs or employees.  


see all ma csl class dtaes and locations If you would like to attend a live class that includes explaining subcontractor vs. employee considerations you can check out the MA CSL Continuing Education class I teach as part of the MA Construction Supervisor License renewal process titled: Managing and Working with Sub Contractors So Everyone Wins.  You can find dates and locations at the training calendar page at my website


If you want help from the IRS and you have a lot of time to wait you can use IRS Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.   The completed form can be filed with the IRS by either the business or the worker. The IRS will review the facts and circumstances and officially determine the worker’s status.  Unfortunately it can take at least six months to get a determination.  Additionally, often times because determining factors used by the government are not always objective, the determination may not binding.

 

 

Topics: New Business Realities, Legal Related, Subcontractor Considerations, Government Regulations, Definitions

Is Using 1099 Construction Workers Worth The Risk?

Posted by Shawn McCadden on Fri, Sep 25,2015 @ 08:03 AM

Is It Worth It To Risk Using 1099 Workers To Avoid Employee Responsibilities?

1099 construction workersMany contractors are using what are refer to as 1099 workers to avoid employee and payroll related administrative responsibilities and financial costs.  Some use this tactic to reduce their costs to help win bids and or make more money. If you never get caught you may feel or believe it was worth it. On the other hand if you get caught, whether you knew what you were doing was illegal or you really believed what you were doing was OK, the financial and litigation related costs can kill your business. The chance of this happening has dramatically increased in certain areas of the country because Washington is offering money to states to help them do so. Read on to find out about what is already happening in Virginia.

In a well written article written by Courtney Malveaux of Thompson McMullan PC, Courtney shares a scary story where a GC jobsite is inspected by VA’s version of OSHA and makes and on-site determination that certain “Independent Contractors” were actually employees, triggering the automatic loss of any ability to negotiate violation penalty reductions. The story gets much scarier as you read on; I suggest you read the whole article.

 

“Under the new policy, if the inspector declares that your contractors should be considered employees, watch out.  You’re paying full freight on each penalty, without exception.  Your only recourse would be legal action.” Courtney Malveaux

Guilty until proven innocent

The part I found most scary in the story was that the contractors who take this risk, for whatever reason they justify doing so, are automatically assumed to be guilty by the inspectors.   If that happens to you it means you are guilty until proven innocent, at your own expense to try to do so. And, even if you eventually win your legal battle, you are not entitled to receive any damages for your challenges. So your legal fees cannot be recouped.

Risk of using 1099 construction workersThat means you have to pay up on any fines, at their full rate (anywhere from $7K to 70K per violation) right away. Then you have to decide if you are willing to wait for your legal case to make it through a legal system sponsored by the same entity that is accusing your business.

 

Collateral damages may be unavoidable

From what I have witness I know the story can go even further than explained in the article. For example if the 1099’s are deemed to be employees you may also become responsible for all employment related taxes on all the money you have paid to them to date, plus fines of course. The same may happen with Workers Compensation and General Liability insurance coverage. Again the likelihood of these things happening has also become more likely. For example in Massachusetts several different state departments are participating in a memorandum of understanding, committing to refer observed violators discovered by each department to the other departments. In a 2012 article I reported on how OSHA and EPA have done the same regarding RRP Inspections.

 

1099 or employee

The Bottom Line

As a business owner only you can decide the level of risk you are willing to take on by avoiding employment responsibilities. I recognize by doing so you may be saving your business and your customers money. At the same time by doing so perhaps both of you are preventing a worker, or many workers, from having the employment rights and benefits your customers expect and even demand at their jobs. Some know they are doing it. Some, I hope, just found out.

 

Topics: New Business Realities, Legal Related, Business Management, Production Considerations, OSHA Considerations, Subcontractor Considerations, Government Regulations, OSHA - EPA Challenges, Workers Compensation, Taxes

As Construction Recovers, Look at Business Operation Tools

Posted by Shawn McCadden on Tue, Dec 09,2014 @ 06:00 AM

As Construction Recovers, Look at Business Operation Tools

Business tools for contractors

 

 

The construction industry that drives so much of the contracting business is steadily gaining throughout the nation. U.S. News & World Report reports that new home construction grew almost 22 percent in 2014. Moreover, builders themselves are optimistic, according to the National Association of Home Builders, which reports its members have seen an increase in "serious buyers."

 

This is great news for the contracting business. But with the recovery still a bit fragile and lenders reluctant to release loans, smart contractors need to be able to respond to work requests quickly. This means working smarter, including the work that runs the business. Luckily, there are tools that can let them focus on their craft and leave the business end in responsible hands, too.

 

Outsource Complex Financial Tasks

Mountain_of_pitch_book_binders-wrLots of small businesses, including many contractors, outsource accounting services like payroll and tax preparation. This is a smart move; tools like QuickBooks and NetSuite are constantly improving their services and lowering their costs. Even better, they are hosted online—in the cloud—so they can be accessed from any secure Internet site, reports Forbes. Online accounting services are very good choices for new firms and small ones that do not have a large enough accounting infrastructure to handle all functions and future growth. They're also heavily focused on security and maintaining backups of their own clients' data.

What about revenue management? This is not part of standard accounting services like QuickBooks. But managing your revenue is how your company stays afloat and can perform tasks like payroll and paying your own suppliers.

Customer management firms like Chargify have filled this important gap, providing clients from businesses of all sizes with online, cloud-based services that include:

  • Accepting payments from several sources, including ACE, eChecks, PayPal, and credit cards.

  • Issuing refunds.

  • Emails to customers that handle electronic invoices and receipts, payment reminders, and upcoming credit card expiration dates.

  • Coupons and discount redemption.


Best of all, these online services guarantee their accuracy and post solid customer ratings.

 

Go Online for Business and Legal Filings

Online legal services for contractors

Most contractors are small businesses but still have to file the same paperwork as the big guys. Unlike the big guys, they don't have in house attorneys and generally don't have time to run downtown to talk to a lawyer about filing for a business license or how to get a federal EIN.

Online legal services can help with the routine legal issues that don't involve the courts. Services like Legal Zoom and RocketLawyer provide small business owners with information and assistance that can help them understand how to address common legal topics that often arise in the course of business, such as:

  • Whether to file as an LLC, partnership, or S-corporation.

  • Steps to take to ensure corporate compliance.

  • Debt collection advice.

Subscribers also get access to common legal forms like employment contracts, cease-and-desist templates, and nondisclosure agreements. On call lawyers are available to answer general questions around the clock.

 

Go Online for Office Software

Perhaps the biggest online industry is office products like word processing and spreadsheets.

Small businesses used to shell out a lot of money for office software and then spend more on antivirus software, backup systems, and of course upgrades. They don't have to do this anymore with online services from well-known companies like Google and Microsoft.

To get Google's free online office products, just open a free Google account which includes the famous Gmail email service and more free services:

  • Online drive that stores virtually any kind of document uploaded to it.

  • Word processing.

  • Spreadsheet.

  • Presentation slide.

  • Forms.

  • Drawing tool.

If you or your office staff can't live without Microsoft Office, the online Office 365 delivers the full suite of Microsoft products, including online meeting services, upgrades, and security. Prices start at $12.50/month.

 

Ruth_Ann-wr

 

Guest Blogger: Ruth Ann Monti is the founder of TimeStorm Communications, which provides original content, copywriting, social media and marketing services for entrepreneurs and small business. She lives with her son and two dogs in sunny Scottsdale, AZ.

 

Topics: Business Financials, Technology for Remodelers, Legal Related, Free Stuff, Business Management, Guest Blogs, Software Related

Update On The Lowes 2X4 Story And Controversy

Posted by Shawn McCadden on Tue, Sep 16,2014 @ 06:00 AM

Update On The Lowes 2X4 Story and Controversy

Lowes 2x4 story update

 

Last week on September 9, 2014 I posted a blog titled California Judge May Have Created Huge Challenges for Contractors.  At that time the information reported indicated that a California Superior Court judge by the name of Paul M. Haakenson had ordered Lowes to pay $1.6 million dollars for selling 2x4’s that are not really 2” x 4”.   The story and my blog caught quite a bit of attention in the construction and building materials industries.   Additional information has now surfaced.

 

Some clarifications

I had originally found the information in an article posted to ProSales magazine, a publication for professional building products dealers.  Remodeling magazine recently posted an update about the story, offering some clarifications provided by the West Coast Lumber & Building Material Association (WCLBMA).  In the article WCLBMA clarified the $1.6 million final judgment Lowe's reached with the State of California appears, at least in part, to involve labeling certain non-wood products as wood as well as the incorrect labeling of certain other lumber products.

In an August 27th press release by Marin County, the county where a local weights and measures division visited one of Lowes’ retail store locations, said the district attorneys' civil enforcement action claimed that "Lowe’s stores throughout the state unlawfully advertised structural dimensional building products for sale and those advertisements stated, contained, and described product dimensions that were not the actual product dimensions".  The press release also states; “The judgment requires Lowe's to immediately remove products from sale or correct false, misleading, deceptive or inaccurate product descriptions when Lowe's knows or should know that the product descriptions are untrue or misleading”.

 

Don't blame the source

Lowes 2x4 challengesIt would appear that in the original interview ProSales had with Lowes about the story the fact that Lowes was selling 2x4’s that did not meet the standard accepted size of 1 ½” x 3 ½” was a detail left out of the interview.  I say this with a high level of confidence because I find ProSales to be consistently accurate and the magazine editor, Craig Webb, does a great job vetting the information being published. 

 

Do contractors still have plenty of reason for concern?

On the other hand I and many of the commenters at my blog are still concerned about the ruling details Lowes and other retailers must now follow.   According to another ProSales article Judge Haakenson’s order lists the following three main rules for the retailer to follow going forward:

  • "Common descriptions" must be followed by actual dimensions and labeled as such. For instance, a 2x4 must be followed with a disclaimer that the wood is actually 1.5-inches by 3.5-inches and include a phrase equal or similar to "actual dimensions."
  • "Popular or common product description," like the word 2x4, must be "clearly described as 'popular name,' 'popular description,' or 'commonly called.'"
  • Dimension descriptions are required to use the "inch-pound unit", meaning they must include abbreviations such as "in., ft., or yd.," and can't use symbols like ' or '' to denote measurements.

 

Regulations affecting contractorsThe concern I am expressing is  if these rules apply to retailers will they also apply to contractors? If they do, or eventually will, contractors in California and the rest of the country may also run into challenges not only with the government, but also with their customers.   Perhaps trade associations such as NAHB and NARI should proactively seek out the answer to this question to help guide and protect their members and the rest of the construction industry.   The RRP Rule came about because our industry didn’t proactively deal with the hazards of lead during construction on its own before the government stepped in and dictated regulations many do not agree with.  

 

Perhaps this case against Lowes can serve as a warning and the industry can get out ahead of what the government could require of contractors.  If these are or do become requirements contractors must follow perhaps the trade associations and industry publications can inform contractors before they experience costly challenges that could put them out of business.

 

What are your thoughts? 

Are you concerned enough to ask your trade association to look into this? 

 

Note:

Click here for an update on this story

 

 

 

Topics: LBM Related Topics, LBM Dealer Topics, Legal Related, Government Regulations, Shawn's Predictions

Contractors, Will Your Use Of Subcontractors Land You In Jail too?

Posted by Shawn McCadden on Tue, Aug 27,2013 @ 06:00 AM

Contractors, Will Your Use Of Subcontractors Land You In Jail too?

Contractor Sent to Jail for workers comp fraud

 

Being a contractor is no longer an amateur sport.  Due to government regulations and laws a contractor can get into serious trouble if he or she is not following the rules of law.   Even if you were ignorant of those rules, the government will still hold you accountable to the legal responsibilities you must accept if you run a residential construction or remodeling business.  A few weeks back I shared how a GC and his subcontractor both got fined for not following the EPA’s RRP rule on the same job due to an anonymous tip.   Between the two businesses they could end up paying about $120,000.00 in fines.   In this blog article I want to make you aware of a contractor who may just go to jail for purposely cheating regarding workers compensation.

 

The facts

The owners of Triple Star Roofing in Wood County Ohio were recently found guilty of fraud for failing to report their payroll to the Ohio Bureau of Workers' Compensation.  Like the RRP violations mentioned above, their business was investigated after an anonymous tip.   During the investigation bank records were analyzed for the 2004 to 2008 time period.  The investigation found that checks were issued to the same individuals on a weekly basis with many of them indicating “payroll” in the memo section.  As a result the company owners now face possible prison terms of one to five years and fines of up to $10,000.  Additional charges are still pending for the 2009 to 2012 time periods.  I am sure you would agree, they are feeling a world of hurt and are probably scared as hell.

Ohio Bureau of Workers Compensation“Schemes like this to avoid paying premium undermine the purpose of workers’ comp insurance – to protect workers who are injured on the job – and will result in unwanted attention from our investigators.”

Steve Buehrer, Administrator/CEO, Ohio Bureau of Workers’ Compensation (BWC)

 

What about you and your business? 

Are you operating illegally to save money and or to be the lowest bidder?  How would you answer the list of questions I pose below?  I don’t know the laws in your location, but remember, if you were in Ohio, and answered yes to any of them, you too might be facing jail time if you get caught.

  • Are you paying employees “under the table” to avoid paying payroll taxes or workers compensation premiums?
  • Are you treating employees as subs to avoid paying payroll taxes or workers compensation premiums by giving them 1099’s?
  • Are you misclassifying workers to put their payroll into a lower cost workers compensation rate?
  • Are other legal and legitimate contractors frustrated that you are stealing work away from them?

These are some of the reasons the owners of Triple Star Roofing are facing potential jail time.   I wonder how their families are doing while they all wait to see what will happen.

 

So let’s just say you get caught, have to pay fines, but don’t actually have to go to jail.  

ohio contractor goes to jail for fraudHow would you look at that?   I know one contractor who had that happen to him.  When I asked him about it he told me he was definitely scared about going to prison so he spent big money to hire a good lawyer to try to keep him out of prison.  He said the lawyer was successful but he was definitely sweating it right up until the final verdict.  He didn’t get any jail time but did have to pay a lot of money in fines.  He also told me that when everything was said and done, and based on all the money he saved over the years by cheating, the fine and lawyer fees were far less than the money he saved.  He told me he felt it was worth the risk.

I then asked him if I asked his wife and kids if they thought it was worth it what their response would be.  He told me he had never thought about that…

Read More Here

 

Topics: New Business Realities, Legal Related, Legal Considerations, Government Regulations, Insurance Considerations, Workers Compensation, Enforcement and Inspections, Violation Reports

Understanding and Complying With Home Improvement Contractor Laws

Posted by Shawn McCadden on Tue, Feb 05,2013 @ 06:00 AM

Help Understanding and Complying With Home Improvement Contractor Laws

MA HIC videos with Shawn McCaddenMany remodeling contractors may be operating their businesses illegally without even knowing it.  In addition to construction supervisor licensing, most states now have some type of licensing or registration requirements for contractors who offer and or perform home improvement work.  Home improvement contractor licensing and regulations govern how contractors conduct business, not how they build or renovate at the job site.  Fines and penalties for lack of compliance can be substantial, including losing your right to conduct business.  The specific details of home improvement contractor laws and regulations are different from state to state, so it’s a good idea to make sure you’re aware of and understand requirements where you work. 

 

What states have Home Improvement Contractor Licensing requirements?

Click here for an interactive map where you can find out.  You or your remodeling customers can also use the map to check to see if a specific contractor is licensed.

 

Currently there are about 26,000 Registered Home Improvement Contractors in Massachusetts.

Recently the Massachusetts Office of Consumer Affairs and Business Regulation ("OCABR") released a series of five short videos to help Massachusetts home improvement contractors become aware of and learn how to comply with the Massachusetts Home Improvement Contractor Registration law.  The videos are well done and are targeted to help Massachusetts contractors, but a lot of the information shared in the videos could also be very helpful for contractors doing businesses in other states as well.  Each video covers a topic that is regulated in some way or another by any state's home improvement regulations.

Home Improvement Contractor Law videos with Shawn McCadden

At about 17 minutes of total time, it’s worth your time to watch all five videos even if your business is not in Massachusetts.  

The first 45 seconds of each video is an introduction and is just about the same, so after watching the first video in full you can probably skip ahead in the other four.

 

Basic Rules for Home Improvement Contractors:

Video #1:  Registration

 

Video #2: Contract Content & Payment Terms

 

Video #3: Advertising & Estimating

 

Video #4: Performance of the Contract

 

Video #5: Arbitration & Enforcement

 

In addition to being an industry representative in the videos, I was also pleased to be able to offer input on the script.  Before, during and after the filming I worked closely with Steven J. Zuilkowski, Hearing Officer for the Office of Consumer Affairs & Business Regulation.  During the filming I also worked with Jacqueline F. Chandler, HIC Program Coordinator.  Both demonstrated they were genuinely interested in helping contractors comply with the regulations and were seeking input to help ensure the videos served the intended purpose.  Recently Steve shared with me that the OCABR now also has a blog were he has written several posts for contractors regarding help interpreting the HIC regulations, check it out here.

I want to thank Barbara Anthony, Undersecretary of the Office of Consumer Affairs and Business Regulation and the OCABR for doing these videos to help contractors.  It was an honor for me to be asked to participate in the project and I had some fun too!

 

Steven J. Zuilkowski

       Steven J. Zuilkowski

Jacqueline F. Chandler

    Jacqueline F. Chandler

 

Barbara Anthony

  Barbara Anthony

 



Topics: Videos, Legal Related, Contracts, Starting a Business, MA HIC Regulations, Sales Considerations, Marketing Considerations, Business Considerations

General Contracting Starts With a Good Construction Contract

Posted by Shawn McCadden on Sun, Dec 30,2012 @ 06:00 AM

General Contracting Starts With a Good Construction Contract

Diane Menke and Tamara Myers

 

Guest Blogger: Diane Menke, VP/Operations Manager of Myers Constructs, Inc.  Diane Menke (left) and Tamara Myers (right) are the co-owners and principals of Myers Constructs, Inc., an award-winning design to build firm serving the greater Philadelphia region. A certified Women Business Enterprise, Myers Constructs is also a member of the U.S. Green Building Council, NARI, and NKBA.

 

 

General Contracting Starts With a Good Construction Contract

Construction ContractOver the years, I have heard from many contractors — some of them with very big companies — about how they handle drafting their business contracts. Many times, these documents consist of a collection of "stuff some guys I know have in their contracts" cobbled together. It doesn't even occur to these business owners that laws vary by state, or that they might need an expert to customize contracts to fit their own business's unique needs. By not having a professional create legal documents that fit a clear sales procedure and overall company goals, they are putting their company at serious risk. I know because we learned the hard way, too. 

When we first started our business, we used "homemade" and very simple carbon copy contracts that Tamara put together over the many years she was a carpenter working for herself.  Basically, it stated: "Seller will do X for Buyer for $Y." Like most carpenters and trades people, Tamara loved working with her hands and helping people. Carpentry was a joyous creative outlet for her. At that time, if a customer didn't pay, Tamara would "make nice" in order to "keep the peace and her good name" and move on to the next project. Lucky for Tamara, most of her customers were good people, the projects were small, and she probably didn't lose as much as she could have. 

What motivated us

Remodeling ContractIn 1998, we incorporated as Myers Constructs, Inc., because we had taken on a huge and complicated renovations project. We knew we needed serious business structures in place to protect us, so in 2001 we asked Dana Priesing, an attorney who is now our office manager, to read our contracts to look for problems. (She had us sign a contract before she did so!) Dana interviewed Tamara to better understand how she sells, and how our customers buy, and then gave us a few recommendations right off the bat:

  1. Don't give away design work. That was a huge lost income stream. It drained endless hours of Tamara's time, and sometimes we didn't even get the project. Dana advised us to bill for it, and she created a contract just for design work. We can now use the same contract if a customer with an architect needs consulting work during the design phase. 
  2. Our income streams should be separated out, and clear and simple contracts should be created for each one. We now have one for fixed price contracts and one for time and materials contracts, which are typically smaller, simpler projects.
  3. Don't use "softening statements" EVER in contracts. By softening the rules, boundaries and regulations of our agreements, and by being vague about price, payment schedules, and customer expectations, we had unintentionally created confusion. Our customers didn't know what we needed from them in order to do a good job, so Dana created a contract for us that clearly and separately identifies buyer's and seller's responsibilities, rights, and remedies.

 Protecting our investments

Contract Clauses for construction contracts

 

Our company supports a lot of people. We have invested decades into it, and we are depending on it to help us retire. It deserves great contracts to protect those objectives. And great contracts mean we can sleep soundly at night because we know we are doing what we agreed to do at the right price, and we are protected against any possible issues that may arise.

 

Liked this guest blog?   You might like this one too:

What Happens In Vagueness Stays In Vagueness!

 

Topics: Legal Related, Contracts, Guest Blogs, Legal Considerations, Opinions from Design/Builders, Design Options

Updates on the Dietz Lawsuit About Reviews On Angie's List and Yelp

Posted by Shawn McCadden on Fri, Dec 14,2012 @ 11:39 AM

Updates on the Dietz Lawsuit About Reviews On Angie's List and Yelp


Dietz Development Lawsuit

 

 

 

The recent lawsuit by Chris Dietz of Dietz Development against Jane Perez for her reviews posted to Angie's List and Yelp have captured a lot of attention.   If you are looking for a place to find updates about the Dietz lawsuit I have created a page on my web site to share links to related articles and information.

 


Go to Dietz Lawsuit Updates Page

 (Click here to take the quick Dietz Lawsuit Survey)

 

If you are aware of related and appropriate articles and/or information please email the links for them to me and I will add them to the list included on the page.


Many contractors have suffered unjust negative reviews by disgruntled clients and consumer. This lawsuit may prove to have long term effects for all contractors.  Stay informed so you can learn about and possibly effect the outcome of the lawsuit. 

 


Topics: Legal Related, Dietz Lawsuit Related, Customer Relations

Will the Angie’s List Review Battle Benefit Professional Contractors?

Posted by Shawn McCadden on Wed, Dec 12,2012 @ 09:09 AM

Will the Angie’s List Review Battle Benefit Professional Contractors?

Dietz law suitUnless they have been under a rock somewhere, most professional remodelers are now aware of the pending law suit filed by a contractor who believes he and his business was falsely accused on Angie’s List and Yelp of wrong doing by a disgruntled client.  I read the complaint Chris Dietz filed in Fairfax County Circuit Court against his customer Jane Perez.  I also read the interview Leah Thayer of D5R did with Dietz where he shared his side of the story.   Assuming the details in the complaint and Leah’s interview are true, Dietz’s story is one that unfortunately many other contractors can relate to.  The difference is that Dietz stepped up to the plate to do something about it.  He got mad and decided he wasn’t going to take it anymore!

(Click here to take the quick Dietz Lawsuit Survey)

 

I say kudos to Dietz!

Again, I say that assuming he has been honest about his side of the story.

Angie’s List Review BattleHe sets a great example for our industry.   We are professionals and as an industry we need to stand up for what is right.  By what he is doing, and assuming he is successful, he will be establishing a precedence that consumers cannot lie with impunity about their experiences with a professional contractor.  I think it’s great that this woman will now have a taste of what it’s like to be financially challenged to defend herself, a position many contractors find themselves in when consumers sue contractors.

 

In my opinion what is good for the goose is good for the gander!

Jane Perez reviewAccording to Perez the pending court case has left her reeling and potentially facing thousands of dollars in legal bills to defend herself.  She has definitely come to realize the consequences of her actions because Dietz had the guts to stand up for his rights.  Had he not done so she would have established and or helped to maintain a precedence of “let’s bad mouth that contractor so we can blackmail him for the money we owe him”.  She took a calculated risk that Dietz would back down.   If Dietz wins the calculation of risks for homeowners who use such tactics will change going forward. 

 

What ever the outcome, I think consumers will think twice about posting false reviews about contractors.

 

What do you think; is Dietz justified and if he wins will it help other professional remodelers?


Topics: New Business Realities, Legal Related, Dietz Lawsuit Related, Marketing Considerations, Customer Relations