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Summer Update for Construction Professionals

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Juanita Ferguson
BKK Construction & Land Use Newsletter
June 2011

The summer is a busy season in the construction industry. Additional employees are often hired to work at construction sites. As a result, increased preparations are made to accommodate employees as the employment experience at a construction site in the middle of summer is physically demanding. Even though summer is upon us, it is still worthwhile to take an inventory of various aspects of your business operation to ensure that you are in compliance with the applicable laws and regulations of the jurisdictions where you operate.

Employment – Hiring and maintaining skilled employees is a tedious, but nonetheless critical aspect of operating a successful construction project. If you have never experienced the challenges associated with managing construction employees, then consider yourself fortunate. The process begins before the employees are even on your payroll.

If you bid on state or municipal construction projects, you need to know the laws of the state or municipality regarding the makeup of your employment pool. Rising unemployment levels over the past few years have caused many states to enact laws that require contractors and subcontractors to employ certain percentages of residents in the location where a construction project is being built. If you are uncertain whether hiring a prospective employee will put you in jeopardy of violating local laws, check with the state or municipal employment division where the project is located to determine if you have to employ local residents and if there is a registry of available persons who are local residents and who are available for hire.

It is important to classify employees properly in order to avoid being subject to violations of the Fair Labor Standards Act ("FLSA"). FLSA applies to virtually all United States employers and covers wage hour laws, overtime and youth employment standards. Potential violations of FLSA include payment of wages less than the minimum wage and failing to classify employees properly. Depending on your jurisdiction, a penalty for an employer who misclassifies an employee as an independent contractor may consist of allowing the employee to seek up to treble damages for lost wages and benefits. An employer could also be required to pay restitution or be subject to a stop-work order or debarment. In order to come into compliance under the law, the employer could be required to provide notice to each employee of their status as an independent contractor and the implications of such status, and to maintain records of independent contractors working on their jobs sites.

Administrative Oversight – The construction industry is regulated heavily in most, if not all jurisdictions. You should have a general understanding of what is required of your business in the jurisdiction where you operate. If required, ensure that your business cards, contracts, and invoices include your state license number displayed prominently. If your clients include homeowners be particularly mindful as home improvement contracts have even more stringent guidelines in place to protect the public.

Avoid being the subject of a formal complaint from your local regulatory board. Don’t enter into an agreement to provide services if the cost of the services exceeds the type of license that you possess. For example, if your license allows you to work on projects that do not exceed the amount of $100,000, entering into an agreement for a $150,000 project will likely subject you to penalties. Even if the prospective client is unaware of the restrictions of your license or is willing to ignore the restrictions in exchange for a reduced sum, you could nonetheless be subject to stiff penalties for a failure to comply with the laws.

Licensure or certification may be revoked for misrepresentation or a fraudulent application or for incompetence as demonstrated by an egregious or repeated violation of the laws of your jurisdiction or the applicable building codes. If a contractor violates the local statutes or regulations, it could be required to participate in remedial education. It could also face suspension, revocation, or denial of the renewal of a license or certification card. Extreme sanctions could include prosecution by the law enforcement authorities, resulting in the payment of sums into a recovery fund or jail time for egregious or repeated offenses.

OSHA Compliance – The Occupational Safety and Health Administration ("OSHA") does not regulate working in hot environments. However, Section 5(a)(1) of the OSH Act, also known as the General Duty Clause, states that employers "shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees." Illnesses that result from working in the heat for prolonged periods are recognized hazards. These illnesses include heat rash, heat stroke, heat exhaustion, heat cramps, and heat collapse. Prior to assigning summer hires to work in the heat, assess the work conditions and also allow a reasonable period of time for employees to become acclimated to working in excessive heat.

The Act also states that "each employee shall comply with occupational safety and health standards and all rules, regulations, and orders issued pursuant to this Act which are applicable to his own actions and conduct." Therefore, it is important for contractors to educate employees about how to recognize heat related illnesses and what to do to prevent the onset of such illnesses. Finally, monitor work conditions periodically to ensure that safe working conditions are maintained.