Small Business Brief


Legal Safety Nets: 7 Tips for Protecting Your Construction Company from Getting Sued

The possibility of getting sued is something every business needs to live with. However, you can stack the odds in your favor with these legal tips.

Are you trying to spark up a new construction business? If you are, then there are certain things you need to be aware of first, mainly how to avoid getting into legal trouble. Like any business, it’s easy to run into this, especially if it’s your first business.

Running a successful construction company calls for being able to balance these issues and stay up to date with them. If you don’t, then you can be slapped in the face with fines or even worse.

Here are seven common issues that construction companies face in terms of legality, and how to avoid getting sued.

1. Drafting, Negotiating and Reviewing Contracts

Construction companies typically use a standard form of contracts because of their availability and simplicity. Recently companies have been opting for contracts that are more specific than that and are tailored to one project. You could risk getting sued if your contract doesn’t contain the following:

  • Responsibilities and deadlines
  • Pricing and pricing terms
  • Conditions of payment
  • Payment dates
  • The scope of the work
  • Account delay contingencies
  • Any other foreseeable risks

There are other things that you can include in your contract if you really want, but these are the basic things that need to be present. They will cover your basis completely.

2. Employment and Labor Issues

A union construction company’s biggest employment issue is managing union and non-union workers. Firms that have unionized employees have to deal with collective bargaining agreements and working with the union in terms of work stoppage, strikes, and other forms of unfair labor practices. Firms with non-unionized employees have to negotiate directly with their workers.

You have to make sure that you are abiding by the federal and state wage and hour regulations. This includes things like minimum wage, overtime, mandatory breaks, “on call” time, split shifts, child labor laws, wage deductions, employee classifications, and exempt status issues.

Foreign workers are a large part of the workplace when it comes to the construction industry. Companies must follow the I-9 compliance and of Immigration and Customs Enforcement.

This deals with audits and investigations as well as ensure that they are checking a worker’s permanent residence, getting labor certifications, and providing temporary work permits.

3. Debt Collection/Payment Enforcement

If a construction client doesn’t pay for the services that were given then there are a few tools that you can use to recover payment. This deals with mechanics lien, bond claims, and other typical breaches of contract claims.

If you’re wondering what a mechanic lien is, it’s a claim that burdens the property or project and often prevents the property owner from selling the property until a large amount is paid.

Securing a mechanic lien and making bond claims can be rather difficult and time-consuming but it’s a good way to obtain payment for your services.

4. Litigation

Litigation can be costly and time-consuming for any business. Companies try to do their best to avoid a litigation when possible. If you want to avoid it too you should hire a risk manager who can evaluate claims, make tactical judgments, understand insurance coverage issues, and make sound judgments about uncovered claims to avoid a company-sponsored litigation.

If the litigation can’t be avoided then than a risk manager will be in a position where they can defend the company.

5. OSHA Compliance

The Occupational Safety and Health Administration enforces safety and health standards in the workplace. This includes construction sites which are heavily monitored by them.

Accidents do happen in the workplace and sometimes they can’t be avoided, but companies that have an effective safety program, including safety policies and safety training, reduce these accidents and are less likely to run into problems with OSHA.

You should always be prepared for an OSHA inspection and should have an outline on procedures that should be enforced to prepare for it or if just so happens you’re hit with an OSHA citation.

Ways to avoid having an unpleasant run-in with OSHA is having up to date and working subsite equipment. Make sure all the tools you’re working with meet safety standards.

6. Building Regulations and Fire Safety

Government-commissioned Building Regulations and Fire Safety Reviews come around once a year or so. Its main purpose is to make recommendations that will make sure there is a regulatory system and assure resident safety.

It will examine building and fire safety with a large focus on multi-occupancy and high rise residential buildings. If standards aren’t exactly met then changes to the building regulations may happen soon after the inspection happens.

By adhering to these regulations, you avoid getting sued over safety issues that could have easily been avoided.

7. Tax Concerns

Issues on your taxes are something you really don’t want to run into. Proper tax accounting is important because the financial statements might show losses from depreciating fixed assets, like trucks and equipment. These can actually be included on your personal tax returns.

This is where you want to pay attention to the Subchapter S election because sometimes losses and deductions can bleed through onto your personal income tax return. Take special precaution and make sure your taxes are done properly. Consider hiring someone to get the job done.

Nobody Likes Getting Sued: Avoid Legal Trouble with Your Company

Getting sued is an unpleasant experience for everyone involved. It can take away time and, in some cases, financial resources that you need to run your company. These are just a few common legal issues that you might see during the life of your contracting company. Avoid them, and work will be smooth sailing.

For more things you should embrace or avoid with your construction company, visit the construction section of our blog.