Monday, June 12, 2017


By Lewis E Melhan -July / Aug MoAgents magazine 2016 

A determination of who an employer is covering under the workers' compensation statutes has always been somewhat confusing, and the more complicated an organization becomes, the more the law may seem complicated. 

This is particularly true in the construction occupations, where many subcontractors may be involved in a project, which is the situation discussed in this article. For understanding what workers are the responsibility of a contractor employer, the most important provision in the law is Section 287.040, which governs what are generally called "statutory employees." A somewhat simplified explanation of the statute is that every person working on a project conducted by a general contractor is considered an employee of that general contractor, unless the person is an employee of a subcontractor which has covered the person for workers' compensation. As most readers here will know, the workers' compensation coverage of the subcontractor is evidenced by having the general contractor receive a certificate of insurance from the subcontractor showing the insurer providing the workers' compensation coverage for the subcontractor's employees. The workers' compensation carrier for the general contractor can then determine that the general contractor is not considered the employer for the employees of the subcontractor and won't have the payroll of those workers used as a consideration in the final premium audit for the general contractor. 
However, many problems occur with small subcontractors operating as sole proprietorships, partnerships or limited liability companies. 

One person sole proprietor subcontractors and partnerships with no employees exist fairly often in plumbing, electrical work, flooring installation and others. If those one person operations do not elect to buy workers' compensation, then that subcontractor proprietor or the partners are statutory employees of the general contractor and the general contractor should be prepared to pay workers' compensation premium for those subcontractors when the audit comes. The general contractor may want to use that information in considering how to appraise thebids of such a subcontractor for work, as the workers' compensation premium will be an additional cost not in that subcontractor's bid. 

A similar problem exists with small contractors that have employees when operated as a 
sole proprietorship, a partnership or a limited liability company, since in one way or another, the sole proprietor, the partners or the members of the limited liability company all can decide by written election whether to be covered by a workers' compensation policy or not. The certificate of insurance form has a check box to indicate whether these individuals are covered. If they have elected not to be covered and they work on a contracted job, then they are statutory employees of the general contractor, even if the employees of the subcontractor are not, and the auditing insurer of the general contractor can add those individuals to the payroll on audit. This is true even if the certificate isn't properly completed and exempted employees are not indicated on the certificate. 

Even though the agent may not be required to advise a general contractor specifically on the effect of this law, he may avoid future disharmony and potential litigation if the agent explains to their insured general contractor clients how the statutory employee provisions work and that the general contractor should actively review certificates of insurance as to the check boxes for sole proprietors, partners and members of limited liability companies. General contractors who do not practice this procedure may get a rude awakening when an audit is issued requiring premium for all those uncovered sole proprietors, partners and members of limited liability companies.

Wednesday, July 8, 2015

Use of drones in construction

There is great potential for use of unmanned aerial vehicles, commonly referred to as drones, on construction jobsites for all kinds of purposes – including creating marketing and business development materials, as well as for determining whether work is being performed safely, with quality and in compliance with all regulations. In the future, drones may even be able to haul small parts and handheld tools across jobsites or to high places.
Currently, the U.S. Federal Aviation Administration (FAA) is only granting permission to use drones commercially for experimental or exceptional purposes. However, the agency in February proposed a rule to allow those who hold a recreational or sport pilot certificate to operate drones under 55 pounds for “non-recreational operations,” provided they fly in daylight, remain under 400 feet and continuously maintain visual line of sight, among other proposed restrictions.
The rule would allow, but not require, an operator to work with a visual observer who would maintain constant visual contact with the aircraft. The operator would still need to be able to see the drone with unaided vision, except for glasses. The FAA is asking for comments on whether the rules should permit operations beyond line of sight, and if so, what the appropriate limits should be.
The agency is also asking the public to comment on another possible classification, an additional, “more flexible” framework for “micro” drones less than 4.4 pounds, to determine whether the FAA should include this option as part of its final rule.
Experts say the benefits of drone use on construction jobsites would be enormous, whether or not contractors ultimately are able to operate the aerial vehicles in-house or outsource to companies authorized by the FAA.
Javier Irizarry, an associate professor at the School of Building Construction at the Georgia Institute of Technology in Atlanta, has been conducting research to determine how drones could be integrated into the construction workflow to increase productivity and safety. Irizarry has been partnering with unmanned aerial systems company 3D Robotics in Berkeley, California to conduct experiments on closed jobsites of several members of AGC Georgia.
“It’s all about having a different perspective on the jobsite, and drones enable contractors to view places where they personally cannot go without costly equipment — including logistics, traffic, material delivery and storage, housekeeping on the jobsite,” Irizarry says.
BNBuilders Inc. in Seattle, an AGC of Washington member, previously used drones on jobsites until the FAA put a hold on widespread commercial use until its rules were clarified, says Pete Campbell, safety director.
“We started using drones mostly for generating marketing materials and aerial views of our projects, but in that process we found out that we could use drones for all kinds of things,” Campbell says. “We could take a close-up aerial photo of a concrete pour, to document the locations of post-tension cables, conduits and rebar built into the concrete. It’s relatively difficult to document that without drones, so we were able to take photos with drones, and within minutes photoshop them over as-built plans to determine exactly what is located in the concrete.”
Unmanned aerial vehicles could be the innovative solution to some of construction’s challenges.
Drones could also be used to photograph documentation of steel erectors to determine how much completion there is on steel roofs, and to inspect high roofs without having to actually go up on the roof, he says. Infrared cameras could be installed on the drones to detect problems with water infiltration on building envelopes.
David de Yarza, director of innovation at BNBuilders Inc., said that more vendors are developing drones to be automated, contending it’s safer. Moreover, soon there may even be drones that can change their batteries themselves and then automatically fly over jobsites three or four times a day.
Rob McKinney, safety director, J.M. Wilkerson Construction Co. Inc. of Marietta, Georgia, an AGC Georgia member, says that drones could be used to conduct safety inspections “with a better set of eyes.” “They could also be used to determine whether there are quality issues, such as leakage issues, in places where I can’t easily go to, such as on top of roofs,” McKinney says.
It also could be possible to install thermal imaging cameras on the bottom of drones, to see where there may be a heat loss or an air conditioning loss problem within the envelope of a building, says Cory Montgomery, project manager at R. K. Redding Construction Inc. in Bremen, Georgia, another AGC Georgia member.
For years, contractors have employed helicopter pilots to take photos or create videos of construction progress or completed projects, which typically is very expensive, says James Benham, president of JBKnowledge Inc., an AGC Georgia and TEXO member, in Bryan, Texas. Using drones could be a much less costly alternative.
“Contractors could use these photos and videos for business development pitches, to determine existing conditions before projects start, as well as to monitor progress during construction, and determine results after projects are completed,” Benham says. “Other interesting research includes the use of aerial photography for photogrammetry, and the use of two-dimensional photos to make a 3D point cloud, to model progress on jobsites.”
This also would allow contractors to better compare BIM models, as they could produce 3D point clouds to automatically interpret what has been accomplished, and what was supposed to have been accomplished on any given day on the jobsite, he says. Drones are very well suited for taking these kinds of images, and they can take any degrees. Drones could also take infrared photos and scan jobsites with onboard 3D scanners.
“I feel like SkyCatch is leading the way in this space with a cloud-controlled autonomous drone that even recharges itself and flies all day over a jobsite according to scan areas the user defines in a web browser,” Benham says. “The drone captures images and 3D scans and automatically relays all of this data back to the cloud system to compare, manage, view and measure daily scans and models of the jobsite.”
Other drone manufacturers are considering whether to develop drones that, in the future, could haul cargo across jobsites, Benham says.
“I think we’re years away from drones replacing cranes or cargo-bearing helicopters, but perhaps future drones can handle carrying small parts and small handheld tools,” he says.
Currently, the weight of an average drone ranges from a half a pound to several pounds, so future drones that could haul small parts, tools and construction material would have to have much bigger engines and bigger batteries.
The “touchpoint” between JBKnowledge and drones is through the firm’s SmartReality mobile app, which is augmented reality through the use of handhelds mounted on, or integrated with, drones, Benham says. Drones would be able to fly over jobsites and take photos of laminated paper targets, to render 3D models to scale on a dirt jobsite.
“This is the merging of virtual data with real world imagery, and contractors would be able show these models on their phones with video fed live from the air,” he says. “It’s currently in the early stages, proof of concept internally, but we see a lot of potential in the next two years as the imaging technology improves.”
The base hardware is still needed to get better production-ready positioning systems, Benham says. But currently SmartReality apps are commercially available for use for someone holding their mobile devices and seeing augmented reality near field or using Oculus Rift or Oculus Gear VR to view the models in virtual reality.
JBKnowledge launched the app suite in October 2013 and started selling production projects last April. There are now thousands of registered users of the app, and dozens of projects have been completed.
Ernest Brown, a construction and aviation attorney at the San Francisco law firm, Smith Currie & Hancock LLP, a member of multiple AGC chapters, says that contractors should consider outsourcing drone use to a company that hold FAA’s initial permits for specific uses, such as to perform elevated inspections of power lines or structural steel frame buildings, or to determine waterproofing details on otherwise inaccessible windows.
“Let a fully permitted and aviation-insured company perform these tasks,” Brown says. “Drones currently can’t legally be used for any commercial purpose, so if you are an employee of a construction company and you use a drone in business, then you are breaking the law. You may very well be facing fines and even imprisonment — if you are so unfortunate to be spotted buzzing people in public or crashing a prototype on the White House lawn.”
Several insurance carriers are now offering “one-off” UAV coverage under a separate aviation policy, says John L Babel, senior risk engineering consultant, North American construction at XL Group, an Austin Chapter member.
Such aviation policies cover bodily injury and physical damage, and may also cover consequential damages and catastrophic loss, Babel says. “Companies considering UAV use should examine their CGL policy. Is the UAV considered an ‘excluded aircraft under their CGL policy?” he says. “Many are now considered aircraft.”
Bradley Meinhardt, area president and managing director, aviation, Arthur J. Gallagher Risk Management Services, Inc., a member of multiple AGC chapters, says, “If you operate drones for commercial purposes and you do not have the appropriate waiver from the FAA, you risk the potential of the insurance not responding to a claim if the drone causes property damages or bodily injury.”
To address the use of small drones used to document jobsites, the International Organization for Standardization is working on an “unmanned aerial vehicle endorsement” to the contractor’s general liability policy, which is expected for implementation in June, Babel says. This coverage will be for bodily injury and physical damage.
If contractors don’t already use aircraft, or have an aviation policy, they can either ask their insurance broker and carrier for a separate aviation policy, or ask for the ISO UAV endorsement to their general liability policy that would cover the incidental use of drones, he says.
“Contractors will have to decide whether to take on the additional risk of operating UAVs in-house, or subcontracting that work,” Babel says. “Naturally, the subcontractor would have to go through rigorous screening by the contractor to ensure that proper insurance coverage, safety procedures and risk management are in place.”
If the contractor decides to take on the risk of drone operation, there are a “plethora” of issues to consider, including the type of drone needed, pilot training, developing flight plans, operating area, regulations triggered by use of the drone in that area, weather, and other hazards, he says.
“With respect to operator or pilot training, Australia and Canada have very specific training for UAV pilots that does not require the operator to necessarily be a general aviation pilot, but still possess the skill set for understanding civil aviation and national airspace, and hopefully the FAA will require something similar,” Babel says.

Personal Automobiles for Business Use

According to the U.S. Census Bureau, there are more than 240 million registered motor vehicles in the United States, and an estimated one-fourth of those are used for business in some way. If you have employees who use personal vehicles for business use, you could be exposing your business to a significant liability risk.

Even if your employees have Personal Auto Policies (PAPs) for their personal vehicles, in the event of a serious accident that occurs during business use, your business could be sued to collect additional damages.
What is “Business Use”?
Activities that constitute general business use include visiting customers, picking up supplies, attending conferences, and commuting to and from work. For activities like this, the general business use of a personal vehicle is usually covered by a PAP. This is because a policy purchased for a specific vehicle is considered the primary insurance, which covers damages before any other policy takes effect.
An exception to general business use is livery, or carrying goods or people for a fee. Livery includes the delivery of items such as food, flowers, or wholesale or retail items to customers, as well as chauffeur services. Carpooling or ridesharing is not considered livery and is covered under a PAP.
Employees that work from home can still pose a risk if they use personal vehicles for business use. It may be more difficult to ascertain the driving habits of employees that work from home or the operational status of their vehicles. Communicate regularly with these employees concerning your company’s policy for the use of personal vehicles.
Employee PAP Coverage
For employees using their personal vehicles, the primary insurance on the vehicles will likely be their PAPs. You should know how your employees are covered for the business use of their vehicles. Encourage your employees to speak with their PAP carriers to be sure of their coverage and to make it clear to the insurance agents what business activities the vehicles may be used for.
Some PAPs appear to exclude coverage for business use, but they may include broad exceptions for a private passenger automobile, or pickup trucks and vans. However, some policies may be stricter depending on the circumstances. Clarification may prevent complications if a claim must be filed.
Four Ways to Reduce Risk
Though employees’ use of personal automobiles may pose a risk to your business, there are steps you can take to help protect both your employees and your business from liability.
Review driving records and create an approved-driver list: All employees that use a vehicle for business use should be cleared to drive by a manager. This process should include reviewing motor vehicle records and PAP coverages regularly and maintaining records to help reduce risk exposure.
Establish standards for personal vehicles: Even employees without any incidents on their motor vehicle records can be a risk to your business if they are driving personal vehicles that are not properly maintained. Establish company guidelines for maintaining personal vehicles. If employees are compensated for time spent driving or if they routinely use their personal vehicles for business, consider regularly collecting maintenance reports to gauge the reliability of personal vehicles.
Make the company policy clear: After you create guidelines for the use of personal vehicles at your business, be sure to communicate them to your employees in a clear and timely manner. Although it is common to have policies against the use of intoxicating substances or mobile devices while driving, reminding employees of all of your company policies is an effective way to mitigate risk.
Establish rental vehicle policies: The use of rental vehicles for business also presents exposure to risk. It may be beneficial to establish a relationship with a particular rental vehicle agency to determine which vehicles best suit the needs of your business and employees while traveling. You should also give your employees guidelines on which rental vehicle insurance coverages to accept during the rental process.
Obtaining Appropriate Liability Insurance
Additional coverage may be needed if any potential risks from personal auto use threaten your business. A standard Business Auto Policy (BAP) will protect your business from any additional liability after an employee’s PAP has paid for damages related to personal auto use.
Although employees who have personal vehicles should be required to have PAPs, obtaining liability insurance should be a priority to protect your business. In the event of a serious accident, your employees’ PAP coverage may not be adequate to pay for all the damages. Be sure to prepare a list of vehicles that may be used by employees and the type of business they may be used for, and contact Naught-Naught Agency in order to discuss your coverage options.

Estate Equalization

As you plan for the perpetuation of your business, you may want to plan to provide for all your children – both those involved in your business as well as those family members who are not.

A business owner can use life insurance to provide the children who are not involved in the business with “equitable” treatment.”
Leaving the business to the active children and life insurance to the inactive children equalizes the inheritances among them. In addition, it avoids the need for the active children to purchase the interests of the inactive children – perhaps at a time when the business may be unable to afford it.
Ask one of the qualified representatives at the NAUGHT-NAUGHT AGENCY to provide you with a customized plan. You may call your representative or simply phone us at 800-392-0423.
We can help.

Compliance with Child Labor Laws

The U.S. Department of Labor’s (DOL) Wage and Hour Division mandates that employers comply with the youth employment provisions of the Fair Labor Standards Act (FLSA) and the implementing regulations of 29 CFR Part 570. These provisions are designed to protect young workers by restricting the types of jobs that they perform and the number of hours they work. The DOL strives to educate teens, parents, educators and employers on the federal youth employment rules in order to promote positive and safe work experiences. The following self-assessment tool is designed to identify some of the most common problems encountered regarding young workers. If you answer “yes” to any of the following questions, you are likely not in compliance with federal regulations.
Do any workers under 18 years of age do the following:
  • Drive or serve as an outside helper on any motor vehicle (including but not limited to automobiles, trucks, golf carts, etc.) on a public road or highway?
Minors under 18 generally may not drive any type of motor vehicle or work as an outside helper on public roads or highways. This prohibition extends to the towing of vehicles and the driving of school buses and trucks. There is a limited exception to this provision that permits 17-year-olds to drive an automobile or truck (gross vehicle weight not exceeding 6,000 pounds) for limited periods of time when certain conditions are met. These conditions include that the minors possess a valid license, the driving is only during daylight hours, the driving does not involve urgent time sensitive deliveries such as delivering a pizza to a residence, and the driving is only occasional and incidental to their employment. There are additional requirements that also must be met.
  • Operate, set-up, adjust, repair, oil or clean any power-driven woodworking machine or perform any off-bearing from circular saws or from guillotine-action veneer clippers?
Minors under 18 may not operate, set-up, adjust, repair, oil or clean any power-driven wood-working machines, including chain saws, nailing machines and sanders. They also may not perform any off-bearing activities from circular saws or from guillotine-action veneer clippers or feed (or help feed) materials into the machines. A limited exception applies to 16- and 17-year olds that allows them to place materials on a moving chain or in a hopper or slide for automatic feeding. The regulations also provide a limited exemption for apprentices and student-learners who are at least 16 years of age and enrolled in approved programs.
  • Perform any activities that involve exposure to radioactive substances or to ionizing radiation?
Minors under 18 may not be employed in occupations that would expose them to radioactive substances and to ionizing radiations.
  • Operate or assist to operate, set-up, adjust, repair, oil or clean any power-driven circular saws, bandsaws, guillotine shears, chain saws, reciprocating saws, wood chippers or abrasive cutting discs?
Minors under 18 may not operate, assist to operate, set-up, adjust, repair, oil or clean circular saws, band saws or guillotine shears, except machines equipped with full automatic feed and ejection. These same minors may not operate, assist to operate, set-up, adjust, repair, oil or clean chain saws, reciprocating saws, wood chippers, or abrasive cutting discs. These prohibitions apply regardless of the materials being processed (wood, concrete, metal, foam rubber, cake, paper, etc.). The regulations also provide a limited exemption for apprentices and student-learners who are at least 16 years of age and enrolled in approved programs.
  • Work in any occupation in roofing operations or perform any work on or about a roof?
Minors under 18 may not be employed in roofing operations, including work performed on the ground and removal of the old roof, and all work on or about a roof. This prohibition includes any work that would require the youth to be on or near the roof at any time. The regulations provide a limited exemption for apprentices and student-learners who are at least 16 years of age and enrolled in approved programs.
Do any workers under 16 years of age do the following:
  • Work during schools hours?
Minors 14 and 15-years old may not work during school hours. School hours are determined by the local public school in the area where the minor is residing while so employed, even if the minor does not attend the public school (i.e., attends a private school or is home schooled). Such minors may be employed outside of school hours with certain limitations. The term outside school hours means such periods as before and after school hours, holidays, summer vacations, Sundays, or any other day or part of a day when the public school district where the minor reside while employed is not in session.
  • Work before 7:00 a.m. on any day?
Minors 14 and 15-years old may not be employed before 7:00 a.m. on any day.
  • Work past 7:00 p.m. between Labor Day and May 31st?
Minors 14 and 15-years old may not be employed past 7:00 p.m. from the day after Labor Day through May 31. This applies even if there is not school the next day, such as Friday or Saturday night, as well as in weeks when school is not in session such as during spring break. These same minors may not work past 9:00 p.m. between June 1 and Labor Day.
  • Work past 9:00 p.m. between June 1 and Labor Day?
Minors 14 and 15-years old may not be employed past 9:00 p.m. between June 1 and Labor Day. They may not work past 7:00 p.m. between the day after Labor Day and May 31.
  • Work more than 3 hours on a school day, including Fridays?
Minors 14 and 15-years old may not work more than 3 hours on a school day, including Fridays. This prohibition applies even if there is not school the next day.
  • Work more than 8 hours on any day?
Minors 14 and 15-years old may work up to 8 hours a day on Saturdays and Sundays and on other days when school is not in session, as long as they do not exceed the maximum permissible hours in any workweek. They may work up to 18 hours in any week school is in session and up to 40 hours in any week school does not meet.
  • Work more than 18 hours in any week when school is in session?
Minors 14 and 15-years old may not work more than 18 hours a week when school is in session. For these purposes, school is in session in any week in which school meets, even if it meets for a part of a day or a portion of the week. School hours and school weeks are determined by the local public school where the minor would attend if he or she attended public school.
  • Work more than 40 hours in any week when school is not in session?
Minors 14 and 15-years old may not work more than 40 hours in a week when school is not in session. They may not work more than 18 hours in a week when school meets. For these purposes, school is in session in any week in which school meets, even if it meets for a part of a day or a portion of the week. School hours and school weeks are determined by the local public school where the minor would attend if he or she attended public school.
  • Operate any power-driven machinery, other than office machines?
Minors 14 and 15-years old may not operate most power-driven machinery, including lawnmowers, trimmers, and “weed-whackers”. These minors may operate office machinery, vacuum cleaners, floor waxers, and machines and devices used in connection with preparing and serving food and beverages, such as dishwashers, toasters, popcorn poppers, milk shake blenders, coffee grinders and microwave ovens that do not have the capacity to warm above 140°F.
  • Ride as a passenger in a motor vehicle (other than public transportation) as part of the job?
The child labor rules allow 14- and 15-year-olds to ride inside the passenger compartment of a motor vehicle, but not when a significant reason for the minor being a passenger in the vehicle is for the purpose of performing work in connection with the transporting of, or assisting in the transporting of, other persons or property. As the transporting of, or assisting in the transporting of, other persons or property need only be a significant reason for the minor being in the vehicle and not the primary reason, permissible trips are fairly limited. When such youth are permitted to ride in the passenger compartment, each youth must have his or her own seat in the passenger compartment; each seat must be equipped with a seat belt or similar restraining device, and the employer must advise each passenger that such seat belts or devises are to be used. Fourteen- and 15-year-olds may never be employed as helpers on motor vehicles.
  • Work in occupations in connection with construction (including repair)?
Minors 14 and 15-years old may not be employed in any construction activities or on a construction site. A limited exception would apply for office or sales work when not performed at the actual construction site.
  • Work inside a freezer or meat cooler?
Minors 14 and 15-years old are prohibited from working in freezers and meat coolers. This includes duties such as taking inventory or performing cleanup work which would require them to enter and remain in coolers or freezers for prolonged durations. These minors may enter freezers momentarily —but not meat coolers—to retrieve items.
  • Perform any work in or about boiler or engine rooms?
Minors 14 and 15-years old may not perform any work in or about boiler or engine rooms.
  • Perform any work in connection with maintenance or repair of the establishment, machines or equipment?
Minors 14 and 15-years old may not perform any work in connection with maintenance or repair of the establishment, machines or equipment.
  • Perform any work requiring the use of ladders, scaffolds or their substitutes?
Minors 14 and 15-years old may not perform work requiring the use of ladders, scaffolds, or their substitutes.
  • Perform any outside window washing that involves working from sills?
Minors 14 and 15-years old may not perform outside window washing that involves working from sills, ladders, or scaffolds.
  • Cook?
Fourteen- and 15-year-olds may perform only that cooking that (1) involves the use of electric and gas grills that do not entail cooking over an open flame and (2) involves the use of deep fat fryers which are equipped with and utilize devices which automatically raise and lower the “baskets” but not pressurized fryers.
  • Bake?
Minors under 16 years of age are prohibited from performing any baking duties. Prohibited baking duties include the weighing, mixing and assembling of ingredients and the operation of pizza ovens and convection ovens. The use of warming devices to maintain the heat of cooked food is permitted.
  • Load or unload goods from a truck, railroad car or conveyor?
Minors 14 and 15-years old may not load or unload goods to and from conveyors, trucks, railroad cars or tanks, trucks, boats, planes, or other mean of transportation. See 29 CFR § 570.33 and Child Labor Bulletin 101. Such minors may load onto motor vehicles and unload from motor vehicles the light, non-power-driven, hand tools and personal protective equipment that the minor will use as part of his or her employment at the work site, and the personal items such as a back pack, a lunch box, or a coat that the minor is permitted to take to the work site.
  • Operate any hoisting equipment, including such equipment as scissor lifts, motorized hand trucks, forklifts, or grocery cart retrieval systems and cart caddies?
Minors 14 and 15-years old may not perform work involving the operation or tending or hoisting equipment—whether power-driven or operated manually or by gravity. Such equipment includes forklifts, scissor lifts, motorized hand trucks, patient lifts, winches, cart caddies, or QuicKart (used to move large strings of shopping carts from the parking lot to the front of the store).
Are any of your employees under 14 years of age?
Minors 13 years of age and younger are generally too young for employment under the Federal child labor provisions. Permissible employment for such minors is limited to exempt work such as delivering newspapers, performing casual babysitting, acting, performing minor chores around private homes, and working for a parent who is the sole owner of a business (in occupations other than mining, manufacturing, or anything prohibited by an HO).
  • Do you fail to maintain a record providing proof of age for all employees under 19 years of age?
Employers are required to maintain and preserve certain records, including the date of birth for all employees who are less than 19 years of age.
Employers may protect themselves from unintentional violation of the child labor provisions by keeping on file an employment or age certificate for each minor employed to show that the minor is the minimum age for the job. Although the Wage and Hour Division no longer issues age certificates, certificates issued under most state laws are acceptable for purposes of the FLSA.
Source: DOL

Wednesday, November 5, 2014

Understanding Construction Contracts

Construction contracts can contain terms that impact your company’s bottom line. Reviewing them carefully prior to signing is indispensable, and can save your company time and money. This contract review guide is meant to be a starting point for reviewing contracts in general. It highlights some common contract terms and their potential impact. You can begin to understand which terms are most often negotiated in contracts generally. Then, with the help of licensed inside or outside counsel, analyze the commercial risks associated with construction contracts in depth and understand terms and conditions to protect your company’s assets.

Scope of the Agreement

Examine the definition of services to be provided to ensure the language is clear enough for an unrelated third party to understand the scope. The contract should include a time frame for completion of services. The rights and obligations of both parties should be clearly outlined. Any mechanism for changing the scope of the contract, as well as any of the terms, if allowed, should also be outlined within the contract.

Terms of Payment

Terms of payment should be clearly listed within the contract so that the expectations of both parties are clear. The contract should specify the agreed payment schedule for goods received. 


There are two types of warranties: express and implied. Both types are assurances regarding particular issues, such as performance. 

Express warranties are those that are defined specifically in the contract. Implied warranties are based in statutory and/or common law, depending upon your jurisdiction. They are two-fold: a warranty of merchantability, which requires that goods/services must reasonably conform to an ordinary buyer’s standards, and a warranty of fitness for a particular purpose, which states that if a seller knows the intended purpose for the product or service, the act of selling the product to that customer implies that it is fit for that purpose. 

Be aware of warranty disclaimers and understand how the disclaimer limits your statutory rights. If it disclaims all warranties, express and implied, then you will likely be limited to the remedies in the contract for issues related to things like performance. You should also examine any disclaimer in the context of the contract. While it may require you to disclaim your statutory rights, other contract language may give you adequate rights and remedies regarding the points about which you are most concerned.

Damages, Limits of Liability and Indemnification

These three items are often in close proximity to one another in a contract, as they are interrelated. Damages may be defined as certain types of losses that could create liability under the contract. A limit on liability would restrict the amount of damages that a party would be required to pay if found liable for such damages. Sometimes this may also include a limit for indemnification.
Indemnification provisions allocate risk and cost between the parties. It is important to examine whether the party assuming the risk is the party with the most control over that risk. For instance, when a company’s employees are required to work at a customer’s location, the company is often asked to release the customer from all liability relating to the employees presence at the customer’s location.

In some cases, indemnification is limited to negligence or to a specific dollar amount, under a heading of “limits of liability.” 


Some contracts will contain minimum bodily injury and property damage liability coverage amounts that the party must possess and also may require that the customer is added as an additional insured on those coverages. 

Prior to consenting to any contract, it is prudent to examine insurance coverage against the amount of liability exposure in a particular contract.

Terms and Conditions

  • Governing Law & Jurisdiction – Look at the governing law provision to make sure that you are comfortable with the implications of the state law chosen by the drafter. This can impact the interpretation of the contract from warranties to indemnification.  Additionally, when specific statutes or regulations are referenced in the body of a contract, it is as though that statute or regulation is wholly contained within the contract itself. It is vital to read and understand that language prior to giving your consent. This happens regularly in government contracting situations.
  • Dispute Resolution – This is another clause with which you must be comfortable with the laws of the state or forum chosen by the drafter. The rules chosen to govern dispute resolution can impact the outcome. Additionally, you should consider whether dispute resolution is right for your situation.
  • Intellectual Property – When you are disclosing and/or licensing your company’s intellectual property, be it trademarks, copyrights or patents, it is important to include a clause that recognizes the owner of such intellectual property and affirmatively states that the agreement does not transfer any rights.
  • Standard of Care – A standard of care clause may appear in certain types of contracts. The standard of care that is provided by the law should provide the minimum standard of care for the provision of services under the contract.
  • Term/Termination – The contract should provide both parties with the right to terminate the contract. The situations in which termination is allowed will vary from contract to contract. Some contracts will allow the right to terminate in cases of dissatisfaction; others will allow it with a specific notice, for no cause. It is important that you contemplate in what cases you would want the right to terminate the contract. There should also be language defining the term of the contract. Does it have a finite term? Does it automatically renew each period?
  • Right to Cure – Related to termination, some contracts will contain a right to cure clause. This would give the defaulting party notice of a breach and a finite period of time in which to remedy such breach. 

Standard Form Contracts

Unlike other industries, construction lacks a consistent set of laws like the Uniform Commercial Code or a federal statutory scheme. Contracts produced by professional and trade associations for architects (American Institute of Architects), engineers (Engineers Joint Contract Documents Committee) and commercial contractors (Associated General Contractors of America) can serve as important references and benchmarks when drafting a new contract. They are a good source of industry best practices, and using them can greatly reduce drafting and review time, meaning lower overall transaction costs for your company.

For all of their advantages, there are several things that you should be cautious about when using standard form contracts. Note the following cautions about standard forms before using them.
  • Standard forms, which are written broadly to encompass many different contexts, require transaction-specific and jurisdiction-specific modifications. For example, certain states require that indemnities be written in a certain way.
  • Changes made to one part of the document, such as definitions of words or terms, may affect other parts that make reference to it.
  • Custom-drafted and industry-drafted forms are often incompatible. Even industry-drafted forms from different publishers can be incompatible.
  • Standard forms always contain the bias of the drafter. Use this bias; know when to use various standard forms published by different industry organizations.

General Understanding

Reviewing general terms and features of construction contracts will help you grasp the consequences of its terms and conditions for your business. In any case, to ensure its completeness and accuracy, it is necessary to submit each contract you must sign to legal review.

Ground-fault Protection for Construction Sites

According to the National Institute of Safety and Health, the most frequently cited Occupational Safety and Health Administration (OSHA) electrical violation is improper grounding of equipment or circuits. This is especially troubling for construction managers in light of the fact that construction workers suffer more electrical burns and fatal electrical injuries than workers in all other industries combined. Each incident carries significant costs in terms of lost time and resources and increases the employer’s risk of costly lawsuits. The most tragic aspect is that many of these accidents could have been prevented with the implementation of proper ground-fault protection practices.

OSHA Regulations

OSHA requires employers to provide either: (a) ground fault circuit interrupters (GFCIs) on construction sites for receptacle outlets in use and not part of the permanent wiring of the building or structure; or (b) a scheduled and recorded Assured Equipment Grounding Conductor Program (AEGCP), covering all cord sets, receptacles not part of the permanent wiring of the building, and equipment connected by cord and plug.

About GFCIs

Grounding a tool or electrical system involves creating a low-resistance electrical path that connects to the earth. A ground-fault occurs in a tool or electrical system when there is a break in this low-resistance grounding path. The electrical current may then take an alternative path to the ground through the user, resulting in serious injuries or death. GFCIs automatically limit or stop the flow of current in the event of a ground fault, overload or short circuit in the wiring system. They operate by monitoring the amount of current going into electric equipment and the amount of current flowing out along the circuit conductors. If the difference exceeds 5 milliamperes, the device automatically shuts off the power to prevent injury.

About AEGCPs

The OSHA-approved alternative to using GFCIs on a construction site is an AEGCP, which is a regimented system for testing electrical tools and extension cords to assure their proper grounding. If an AEGCP is used in place of GFCIs for ground-fault protection, the following minimum requirements apply:

  • Keep a written description of the program at the jobsite. Outline specific procedures for the required equipment inspections, tests and test schedule, and make them available to OSHA and to affected persons upon demand.
  • Designate one or more competent persons to implement the program. OSHA defines a competent person as someone who is a) qualified to identify hazards and b) authorized to take prompt corrective measures.
  • Visually inspect all cord sets, attachment caps, plugs and receptacles, and any equipment connected by cord and plug, before use each day. If you see any external damage, such as deformed or missing pins, damaged insulation, etc., or discover internal damage, take the equipment out of use until it is repaired.
  • Perform two OSHA-required tests on all electrical equipment: a continuity test, and a terminal connection test. 
These tests are required:
  • Before first use
  • After any repairs, and before placing back in service
  • After suspected damage, and before returning to use
  • Every 3 months

Maintain a written record of the required tests, identifying all equipment that passed the test and the last date it was tested (or the testing interval). Like the program description, make it available to OSHA inspectors and affected persons upon demand.

Using GFCIs in Conjunction with AEGCPs

Although OSHA permits the use of an AEGCP in lieu of GFCIs, it would be a mistake to view the choice as strictly an either/or proposition. The best course of action is to use GFCIs in conjunction with an Assured Equipment Grounding Conductor Program. Taking this step will not eliminate the possibility of a costly electrical accident on the worksite, but it will significantly reduce the risk of injury or death due to ground faults.

For more risk management tips, contact Naught-Naught Agency at 573-634-2727.

Source: OSHA