... continued from front
of-bond” aspect but also a timing aspect. If I were drawing up dream subcontractor bonds for a general contractor client, I would want a three-year timeline, within which the general contractor could sue the bond for payment-related claims. Third and finally, our office has already started to see extraordinarily burdensome indemnity clauses in subcontracts, where subcontractors indemnify the general contractor for all wage payment-related claims and certify that sub-subcontractors have paid their employees properly and retained sufficient paperwork to defend the general contractor against payment claims. That is not only a liability burden but also a significant administrative burden, as well. How can construction companies manage these new risks? For general contractors, suggestions read parallel to the subcontractors list of risks: • Protect yourself by tightening up your subcontractual indemnity clauses. For this new liability, build new indemnity coverage into your subcontracts. • Require more bonding, especially in length of coverage. If a downstream employee can sue you for triple damages and attorneys’ fees three years after a project winds up, then get your subcontractors to bond all of that. • Increase project reporting requirements. If subcontractors are properly paying their own employees, it is not much more of a
burden for those subcontractors to provide documentation that they have been doing just that. And if a claim does arise, that documentation could be helpful in defending against that claim. For subcontractors, the risk management requires some more creativity, such as: • Fighting up front to limit your indemnity obligations to scenarios where you are the guilty party, as opposed to your own subcontractors. • Keep better records. If a claim does arise in the future, make sure you are ready to combat that claim with clear, timely record- keeping of all wage payments. • Push the risk downhill. For your own subcontractors, add the indemnity, bonding, and reporting requirements recommended for general contractors above. I understand that for both general contractors and subcontractors, these fixes might not always fit into real-world scenarios, but they can be tools in your toolbox to take out and use as appropriate. This column is intended to provide educational material only and is not intended to provide legal advice. Before proceeding with or defending any claim, you should carefully evaluate your contract and related legal rights and seek the direct counsel of a construction attorney. If you want to learn more skills and tips about avoiding construction claim pitfalls, you can receive a free copy of my book, “The Subcontractor’s Roadmap to Getting Paid for Extra Work” by emailing me at jwyatt@harrisonlawgroup.com.
-Jeremy Wyatt
jwyatt@harrisonlawgroup.com
www.HarrisonLawGroup.com
(410) 832-0000
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