Five Essential Roofing Contract Provisions

Contracts can either be a roofing contractor’s best friend or worst enemy. It is critical that contractors are aware of the provisions within roofing and prime contracts (as subcontracts often incorporate prime contract provisions). Due to the importance of contractual terms and provisions, outlined below are five essential contract provisions that, if not properly drafted, can have harmful consequences to your business and bottom line.

1. Scope of Work Provisions

“Scope of work” issues compose a large part of litigation under roofing contracts. Scope of work disputes typically involve contractors seeking payment for work that was not in the original contract, followed by unhappy owners disputing whether or not they agreed to the work that was performed. Scope of work issues arise when roofing contractors find areas of the roof that need additional work performed in order to successfully complete a project but may not have been adequately referenced within the contract. For instance: when a roofing contractor is performing a contract for a roof replacement, and the roofing contractor — in the process of replacing the roof — finds rotted decking that needs to be replaced, the roofing contractor is likely, and rightfully, going to perform the additional work and charge for the additional material and labor costs. The additional charges can be ripe for disagreement due to the original contract failing to adequately contemplate decking replacement as an extra charge.

Well-crafted scope of work provisions are imperative to include in roofing contracts. If additional work is encountered during a roofing project, as we all know is typically the case, the contract should explicitly state that the extra work (i.e., replacement of decking, fascia, soffits, etc.) will be an additional cost. Just as important, the contract should also state the method of pricing for this extra work.

2. Indemnification Provisions

Indemnification provisions are another important component of roofing contracts. Indemnification is the compensation for damages (or loss) as a result of someone else’s bad acts or omissions. For the roofing industry, indemnification clauses are important because they limit a roofing contractor’s liability.

It is important to note that there are several different types of indemnification provisions within roofing contracts: standard indemnity, super indemnity, and those that fall in between. Standard indemnity is the indemnification of the customer for the roofer’s actions that cause damage to the subject property. Super indemnity includes indemnification from the roofer’s own actions that cause damage, in addition to indemnifying a customer of his/her own acts. For instance: if a customer goes on a roof after hours to move equipment around, tearing a hole in a tarp covering which later leads to water damage, the super indemnity provision allows the customer to make a claim against the contractor — even though the customer’s own act caused the damage.

Indemnification provisions are complex and heavily litigated. Individual states have specific statutes and rules that control indemnification provisions in construction contracts. Due to this, roofers must ensure contracts are sensibly reviewed to ensure that the contract and its provisions comply with applicable state laws.

3. Liquidated Damages Provisions in Construction Contracts

When there is a contract, and one party to the contract breaches it, the non-breaching party oftentimes desires a liquidated damages provision in the contract to limit its damage exposure. Liquidated damages provisions are created to compensate a non-breaching party for the damages incurred from another party’s breach of the contract based on a predetermined amount and can protect a roofing contractor from large losses.

In roofing contracts, liquidated damages are usually tied to timely completion of the work by the contractor — that is, if not timely completed, the project owner is able to collect liquidated damages from the contractor due to failure to complete the project within the set timeframe.

Liquidated damages provisions must be carefully crafted and generally must abide by the following:

  • The damages must be intended to compensate the project owner for the breach of the contract — the liquidated damages provision cannot be a penalty. Courts have found that if the stipulated sum for liquidated damages is too great in comparison to the actual contract amount, the liquidated damages provision will not be enforced.
  • The liquidated damages provision is not enforceable if the non-breaching party contributed to the breach.
  • Because liquidated damages compensate for damages caused during late completion of a project, liquidated damages cannot be sought after the project has been substantially completed since the owner is no longer accruing damages.

These general rules of liquidated damages are important for roofing contractors to be aware of because when a project owner withholds proceeds, the contractor will be ready to make proper arguments to secure payment and potentially void the liquidated damages provision. To void a liquidated damages provision, the contractor can argue that any one of the above liquidated damages provisions has been violated. By proving any of above, the liquidated damages provision may not be enforced by a court and the contractor can successfully collect payment.

4. No Damages for Delay Clauses

Owners try to include limitations of liability and disclaimers within their roofing contracts. This is done to limit a roofing contractor’s ability to collect additional compensation from work due to unexpected delays and other conditions. Typically, under no damages for delay clauses, the roofing contractor is given extra time to complete a project but is not compensated for extra costs incurred due to said delay. No damages for delay clauses have a wide breadth in that they cover delays whether they are caused by an owner or caused by acts of God.

No damages for delay clauses are for the most part upheld in courts of law. However, there are certain circumstances where courts have declined to enforce a no damages for delay clause. If it is shown that an owner has acted in bad faith, the owner defrauded the contractor, or that the owner interfered with the contractor’s ability to finish the project, courts have the ability to decline to enforce a no damages for delay clause.

No damages for delay clauses—which can be found within bid documents—are important for roofing contractors to take note of since it allows roofing contractors to accurately adjust both their bids and work according to the contract terms.

5. Retainage Provisions

Retainage — or the withholding of a predetermined percentage of each progress or final payment — is included in many roofing and general construction contracts. Owners and prime contractors withhold retainage until final completion of the project. Retainage provisions have dual purposes: (1) they are used as an incentive for roofing contractors to complete the project; and (2) are used as protection by the owner in the event of uncompleted or defective work.

Roofing contractors should be wary that retainage can deepen the impact of subpar estimating as 5 percent to 10 percent of the contracted price is typically not paid until final completion of the project.

About the author: David Keel is an attorney at Cotney Construction Law who focuses his practice in various areas of construction law, and he serves as General Counsel of Space Coast Licensed Roofers Association. Cotney Construction Law is an advocate for the roofing industry and serves as General Counsel for FRSA, RT3, NWIR, TARC, WSRCA and several other roofing associations. For more information, visit www.cotneycl.com.

Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

How Can the H-2B Classification Help Contractors Find Good Workers?

Nearly all businesses require employees to operate, and all successful businesses require that those employees be competent and capable. One issue facing contractors is the inability to find well-qualified and competent workers. Another issue facing contractors is the shortage of workers available to keep up with increased building demands in the United States. The H-2B classification can help contractors address these issues by expanding the pool of potential workers.

What Is the H-2B Classification?

The H-2B classification was created in order to facilitate the hiring of foreign workers to fill temporary needs with U.S. businesses. For the H-2B classification, it must be established that (1) there are not sufficient U.S. workers who are qualified and available to perform the temporary services or labor for the employer; (2) that the employment of foreign workers will not affect the wages and working conditions of similarly employed U.S. workers; and (3) that a temporary need exists for the employer.

The H-2B program has two components with two different government agencies. The first component deals with the U.S. Department of Labor (DOL) and the second component deals with the U.S. Citizenship and Immigration Services (USCIS). Each agency oversees a different aspect of the H-2B program. The DOL focuses on the labor market, and is tasked with determining that:

  1. There are not sufficient U.S. workers who are qualified and who will be available to perform the temporary services or labor for which an employer desires to hire foreign workers.
  2. The employment of H-2B workers will not adversely affect the wages and working conditions of similarly employed U.S. workers.

At the end of the day, the DOL wants to make sure that the foreign worker is not taking a job from an American or affecting the wage market for American workers. The USCIS component of the H-2B program focuses on the temporary need of the employer and the foreign worker’s qualifications. The USCIS component is the last part of the process and is the final authority on whether the H-2B classification will be granted to the foreign worker.

What Is a Temporary Need?

A critical element of the H-2B analysis focuses on the temporary need of the employer. There are four types of needs for H-2B classification purposes. They are (1) one-time occurrence; (2) seasonal need; (3) peak-load need; and (4) intermittent need. A one-time occurrence is as the name suggests; it is an event that occurs one time which requires the need for additional workers and after this event concludes, so does the need for the workers. A seasonal need exists where the employment is traditionally tied to a season of the year by an event or pattern and is of a recurring nature. Examples include the hiring of workers during the Christmas shopping season by UPS and FedEx due to an increase in holiday shipping demands, and when the Disney theme parks require additional workers in the summertime because of an increase in visitors after schools are no longer in session. Both these needs are seasonal and recur every year. A peak-load need exists where the employer normally employs permanent workers to perform a service or labor and an increased seasonal or short-term demand requires additional workers who will not become part of the employer’s regular operations. The key with a peak-load need is that it is not recurring. An intermittent need exists where an employer does not employ permanent or full-time workers to perform services or labor and occasionally needs temporary workers for short periods of time.

What Is the Process?

The H-2B classification process starts with the DOL and ends with USCIS. The first step is to file an Application for Prevailing Wage Determination with the DOL. This application outlines the proposed employment and results in a Prevailing Wage Determination (PWD) issued by DOL, which sets the minimum amount that can be paid to the foreign worker. After the employer received the PWD from the DOL, the employer can begin the recruitment process. The recruitment process includes posting a job order with a state agency and running two print advertisements as well as interviewing candidates that apply for the position. After recruitment is completed, the employer submits an Application for Temporary Employment Certification with the DOL along with a completed recruitment report. Once a final determination is made by the DOL and the application is certified, the process then shifts to USCIS. The final step is to file an I-129, Petition for a Nonimmigrant Worker. If the foreign worker is outside the United States, he or she will also need to apply for an H-2B visa at a U.S. Embassy or Consulate.

H-2B “Cap” and the Period of Stay

For the H-2B classification, there is a statutory limit on the total number of foreign nationals who may be granted H-2B status or issued an H-2B visa. This is commonly referred to as the H-2B “cap” and is currently set at 66,000. Unlike other statutory limitations, the H-2B cap is split between two parts of the year, with 33,000 allocated for the first half of the U.S. government fiscal year (October 1 to March 31) and 33,000 allocated for the second half of the U.S. government fiscal year (April 1 to September 30). If any of the first 33,000 are not used by the beginning of the second half of the fiscal year, those unused numbers will be reallocated to the second half of the fiscal year. While cases based on a one-time occurrence can be approved for up to 3 years, all other H-2B classifications will be approved for, at most, 10 months. The H-2B classification can be renewed, in increments of up to one year, and the foreign worker can stay in the United States for a maximum for 3 years. After 3 years, the foreign worker must stay outside the United States for an uninterrupted period of 3 months before seeking readmission under the H-2B classification.

Pros and Cons of H-2B Classification

For contractors, the H-2B classification can provide them temporary workers when needed for short periods of time. This can be especially important when there is difficulty finding quality workers in the United States. But as with any immigration classification, there are some pros and cons to consider when it comes to the H-2B classification.

Pros

  • While there is a cap on the number of H-2B statuses granted/visas issued, there is no lottery system in place like the H-1B. This means that there are usually H-2Bs available if you file at the right time.
  • There are no special qualifications, educational or otherwise, required for the H-2B classification, unlike some other immigration classifications. The foreign worker must simply meet the requirements for the position.
  • Premium processing from USCIS, which guarantees a response in 15 days after filing, is available.
  • The H-2B classification is renewable, in increments up to 1 year, for a total stay in the United States of 3 years. After the 3-year limit is reached, the foreign worker only needs to leave the United States for 3 months before he or she is eligible for H-2B classification again.

Cons

  • The H-2B classification essentially requires the foreign workers to be employees of the company by requiring an employee-employer relationship for the proposed employment. Independent contractors would not qualify.
  • From start to finish, it takes about 3 to 4 months while utilizing USCIS’s premium processing service, or 4 to 7 months without the premium processing service. If a worker is needed quickly, the H-2B classification may not be the right choice.
  • Only individuals from certain countries are eligible for the H-2B classification.
  • The minimum wage that must be paid to the H-2B recipient is fixed by the DOL and may be higher than what the employer is willing to pay or normally pays similar workers.
  • The foreign worker needs to have legal status in the United States or reside outside the United States to qualify. Illegal immigrants do not qualify for the H-2B classification.

The H-2B classification may help contractors address some of their labor needs. Contact an experienced immigration attorney to see whether this is a good fit for your company.

About the author: Paul Messina is an attorney at Cotney Construction Law who focuses his practice on immigration law. Cotney Construction Law is an advocate for the roofing industry and serves as General Counsel for FRSA, RT3, NWIR, TARC, WSRCA and several other roofing associations. For more information, visit www.cotneycl.com.

Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

Three Key Questions About OSHA Inspections

OSHA will investigate a jobsite for a number of reasons. A representative from OSHA will show up if an employee has issued a complaint against you, if there is a recent fatality, or if there is an imminent threat they have identified. The dangers of fall-related injuries in the industry have been well documented, and this has prompted inspectors in your area to be on the lookout for roofers. Additionally, roofers are the easiest to cite due to the fact that roofing is a highly visible construction trade and an inspector does not have to use much effort to determine the likelihood of a dangerous situation that needs inspecting.

OSHA inspections can be stressful, but they can be less stressful if you know your rights and the proper procedures to follow during an inspection. Here are the answers to the most common questions I encounter when it comes to OSHA inspections.

Question #1: Do I have to comply, and what happens if I refuse OSHA access?

First and foremost, you need to know that OSHA has a legal right to inspect your jobsite. OSHA has what is called “administrative probable cause” to inspect and investigate your project. OSHA’s probable cause is more easily obtained than that of other agencies. An officer of a city, state, or federal law enforcement agency needs a much more specific probable cause to enter a private citizen’s property. This is not the case with OSHA. When an active construction project is taking place, there is an inherent risk of danger and injury, and this gives OSHA all the administrative probable cause they need.

This is not to say that you and your site superintendent do not have the right to deny OSHA access to the project and demand that they get a warrant. The site superintendent has the option to consent to OSHA’s inspection or deny them access to the project. The superintendent is well within his or her rights to tell the inspector to get a warrant. However, if you tell OSHA to get a warrant, they most certainly will. Because of OSHA’s broad power to oversee safety within the United States, they can obtain a warrant from a judge or magistrate. Once OSHA obtains a warrant for a site inspection, their inspection can become much more invasive. This means that OSHA inspectors can get permission from a judge to examine documents, conduct extensive interviews, and also perform scientific tests on items such as air quality, presence of combustible material, or any other danger.

The bottom line is that it is rarely a good idea to tell an OSHA compliance officer to get a warrant. The reasoning behind this has to do with the scope of OSHA’s inspection rights under the Code of Federal Regulations (CFR). The CFR demands that OSHA’s inspection be “reasonable.” This essentially means that they are limited to inspect only the workers, equipment, and materials which are within “plain sight.” “Plain sight” is a doctrine borrowed from criminal law and the Fourth amendment, which says that a government agent may not sample or manipulate anything that is not within his or her reasonable line of sight. If an agent violates this doctrine, it is possible that all the information they obtained during the inspection may be suspect.

Question #2: What should I do during the inspection, and are there areas I can prevent OSHA from viewing?

When OSHA is on site, the superintendent should remain alert, aware, and advocate for his or her company. The superintendent has specific rights granted to them under the CFR, and they must use those rights in order to protect themselves, the business, and the men and women who rely on that business for their livelihood.

The superintendent has the right to accompany the inspectors wherever they go on site, and he or she should do so. The inspector should be followed on the roof, through the rafters, and wherever else they intend to go. The superintendent also needs to ask a few key questions of the inspector and needs to ask them often. Mainly, he or she needs to know why OSHA is there. What is the scope of their investigation? What specifically are they there to see? Once the superintendent knows what OSHA wants, he or she can then limit them to what they can see. If an inspector attempts to go outside that scope, then the superintendent needs to notify them immediately.

Question #3: What happens during the inspection?

During the inspection, the OSHA compliance officer will make a walkthrough of the project. The inspector’s main focus is usually on fall protection equipment and fall protection practices of the crew. Always make sure every harness, rope, and lanyard on site is properly maintained. If a harness has been previously impacted, it does not need to be on a jobsite. Such equipment should be discarded and replaced. Roofers are cited far too often because an old harness or frayed rope stays on a truck when it should have been discarded. This is an easy citation to avoid. Throughout the inspection, the OSHA officer may perform brief interviews with the crew and question crew members on various issues relating to the inspection. OSHA has the right under the CFR to perform these interviews in private, away from the superintendent. Although the questioning can be private, it must also be brief. The superintendent needs to object to any questioning that goes on for an excessive amount of time.

Next, an OSHA inspector may ask to interview the managers and superintendents on site. This is a common practice, and OSHA inspectors are within their rights granted by the CFR to request such an interview; however, company managers have the right to refuse an interview without counsel present. This is important to remember because poor statements about safety from a crewman can hurt your case, but poor statements about safety from a supervisor can destroy your case. The only discussion going on between a supervisor and an OSHA compliance office during the walkthrough inspection should involve the scope of the inspection. The superintendent should not answer any questions regarding safety protocols, equipment, or practices without the assistance of counsel. If OSHA wants to speak with a manager, supervisor, or superintendent, they must do so with an attorney present. Paying for a lawyer may be expensive, but paying for a “willful” OSHA citation can bankrupt a roofing company.

Remember Your Rights

An OSHA inspection can be a trying and frustrating time. A roofing contractor’s best defenses against costly citations are to teach satisfactory safety techniques within the crew; update and maintain the required safety equipment; ensure everyone is aware of the jobsite-specific safety plan; and remember their rights when OSHA visits the jobsite.

About the author: Anthony Tilton, Partner at Cotney Construction Law, focuses on all aspects of construction law and works primarily on matters relating to OSHA defense. Cotney Construction Law is an advocate for the roofing industry and serves as General Counsel for FRSA, RT3, NWIR, TARC, WSRCA and several other roofing associations. For more information, visit www.cotneycl.com.

Author’s note: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.

Witness Statements and OSHA Inspections

During any OSHA inspection, the Compliance Safety and Health Officer (CSHO) will more than likely take witness testimony from crew members that are on site. This CSHO will hand-write the interview answers and ask the employee to sign the witness statement. Most employers and employees do not understand their rights during an OSHA inspection and do not know that they are not required to sign witness statements. This article explores the use of witness statements by OSHA and suggests alternatives to signing a witness statement.

First and foremost, it should be noted that all members of management, including officers, directors, and owners, have the right to have counsel present during any OSHA interview. In addition, any supervisory employee is also considered part of management, and therefore has the ability to have counsel present during the interviews. When OSHA inspects a jobsite, supervisory employees such as crew leaders, foremen, superintendents, and/or project managers should assert their right to have counsel present before giving any testimony to OSHA. In other words, the supervisor should state their name, position and assert the right to counsel. This will give the individual an opportunity to discuss the alleged violations with management and counsel prior to being interviewed. It will also allow management and counsel to be present during the interviews. Generally, these interviews occur at counsel’s office or OSHA’s area office rather than the jobsite, thereby limiting exposure to additional potential violations.

With regard to crew member interviews, management and counsel for management cannot be present during non-supervisory employee interviews. However, if the employee requests that counsel be present for the interview, OSHA must allow counsel to be present. During the interviews, OSHA will ask a variety of questions regarding safety training and jobsite-specific acts or omissions. For example, common safety training questions include how to properly tie off, use personal protective equipment (PPE), properly install anchor points, properly tie off ladders, knowledge about hydration and water breaks, knowledge regarding risks associated with swing radius, inhalation of chemicals and/or silica, as well as other potential hazards.

The jobsite-specific questions will focus on the who, where, when, what and how. In particular, questions will be asked to employees regarding the training they received and commands they received on the date of the incident. For example, if employees are not properly tied off as required, the CSHO will ask whether employees were instructed to tie off on the date of the inspection, whether supervisory employees inspected the crew members during construction, and the reason(s) why employees were not tied off. OSHA often asks whether employees were not wearing fall protection because they were told to complete work at an accelerated pace or to meet certain schedule obligations. If an employee answers in the affirmative, it could be damaging to the employer.

While the testimony is being taken, the CSHO will be drafting a witness statement, which generally contains self-serving declarations for purposes of prosecuting the employer. No one is required to sign a witness statement. Both supervisory and non-supervisory employees can refuse to sign witness statements. The CSHO may take his/her own notes and use that as evidence or have the local area office issue a subpoena requiring that his/her testimony be taken under oath. This delay in obtaining testimony may be beneficial for the employer because it will allow the employee to have the opportunity to think about his/her answers and be in a better mindset for purposes of providing testimony. It also gives counsel and management an opportunity to speak with and prepare the employee for the interview if he or she wishes to do so. Obviously, regardless of when testimony is provided, all employees must always tell the truth.

OSHA relies heavily upon the witness statements during inspections to issue citations. Employees need to understand that interviews are voluntary and that they have the right to decline the interview outright. In the absence of a subpoena, an interviewee cannot be compelled to do anything during the voluntary interview. Additionally, an employee also has the right to refuse the recording of an interview, whether video or audio, and has the right to take a break from the interview at any time.

As always, nothing in this article is meant to suggest that any employer should not fully comply 100 percent with OSHA rules and standards. However, it is important to understand and assert your rights while an inspection is being performed to help limit exposure to OSHA citations.

About the author: Trent Cotney, CEO of Cotney Construction Law, is an advocate for the roofing industry and serves as General Counsel for FRSA, RT3, TARC, WSRCA and several other roofing associations. For more information, contact the author at 866-303-5868 or www.cotneycl.com.