Speaking of Education…It May Be Back to Class for Contractors

It’s no surprise that almost all states require general contractors and some subcontractors to register with regulatory boards and pass a qualifying exam in advance of bidding, contracting, and certainly physically undertaking construction work. That’s not new. However, there is an emerging trend towards requiring general contractors, and even some subcontractors, to participate in continuing education. Depending on the jurisdiction, some contractors and subcontractors are now statutorily obligated to complete a certain amount of continuing education — similar to what has been historically required only of doctors, lawyers, and accountants — to maintain licensure.

For instance, this summer, North Carolina became the most recent state to impose continuing education requirements for general contractors. Effective January 1, 2020, general contractors will be required to complete 8 hours of continuing education per year. Because roofing contractors in North Carolina performing work in excess of $30,000 are required to be licensed as general contractors, they will now be subject to the new continuing education requirements.

This recent legislation and its impact on the roofing industry raises questions about what is required for roofing contractors nationwide. Does roofing require special licensure and registration or continuing education? The answer is entirely dependent on the jurisdiction where the work is to be performed.

The following states currently require licensure for roofing: Alabama, Alaska, Arizona, California, Florida, Hawaii, Illinois, Louisiana, Massachusetts, Michigan, Minnesota, Mississippi, New Mexico, North Carolina, Rhode Island, South Carolina, Utah, and Virginia.

Other states don’t require licensure per se but do require roofing contractors to register. For instance, Oklahoma requires roofing contractors to register with the Construction Industries Board. Failure to register is a misdemeanor, and registration and endorsement as a commercial roofing contractor requires 4 hours of continuing education every 36 months. Similarly, Idaho does not require a state license, but requires roofing contractors to register with the Idaho Contractors Board.

As seen in Figure 1, even among the states which require continuing education, the requirements vary greatly both in the amount and type of education required. For instance, Florida law requires contractors holding a roofing license to take 1 hour of wind mitigation methodologies as part of the 14 annually required continuing education hours. In Massachusetts, construction supervisors within the roofing industry are required to take 2 hours of continuing education in code review and four one-hour courses in topics of workplace safety, business practices, energy, and lead safe practices.

Figure 1. Licensing and continuing education requirements by state.

Finally, in those states which don’t require licensure or continuing education, some industry groups have developed self-regulation. These industry groups are aimed at consumer protection and seek to secure public confidence in the roofing industry. In Georgia, which does not require a state roofing license, the Roofing and Sheet Metal Contractors Association of Georgia (RSMCA) provides a voluntary licensing program. Similarly, Kentucky has no license requirements for roofing contractors. However, the Kentucky Roofing Contractor Association (KRCA) is a nonprofit and professional organization which certifies roofing contractors. To obtain and maintain KRCA certification, roofing contractors must complete 10 hours of continuing education per year.

But just because a state legislature or professional association has not enacted regulations necessitating continuing education does not mean contractors are free from such requirements. While not mandated by the state itself, many cities have imposed their own directives. States such as Kansas, Kentucky, Illinois, Indiana, Maine, Missouri, New York, Oklahoma, Wyoming, and Pennsylvania each contain at least one municipality that compels contractors to take board-accredited continuing education courses. For example, Idaho Falls, Idaho, requires 8 hours of continuing education.

Regardless of where you are engaged in the practice of roofing contracting, it is imperative that all contractors exercise due diligence and review and comply with all state and local regulations before undertaking any project.

Contractors and trades are seeing a rise in regulation through the government by way of mandated continuing education courses. Do you think contractors should be required to take continuing education classes? Is this a necessary void that needs to be filled by the government intervention or is this just another example of unnecessary government regulation? Tell us what you think.

About the author: Lindsey E. Powell is an attorney with Anderson Jones, PLLC practicing in North Carolina and Georgia. Questions about this article can be directed to her at lpowell@andersonandjones.com. Special research credit is given to Kyle Putnam, Juris Doctor candidate and summer law clerk with Anderson Jones, PLLC.

Author’s note: This article is intended only for informational purposes and should not be construed as legal advice.

OSHA Education and Training Requirements For Contractors

Many licensed contractors have been getting “on-the-job” training for years — some, since they were working on jobsites as young laborers. But what formal education and training are required for contractors? The short answer is that it differs slightly from state to state, but no one can escape OSHA.

Perhaps the best-known training requirements for contractors are those set forth in the federal Occupational Safety and Health Act of 1970 (OSHA) and the regulations OSHA enables.

OSHA permits individual states to develop and enforce their own occupational safety and health plans, statutes, and enforcing agencies as long as the states meet federal requirements (29 U.S.C. § 667), so many contractors may be more familiar with their state’s occupational safety and health act than the federal. According to the U.S. Department of Labor, jurisdictions with their own federally-approved plans governing both public and private employers are Alaska, Arizona, California, Hawaii, Indiana, Iowa, Kentucky, Maryland, Michigan, Minnesota, Nevada, New Mexico, North Carolina, Oregon, Puerto Rico, South Carolina, Tennessee, Utah, Vermont, Virginia, Washington, and Wyoming. (Connecticut, Illinois, Maine, New York, New Jersey, and the Virgin Islands have plans that apply only to public employees.) State laws must be “at least as effective” and stringent as OSHA.

In most of these states, and in states that simply follow the federal OSHA requirements, construction-industry employee training is required to comply with the federal requirements set forth in 29 CFR 1926. California, Michigan, Oregon, and Washington have more stringent requirements than the federal rules.

What Training Does OSHA Require?

The Department of Labor’s regulations contained in 29 CFR 1910 and 29 CFR 1926 give employers numerous “accident prevention responsibilities.” These responsibilities specifically include the duty to train each “affected employee” in the manner the standards require. The regulations specifically require training for employees on topics including scaffolding, fall protection, steel erection, stairways and ladders, and cranes. Both federal and state courts interpret OSHA training requirements; state courts interpret them in states with their own laws but look to federal decisions for guidance.

Court decisions indicate that training requirements are interpreted broadly. For example, in 2002, the U.S. Court of Appeals for the First Circuit evaluated 29 CFR § 1926.21(b)(2)’s requirement for employers to instruct each employee in the “recognition and avoidance of unsafe conditions.” The case, Modern Continental Const. Co., Inc. v. Occupational Safety and Health Review Commission, involved vertical rigging in a tight working space during an underground project involving submerging a section of highway. The operation resulted in a fatality. The court found that the employers’ duty “is not limited to training for hazards expressly identified by OSHA regulation” and that employers are obligated to instruct their employees in the recognition and avoidance of “those hazards of which a reasonably prudent employer would have been aware.” The court recognized that while the training does not have to eliminate hazards, the training must focus on avoiding and controlling dangerous conditions.

Furthermore, merely holding or sponsoring training courses may not be enough to comply with OSHA; the regulations require employers not only to ensure training but also to ensure that each affected employee has received and understood the training. The District of Columbia Circuit emphasized this requirement in Millard Refrigerated Services, Inc. v. Secretary of Labor. The Court upheld a citation against an Alabama company operating a refrigerated storage facility after an anhydrous ammonia leak even though the employer claimed it didn’t know that its employee didn’t understand the training and therefore wasn’t wearing a respirator.

Decisions like this make it incumbent upon employers to recognize and anticipate hazards and ensure that employees have the proper education and quality training to handle them.

Penalties for Training Violations

Employers’ duty to train is worded as a duty to its individual employees: “The employer must train each affected employee in the manner required by the standard, and each failure to train an employee may be considered a separate violation” [29 CFR 1926.20(f)(2)]. The statute and regulations do not explicitly state the penalty for failure to give required training; penalties will depend on the facts of each case. OSHA violations generally fall into one of four categories: willful, serious, repeated, or other-than-serious. According to the Department of Labor, the current maximum penalty is $13,260 per serious violation and $132,598 per willful or repeated violation.

Courts have upheld steep penalties for certain training violations, particularly for repeated failure to train employees. For example, in Capeway Roofing Systems, Inc. v. Chao, a roofing contractor was fined $6,000 for failing to train an employee on fall protection. (The Secretary of Labor also assessed other fines against the contractor for failure to comply with rules on fall protection, personal protective equipment, and other regulations.) The court reasoned that the fine for failure to train was appropriate, though relatively high, because it was a third “repeat” violation. Additionally, in some states, certain OSHA violations, especially willful and repeated violations, can subject employers to criminal liability.

About the author: Caroline Trautman is an attorney with Oak City Law, LLP, based in Durham, North Carolina. Questions about this article can be directed to her at caroline@oakcitylaw.com.

Author’s note: This article does not constitute, and should not be construed as, legal advice on any particular scenario. For specific advice, consult with an attorney licensed in your state.

3 Best Practices for Communicating During a Crisis

From jobsite accidents to employee or management misdeeds, no business is immune from crisis situations — including the roofing sector. Contractors, manufacturers, distributors, and stakeholders throughout the supply chain do their best to safeguard against crisis situations and hope such events will not occur. But of course, hope is not a strategy and even the most stringent procedures cannot guarantee a crisis will not damage a business’s operations or its reputation.

As with many aspects of managing a business, advance consideration and planning can help minimize the consequences of a crisis situation. Have you asked yourself, “What would I do if a crisis situation threatened my business and the media/social media were at my door?”

A good place to start is by understanding not all crisis situations are the same. Most crises fall into one of two categories: “sudden” or “smoldering.” As the name implies, a sudden crisis arises without warning. Industrial accidents, terrorism, workplace violence and acts of God are all examples of sudden crisis situations. There is little time to prepare in these events and they are more likely to generate the public’s sympathy. In contrast, smoldering crisis events generally emerge over time and present problems not generally known that could generate negative public sentiment if they become public. Examples of smoldering crisis situations include business concerns such as audit findings, drug use by an employee, board mismanagement or a potential regulatory violation. A smoldering crisis may rapidly evolve into a sudden crisis if the news becomes public on the news or social media. As opposed to sudden crises, smoldering crisis events are rarely viewed positively.

Three Keys to Crisis Communication

Regardless of whether a crisis is sudden or smoldering, communication is imperative. A crisis communications plan can help manage either type of crisis. The plan should outline a central spokesperson to deliver all messages and include specific processes for who within the organization to contact in the event a team member is contacted by the media. While the details of a crisis management plan are beyond the scope of this column, every crisis management plan requires communication. When crafting crisis communications, three “best practices” can be applied to most situations. These practices are:

1. Tell the truth. Rarely are all of the facts readily available as a crisis situation unfolds. Yet members of the media are trained to “demand the facts” as news is still breaking. Obviously, trade secrets, confidentiality agreements and legal issues typically limit what can be disclosed. And the reality is, many times an organization simply does not know all of the details surrounding an unfortunate event. As such, it can be tempting to refrain from making any statement during a crisis situation or uttering the words “no comment.” But evasiveness naturally breeds suspicion. While organizations should never speculate during a crisis, they can share some truths about what they are doing.

A good technique to use in these situation is the “why plus what” approach. For example, “While not all of the facts are clear based on the investigation underway at the site of the accident, we are cooperating with first responders and posting updates on our website.”

The “why plus what” approach is a very useful technique for communicating without speculating or refraining from comment. Using this approach, spokespersons explain why they cannot elaborate and follow up with what they can share right now. For example: “While I can’t speculate about the root cause as research is still underway, what I can tell you is (approved statement).” A classic example of this technique used by reporters covering unfolding stories is, “While the details are still emerging, what we do know is ¼”

2. Tell it fast and with empathy. Not only is it important to tell the truth (what you can tell) quickly, but it is important to be prompt in response and empathetic to those affected by the situation. History provides some unfortunate examples of the damage a company can suffer from delaying its response, or not responding empathetically. The 1989 Exxon Valdez oil disaster in Alaska is a good example of the damage that can arise when timeliness and empathy are lacking. The company waited a full week to address the media following the oil spill. When the executive did speak in a TV interview, he delivered a strong impression that he didn’t really care about the environmental impact of the disaster, committing a huge PR cardinal sin — lack of empathy.

More than 20 years later, after another oil disaster, another oil executive committed a crucial PR blunder. (Google “Tony Hayward get my life back.”) BP former CEO Tony Hayward conducted a number of high-quality media interviews before complaining halfway through a conversation with a reporter, “There’s no one who wants this thing over more than I do. I’d like my life back.” His comment demonstrated a lack of sympathy for the many lives lost and the hundreds of jobs lost due to the incident’s aftermath throughout the affected area. Unlike the Exxon leader’s interview, BP’s situation unfolded in the social media era, amplifying the damage of the negative PR as the unfortunate interview went viral.

In any crisis situation, it is imperative for an organization’s leadership to put themselves in the shoes of those affected. This means thinking like a customer — and just as important talking like a customer — personally affected by the situation. Leaders should acknowledge the affected parties’ fears and frustrations. In stark contrast to the corporate speak of a prepared statement, empathy acknowledges that the speaker feels and shares the customer’s pain. Effective crisis messages project empathy and concern while explaining clearly and succinctly what can be shared. The best examples also provide perspective by framing the issue in context. For example, “Each year, our operations produce XX metric tons of product without incident.”

3. Tell your employees first. Despite all the efforts companies invest in developing messages for their website and official statements, a company’s people are usually the most sought-after and trusted source of information. Thus, in crisis situations, it is a company’s people who will receive questions from customers, friends and family about what’s “really” taking place. Employees must be a key audience in any crisis management plan. The plan should educate employees on the issue and provide clear information on how to direct inquiries to the appropriate spokesperson.

Whether it’s a sudden or smoldering crisis, the crisis communications best practices outlined above coupled with a crisis management plan can help members of the roofing community navigate the challenge.

About the author: Susan Miller is director of public relations at 5MetaCom, a marketing agency for companies selling technical and scientific products, including building products.

Contracts Can Provide Protection From Escalating Prices

If you work in the construction industry and you aren’t familiar with the impact of price escalation, chances are you are about to learn.

It’s hard to make sense of the so-called “trade war” between the United States and China, and the economic forces in play are complex. But in essence, reports are that the events of past months are continuing to impact building costs in the United States.

President Trump and his administration have imposed tariff increases on certain Chinese goods in a claimed effort to boost the United States’ economy. As several news outlets have reported, Trump started with a 10 percent increase on certain Chinese products; then on May 10, he announced an increase from 10 percent to 25 percent on products like electronics, clothing, and seafood. A May 14 Los Angeles Times story reported that the tariffs had already added $1 billion – a number that could increase to $2.5 billion – to the annual cost of housing construction due to price increases in Chinese granite, cement, vinyl floor coverings, waferboard, tile, and stainless steel. Some roofing materials, like aluminum, are projected to cost more in the near future, too. (See, for example, BBC News’ May 10 article “Trade wars, Trump tariffs, and protectionism explained.”)

The Los Angeles Times’ prediction was that cost increases would be borne by American consumers investing in housing and construction. But the only thing that truly allocates risk of price increases will be contract terms.

And this gets us back to why we care about material price escalation and how players in the construction industry can assert some control over what are, at their core, factors beyond their control.

None of us can control what President Trump says, does, or tweets, or what China does in response. But if parties think about these issues before entering into construction contracts, they can at least know who will bear the risk of these types of increases and try to prepare accordingly. Although factors like federal economic policy and market forces can impact material prices, who bears the cost of these increases in a commercial setting is solely dependent on the parties’ contract terms. 

Assessing Risk in Pre-Existing Contracts for a Fixed Price

If standard-form construction agreements, like AIA or ConsensusDocs contracts, are a guide, then contractors and subcontractors will probably bear the risk of material price increases in contracts to which they are already a party, assuming they are contracts for a fixed sum or guaranteed maximum price. (Of course, cost-plus agreements will give contractors much more potential to recover for price increases.) Although price escalation can be addressed in provisions on contingencies — percentages of the contract value set aside for unpredictable changes in the work — unless the agreement specifically mentions price increases or escalation, contractors probably are not entitled to an increase in a fixed contract sum due to price escalation.

To understand the legal significance of a price escalation claim, it is important to understand the distinction between changes in scope of work and changes in price. Nearly all standard-form construction agreements provide for how “changes in the work” will be handled. For example, AIA A201 (General Conditions of the Contract for Construction) provides in §7.3.1 that “the Owner may … without invalidating the Contract, order changes in the Work within the general scope of the Contract consisting of additions, deletions, or other revisions, the Contract Sum and Contract Time being adjusted accordingly.” However, because per §1.1.3 the term “Work” includes “all … labor, materials, equipment, and services provided or to be provided by the Contractor to fulfill the Contractor’s obligations,” contractors will not be entitled to an increase in the contract sum unless there is a change in the scope of the work or materials themselves.

Addressing Price Escalation in Future Contracts

Because price escalation claims don’t fit neatly into most standard provisions on change orders or equitable adjustments, parties who want to reduce their risk with respect to material price increases should explicitly address the issue when negotiating contracts. Contractors can do this by considering cost-plus contracts, inserting a price escalation clause into fixed-price agreements, or simply increasing the contract sum in an attempt to protect themselves in the event of price increases.

Cost-plus contracts could be a useful tool for contractors hoping to shift away, or more evenly distribute, the risk of higher material costs. While most cost-plus agreements will still contain a guaranteed maximum price that potentially won’t cover builders for all price increases, these arrangements still probably give contractors greater ability to pass cost increases to owners than fixed-price agreements. Because these contracts charge owners for the cost of labor and materials plus a fee, owners can also benefit from any decreases in material costs. Negotiating a guaranteed maximum price may also allay owners’ concerns about rising costs.

In fixed-price agreements, parties who want to address material cost issues should likely insert clauses that either condition the contract sum on material costs existing at the time of the contract, or clauses explicitly entitling them to make a claim for additional payment in the event of price increases. Such provisions might be more appealing to owners if they similarly entitle owners to the right to reduce the contract amount in the event of material price decreases.

If price escalation clauses are based upon time, they should specifically state the date through which the contract sum can be guaranteed. They should then specify how a contract increase, if any, should be imposed so that the parties will have a clear understanding of how a new price will be calculated. If provisions are contingent not on time but on the amount of the price increase, they should address how much of a cost increase is actionable — for example, a clause could apply to material cost increases of 3 percent and above — and should explicitly state what documentation is required in order for the contractor to make a claim for increases. In anticipation of making such a claim, contractors should consider preserving documentation of prices as they exist at the time of bid so that they can prove that price increases in fact occurred later when they are asserting a claim for price escalation. With both types of clauses, providing cost savings for the owner in the event of a price decrease, or placing some limit on the ability to claim an increase, could be crucial to making a deal with owners.

About the author: Caroline Trautman is an attorney with Oak City Law, LLP, based in Durham, North Carolina. Questions about this article can be directed to her at caroline@oakcitylaw.com.

Author’s note: This article does not constitute, and should not be construed as, legal advice on any particular scenario. For specific advice, consult with an attorney licensed in your state.

How to Reduce Labor Expense Without Sacrificing Quality

Photos: CertainTeed

Labor shortages have been a longstanding issue in the construction industry. With not as many skilled tradespeople as needed to do the work, roofing contractors have to work smart to stay competitive and maintain profits. Roofing manufacturers have adapted to the labor shortage by developing labor-saving products that are easier to master and install.

To help commercial roofing contractors make more informed product decisions, CertainTeed commissioned Trinity|ERD, a well-recognized building envelope consulting firm, to conduct “Factors Impacting Low-Slope Roofing: A National Labor Study,” which quantifies the labor differences between self-adhered modified bitumen, traditional bituminous systems and single-ply roof coverings. This independent, five-year low-slope labor study analyzed the installation of 45 different roofs with six popular roof covers in 18 different configurations in various regions of the country, isolating and timing product and task-level installation data, and observing where efficiencies or inefficiencies occurred. The study also combined observed labor data with national average labor and material costs to allow for a comparison of installed costs across 12 popular modified bitumen and singe-ply roof assemblies.

While the study confirms that product selection impacts labor efficiency and ultimately earnings, a contractor’s ability to turn a profit is multifaceted. In addition to product labor analysis, the study produced a wealth of information on how commercial contractors can improve their efficiency across any roof covering by optimizing their crew management, project management and estimating accuracy.

Here are some observations from the study that can improve the productivity of commercial roofing contractors, regardless of product selection:

Roofing manufacturers have adapted to the labor shortage by developing labor-saving products, including self-adhered modified bitumen roofing. Photos: CertainTeed

· Estimate for Temperature and Environment. Environmental factors associated with a project should always be factored into estimates. Productivity can slow down in both high and low temperatures. Cold weather often creates more work due to heating adhesives being required, longer periods for relaxing rolls, longer welding times of membranes (APP, SBS, TPO, PVC) and the need for cumbersome cold-weather clothing. Heat can often cause fatigue and the need to hydrate often, resulting in more break periods. Also, projects taking place at night are typically slower than daytime projects, as the area of work is constrained to lighted areas and tools are more difficult to find in the darkness.

· Improve Crew Communication. Roof cover installation is optimal when the installing crew works as a coordinated team. Crews that spoke multiple languages or crews with limited understanding of one another tend to have longer installation times.

· Specialize Crew Tasks. Productivity increased when multiple crew members carried out narrowly defined work activities to complete a task as a team, as opposed to a single man completing the full breadth of the task alone. For example, when hand-held screw guns were used, laborers that staged and placed screws/plates as one phase of work — and either dropped back to install or were followed by another crew member to install — were more efficient than a single individual carrying pouches of screws and plates.

· Stage Products With Foresight. Material movement and staging was a critical component in speed at application. Projects that were staged with easy material access for installers resulted in faster installations. Crews that relied on installers to stage their own materials required fewer personnel on the roof, but at the cost of slower overall installation times.

· Employ Strong Management. Rooftop supervision and direction – including effective management of roof loading, managing break times, staging materials for easy access, prefabrication (such as combining screws and plates) and staging materials which have already acclimated to the temperature/environment – played a pivotal role in faster installation times.

Environmental factors associated with a project should always be taken into account during extimates. Extreme weather can slow down productivity. Photos: CertainTeed

· Implement Quality Control. Across the country, the labor study observed a variety of quality control methods ranging from no in-application quality controls to extensive quality controls conducted by both foremen and in-house, third-party quality managers. A lack of in-application quality control reduces upfront labor, but increases the likelihood that a crew will need to return to correct issues found post-inspection. As with many things, an ounce of prevention is worth a pound of cure.

· Use and Manage Tools Wisely. The efficient use of tools and tool accessories has a measurable impact on installation times. For example, the installation of a bituminous cap membrane with a multi-torch cart (a.k.a. “dragon wagon”) was completed in 86 percent of the time required in comparison to a hand-held torch. Automated screw and plate installers provide a measurable time advantage; however, a knowledgeable mechanic or crew member who has rooftop access to spare parts is crucial in case the machine jams or malfunctions. Poorly maintained automatic welders (single-ply TPO/PVC) with inconsistent power and/or damaged parts (nozzles and silicone wheels) slow down productivity and hamper the quality of the application. Blowers used on roofs to clean surfaces and move large sections of membrane on a cushion of air were effective and increased productivity in multiple applications.

Increasing Efficiency

The ability of a crew to quickly and profitably install a low-slope roof system cannot be isolated to the specific type of roof cover being installed. A roofing crew’s efficiency is also impacted by climate, project parameters, tools, safety requirements, quality requirements and crew management. Roofing estimators and managers should clearly identify the factors impacting their crews, optimize productivity whenever possible and adjust their estimates accordingly. While project parameters and management apply a high degree of variability to every job, proper training, project management and crew management can significantly increase efficiency and help contractors extract the most profit from projects.

Understanding the many factors that impact crew efficiency can help contractors produce better results in less time. The labor study can help roofing contractors better understand labor efficiencies by product, more accurately estimate the labor associated with certain tasks and improve installation efficiency across all roof covering types.

For the full 20-page CertainTeed/Trinity|ERD study, including detailed analysis of labor data and installed cost for various roof assemblies, visit www.certainteed.com/laborstudy.

About the author: Abby Feinstein is Product Manager, Commercial Roofing for CertainTeed Corporation. For more information, visit www.certainteed.com.

Business Succession Planning Tips for Roofers

Business succession isn’t as simple as choosing someone who will run your roofing company after you decide to hang your contracting hat up — or an unfortunate event cuts your time as the owner of your business short. Business succession requires you to put into place a plan that will ensure the success of your company after you’ve moved on. Business succession planning is time consuming, complicated, and dependent upon your business’ structure. It is therefore wise to begin thinking of what you want to do with your business long before you will need your plan.

One of the more obvious questions that need to be answered in business succession planning in the roofing industry is who will be the successor. Do you plan on training an employee to take over the company? Is it best to keep the company in the family and to name a family member as the successor? Are there multiple owners and succession will remain within the company? The answer to this question will vary from roofing company to roofing company. For some companies, they may already have a family member who is an employee, making the decision relatively simple. Some newer companies may not have the option to appoint a family member as a successor because the family member is too young or not willing.

Business succession planning is complex, but it can still be broken down into manageable segments to help owners better understand the process. Some of the common components of business succession planning include: buy-sell agreements; gifting; merger and acquisition transactions (M&A); employee stock option plans; key-man life insurance; and management buyouts. A basic understanding of these components will give roofing contractors a good place to begin their business succession planning.

Buy-Sell Agreements

Buy-sell agreements are especially useful in a multi-partner business to ensure there is an agreed upon plan in the event a partner dies or there is a dispute. Also known as buyout agreements, these types of agreements have control over when someone can sell their interest in a business, who can buy that interest, and the amount which is paid for said interest. What triggers a buy-sell agreement varies, but typically an event such as retirement, bankruptcy, disability, or death will be the triggering event that creates an automatic offer to the current owners of the company to buyout the departing members’ interest in the company.

A good example of a buy-sell agreement is the cross-purchase agreement where owners typically purchase insurance policies on one another. Different triggering events (death, incapacitation, age, or something similar) cause the Agreement to go into effect. In a hypothetical cross-purchase agreement arrangement, Owner B, who owns 30 percent of the business, would carry insurance equal to 70 percent of the business value. This allows the remaining partners to continue business as usual without the need to fill the vacant position within the company’s ownership.

Gifting (Family Succession)

Before the recent tax overhaul, if your estate was above the $5.6 million ($11.2 million for couples) estate and gift tax exclusion, then gifting was an incredibly powerful tool. However, in 2018 the IRS announced that the 2018 federal estate and gift tax limit has been elevated to $11,180,000 for individuals and $22,360,000 for couples, which makes gifting helpful for a smaller subset of business owners. It should be noted that there are some 15 states that impose estate taxes at a lower level than the federal government, and a prudent business owner should consult a professional to see if his or her state enforces their taxes in such a manner.

Depending upon the vehicle chosen and size of your company, taxes will vary from unaffordable to little or nothing. If family succession is the vehicle chosen, states have varying amounts of money which can be gifted without being subject to a gift tax. Certain trusts also allow you as a business owner to transfer in the neighborhood of $10 million without being subject to a gift tax. The amount of taxes due when succession takes place will depend on you and your company’s finances and your state’s tax laws.

Merger and Acquisition Transaction

A merger or acquisition transaction with a competitor or company or individual is another method of maximizing the value of your company and retirement as you look to transition away from your business. Oftentimes you won’t know if the person that you are handing control of the roofing company over to is going to maximize the value of the company once you leave or if they’re going to run the business into the ground and leave your former employees out of a job in the process. By merging with or selling to a larger, proven roofing company with similar culture to your current business, an owner can assure that his or her business will continue to thrive, albeit with a different name, and continue to serve both employees and clients suitably.

Some professional business owners often encounter issues that force them to make the tough decision to sell his or her roofing company and decide that the time has come to pursue other ventures. A sale would allow him or her the freedom (and cash) to pursue other business opportunities, and if he or she so chooses, he or she could still retain a minority ownership in the business so that if the business measures fail, he or she still has a profitable asset in the form of his or her minority position.

Employee Stock Option Plans

An employee stock option plan is also an excellent method for monetizing your business outside of its traditional cash flow and often gives you time to transition out of the business over the course of several years. An employee stock option plan, also known as an ESOP, is a tool that business owners can create to incentivize current employees, all while planning for a smooth transition once the owner exits the business. In its most basic form, an owner seeking to transition out of his ownership role sells the company to a trust (the ESOP), designating key employees (hard-working managers, promising family members, etc.) as beneficiaries, and receives full payment for the business as a loan from a lender (who now controls the ESOP). Over time, the company can make tax-deductible payments to the principal on the loan, which slowly releases equity control from the ESOP to the employees who are listed as beneficiaries.

Management Buyout

A management buyout occurs when the management group of a business purchases the roofing company directly from the owner or parent company. The management group typically acquires a loan for the full value of the company, which compensates the transitioning owner for full value of the company without having to liquidate the company’s assets. The typical management buyout scenario occurs when an owner is ready to transition control to a group of committed managers, but also wants to ensure that he or she can provide for a spouse or child upon sale of the company. These acquisitions are particularly intriguing for many business owners, as they can be assured that those taking over the company have knowledge of the business and share the departing owner’s vision.

Key-Man Life Insurance

Finally, company paid key-man life insurance can be a good tool to ensure that the company can afford to redeem your share of the company upon your death. This provides cash to your heirs while helping you sleep better at night. Key man life insurance operates in a similar fashion to your run-of-the-mill life insurance policies. The company takes out a life insurance policy on a key member of the business (often an owner) and names itself as the beneficiary. The company pays the premiums on the policy, and when the owner dies, the company receives the applicable monetary disbursement. In a succession-planning context, you often see key-man life insurance policies utilized in situations where an owner is quickly aging or in poor health and wants to ensure that his family is financially stable upon his or her death, but does not necessarily want his family to take control of the company’s operations upon the owner’s death. When packaged with a management buyout, key man life insurance gives the owner the ability to do just that. It ensures a smooth transfer of control to a group of trusted employees and guaranteed compensation for the family upon the owner’s death.

As it should now be clear, business succession is necessary, time consuming, and requires a number of difficult questions to be made. If you do not have a business succession plan in effect, or you’ve come to the realization that your business succession plan isn’t as reliable as you believed, the time is now to start planning for the future of your roofing company.

About the Author: David Kronenfeld is an attorney at Cotney Construction Law who focuses his practice on a broad range of transactional matters. Cotney Construction Law is an advocate for the roofing industry and serves as General Counsel for FRSA, RT3, NWIR, TARC, TRI, WSRCA and several other industry 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. Regulations and laws may vary depending on your location. Consult with a licensed attorney in your area if you wish to obtain legal advice and/or counsel for a particular legal issue.

Examining Workplace Policies in the Era of Legalized Marijuana Use

Legalization of marijuana continues to be a topic of great interest and debate throughout the country. For example, Acreage Holdings, a U.S.-based cannabis firm, made a splash in the news when their ad spotlighting the use of medical marijuana for pain relief was denied a commercial slot during this year’s Super Bowl.

The legalization of marijuana, whether it be for recreational or medical use, is an issue our country continues to struggle with as lawmakers weigh the costs and benefits of legalizing the drug. Despite the fact that marijuana remains a Schedule I controlled substance under federal law — the Controlled Substance Act — to date recreational use of marijuana is legal in 10 states and the District of Columbia, and medical marijuana use is legal in 33 states and the District of Columbia.

There appears to be a growing trend of legalizing marijuana use in one form or another. In fact, on December 6, 2018, Forbes reported in its article titled “Marijuana’s Ten Biggest Victories of 2018,” just in the previous year Vermont lawmakers approved a marijuana legalization bill allowing growth and possession of small amounts of cannabis; voters in Missouri, Oklahoma, and Utah approved ballot measures for medical marijuana use; and Michigan voters approved a ballot measure for legal recreational marijuana use.

With this growing trend toward legalizing marijuana, many employers may be left wondering how this will impact their businesses. Ensuring workplace safety should be a primary concern for any employer, particularly in the construction industry where employees may be operating heavy equipment or driving company vehicles. Right now, many companies may be relying on drug-free workplace policies to address those safety concerns. While these policies may be able to handle issues of recreational marijuana use, just as an employer can terminate or otherwise take disciplinary action against an employee who shows up to work intoxicated due to alcohol consumption, when medically prescribed marijuana is involved, this issue gets a little more complicated.

There is nothing inherently wrong with having a drug-free workplace policy. However, some recent cases have indicated that legalization of medical marijuana use could throw a wrench in the way in which an employer is allowed to enforce its drug-free workplace policy. Particularly, this can be an issue for employers in states where the medical marijuana laws include anti-discrimination or other employment provisions.

One example is Connecticut’s medical marijuana legislation, the Palliative Use of Marijuana Act (PUMA). PUMA prescribes qualifying conditions for a person to use marijuana for medicinal purposes. PUMA also contains an anti-discrimination provision that bars an employer from refusing to hire a person or from discharging, penalizing or threatening an employee based on an employee’s status as a qualifying medical marijuana patient. The statute further provides that it does not restrict an employer’s ability to prohibit the use of intoxicating substances during work hours or restrict an employer’s ability to discipline an employee for being under the influence of intoxicating substances during work hours.

In 2017, in Noffsinger v. SSC Niantic Operating Co. LLC, the US District Court for the District of Connecticut denied in part an employer’s motion to dismiss plaintiff’s state discrimination claim when her offer of employment was rescinded after testing positive for cannabis. In Noffsinger, the plaintiff accepted a job offer from the employer which was contingent on drug testing. The plaintiff informed the employer she qualified as a medical marijuana user under PUMA for treatment of PTSD. When the plaintiff’s drug test came back positive for THC, the employer rescinded the offer.

The plaintiff filed a lawsuit against the employer and the employer filed a motion to dismiss her claim. The employer’s primary argument for dismissal of the claim was based on the assertion that PUMA was preempted by federal law. The court disagreed with this assertion and further found that PUMA creates a private right of action.

In 2018, the US District Court for the District of Connecticut heard motions for summary judgement on plaintiff’s discrimination claim and the Court held that the employer violated PUMA by rescinding the plaintiff’s job offer.

The Noffsinger case appears to illustrate the idea that while an employer is not prohibited from having a drug-free workplace policy, Connecticut law prohibits the policy from being used in a decision of hiring or to take action against an employee for their medically prescribed, off-duty marijuana use.

What remains a wildcard is how courts will handle discrimination claims in states where their medical marijuana legislation does not contain any explicit employment protections. A recent Massachusetts case (Barbuto v. Advantage Sales & Mktg., LLC et al.) could prove to be fairly groundbreaking in that regard. Massachusetts’ laws regulating the use of medical marijuana do not contain explicit anti-discrimination or employment provisions. However, in July 2017, the Supreme Judicial Court of Massachusetts reversed the dismissal of an employee’s discrimination claim against her employer when she was terminated from her employment because she tested positive for marijuana as a result of her lawful medical marijuana use.

This was a scenario that involved an employee prescribed marijuana for treatment of her Crohn’s disease, and the employee claimed she would use small quantities when at home a couple of times per week to maintain a healthy appetite. The employer was informed of her medical marijuana use and informed the employee that it should not be a problem. The employee ultimately underwent a drug screen that was positive for marijuana and was terminated due to the positive test results. The Barbuto court’s decision provides medical marijuana users the ability to assert claims against their employers for handicap discrimination under the Massachusetts Fair Employment Practices Act.

The Barbutocase, only having gotten past the motion to dismiss phase, still has a long way to go in terms of an ultimate ruling on the matter. Depending on whether a court finds in favor of plaintiff’s discrimination claim in this particular scenario has the potential to impact other state courts’ decisions in this regard.

Unfortunately, because we are only recently starting to see some of these issues rear their head in the state and federal court systems many of these issues are still in preliminary phases, as is the case with Barbuto. However, what that does mean is in the very near future we are likely to see more courts having to render decisions on these issues and hopefully provide more guidance to employees and employers.

Trying to navigate the waters while legalization of marijuana is still in a period of growth can seem like a daunting task for employers, but there are things that all employers can do to better protect themselves from these types of legal disputes. First, employers need to be familiar with their state and local laws regarding marijuana use; they should also stay up to date on pending legislation or issues on the ballot in their state regarding the same. Having clear and precise policies regarding the workplace can be beneficial, but employers must remember that the state laws vary. Therefore, employers with national companies could be opening themselves up to liability if they simply implement a blanket policy for all locations.

About the author: Felicia M. Haigh is an attorney with Raleigh, N.C.-based Anderson Jones PLLC. Questions about this article can be directed to her at fhaigh@andersonandjones.com.

The Future of Construction Projects: Geofencing, BIM and Smart Contracts

The modern-day construction project is quickly moving into the future. Within the next few years, an automated materials delivery truck will deliver an order of lumber to a project site without the need for physical labor, and as the material is incorporated into the project a 3D model will be automatically generated and stored on blockchain. Three technologies that roofing contractors and those involved in the construction industry need to be aware of are geofencing, Building Information Modeling (BIM) and smart contracts. Together, these three technologies will forever alter the modern construction project landscape.

What Is Geofencing?

Geofencing is a virtual perimeter around a single point with predefined boundaries created for a real-world area such as a construction site.1Geofencing uses either Global Positioning System (GPS) or Radio Frequency Identification (RFID) to map the boundaries and track objects traveling in and out of the virtual perimeter. 

GPS is a satellite-based global navigation system that provides geolocation anywhere on Earth where there is an unobstructed line of sight to four or more GPS satellites. Geofencing with GPS works well when applied to construction projects due to its ability to be used anywhere in the world. GPS technology works with geofencing software to track equipment and people, as well as sending real-time alerts and notifications to project managers and contractors. 

RFID uses electromagnetic fields to automatically identify and track tags attached to objects. The most common use of RFID is tracking large retail store product movement and inventory. In fact, RFID technology has replaced the old barcode system because it is more efficient. RFID tags may be attached to heavy equipment and/or on employee’s personal protective equipment (PPE) to track their movements in order to give contractors a deeper understanding of the project workflow and needs. 

Tags or other electronic communication tools (i.e., GPS, iPhone, etc.) placed on/in physical objects communicate instantly with administrators using geofencing software. Geofencing software installed on computers, iPads, and other electronic devices allows the user to receive real-time information on who and what has entered or left the geo-fenced area, as well as other information such as object height and time spent in the area. The devices with geofencing software can receive text messages, email notifications, phone calls, and other forms of communication indicating when an object has left or entered a geo-fenced area. 

Programs that incorporate the geofencing software may be programmed to set up “triggers” that notify the administrators when an object has left the geo-fenced area. For example, heavy equipment can be retrofitted with a RFID tag that is set to trigger when it leaves a geo-fenced area and instantaneously send a notification to a project manager’s phone or tablet, allowing the manager to immediately act upon the information.

How Can Geofencing Technology be Used by Contractors?

Contractors can apply geofencing technology to a number of different aspects related to most construction projects. Fortunately, most contractors already supply project managers and other supervisors with mobile devices capable of using geofence software, making implementation of geofence programs an easy next step. Purchasing RFID tags and GPS equipment is one of the only primary costs associated with this new technology. 

· Security: An obvious and practical application geofencing provides contractors and equipment owners with is security. Heavy equipment, expensive machinery, and other tools can be equipped with RFID tags that, when moved outside the geo-fenced area, will immediately send a notification to a project manager or owner, via text message or other, informing them that the equipment has moved. This gives the party receiving the alert an opportunity to immediately call emergency services and report a theft-in-progress, rather than discovering the theft at a later date and reporting it at that time. Further, with stolen vehicle technology, a contractor, project manager, or equipment owner may also disable the equipment to fully prevent the theft. 

Installing RFID tags on expensive construction equipment provides those with vested interests in construction projects with the ability to lower costs related to theft and theft recovery. Further, preventing construction project theft will lower the high costs associated with project delays caused by replacing equipment. 

· Material Supply: Geofencing software will allow contractors and project managers to have ample electronic data to monitor the progress of construction projects. For one, geofencing software will specify when supplies have been delivered to the project, how long they have been on site before incorporation into the project, and where the materials have been incorporated. This allows contractors and project managers to better allocate materials to reduce the amount of overstock and loss or damage of materials due to non-use. As will be discussed in much greater detail later in the article, combining geofencing technology with smart contracts will heavily reduce costs associated with material delivery and payment problems. 

· Fleet Management: Geofencing can also be used to monitor the arrival and departure of trucks on a project. Placing RFID tags or installing geofencing software on the trucks navigation system will allow for easy monitoring of the truck’s movement. Project managers can receive immediate notification when a fleet truck arrives or departs from the project. This will allow the contractor to save on administrative expenses related to tracking fleet movement. Geofencing will also allow fleet owners to monitor the amount of time trucks take to move from point A to point B in order to better coordinate the fleet in the future. 

· Labor Savings and Monitoring: The data collected from geofencing software can be used to supplement claims for overtime and the amount of labor used during a construction project. Often contractors are forced to litigate issues relating to the number of employees working on a jobsite, the number of hours worked, and when the workers were on site. Geofence technology will allow contractors to store and compile labor information in an easy-to-use format to save on expensive litigation costs. 

Further, project managers will be able to monitor whether employees remain within the authorized project perimeter. This allows contractors to ensure employees remain diligent and focused on their work and reduce labor costs due to inefficient labor. In addition, if/when disputes arise as to whether employees worked a number of hours of overtime, both parties will have the geofencing data to quickly resolve the dispute and return to business as usual. All that is necessary to achieve the aforementioned benefits is placement of RFID tags on PPE or installation of geofencing applications on employees’ smart phones.

· Site Grading: Geofencing software installed on heavy equipment can help track with greater accuracy and increase progress towards proper grade, as opposed to using traditional methods such as survey stakes. A GPS device may also be installed within the heavy equipment’s cabin, allowing the operator to accurately monitor his or her progress. All of this information can be relayed to the project manager to better assist in deciding when to order supplies and labor to move on to the next phase of the construction project. 

· Increased SafetyGeofencing perimeters can be created around hazardous work areas to prevent unauthorized employees from entering the area and risking injury. This can be accomplished by creating the perimeter and setting RFID tags to send an alert to a project manager when unauthorized personnel enters the dangerous area. The project manager can then contact the foreman to ensure that the employee moves to a safer location or trigger an onsite siren. Contractors who utilize geofencing software for all employees, via their smart phones, can even have an alert sent to the specific employee who has entered the unsafe area, warning them to leave immediately. 

Geofencing tags located on mobile equipment can also monitor the speed that the equipment is traveling. If the equipment exceeds the safe speed limit, a foreperson can be notified. 

As it should be clear, geofencing technology offers contractors an abundance of benefits that will drive down costs and time associated with project completion. While geofencing will have a positive impact on projects, there still will be costs associated with implementing and using the new technology.

The Costs of Geofencing Technology

As previously stated, most contractors already supply project managers and other supervisors with the equipment necessary to implement geofencing (i.e., tablets, smart phones, and laptops). Therefore, one of the largest drawbacks, that being the initial cost of implementation, is already at least partially covered. 

The next step contractors wishing to implement geofencing technology must take is purchasing software compatible with the hardware already in the hands of project managers. The software will need to be implemented by a third party specializing in geofencing. The price of this software will likely pay for itself with the savings associated with geofencing. Further, resources previously allocated towards expensive and time-consuming data analysis will be no longer necessary as geofencing software will automatically compile the data on its own. 

One initial drawback will be training project managers and other employees to use the geofencing software. Contractors and project managers will need to initially educate themselves through third-party geofencing professionals on the ins-and-outs of using the technology. The next step will be educating employees on the intricacies of geofencing technology. If contractors opt to use geofencing software on smart phones, tablets, and other electronic devices, the employees will need to know how to respond and comprehend alerts and notifications sent to their devices. This requires a review and update of the employee manual. 

Any change to the workflow of a construction project will have its obvious costs and adaptation period; however, the future is fast approaching and contractors should prepare to embrace this new technology.

Building Information Modeling (BIM)

In addition to creating a better understanding of material movement and location, RFID and other geofencing tech can be combined with BIM to supplement 3D models of a construction project. According to the U.S. National Building Information Model Standard Project Committee, BIM is “a digital representation of physical and functional characteristics of a facility” that can be used as a “reliable basis for decisions … from earliest conception to demolition.”2For example, RFID tags may be placed on decking material, and as the decking material is placed on the structural components of a building, a real-time 3D model is augmented to reflect the addition.

Before BIM, building design was reliant on computer-aided design (CAD). CAD creates a model of a building using three dimensions (width, height and depth), which are in turn used by roofing contractors to complete roofing projects. BIM uses CAD concepts and adds more dimensions, such as time and cost, to give project managers a more complete understanding of project workflow. 

The entire project can be modeled prior to construction beginning by using BIM, allowing for better preconstruction coordination among roofing contractors and other parties on the project. A roofing contractor can have a better understanding of materials and labor needed, as opposed to using older and simpler CAD technology. Further, project managers can use BIM software in concert with smart contracts to automate most of the project. A more detailed discussion of smart contracts and BIM is included later in the article; however, a better understanding of smart contracts and blockchain is necessary before delving into that discussion. 

Blockchain and Smart Contracts

The advantages offered by geofencing technology are abundantly clear. As previously mentioned this article, two of the technologies that will forever reshape the construction project landscape are geofencing and smart contracts. To better understand what smart contracts are and how they will also help drive the construction industry into the modern era, a basic understanding of blockchain is necessary. 

If you’ve ever used Google Drive or Microsoft OneDrive, then you already have a basic understanding of blockchain. Certain cloud-based programs allow a number of users to access a document at the same time, and as each user edits or adds to the document, all of the other users are able to view these changes and additions in real time. Blockchains work in an analogous manner. They are a database that tracks transactions, in the order they occur, and creates a record of each transaction. 

By combining blockchains with smart contracts, as well as BIM, a new form of project management can be, and already has been, created. In its simplest form, a smart contract is “a computer program that works on the if/thenprinciple.”3For example, ifa roofing contractor has installed decking on a building, then an inspection is requested to ensure the decking has been properly installed. If the roof deck passes inspection, then the roofing contractor is paid for his work and can be given authorization to continue to the next phase of the roofing installation. All of the different smart contract sections, as well as changes made to them, will be permanently recorded on the blockchain, eliminating a number of different issues inherent with typical project management.

Smart contracts work together on what is known as a Decentralized Autonomous Organization (DAO). The DAO is an organization that is run through rules encoded as the smart contracts. The DAO provides the ability of blockchain to deliver a secure record of the different transactions that occur. This enables roofing contractors and other individuals involved on a construction project to view the current status of the project on a fixed record that encompasses all of the transactions that have taken place.

Smart Contracts and Geofencing

Geofencing data, RFID triggers, and notifications can be used as a supplement to smart contracts that govern a construction project. Working together, these two dynamic technologies can increase project efficiency and lower project costs. 

· Materials: One of the biggest geofencing and smart contract applications is through material purchase, delivery, use, and payment. All contractors are familiar with the problems inherent in construction projects regarding payment. Subcontractors who finish their work want to be promptly paid, they want to have regular disbursements of payment if the payment isn’t to be made in full at project end, and they want the retainage held by the general contractor/owner. General contractors want to ensure that the work performed by their subcontractors passes inspection before releasing funds and will hold on to the retainage until such inspection is passed. When disputes arise as to the quality or progress of work performed, late payment issues will inevitably rear their ugly heads. With blockchain, many of these issues can be avoided, or at the very least mitigated, through the use of smart contracts which automatically provide payment when different aspects of a project are completed.

Just as with subcontractors and general contractors, the same issues arise between subs, general contractors, and their material suppliers. Issues arise over the delivery timing, prompt payment, payment amount, and a host of related problems. Combining smart contracts and geofencing, many of these problems can be alleviated. 

Using the if/then principle and site grading example mentioned previously, if the site grading equipment communicates to the project manager that proper grade has been achieved, then materials, such as concrete and steel, can automatically be ordered for delivery to begin the fill process. Once materials arrive on the site, and a project manager verifies that they are as contracted for, a trigger will be sent to the blockchain automatically sending payment to the material supplier. Further, if the materials arrive on time, labor may be directed to complete the site grading and filling process of the construction project. This simple example demonstrates the amount of resources saved and increased project efficiency from use of this new technology. 

· Labor: Another symbiotic effect from combining geofencing technology with smart contracts has to do with paying employees for their labor. As previously stated, geofencing allows contractors to monitor when and for what amount of time employees are on-site. Smart contracts allow employees to be paid automatically for labor performed. 

Employees who wear geofencing RFID tags or have geofencing software applications installed on their smart phones will be able to have their clock-in and clock-out times automatically recorded based on their entering the geofence perimeter. The geofencing software can communicate this information to the smart contract, and release payment according to the specific terms programmed in the contract. This removes the clerical and human error often found in standard time-keeping tools used today.

· Reduced “Paper Trail” Litigation: Owners and suppliers have become well aware of the legalities involved in most construction projects and are often ready to take advantage of the unprepared roofing contractor. When a construction project ends up in litigation, the party with most detailed and descriptive paper trail will typically be the most successful in the courtroom. 

Most contractors know to keep accurate written records of all communications involving disagreements over workmanship, material arrival or other potential information that is involved in claims on a project. These written records can include change orders, emails, text messages, and other correspondence. 

Geofencing and smart contracts will work to remove a number of the costs associated with litigating disputes between contractors and their employees when it comes to overtime and other employment related issues, as the data will be stored on the blockchain. A blockchain is “essentially a distributed database of records, or public ledger of all transactions or digital events that have been executed and shared among participating parties.”4Once a record has been created on the blockchain, it can never be deleted. This allows for instant verification that a transaction has occurred and allows for participants to view the transaction. Blockchain removes uncertainty from the playing field and allows for consensus between parties. All those involved with a construction project will be able to view transactions as they happen, eliminating uncertainty that usually comes with whether an employee was on-site and for what amount of time. 

Smart Contracts, Geofencing and BIM

Smart contracts and geofencing information can be used even further by being embedded within a BIM model that is secured by blockchain. BIM software allows data inputs from multiple sources. These sources can include smart contracts and geofencing data. 

As stated earlier, BIM can incorporate more than just the three standard dimensions of width, height, and depth. BIM can incorporate time and cost. The dimensions of time and cost can be further supplemented with smart contracts within the BIM software so that the entire project is centered on one convenient application. Building on the prior example of placing RFID tags on roof deck materials, once the roof deck has been installed, BIM software can work with the smart contract if/then principle to automatically send payment for completion of a portion of the scope of work, and request the next phase of the project to begin.

Through the use of blockchain technology, smart contracts, BIM and geofencing, construction projects could enter into a new, technology-driven, risk adverse system that reduces disputes and increases the likelihood of prompt payment and project efficiency. Roofing contractors and the rest of the construction industry will need to work together over the coming years to adapt to this new phase of construction projects. Soon all aspects of a construction project will be included in a singular platform that allows all those involved, including contractors, government officials, lawyers, and so on to work dynamically to reach project completion. 

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.

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. 

Sources

Why Do I Need a Marketing Plan?

As marketing professionals who have worked in the roofing industry for more years than we like to admit, we are very aware of the challenge that contractors have in developing and implementing successful marketing programs. With the flurry of lead generation companies popping up seemingly every day, and the SEO companies who promise first page of Google results, how can you decide what to spend money on and how do you know what will work? 

It’s very tempting to fall victim to “spray and pray” marketing, where you throw some money to a bunch of different things, spray some marketing ads or mailers out there and pray that it works and the phone rings. But it doesn’t have to be this way. Success comes from having a plan in place that supports your business goals and provides consistent activities and messaging. 

We know that marketing for roofing contractors can be confusing, frustrating and elusive. Most roofing contractors are craftsmen and women who have started businesses by understanding and excelling at roofing, waterproofing and building envelope technology. They are not marketing professionals, so it is hard to change gears and figure out how to sell or promote their services while also running operations, estimating, sales and the business overall. A good marketing plan helps drive marketing without having to worry all the time.

Taking the time up front to strategize and plan on how to market your business successfully enables you to move on to other challenges of the day, week or month. A good plan can be the template for what needs to happen daily, weekly and monthly to keep marketing on task. It also eliminates daily questions or sales calls for additional marketing initiatives. By creating and sticking to a yearly plan, you are simplifying the day-to-day decisions that can stymie progress.

Fewer approvals and more action reduce the stress put on decision makers and puts the action into the hands of the marketing professionals. Whether it is a person in the office, an agency or a marketing coordinator implementing the marketing plan, by being prepared ahead of time you will reduce the stress of making reactive decisions or, worse, doing nothing due to lack of time and/or planning.

A good marketing plan will also save you money. Without a plan it is easy to say yes to that advertising salesperson from the local media or free coupon website; or that great new advertising concept for ad words or events that is purchased mid-year without planning or research. It can cost the company in lost time, low productivity and extra expense when you do not budget in advance. When you formulate a plan and establish a budget, you can still move money around if necessary, but there is a set allocation to work within.

Timing is important. Look at starting your yearly marketing plan in the fall if possible. It should be a planned exercise to review the past year and look at the upcoming year. Reviewing statistics, campaigns and lead/close ratio is important before starting on the tactical plans for advertising, PR and direct marketing. By organizing budgeting meetings or even off-site working retreats with your leadership team (ideally comprised of leadership from sales, operations, accounting and marketing), you can take the time to review past performance while setting new goals that reflect growth. By being conscious of past performance, you will set the stage for developing strong marketing programs for the next year.

Establish Your Goals

In fact, you should not even start looking at a marketing plan until you have your goals set. What are the company’s plans for growth next year? Will there be new services or products? Will there be any changes in overall company mission? Marketing supports the goals of the company and supports the sales team in attaining the revenue and profitability goals that make a company successful. If you do not have strong goals and plans, then marketing will most likely flounder.

Regarding sales, it is critical that marketing works hand-in-hand with sales. The marketing plan needs to reflect the goals of the sales team so that the marketing activities are nurturing and delivering the right types of leads for sales success. If the goal is to grow metal roofing but marketing is delivering asphalt shingle leads that are not upgradable, both teams will fail. 

By understanding the types of customers the sales team is looking for and the products and services they will be selling, a marketing plan can be created that will result in success for all departments as well as for the company.

By creating a marketing plan for your roofing business, you are taking the time to determine the ideal customer for your business and how you will attract, convert, close and delight that customer. A good marketing plan that is well thought out will address every stage of the sales and marketing process and detail how you will retain the attention of past customers while also gaining ongoing referrals.

So, let’s get back to that original question: how will you know where you should be spending your marketing dollars? Well, it depends. That’s the reason developing your marketing plan is so important. During the process you will have identified your goals and ideal customers. If your business goal is to focus on commercial roof restorations, then you want to invest dollars where your customers can be reached. You might consider joining your local chapter of a building owner or facility manager’s group, or implement an advertising program on LinkedIn that targets specific job titles in your area. 

On the other hand, if your business goal is to focus on residential roof replacements, you might consider a digital advertising program that is geofenced to target neighborhoods with homes that are 20 years or older and will soon need a new roof. The strategies that you use to reach your customers really depend on what you have determined in your marketing plan.

Your marketing plan serves as a guide for your business. It spells out your company’s positioning statement, the markets you will serve, your yearly goals, your brand promise, the tasks and timelines as well as the tools and technology needed to achieve your goals. It will also help you determine budget and resources needed to implement the tasks, campaigns and initiatives detailed in the plan. 

About the authors: Heidi J. Ellsworth and Karen L. Edwards specialize in the roofing industry, helping contractors, manufacturers and associations achieve their marketing, branding and sales goals. They have authored two books: “Sales and Marketing for Roofing Contractors” and “Building a Marketing Plan for Roofing Contractors.” Both are available in the NRCA Bookstore and on Amazon. 

Proper Documentation Can Be the Key to Dispute Resolution

Ever been told to dance like nobody’s watching? 

That advice is great for weddings and end-zone celebrations. But after wrapping up a week-long trial, your exhausted, cynical lawyer probably thinks “write every email like it will one day be a courtroom exhibit” is far better advice than the dancing thing.

This might sound needlessly frightening, but for construction professionals working on challenging projects, documentation can make or break the ability to successfully negotiate — or, if it comes to it, prove the merits of — a dispute with another party. 

Below are some items that, if handled properly, can help companies establish their side of case and that, if handled poorly, can constitute problem areas. 

Contract Documents and Statutory Notices 

Many legal rights on a project come from the parties’ written contract agreement. Basic measures like ensuring the both parties have signed — and not just received — the contract can be crucial to preserving these rights. It is also a good practice to keep a copy of the signed contract and all attachments in a location where it is accessible to project managers and others who have authority to deal directly with the other party. As always, reading the contract in advance, and perhaps consulting with an attorney before signing the contract, is an important practice. 

Having a checklist for every project can also help ensure that good practices are routine, and not just employed for especially difficult projects. If practices are done on every project, no matter the size or complexity, it is easier to ensure that companies will comply with them. 

Potential project checklist items include: 

  • Has a written contract been signed by both parties and saved in the project file? 
  • Are certificates of insurance on file for all subcontractors? 

Checklist items for privately owned projects: 

  • Have any statutorily required project statements, notices of contract, or notices of subcontract been properly filed and served? 
  • Have any statutory prerequisites to filing lien claims been met — such as North Carolina’s requirement to serve a Notice to Lien Agent? 

Checklist items for publicly owned projects:

  • Has the payment bond been obtained?
  • If required by state or federal statute, has the payment bond surety information been sent to all parties?
  • Have statutorily required notices of contract or notices of subcontract been properly served or filed? 

Notices 

Most written prime contracts and subcontracts require parties to give written notice to the other party to communicate various things, like change orders, claims for extra payment, or the other party’s breach or default. Failure to provide notice using the proper means and by the required deadline can prevent contractors from asserting their contractual rights. To ensure compliance with contract provisions, ensure that a copy of the contract is accessible to the project manager and that notices are dated, signed (if applicable), and that copies of the notice are preserved. If notices are sent by email, a good practice is trying to obtain a delivery or read receipt. Notices to cure should state specifically what is expected of the other party in order to cure a default and what will occur if the other party does not cure the default. 

Where Notices are concerned, do the following:

  • Keep a copy of the signed, written contract in a place where project managers can easily access it.
  • Send requests for change orders and additional time or money in writing.
  • Send notices to the right person. The written contract usually dictates to whom notices should be sent, and sending notices to a person with managerial authority is generally recommended. 
  • Consult with an attorney and send a written notice before invoking contractual remedies like self-correcting defective work, supplementing a subcontractor’s workforce, or terminating a subcontractor. 
  • Maintain copies of any letters, correspondence, or notices sent to another party, including copies of proofs of service like Certified Mail cards, email read receipts, or fax confirmation sheets. 

Confirming Emails 

Emails and text messages constitute the bulk of the written communication on most construction projects today. Both emails and text messages — whether they are sent from work or personal devices — are discoverable in legal cases, meaning that companies will be required to provide them to other parties in the case during the litigation process. This may be true whether or not the company or sender believes they are relevant. The implication is twofold: contractors should send emails and text messages with care and should assume that they could one day be seen by an opponent, judge or jury. On the other hand, when used effectively, emails and text messages can be used to accurately document parties’ agreements and understandings about what will occur on the project. 

With all communications, but particularly email, attorney-client privilege is an additional concern. The attorney-client privilege protects communications between an attorney and his or her client. The client has the right to keep these communications confidential in nearly all situations. However, the attorney-client privilege can be waived if communications are shared with third parties. The ease with which people can forward and share emails makes waiving the privilege dangerously easy. In some situations, waiving the privilege once can mean waiving it in future situations. 

Below are some do’s and don’ts that can result in helpful, not harmful, emails.

DO

  • Send emails to document conditions on a project. 
  • Send emails to confirm important conversations, especially ones about dates of mobilization or that contain notices. 
  • Respond to any emails that accuse you or your company of failing to fulfill any contractual obligation. 
  • Ensure you have access to the emails of any employees who leave the company. 

DON’T

  • Don’t forward your correspondence with your attorney to others. This could waive the attorney-client privilege. 
  • Don’t copy people outside of your company on emails to your attorney. This could waive the attorney-client privilege. 
  • In a dispute over fulfilling contractual obligations, don’tlet the other party have the last word. If you are sent an email accusing you of wrongdoing, not responding to an email can make it appear that you agree with it. 
  • Don’t send emails from your personal account. If you ever need to pull and produce all of the emails related to a project, it will be much easier to do if you are only pulling from one account per employee. 
  • Don’t use profanity or offensive language or phrases. If there is anything you would be ashamed of a judge or jury seeing you say, think twice before typing it. 

Daily Reports and Photographs

Daily job reports, if done well, can serve as a diary of what occurred on a project. While emails can be helpful, too, photographs do not lie, and daily reports with objective information like number of workers, hours worked, and weather conditions can effectively corroborate a company’s narrative of a story or dispute another side’s version. 

These types of documents typically have to be authenticated in court in order for them to be admissible as evidence, so if possible, it is best for the person who wrote a report or took a photograph to be able to testify about the origin of the document itself. 

Recommended procedures include: 

  • Have competent, trusted employees, such as project managers, take photographs and complete daily reports. 
  • Have a system in place for uploading photographs and saving them in the construction file so that they are centrally located, not just stored on employees’ individual phones or tablets. 
  • Ensure all photographs are dated or otherwise stored so that dates and identities of the people who took the photographs can be accessed. 
  • Complete daily reports documenting conditions like date, weather, number of workers, and anything pertinent occurring on the project site.  

About the author: Caroline Trautman is an attorney with Raleigh, N.C.-based Anderson Jones PLLC. Questions about this article can be directed to her at ctrautman@andersonandjones.com.

Author’s note: The above article is not, and should not be construed as, legal advice. For specific advice, consult with an attorney licensed in your state.