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THE OFFICIAL EDUCATIONAL JOURNAL OF THE AMERICAN SUBCONTRACTORS ASSOCIATION

ASA’s

WWW.ASAONLINE.COM SEPTEMBER 2017

Workforce and Professional

Development

AMERICAN

ASSOCIATIONSUBCONTRACTORS

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Yes, Sir, Can I Have Another? How Organizations Hurt Their Operations Team Without Even Knowing It by Gregg M. Schoppman, FMI

Professional Development—It Begins with Workflow Definition by Stephane McShane, Maxim Consulting Group

A How-To Guide for Women in Construction Project Management by Mary Beth Kingsley and Sandy Palmerton, Shapiro & Duncan, Inc.

Self-Funded Healthcare: A Better Option for Contractors by Mike Bechtol, Redirect Health

Employee Training and Development: The Importance, the Employer Neglect and the Cost to the Organization by Jamie Hasty, SESCO Management Consultants

Optimize Your Workforce with On-Screen Measurement by Adam Khemiri, eMeasure

Use of Arrest and Conviction Records in Employment May Be Discriminatory by Laura Lapidus, Esq., CNA

Inflexible Leave Policies: Automatic Termination May Violate the ADA by Laura Lapidus, Esq., CNA

The Americans with Disabilities Act— Important Resources to Assist with Compliance by Laura Lapidus, Esq., CNA

Has Unethical Behavior Reached a Breaking Point? Criminal Prosecution of Bad Acts in the Construction Industry by Bruce R. Demeter, Esq., American Institute of Constructors

Game Winning Strategies to Ensure Your JV Performs at the Varsity Level by Fielder Martin and Jodi Taylor, Baker Donelson

Unforeseeable Employee Misconduct Defense to an OSHA Citation by Philip J. Siegel, Hendrick, Phillips, Salzman & Siegel

Legally Speaking: Five Boilerplate Terms to Negotiate in Your Next Subcontract by James R. Lynch, Ahlers & Cressman, PLLC

SAVE THE DATE!February 28 – March 3, 2018

TEMPE MISSION PALMS HOTEL & CONFERENCE CENTER | TEMPE, AZ

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EDITORIAL PURPOSEThe Contractor’s Compass is the monthly educational journal of the Foundation of the American Subcontractors Association, Inc. (FASA) and part of FASA’s Contractors’ Knowledge Network. The journal is designed to equip construction subcontractors with the ideas, tools and tactics they need to thrive.

The views expressed by contributors to The Contractor’s Compass do not necessarily represent the opinions of FASA or the American Subcontractors Association, Inc. (ASA).

EDITORIAL STAFFEditor-in-Chief, Marc Ramsey

MISSIONFASA was established in 1987 as a 501(c)(3) tax-exempt entity to support research, education and public awareness. Through its Contractors’ Knowledge Network, FASA is committed to forging and exploring the critical issues shaping subcontractors and specialty trade contractors in the construction industry. FASA provides subcontractors and specialty trade contractors with the tools, techniques, practices, attitude and confidence they need to thrive and excel in the construction industry.

FASA BOARD OF DIRECTORSRichard Wanner, President Letitia Haley Barker, Secretary-Treasurer Brian Johnson Robert Abney Anne Bigane Wilson, PE, CPC

SUBSCRIPTIONSThe Contractor’s Compass is a free monthly publication for ASA members and nonmembers. Subscribe online at www.contractorsknowledgedepot.com.

ADVERTISINGInterested in advertising? Contact Richard Bright at (703) 684-3450 or rbright@ASA-hq.com or advertising@ASA-hq.com.

EDITORIAL SUBMISSIONSContributing authors are encouraged to submit a brief abstract of their article idea before providing a full-length feature article. Feature articles should be no longer than 1,500 words and comply with The Associated Press style guidelines. Article submissions become the property of ASA and FASA. The editor reserves the right to edit all accepted editorial submissions for length, style, clarity, spelling and punctuation. Send abstracts and submissions for The Contractor’s Compass to communications@ASA-hq.com.

ABOUT ASAASA is a nonprofit trade association of union and non-union subcontractors and suppliers. Through a nationwide network of local and state ASA associations, members receive information and education on relevant business issues and work together to protect their rights as an integral part of the construction team. For more information about becoming an ASA member, contact ASA at 1004 Duke St., Alexandria, VA 22314-3588, (703) 684-3450, membership@ASA-hq.com, or visit the ASA Web site, www.asaonline.com.

LAYOUTAngela M Roe angelamroe@gmail.com

© 2017 Foundation of the American Subcontractors Association, Inc.

Quick ReferenceASA/FASA CALENDAR ..................................................................................................................37

COMING UP ....................................................................................................................................... 37

DepartmentsCONTRACTOR COMMUNITY ........................................... ........................................................... 4

LEGALLY SPEAKING .................................................................................................................... 34Five Boilerplate Terms to Negotiate in Your Next Subcontract by James R. Lynch, Ahlers & Cressman, PLLC

FeaturesYes, Sir, Can I Have Another? How Organizations Hurt Their..................................8 Operations Team Without Even Knowing It by Gregg M. Schoppman, FMI

Professional Development—It Begins with Workflow Definition ..........................10 by Stephane McShane, Maxim Consulting Group

A How-To Guide for Women in Construction Project Management ......................13 by Mary Beth Kingsley and Sandy Palmerton, Shapiro & Duncan, Inc.

Self-Funded Healthcare: A Better Option for Contractors ....................................17 by Mike Bechtol, Redirect Health

Employee Training and Development: ..................................................................20 The Importance, the Employer Neglect and the Cost to the Organization by Jamie Hasty, SESCO Management Consultants

Optimize Your Workforce with On-Screen Measurement ......................................22 by Adam Khemiri, eMeasure

Use of Arrest and Conviction Records in Employment.........................................24 May Be Discriminatory by Laura Lapidus, Esq., CNA

Inflexible Leave Policies: Automatic Termination May Violate the ADA ...............26 by Laura Lapidus, Esq., CNA

The Americans with Disabilities Act—Important Resources ...............................27 to Assist with Compliance by Laura Lapidus, Esq., CNA

Has Unethical Behavior Reached a Breaking Point? .............................................28 Criminal Prosecution of Bad Acts in the Construction Industry by Bruce R. Demeter, Esq., American Institute of Constructors

Game Winning Strategies to Ensure Your JV Performs at the Varsity Level .........30 by Fielder Martin and Jodi Taylor, Baker Donelson

Unforeseeable Employee Misconduct Defense to an OSHA Citation ...................32 by Philip J. Siegel, Hendrick, Phillips, Salzman & Siegel

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CONTRACTOR COMMUNITY

Contractors Must Be in Compliance with OSHA Silica Rule by Sept. 23

Construction contractors with more than 10 employees have until Sept. 23 to comply with OSHA’s final rule reg-ulating employee exposure to respir-able crystalline silica. Under a rule issued by OSHA on March 25, 2016, construction employers must comply with all requirements of the standard by Sept. 23, 2017, except requirements for laboratory evaluation of exposure samples, which begin on June 23, 2018. The rule requires construction employers to limit worker exposure to silica and to take other steps to pro-tect workers.

Crystalline silica is a common min-eral found in many naturally occurring materials and used at construction sites. Inhaling very small crystalline silica particles can cause multiple dis-eases, including silicosis, lung cancer, chronic obstructive pulmonary dis-ease and kidney disease. Respirable silica is generated by high-energy operations like cutting, sawing, grind-ing, drilling and crushing stone, rock, concrete, brick, block and mortar. Activities such as abrasive blasting with sand; sawing brick or concrete; sanding or drilling into concrete walls; grinding mortar; and cutting or crush-ing stone generate respirable dust. Under the OSHA standard, construc-tion employers can either use a con-trol method, as laid out in Table 1 of the standard, or they can measure workers’ exposure to silica and inde-pendently decide which dust con-trols work best to limit exposures to the permissible exposure limit in their workplaces. Regardless of which exposure control method is used, all construction employers covered by the standard are required to:• Reduce the permissible exposure

limit for respirable silica to 50 micrograms per cubic meter of air,

averaged over an eight-hour shift.• Use engineering controls, such as

water or ventilation, to limit worker exposure to the PEL.

• Provide respirators when engineering controls cannot adequately limit exposure.

• Establish and implement a written exposure control plan that identifies tasks that involve exposure and methods used to protect workers, including procedures to restrict access to work areas where high exposures may occur.

• Designate a competent person to implement the written exposure control plan.

• Restrict housekeeping practices that expose workers to silica where feasible alternatives are available.

• Offer medical exams, including chest X-rays and lung function tests, every three years for workers who are required by the standard to wear a respirator for 30 or more days per year.

• Train workers on work operations that result in silica exposure and ways to limit exposure.

• Keep records of workers’ silica exposure and medical exams.

ASA, in collaboration with 22 other construction associations, has ini-tiated a lawsuit to prevent OSHA from implementing its rule. In addi-tion, ASA, as part of the Construction Industry Safety Coalition, has filed a petition with OSHA requesting the agency to stay and reopen the rule-making. In the meantime, ASA urges construction employers to take steps to be in compliance by the OSHA deadline.

For more information, see the ASA Fact Sheet on OSHA’s Rule on Respirable Crystalline Silica, the ASA Frequently Asked Questions on the OSHA Standard on Respirable

Crystalline Silica, and the free ASA video-on-demand, “OSHA Silica Rule—Applications for Subcontractors” (Item #8101), pre-sented by Gary Visscher, Esq., Law Office of Adele L. Abrams, P.C.

Crane Operator Certification: Two Months and Counting

“Employers have only two months to ensure their crane operators are certified according to OSHA requirements,” ASA Chief Advocacy Officer E. Colette Nelson reminded subcontractors.

The Occupational Safety and Health Administration published a rule on Aug. 9, 2010, that requires employ-ers to ensure that crane and derrick equipment is in safe operating con-dition via required inspections and that employees in the work zone are trained to recognize hazards associ-ated with the use of the equipment and any related duties that they are assigned to perform.

The rule takes effect on Nov. 10, 2017.

Who needs to be certified or qualified? Any person engaged in a construction activity that is oper-ating a crane covered by the cranes and derricks rule, except: sideboom cranes, derricks, equipment with a rated hoisting/lifting capacity of 2,000 pounds or less. (Operators of the listed equipment must meet the crite-ria for minimum expertise described elsewhere in OSHA rules.)

Are operators of digger der-ricks required to be qualified or certified? Yes, unless the digger der-rick is being used to auger holes for poles carrying electric or telecommu-nication lines, place or remove the poles, or handle associated materials to be installed on or removed from the poles.

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CONTRACTOR COMMUNITY

What is required in the test-ing for certification? Certification has two parts: (1) A written examina-tion that includes the safe operating procedures for the particular type of equipment the applicant will be oper-ating and technical understanding of the subject matter criteria required in the rules. (2) A practical exam show-ing the applicant has the skills needed to safely operate the equipment, including, among other skills, the abil-ity to properly use load chart informa-tion and recognize items required in the shift inspection.

Does an operator need more than one certification? With respect to certification from an accredited testing organization, an operator must be certified for the type and capacity of crane he or she is going to operate. Each accredited test-ing organization develops its own cat-egories for crane type and capacity.

How is an operator certified or qualified? There are four ways that an equipment operator can be qualified or certified to meet OSHA requirements:1. A certificate from an accredited

crane operator testing organization.

2. Qualification from the employer through an audited employer program.

3. Qualification by the U.S. Military (only applies to employees of the Department of Defense or Armed Forces and does not include private contractors).

4. Licensing by a state or local government (if that licensing meets the minimum requirements set forth by OSHA). When a state or local government requires a crane operator license, the crane operator must be licensed accordingly to meet OSHA requirements.

See OSHA’s Web site on Cranes and Derricks in Construction for more information.

What’s Really Going on with Federal Tax Reform?

As the Senate rushed through a series of votes on healthcare reform, the White House and the Congressional Republican leader-ship issued a joint statement setting forth the key principles that they have agreed upon for tax reform. Perhaps the big news in the announcement is an agreement not to pursue the intro-duction of a border adjustment tax. “Without the savings that would have been generated by healthcare reform and the $1 trillion in new revenue projected from BAT, Republicans will need to make some hard decisions on how to proceed,” reports ASA Chief Advocacy Officer E. Colette Nelson. She set forth three options:1. An alternative revenue raiser to

offset the cost of tax cuts. House Ways and Means Committee Chair Kevin Brady (R-Texas) has made it clear that he sees no low-hanging fruit that could be plucked to generate significant revenue. Indeed, the lack of alternative revenue raising options is the reason that House Speaker Paul Ryan (D-Wis.) continued to back the BAT for so long despite its controversy. Absent a major new source of tax revenue, the only alternative to make the bill anywhere close to tax neutral is to chip away at tax credits and deductions.

2. Smaller tax cuts than promised. According to estimates, under the current tax reform proposal but without the revenue raised by the BAT, the lowest the corporate rate could go while keeping things revenue neutral would be

somewhere between 26 percent and 28 percent. The House’s latest proposal calls for a 20 percent corporate rate; President Trump has called for a 15 percent corporate rate.

3. Enact bigger cuts on a temporary basis. Because Republicans are trying to pass tax reform through reconciliation, any tax cuts must be offset by revenue in order to be permanent. If provisions increase the budget deficit, they will sunset at the end of the budget window, which currently is 10 years. There has been some talk about the option of extending the budget window. However, that would be an unusual move and still wouldn’t change the fact that the provisions would ultimately sunset.

The Republican leadership stated that they “are confident that a shared vision for tax reform exists, and are prepared for the two committees to take the lead and begin producing legislation for the President to sign.” Nonetheless, as they did with health-care reform, the Republican leader-ship is hammering out the details behind closed doors without input from other legislators. In the mean-time, ASA, in collaboration with the Small Business Legislative Council, submitted recommendations to the Senate Finance Committee, which among other things:1. Urged Congress to pursue

greater parity in the tax rates for pass-through entities and C corporations while avoiding providing an opening for complex rules and systems.

2. Advocated for the preservation of the business interest deduction.

3. Stated support for immediate expensing.

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4. Encouraged Congress to maintain the step-up in basis while repealing the estate tax.

5. Pushed for the preservation of deductions for health insurance premiums and retirement plan contributions.

DOL Requests Information Regarding Overtime Exemptions Under FLSA

The Wage and Hour Division of the U.S. Department of Labor published a Request for Information regard-ing overtime regulations under the Fair Labor Standards Act. DOL invited comments on the 2016 revisions to the “white collar” exemption in the FLSA, including whether the stand-ard salary level set effectively iden-tifies the employees who should be exempt, or whether there should be a different methodology used to set the standard salary threshold.

DOL also is seeking feedback on whether small entities encountered any unique challenges posed by this rule, and if they faced any economic and non-economic impacts.

Under the FLSA, most workers are entitled to minimum wage and over-time pay for hours worked over 40 hours. However, there is a “white col-lar” exemption in the FLSA for certain executive, administrative, profes-sional, outside sales and computer employees; qualifying for this exemp-tion requires that these employees earn no less than a standard salary threshold and other criteria.

In May 2016, DOL finalized a rule that changes the standard salary

threshold for this exemption, from $23,660 to $47,476. In November 2016, the rule was enjoined by a fed-eral court before it became effective. Interested parties can submit com-ments at www.regulations.gov, the federal government’s regulation por-tal, on or before Sept. 25.

ASA and SBLC Call for Tax Reform to Preserve Retirement Plan System

ASA, in conjunction with the Small Business Legislative Council, submit-ted comments to the Senate Finance Committee that call for preserving the small business retirement plan system as part of planned tax code overhaul.

“Most small business owners are motivated to establish plans, and to make contributions for their employ-ees, by a desire to save for their own retirement,” SBLC said. “If the tax laws are changed to reduce the abil-ity or appeal of saving in a retirement plan, small business owners will be much less likely to continue an exist-ing plan or start a new plan.” So as not to disturb the current small busi-ness retirement system, SBLC urged Congress to:• Reject attempts to decrease the

amount that can be saved in a qualified plan. If the amount that small business owners can save in a qualified plan is reduced, small business owners will be motivated to freeze or terminate plans once they themselves have hit that cap. This will mean that fewer small business employees will be offered a plan.

• Avoid changes that would quickly force savings out of a plan after the owner’s death or otherwise do anything to make owners concerned about saving too much in a retirement plan. If a small business owner is concerned about his/her descendants who inherit the plans assets will be forced to take the money out over a short period of time and therefore face negative consequences, the owner is likely to save less in the plan, which will not only impact his/her retirement security but that of the other employees of the business as well.

• Protect the deductibility of employer contributions. If the deduction for the employer contribution is eliminated, an employer will be far less likely to contribute toward an employee’s retirement savings.

• Reject proposals to try to limit how much can be saved in a defined contribution plan pre-tax (i.e., to force some or all of the defined contribution retirement plan system towards Roth IRAs). If employees are taxed on contributions to a plan, they will be less likely to save, which, given that people are far more likely to save in employer-sponsored retirement plans than in any other vehicle, would reduce retirement savings overall.

SBLC is a permanent, independ-ent coalition of more than 40 trade and professional associations that share a common commitment to the future of small businesses. ASA Chief

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Advocacy Officer E. Colette Nelson is a past chair of SBLC and currently serves on its board of directors.

ASA-Endorsed Change Order Reform Bill Introduced in U.S. House

“The ‘Small Business Payment for Performance Act,’ when enacted, will help protect the cash flow of small contractors and subcontractors,” said ASA Chief Advocacy Officer E. Colette Nelson.

H.R. 2594, introduced by Rep. Brian Fitzpatrick (R-Pa.) on May 23, would require a federal agency to make interim partial payments to its con-struction prime contractor for work performed under a directed change order.

“This is a best practice concept embodied in the changes clause in ConsensusDocs and brought to the attention of federal legislators by ASA and other members of the Construction Industry Procurement Coalition,” Nelson said.

Today, when a federal agency uni-laterally requires a prime construc-tion contractor to perform extra work, a prime construction contractor may request an equitable adjustment—an increase in fee—for the additional work. The request must be made in a timely manner and must specify the estimated amount it cost to per-form the extra work required by the agency.

Under H.R. 2594, once it receives a request for an equitable adjust-ment from a small business con-struction contractor, a federal agency would have to make an interim partial

payment of at least 50 percent for the additional work performed, within the time frame specified by the Prompt Payment Act. The provisional pay-ment would not prejudice the rights of either party in finalizing the con-tractor’s request for an equitable adjustment during subsequent negoti-ation or failing to reach mutual agree-ment, any further resolution pursuant to the disputes clause in the Federal Acquisition Regulation.

As under the existing Prompt Payment Act, a federal prime con-struction contractor would have to pay its subcontractors and suppli-ers within seven days of receipt of payment from the federal agency. Ask your Representative to co-spon-sor H.R. 2594 by using the ASA Legislative Action Center.

ASA Invites Subcontractors to Apply for Certificate of Excellence in Ethics

ASA, upon the recommendation of the ASA Task Force on Ethics in the Construction Industry, has renamed the ASA Excellence in Ethics Awards Program as the ASA Certificate of Excellence in Ethics to better reflect that the program is not an awards competition, but rather a certifica-tion program that determines whether a subcontracting firm has met cer-tain qualifications demonstrating its commitment to professionalism and sound business practices.

The ASA Certificate of Excellence in Ethics recognizes subcontractors that demonstrate the highest stand-ards of internal and external integrity. Applicants still must meet a number

of critical milestones before the Dec. 15, 2017, deadline, particularly those who have not yet developed a docu-mented ethics program. ASA provides a timeline to help applicants keep on track. Each applicant is also required to respond to questions concern-ing the firm’s corporate ethics poli-cies and procedures, its construction practices, and its general business practices. Each applicant must sub-mit detailed documentation, includ-ing sealed letters of recommendation from a customer, a competitor, and a supplier.

Applicants can learn more about the judging criteria and submission requirements in the program bro-chure, download an application, and access a resource guide to help them prepare and submit an application. This guide contains model docu-ments, such as sample recommenda-tion letter requests and model policies on topics ranging from competition and conflicts of interest to internal procedures and whistle blowing.

Apply for the ASA Certificate of Excellence in Ethics by Dec. 15, 2017. Certificate recipients will be announced during an awards cer-emony held in conjunction with SUBExcel 2018, which will take place Feb. 28-March 3, 2018, in Tempe, Ariz. Be sure to save the dates on your cal-endar! Online registration is expected to be made available this month. Information about this certificate is located under “About ASA” on the ASA Web site.

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Feature

Sometimes we hurt the ones we love the most. For construction organ-izations, the project managers often wear targets the size of a barn door and they don’t even realize it. When one considers the impact a great pro-ject manager has in an organization, it is a great deal like that of the blue-chip quarterback. The team rises and falls with each reception or intercep-tion thrown. The same can be said of the project manager. The nexus of all information, decisions, communica-tion and most importantly projects success and failure is the project man-ager. If this person is so important, why do we hurt them the most? Of course, no one is consciously beating their project quarterback. Like many football programs, firms’ like to think they protect their assets like a quar-terback wearing the red “non-contact” jersey. What is said and what is done are entirely two different things.

No Offensive LineOne of the first critiques of many

firms is the lack of resources availa-ble to the project managers. Seriously examine the team you have and look at how much they have on their plate. Firms constantly hear about the new constraints, regulations, procedures, etc., that their operations teams have to accomplish, yet they staff them with the same personnel and general con-ditions that were used 10 to 20 years in the past. Obviously there is a fine line that separates competitiveness and being “fat,” but too often firms err to the side of incredibly conservative, breaking their general conditions into

Yes, Sir, Can I Have Another? How Organizations Hurt Their Operations Team Without Even Knowing Itby Gregg M. Schoppman, FMI

strong recommendation that firms incul-cate their new associates with the sem-blance of a real training program.

No PlaybookAs the team rushes onto the field,

and the quarterback starts calling plays, no one has a clue on what play is being called. So many project manag-ers are hurt by a firm’s lack of consist-ency in operations. When every project and every client, requires a different set of operational tools, it is impossi-ble to gain traction and even drive a project successfully. It is as if the plays are being written as the game is being played, much a like a group of kids play-ing in the sandlot. Meeting agendas are frantically assembled. Logs of crit-ical data are generated ad hoc and as needed. Close-out happens at a cadence by someone other than the project man-ager. Proactive gives way to reactive, leaving the offense to play defense. Why reinvent the wheel with each new asso-ciate? Is your organization hurting itself by leaving operations to chance?

No Depth or StructureThere have been a few great play-

ers in history that were tagged with the moniker of “Slash.” They were great passers/runners/receivers. Double- or triple-threat players are outstanding and some organizations thrive on hav-ing that level of ambiguity in the play calling. Construction organizations are somewhat contrarian to that. There are always great project managers that can be tasked with managing incredi-ble workloads, governing the field, esti-mating with accuracy, and cultivating

fractional components (i.e. 50 percent of a project manager, 35 percent of a superintendent). While it may work in the estimating war room, manag-ers are suffering through projects that are inappropriately staffed, leading to project overruns and losses. In the end, the project manager looks like the quarterback who suffered the loss, but in reality the statistic that was buried on the scorecards was 10 sacks he/she took during the game.

No TrainingIn their haste to avoid squandering a

resource, executives constantly shove new resources on the field long before they are ready. Has your organization ever said the following:• “We tend to throw people to the

wolves …”• “We throw new associates right

into the fire …”• “New project managers sink or

swim quickly …”It is clearly understandable that

management wants to see an immedi-ate return on its investment. However, there are plenty of rookies that could use some time on the farm system or even ride the bench to learn how to execute appropriately. Even for a more seasoned veteran, there should be nuances that are exclusive to the firm that requires training, orientation, edu-cation, etc. So many managers are tal-ented but lack an understanding of that firm’s playbook or operations manual. This does not mean that a new engi-neer or manager must sit out for two or three building cycles, but it is a

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superior client relationships. On the other hand, there are many position players that do parts and pieces of the above list very well. Some organiza-tions create disjointed organizational charts that segregate talent dispro-portionately, leading to resource problems, misalignment amongst customers and managers and more importantly workloads that may be off kilter (i.e. putting all of the work on one “Slash”). There will always be A+ superstars and those that are not. However, organization should be striv-ing to drive toward more consistent structures by establishing the right playbook, standardizing performance and holding personnel accountable. It is great if a quarterback is throw-ing 500 yards a game, but it is all for naught if the rest of the team fumbles 16 times.

As a principal with FMI, Tampa, Fla., Gregg Schoppman specializes in the areas of productivity and project man-agement. He also leads FMI’s project management consulting practice. Prior to joining FMI, Schoppman served as a senior project manager for a general contracting firm in central Florida. He has completed complex and sophisti-cated construction projects in the med-ical, pharmaceutical, office, heavy civil, industrial, manufacturing, and multi-family markets. He has also worked as a construction manager and managed direct labor. Furthermore, Schoppman has expertise in numerous contract delivery methods as well as knowl-edge of many geographical markets. He can be reached at (813) 636-1259 or gschoppman@fminet.com.

Project managers are not more important than estimators or superin-tendents or any other associate within a firm. The main difference is how pro-ject managers are positioned and their direct or indirect impact on costs and overall profitability. For some firms, the quarterback is the superinten-dent, while others it is the project man-ager. There has to be a primary play caller for any project. However, just like within the parallels of a football team, coaches and executives can set their play caller up for failure. There are few firms that fall within the realms of being sadists, but in their zeal to “run lean” or “be cost conscious” they for-get some of the critical infrastructure that enables even the most pedestrian quarterback to look like Brady.

2017 ASA CERTIFICATE OF EXCELLENCE IN ETHICSASA will honor selected firms that demonstrate the highest standards

of internal and external integrity during an awards ceremony at the ASA annual convention, SUBExcel 2018, Feb. 28 —March 3, 2018, in Tempe, Arizona.

Online Resources:• Watch the Video.

• Download the 2017 ASA Certificate of Excellence in Ethics Brochure.

• Download the 2017 ASA Certificate of Excellence in Ethics Application.

• ASA provides useful model documents to help with your submission and your ethics program. View the 2017 ASA Certificate of Excellence in Ethics Resource Guide.

• Download the 2017 ASA Certificate of Excellence in Ethics Timeline.

• ASA’s Certificate of Excellence in Ethics Program Q&A LinkedIn Group—a forum for getting answers to your questions about the application process. This forum includes current recipients who have been through the application process and who are willing to help guide new applicants through their application process.

• Recipients of the ‘2016 ASA Excellence in Ethics Award’ may re-apply for the 2017 ASA Certificate of Excellence in Ethics using the Re-Certification Form.

APPLICATION DEADLINE: DECEMBER 15, 2017

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In many organizations, it seems that the method of promoting some-one to a new position entails putting them into that position and “hoping” that they come up to speed quickly. In the construction world, hope is a risky, and costly, strategy. Many who grew into promotions in their career will share stories of being kicked off the deep end of the pier into a new job, with those around them watch-ing to see if they could dog paddle fast enough to keep up with the changes. Culturally and operationally, this strat-egy is fast-becoming obsolete. It is dis-tasteful and frustrating to those who have been identified as promotable. For professional development to be engaging, productive, and meaningful, the contractor needs three things: A value-stream map to develop defined system and process for how you do business, strong mentorship and lead-ership to provide the proper learning environment, and training that is cre-ated in the platform that will take us far into the future. This article will uti-lize simplified, illustrated example to depict the path for structured profes-sional development and employee retention.

Workflow DefinitionOne of the many challenges many

organizations face is that their work-flow is defined into functional silos. That is, the workflow is only defined within the silo of the department in which that person resides. The silo approach does not outline how a spe-cific position is to receive information, transform it, and transmit it forward across functional groups. This method can create some negative culture and competition between departments, instead of the synergy that is so highly desired.

Professional Development— It Begins with Workflow Definitionby Stephane McShane, Maxim Consulting Group

TRADITIONAL METHOD:

 That said, this is simply not how the most progressive firms define work-flow. This example has processes that define the workflow that spans mul-tiple departments so that the processes define the path, not the operational positions inside of the company. This is a very simplified example, but makes the point of transference between departments.

PROCESS DEFINED WORKFLOW:

 

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Until the firm is able to process map into a defined-value stream map, draft-ing the roles and responsibilities for each position will be very difficult. However, if the time is taken to per-form this critical function, the staff can become familiar with the expectations of their positions, what their role is in each process, how their performance will be measured, as well as the abil-ity to look forward at the responsibility of future positions. At this point, you can easily create a career path map with the employee to engage them in their own success, and allow them input about where they would like to go based upon the requirements of the desired position.

Mentoring and LeadershipThe benefit of the transparency

defined in the roles and responsibili-ties cannot be realized without the abil-ity to have mentoring and leadership. In what intervals do you meet with your employees to discuss their cur-rent performance, review their learning plans, and discuss their work goals? Developing greatness in performance does not stop at definition, but must be cultivated consistently.

Many performance evaluations are quite subjective. This means, the def-inition behind the terms “below aver-age,” “average,” “above average,” and “excellent” have not been defined. With this method, the employee is relying on the opinion of the evaluator and no specific skill set mastery defi-nitions have been identified in order to achieve higher marks. Current per-formance should be an evaluation on whether the individual roles and responsibilities have been taught, used infrequently, used frequently, and mastered. For instance, if a pro-ject manager has specific roles in the preconstruction planning process, the specific task mastery involved in the process should be evaluated using the same definition of scale across all like positions, driving consistency into the process. An example of a performance evaluation matrix immediately follows.

Utilizing this type of objective crite-ria, it would also allow you to create levels within a larger organization as specific stages of mastery (point lev-els) have been achieved. An exam-ple would be titles such as Project Manager I, II, and III. In this way, the employee drives their own success in reaching the next level, because they understand the metrics in which they are being evaluated and can strive to meet and exceed those goals. This cre-ates a win-win for the employee and the organization as the best practices have been defined, the employee owns their own progression which is influ-enced and encouraged by leadership, and the resulting behavior is incentiv-ized by promotion and compensation.

Education and TrainingThe platform utilized to train today

and into the future looks quite differ-ent than the methods of the past. Does anyone remember the days of the job manual? Many of the manuals still sit-ting on the shelves in construction offices are out of date, do not contain the latest information, and are rarely referenced. There is a reason.

Process Flow ChartsMany of our employees are visual

learners, yet many organizations have not updated their process definitions and translated them to visual media. Remembering that the future of our industry lies in technology, it would make sense that our training and edu-cation methods would follow suit. During the value-stream mapping pro-cess, it would be easy to identify spe-cific processes, including where they begin and end. An example of a very simplified Job Startup Overview is

Policy & Procedure Points

Always follows company policy and procedure 10

Usually follows company policy and procedure 8

Makes an effort to understand and follow policy and procedure 6

Understands what to do but does not always follow suit 4

Gives little regard to established policy or procedure 2

shown on the next page. With a swim lane flow chart such as this, it depicts the process and shows who owns each task. Each of the three horizon-tal lanes in the center represent a job title who is responsible for that action. The swim lane up top is reserved for the metrics or evaluation of whether or not this was completed. The lane on the bottom is reserved for examples of documents, templates, or to embed video training as necessary. This cre-ates a repeatable, measurable process that can be saved and used during onboarding of new staff or promotion of individuals into a new position.

Video EducationSo much of our work in construc-

tion is on the computer. Whether the construction organization is large and can retain the services of online train-ing producers, or the firm needs to perform this in house, video educa-tion provides tremendously beneficial results.

Considering the depth and detail needed in training for specific pro-cesses, especially those tasks done on our devices, video becomes one of the easiest methods of capturing the needed information, while still mak-ing it a human interface. For exam-ple, in reviewing the flow chart above, there is a task to “open the start-up cost codes with 1 hour and a quan-tity of 1” so that they are active and available for immediate use. The con-tractor could simply use any online resource which would allow us to record an online meeting to capture voice and screen contents to follow someone doing this exact process. Take someone who is familiar with this task, have them start the meeting,

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share their screen, record the session, then simply talk through each step and option of the task while they are doing it. Once the recording is stopped, it can be converted into a video file, renamed appropriately, and stored in a train-ing repository on the contractor’s net-work. A link to this video could also be embedded into the contractor’s pro-cess flow chart for ease in training use. It’s quite easy as many of us now have two monitors (or more), and can have the training video up on one screen, and the software or program up on the other screen. They can watch a segment, then do that segment, and repeat.

This should not replace training and mentoring in person. However, it is understood that if the process or task is not done frequently after the training, the in-person session education is lost. Another method of utilizing video is to record the training so that the employee can refer to it over and over again, in lieu of asking for multiple rounds of in person training. This would certainly avoid duplication of effort and give a strong platform for others to use.

 Outside of large, progressive firms

who have staff dedicated to profes-sional development, educational resources and career-path mapping can be fairly slim or simply non-exist-ent. The end goal is to set our teams up to succeed, and understand how to accomplish their goals. With the speed of change in our industry, the structure and methods of training in the past has been replaced with value-stream map-ping, process definition, and roles and responsibility clarification. The contrac-tor must also allow for the mentorship and leadership to guide in the educa-tional process by providing attainable milestones, objective evaluations of performance, free access to education, and technology solutions to measure and track the change. External training resources are available should the con-tractor require help developing their own programs, bringing external paid trainers in-house, or sending their staff to courses offered through associa-tions or other groups. In short, effec-tive professional development is the greatest opportunity to inspire growth

and loyalty in our employees and, more importantly, put the ability to excel into their own hands.

Stephane McShane is a director at Maxim Consulting Group responsible for the assessment and implementa-tion processes with our clients. McShane works with construction-related firms of all sizes to evaluate business practices and assist with management challenges. With a large depth of experience work-ing in the construction industry from the field to executive leadership, McShane is keenly aware of the business and, most specifically, operational challenges firms’ face. Her areas of expertise include leadership development, organizational assessments, strategic planning, project execution, business development, pro-ductivity improvement, and training pro-grams. McShane is an internationally recognized speaker, mentor, author, and teacher. Her ability to motivate, inspire, and create confidence among your work groups is extremely rare and very effective.

T H E C O N T R A C T O R ’ S C O M P A S S S E P T E M B E R 2 0 1 7 13T H E C O N T R A C T O R ’ S C O M P A S S S E P T E M B E R 2 0 1 7 13

Feature

As project managers for a large mechanical company, we enjoy being part of a team working toward a com-mon goal and the satisfaction of com-pleting a project from the ground up. We relish seeing real progress and no two projects are ever the same. A “desk job” was never going to work for either of us—we like to change our workplace settings and enjoy pro-ject-managing onsite.

As women, we defy the stigma that the construction industry is only for men.

We have been fortunate to work alongside women in important pro-ject leadership roles such as archi-tects, engineers, senior project managers, owner’s representatives, site superintendents and safety man-agers. We have also worked on projects with female electricians, car-penters, sheet metal installers, pipe welders, heavy equipment operators and masons.

How-to Guide for Women in Construction Project Managementby Mary Beth Kingsley and Sandy Palmerton, Shapiro & Duncan

The key is to be aware of your self-con-fidence level, your overall demeanor and to stay consistent.

Another gender-based challenge is that women tend to hold them-selves up to a higher level of self-scru-tiny than our male counterparts. Small details matter that much more to us. At the same time, our work is more closely scrutinized. We have more to prove. Yet everybody makes mistakes. While no business professional enjoys making an error, the real value to your employer (whether you are male or female) is demonstrating self-growth by learning from those errors.

It’s not a question of whether it is fair or unfair. It is our responsibility and our obligation to uphold a professional image. That’s why we always prepare thoroughly for meetings. Ultimately, if you show up for work, do your job and do it to the best of your ability, there is

Attitudes are changing and the days of any stigma related to the accept-ance of women in the construction industry are fading fast, in our opin-ion. There is no reason why the con-struction industry should be any different from other sectors in terms of equality. Seeing other women in leadership roles and working in the field has helped us build confidence, provided an unspoken camaraderie, and showed us the diverse opportu-nities that are available to women in the industry.

ChallengesNo doubt, in the construction indus-

try women are put under the micro-scope more so than males. There is a perception often associated that women are emotional and incorpo-rate their feelings into their work. It is important to act professionally and demonstrate your level of exper-tise without feeding the perception.

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no place for gender bias. If you don’t make gender a big deal and let it affect your job performance, then oth-ers are more likely to perceive it in the same way. As long as you are meet-ing or exceeding your job responsibil-ities, gender quickly disappears as a job-related issue.

Top Tips for SuccessIn a project management role, bal-

ancing a heavy workload and keeping all the balls juggling can be stressful. But creating and working from lists is one way to stay focused and gives a feeling of accomplishment when an item is crossed off.

Here are more project management success tips. Some are gender-based, and some aren’t.

No one person has it all. Don’t be afraid to delegate to your fellow team members and reach out when their expertise is needed. Learn from them. Accept praise and positive feed-back when it is given. Try to avoid the (sometimes) female tendency to say, “Oh, it was nothing.” Be clear and concise in your communication.

Always remain assertive and present yourself in a confident manner. Neither of us has a hard time speaking up or voicing our opin-ions in a room full of men. The sooner you decide your gender is not a fac-tor in performing your job, the sooner others will reach the same conclusion. In those very rare instances where we have sensed hesitation from an “old timer” who is maybe unaccus-tomed to working with a female, once that relationship of familiarity and trust is established, working together becomes second nature.

Understand women inherently want to please other people. If you’re inclined to take a stab at an answer that you are not totally famil-iar with, that can get you in trouble. If you don’t know something, answer honestly and say, “I’m not sure. Let me do some homework and get back to you.” On the other hand, if there is a topic on which you are knowledgea-ble, do not be afraid to speak out.

Mentor the people around you. Share teachable moments to strengthen co-workers. Demonstrate a willingness to teach, because this builds a better team. Some peo-ple are afraid to share information because of job security worries, but reality shows that there are over 500,000 current skilled trade posi-tions to fill in the industry and that number is expected to approach 2 million by 2022. Our industry is in need of qualified project managers and in our view, we have an obliga-tion, now more than ever, to mentor assistant project managers and pro-ject coordinators.

Remain approachable and open-minded. For managers, it is critically important to know how your employees and clients perceive you. Obtain feedback and build on processes to get better results. Take a look around you—look at clients, subcontractors and foremen. Feed on their strengths to get the results you need.

Realize what is hot and criti-cal. Be organized. Prioritize. What has to go out today? In construc-tion project management, attention to detail is a fundamental success trait—for men and women.

Treat everyone—owner, archi-tect and subcontractors—with respect.

Don’t present yourself as a know-it-all. Have an open mind, be willing to learn new things and hear new ideas. Seek out professional and career development opportuni-ties. The industry is evolving every day.

Key TakeawaysWomen employed in male-dom-

inant industries, possess the tools to change stereotypes and break gender barriers by remaining pro-fessionally passionate, by staying hungry for excellence, by execut-ing assigned tasks with care and by taking initiative to be a self-starter. Stay focused on the finish line until completion is achieved. Then, ask your superiors for your next task or

project—don’t wait for them to fig-ure it out. We would like to think that our current project manager positions have been obtained, and maintained:• By our respective willingness to

accept the obstacles of the industry; • Our respective interest in learning

new technologies; • Our dedication to upholding ethical

treatment of clients and co-workers; and finally,

• Our commitment to delivering results.Although both of us were on ini-

tial paths to enter the workforce in predominately female roles, both of us shifted gears and instead chose a career in a predominately male indus-try. We have zero regrets. Like a lot of other people, we didn’t choose our profession. We grew into it.

Yes, over the years both of us have been mistaken for the secretary or the accounting manager—but we don’t take it personally. We are always quick to hold our heads high and (politely) set the other person straight. Once that individual realizes that we are in a leadership role, the initial shock wears off and they expect the same results from us as they would a male counterpart.

Our advice to women consider-ing the construction industry is the same advice we would give to any-one entering the field—find solidarity through networking, accept all oppor-tunities to further your education and training, ask questions, speak up for yourself, and treat everyone equally and with respect. Simple tools to live by, no matter what career path you choose!

Mary Beth Kingsley and Sandy Palmerton are project managers at Shapiro & Duncan, Inc., a third-gen-eration family-owned mechanical contracting business serving cus-tomers in the Washington, D.C., area since 1976. Shapiro & Duncan is the “Provider of Choice” for complex commercial, government and insti-tutional design-build projects that require first-rate performance, work quality and customer service.

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So You Want to Be a Female Project Manager in a Male-dominated Industry? It Takes a Team

by Mary Beth Kingsley, Shapiro & DuncanJerry and Sheldon Shapiro, president and CEO, respectively, of Shapiro & Duncan, gave me the nudge

to take on my first mechanical project in 2003. Starting off as receptionist for their company in 1996, they decided to back me 100 percent, so I could take the next steps to further my career. After working as project coordinator and assistant project manager, I became the first female project manager in their company. The contract value of my first project, a middle school, 15 years ago was $500,000. Last year, I completed a complex, fast-track healthcare project with a contract value of $24 million.

Each (sometimes reluctant) step up the ladder has been backed by my Shapiro & Duncan team-mates—who, by the way, are predominately male. Many individuals have served as mentors to me and provided support aiding in the success of my career.

In particular, Shapiro & Duncan project executive Ron Chazin, my team leader, has been and contin-ues to be instrumental in my career. He serves as a sounding board, assists me as I work through pro-ject hurdles, and lends his technical experience while always teaching. Never one to just give me the answer, Ron encourages research, independent thinking and confident decision making.

Shapiro & Duncan’s greatest strength is our people. Our team atmosphere promotes and fosters the success of the individual and the project—gender notwithstanding!

Four Years Later, A New York Minute

by Sandy Palmerton, Shapiro & Duncan

“Sandy, we need your resume for a bid that is due today, and we also need you to provide a listing of (county) schools you have worked on recently.”

I am asked this via email late in the afternoon on the day the bid is due. After our company success-fully makes it through the first round of pricing submissions, an internal meeting is called to discuss technical interview approaches for the bid to bring 100-plus schools into code compliance.

That evening, while I am driving home after we receive notice that we are awarded the work, the anchor of reality and challenge takes hold. This is an open format project; the owner expects the suc-cessful contractor to engineer, design, schedule, install and close out mechanical construction in more than 100 schools—with no owner-provided project manager or liaison.

A team approach is instituted. Although I have a heavy hand in creating and implementing the pro-cesses and procedures, the jump start comes from my surrounding professional supervisors and co-workers with years of experience. Constant support and constructive feedback help keep things moving.

Four years and 167 schools later, achieving completion is equal to sitting atop a red Harley moving 80 miles an hour on a bright sunny day. Looking back, the sense of accomplishment is reinforced by confi-dence to move forward progressively. No matter how large the project, I feel equipped to reproduce the project management processes with renewed spirit.

Would I do it all over again? In a New York minute!

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Feature

The past several years have been marked by dramatic ups and downs in healthcare. From the decline in insurer participation in healthcare exchanges to multiple attempts at “repeal and replace” legislation, the future is full of uncertainty.

Business owners are especially impacted by the instability of our nation’s healthcare system. Despite the ongoing political discourse about improving healthcare, all signs indicate that health insurance costs will con-tinue to skyrocket. For contractors who want to offer an employer-sponsored health plan, it’s a Catch 22. Insurance rates increase every year—often by double-digits—cutting deeply into their profits and threatening the stability of even the most established companies.

 But cost isn’t the only issue facing contractors. Even among those com-panies offering healthcare, many work-ers can’t afford to pay their portion of a traditional insurance plan and opt out of the coverage. For these employees, workers’ compensation becomes their only option for healthcare—even for issues sustained outside of the work-place. It’s no surprise, then, that work-ers’ comp claims can easily spiral out of control, cutting into the bottom line and damaging the company’s eMod scores.

Despite all of these challenges, there is a solution that’s beginning to take hold in the construction industry—and it’s proving to be a silver bullet for employers who want to provide qual-ity healthcare and keep their workers’ comp claims in check, but simply can’t afford the cost of traditional medical insurance.

Misperceptions: Fully Funded Medical Insurance

The majority of small and midsized businesses offering healthcare benefits provide a traditional, fully insured plan

with premiums, deductibles, copay-ments or coinsurance. However, few employers understand the rate struc-ture of their plans. Most assume that their rates will stay the same or even decline if their company’s claims are low. It’s a reasonable assumption, but it’s not at all true.

No matter how low their utiliza-tion, the insurance carrier will pool their company with other businesses of the same size and in the same geo-graphic area. At that point, their uti-lization hardly matters—it’s a drop in the bucket of the risk pool—and it’s far more likely their rates will increase, year after year.

Likewise, few business owners understand that the insurance com-pany will keep all of the money they’ve paid into the plan, even if their claims costs fall far below their cash outlay.

Self-Funded Healthcare: A Better Way

In a self-funded health plan, employ-ers create their own benefit plan for their employees, pay health claims directly or through a third-party admin-istrator (TPA). Businesses can choose from a wide variety of plan designs, including partially-self funded and level-funded insurance plans. For employees, the health plan may look and operate exactly the same.

Benefits may include medical, dental, vision, prescription medications and workers’ compensation. In addition, companies that self-fund can tailor their package to address the specific needs of their workers. For contrac-tors, this may mean providing more coverage for injury and chiropractic care. Fully insured medical plans aren’t nearly as flexible. Moreover, employ-ers can determine how they will fund their plan and whether their staff will pay a percentage of the claims costs.

From a cost perspective, a well-designed self-insurance plan yields significant savings. Cash flow improves because employers don’t pre-pay for coverage—they only pay when claims are incurred. They keep any extra money they’ve put into their claims bucket—it doesn’t line the pockets of their insurance carrier. Moreover, businesses aren’t on the hook for insurance companies’ market-ing costs or profit margins, a savings estimated at 10 percent to 25 percent in non-claims expenses. Self-funded plans are also exempt from state health insurance premium taxes—a savings that equals 3 percent of the total premium dollar value of a tradi-tional plan.

For contractors, a strategic plan has also shown to bring down workers’ comp costs and provide lower-wage employees with an appropriate avenue to seek healthcare.

Creating a Smart Self-Insurance Plan

In today’s broken healthcare system, the promises of self-funding sound too good to be true. Even so, a well-designed plan may well be the solu-tion for drastically reducing health costs while providing employees with robust benefits.

Simplifying access for employees, helping them navigate the health care system, and understanding the factors that impact costs are key to realizing the benefits of a self-funded plan.

Simplifying Access: Most tradi-tional health plans include deductibles and copayments, meaning employees pay money (on top of their monthly premium) every time they see a doc-tor. Obviously, this creates a barrier; many people, especially low-wage earners, choose not to seek treat-ment because the money is an issue. This may result in extra sick days or

Self-Funded Healthcare: A Better Option for Contractorsby Mike Bechtol, Redirect Health

Complimentary Human ResourceStaff and Servicesfor ASA Members

As a member of the American Subcontractors Association, your organization is eligible to receive complimentary Human Resources services:

Member Service Agreement – ASA member companies can establish a service agreement with SESCO Management Consultants to provide ongoing professional services. Free Telephone/Email Consultation – SESCO staff is available to answer your human resource questions on a daily basis at no charge. Whether it be a federal or state employment compliance question, such as wage and hour, FMLA, COBRA, insurance, Equal Employment, etc., SESCO staff stands ready to assist you! In addition, staff assists in research, handling difficult people problems such as terminations, disciplinary actions, substance abuse or other day-to-day issues that arise. Free Handbook Review – SESCO staff will review and analyze your current employee handbook or policies to ensure compliance with federal and state employment regulations. Human Resource Compliance Manual – The SESCO staff has prepared a custom compliance manual for ASA members and the industry. It is over 200 pages and contains sample policies, forms and SESCO staff recommendations! Discounted Employee Satisfaction Survey Program – Employee morale is at the core of whether a company is profitable and successful. SESCO offers a discounted employee satisfaction survey program to help ASA-member companies identify employee relations issues that may be impeding optimum productivity and quality customer services. Discounted Consulting Services – The SESCO staff is available to provide consulting services as requested.

Contact a SESCO consultant at (423) 764-4127 or sesco@sescomgt.com

T H E C O N T R A C T O R ’ S C O M P A S S S E P T E M B E R 2 0 1 7 19

reduced productivity while on the job. In some cases, health issues left untreated may become dramatically worse—and much more costly.

A smart self-funded plan builds in routine health services at no cost to the employee. Treatment of common conditions like sinusitis, flu, cough and colds, conjunctivitis and minor inju-ries is inexpensive for the business, but highly valuable for employees. For contractors, this also provides employ-ees with an alternative to workers’ comp for minor injuries requiring only first aid.

Stop Loss Insurance: To mitigate their risk, self-funded companies often purchase a stop-loss insurance pol-icy for catastrophic illnesses and acci-dents. With this coverage, the business pays employees’ health claims up to a certain dollar amount, protecting the company from unexpected financial loss.

Care Coordination: Most compa-nies that self-fund hire a TPA to help administer the plan. Employers who want to realize the full benefit of self-insurance may also consider partner-ing with a third-party organization to help manage the coordination of care for their employees.

The healthcare system is compli-cated and confusing—for business owners and their staff. In many cases, people don’t know what to do when they’re sick or injured, but a third-party care delivery coordinator can help employees navigate a cumbersome system, ensuring they get the care they need, at the most appropriate site of service and at a fair price. A partner organization protects businesses from overpaying while serving as a health-care concierge for employees.

Care Management: In the health-care system, 10 percent of patients spend 90 percent of the money, but costs can be controlled by providing a higher level of care management to people who suffer from diabetes,

hypertension, heart disease, cancer and other chronic or complex diseases. For example, simply ensuring diabet-ics are taking their insulin as directed can prevent serious and costly epi-sodes. Building in care management, either directly or through a care coor-dination partner, will yield significant savings for companies that self-insure.

Fair Pricing: Most self-funding plans use reference-based pricing to ensure costs are fair. Medicare is con-sidered the standard in fair pricing. For example, the fair price to deliver a normal, healthy baby in a hospi-tal is $5,000; the going rate in a tradi-tional insurance plan is $15,000. This cost is baked right into premiums and reflected in high deductibles.

By negotiating fair pricing and self-funding the cost (either directly or through their care coordination part-ner), a business whose covered employees and dependents deliver seven babies in one year will save $70,000.

Interestingly, many traditional insur-ance carriers offer self-funded plans, but their reference prices are much higher than Medicare. For example, their reference price for an MRI may be as high as $1,500, while the fair price for the service can be as low as $300. For a construction company with a total of 20 MRIs in one year, nego-tiating fair pricing saves $24,000. It doesn’t make sense that an insurer would set such high reference rates, but it’s just a symptom of a much larger issue. Nothing in today’s health system makes sense.

Place of Service: When it comes to managing costs, the place of ser-vice has the single greatest impact on healthcare spending. While an MRI may cost $4,000 at a hospital, the exact same MRI is just $300 at an off-site imaging center. There is no dif-ference in quality. The same is true of X-rays, blood and urine tests, and other common procedures. In general,

hospitals charge five to 20 times more than independent labs or doctor’s offices.

Moreover, a visit to the emergency room averages about $3,000—a big hit to a company’s health claims budget—but the majority of people who seek care at an ER are at the wrong place. They need a primary care provider to treat a respiratory infection, or an X-ray for an injured arm. By eliminat-ing 10 unnecessary ER visits each year, companies will save up to $30,000 in claims costs. When employers truly understand the impact of place of ser-vice, they take action to ensure their employees seek the right care at the right place.

Pharmacy Costs: Dramatic cost variations are true at the pharmacy, too. Prices of common antibiotics vary greatly depending on the pharmacy, the insurer and the way the doctor writes the prescription. A simple med-ication may cost $40 at a corner store pharmacy—but just $10 at a supermar-ket pharmacy. If a company’s employ-ees fill 500 prescriptions each year, this $30 difference adds up to $15,000. It’s a clear and simple choice to order prescriptions through a lower-cost pharmacy—and an easy way for self-funded companies to protect them-selves from overpaying.

Self-insurance might just be the best-kept secret in healthcare. A well-designed plan provides companies and their employees with real benefits without breaking the bank.

Mike Bechtol is director of Care Logistics for Redirect Health, a Gold ASA sponsor. For more information about self-funded health plans, contact Redirect Health at (888) 995-4945 or nextsteps@redirecthealth.com.

S E P T E M B E R 2 0 1 7 T H E C O N T R A C T O R ’ S C O M P A S S20

Feature

When considering all the aspects of neglected management, most often organizations identify development planning as an area of important need. Development planning truly aids your employees in shaping not only the future of their careers, but also the future of the organization. For a vari-ety of reasons, the valuable activity of employee training and development often goes ignored or becomes an after-thought by management. With this comes the ultimate price: the loss of top talent or future hopefuls.

We often hear from management that not enough time was spent on the development of direct reports or others in a managerial role. In retrospect, man-agement regrets the lack of engagement in the training in development piece as well as consistency and thoroughness via mentorship and/or coaching. Further identified is the benefit that upper man-agement gains from mentorship and professional growth from others in mid-dle level managerial positions.

These general observations and nota-tions were also confirmed in Harvard Business Review. The Review identi-fied a study based on analysis of inter-national databases of over 1,200 high achievers and concluded that many of the high-performing employees are not receiving the career development sup-port they desire. The study stated:

“Dissatisfaction with some employee-development efforts appears to fuel many early exits. We asked young man-agers what their employers do to help them grow in their jobs and what they’d like their employers to do, and found some large gaps. Workers reported that companies generally satisfy their needs for on-the-job development and that they value these opportunities, which include high-visibility positions and sig-nificant increases in responsibility. But they’re not getting much in the way of formal development, such as training,

mentoring and coaching—things they also value highly.”

Why is employee training and devel-opment a chronic problem in many organizations and why should it not be? Based on SESCO’s 72-year human resource experience, the following rea-sons explain why training and develop-ment planning often goes ignored and how that can be a costly mistake for an employer of any size. Consider:

Why is training and development planning put on the back-burner?1. Organizations and management

tend to focus most on the present. Organizations or management often serve in frenetic state of change, rea-lignment of goals/priorities and try-ing to do more with less. In this environment, management naturally tends to focused on the essential day-to-day operations and less inter-est in longer-term activities perceived as having less return on investment such as training and development.

2. The training and development exer-cises are done but rarely acted upon. We often see many corporate man-agement individuals spend a signif-icant amount of time trying to label certain employees or place them into nondescript or confusing matri-ces. For example, XYZ organization creates a training matrix with labels such as Super Shining Star, Diamond In The Rough, Underdog, so on and so forth. The challenge with such matrices is that often management is merely concerned with complet-ing the exercise that employees can be misplaced or left out of the mix because they simply do not fit within the overly convoluted label or box.

3. There is most certain a benefit in uti-lizing a training and development matrix so long as it is usable and understandable to all involved in the

process. Management should accu-rately identify the categories and label appropriately, explaining why and how the individual has been placed. Further, the matrix should then be integrated into the human resource training and development program, which should allow for measurable growth and develop-ment of the employee.

4. Management simply states there is no time for training and develop-ment. This is and will continue to be the worst excuse of all. There will always be time for important activ-ities for growth and development if that time is prioritized by manage-ment. As a valuable function of man-agement, carve out the time and integrate the training and develop-ment opportunities into daily func-tion. Keep in mind that training and development should be done incre-mentally to allow for on the job application of the new skill sets.

Why does training and development planning make good business sense?1. Employees, particularly those of the

millennial generation, want to see management take a genuine interest in their future and career. It is impor-tant to note the emphasis “genuine.” Training and development plan-ning should involve a manager tak-ing a personal interest in the actually employee needs or career path both inside and outside the organization. The program should never be simply a human resource-driven mandate, but a collaborative effort between the manager and human resources to create proper growth and devel-opment of employees.

2. A solid training and development program builds loyalty and commit-ment, not only to the organization

Employee Training and Development: The Importance, the Employer Neglect and the Cost to the Organizationby Jamie Hasty, SESCO Management Consultants

T H E C O N T R A C T O R ’ S C O M P A S S S E P T E M B E R 2 0 1 7 21

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but also to the manager. In turn, that same loyalty and commitment increases productivity and employee engagement/satisfaction. Referring back to the point noted above, taking a genuine interest in the employee builds loyalty. Loyal employees are more engaged. Engaged employees are more productive.

3. Engaged and talented employees naturally aspire to advance within the organization and appreciate meaningful support in the process.

As the Harvard Business Review study showed, capable and ambitious employees strongly desire training, mentoring and coaching. They want to gain valuable career skills sets to fur-ther move up in the organization. They look to become more versatile and val-uable to an organization, which aids in retention rates and return on invest-ment. Years ago the emerging trend for organizations was to assist employ-ees with their education with tuition

reimbursement or assistance. We regu-larly see where this type of investment in the employee’s education (or skill set) provides valuable support, as well as fosters that loyalty and commitment. On the contrary, if there is no incentive provided by management or the organ-ization for employee education or train-ing and development, employees will go elsewhere to find such resources.

In summary, training and develop-ment planning doesn’t have to be elab-orate or costly. At the core of every program is good management taking the person-to-person time to under-stand employee needs and desires, recognizing skills and training needs and collaborating with the employee and human resources to fill any exist-ing gaps. If training and develop-ment is executed well, the payoff for the organization can be substantial in terms of long-term loyalty, retention, engagement and productivity. If there is a training and development void,

organizations substantially risk valuable employee assets and long-term talent.

Jamie Hasty is the vice president of SESCO Management Consultants. Under an arrangement with ASA, SESCO pro-vides results-oriented human resource consulting services to ASA members. SESCO provides a special “retainer” rela-tionship that provides a free “hotline” to ASA members to discuss day-to-day employment issues such as policy devel-opment, employee challenges such as disciplinary actions, terminations, or workers’ compensation issues, compli-ance to federal and state employment regulations, and many other manage-ment and human resource matters. Hasty can be reached at (423) 764-4127 or jamie@sescomgt.com. SESCO offers a variety of online and classroom training for employees and managers, custom-ized to meet your organization need and budget. Contact a SESCO consultant to explore training and development oppor-tunities for your organization.

S E P T E M B E R 2 0 1 7 T H E C O N T R A C T O R ’ S C O M P A S S22

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Optimize Your Workforce with On-Screen Measurementby Adam Khemiri, eMeasure

As any business expands, it eventually reaches a critical point. Processes must be optimized before further growth. For estimators, han-dling manual plans is cumbersome and wasteful. Moving to on-screen measurement will dramatically improve productivity in many ways. Let’s take a look at some of the main advantages.

Go Faster

 

Of course, one of the main advan-tages of on-screen measurement compared to paper plans is the speed. Instead of using a ruler to measure each wall, an on-screen measurement program lets you use your mouse to measure areas, lengths and counts in a flash! If your plan is CAD (or vector PDF), some systems have the ability to take advantage of the polylines added by architects. This means you can take off a whole room in one click. Plus, with traditional takeoff by ruler you would have to manu-ally aggregate all of the individual measurements into one total using a calculator, or possibly a spread-sheet. This is time consuming and potentially prone to errors, whereas an electronic takeoff system

automatically extends and aggre-gates all dimensions to quickly give an accurate overall total. Studies have shown that when using an on-screen measurement system, take-off speed will increase by up to 80 percent!

More AccurateWith a ruler, you’re relying on the

steadiness of your hand to ensure you don’t make any mistakes. Plus, when you’re taking off from a paper plan, you’ll often be making nota-tions of measurements. These have to be crystal clear, or else they’ll be read incorrectly by someone else. These two factors mean that some-times, accuracy can be in question. With most on-screen measurement systems, measuring a dimension inputs it directly into an organized list. This ensures you’re able to refer to it later with no confusion. Some systems will even show you where a measurement comes from when you click on the figure. This gives you a great reference point and makes sure you know what’s been measured where. When your plans are on-screen, you can zoom in eas-ily, making sure you’re taking the most accurate measurement possi-ble. And again, if you receive CAD or vector PDFs, use an on-screen measurement system with polyline compatibility. With one click, your dimension will be measured exactly as the architect, designer or drafter intended it. Any software costs are quickly recouped by savings in increased accuracy.

Everything in One PlaceIf you’re measuring manually,

you may have a bunch of different plans relating to the one project. Not only do you have to pay for printing costs, but this can be very annoying for storage purposes. Over time, it continues to add up and you can feel like you’re drown-ing in blueprints! You couldn’t pos-sibly carry all of the paper plans for all of your projects around with you, too, so referring back easily is difficult. Plus, if you happen to lose or misplace one of the plans, it can become a big issue. With an on-screen measurement system, you can load all your plans into the one program. That means you’ll have everything you need in one place. You can easily keep track of the pro-ject and optimize your processes. With the program installed on your laptop, all of your marked-up draw-ings and corresponding quantity takeoff go with you wherever your laptop does! And by simply tog-gling between the different plan views, you’ll be able to see what’s been measured where! Previously, you would have had to move huge plans around a tiny desk to try to compare.

Ready for Revisions

 

T H E C O N T R A C T O R ’ S C O M P A S S S E P T E M B E R 2 0 1 7 23

We’ve all been there. The initial estimate is done, but you then get revised plans back from the archi-tect, designer or draftsperson. However, it’s unclear where the changes have been made. You have to spend considerable time scru-tinizing the plan to see where the differences lie. This is a huge time-waster. To eliminate this frustration, on-screen measurement systems allow you to overlay plans so you can see the differences instantly. This is a huge time-saver. You’re able to update necessary measure-ments quickly, without having to measure the whole plan again.

See the Bigger Picture  

When you’re estimating from plans, it can be extremely diffi-cult to try and visualize how the end result is supposed to look. With an on-screen measurement system, you can view your meas-ured dimensions in 3-D. This allows you to see what’s been measured where, and if you’ve missed any-thing. You can also visualize the end result more accurately. It’s a great advantage that paper plans simply can’t give you.

Bonus: Integrates with Excel  

So many of us use Microsoft Excel every day for estimating. If you’re taking off from paper plans and using Excel, you know the feel-ing of having to type those figures into Excel one by one. And it can be so easy to type one figure wrong—a mistake that lets down your whole project! Some on-screen measure-ment systems actually integrate with your Excel spreadsheet. This allows you to directly drag and drop those measured dimensions into Excel. Not only does this mean the chances of getting a figure wrong are dramatically reduced, but it’s a huge time-saver. You can even set up templates so that when figures are measured, they are automati-cally input into the spreadsheet. The power of a fully-blown estimating system, but all in familiar Microsoft Excel.

Overall, it is clear that if you want to take your business to the next level and develop your workforce, you need to invest in an on-screen measurement system or risk being left behind. Give your business the best advantage it can have, and move on-screen today!

Adam Khemiri is the business development manager at eMeas-ure. eMeasure is the latest soft-ware offering from Exactal Group, a low cost, high quality on-screen measurement solution intended for those who want rapid and accurate Excel®-linked takeoff at an afford-able price. Intuitively designed with a learning curve of under an hour, eMeasure allows estima-tors to painlessly takeoff quanti-ties with just a few clicks. Users can load in digital plans, calibrate and rotate, measure up, and then when done, just drag and drop the quan-tities straight into their spreadsheet with the Excel® add-in. eMeasure is a Bronze ASA sponsor. For more information, visit www.emeasure.com or email sales@emeasure.com. Use the code ASA211 when purchasing to get special discount deals—or rent per month for a great price!

S E P T E M B E R 2 0 1 7 T H E C O N T R A C T O R ’ S C O M P A S S24

FeatureFeature

“Should employers have blanket policies that prohibit employing individuals with criminal conviction records? The Equal Employment Opportunity Commission says they should not.”

In April 2012, the EEOC issued Enforcement Guidance No. 915.002, “Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964” (“Guidance”). It warns that blan-ket policies and practices that exclude all individuals with any type of crimi-nal conviction record from employment may be discriminatory and in violation of Title VII.

One Size Does Not Fit AllCriminal background checks have

long been an important part of the hir-ing process. These routine checks are valuable in mitigating the risk of negli-gent hiring claims. They can help pre-vent employers from hiring a worker charged with sexual harassment or who had a recent criminal conviction for sex-ual assault. Criminal record checks may also ensure that individuals, who were recently convicted of theft or fraud, are not hired as bank tellers.

However, background checks can lead to unintended consequences. For exam-ple, a decades-old marijuana posses-sion conviction may preclude a perfectly capable, reformed, 50-year-old person from earning a job in which he or she may excel.

Blanket policies may result in “dispa-rate impact discrimination,” a neutral policy or practice that has a discrim-inatory effect on a protected class or classes, even though no intent to dis-criminate exists. The EEOC references research indicating certain protected classes, such as African American and Hispanic men, have higher rates of criminal convictions. Thus, disqual-ifying an individual based upon a

a state or local law which prohibits an individual with certain criminal con-victions from holding a particular job must still demonstrate that its policy is job-related and consistent with busi-ness necessity. An employer cannot rely solely on a state or local law to provide justification for such an exclusion from employment.

The EEOC cautions that “convictions” and “arrests” are not the same. An arrest does not prove criminal conduct occurred, so excluding an individual from employment based solely upon an arrest record will not be job related or consistent with business necessity, and therefore, a violation of Title VII. However, an employer may make an employment decision based upon the conduct underlying the arrest if, after a factual inquiry, the employer deter-mines the conduct that occurred ren-ders an individual unfit for the position being filled.

Risk Control RecommendationsTo comply with the Guidance and to

mitigate the risks inherent in hiring:• Avoid across-the-board policies that

automatically prohibit the employ-ment of an individual based upon any criminal conviction.

• Write narrowly tailored policies and procedures to govern the use of criminal background checks.

• Review job descriptions and deter-mine which specific criminal convic-tions that may render an individual unfit for a particular job.

• Determine whether certain crimi-nal conduct may be excused after a given time period, and if so, how many years should be relevant.

• Document the justification for the policy and procedures, including consultations and research con-sidered in crafting the policy and procedures.

Use of Arrest and Conviction Records in Employment May Be Discriminatoryby Laura Lapidus, Esq., CNA

criminal conviction could have a dispa-rate impact on those protected classes, and would violate Title VII unless an employer can prove that its policy is “job-related and consistent with busi-ness necessity.”

Background Checks and Screening Process—EEOC Guidance

Background checks remain legal and critical to the hiring process. But, rather than maintaining a blanket policy against employing individuals with con-viction records, the EEOC encourages employers to develop narrowly tailored policies and targeted screens based upon each particular job to ensure exclusions are job-related and consist-ent with business necessity. The screen-ing process, according to the EEOC, should focus on the:• Nature and dangers of the crime in

question.• Time elapsed since the crime was

committed.• Nature and risks of the particular job.

The EEOC further proposes that individuals with criminal records be offered individualized assessments. Such reviews would allow the individ-ual to provide information employers may consider in determining whether the factors excluding those individu-als from employment are, indeed, job related and consistent with business necessity.

The Guidance also indicates that the EEOC will defer only to federal laws that prohibit individuals with certain criminal convictions from holding cer-tain jobs. Any employer that follows

T H E C O N T R A C T O R ’ S C O M P A S S S E P T E M B E R 2 0 1 7 25T H E C O N T R A C T O R ’ S C O M P A S S A U G U S T 2 0 1 7 25

• Consider individualized assess-ments of applicants with criminal backgrounds.

• Consider removing questions regard-ing criminal arrests and convictions from employment applications. Such questions may be asked in another form once a criminal background check is completed.

• Focus on the dangers of particu-lar crimes and the risks in specified positions when discussing criminal records with applicants.

• Train hiring officials, managers and others involved in the recruitment and hiring process about Title VII pro-hibitions against discrimination, and train them to implement the employ-er’s policy and procedures.

Since the Guidance is not law, it remains unclear the extent to which the courts will agree with the EEOC’s posi-tion, although courts typically defer to

the EEOC’s interpretation of Title VII. What is clear is that an employer should consult with an employment attorney to review and revise its policies and prac-tices regarding criminal convictions before such policies and practices are challenged by the EEOC. Discrimination is against the law, and blanket poli-cies that prohibit the employment of individuals with conviction records are more likely to be held as discriminatory, exposing employers to costly claims.

Additional Resources• EEOC Enforcement Guidance,

“Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C. Sec. 2000e et seq.” No. 915.002 (4/25/12).

• What You Should Know about the EEOC and Arrest and Conviction

Records: http://www.eeoc.gov/eeoc/newsroom/wysk/arrest_conviction_records.cfm

• Questions and Answers about the EEOC Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions Under Title VII: http://www.eeoc.gov/laws/guidance/qa_arrest_conviction.cfm

Laura Lapidus, Esq., is CNA’s Management Liability Risk Control Director and provides risk control sup-port to all of the insurance products which provide management liability coverage, with a focus on Employment Practices Liability insurance cover-age. Lapidus has more than 25 years of experience in employment law. She has taught dozens of CNA’s School of Risk Control Excellence courses and webi-nars and has written various articles on employment practices issues.

25T H E C O N T R A C T O R ’ S C O M P A S S A U G U S T 2 0 1 7 25

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S E P T E M B E R 2 0 1 7 T H E C O N T R A C T O R ’ S C O M P A S S26

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The Equal Employment Opportunity Commission has stated its position with respect to employee leave policies. Once employees have exhausted their leave, their employers must determine whether they are considered disabled under the Americans with Disabilities Act and, if so, whether a “reasonable accommodation” is necessary to help them return to work. Inflexible leave policies that automatically terminate employees upon exhaustion of a max-imum medical leave period, and in the absence of an individual assessment of whether an accommodation is neces-sary and possible, may violate the ADA and potentially result in litigation and consequent loss.

ADA RequirementsMany companies’ leave of absence

policies provide for termination of employment if the employee fails to return to work within a fixed period of time, typically ranging from 12 weeks to one year. While such a policy may sat-isfy an employer’s obligation to pro-vide unpaid leave under the Family Medical Leave Act or other similar laws, it does not necessarily comply with the ADA. The EEOC has stated that if the employee is a qualified individual with a disability, the employer must engage in an interactive post-leave process to determine whether reasonable accom-modation is possible. Any policy that automatically terminates employment at the end of a set period, regardless of its length, prevents consideration of rea-sonable accommodation and will likely be viewed by the EEOC as a violation of the ADA.

The EEOC and courts have stated that an employer may accommodate a qualified disabled employee by grant-ing additional unpaid leave beyond the requirements of the employ-er’s policy and other laws, such as the FMLA. Although a general consen-sus has emerged that indefinite leave is not a reasonable accommodation,

• Review policies and procedures to ensure they allow for consideration of a reasonable accommodation for qualified individuals with disabili-ties who have exhausted their ini-tial leave. Options, which should be examined on a case-by-case basis, include additional unpaid leave, modification of job functions or reas-signment to an open position.

• Eliminate rigid policies and/or proce-dures that authorize automatic termi-nation upon exhaustion of leave, or that limit employees’ ability to return to work unless they have “no restric-tions” or are “100 percent able.”

• Document discussions with employ-ees regarding their needs and poten-tial accommodations in order to demonstrate that an interactive pro-cess has occurred.

• Retain an employment attorney to review any changes to policies and/or procedures prior to their implementation.

• Educate managers regarding the ADA and its regulations, as well as the company’s own policies regarding leave and reasonable accommodation.

By following these simple guide-lines, organizations can minimize leave-related risk and help ensure that their policies and procedures are both legally compliant and fair to employees.

Laura Lapidus, Esq., is CNA’s Management Liability Risk Control Director and provides risk control sup-port to all of the insurance products which provide management liability coverage, with a focus on Employment Practices Liability insurance cover-age. Lapidus has more than 25 years of experience in employment law. She has taught dozens of CNA’s School of Risk Control Excellence courses and webi-nars and has written various articles on employment practices issues.

Inflexible Leave Policies: Automatic Termination May Violate the ADAby Laura Lapidus, Esq., CNA

no bright-line test exists to determine what length of unpaid leave constitutes a reasonable accommodation. Whether a request for a longer leave would be considered an undue hardship depends upon individual circumstances, such as the size of the company and the posi-tion held by the employee requesting leave.

EEOC SettlementsThe EEOC has aggressively pursued

organizations that maintain inflexible leave policies. For example, one com-pany paid more than $4.8 million to set-tle leave-related claims alleging that it automatically terminated hundreds of employees who could not return to work after exhausting their 12 weeks of leave. The EEOC asserted that this policy violated the ADA because it did not allow for consideration of reason-able accommodation, such as addi-tional unpaid leave. The agency also contended that the company’s policy of prohibiting employees from returning to work if there were any restrictions placed upon them violated the ADA. According to the EEOC, such a blanket prohibition precluded consideration of a reasonable job accommodation that would permit employees with restric-tions to return to work in some capacity. EEOC actions against companies with inflexible leave policies have resulted in a number of significant damage awards and settlements, ranging into the mil-lions of dollars. The loss potential of these lawsuits is high, as claimants often include many past and current employees.

Risk Control Measures The following strategies can help

employers mitigate the risk of potential ADA violations:• Understand the ADA and its regu-

lations, especially the mandate to engage in an interactive process designed to explore reasonable accommodation.

T H E C O N T R A C T O R ’ S C O M P A S S S E P T E M B E R 2 0 1 7 27

Feature

An employee tells one of your managers that a medical condition is interfering with the employee’s ability to do his/her job. Does your manager know what to do? Do you under-stand your obligations under the disabilities laws?

Additional Accommodation Resources• The ADA National Network—The ADA

National Network is a national network of 10 regional ADA centers that provide, for employers, up-to-date information, referrals, resources and training on the ADA. www.adata.org; (800) 949-4232.

• U.S. Equal Employment Opportunity Commission—The EEOC’s Web site contains articles, checklists, a glossary, and links to useful disability resources to assist in complying with the ADA. www.eeoc.gov.

• Questions and Answers on the Final Rule Implementing the ADA Amendments Act of 2008—http://www.eeoc.gov/laws/regulations/ada_qa_final_rule.cfm

• Questions and Answers for Small Businesses: The Final Rule Implementing the ADA Amendments Act of 2008—http://www.eeoc.gov/laws/regulations/adaaa_qa_small_business.cfm

• The Americans with Disabilities Act: A Primer for Small Business—http://www.eeoc.gov/eeoc/publications/adahand-book.cfm

Laura Lapidus, Esq., is CNA’s Management Liability Risk Control Director and provides risk control support to all of the insurance products which pro-vide management liability coverage, with a focus on Employment Practices Liability insurance coverage. Lapidus has more than 25 years of experience in employ-ment law. She has taught dozens of CNA’s School of Risk Control Excellence courses and webinars and has written various arti-cles on employment practices issues.

The Americans with Disabilities Act—Important Resources to Assist with Complianceby Laura Lapidus, Esq., CNA

the ADA and the employer’s obliga-tion to provide reasonable accommoda-tion. JAN has an online search system, the Searchable Online Accommodation Resource, which an employer can use to research various types of disabilities and potential accommodations. JAN also provides complimentary telephone consultations to assist employers in understanding the ADA and the accom-modation process.

Employers and others with human resources responsibilities may wish to bookmark www.askjan.org on their computers for useful information about workplace accommodations and ADA compliance.

Job Accommodation Network Resources• Contact via telephone, live online

chat, email or social media—http://askjan.org/links/contact.htm

• SOAR database—http://askjan.org/soar/index.htm

• Training, including webcasts and podcasts—http://askjan.org/training/index.htm

• Online training regarding the interac-tive process—http://webcast.askjan.org/process

• Written handout regarding the inter-active process—http://askjan.org/media/eaps/interactiveprocessEAP.doc

• Accommodation and Compliance Series: The ADA Amendments Act of 2008—http://askjan.org/bulletins/adaaa1.htm#resources

The federal Americans with Disabilities Act, 42 U.S.C. § 12101, as amended by the ADA Amendment Act, Pub. L. No. 110-325, 122 Stat. 3553 (2008) requires employers to provide reasonable accommodations to “quali-fied individuals” with disabilities. Under the ADA, a qualified individual with a disability is an individual who satis-fies the employer’s requirements for the job and can perform the essential func-tions of the job, with or without rea-sonable accommodation. The primary purpose of the ADAAA was to expand the definition of “disability” enabling more individuals to obtain protection under the ADA. As a result, in determin-ing whether an employer has complied with the ADA, the focus has shifted from whether or not an individual is disa-bled under the law to whether or not the employer has engaged in an “interac-tive process” to determine what, if any, accommodation should be provided, and whether or not the employee’s dis-ability can be reasonably accommo-dated without undue hardship to the employer.

Accommodating employees with disa-bilities may at first appear to be a daunt-ing task, but there are many resources available to assist an employer. The Job Accommodation Network, a confi-dential service offered by the Office of Disability Employment Policy of the U.S. Department of Labor, provides useful information regarding implementation of the accommodation process. JAN’s Web site, www.askjan.org, provides employers with a number of resources, both written and multimedia, which can be used to train managers regarding

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Elizabeth Perino was recently sen-tenced to one year and one day in fed-eral prison for allowing her firm to be used as a payroll pass-through for a general contractor. Perino owns Perdel Contracting Co., a WBE concrete and carpentry firm. Perino allowed the gen-eral contractor of a $7 million O’Hare International Airport runway repair pro-ject, Diamond Coring Company, to list several of its employees on Perdel’s payroll. Perdel also reported buying sev-eral street sweepers from Diamond for use on the project. Perdel performed no work on the project but received an 18 percent commission from Diamond on labor costs and $20 an hour for street sweeper use. Through this deceptive and unethical practice, Diamond was able to report compliance with the pro-ject’s DBE/WBE requirements.

Stories involving the criminal pros-ecution of construction companies, company officials and individuals are appearing with increasing frequency in the news, ENR and other construc-tion industry publications. Not too long ago, an offending party would have been fined or barred from bidding pub-lic work for a certain period of time as punishment for an ethical transgres-sion. For many those actions were con-sidered to be no more than reprimands that did not outweigh the potential ben-efits of committing an unethical act. The call to impose more stringent punish-ments for unethical behavior is on the rise because it is perceived as the most effective means of ensuring ethical behavior at this time.

Many of us remember the back-lash that grew in the 1970s and 1980s against the construction industry and contractors especially. Surveys listed contractors as one of the most uneth-ical professions in the United States.

damages criminal prosecution, and debarment from federal contracting under Federal Acquisition Regulation Subpart 9.4. Suspension and debar-ment actions include contractors and their employees.

In addition to listing Diamond employees as Perdel employees, Perino also teamed up with another general contractor, McHugh Construction Co., to circumvent federal and state DBE requirements on several other pro-jects. It is estimated that Perino allowed McHugh to pass $40 million through Perino’s other company, Accurate Steel Installers, from 2004 to 2011. These activities came to light after a McHugh project manager, Ryan Keiser, started a whistle blower lawsuit. While Perino is going to jail, McHugh settled with gov-ernment for $12 million and an agree-ment that it would revamp its DBE procedures, which included its hiring of an oversight supervisor to manage its subcontracting procedures in coordina-tion with McHugh’s general counsel.

Perino may be one of the latest con-struction industry individuals to be criminally prosecuted, but she is not the only. Wilmer Cueva, a construction fore-man for Sky Materials was sentenced to three years in prison as a result of a 2015 trench collapse that killed Carlos Mancayo and endangered the lives of several others. Mancayo was work-ing in a 13-foot deep trench that was not properly shored. Inspectors repeat-edly warned Cueva, and the general contractor, that the trench was in dan-ger of collapsing. Cueva and the gen-eral acted unethically by not taking any steps to correct the unsafe condi-tion. After the trench collapsed, Lower Manhattan District Attorney Cyrus Vance Jr. charged Cueva with negligent hom-icide and the general contractor with

Has Unethical Behavior Reached a Breaking Point? Criminal Prosecution of Bad Acts in the Construction Industryby Bruce R. Demeter, Esq., AIC

Project delays, cost overruns, bid shop-ping, onerous contracting practices, las-sie faire attitudes and various unsavory practices left the construction adjacent to the used car industry in the public’s perception of those individuals who had the least amount of moral fiber.

The reaction to the public’s out-cry was aggressive action taken by the industry to clean up its act. Codes of ethics were drafted and instituted by companies and trade associations. Bid procedures designed to prevent bid shopping preceded the enactment of anti-bid shopping laws. “Whistle blower” protections were instituted. A plethora of seminars discussing act-ing ethically were created, and ethics became a key component of indus-try university degrees and trade educa-tional programs.

Despite the industry’s significant efforts and gains in the area of ethics, many construction companies and indi-viduals continue to act unethically. As a consequence commercial, residential and governmental clients still believe that contractors, subcontractors and design professionals care more about making money than performing qual-ity work on time and on budget. They are convinced that harsher punishment is necessary in order to protect the pub-lic and overcome an inability of the industry to significantly abate uneth-ical behavior on its own. The criminal prosecution of construction companies and individuals is a trend that is gaining momentum.

Laws, regulations and rules continue to be enacted that make acting ethi-cally a construction contract obliga-tion and a potential criminal act. For example, under the civil False Claims Act, contractors and their person-nel face civil prosecution and treble

T H E C O N T R A C T O R ’ S C O M P A S S S E P T E M B E R 2 0 1 7 29

manslaughter. Both Cueva and the gen-eral contractor were found guilty.

Using a relatively unused Pennsylvania consumer protection act, James Carpenter III, a residential con-tractor, was criminally convicted of defrauding two homeowners. Carpenter was sentenced to up to 23 months in prison; 400 hours of community service and up to seven years of probation. He was also order to repay $100,000 to the homeowners he defrauded.

Also in Pennsylvania, a general con-tractor and excavator operator were found guilty of six counts of involun-tary manslaughter. On June 5, 2013, a building undergoing demolition col-lapsed into an adjacent building being operated as a Salvation Army Thrift Store. The collapse killed six people and injured 14 others. The Philadelphia District attorney said that the struc-tural supports of the collapsed building had been improperly removed because the contractor was trying to do the job as cheaply as possible. The District Attorney noted that competing bids for the project were two to three times higher than the amount being charged by the contractor. Griffin Campbell, the contractor, was sentenced to 15 to 30 years in prison. The excavator operator, Sean Benschop, received a prison sen-tence of 7.5 years to 15 years.

Some will argue that the elimina-tion of unethical behavior is not pos-sible. They point to the fact that there are some individuals who inherently lack the ability to act ethically. They also argue that not all people see some acts as being unethical, which will prevent their acting ethically. For example, there are many people who still consider bid shopping to be an acceptable practice. They ask, “How can you ensure that the owner will receive the best bids for the project if the general contractor cannot shop bids?” To them, bidding shopping is an intelligent and effective means of doing business.

However, more than ever, contrac-tors, subcontractors and construction workers are facing a multi-pronged attack against unethical behavior. Civil penalties will continue to be imposed against those acting unethi-cally. Criminal prosecution for the same bad acts will continue to rise unless we, the collective construction indus-try, can demonstrate an increased com-pliance with rules, regulations, laws, and, most importantly an industry-wide code of ethical conduct. Acting ethi-cally is not always the easiest course of action to pursue. But it becomes eas-ier if everyone takes responsibility for

acting ethically, and imposing sanc-tions against those who do not. Until this occurs we will see others trying to control industry ethics through the imposition of civil, criminal, and admin-istrative actions.

Bruce R. Demeter, Esq., American Institute of Constructors, is the author of AIC’s “Mr. Ethics” column. He is for-mer construction litigator. He has pub-lished construction industry articles and has been a featured speaker at var-ious national association and organi-zation meetings. He can be reached at brucedemeter@gmail.com.

Construction Subcontractors Are Learning How to Minimize Risks of an Employment Practices Liability Claim with New FASA Video-on-Demandby American Subcontractors Association

Employment practices liability is a serious exposure for all business owners, and coverage is not included in a standard general liability pol-icy. Construction subcontractors are learning about federal employment law, employment practices liability (EPL) exposures and the techniques they may consider to help minimize the risk of a claim with a new video-on-demand from the Foundation of the American Subcontractors Association.

In “School of Risk Control Excellence: Employment Practices Liability,” presenter Laura Lapidus, Esq., CNA, discusses federal employment law, current trends and statistics, claim scenarios and risk control practices.

“School of Risk Control Excellence: Employment Practices Liability” (Item #8108b) is free for ASA members and nonmembers. This and other on-demand videos are available through FASA’s Contractors’ Knowledge Depot.

CNA and Scirocco Financial Group offer an EPLI program exclusively for ASA members. Log-in under “LogIn/Access Member Resources” and click on the ASAdvantage Program for more information. To become a member, visit the ASA Web site.

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Although the air may not be cool and crisp yet, it is August, and in the South, that means football season is just around the corner. Perhaps it is “football brain” that drove our thoughts in presenting recommen-dations for creating and running a successful joint venture, resulting in the analogies discussed below. However, we believe it is more than that. A successful joint venture, much like a successful football pro-gram, requires thoughtful planning during the inception phase, strong leadership with well-defined roles, and careful risk management. Coin-toss, kick-off, and read on to learn effective ways to make your JV per-form like it is playing on the varsity team.

Get in FormationA JV may be created informally

through oral agreements or through conduct of the entities involved. Even if the entities did not intend to create a JV, in those instances, both JV partners will be liable for the other’s actions. The better practice is to enter into a formal JV agreement any time your company engages in conduct that could arguably be seen as a joint engagement with another company.

Formal JV agreements, clearly defining the material terms, allow clarity at the inception of the pro-ject and later should any problems

get their wires crossed about who is handling what, and leadership of a JV is no exception. The JV Agreement should define the roles, responsibilities, and decision-mak-ing ability of each entity forming the JV. The project will be dis-jointed, and the schedule may be affected, if the members of the JV cannot agree on how to make deci-sions affecting the project and there is no mechanism in place for deter-mining how critical path items will be decided.

Also, most government pro-jects require that a DBE JV mem-ber assert majority control of the JV. If not, there is a chance the JV will lose the opportunity to bid or win public work. During the forma-tion process, these types of require-ments must be considered and addressed to ensure that the JV is able to procure its intended project.

Staying Off the Injured ReserveThe JV may have been neces-

sary to win the work, bond the pro-ject, or adequately manage the construction process. A well-doc-umented JV agreement will likely provide the most protection for the additional risks associated with the JV as discussed above. The agree-ment should also include a dispute resolution plan for managing the JV among the entities forming the JV. Further, it is imperative that all

Game Winning Strategies to Ensure Your JV Performs at the Varsity Levelby Fielder Martin and Jodi Taylor, Baker Donelson

arise. Federal government contracts require that JV agreements are in writing, and that each participant sign the contract and all bid docu-ments. In further example, forming the JV prior to bidding on govern-ment jobs is a necessity; creating a JV after a bid is awarded will inval-idate the award because the JV would create a distinct legal entity from the bidding entity.

It is also important to deter-mine the corporate structure best suited for the JV—such as con-tractual, corporation, LLC, partner-ship, or limited partnership. This selection depends on the tax impli-cations for all entities involved, liability and risk tolerance of the participants, complexity of the pro-ject, size of the participating enti-ties, and Disadvantaged Business Enterprise participants and require-ments. Unless otherwise defined, JVs are usually treated as general partnerships. In those instances, all participating entities will be respon-sible for the actions and conduct of the other JV entities. Defining the JV otherwise is preferred to limit the liability of all JV members, but it must be done through a formal agreement.

Who Is Calling The Plays?Football games become a mess

when the offensive coordina-tor, special teams and head coach

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members of the JV be included as named insureds on the JV’s com-mercial general liability insurance policy. Most CGL policies contain an exclusion for liability that is arising out of the conduct of any partner-ship or JV of which the insured is a party or member. In short, JV enti-ties not listed are not covered.

Team RosterStaffing the JV is fundamental to

the successful completion of the project. However, this can create additional liabilities. It must be clear that the employee is working for the JV, not the individual entities form-ing the JV. Best practices include having the employees who will

work on the JV fill out new employ-ment paperwork, such as I-9s, W-2s, etc., the distribution of company policies, handbook, and other com-pany documents containing the JV name and logo, and employee email addresses, accounts, and sig-nature lines should identify the JV entity. Paychecks should be issued through the JV, and pay-stubs should be written from the JV account on JV checks (whether paper checks or electronic deposit). The human resource departments of the JV members should be involved in integration to ensure that the JV workforce is trained on their roles within the JV.

Game On!The JV Agreement, or playbook,

has been signed, managerial roles defined, liabilities accounted for, and the starting players selected—you are ready to drive down the field for a successful project.

This is a snapshot of the issues surrounding JV construction pro-jects. For more information on whether a JV is right for your next project, and counsel on how to implement a JV Agreement suited for your needs, contact Fielder Martin at fmartin@bakerdonel-son.com or Jodi D. Taylor at jtay-lor@bakerdonelson.com in Baker Donelson’s Atlanta office.

2017 ASA BEST PRACTICES AWARDSASA offers national recognition to prime contractors that are committed to superior business practices like prompt payment. ASA’s annual “National Construction Best Practices Awards,” developed by the Task Force on Ethics in the Construction Industry, recognize elite prime contractors that uphold best practices and refuse to do business according to the “lowest common denominator.” The deadline for prime contractors to submit applications is Nov. 3, 2017. The application fee is $495. Each prime-contractor applicant must supply three sealed business- practices recommendations from specialty trade contractors that have worked for it in the past year, along with a copy of its standard subcontract, with its application. ASA will honor recipients during an awards ceremony at the ASA annual convention, SUBExcel 2018, Feb. 28-March 3, 2018, in Tempe, Arizona.

APPLICATION DEADLINE: NOVEMBER 3, 2017

Helpful Links:

• Watch the National Construction Best Practices Awards video.

• Prime contractors: Download the 2017 National Construction Best Practices Award application form.

• Specialty trade contractors: Download the 2017 National Construction Best Practices Award “Form for Evaluating the Applicant’s Business Practices.

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A contractor who has established, implemented and enforced a safety program may be able to successfully defend an OSHA citation based on the defense of unforeseeable employee misconduct. The Occupational Safety and Health Review Commission and the U.S. Circuit Courts of Appeal recog-nize that employee misconduct may be a valid defense to an OSHA violation.

Contractors have successfully been able to defend themselves against OSHA liability in many cases based on showing “unforeseeable,” “unpre-ventable” or “isolated” employee mis-conduct. The unforeseeable employee misconduct defense is primarily geared toward violations over which employees have individual control. The rationale in support of the employee misconduct defense is that the employ-ee’s misconduct was unpreventable or unforeseeable or was an isolated inci-dent, atypical of the contractor’s nor-mal operations. Even though there has been a violation of an OSHA reg-ulation, the contractor will be able to avoid liability if he can show that the contractor’s conduct is such that he is entitled to rely upon the employee misconduct defense.

In order to be able to rely on the employee misconduct defense to vacate an OSHA citation, an employer must satisfy four requirements that have been enunciated in decisions ren-dered by the Review Commission to show that the employee misconduct occurred despite the employer’s efforts to require safe work practices. If any one of the four requirements is lacking, the defense fails and the contractor will be liable. If a contractor is committed to safety and avoiding OSHA liability, the contractor can reduce the likeli-hood of accidents and potential OSHA

in a safety manual and orally reviewed from time-to-time at job site meetings or tool-box talks. A contractor is likely to meet this requirement by adopting a safety program in accordance with OSHA regulations applicable to the contractor’s operations.

Contractor Adequately Communicated the Rules to Employees

The second requirement is to com-municate the work rules to employ-ees. The contractor must be able to show that the employee, whose con-duct was in violation of the contrac-tor’s work rules, had previously been told of the work rule. This require-ment can be satisfied by conducting for all employees regular safety train-ing programs that cover the OSHA reg-ulations most applicable to the work being performed. Every employee must be provided safety training prior to being allowed to work. Periodic training should be conducted to make sure that employees are reminded of the contractor’s safety program and work rules. Safety videos are an excel-lent means to communicate work rules. Contractors must emphasize to all employees, and especially foremen and superintendents, that compliance with fall protection rules is required at all times and that safety should not be compromised to increase productivity.

Contractor Took Steps to Discover Violations

The third requirement—that the employer take steps to discover vio-lations—can be satisfied by the con-tractor’s conducting regular job-site monitoring to check that the safety rules are being followed. There is no rule that job-site monitoring be

Unforeseeable Employee Misconduct Defense to an OSHA Citationby Philip Siegel, Hendrick, Phillips, Salzman & Siegel

liability by actively managing his or her company in such a way that each of the four requirements is satisfied.

The four requirements that a con-tractor must show in order to vacate an OSHA citation based on employee misconduct are:1. The contractor established work

rules to prevent the violation from occurring.

2. The contractor adequately com-municated the work rules to employees.

3. The contractor took steps to dis-cover violations of its work rules.

4. The contractor effectively enforced its rules and took action when there were employee violations.

Contractor-Established Work Rules to Prevent the Violation

The first requirement to invoke the employee misconduct defense is for the contractor to show that it adopted work rules, consistent with OSHA requirements, that were intended to prevent the violation for which the contractor has been cited. The Review Commission has defined a work rule as “an employer directive that requires or proscribes certain conduct and that is communicated to employees in such a manner that its mandatory nature is made explicit and its scope clearly understood.” There is no requirement that the work rule be written, but the rule must be clear and protect against the specific hazard addressed by the standard. The work rule must be designed to foster compliance with the cited standard and should not be gen-eral and open to interpretation.

The best practice is for a contractor to develop specific written work rules that are distributed to each employee

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conducted with any particular fre-quency. The employer must establish that it exercised reasonable diligence in detecting workplace hazards. The criteria will be satisfied if the contrac-tor can show that it took reasonable steps to determine whether its jobs were being run in compliance with safety rules. If there is little correla-tion between the work rules and what takes place regularly in the field, the employee misconduct defense will fail. An effective safety program requires “a diligent effort to discover and dis-courage violations of safety rules by employees.” A failure to discover a safety violation that occurs in a short period of time is not evidence that the employer was not diligent in its effort to discover violations.

Contractor Effectively Enforced the Safety Rules and Took Disciplinary Action When Violations Were Discovered

A contractor can meet the fourth criteria by establishing and enforc-ing a disciplinary program directed at employees who do not follow the safety rules. First, a disciplinary pro-gram should be established and com-municated to all employees. When an employee is seen violating the work rules, the employee must be disci-plined. Often, the key to establishing the employee misconduct defense is proving that the employer has a reg-ularly enforced disciplinary program for safety violations. If employees feel free to violate work rules, there is not unforeseeable or isolated employee misconduct.

Disciplinary action could include ver-bal and written reprimands, suspen-sion, demotion, removal from a safety incentive or bonus program, and

termination. Written evidence of disci-plinary actions taken should be main-tained by the contractor to show that the contractor enforced its safety rules and took disciplinary action against employees who did not follow the rules. Formal records of the discipli-nary action should be maintained indefinitely. The disciplinary program should be structured as a progres-sive program, so that an employee who continues not to abide by com-pany safety rules receives a harsher penalty, culminating in termination of employment. If the contractor has not disciplined the employee whose misconduct led to the citation and there is little evidence of prior discipli-nary action within the company, the employee misconduct defense will not be accepted.

Several factors can negate the employee misconduct defense, such as placing an untrained employee on the job or failing to provide the needed safety equipment.

Supervisor MisconductWhen the employee who is involved

in the violation of a safety rule is a supervisor, the proof of unpreventa-ble employee misconduct is more rig-orous and the employee misconduct defense is more difficult to establish. A supervisor’s conduct is imputed to the employer and the supervisor has the duty to protect the safety of employ-ees under his supervision. In addition, the “fact that a supervisor would feel free to breach a company safety policy is strong evidence that the implemen-tation of the policy is lax.”

“When the alleged misconduct is that of a supervisory employee, the employer must also establish that it took all feasible steps to prevent the

accident, including adequate instruc-tion and supervision of its supervisory employee.” The Review Commission has held that the failure to give spe-cific instructions on how to accomplish a job can amount to a lack of reasona-ble diligence.

Nevertheless, there have been cases where contractors have been able to rely on the employee misconduct defense, even though the employee who engaged in the misconduct was a supervisor, by showing compliance with the four criteria.

In L.R. Willson and Sons, Inc. v. OSHA, 18 BNA OSHC 1129, 134 F.3d 1235 (4th Cir. 1998), the Review Commission concluded that because a supervisory employee committed the violation, knowledge of the violation should be imputed to the employer and the employer bore the burden of establishing that it had made a good faith effort to comply with the fall pro-tection standards. The Fourth Circuit Court of Appeals reversed this decision and held that OSHA bore the burden of proving that the supervisory employ-ee’s actions were neither unforeseea-ble nor unpreventable.

Philip Siegel is a partner and share-holder with the firm Hendrick, Phillips, Salzman & Siegel, P.C., whose prac-tice focuses on labor and employ-ment matters within the construction industry. Siegel has an undergraduate B.B.A. from the University of Michigan, and he earned his law degree from Emory University School of Law. Siegel can be reached at (404) 469-9197 or pjs@hpsslaw.com.

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Five Boilerplate Terms to Negotiate in Your Next Subcontractby James R. Lynch, Esq., Ahlers & Cressman, PLLC

Whether you negotiate your own subcontracts or rely on your lawyer to do the heavy lifting at contract time, a savvy subcontractor should under-stand the basic purpose of common subcontract provisions, and be pre-pared to negotiate for fair and com-mercially reasonable terms. While most sophisticated subcontractors are skilled at negotiating the core terms of a subcontract—scope of work, price, and time—a few simple but less obvious tweaks to common subcontract terms and conditions can go a long way to protect a subcon-tractor from unfair results when a dis-pute arises.

From the desk of an experienced construction lawyer, below are my top five “boilerplate” provisions that subcontractors too often overlook during contract negotiations, along with tips on language to include and to avoid.

Delay/Liquidated DamagesContrary to popular belief, liqui-

dated damages are not a penalty for late performance. In fact, in many cases the consequence of late per-formance can be much higher with-out a liquidated damages provision than with one. Below is a check-list of points to negotiate a fair liqui-dated damages provision to benefit all parties:1. Clearly define when liquidated

damages will apply. This can be based on a specified duration or a date certain. Clearly state all assumptions supporting the con-tract time. Where feasible, the gen-eral contractor’s schedule should be attached to your subcontract to establish your baseline schedule.

2. Negotiate a Reasonable Rate. This requires a project-specific inquiry, considering factors such as daily project burn rates, anticipated management/consultant costs, extended overhead, upstream liq-uidated damages, and subcontract scope and size.

3. Make it Exclusive. Negotiate for express language indicating the specified liquidated damages are the exclusive remedy for late per-formance. An example is as fol-lows: Subcontractor’s payment of liq-uidated damages as specified in this section shall be the sole and exclusive remedy for any delay by Subcontractor in the performance of the work or completion thereof.

4. Caps. Consider negotiating a cap on the aggregate liquidated dam-ages. The cap may be an amount equal to your fee, the total con-tract price, or any other justifiable amount.

Payment TermsUse Net Payment Terms, and Clarify

Pay-When-Paid Provisions. In a sub-contractor’s ideal world, payment would always be due within a defined time period after each application for payment (e.g. “Net 30”). Some sub-contractors can achieve this by spec-ifying “net” payment terms in their proposals. More often, however, gen-eral contractors will not commit to pay subcontractors until they receive payment from the project owner. As such, “pay-when-paid” provi-sions have become commonplace, with contractors agreeing to pay

subcontractors within X days after receipt of funds from the owner. As a subcontractor presented a pay-when-paid clause, you should negotiate for language calling for payment within a “reasonable time” if the owner fails to pay, and specify what time will be deemed “reasonable” if there is a significant payment delay. At a min-imum, this will clarify the issue is only one of the timing of your pay-ment, not your right to payment. That is, your “pay-when-paid” provision will not be misconstrued as a “pay-if-paid” provision, under which you are not entitled to any payment if the owner fails to pay.

Pay-if-paid or “conditional pay-ment” terms are unlawful in some states, and require specific language to be effective in others. As a sub-contractor, you should strike pay-if-paid language wherever possible, and many general contractors are willing to negotiate to convert pay-if-paid into pay-when-paid terms.

Negotiate for a Right to Stop Work for Nonpayment. Absent from most contractor forms, insert a provision that you may suspend work if you are not timely paid all undisputed amounts. For example:

In the event Subcontractor does not receive payment of all undis-puted amounts within thirty (30) days after submission of an applica-tion for payment, then upon seven (7) days’ written notice to Contractor, Subcontractor may suspend work until all undisputed amounts are paid. For purposes of this paragraph only, an “undisputed amount” means any

Legally Speaking

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Five Boilerplate Terms to Negotiate in Your Next Subcontractby James R. Lynch, Esq., Ahlers & Cressman, PLLC

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amount or portion thereof speci-fied in Subcontractor’s application for payment, including any payment items, changes, and claims therein, to which Contractor has not pro-vided specific written objection. The subcontract time and price shall be equitably adjusted to reflect any shut-down, delay, and start-up pursuant to this paragraph.

You can usually cleanly insert such suspension language directly into the section governing the timing of pay-ments, the provision for suspension of work (if any), or the terms govern-ing continuation of work during dis-putes (if any).

Never Give Up Your Lien Rights. This is unlawful in many states. A subcontractor’s lien rights are a pow-erful source of leverage and a pos-sible last resort on a financially distressed project.

IndemnityAn indemnity provision comes

into play when the general contrac-tor or owner incurs some liability as a result of a subcontractor’s work. Your overarching goal as a subcon-tractor is simple: You should only be required to pay for liabilities to the extent caused by your fault, and cov-ered by your commercial general lia-bility (CGL) insurance. Otherwise, you could be required to pay for a claim even if you did nothing wrong, and even if you had no reasonable way to manage and price for the risk of that claim.

Generally, your CGL insurance will only cover claims by third parties for bodily injury or physical property damage caused by your negligence. As such, you should always negotiate for an indemnity provision limited to the following:

1. Third party claims2. For bodily injury or physical prop-

erty damage3. To the proportionate extent caused

by your negligenceAs a practical matter, these points

can often be incorporated through relatively simple redlines. For exam-ple, the following broad-form indem-nity provision that could require you to defend and pay for a claim not caused by your fault (or pay a grossly disproportionate share) and not cov-ered by your insurance:

Subcontractor shall defend, indem-nify, and hold harmless Contractor and Owner from and against any and all claims, liabilities, or obligations of any kind whatsoever, arising out of or relating to Subcontractor’s work.

The subcontractor’s indemnity checklist above can be inserted through simple edits:

Subcontractor shall defend, indem-nify, and hold harmless Contractor and Owner from and against any and all claims, liabilities, or obligations of any kind whatsoever by third parties for bodily injury or physical property damage, but only to the proportion-ate extent arising out of or relating to negligence by Subcontractor in the performance of Subcontractor’s work.

Many state-specific laws may affect the indemnity provision—and you should consult your legal counsel on this complex issue—but these basic points will go a long way to avoid turning your company into the pro-ject’s insurer.

Changes & ClaimsBeyond a basic reminder to read

and confirm that the change and claim processes align with the pro-cess the parties actually intend to

use—a point too often missed by subcontractors and generals alike—the following negotiating points and questions can help you achieve more fair and practical procedures, and ease the consequence of technical failures.

Strike Forfeiture Language. While it is not unreasonable for the gen-eral contractor to require early notice and an opportunity to address poten-tial change orders and claims with reliable information, it is not reason-able to strip a subcontractor of an otherwise valid claim for extra time or compensation simply because the subcontractor has not strictly com-plied with the often complex, overly technical, overlapping, and some-times conflicting provisions gov-erning written notices and claim documentation. To avoid this result, you should search for and strike terms such as “strict compliance,” “condition precedent,” “waive,” and “forfeit,” and consider adding a provi-sion such as the following:

Notwithstanding anything to the contrary, a party’s failure to provide any notice strictly in the time and form required shall not result in a waiver of an otherwise valid right or claim unless, and only to the extent that, the party entitled to receive such notice demonstrates actual harm resulting from such failure.

Require Executed Change Orders for Extra Work. A strict pre-work Change Order requirement protects the general and owner against claims for extras after the work is completed. It also protects the subcontractor from being directed to perform extra work without prior agreement on the cost and time adjustments. However, it can also be a trap where the sub-contractor performs time-sensi-tive extra work in good faith based

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on clear direction, but the contrac-tor later denies the requested Change Order. As a subcontractor, this means it is important for you to be firm in requiring signed Change Orders before you perform any extras. If you cannot agree on your entitlement or cost, demand a formal Change Directive.

Include a Clear “Change Directives” Procedure. A good “Change Directive” process will require a writ-ten Change Directive when Change Order terms cannot be agreed, spec-ify how interim compensation will be determined, and dovetail with the Claims provision. Again the key for you as a subcontractor is to demand that the general follow its own pro-cedures and issue a formal direc-tive before you commence any extra work.

Remove Advance Change Order Limitations. Does a signed Change Order automatically waive all related rights and claims? What about cumu-lative impacts, which might only arise or are only identifiable when change orders become excessive? Is there any limitation on the time or money you may receive for certain types of changes? As a subcontractor, you should any such advanced limitations in the subcontract documents where possible, and instead address spe-cific issues in the individual Change Orders to be issued during the work.

Dispute ResolutionWhile there are many other impor-

tant subcontract terms that come into play more often, the Dispute Resolution provision makes the Top 5 here because most subcontrac-tors overlook it as a possible item for negotiation, yet it can have important long-term consequences.

Keep It Simple. As a general rule, the more mandatory steps in the dis-pute resolution process, the more costly it will be for you to enforce

your rights as a subcontractor. While it may be desirable to try to resolve disputes initially at the project level, then through direct executive negoti-ations, and then by mediation before finally commencing litigation or arbi-tration, each of those steps takes time and costs money. Where feasible, you should negotiate to make these aspi-rational, not mandatory prerequisites you must fulfill before litigation or arbitration.

Litigation vs. Arbitration. While there is no one-size-fits all option, you should understand the differences between litigation and arbitration and recognize that this is often a negotia-ble term.

Arbitration is a private resolution process where an experienced lawyer, industry professional, or panel hears the case and renders a binding deci-sion. Generally, the parties agree on the arbitrator or panel’s qualifications, if not the individual arbitrator(s). The arbitration hearing typically occurs within six to 12 months of fil-ing. Discovery is usually more lim-ited than litigation. The process is less formal. The proceedings are not pub-lic. Appeals are usually more difficult than in court.

By contrast, litigation is an open public process where a judge and/or jury decides the case. Judges are generalists and not usually construc-tion specialists. Trial is often sched-uled 12 to 18 months from filing. The discovery process is formal and can be extensive. All filings and proceed-ings are public, unless sealed by court order. Appeals are relatively common and can take years to resolve.

The important point here is to con-sider which process best suited to the types of disputes most likely to occur on your project, and negoti-ate for that process when appropri-ate. On a complex project with novel means and methods where the most likely disputes will be highly technical,

arbitration may be a better option for all parties. On a simple but financially risky project where the most likely disputes relate to payment issues, the formality of the litigation process may be more desirable.

While you should always read your subcontract carefully and understand your rights and obligations, engag-ing in active negotiation with a gen-eral contractor on key terms such as those above can not only reduce your risk as a subcontractor, but it can also help all parties avoid potential dis-putes down the road, and set a ben-eficial tone of professionalism and conscientiousness to carry forward into a successful project.

James R. Lynch represents and advises property and project owners, general contractors, trade contractors/subcontractors, and design profes-sionals on a variety of matters, includ-ing contracts and claims, litigation and arbitration, alternative dispute resolution, risk evaluation and man-agement, real estate transactions and disputes, procurement, bid protests, and insurance coverage matters. He additionally provides general outside counsel to several closely-held Pacific Northwest companies. Since joining Ahlers & Cressman in 2011, Lynch has recovered millions of dollars for cli-ents on construction and real estate claims, and successfully defended his contractor and developer clients from millions more in potential liability. He can be reached at (206) 287-9900 or jlynch@ac-lawyers.com.

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ASA/FASA Calendar Coming Upin the October 2017

Issue of ASA’s

Theme: Networking

• Relationship Building from a Bond Producer’s Perspective

• Networking Strategies

• Building Business Relationships

• Networking Is a Mental Game

• Questions to Ask Your Broker That Can Save you Money in 2018

• Legally Speaking: Indemnity and Hold Harmless

Look for your issue in October.

PAST ISSUES:Access online at

www.contractors knowledgedepot.com

TH

E

September 2017

22–24 — ASA Executive Committee and Board of Directors Meeting, Baltimore, Md.

26 — Webinar “How to Have a Multi-Million Dollar Impact by Asking ‘One More Question’” presented by Eric Anderton, Professional Leadership Coach and Trainer

October 2017

10 — Webinar “Technology and Transparency—Part 2” presented by Stephane McShane, Maxim Consulting Group

20–21 — ASA Legal & Advocacy Meetings, Santa Ana Pueblo, N.M.

24 — Webinar “Using Drones: What Subcontractors Need to Know” presented by Brian Esler and Seth Row, Miller Nash Graham & Dunn LLP

November 2017

14 — Webinar “Employment Law Mistakes Most Commonly Made by Subcontractors” presented by Philip J. Siegel, Hendrick, Phillips, Salzman & Flatt

December 2017

12 — Webinar “Ownership Succession Planning” presented by Stephen Bonebrake, Maxim Consulting Group

January 2018

9 — Webinar “Indemnity and Hold Harmless” presented by Lee B. Brumitt, Dysart Taylor Cotter McMonigle & Montemore, P.C.

23 — Webinar “How the Difference Between Extra Work and Additional Work Can Impact Claims for Payment” presented by Stephen Moore and James Morris, Galloway Johnson Tompkins Burr & Smith

February 2018

13 — Webinar “Getting Better Subcontracts” presented by Eric Travers, Kegler, Brown, Hill and Ritter

28–March 3 — SUBExcel 2018, Tempe Mission Palms Hotel, Tempe, Ariz.

April 2018

10 — Webinar “Lien & Bond Claims” presented by Timothy Woolford, Woolford Law, P.C.

May 2018

8 — Webinar “Change Orders” presented by Joe Katz, Huddles Jones Sorteberg & Dachille, P.C.

June 2018

12 — Webinar “Cash Management” presented by James L. Salmon, Benjamin, Yocum & Heather, LLC

Contact information for ASA/FASA events and programs: www.asaonline.com, education@asa-hq.com.

TM

“The flow and consistency of the documentation in Project DocControl was exactly what we had been looking for. We needed a tool that would allow employees to generate documents easily and consistently.”—Stephen Rohrbach, CPCPresidentF.A. Rohrbach, Inc.Past ASA National President

Complexity.

That’s the biggest obstacle to implementing a new technology. The more complex it is, the less your people will use it.

That’s what sets us apart.

Our software was created for subcontractors by subcontractors. It speaks your language. It mirrors the way you work.

And it strips away all the confusing bells and whistles that make other systems so complex.

With Project DocControl, it’s never been easier to stay connected to all your projects from the field. Or to access project information from your mobile devices.

Discover why so many ASA members have implemented Project DocControl. For more information, or for a no-obligation online demo, call 813.903.9446 or visit ProjectDocControl.com.

Cloud-Based Project Management Software for Subcontractors

Congratulations to ASA on your 50th anniversary!

Project DocControl is proud of its decade-long

ASA national sponsorship.

50!

“The flow and consistency of the documentation in Project DocControl was exactly what we had been looking for. We needed a tool that would allow employees to generate documents easily and consistently.”—Stephen Rohrbach, CPCPresidentF.A. Rohrbach, Inc.Past ASA National President

Complexity.

That’s the biggest obstacle to implementing a new technology. The more complex it is, the less your people will use it.

That’s what sets us apart.

Our software was created for subcontractors by subcontractors. It speaks your language. It mirrors the way you work.

And it strips away all the confusing bells and whistles that make other systems so complex.

With Project DocControl, it’s never been easier to stay connected to all your projects from the field. Or to access project information from your mobile devices.

Discover why so many ASA members have implemented Project DocControl. For more information, or for a no-obligation online demo, call 813.903.9446 or visit ProjectDocControl.com.

Cloud-Based Project Management Software for Subcontractors

Congratulations to ASA on your 50th anniversary!

Project DocControl is proud of its decade-long

ASA national sponsorship.

50! To learn how CNA’s insurance programs for contractors can help your business grow more profitably, contact your independent agent or visit www.cna.com/construction.

IN AN INSTANT, ARIK MULLEN REALIZED THE VALUE OF MOTION IS MONEY®

MAY 7TH, 8:10 A.M.

A HANDY REFERENCE TOOL BRINGS HIGHER PROFIT WITHIN REACH

AmSlab Solutions founder, Arik Mullen, is always finding ways to solidify his concrete business. So when he learned how a simple workbook available through CNA’s Motion is Money® program could highlight hundreds of hours of worker inefficiencies, he called his Risk Control Specialist, conducted a worksite audit, and developed a plan to minimize bending, lifting and reaching for tools. Now AmSlab productivity is up 3%, and Arik’s enjoying a much healthier bottom line.

When you’re looking for programs that help keep workers safe and businesses strong … we can show you more.®

The examples provided in this material are for illustrative purposes only and any

similarity to actual individuals, entities, places or situations is unintentional and

purely coincidental. Please remember that only the relevant insurance policy can provide the

actual terms, coverages, amounts, conditions and exclusions for an insured. All products and

services may not be available in all states and may be subject to change without notice. “CNA” is a

service mark registered by CNA Financial Corporation with the United States Patent and Trademark Office.

Certain CNA Financial Corporation subsidiaries use the “CNA” service mark in connection with insurance

underwriting and claims activities. Copyright © 2017 CNA. All rights reserved.