How to Protect Your Construction Business from Risks Involving Subcontractors

A unique situation confronts general contractors and builders in terms of risk management. The law holds them liable to the owners for the actions and omissions on the part of their subcontractors. Therefore, it is vital for you to take the appropriate steps to protect yourself and your company as you work on job sites and engage subcontractors to perform work.

Sufficient Insurance Coverage

Before bringing a subcontractor on-board, it is essential to make sure that your subcontractor agreements have strong requirements for insurance coverage. You should then ensure that these contract provisions are enforced.

The provisions for insurance should include the need for subcontractors to maintain various kinds of insurance coverage (such as PL, worker’s comp, CGL, and automobile insurance) at minimum coverage levels.

In case a subcontractor signs a contract stating that they will get insurance, ask them to submit a Certificate of Insurance. If they are unable to provide this certificate, take them off the job. While this may require a few additional steps and more documentation, it is undoubtedly a worthwhile risk management initiative.

You should consult your insurance agent about more details on the types and amounts of insurance coverage necessary for your subcontractors.

Allocation of Risk

In your subcontractor agreements, there should be specific provisions to shift the risk and liability from you to the subcontractor undertaking the job in terms of that subcontractor’s work.

This aspect is more straightforward in commercial construction, where a majority of projects involve AIA or other subcontractor agreements specific to the project. But when it comes to residential construction, this is not always the case.

If you are involved in residential construction, it is best to have your lawyer prepare a master/standing subcontractor agreement detailing risk allocation and other general provisions. This agreement should be signed by every subcontractor you engage in working for you. A best practice in this area is to attach an addendum/contract document with the scope and price of work details.

Consult your attorney about what provisions are suitable for your master/standing contracts and for your project-specific agreements to make sure that the liability is equitably spread among parties, and is reasonable and fair, including but not restricted to, adequate indemnification provisions, insurance coverage provisions, equipment license provisions, flow down/conduit provisions, remedy provisions, and others.

Loss Prevention

Loss prevention can be summarized as various best practices concerning your relationship with your subcontractors. It can certainly be tempting to select the lowest cost subcontractor to work with you. But this can have adverse outcomes.

As a best practice, only engage reputable, well-operated, and well-qualified subcontractors. Instead of price, the primary consideration should be the quality of work. Besides, do not hesitate to end a subcontractor relationship, no matter how long or short, if the current employees and crew of the subcontractor are not working in an optimal and safe manner.

If the owner complains about an aspect of the subcontractor’s work during the project, it is vital to give notice to the subcontractor as soon as possible. In the course of following your loss prevention plan, you should make sure that the subcontractor understands and respects the significance of the process. Consult your lawyer about possible insurance claims.

Some possible options that your lawyer may recommend are:

  • Inform the insurance company of the subcontractor of an owner complaint
  • File a claim with the insurance company, if you are also insured under the plan
  • Demand a tender of defense from the insurance company of the subcontractor on the basis of your additional insured status or contractual indemnification language

Safety of the Subcontractor

Lastly, a majority of general contractors are not aware that there are circumstances in which they may be held responsible for job site accidents and injuries sustained by a subcontractor’s employee(s). Under state law, general contractors are not liable for the safety of the subcontractor’s employees. But there are certain exceptions, such as:

Control Exception

Courts have determined in some cases that a general contractor is accountable for injuries that a subcontractor’s employee sustains when the general contractor has substantial control over the means and manner of work, i.e., sufficient control over daily work and the ways and techniques of the subcontractor.

Sufficient control in this regard does not include general oversight, inspection, and coordination of the subcontractor and their work.

Hazardous Conditions Known to the General Contractor

Sometimes a court has held a general contractor responsible for subcontractor injuries sustained due to hazardous conditions that were known to the general contractor but were not apparent to the subcontractor.

Other Exceptions

There are other exceptions under the law, such as where the contractor allows liability and where the construction work involves an unusual, unreasonable risk of injury.

Consult a Skilled Attorney for Subcontractor Agreements

The attorneys at the law offices of Evans Law have extensive experience handling cases related to real estate, construction, and land use. A skilled and knowledgeable lawyer at the practice can guide you on the correct measures to protect your business when working with subcontractors. Call today at (410) 626-6009 to schedule a consultation with a dedicated real estate attorney.

Zoning Appeals & Zoning Use Changes

As a homeowner, when you want to remodel your home or even a build an addition, you must obtain permission from the local government. That is understandable in that the government assesses boundaries, environment impacts, and building regulations.  

The same requirements also apply to new land use. Without clearing the way through zoning ordinances and regulations, a planned project can stall.

Zoning plans establish agreed upon standards of a community while zoning ordinances and regulations define how the property will be used, whether mixed residential, commercial, industrial, agricultural, recreational, or rural.   

At the Law Office of Matthew S. Evans, we understand local zoning restrictions and ordinances and we will represent your interest before planning boards and explain the land use restrictions imposed by local, county and state governments. We can also assist clients by researching special exemptions or variances. We are skilled at negotiating solutions and can help you clear the legal hurdles that might otherwise block your plans.

Land Use Development

Let’s presume you are a land developer in Maryland and have acquired property with the goal of developing it into usable lots for local builders. Every parcel of land is governed by zoning requirements. These laws determine how the property can be used and what can be set upon it.

When the zoning code does not allow your purposes for the intended parcel, you will need to understand the options you have available in order to move ahead.

The first step is to explore the land use ordinance established by the county zoning code. Generally, its purpose is to promote public health and safety and the general good of residents.

Zoning encourages the most appropriate use of land, such as:

*Historic preservation

*To promote appropriate use of waterfront properties

* To provide for adequate parking and loading areas

*To protect building standards and conformation

*To ensure there is adequate drainage, a reduction of flood damage and erosion 

*To protect residential communities and business areas

*To avoid concentration of population and street congestion

*To avoid harmful encroachment by incompatible uses and promote health and welfare of residents

Any appeal of the zoning code must comport with those requirements. Neighborhoods change over time. We frequently find that zoning codes are decades old and need updating, especially in industrial and commercial districts and their encroachment on land use.

Zoning Appeals

Let’s say that part of your development is close to the Chesapeake Bay Critical Area.  That area is defined as any property within 1,000 feet of tidal waters. In order to appeal for a zoning reclassification, you have the burden of proof.

First you must submit a Critical Area report. It needs to include the rezoning application and finding and address the impact of the proposed reclassification.  

Your success likely depends on whether you are asking for a Zoning Variance, which is a modification of a specific requirement contained in the county zoning ordinance that seeks a relaxation of regulation.

If you are seeking a variance, you want to meet less than the full zoning requirements.

Another type of appeal might be seeking new Conditional Use, which allows certain use of the property.

The first step is to apply for a zoning variance of with the county Office of Planning and Zoning.

After filling out the paperwork, the Office of Administrative Hearings will set a date for a public hearing. During that public hearing, testimony will be received and the office will ultimately decide whether to grant or deny your request.

Evans Law will help you with your presentation, including the efforts you plan to make to eliminate any negative impacts. We will represent your rezoning application before the county government administrative hearing, which will review the applications and issue findings.

Zoning Use Changes

Any zoning variance application must be very specific and must adhere to the demands of the zoning division of your county.

Besides an application form, you will most likely need to provide multiple copies of a letter of explanation. It must include dimensions and the square footage of all existing and proposed buildings, topography, and information about the surrounding neighborhood.  Information on the locally environmentally sensitive area will also weigh heavily in their decision.

We will need to be very specific in the changes that are requested and thorough in the information that is submitted including:

*Zoning boundaries

*Bog protection areas

*Setbacks and parking

*Road circulation

*Utilities and drainage structure

*Forested areas and high water lines

*Natural features and required buffers

*Impact on environmentally sensitive areas

*Easement and right of way agreements

When appealing zoning requirements or zoning use changes, we must establish that our changes conform with the County Development Plan.

Zoning Use Changes

On occasion, a resident may seek a zoning use change. That request asks that the area be rezoned and reclassified from one zoning district to another.  This can be done as a comprehensive reassigning or piecemeal.

The County Council will review and update all of the zoning maps in a comprehensive zoning. In piecemeal, property may be reclassified to correct any mistake undertaken by the last comprehensive process. In some cases, there may be a change in the character of the neighborhood that will require a change in the zoning.

Contact the Law Office of Matthew S. Evans for Further Assistance with Zoning Appeals and Zoning Use Changes

If you need legal guidance with zoning and land use issues in Maryland, call our office today at (410) 431-2599 or message us online to schedule a consultation with a member of our legal team.

The Importance of Proper Licensing for Contractors

If you have a home improvement project in your future, it is very important that you make sure the person you hire is licensed by the Maryland Home Improvement Commission.  The Commission regulates contractors and the sales force involved with the home improvement industry, including remodels and repairs.

It may be tempting to hire an unlicensed contractor who delivers a cheaper estimate, but if the home improvement repair goes wrong, you have few options for recovery.   

Also consider that a licensed contractor must have at least two years of experience and is required to pass a licensing exam. Your properly licensed contractor understands how to get the job done with the correct permits and on time, all conditions of his licensing.

Part of being a professional involves carrying $50,000 in liability insurance to protect everyone from bodily injury and personal and property damage that could occur during the home improvement. 

No one expects problems to occur, but large-scale projects can come with potential dangers on-site. Additionally, when it comes time to sell your home, the fact that your home improvement had the correct permits pulled and the work done up to code will make selling your home that much more hassle-free.
 

Why Proper Licensing is Important

You undergo a home improvement project, but unfortunately the roof leaked, and the leak ruined your floors.

In Maryland, if your contractor is licensed, the Maryland Home Improvement Commission (MHIC) will investigate any complaint filed by the homeowner and prosecute those contractors who violate the home improvement laws. The homeowner could be awarded monetary damages against the contractor. 

The fund has the ability to reimburse homeowners due to poor workmanship or a failure to fulfill a home improvement contract. It only applies to work done by a licensed contractor.

A homeowner can be awarded up to $20,000 for poor workmanship.

General Contracting

Builders should acquire a construction license.  Out-of-state contractors should obtain a nonresident construction license.  Maryland eliminated subcontractor licensing in July 2016. A subcontractor must work under an MHIC licensed contractor.

Most home improvements do require the licensing of contractors. You can call the Maryland Department of Labor to verify the license status of any contractor before beginning a home renovation at (410) 230-6231.

Home Improvements – License Required:

  • Installing patios and retaining walls
  • Installing a pole building
  • Install a movable shed
  • For the installation of solar panels, regardless of whether they are on the home or an outbuilding
  • Tree experts and trimmers are licensed by the Maryland Department of Natural Resources
  • Gravel driveways
  • Roof work or installation
  • Painting
  • An addition
  • Installing a central vacuum system
  • Installing tile, wood or other flooring is considered a home improvement  

Home Improvements – License Not Required:

  • Demolition and cleanup of a property
  • For the installation of carpeting, for example, a license is not required
  • Installing a wall mounted television is not considered a home improvement so no license is required
  • Chimney sweep

Do be careful of someone who comes to your home to offer you a driveway sealcoating, for example.  This is a common scam in Maryland that could cost you thousands of dollars if the materials used are below par.

Look at someone’s business card to see if it contains a Maryland contractor’s number.

Types of Licensing

You do not need a license to perform general contractor work in Maryland. The license is required by the state if you are doing home improvement projects or for plumbing, electrical systems, or HVAC work.   

  • Master Electrician License – Required for home improvement projects

  • Plumber’s License- Requires a Master or Journey Plumbing License

  • HVACR License- Also requires a master, limited contractor or journeyman license

There are several types of licensing violations committed by certified contractors, some common violations include:

Omitting or Misrepresenting a Material Fact when Obtaining or Renewing a License

Some certified contractors should not be licensed in the first place. This is because when they applied for a license (or applied to renew an existing license), they either failed to report an important fact or misrepresented that fact. Had they been truthful on the application, their license application or renewal may not have been approved.

Failure to Obtain a Required Work Permit

Many licensed contractors perform work in municipalities all over the state of Maryland, and each locality has their own specific permitting requirements. Contractors who are busy all the time and perform a high volume of work sometimes have a hard time keeping up with all the various permit requirements. When a contractor fails to pull the required permits, the property owner is at risk of being cited for building code violations, being subject to fines and penalties, and having to pay to tear out and rework the project. The local governing agency determines how permit violation penalties are assessed, and many times, the property owner is the one stuck paying to fix this violation.

Hiring an Unqualified Subcontractor

The contractor may be licensed, but the subcontractors they hire to perform various tasks at the construction site may not be. Some contractors try to get around this by hiring a subcontractor through a middle man who is fully licensed and vouching for the legitimacy of the subcontractors. In October, a new law went into effect that will make it more difficult for contractors to avoid responsibility for the subcontractors they hire. The law is called the General Contractor Liability for Unpaid Wages Act. This law makes contractors responsible for wage and hour law violations of subcontractors who work directly under them (first-tier subcontractors), as well as second and third-tier subcontractors.

Abandoning the Construction Project

If a contractor does not start and/or complete a project within a reasonable period of time, or the contractor simply stops showing up, this may be considered abandonment of a construction project. There are some instances in which project abandonment may be justified because of the actions of the property owner. If, however, a contractor abandons a project without just cause and without properly notifying the owner, it may be a licensing violation. One common example of just cause for abandoning a project may be failure to pay the contractor as agreed for work completed. It should be noted that project abandonment may also occur if a contractor fails to pay subcontractors for their work, thus causing them not to show up at the job site.

Things to Know Before Entering into a Contractor / Subcontractor Agreement

In general, subcontractor agreements detail the project’s precise timeline, communication protocols, the scope of work, and payment. Some agreements contain specifics such as “pay when paid” or “pay if paid.” Such phrases decide when the subcontractor will get paid.

Other subcontractor agreements are fair to both the subcontractor and contractor. Subcontractor agreements can be more beneficial to them than common verbal agreements, depending on the contract’s specific terms.

Advantages of Subcontractor Agreements to Subcontractors

A subcontractor agreement may seem like a way for contractors to protect their interests rather than subs. Still, it can actually be more advantageous to subcontractors rather than contractors. This formal written document contains essential aspects of the construction project, such as timelines, work, and other factors.

It can be beneficial for subcontractors to know all these factors as they can show what the owner or subcontractor was supposed to do. Also, subcontractors can prevent unreasonable clauses by reviewing and not accepting unreasonable risks in their subcontractor agreement. These agreements offer subcontractors an opportunity to uphold their rights and create more favorable business terms.

Elements of a Subcontractor Agreement

A subcontractor agreement must contain various essential elements. In addition, there are some aspects that the subcontractors should be wary of. Such features can affect the agreement in a positive or negative manner.

Scope of Work

The work scope, which the subcontractor is hired to undertake, should always be clearly laid out in a subcontractor agreement. If the scope of work is broad or vague, it can be difficult for subcontractors to complete. As the work is not adequately defined, it is easy to allege that the subcontractor did not perform good work on the construction job. Thus, it is critical that the scope of work is well-defined.

Supply Chain

The supply chain and other operational risks are another critical aspect to note in a subcontractor agreement. All to often, the supply chain or owner-specified materials are not within the control of the subcontractor. In such cases, the subcontractor should not be held at fault. But some agreements hold subcontractors accountable for such risks. Supply chain risks can be minimized by reviewing and negotiating the subcontractor agreement.

Defense & Indemnification

Defense and indemnification are a common element in a subcontractor agreement. In many subcontractor agreements, contractors add defense and indemnification clauses. But these clauses can sometimes be unfair towards the subcontractor. Certain states have passed regulations to protect subcontractors from unjust indemnification clauses. Other states also have laws that void unfair indemnification. Subcontractors should be mindful of defense and indemnification clauses in a subcontractor agreement.

Insurance, Bonds, & Liens

Insurance, bonds, and liens are specified in many subcontractor agreements. A subcontractor needs to understand the exact provisions in their contract for insurance and bonds. However, at times, a contractor will specify in the subcontractor agreement whether or not a subcontractor can take out a lien. Such a clause limits or prevents a subcontractor from using a mechanics lien in the event of late payment or non-payment.

Warranty

Depending on the project, a subcontractor agreement might detail the warranty on work. This part of the agreement is beneficial for the contractor, but it can also be advantageous to the subcontractor. If the subcontractor provides solid, well-documented work, their reputation is untarnished. Also, it offers the subcontractor the opportunity to fix any unexpected issues and save their reputation.

Arbitration

Arbitration clauses are more common in a subcontractor agreement. But they force subcontractors to pursue claims via binding arbitration, instead of through a court. This prevents subcontractors from taking any potential disputes to court. This might not be a problem, depending on your business. Still, it is something you should review before signing a subcontractor agreement.

Conditional Payment

An increasing number of subcontractor agreements have conditional payment clauses, such as “Pay if Paid” and “Pay when Paid.” Sometimes, this clause can cause delays in subcontractor payment and even result in non-payment. Subcontractors must understand whether or not the agreement contains this clause before signing. Otherwise, they may risk their business.

A Professional Experienced Real Estate Lawyer   

There is so much that can go wrong during a home improvement project and you can prevent having any regrets about the hiring of an unlicensed contractor.  At that point you have very few options to make it right.

Contact us for a complimentary consultation at 410-431-2599 in our Annapolis or Severna Park offices. Attorney Matthew Evans wants to make sure your project is protected from the beginning until the end.

Four Common Misconceptions about Surety Bonds

In the construction industry, there are a lot of moving parts. There is the contractor, subcontractors, suppliers, and other third parties that work together to complete the project. In this industry, it is not uncommon for projects to be left half completed, companies to go out of business, suppliers and subcontractors to not get paid, and similar problems. To protect project owners and other parties from unfulfilled obligations, contractors are most often required to purchase a surety bond.

How Does a Surety Bond Work?

A surety bond is an agreement between three parties; the principal, the obligee, and the surety.  In the construction industry, the principal would be the licensed contractor who is required to be bonded in order to be hired for a project by a government entity or private party. With Federal government projects and most state-sponsored public projects, Maryland included, surety bonds are required. Many private businesses and consumers will also want the contractor to be bonded in order to be considered for the project.

The surety bond essentially “assures” the obligee that something will happen. The project owner/consumer receives assurance that the work will be performed as outlined in the contract.  Subcontractors and suppliers receive assurance that they will be paid for the materials they provide and/or the work that they perform. 

The surety is the entity from which the bond is purchased. The principal pays a premium to the surety, and the surety provides financial backing for the bond and assurance that the obligee will obtain the desired result.

Common Misconceptions about Surety Bonds

There is some confusion among those in the construction industry and others about exactly how surety bonds work. Here are four of the common misconceptions people have about this type of product:

Surety Bonds are the Same as Insurance

While there are similarities between a surety bond and an insurance product, there are significant differences as well. With insurance, the insurance provider assumes the risk on behalf of their own client. For example, if someone purchases a homeowner insurance policy and their house is destroyed by fire, the insurer will cover the loss for the homeowner based on the terms and conditions of the policy. The individual who purchased the policy does not have to reimburse the insurance company for their cover losses.

With a surety bond, the risk remains with the principal, or in the case of the construction industry, the contractor who purchases the bond. Protection is provided to a third party, the obligee, who is provided assurance of a certain result. If the principal does not perform their obligations, this does not mean they are off the hook. Although the surety will make sure that the obligee is satisfied, the principal is still ultimately responsible to pay the claim.

Performance Bonds and Payment Bonds are the Same Thing

While they are usually purchased together before beginning a construction project, performance and payment bonds serve two different purposes for two different groups of obligees.  Performance bonds provide assurance to the project owner/customer that the work will be completed as specified in the contract. Payment bonds provide assurance to subcontractors who are working on the job and/or suppliers who provide materials for the job that they will be paid as agreed.

Large Construction Companies do not Need Surety Bonds

One common misconception in the construction industry is that large companies who are well-established do not need to be bonded, and that they can get by with a letter of credit or some other type of insurance product. Aside from the fact that in most states, publicly funded projects will require a surety bond, large companies are not immune from financial difficulties, mismanagement, and other problems. Even large companies get overextended, fail to pay suppliers and contractors, fail to finish a job, or file for bankruptcy. Without a surety bond, those affected by this risk would have no way of recovering their losses if something should go wrong.

All Sureties are the Same

Some people think it does not matter much where they get their surety bond from. But the truth is, not all bond companies are created equal. Like insurance companies, bond companies have different areas of specialty. For example, some will only provide backing to a principal with strong credit, while others have high-risk programs designed to accommodate almost anyone.  And of course, bond premiums vary from company to company, as do ratings, certifications, and regions in which they are approved to provide bonds.

Need Legal Help with Surety Bonds in Maryland? Contact a Skilled Construction Law Attorney

Surety bonds are complex contracts, and legal complications can often arise between the parties. Working with an established and experienced construction law lawyer can help you determine the best way to approach legal matters that come up, and how to successfully navigate the complexities involved with these issues. 

Whether you are a principal, obligee, or surety, if you need any type of legal guidance related to surety bonds in Maryland, call the Law Offices of Matthew S Evans, LLC at 410-431-2599 for a personalized consultation. You may also message us through our online contact form or stop by our office in person at your convenience. 

What Should I Do if I Suspect my Contractor is Using Defective Materials?

Construction disputes can be complex and highly contentious, often involving multiple issues that parties have vehement disagreements about. Most of these have to do with perceived failures to meet contractual obligations, failures to meet performance standards, and similar matters. One issue that may come up during a construction project is the quality of the materials being used.

The cost of materials is obviously one of the major expenses that will be incurred during any construction project. With some construction contracts, the owner pays the contractor for time and materials. This may be a preferable arrangement when the scope of the project is not clear or has not yet been defined. When there is a clear scope and defined completion schedule, an owner may be more likely to prefer a fixed-price or lump sum contract.

With a fixed-price contract, the entire cost of the project is pre-determined based on the contractor’s estimate and any subsequent changes and negotiations. Property owners tend to like this type of contract, because it gives them certainty about how much everything is going to cost and a fairly accurate estimate about when the construction will be completed. That said, a fixed-price contract is not without its drawbacks.

From the contractor’s perspective, fixed-price contracts are risky. During the course of the project, unexpected costs may arise that go beyond the original estimate. A contractor typically accounts for these risks by adding a certain percentage to the fixed price, so they can pay for unspecified work that may need to be performed. This additional percentage is usually wrapped into the overall price of the project.

Another way a contractor may try to minimize their risk is by cutting corners on the materials they use and other major costs (such as labor). When the owner is paying a fixed-price, the contractor is usually the one purchasing the materials. They will often have agreements with building material suppliers, allowing them to buy the materials at a better price. If you are paying a contractor a specified price to complete a building project, using cheaper materials can increase the contractor’s overall profit. With this in mind, it is always important to look closely at the products they are using.

A contractor is obligated to perform work in a good and workmanlike manner and in full accordance with the plans and specifications of the project (as laid out in the contract). This usually includes a warranty to the owner that all labor, materials, and equipment furnished are of the type and quality required under the agreement, and that the materials will be free of defects. Even if these duties are not stated specifically in a contract, they are generally implied by law. This means that if a contractor is knowingly using defective materials, they may be liable for any resulting damages.

What Should I do if I Suspect my Contractor is using Defective Materials?

If you believe your contractor is using materials that are faulty or defective, it is important to take proactive steps to rectify the situation. The first thing to do is to take a closer look at the project as it progresses. It is best to do this discreetly and in a way that does not interfere with their work.

Go to the job site in the morning or evening and check out the materials that are being used. Look for defects such as warped lumber and similar problems. Take multiple photographs of the materials so you can show them to an expert. You may even want to consider bringing a building expert you trust to the job site to inspect the materials more closely.

If you do uncovered defects with the building materials being used for your project, start by having a conversation with your contractor about this issue. Politely explain your concerns about the quality of the materials they are using. It could just be an honest mistake or oversight on their part, and hopefully, they will agree to make things right by replacing the defective materials.

If, on the other hand, the contractor is hostile or defensive, talks down to you, or denies that the material is of low quality or otherwise denies responsibility, it may be time to escalate the matter. At this point, stop making any payments to the contractor and speak with an attorney to discuss your rights and legal options.

Contact an Experienced Maryland Construction Law Attorney

If you are having issues with a contractor that is using defective materials and refuses to do anything about it, the Law Offices of Matthew S Evans, III is here to help. Our lawyers have in-depth knowledge of this area of the law, and we work closely with clients in Maryland and Washington, DC. to help resolve construction-related issues and obtain appropriate legal relief on their behalf. For a personalized consultation with one of our attorneys, call our office today at 410-431-2599 or message us through our web contact form.

New Maryland Law Makes General Contractors Responsible for Subcontractor Wage Violations

At a typical construction site, there are numerous workers doing various tasks to help complete the project. The workers could be employed by a general contractor, or they could be employed by a subcontractor who was hired by the general contractor. Up until now, general contractors only needed to worry about making sure they were not in violation of Maryland wage and hour laws. Effective October 1, 2018, that is all going to change.

Earlier this year, the Maryland legislature passed a stunning new law that makes general contractors jointly responsible for subcontractors who fail to pay their employees in accordance with state wage and hour laws. The law is called the General Contractor Liability for Unpaid Wages Act.

Changes under the new law expose general contractors to a major new liability. Under Maryland law, employers who fail to comply with wage and hour laws can be forced to pay up to three times the wages owed plus all reasonable attorney fees and other costs.

The new law does not apply to all employers, it only applies to general contractors who work on a “construction services” project. Construction services is broadly defined and may include any of the following:

  • Building
  • Reconstruction
  • Improvements
  • Enlargements/Additions
  • Alterations
  • Painting
  • Repairs

Under the new law, general contractors are not only responsible for wage and hour law violations of subcontractors that work directly under them (i.e., first-tier subcontractors), they are also responsible for any subcontractors their direct subcontractors hire (i.e., second-tier subcontractors), and subcontractors they hire (third-tier subcontractors), etc. So not only is a general contractor responsible for subcontractors they hire directly, they are responsible for all other subcontractors they are even indirectly associated with.

The Implications of the General Contractor Liability for Unpaid Wages Act

It is difficult to know the full ramifications of the new law until it is implemented, because you never know what unintended consequences might arise. Based on what we know already, however, there are several ways this law might impact general contractors, subcontractors, and the working relationships between the two:

  • Stricter Vetting Processes for General Contractors: When this new law goes into effect, general contractors will need to be much more careful who they hire as subcontractors on a construction project. This will likely require general contractors to implement a much more extensive vetting process to ensure that they only work with reputable subcontractors who have a proven track record of paying their employees.
  • Greater Difficulty for Upstart Subcontractors: This law is likely to hurt new subcontractors who have not yet established themselves in the industry. It is already an uphill battle for upstart subcontractors bidding against larger players that are better known and have more resources. The new law will certainly not help in this regard, and it may cause newer subcontractors to lose out on jobs they might have gotten otherwise.
  • Insufficient Employee Record Requirements: While the statute puts general contractors on the hook for wage and hour violations of subcontractor employees, it does not require subcontractors to provide general contractors with their employee records. This could make it more difficult to defend wage and hour violation claims brought against them.
  • Broad and Undefined Potential Litigation Exposure: The new law is vaguely worded, and as mentioned earlier, it puts general contractors on the hook for subcontractors of subcontractors of subcontractors. The law also opens up the possibility that a general contractor could be sued by employees of a subcontractor even if those employees did not work on the same construction project.
  • Contract Changes Needed to Address Exposure: Indemnification language in the contracts between general contractors and subcontractors will need to be strengthened to address the new liability exposure. Bonding requirements may need to be enhanced as well.
  • New Insurance May be Needed: General contractors may need to add a rider to their present liability coverage or obtain new insurance coverage to insure for exposure to wage and hour violation lawsuits by subcontractor employees.
  • Potentially Higher Consumer Costs: The enhanced bonding and insurance requirements, as well as the potential for fewer subcontractors to be considered for bids on projects could drive up costs for construction project services, which will likely be passed along to the consumer.
  • Out-of-State Contractor Implications Unclear: General contractors who are based out of state and land even one construction project in Maryland will need to find out how the new law affects them. It could be that some out-of-state contractors will decide to stay out of Maryland altogether, which would be another contributor to a less competitive and more cost-prohibitive environment for consumers.

Speak with a Skilled Attorney about the Latest Changes

If you are a general contractor or subcontractor who performs work in the state of Maryland, the General Contractor Liability for Unpaid Wages Act will impact you in some way. To learn more about this new law and the steps you need to take to cover your legal exposure, contact the Law Offices of Matthew S. Evans, LLC today.

Our Maryland lawyers have in-depth knowledge of the complexities of state construction statutes, and we have over two decades of combined experience helping clients with all matters related to this area of the law. Call us today at 410-626-6009 for an initial consultation or send us a message through our web contact form for a case review. You may also visit us in person at our Annapolis office.

Who Pays When a Contractor Damages My Home

Hiring a contractor to perform work on a home is something that countless people do each year. Perhaps you’ve always wanted to finish your basement, remodel your kitchen, or install the luxury bathroom you’ve been dreaming of. Whatever it is, when you hire a contractor for work on your home, you have high expectations; the last thing that you anticipate is for the contractor to cause damage to any part of your property.

If damages to your home do result, you may be wondering who’s responsible for paying for them: your homeowners’ insurance policy or the contractor’s insurance?

Which Insurance Company Pays for Damages to My Home?

Which insurance company will pay for damages to your home often depends on your homeowners’ insurance policy, the type of damage, and the manner in which damage was caused. For example, damages from a true accident (like a fire) caused by a contractor may be covered, whereas poor craftsmanship may not be.

Your homeowners’ insurance company may pay for damages in the following situations:

  • Accident coverage. Accident coverage is part of most homeowners’ insurance policies, and it usually kicks in when a contractor damages a home. Accident coverage will pay for exactly that – damages caused by accidents. This means fires, water damage, structural damages, etc.
  • Property damage. It is important to note that there is a distinction between unsightly or shoddy work and actual damageto property resulting from that work, and that your insurance company will likely only offer coverage for the latter. For example, if a roof is constructed poorly and is beginning to show damage, your homeowners’ insurance company will likely not pay for this damage unless there is resulting damage to the home or structure otherwise. In other words, if there is no damage beyond faulty work, then you probably don’t have a claim for property damage.
  • The damages are within your coverage limits. It is very, very important to familiarize yourself with your homeowners’ insurance policy beforehiring a contractor to perform any work on your home. This is because many homeowners’ policies do cover damages during a home remodel, but don’t cover damages that result from an addition or an individual project. You should know your coverage limits and weigh whether or not increasing them before a project would add peace of mind.

When Does the Contractor’s Insurance Pay?

Even if you file a claim with your homeowners’ insurance company and the company agrees to pay for damages resulting from a contractor’s mistake, it is likely that your insurance company will attempt to collect repayment from the contractor’s insurance.

If your homeowners’ insurance company denies your claim, you may be able to recoup damage from the contractor’s liability insurance. Contractor liability insurance is designed to pay for accidents, damages, and injuries resulting from a contractor’s errors. In some cases, contractors even carry faulty workmanship coverage, which would allow you to recover damages for negligent work, even when other damages aren’t present.

Why You Should Work with an Experienced Attorney

While you surely deserve to be compensated for damages in your home, the truth is that insurance companies are often hesitant to pay claimants anything, and often offer far less than they deserve, if not outright deny claims. When there are two insurance companies involved (your homeowners’ insurance policy and the contractor’s insurance) the process of recovering damages may be delayed, as these two companies may engage in a back-and-forth about who owes what.

When you work with an attorney who is experienced in insurance law and contractor and homeowners’ insurance claims, you improve your chances of recovering the compensation you deserve. Your attorney will not only know which company to file a claim against for damages, but how much your claim is worth, what your options are if available insurance is limited, and how to negotiate for a fair settlement.

Contact the Law Offices of Matthew S. Evans, LLC Today

For a free consultation with an experienced legal professional, contact the Law Offices of Matthew S. Evans, LLC today. Our Maryland attorneys are well-versed in construction defect claims and have more than 20 years of combined legal experience successfully pursuing damages on behalf of our clients. Please visit us today for your initial case review or call us at 410-626-6009.

What To Do if You Suspect a Construction Defect in Your Home

Maybe you’ve recently undergone a remodeling project in your home, and have found that the construction seems shoddy, or has started to fall apart. Perhaps you’ve found pools of water or water damage, and believe that a window or door may be leaking. Construction defects can become hugely expensive to fix, and lead to damage to the underlying structure of the home. As experienced Anne Arundel County real estate attorneys, we are frequently called upon to advise clients and represent them regarding construction defects. Below are some answers to common questions we frequently get asked about construction defects.

What makes for a “construction defect” under the law?

A construction defect is anything done to your home or condominium that reduces its value due to poor workmanship or faulty design.

What are common defects?

One very common defect, which can in turn lead to additional issues, is a leaky façade or water seeping through improperly installed windows or doors. This sort of defect can increase your heating and cooling bills, can lead to widespread mold, and can even lead to damage of the structure from extensive water damage. Another common defect is faulty electrical work, which can damage expensive electronics, and even lead to fires. If a city inspector finds that your home does not meet relevant building codes after construction is complete, you may have a claim for a design defect.

What happens if I don’t notice the defect for a long time?

There are two main types of construction defects: patent and latent. If a defect is visible for anyone to see and should be obvious to the homeowner, then it is considered “patent.” If the defect is hidden, and only becomes evident after, for example, a serious rainstorm or after the passage of some time, then it will be considered “latent.” While statutes of limitation will keep you from filing a lawsuit after a certain length of time after you discover the defect, that point in time may be later if the defect is latent, since you would not be expected to know about a hidden defect. A skilled inspector or construction expert can examine your home and support a claim that you had no way to know about the defect prior to discovering the damage.

What if I repair the defect, but still want to recover damages for the defect?

Even if you’re forced to take immediate action to repair your home due to the defect, you can still recover against the contractor, subcontractor, architect, developer, or builder for the flaw. In fact, if the defect were left unrepaired and resulted in an even greater loss in value to your home, the court may find that you are not entitled to the greater damages caused by the fact that you didn’t stop the problem from getting worse.

If you’ve been the victim of defective construction or a fraudulent or negligent contractor, contact an attorney who understands the law and knows how to prove complex construction causes of action in court. For a free consultation on your D.C. or Maryland construction defect claim, contact the experienced Anne Arundel construction and real estate attorneys at the Law Offices of Matthew Evans III, LLC, at 410-626-6009.

Annapolis Real Estate & Construction Law Services

At the Evans Law we offer a broad range of legal services from contract-related disputes, to real estate and construction law, to general civil litigation. We also provide residential and commercial real estate settlement services throughout our affiliate company United Title, Inc.

We are one of the few firms in Annapolis, MD that specialize in legal matters regarding construction, land use and real estate. Matthew S. Evans, III is an Anne Arundel County attorney with over 15 years of professional experience. He has also completed continuing education courses and is very active in the community. He serves both businesses and individuals with a wide range of services.

Real estate can be a very costly and complex investment. In fact, it will most likely be one of the most expensive investments that you will ever make. That is why it is essential for you to have an experienced attorney to help you. A qualified attorney will help navigate you through this process. This will potentially help you avoid costly matters. Evans has worked with clients of different backgrounds, needs and sizes. He also brings personalized service that cannot be found at other firms. Contract disputes, homeowners association issues, real estate litigation and contracts, ownership transactions and landlord-tenant lease agreements are considered real estate law.

Construction Law is another one of the legal services that Evans offers. He has had over 10 years of experience in dealing with construction defects, bond claims, licensing issues. Evans will provide his counsel and advice. He will also negotiate claims and contracts as well as review contracts. The legal climate today requires that one be flexible in problem solving. Evans is experienced in successfully using alternative dispute resolution. He strives to provide you with the best counseling and advice that will help you avoid expensive litigation that is related to construction law. Contact Matthew S. Evans today for more information.