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these agreements will reduce your review time, your questions and
the attorney’s fees you incur clarifying the meaning of the various
standard clauses. A perfect example is a dispute resolution clause,
as it will likely be included in each of these agreements. A company
should strive for consistency and compatibility for these agreements
so to ensure predictability and efficiency and to reduce the amount
of legal fees incurred for decoding the legal impact of such clauses.
5. Cultivate and Protect Your Company
Intellectual Property (IP)
Company trade secrets are protectable IP, and comprise
information that: (i) is not publicly available; (ii) provides a
commercial advantage; and (iii) subject to reasonable efforts to
maintain secrecy. These can include client lists, production or
construction methods, production formulas, marketing strategies,
pricing strategies and other commercially sensitive materials.
Protect you company’s IP with written confidentiality and
intellectual property agreements and safe practices for ensuring
such information is not accessible by non-essential personnel.
6. Comply with All Contractor
Licensing Requirements
When performing work that requires licensing, ensure that your
company obtains all proper licenses. Each state treats licensing infractions
differently, but an unlicensed contractor is always at risk.
For example, Washington and California are both very strict about
licensing and limit recovery of claims by unlicensed contractors.
A number of states also impose both civil monetary penalties and
criminal sanctions for licensing violations. Additionally, some
states declare any contracts with unlicensed contractors null and
void and/or allow disgorgement of any previous payments to unlicensed
contractors. Do not underestimate the consequences of
improper licensing.
Similarly, contractors should also be cognizant of any special
licensing requirements for performing work on tribal land. There
has been a construction boom nationally with respect to casinos
and other establishments for Indian tribes on Indian tribal land.
Thus, licensing issues on tribal land have become a relevant concern.
To commence construction, tribes often require special business
and building permits, which are granted by the tribe.
7. Properly Classifying Workers as Either
Employees or Independent Contractors
The proper classification of a worker has implications in a number
of areas including: wages and hours, unemployment and worker’s
compensation and tax liability. To make matters worse, a worker
may be considered an independent contractor for tax purposes, but
an employee for unemployment purposes. Generally, independent
contractors receive far fewer protections under state and federal law,
and organizations have less obligations and liabilities toward them.
However, the federal government and a number of states are beginning
to give greater attention to misclassification of workers, which
can result in fines, penalties, stop work orders and back taxes.
Learning to assess relative risk is crucial in
protecting a utility contractor’s business. Take
a photo of this QR code with your smart phone
and read an article specifically on protecting
yourself from uninsurable risks.
The determination of
whether a worker is an independent
contractor or an
employee is very fact specific,
and may vary depending
on the agency and state.
But, at the most basic level,
a worker may be an independent
contractor when
he controls the means and
methods by which the work
is done. Courts also consider
factors such as whether
or not they are paid the
same weekly wage and own
their own tools. Moreover,
the employer bears the burden
of proving the existence
of an independent contractor
relationship. Given the
Breaking up your business can help
protect it. A company should consider
forming separate business entities for
operations, holding equipment and, if
applicable, even office ownership.
increased scrutiny and penalties for misclassification of workers, it
is important that organizations carefully analyze the employment
status of each worker under applicable federal and state law.
8. Business Continuity Plans
An important consideration for any company is a well formulated
business continuity plan. Many closely held companies are unprepared
for business continuity after the founder or major shareholder
retires, becomes disabled or is deceased. Thus, contractors
should consider how to hold on to key employees and develop
plans for operations in the event that something happens to the
owner or a key person. With regard to keeping employees, contractors
may want to consider various incentives, such Employee Stock
Ownership Plans (ESOPs), or other mechanisms to give employees
a stake in the business. A business continuity plan should also consider
other risks and interruptions that can negatively affect business,
such as IT failures, supplier default and economic slowdown.
Preparation in event of unforeseen circumstances is important to
ensuring that business can continue to run smoothly.
Conclusion
In this volatile market, it has become increasingly important
that contractors exercise smart business legal judgment to help
ensure continued success. Accordingly, this article sheds light on
a number of topics that contractors should consider when making
future business decisions. The foregoing is provided for informational
purposes only and should not be construed as legal
advice. Contractors are encouraged to consult with an attorney
of their choice to discuss their own individual circumstances.
Paul Tonella is a Partner at the law firm of Oles Morrison Rinker & Baker,
which represents hundreds of closely held companies in their corporate
management, succession planning, tax, real property and general business
needs. Contact: Tonella@OLES.com or 206-623-3427
Firm associate Benjamin Greenberg earned his law degree from
Boston College Law School. During law school, he was a Staff Writer
for Boston College Law Review and was Co-President of the Criminal
Justice La Project. Contact: Greenberg@OLES.com or 206-623-3427
December 2011 | Utility Contractor 25