Managing Risk: Keep a Target Off Your Back While Constructing Your Business

Risk management. It’s not something you thought you would have to be an expert on when you decided to start your own contracting business, right? The reality is that as a business owner, you have to be part risk manager if you want to survive, much less maximize the fruits of your labor. For construction contractors, the risks of not focusing early on the fundamentals can wreak havoc on the growth and sustainability of otherwise lucrative business models.

One area of potential risk (and therefore vital importance) involves management of the one resource that often makes the difference between the success and failure of a project: your workforce. Basic issues such as recruiting and retaining qualified labor, instilling safe work practices and securing consistent productivity are nearly universal among construction industry employers.

More complex issues involving wage and hour compliance, the nuances of government contracting, and pressure from labor unions are also all too familiar to many contractors. Fortunately, by tackling some core issues early, controlling labor and employment law exposure is not as unattainable as it might seem. Here are the five most important proactive labor and employment law measures you can take to avoid expensive and productivity-sapping labor issues:

1. The construction industry is facing a labor shortage of epic proportions. If you want to secure the best of what the market has to offer, be prepared to navigate the recruitment and on-boarding of the best candidates seamlessly — or they may opt to go elsewhere. In addition to always being able to demonstrate to candidates the value proposition of working at your company, make sure your employment terms are competitive, and that your employment application/interview, background check and drug testing processes are legally compliant.

2. Don’t play defense where your greatest asset — your workforce — is involved. Invest the time, manpower, and resources to develop a fundamental labor and employee relations platform for your business. Consider publishing an employee handbook or even just key policies to provide workers with a road map of what they can expect from you — and what will be expected of them. Evaluate what type of performance management system (discipline and reward alike) will work best for your business. Implement policies and procedures to make sure that you stay true to that system, particularly when business gets so hectic that the last thing you on your mind is rewarding solid efforts, or imposing discipline where warranted. The failure to reward and the failure to discipline can both wreak havoc.

3. Invest in training your employees and those who supervise your employees. Skills-based training and safety training are no-brainers for construction contractors. They put workers in a position to build better, faster and safer. But training for supervisors on how to manage processes and, importantly, people is just as important. Your supervisors set the tone for the overall employment experience for your workers. If supervisors lack basic interpersonal communication and/or management skills, their technical skills (which is likely how they got to be supervisors) will rarely be enough to keep workers tethered to your company. Today’s workers are savvy shoppers and far less likely to tolerate workplace conditions that they find unfair. Since employee flight is a cost of bad management, making your supervisors better at their jobs means keeping good employees at your company.

4. Don’t mess with the paycheck! Construction contractors have a well-earned reputation for being wage-and-hour cowboys. Their rules on when the workday starts and stops, how and when overtime will be paid and, on public works, who earns prevailing wage is all too often disconnected from the law. In other words, some contractors either don’t get or possibly don’t care what the law says about how much they have to pay their workers. The problems related to wage-and-hour non-compliance are numerous, and they are sobering. To begin with, workers literally cannot waive their rights to statutory minimum, prevailing and overtime wage rates, regardless of whether they profess a willingness to do so. Serious violations could result in the payment of liquidated (a/k/a double) damages to employees, payment of attorneys’ fees (yours and your employees’), debarment from public contracting and even criminal prosecution. The inescapable conclusion for any thinking contractor is that a crash course in wage-and-hour law is an absolute necessity before projects start getting booked and your payroll expenses escalate.

5. Develop your support network early. Ask around and get to know qualified professionals before you need them, since their early involvement just might help you to avoid costly mistakes. Construction accountants, safety experts, insurance brokers and lawyers usually cost a lot less to consult on a proactive basis rather than retaining them to fix a problem after the fact.

There are many, many other specific compliance initiatives that a growing contractor is likely to have to take on; but by taking the basic steps outlined above, contractors can minimize their labor and employment law risks and focus on their true core competencies.

Russell McEwan, co-office managing shareholder of the Newark, New Jersey, office of Littler Mendelson, represents employers in a number of industries, especially construction, in federal and state court litigation, before labor arbitrators, at the bargaining table, and before regulatory agencies. He proactively counsels employers on strategies to promote workplace harmony, strengthen the employment relationship, and minimize the risk of litigation. Comment below or email editors@workforce.com.