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Texas Construction Law Blog For Subcontractors & Suppliers

Fighting the Four Horsemen of the Workforce Apocalypse

Posted in Labor/Workforce

Co-author: Michael Kelsheimer
Published in TEXO InFocus Magazine

Since at least 2008, Flood, Fire, Famine and Pestilence have ravaged the construction workforce across America. In the downturn, many workers left the industry never to return. Others left the U.S. and have not returned.  Couple that with construction growth, a resistance to training workers who may leave for another dollar an hour, and seeming lack of interest in construction jobs by the current generation now entering the workforce, and you’ve got the makings of a big challenge.

Protect yourself on the contracting side before heading into the storm . . .

  • Be realistic about your company’s capabilities based upon its manageable resources by not taking on too much work. More projects obviously translate to more labor, which places contractors in a vulnerable position, especially if members of their key labor force leave, the project is accelerated requiring additional manpower, or a project is not properly funded.
  • Carefully review adequate labor provisions. Instead of glossing over contractual provisions that contractors customarily view as non-negotiable, read, understand, and negotiate to the best of your ability contract terms related to acceleration, increased manpower obligations, and limitation of liability for owner-caused delays. Your attorney can help with this.
  • Check for milestone dates within the project schedules to properly gauge the most critical periods of the project that may require increased manpower or skilled labor. This will allow a contractor to properly allocate its workforce across multiple projects or identify key periods, which may require the acquisition of supplemental labor.
  • Pay attention to liquidated damages. While liquidated damages on a project are often unavoidable, they do not always have to be any of your responsibility. Avoid circumstances in which an argument can be made that you, as the contractor, breached any obligations by not having a sufficient labor force on the project at all times, lacked the necessary skilled workers, or did not provide adequate supervision. These are all examples of issues commonly connected to project delays and liquidated damages.
  • Protect yourself from defective work claims, warranty, claims, and injuries by using labor that is reliable, experienced, and skilled. Reliable labor should show up and work, experienced labor should understand the importance of completing work in a timely, efficient manner and the consequences of not doing so, and skilled labor should know how to properly construct so your work is accepted and not the source of costly, never-ending defect claims. Having the right people performing the work can make or break a project or a business.
  • Insurance coverage to protect your company in the event that all other safeguards fail. Explain to your insurance broker any issues you may be currently facing or otherwise anticipate regarding labor before you commence work on any given project to see what coverages are available and which exclusions to avoid. Insurance may not always be the answer but it can provide relief. Understanding your coverage as it relates to how your work is impacted by your labor force is essential. For example, if you are forced to work with laborers you are not familiar with or utilize unskilled labor to accomplish difficult tasks, it would be good to understand how your policies will cover property damage, injuries, and any allegations of defective work.

Protecting yourself on the employee side while in the storm . . .

Unfortunately there is no magic legal umbrella that provides quality, skilled workers and wards off poachers, but there are things you can do to protect your preyed-upon workforce:

  • Pay:  As an economics major, the law of supply and demand was beaten into our heads.  Lots of construction projects and few skilled workers realistically means increased wages, benefits, and overtime to keep those workers loyal only to the almighty dollar.
  • Loyalty: As a marketing minor, we learned the importance of building brand loyalty.    Customers who have become loyal to a brand rarely ever look elsewhere.  Employees treated right are the same.  Some business have even started social media campaigns to tell prospective employees all the things they do to care for them and build that loyalty.
  • Training the Future:  No one seems to want to train the next generation of workers.  One huge reason is a lack of loyalty.  Ungrateful, trained employees often leave at the first sign of more money.  One legal solution could be requiring the workers to repay training costs if they leave or not to compete in the geographic area.  That said, a promise to repay is only as good as the person making the promise.
  • Tech:  Outsmart the problem, more and more prefabrication cuts down on the worker’s needed.  Using technology like drones to scan job sites and create efficiencies cuts down on superintendent work and time.  New efficiencies are developing all the time.
  • Poaching: Others are poaching your employees, turnabout may be fair play depending on your views.
  • Finding a New Talent Pool:  Some construction companies are marketing directly to high school students and guidance counselors offering training in exchange for a period of promised employment.
  • Non-Competes: Yes, this is a legal solution, but clients who have taken this approach have been met with mixed success.  It could easily cost $10 to $20,000 to get an injunction at the courthouse. Probably worse, word will get around about your strategy.  The first few employees who sign will warn others and your talent pool may dry up.

Flood, Fire, Famine and Pestilence are hitting everyone.  Efficient strategies, while sometimes painful, will hopefully help you stem the tide of workforce disaster.