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By: Jeffrey C. Bright, Esq., Saxton & Stump, LLC

From experience representing many contractors and subcontractors, we have noticed certain patterns when construction businesses grow and run into typical “growing pains.” These tend to arise at certain points, and with proper planning, the transition can be less painful.

Growth Beyond Yourself

The first growing pain that contractors tend to experience is when the business grows to the point where the founder of the company can no longer be intimately engaged in each project and issue. Lots of successful contractors started out with handshake deals and strong, trusting relationships. And, that’s great. But at some point, the business grows to the size where that one-on-one relationship cannot be present for every single issue. At that point, companies often desire to standardize the types of deals and relationships, so that quality and services remain consistent.

To continually grow and increase revenue, companies start to utilize stronger human resource management, such as employee handbooks, internal policies, operations manuals and safety programs. Additionally, companies tend to invest in standard contract forms and negotiation protocols. For some companies, this point may be reached when there are only a handful of employees; for others, the company might be larger. It all depends on the company.

These growing pains also tend to repeat themselves at various points: changing laws and economic trends; growing into a new geographical market, growing into a new related type of product or service, or when the size and risk on projects has changed. At each of these points, similar growing pains arise that require constant evaluation and revising of handbooks, internal policies, operations manuals, standard contract forms and negotiation tactics.

The Threshold Compliance Numbers – 4, 15, 20, 50, and 100

As companies grow, they run into additional compliance. It is a fact of life. From inception, certain wage, tax, insurance and other compliance laws apply. Also, in Pennsylvania, once a company has four employees, the Pennsylvania Human Relations Act applies, requiring anti-discrimination compliance. At 15 employees, Title VII of the Civil Rights Act (anti-discrimination) and the Americans with Disabilities Act applies. Once a company has 20 employees, the Age Discrimination Employment Act applies. At 50 employees, the Family Medical Leave Act applies and an Affirmative Action Plan may be required, depending on the type of work, services and products sold. Additionally, if a company is engaged in federally funded projects or services, it may be required to comply with certain Equal Employment Opportunity (EEO) and Affirmative Action regulations, even at thresholds as low as $10,000 on federally funded contracts. At 100 employees, an EEO-1 report is required.

Planning in advance can avoid, or at least lessen, these compliance issues. Generally, it is best to institute a handbook and policies early, so that the company is
already under protocol for satisfying these compliance requirements, even before hitting the threshold employee numbers. This is particularly true when engaged in federal contracts because it is best practice to have compliant policies in place prior to bidding and securing the work.

Also, from an operations standpoint, once a company has reached a certain size, there tend to be numerous projects, perhaps in multiple jurisdictions, that require monitoring and oversight. Use of standard contracts and trusted reliance on insurance, accounting, and legal consultants helps the company grow, so that the company can focus on core business decisions, instead of becoming bogged down in legal and compliance minutiae.

Monitoring and overseeing the complicated and dynamic rules for compliance can be tricky practice for a growing company, especially when also focused on growing the business revenue. Best practice is to engage counsel, insurance consultants, and other resources to assist.

Jeffrey C. Bright, Esq., regularly presents at ABC Keystone’s educational seminars. Jeff focuses his practice on construction matters, civil litigation, employment law and real estate development and disputes. He represents contractors, subcontractors, owners, construction managers and design professionals on the preparation, revision, negotiation and litigation of construction contracts.

Saxton & Stump, LLC is a full-service law firm serving businesses by providing legal and consulting services. The firm’s professionals apply strategic solutions and provide problem-solving support to help clients navigate legal issues and thrive in an increasingly complex world. The firm’s Construction Law Group takes a collaborative approach and can advise growing construction companies on maintaining compliance, handling employment issues and grow through the use of standard contract forms and negotiation of construction contracts.

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January 7, 2020