By Karalynn Cromeens, Cromeens Law Firm, PLLC
Do you know what a legal land mine is? A legal land mine is one of those things that you don’t even know you need to be aware of but stepping on one can blow up and destroy your company. In this blog, we will walk you through a terrifying example from a client, one that almost took out the family business in its early stages because they did not know any better. You must be aware of the things that can damage your company so that you can be on the lookout. You’ve put your heart and soul into building your business; now it’s time to put the proper protection in place to ensure that it runs smoothly.
The Story that almost Took Out a Company
This client started a construction material supply company which quickly picked up business. Before they knew it, they needed to hire employees. One of the first to be hired was a driver to deliver the materials. Drivers for the size of the truck they needed to make deliveries required a commercial driver’s license, so they put an ad in the paper for this specific type of driver. They hired the first person who showed up for the interview, and he started work immediately. He never filled out an application, and the client had absolutely no process to set up a new hire or start an employee file. They certainly did not have an employee handbook. The employee was a hard worker, showed up to the job early every day, and did great with deliveries. Then one day, the client got a phone call that changed the course of their business forever. The employee had been in an accident with the company delivery truck. The woman the driver hit had minor injuries and was taken to the hospital, but the most damaging part was that the new driver did not have a commercial driver’s license. My client was in a panic, they had just started the company, and obviously had no money to pay for any of this. Then a miracle happened; their insurance covered the claim! You can bet your ass they immediately spent the money, got an employee handbook, and set up a process to verify all future employees.
If their insurance had not covered the claim, the client would have had to pay over $100,000 in damages. That large expense would’ve ended their business. The insurance company could have easily denied the claim because the driver didn’t have the proper license to operate that type of vehicle. My client was completely unaware of the liability because they didn’t have a proper hiring process or an employee manual that laid out their policies, procedures, and a proper safety plan. Over the years, I have seen plenty of companies that have not been so lucky and have gone out of business because they hit a legal land mine. Don’t learn the hard way; don’t test the waters.”
Legal Land Mine Construction Checklist
Based on my experience in business as a construction attorney, I have put together a legal land mine checklist of things you need to be protected from as a business in the construction industry. I work with small to mid-size construction companies from all over the country and these are the first things we go over when they contact my office.
- You must be incorporated.
- You must know the difference between an employee and a subcontractor.
- If you have employees, you must pay them properly.
- If you have employees, you need a new employee intake process and an up-to-date employee handbook.
- If you have subcontractors, you must have a written subcontract.
- You must have insurance – drafted specifically for your business.
- If your customers are signing your contract, it needs to protect you, be in plain English, something both you and your customer can understand, and specific to your state.
- If you are signing someone else’s contract, you need to have a process in place to have that contract reviewed and/or negotiated.
- You must have a consistent collection strategy that incorporates the lien laws of your state.
- Know how to “CYA” – Cover Your Ass!
The best way to survive a land mine is to never hit one at all. My client was one of the lucky ones. Do you think your company could survive a legal land mine? What are your company’s pain points? Where are you struggling? Be proactive and think preventatively. Your company depends on it. Deal with these things before they become issues.
About the Author:
With more than 18 years of experience in construction and real estate law, Karalynn Cromeens has filed more than a thousand lawsuits to foreclose or remove mechanics liens successfully. Her family also owns a material supply company, providing Karalynn first-hand knowledge of the construction industry. This personal understanding, combined with her extensive legal experience, guides The Cromeens Law Firm’s true purpose— To protect and defend all that you have worked hard for and be your partner in business. She is also a best-selling author and podcast host for Quit Getting Screwed.
