If you are a contractor who specializes in residential construction in Texas, you need a residential construction contract tailored to conform with Texas law. Below are some statutes and guidelines you should follow to maximize your right to payment.

Residential Construction Contract Requirements: Statutes that Govern Residential Contracts

1. Texas Property Code §53.255 and .256 requires contractor to provide a list of disclosures and list of subcontractors and suppliers to the homeowner. There is no penalty for not providing this information.

2. Residential Construction Liability Act (RCLA) Texas Property Code §27. This statute governs disputes between a homeowner and a contractor. There are specific notice and procedural requirements that must be followed that can affect a contractor’s case and whether a case can be brought to litigation. It also requires all residential construction contracts contain statutory language outlining the notice procedures under this chapter.

3. Regulation Z Texas Business and Commerce Code (TBCC) §601. This is a consumer protection statute that requires a contractor to give the consumer 3 days to cancel the contract. This notice must be provided next to the signature in the contract and a cancellation form must be provided to the consumer.

4. Texas Property Code §41.007. This statute requires home improvement contracts to contain a warning that the property may be subject to lien if they don’t pay. Failure to include this warning is considered a deceptive act under the Texas Deceptive Trade Practices Act. This warning is also a prerequisite to the contractor having a right to lien. 

5. Disaster Repair Work. If you are performing disaster repair work outside of the County where your office is located or any adjacent county, you must include an additional warning in the contract according to §58 of the TBCC.

Procedure to Preserve Your Lien Rights

If you are a residential contractor, many of your projects will be on homestead properties. The Texas Constitution protects a person’s homestead from forced sale with a few limited circumstances – one of which is a mechanic’s lien. To successfully lien a homestead, a contractor must follow certain contractual procedures. They are:

1. A written contract between contractor and owner;
2. Signed by both spouses;
3. Filed in the property records with the county clerk PRIOR to any work being done on the homestead.;
4. Contract contains the warnings outlined above;
5. Comply with the notice provisions and deadlines for filing liens set forth in §53 of the property code (not covered in this outline).

Contract Scope and Exclusions

Make sure you are very clear and specific as to what your scope includes, and just as importantly, DOES NOT include. Use an addendum if necessary. Homeowners will always remember (or misremember) things in their favor and believe that the scope includes more than what you put in your bid. They may also not understand construction very well and have unreasonable expectations as to what you can do with the budget they provided you. The more specific you make the scope, the better.

Please note that this is not a comprehensive summary for residential construction contracts. If you get into a position where you need to file a lien, there is a separate set of procedures and deadlines that you must follow in order to successfully attach the lien to the property. Any dispute between you and the property owner is possibly governed by RCLA, which has its own procedural requirements and deadlines. You need to contact me or other competent legal counsel at the onset of either of these situations since they both contain deadlines you must meet to preserve your right to payment.

© Law Office of Justin Scroggs, PLLC. All rights reserved. This article is provided for educational purposes only and is not legal advice. This firm will represent you only after being retained by written contract.

Find out more about residential construction contracts at The Law Office of Justin Scroggs.

Should Your Company Have a Social Media Policy?

The world of today is lived largely on social media. Millennials, Gen Z, Gen Alpha, and some who are just very social and want an easy way to stay in touch with others can be found frequently posting their thoughts and experiences on social media. Companies that would never have considered social media as a platform for reaching potential customers five years ago now have Facebook pages, Twitter accounts, YouTube channels, and posts anywhere else a customer can be found. 

With this new environment comes the challenge of controlling information shared by and about the company from those in leadership to the newest employee. Because a company’s online presence can be critical to its success, what is said by and about the company should, to the extent it is within the company’s control, be subject to reasonable limitations. 

In other words, any company that cares about its social media presence should have a social media policy. If that isn’t convincing, think about it this way. A company that doesn’t want to be sued because an employee “speaking” for the company makes a rash or inflammatory statement in a manner that could be construed as endorsed or sponsored by the company needs a social media policy. 

Now for the hard part. How can a company control speech which is related to or could reflect negatively on the company without interfering with an individual’s right to free speech? The answer is “very carefully.” Your social media policy should be targeted to speech which could reasonably be construed as being sponsored or endorsed by the company, or that which purports to be a reflection on the company’s values or processes. If a type of speech is prohibited, such as hate speech against a population of Americans – or other, the policy should clearly say so and give examples. It should also put the potential violator on notice that egregious posts can result in termination of employment. 

However, your social media policy should also make it clear that an individual has the right to share his/her beliefs and opinions, even if contrary to the company or society in general, provided those “shares” are clearly made on that person’s own social media pages and not on the company’s social platforms, such as LinkedIn, Facebook or Twitter. Think of speech which would be appropriate to share in the company lunchroom versus speech which should be shared in the company parking lot, or better yet the coffee shop off company property. 

As in any area of employee management, providing clear guidelines and applying those guidelines uniformly will be key to avoiding claims of disparate treatment, censoring, etc. 

Having a policy that is clear and enforced can also help should someone post something truly inappropriate and offensive to a fellow employee or someone outside the company. If a claim is lodged against the company that clearly prohibits the offending behavior, assuming it is violative of the policy, having a policy in place that is enforced as appropriate can help avoid or at least minimize liability. 

It’s also, if I may speak personally, the right thing to do. None of us should want to be the thought police and should in fact celebrate that we live in a county where it’s still OK – mostly – to have differing beliefs and opinions. Being kind and being thoughtful of these differences will, hopefully, create a more pleasant work and social environment. 

And here’s some insider news we want to share with you!

Congratulations to Scott Colley of our firm for his excellent work in obtaining payment in full from an HOA on behalf of a now very happy client who had remained unpaid for more than a year prior to bringing the matter to our firm. Great job, Scott!

Karen Ensley | Ensley Benitez Law, PC | 469-983-6500 | karen@eblawtexas.com

© Karen Ensley and Brian Benitez, Ensley Benitez Law, PC, 2021. All rights reserved. This article is provided for educational reasons exclusively and is not meant to be construed as legal advice. Ensley Benitez Law, PC, will represent you only after being retained and that agreement is made in writing.

OK, unraveling may be too strong a term, but there is a lot of mystery surrounding the concepts of indemnity and defense. What are they and why should you care? You should care because they are in almost all commercial construction contracts and because generally the indemnity and defense obligations flow downstream from the Owner to the General to the subcontractor and beyond.

For instance, the window contractor fails to properly install the window and rain leaks inside the building and damages the drywall. Or some other trade leaves a trip hazard on an active jobsite and a worker falls and hurts him/herself. The building owner sues the GC and the GC in turn demands indemnity and defense of the subcontractor believed responsible for the damage. 

First, although generally seen together, they are two separate obligations. For instance, a party can have an obligation to defend without an obligation to indemnify. And the obligation to defend generally comes before the obligation to indemnify.

Indemnity: the promise to step into the shoes of another based on a triggering event, like the water intrusion or the injured worker. There is no common law duty to indemnify. Instead, it is said to be a creature of contract, arising because of a promise exchanged between two parties. Its purpose is to allocate risks between parties to the contract and can result in a party without any actual liability for the wrongdoing undertaking to “pay the debt” of the other. This can commonly be seen in insurance policies where the carrier of the individual who ran a red light and struck my car is liable to pay to have my car repaired.

In the construction context, this duty can be triggered when the employee of the subcontractor is injured on the jobsite due to a hazard created by a third party over whom the subcontractor has no control, such as the owner, General, or another subcontractor. Even though the subcontractor didn’t cause the injury, the sub can still be made to indemnify the Project Owner, General, and anyone else for whom the Owner or General promised indemnity.

However, the obligation to indemnify generally doesn’t arise until the party seeking the indemnity is actually found liable for the damage. That’s why you’ll often see that an upstream party made an indemnity demand upon the downstream party (and their insurance carrier), only to see that demand go unanswered. In many instances, that’s because the indemnity obligation is not yet triggered by a finding of actual liability.

Defense: the promise to defend a party against claims made against the party to whom the defense is owed. Assuming it is properly triggered, i.e., the claim is one for which defense was promised, it arises as soon as the claim is made and continues until the claim is satisfied or the party is released from its defense obligation. In construction contracts, this can be seen when a triggering event occurs, the Owner or General is sued, and makes demand on the party who promised to defend. Many times the obligation further authorizes the defendee to choose its own attorney, which can become even more expensive since money is no object when you’re not the one paying the bill.

So, back to why this matters . . . Since 2012, with a few notable exceptions, the most common being injury to an employee of the indemnitee or one over whom the indemnitee exercises control, parties are generally liable for their own wrongdoing and their indemnity obligations extend only to the extent of that wrongdoing. However, the trend these days is for contracts to include ever broader indemnity and defense obligations.  Generals especially have taken to requiring indemnity and defense for breach of contract, breach of warranty, violations of safety or pollution laws, and all manner of breaches that should not be the subject of indemnity or defense obligations, many of which are not covered by an insurance policy and therefore would be funded from the downstream party’s own coffers.

A few takeaways: 

·       Carefully review all contracts before you sign them. If you aren’t sure what they mean, and even if you think you understand them, consult an attorney before signing on for any indemnity or defense obligations.

·       Negotiate the key provisions of the contract that are most likely to affect your performance on the job and your potential liability should something go wrong.

·       Unless your policy covers claims for breach of contract or breach of warranty, don’t agree to indemnify and defend the upstream party for these kinds of claims.  

·       Have your insurance agent review the indemnity and insurance terms to ensure that you have insurance to cover the indemnity and defense obligations in the contract and to ensure that you can provide the types of insurance coverage sought.

·       Don’t be too quick to agree to indemnify a party under an indemnity demand.

·       Put your insurance company on notice as soon as you are served with an indemnity and/or defense demand. Generally an insurance company can reject a claim if failure to timely notify compromises the carrier’s ability to properly evaluate the claim.

Karen Ensley, Board Certified Construction Law Attorney, Managing Partner

Ensley Benitez Law, PC | 469-983-6500 | karen@eblawtexas.com

© Karen Ensley and Brian Benitez, Ensley Benitez Law, PC, 2021. All rights reserved. This article is provided for educational reasons exclusively and is not meant to be construed as legal advice. Ensley Benitez Law, PC, will represent you only after being retained and that agreement is made in writing.

A well-thought-out and well-written proposal is critical to your company’s ability to get work and successfully complete the work at a profit. So here are the first steps you need to take to learn how to write a proposal letter. 

You have to make sure your proposals have a professional look. That means your company name and the name and contact information for your salesperson can be easily identified and found.

The questions you need to ask BEFORE you can answer, “How to write a proposal letter.”

Do you know what it actually costs you to complete a project? If over the past few months or more, your actual costs to complete varies greatly, positively or negatively, from your projected costs, you may not be identifying all of your project costs. To help identify all your project cost you need to start by first: Looking back at a representative number of completed projects to determine your actual costs. Did you include an adequate allocation for office overhead? Perhaps you under-estimated or over-estimated your labor costs or the estimate did not account for all of the materials needed to complete the work. What are your insurance costs, such as CGL, worker’s comp, and vehicles? How much supervision will the project require? What is the level of technical detail? Where is the project located? Be sure you are properly calculating your rental costs, even if you are “renting to yourself.” Know your fuel/maintenance costs. Answering all these questions will help you know how to write a proposal letter specific to each project.

What you need to include when writing a proposal letter

Don’t forget! It’s very important to carefully review the project plans and specifications and recite them in your bid. Simply saying “all labor and materials to complete XYZ project” is not adequate. Anyone reviewing your proposal should be able to identify, with specificity, what your bid includes and whether it is a complete proposal. Is there are choice of materials? If so, what brand are you proposing? Do you plan on protecting surrounding work or excluding that from your bid? Are you replacing the decking? Are you completing the work in 3 days or 3 weeks? Can you start tomorrow or is there a lead time for your crew or the materials? Specifically identifying all labor and material warranties and who is providing the material warranty can help you write a proposal letter that’s inclusive of everything you and your clients need.

It is as important to specify your exclusions as well as your inclusions. Are taxes included or excluded? What about permits and fees, trash hauling, or storing materials? Is the owner responsible for protecting surrounding work? Note any materials whose colors may be subject to variation. Note any limitations on warranties.

What else should be included?

Always include a deadline to accept your bid. Crew and material availability, as well as fluctuations in material costs, are not constants and must be managed. Don’t forget to include payment terms in all proposals, including whether you offer a discount for early payment. It’s also important to make sure your proposal notifies your potential customer that interest, at the highest rate allowed by law, will be charged on all accounts which remain unpaid for more than 30 days following presentment. Also include a signature block, because you want to make it’s easy for your customer to accept your proposal and get you started with the work. Now you have a better idea on how to write a proposal letter. If you have questions or would like help writing your proposal letter, reach out to us! We’re very experienced in contract writing and construction law.

Karen Ensley
Ensley Benitez Law, PC
469-983-6500
karen@eblawtexas.com

© Karen Ensley and Scott Colley, Ensley, Benitez Law, PC., 2021. All rights reserved. This article is provided for educational reasons exclusively and is not meant to be construed as legal advice. Ensley Benitez Law, PC, will represent you only after being retained and that agreement is made in writing.

Human resources professionals and business owners have long debated about giving references on former employees. It’s both tempting and scary to share what you know about a less‑than‑desirable former employee. You also may be eager to sing the praises of an exemplary ex‑employee you want to see do well in a future position.

Before you decide whether to give in to temptation or play it safe, it’s good to know the pros and cons of giving references and sharing such information.

Name, Rank and Serial Number

For many years now, employers have limited the information they share about former employees to avoid lawsuits based on fear that a former employee claiming of having a missed job opportunity because of a negative reference. But employers do have alternatives to the strict “name, rank, and serial number” policy.

Some prospective employers ask, “Is this person eligible for rehire?” The safest option is to answer no without any specific commentary or details on why. If asked why you cannot comment further, the best answer is that company policy forbids it.

What if the employee is fired?

The decision about what to say in an employee reference is complicated when an employee is fired. If you aren’t careful in your statements to prospective employers, you may leave yourself open to a defamation lawsuit. 

Defamation is generally defined as damaging the good reputation of someone by slander or libel, which is in turn defined as the action of making a false statement to another person resulting in damaging a person’s reputation. In Texas, truthful statements cannot form the basis of a defamation claim. However, while that may appear to be an easy trap to avoid, there are some serious pitfalls. 

Most of the time when an employee is fired, it’s for reasons that make him look bad. For example, if you let him go for padding hours, inappropriate comments to another employee, stealing, excessive tardiness, or lying about his job qualifications, it’s hard to explain the discharge to a prospective employer without damaging the employee’s reputation. In addition, it’s often difficult or impossible for an employer to fully prove what it knows to be true. As a result, the best policy is to say as little as possible and stick to the facts your company can prove. 

One option is to inform a fired employee at dismissal that you won’t be able to give a positive reference.  To give yourself increased protection from lawsuits, you may ask departing employees to sign a release that gives you permission to provide information to prospective employers and prevents them from suing you over the information you provide.

Other Considerations When Giving Employee References

Whether or not an employee quits or is fired, it is also dangerous to say positive things about a former employee, such as “bright” and “energetic” without also saying – truthfully – “thief” or “persistently late” because by providing a partial reference that is not truly reflective of that person’s overall suitability for employment and you run the risk of opening the company and yourself personally up to a claim of false representation. If that former employee was known to have stolen from the company but is nonetheless given a glowing reference, the next employer could look to the referring employer to recover its losses when the bad apple steals from it.

When it comes to giving employee references, other recommendations include keeping a reference brief, making sure your company designates a specific person or department to handle reference requests, and providing only the information the company policy allows you to disclose. Also, treat all former employees similarly. Providing information on some employees but not others may be grounds for a discrimination claim.

Karen Ensley

Ensley Benitez Law, PC

469-983-6500

karen@eblawtexas.com

© Karen Ensley and Scott Colley, Ensley, Benitez Law, PC., 2021. All rights reserved. This article is provided for educational reasons exclusively and is not meant to be construed as legal advice. Ensley Benitez Law, PC, will represent you only after being retained and that agreement is made in writing.

Have you ever heard someone say that a particular term in a contract is so outrageous, unfair, one sided, or ridiculous that it cannot possibly be enforceable? If you are signing a contract as a consumer, that may very well be true as there are several laws out there for the express purpose of protecting the consumer.  However, if you are signing the contract as a business, for the most part the courts presume that you are a “big boy,” know what you’re signing (even if you don’t or in fact never even read the contract) and will hold you to these contractual terms. This is true if you are signing a contract with or as a supplier, with a general contractor or a commercial business owner.

However, there are some notable exceptions to this rule. One is indemnification provisions that attempt to shift liability from the bad actor to another party. Another is a provision that seeks to impose a financial penalty for failure to perform on time. Such a penalty, without a rational basis for the amount, can be deemed void, but only under specific circumstances.

So, read those pesky contracts before you sign them! If you have concerns, consult your attorney for help interpreting your rights and obligations under the contract. And don’t be afraid to negotiate more favorable contractual terms when that option is available.

Karen Ensley
Ensley Benitez Law, PC
469-983-6500
karen@eblawtexas.com

© Karen Ensley and Brian Benitez, Ensley Benitez Law, PC, 2021. All rights reserved. This article is provided for educational reasons exclusively and is not meant to be construed as legal advice. Ensley Benitez Law, PC, will represent you only after being retained and that agreement is made in writing.

Texas just experienced one of the worst arctic weather events in its history. Governor Abbott issued a statewide disaster which triggers the provisions of TBCC 58.  If you are considering offering disaster repair services to those affected, here’s a friendly reminder of the additional contracting requirements needed for disaster repair that falls under the TBCC 58 rules.  A contractor offering remediation services:

(a) cannot request an upfront or interim payment that exceeds the reasonable value of the materials to be delivered or work to be performed and

(b) must include the following language in their contract: “This contract is subject to Chapter 58, Business & Commerce Code.  A contractor may not require a full or partial payment before the contractor begins work and may not require partial payments in an amount that exceeds an amount reasonably proportionate to the work performed, including any materials delivered.”

This warning can go anywhere in your contract but must be in conspicuous, boldfaced type of at least 10 points in size. If you use digital contracts, it’s easy to stick this provision in. If you’re using paper, you can easily meet the contract language requirement by either including the warning in an addendum or making a stamp that you can manually stamp on your paper contracts wherever you may have room. 

These requirements apply to ALL contracts, residential and commercial. They cannot be waived and a failure to follow these two requirements is a deceptive trade practice that opens you up to triple damages and attorney fees, but will not void your contract.

Note: These requirements DON’T apply to contractors who have, for at least a year prior to the declaration, maintained a physical address in the county where the storm occurred or a county adjacent to the affected storm county.  That means if you’re in Dallas County you don’t need the notice for work in Dallas or any immediately adjoining counties, but if you went to Rockwall or Travis you would need the notice. So we recommend that you just include in all your contracts so you know you’re covered.

© Karen Ensley and Brian Benitez, Ensley Benitez Law, PC, 2021. All rights reserved. This article is provided for educational reasons exclusively and is not meant to be construed as legal advice. Ensley Benitez Law, PC, will represent you only after being retained and that agreement is made in writing.

That nasty letter from the customer – we’ve all gotten complaints on the job site. The complaint? You’re behind schedule, your work isn’t being performed properly. Your materials are late, you’ve delivered the wrong materials, or maybe you’ve not delivered enough materials. Your truck didn’t show up, or any number of issues. Maybe the letter comes in the form of a 48-hour notice, or maybe just a general complaint, or maybe you got verbal approval on a change order, you did the work, and now you want to get paid.

What should you do? For many of our clients, what they do is pick up the phone, call the complaining party, talk the matter through and believe they’ve resolved the issue. Then, days, weeks, or months later you get hit with a back charge, or a rejected pay application, and a claim that the issue was never resolved. You say, “but we talked about this,” and they say we have no record that the claim was ever disputed, or the additional work approved.

What Should you do to Handle a Complaint on the Job Site?

What happened and what should you have done?  It’s all about documentation. If you don’t have documentation to prove it, the “other side” will claim that the call or meeting resolving the dispute or approving the change never happened. So, by all means make that call, but follow it up with a letter, email or text letting your customer know either that they’re wrong and why, what you have agreed to do to rectify whatever legitimate deficiency there is, or to confirm their approval of the changed/additional work.  Be respectful but be specific.  If you are properly manning the job, say so.  If the job is behind schedule for a reason other than your work, state what the reason is.  If there are sufficient materials on the jobsite, say so.  If the material delivery is late, say why and when it’ll be there.  Maybe they weren’t timely ordered.  Maybe there is a problem at the factory. Whatever it may be, make sure your side of the story has been conveyed in written form, clearly and without any unnecessary apology.

If you’re confirming a change to the work, be specific about the change, what the change consists of, when it will be performed, how much it will cost, and when and how your customer approved that change.

Finally, timeliness is very important.  Get your written response to your customer as quickly as you can, within 24 hours if at all possible.  The longer it takes to respond, the less impact your response may have.  Certainly, any confirmation of changed or additional work should be sent before the changed work is performed.  

Complaints on a job site are never fun, but if it comes down to a true dispute at the end of the project or in court, having properly and timely documented your response/positing to whatever complaint has been lodged or change requested is very powerful evidence that can help get you paid.

Karen Ensley

Ensley Benitez Law, PC

469-983-6500

karen@eblawtexas.com

© Karen Ensley, Ensley, Benitez Law, PC., 2021. All rights reserved. This article is provided for educational reasons exclusively and is not meant to be construed as legal advice. Ensley Benitez Law, PC, will represent you only after being retained and that agreement is made in writing.

The Immigration Reform and Control Act of 1986 and how it affects your construction company.

Happy 2021!  It’s the start of a new year and a good time to re-visit your company’s I-9 compliance.

The Immigration Reform and Control Act of 1986 requires that all employers complete a Form I-9 for all employees hired after Nov 6, 1986.  The U.S. Department of Homeland Security oversees all immigration and customs efforts through Immigration and Customer Enforcement and the U.S. Citizenship and Immigration Services.

The U.S. Dept. of Labor oversees labor, employment, and wage laws.  However, there are also state laws that apply.  See:

*                      U.S. Department of Labor:  www.dol.gov   

*                      Texas Workforce Commission:  www.twc.state.tx.us

I-9 compliance is required for all W-2 employees, i.e. anyone who receives a paycheck from the employer, but is not required for independent contractors.

I-9 Compliance Process – What’s involved?

Starting the I-9 process must wait until the applicant actually becomes an employee.  In other words, unless directly related to the job duties, an employer cannot ask a prospective employee anything other than whether he/she is eligible to work in the U.S. prior to making an offer of employment.  Once the offer is accepted, it is time to confirm the new employee’s eligibility to work in the U.S.

Remember, the employee, not the employer, gets to choose which documents are presented to confirm work eligibility.  Acceptable documents must be originals from those on List A or a combination of documents from Lists B & C, all of which are found on the reverse side of the Form I-9.  If the document presented looks reasonably genuine on its face and relates to the employee (names match, photo looks like employee, etc.), then the document must be accepted. Questionable documents may be rejected, and the employee allowed to present other acceptable documents.  However, the employee still gets to choose what documents to present and can be terminated only after the employee is given a reasonable time to provide other acceptable documentation from the A, B, and C lists and is unable to do so.

The employer can – and should – keep copies of these documents and should update any documents that are close to expiration, but must be kept with the employee’s I-9 form and not in the employee’s regular personnel file or in any unsecured location. This is sensitive personal information and must be kept in a secure and segregated location.  If kept on the computer, the directory containing these files should be password protected and access limited to those persons with a business need to access them (HR department, not direct supervisor).

Karen Ensley

Ensley Benitez Law, PC

469-983-6500

karen@eblawtexas.com

© Karen Ensley and Scott Colley, Ensley, Benitez Law, PC., 2021. All rights reserved. This article is provided for educational reasons exclusively and is not meant to be construed as legal advice. Ensley Benitez Law, PC, will represent you only after being retained and that agreement is made in writing.