By Curt Liscum, RRC, RRO
Recently, there has been an increase in the use of subcontracting in the roofing industry. This article will explore the reasons why this practice is on the rise and the ramifications of this practice. According to the National Roofing Contractor Association (NRCA) about 70% of residential and 40% of commercial roofing projects are performed in whole or part using subcontracted labor force.
What we will look at is subcontracting on projects where the roofing contractor is the prime contractor and the subcontracted work is not ancillary work such as plumbing, sheet metal or HVAC tasks, but rather is work normally completed by the prime roofing contractor. We have observed this subcontracted work includes demolition, roof tear off, and roof installation work. Often the prime contractor provides the materials and equipment necessary to complete the project. In many cases the owner or designer is unaware a subcontractor is being used on the project.
So, what defines a subcontractor or independent contractor versus an employee of the prime roofing contractor? With the increased use of subcontractors and independent contractors this definition has been under intense scrutiny by several federal and state agencies in the past years. Without getting into an in-depth legal terminology debate or discussing the multi-factored determination testing, in short, someone who sets their wage, hours, and chooses the jobs they take on is a subcontractor; while someone whose employer specifies their wage, hours, and work tasks is an employee.
We researched what has prompted the increase in the use of subcontractors and found there are many factors fueling this trend. We will explore a few of the more prevalent causes. Like many changes in our world today the “pandemic” and supply chain shortages are thought to have dramatically contributed to the increased use of subcontractors. Many roofing contractors have lost crew members during the downtime when they have been unable to start projects due to a lack of materials. Enterprising and talented roofers have struck out on their own to keep working, allowing them the flexibility to move between companies and projects as opportunities avail. Increased worker’s compensation and insurance rates have also forced roofing contractors to reduce their in-house labor force to control this rising cost. As independent contractors, subcontractors are responsible for their own insurance costs. Like almost all construction trades, there is no doubt the roofing industry is facing a severe labor shortage. Subcontracting work to a third party allows prime roofing contractors to expand and manage more work with fewer “office” personnel. If a contractor is doing every job with in-house forces, they will be limited in scope since they can only handle so much at a time. Many prime roofing contractors have discovered by using subcontractors they can take on more work; and more work means greater volume and profit potential.
With the increased use of subcontractors, there are heightened risks for the owner associated with the use of independent contractors, especially when many of these subcontractors work as independent contractors without the knowledge of the owner or designer.
- You may not have a direct contractual relationship with the entity performing work on your building. If the contract or purchase order is with the prime roofing contractor, have the provisions of that contract been extended to all other companies working on the project?
- Does the subcontractor meet the project insurance requirements? Many entrepreneurial roofers started subcontracting companies in lieu of building a prime roofing company because they do not have the financial resources to obtain the required insurance, worker’s compensation, or equipment to become a full-service roofing company.
- Does the subcontractor meet the project safety requirements? Many owners have extensive safety verification process for prime contractors; does an unknown subcontractor meet those same requirements?
- Who is providing project supervision? Many prime companies are reluctant to place a project supervisor on site that may cloud the legal interpretation on who is directing the work and jeopardize the company’s subcontractor or independent contractor status. In many cases the prime contractor will place an interpreter or material expediter on site as the company representative. At the very least, the company you contracted with, the prime roofing contractor should provide a technically competent project representative on site every day work is being accomplished. This way you have a contractual point of contact for the project that understands roofing and the scope of your project.
- Most prime roofing contractors have employee training programs or participate in apprenticeship programs. Subcontractors should be required to prove that their employees are trained, competent roofing mechanics and understand the safety requirements of the project. This could be accomplished by requiring that the supervisor and a portion of the roofing crew have completed the applicable portions of the NRCA’s ProCertification program.
- In order to obtain a roofing warranty, roofing companies are required to be authorized by the roofing material manufacturer. This authorization may include technical training by the manufacturer. The subcontractor may not be authorized or trained by the manufacturer, leaving a potential disparity between the company who installed the roof and the warranty. The roofing material manufacturer should acknowledge and train the subcontractor in the proper installation of the roofing material.
Subcontracting in the roofing industry has increased and, in all likelihood, will continue to increase in the future. It is imperative for the owner or designer to be aware when the prime roofing contractor has subcontracted portions of the work and confirm these independent contractors work under the same contractual obligations as the prime contractors. The responsibility for quality work remains with the prime roofing contractor and precautions must be undertaken to prevent any misunderstanding or finger-pointing should defects arise. Subcontracting is not intrinsically bad; however, designers and owners alike must take the necessary precautions to achieve a successful roofing project.
If you are interested in learning more about the definition of a subcontractor or independent contractor, please reference the following websites.