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The Risks of Working with an Unlicensed Subcontractor

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As a general contractor, you’re not only responsible for meeting the scope of work, reaching the agreed upon deadline, and managing your own workforce. You’re also responsible for the work performed by your subcontractors. If a general contractor fails to perform their due diligence and hires an unlicensed subcontractor, whether or not they know it, the general contractor is taking on a great deal of risk considering that they are liable for any issues that their subcontractor encounters.

Vulnerable General Contractors

If the subcontractor damages property, performs substandard work, or if one of their workers is injured on the job, the general contractor is legally responsible for any of these issues. Hiring an unlicensed contractor results in a general contractor being susceptible to a significant number of issues.

In this brief article, a Lakeland construction attorney will discuss the significant impact of what can occur when a general contractor is left in this vulnerable position. Remember, workers’ compensation laws differ depending on the state you are performing work in. To ensure compliance with these laws, consult a Lakeland construction lawyer with Cotney Construction Law.          

The Repercussions of Hiring an Unlicensed Subcontractor

Before we discuss ways a general contractor can mitigate the conflict of hiring an unlicensed contractor, lets first review some of the repercussions a contractor can experience when they hire an unlicensed subcontractor including:

  • Workers’ Comp Investigations: When unlicensed contractors are performing work on a project, they may be detected during an investigation by the Bureau of Workers’ Compensation Fraud. If Florida workers’ compensation laws are violated, during an audit, the Bureau will issue a stop-work order, costly citations, and additional premiums will be required to be paid.
  • Fiscal Challenges: With a stop-work order in place, a construction business risks not reaching a contractually obligated deadline for a project. Raised insurance premiums and excessive fines for violations can also significantly impact a business financially.  
  • Damaged Reputation: A construction firm that is working with an unlicensed contractor will have a blemish on their record that will prove challenging to overcome. Renewal of insurance premiums is another issue as the insurance company may raise the price of premiums or deny coverage altogether.

Three Steps to Avoid Working with Unlicensed Subcontractors

In order to avoid the embarrassment and liability issues related to hiring an unlicensed subcontractor, a general contractor needs to perform the following tasks:

  1. Perform Your Due Diligence: Contractors should never cut corners during the hiring process and hire a subcontractor without running a background check. You need to make certain that the subcontractor is licensed to perform work in your state. Spending a little time performing your due diligence in the pre-construction phase can save you significant expenses.  
  2. Create a Contract: Contractors should always have a written agreement in place. Although you can’t shift liability for workers’ compensation coverage in Florida, it’s important to have a proper agreement in place with a subcontractor before they begin work on a project.
  3. Consult an Attorney: Even if you are confident that you are compliant with Florida workers’ compensation laws, you should always consult a knowledgeable and experienced Lakeland construction attorney that can verify that you are lawful. Moreover, an attorney will understand the most recent changes to workers’ compensation laws and can ensure that your company is protected from these changes.  

If you would like to speak with our Lakeland construction attorneys, please contact us today.

Disclaimer: The information contained in this article is for general educational information only. This information does not constitute legal advice, is not intended to constitute legal advice, nor should it be relied upon as legal advice for your specific factual pattern or situation.