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The 5 Most Dangerous Practices for 2024

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The 5 Most Dangerous Practices for 2024

Common mistakes contractors must avoid to stay out of legal trouble


By D.S. Berenson September 21, 2023
Dangerous practices contractors must avoid to stay out of legal trouble
Photo: Jadon B/peopleimages.com | stock.adobe.com
This article first appeared in the September/October 2023 issue of Pro Remodeler.

A successful remodeler wears many hats, but “DIY attorney” should not be one of them. Some business leaders think they don’t need legal advice, while others believe they can’t afford it. Unfortunately, this approach can cause big problems for your com­pany.

These are the top problems facing the industry currently.
 

1. Advertising and Marketing

The call-to-action marketing pieces in our industry need to be balanced with legal safeguards. From “free” products to energy-saving guarantees or health benefits, we have to identify triggering lines that will raise the ire of state and federal agencies.

For example, if you incorrectly reference financing, a state agency and/or class action attorney can come after you for every advertising piece with the error. It’s important to note these triggering lines are not the same in all jurisdictions but are often open to subjective interpretation by agency staff. That’s why these actions can run easily into hundreds of thousands of dollars.

There is currently a group of plaintiffs’ injury attorneys that make millions in class action litigation against unsuspecting contractors.

2. 1099-Based Installer Labor

For over a decade, the second greatest liability in the remodeling industry has been the all-out attack against the use of independent contractor labor.

Many contractors believe all you need is a good agreement in place, but that will not withstand a reclassification attack by a state attorney general, class action attorney, or the IRS. You need to have implemented full protocols to protect that relationship, and that goes well beyond just a written agreement.
 

3. Telemarketing

In 2013, the federal government changed the telemarketing laws, resulting in skyrocketing litigation involving cell phones. Most contractors don’t think they engage in telemarketing if they don’t cold call. That is dangerously wrong.

I’ve never found a contractor that isn’t engaged in telemarketing because, essentially, any telephone call following up with a lead is considered a telemarketing call under federal and most state regulations. There is currently a group of plaintiffs’ injury attorneys that make millions in class action litigation against unsuspecting contractors.
 

4. Sales Representative Structuring

While there are dozens of ways to structure a commission plan, there are just three employment structures that can be used for sales representatives in the industry.

Each has pros and cons, but in all cases, providing a legally compliant document is only part of this process. The real need is for a sales representative document to fully flesh out the operational safeguards a contractor requires given that the sales representative is the weakest link in the contractor’s process.
 

5. Contract Structuring

It’s always interesting that the entire operation of a contractor rests on its customer-facing documentation on which it writes millions of dollars of business, but usually, if we’re going to be honest, that documentation has either been partially stolen from a competitor, picked up from where they used to work, or created by an attorney that probably doesn’t know the first thing about the home improvement industry.

Customer-facing documentation should be easy to use, non-threatening, easy to understand, and legally compliant under federal and state law. However, it should also contain the unique operational protections that are necessary for the home improvement and remodeling industries.


written by

D.S. Berenson

D.S. Berenson is managing partner of Berenson LLP in Washington, D.C. He serves as general counsel and special counsel to home improvement contractors and remodeling industry manufacturers on a full range of industry matters. For more information visit: www.homeimprovementlaw.com


Comments (1)

  • Submitted by Nancy Stein (not verified) on Tue, 10/31/2023 - 14:12

    Permalink

    What's the best way for a very small construction company to afford the services of an attorney? Most construction attorneys' hourly fee is between $250-$500/hr, which is probably why most small companies forego the services of an attorney.

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