It's becoming increasingly difficult to avoid litigation in today's society. Many businesses, big and small, have been hit with lawsuits that hinder profits. Some firms even have to file for bankruptcy as a result of these claims.

To avoid such lawsuits, it's important to use common sense. Make sure your workplace is as safe as it can be. Fall into compliance with any and all regulations. Write out all your safety policies and procedures, and then make them readily available for all to read.

Just Imagine

Think about a scenario where a company hires a contractor to remove natural gas lines. This contractor is known and trusted, but he then hires two subcontractors to help with the project. One of these contractors makes a grave error, which results in two employees suffering from severe burns.

So who is on the hook for medical bills and the forthcoming lawsuit? In this example, the original company that hired the contractor is now responsible. Now, this may not be a big deal. If your company has workers' compensation and employer liability insurance, then you might be all set.

The Scary Thing About Contractors

Contractor lawsuits can be scary ordeals, and they're becoming increasingly common in today's contractor economy. In industries where the majority of employees are contractors (say 50-75 % of employees), the risks are greatly magnified.

It's hard to manage employees and ensure safety when the workforce is out of your company’s immediate supervision. In those cases, employees complying with your company's safety procedures and policies cannot be guaranteed.


The First Step to Protection

If you own a company or manage a supply chain, then protecting your business should be high on your priority list. While contractors can bring vulnerabilities, you understand that it's impossible to get many jobs done without them. Using contractors is just a part of doing business these days.

To keep your company protected, there is one thing you can do – create a verification process. Had the perfect contractor pre-qualification process been in place, the situation described above could have easily been avoided.

Here's how to implement a verification process:

1. Emphasize Safety

Create safety expectations and standards. Communicate these rules to any contractor before hiring. Hold meetings with your regular contractors regarding safety. Offer safety policies and procedures in written format for all involved.

 

2. Dig Deeper

Dive into the data. Look at objective measures to grade the contractor's performance. Use supply chain risk management audits with written protocol to ensure objectivity.

 

3. Create Criteria

Once you have settled on criteria by which you will judge your contractors, clearly communicate these criteria to any contractors you may hire.  Let each contractor know that safety is more important than price and your company will select the safest people to work with, not just the cheapest.

 

4. Manage

Keep company-wide rules and standards in place by maintaining a real-time database of every contractor. Continually update this database. Any possible user should be able to access the information at any time of the day.


Your Verification System

By keeping an up-to-date database of verified and reliable contractors, your company will avoid the vast majority of frivolous lawsuits that are a result of the contractor economy.

Your system can verify that every contractor has the necessary insurance and endorsements. This would remove a company's liability if an issue and lawsuit were to occur. In this scenario, both the contractors would be fighting a lawsuit – not the company.


It's Worth It?

If you keep updating your contractor verification system, you will mitigate a significant amount of risk in your supply chain. Not meeting contractual requirements and regulatory issues will become a thing of the past. In the present, you'll find reduced risk and often cost savings. 

 

If you have questions about sub-contractor insurance standards contact Skyline Risk Management, Inc., (718) 267-6600 to voice your concerns.