Every contractor has a form subcontract. But, how long has it been since you reviewed your form? Has it been cobbled together over the past few years? Like the tools in your toolbox, maybe it’s time to review your subcontractor agreement to see if it still works.
Subcontracts can range from a single page to several pages and can include any number of clauses. Here are some clauses that I think are important to include:
- Performance of the Work: You should describe the work that the subcontractor will be doing, either in the actual agreement or in an addendum. You should also identify those pay items for which the subcontractor is responsible, such as taxes, permits, and expenses.
- Insurance: You should identify the types of insurance you expect your subcontractor to maintain and the limits of that insurance. I anticipate that you would include workers’ compensation insurance and commercial general liability insurance, but others may be advisable.
- Compensation: Identify how you are going to pay the subcontractor and how much retainage you are going to hold back and for how long.
- Indemnity: Set forth the subcontractor’s indemnity obligation to the general contractor and perhaps upstream entities.
- Independent Contractor Status: Confirm that the subcontractor is an independent contractor and identify various criteria considered for establishing an independent contractor status, such as the subcontractor’s control of the work and performing work for other contractors.
Subcontracts can be a tremendous tool to limit your liability. But, like your tools, they need to be checked to make sure they still work properly.