Navigating the Legal Side of Subcrews - PODCAST TRANSCRIPT

Editor's note: The following is the transcript of an live interview with Trent Cotney of Adams & Reese L.L.P. and Justin Bedwell of Camouflage Roofing & Construction, LLC. You can read the interview below, listen to the podcast here or watch the full webinar.

Karen Edwards: Hi, everyone. My name is Karen Edwards, and I would like to welcome you all to this RLW - Read Listen Watch. I am super excited about it because we're talking about one of the hottest topics in the industry and that's navigating the legal side of subcrews, sponsored by Adams and Reese. So thank you because this is a really important topic and we're going to learn a lot today.

A few housekeeping items before we dive into our introductions. First of all, we are recording this and it will be available on rooferscoffeeshop.com within 24 hours. So, if you want to share it with friends, colleagues or anyone else who needs to see this, please do so. Also, we've opened the chat so you can tell us who you are, where you're from. If you have questions throughout, go ahead and drop them in the chat and we'll be having a Q&A period at the end where we will answer your questions. So let's dive in.

First of all, our first guest, you all know probably, is Trent Cotney from Adams and Reese. Now, Trent was actually just wrapping up a webinar on this very topic that he was doing through Owen's Corning. He will be here in just a couple of minutes while he wraps that one up. But Trent is with Adams and Reese our sponsor today, and he specializes in OSHA defense, in contracts, in licensing, in defense. He is just an amazing, very smart, knowledgeable person on this topic. So we are thrilled to have him joining us here in just a couple of minutes. And then we've also got with us today, Justin Bedwell. And Justin, I'm going to let you tell our audience a little bit about your background and who you are.

Justin Bedwell: Well, first and foremost, thanks for having me, Karen. I want to thank the RoofersCoffeeShop podcast. You guys are fantastic. And special thanks to Trent and Adams and Reese for considering to bring me on as well.

My name is Justin Bedwell. I'm the owner of Camouflage Roofing & Construction. We are corporately located in Moore, Oklahoma, and we have another satellite office here in Oklahoma. I started my adventure in construction whenever I was a teenager. My dad had more kids than the old lady in the shoe, so we were all indentured servants, learning how to do everything from pour concrete all the way to putting ridge caps on by ourselves. I shingled several houses by myself with these two bare hands at a 16-foot trailer. I was in the military for a decade and I would buy and sell houses and work on them, strip them down, install, but I became infatuated with the process and information.

After I got out of the military, I went to work for a company that I knew the owner of. He encouraged me to come along and learn how to do some of the stuff that he was doing. I got into that and moved along, progressed, started with door knocking, moved to setting leads and appointments. And then running my own appointments all the way up to management. Moved out to a different territory, opened a satellite version of his business in another state. Learned a lot. Left there. Went to work for a nationwide roofing company and I ended up working my way up to a manager of a territory that included six states. So I've seen a lot, done a lot, storm chased, done it all within the industry. Glad to be able to say that I've pretty much seen and dealt with all different manners of issues in a variety of different markets.

Karen Edwards: Well, we're glad that you are here, Justin. I don't think Trent has arrived yet. So we were going to start off with talking about some statistics and where we are today. I saw some of these statistics and I don't have them. I'll have Trent share them when he gets on. But the percentages were really high of the number of contractors that are using subcrews currently. And we kind of have to, right? I mean, Justin, we talked about this yesterday. How many are doing 1099s versus W-2? And what are these regulations that keep changing? I know there was a new one that just went in effect last month in March. And when Trent's here, we're going to talk about that because I don't even want to get into any of those legalities without him here. But maybe, Justin, you can just tell us a little bit about what you are seeing and maybe how we got where we are today with the boom in the use of subcrews.

Justin Bedwell: Well, what I see typically and what I have seen in other markets is that subcrews allow you to go out and find crews at an accelerated rate. So you're able to go out and you're able to cherry-pick and hand pick versus the onboarding process of a W-2 employee. Then you have all these different things that you have to navigate. And it allows companies to mitigate their loss or exposure, if you will.

Again, everybody's got their own different makeups in the way that they do business, but from what I see is that it changes the dynamic between employer-employee relationships. The crews are ran as their own individual entity. Now, the way that we got here is cost and inflation and then skilled labor. Whenever you put somebody on a W-2, their expected hourly rate and hourly pays and all these things, 1099, roofers want expediency and we want efficiency. So you don't want three to five days of construction going on in the neighborhood if you don't have to or at a job site where they don't need to be. So these guys are going out finding these crews, and they're going to maximize their efficiency where they can put this crew on a job and they can be done in one day and then they're paid in a lump sum. It's a per square basis most oftentimes. Absolutely.

Karen Edwards: All right. And labor shortage is definitely, as you mentioned, one of the reasons that we're here today because talking about finding the people that want to do the work, that's a challenge.

Justin Bedwell: That is a challenge. And Covid definitely played a factor in that. You see a really, really big boom in shortage of labor after post-Covid. There's a lot of people out there that are now not necessarily wanting to get out there and do the hard stuff. The other part is, is that for a very long time as a culture, we have pushed education, education, education and we haven't pushed skilled trade, skilled trade, skilled trade. So it's kind of a tipping point where we're having to get labor where we can with people that are willing to do the work. We're struggling with... The people that are getting up in age are moving out of the workforce and you're not able to retain that. And there's not a whole lot of influx of people that are willing to go in and do this hard manual labor, albeit they can make very, very good money.

Karen Edwards: Yeah, yeah, it's definitely a challenge and that's why we're here today is to talk about it and look for answers. So let's look at the different type of business models and compare. Well, before we do that, welcome Trent. I see you just popped on. We're glad you're here. We told everyone you were just actually talking about this on a webinar previously back to this one. But I want to go back if you'll bear with me, because I think it's really important to look at the statistics that you... Whoops. No, there we go. Nope, that's Justin. One more forward. Okay. You had some statistics that you shared with us from one of your other presentations and I just want people to understand the numbers. If you're using subcrews, you're not alone. So can you share a little bit of that, please?

Trent Cotney: Yeah, absolutely. So, the statistics that we've seen and I'm sure it's probably even grown more since then, is roughly 90% of residential are using subcontract labor. It might not be 100%, but a large portion of that is up there. And then on commercial side, it's anywhere from 60 to 75%. So in the last three years, we've really seen this emerge to become sort of a dominant trend where a lot of roofing contractors out there are basically becoming construction managers where they're subbing out almost 100% of their labor. And I think it's here to stay. And if anything, I think it'll probably grow.

Karen Edwards: Excellent, thank you. All right, I'm going to advance ahead. We talked about how we got here and now let's take a look at the business model. How does that look like? What does it look like for you, Justin?

Justin Bedwell: For me, in Oklahoma 1099 has become keen as Trent said. It's one of those situations where you have to go based off of the market. And we were kind of talking about it before the podcast started, is that if you are going to try to super regulate crews and you're going to start taking money out of their check and you're going to start doing these things, they're going to leave you to go to a more market that is more suitable for them because there are places like Texas that's like, it's still literally the wild, wild west and subcrews are always going to continue to flourish down there. Everybody wants to be able to be paid, everybody wants to do these things that they need to do to make sure that they're being able to take care of their family. Crews are no different than business owners like myself, so they're going to want to make sure that they're being paid.

But whenever you see the 1099, you can see the award. What I see within my particular market is that you have to be competitive. And if you're not being competitive, you're going to go away. And as I told you, the universe and every homeowner on the planet wants efficiency. Every business owner wants efficiency. The most efficient way to do a roofing job, especially in residential, is one day get in, get it torn down, clean it up, get everything installed and then clean it up, move along and you get in and get out of the neighborhood because you have wives, you have dogs, you have babies, you have all these different things. And whenever you've got a W-2 comparison, most of those guys want to be paid by the hour as we've already spoken about. Well, by the hour, they're going to want three to five days to take care of that same project. Well, that's three to five days of nails and bare feet and tires and dogs and upset children. So go ahead, Trent, you have anything on that?

Trent Cotney: No, you're spot on. I hope our listeners are appreciating you, getting hopefully the real world aspect and legal aspects so that you can marry the two. And it's interesting, Karen, I'm watching the chat here. A lot of the questions that are being generated now is because of SSA's new law on how to properly classify workers, the misclassification rule. I'll just to kind of touch on that briefly, I don't know if we're going to touch on it elsewhere, but I'll go ahead and speak a little bit to it.

On March 11th of this year, the Biden administration enacted a new law with six different factors that goes through the determination of whether or not a 1099... And just so our listeners understand, when I say 1099, I mean anybody that's not on payroll, right? So anybody that's not a W-2 that you're not taking out with holding on. So it could be independent salesperson, it could be some laborer, some crew, some contractor, whatever it might be, right? This new law has six different factors. What the factors look at are a variety of different things. They want to look at to what degree is a sub truly independent? Do they operate like a business? Do they have their own website? Do they only work for you or do they work for other people? Do they wear your gear? All those types of questions are kind of looked at. This law doesn't weigh one factor over another. It looks at all of them together, throws them in a bucket and then makes a determination as to whether or not you've properly classified a subcontractor or a salesperson as a 1099 rather than a W-2.

So the question that I'm getting at least two or three times a day now is, "What should I do? Should I just go ahead and make all of my sub and salespeople W-2?" And I'll tell them the same thing that I'll tell you guys and that is legally speaking, if they only work for you and they don't work for anybody else and you want as little risk as possible, the answer is make every single 1099 you have a W-2. That's the legal answer. If you don't want to worry about any risk whatsoever and they only work for you and they don't work for anybody else.

Now the reality of that is, Karen, and Justin, you know this as well, is that if you did everything that I told you to do, your accountant told you to do and your insurance agent told you to do, you'd be out of business. So you have to factor in the real world and combine that with a legal to get within an acceptable tolerance of risk mitigation. So how do you do that? Well, I will tell you there's a difference between salespeople and sublabor. There's much less risk with an independent salesperson. There's still risk. So I don't want anybody to misconstrue what I'm saying. But with independent salespeople, if they're truly an independent salesperson, meaning they're not sitting in your office making calls, they're not doing social media for you, they're out knocking on doors, if they're truly independent, there's a lot of exemptions to the labor law already.

You don't have to pay them overtime, you don't have to pay a minimum wage. You don't have to do the same record keeping because usually they're paid by commission. So there's already those exemptions in place, even if they were a W-2. But as an independent salesperson, it's usually in their best interest to be independent as well, because a smart independent salesperson is going to be receiving the money into an entity and then using that entity to legally reduce their tax footprint, right? So it is in their best interest as much as it is in the primary roofing contractor's interest to have that relationship.

The other thing that's sort of a good fact is that rarely are salespeople ripping off roofs. They still get on roofs, right? We've had one fatality unfortunately this year with a salesperson. But the danger isn't the same. There's much greater danger with a subcrew than there is with a salesperson.

Now, turning now towards the sublabor analysis, where I see the majority of these problems happening is wherein somebody gets hurt, right? Somebody that works for a sub get hurt and there's not comp there to cover them. So they'll hire bad guy lawyer, and that lawyer is looking for a big pot of money. They will oftentimes go to the Department of Labor or go to OSHA and use that as sort of a way to get this misclassification label so they can go after the prime roofing contractor easier. Hopefully that makes sense though. It's a big, big topic obviously we're unpacking today, but lot to talk about.

Karen Edwards: Oh my goodness, yeah. Yeah. Justin, anything to add? I saw you nodding your head.

Justin Bedwell: I mean, no. Trent's dead on. You've got to be able to navigate that correctly. And as he was talking about sales, sales is a lot easier to manage. And if they are structured properly, they have contracts, which we'll talk about later on in this podcast. There's a lot of different ways that you can go about setting yourself up for success. Ultimately, it's all about trying to reduce cost for the consumer, which would be your homeowner or your business owner. So what does that look like and how do we do that effectively while still being able to generate a product and a quality installation? That's what it all boils down to.

Karen Edwards: Okay. And-

Justin Bedwell: I-

Karen Edwards: Sorry, the last bullet on there is that hybrid model. I think we chatted about this a little bit yesterday where you do have W-2s maybe, but you also have 1099s, so it is possible to have both.

Justin Bedwell: Yeah, it is. And so your hybrid systems would be where you employ the project manager who may be a bilingual individual and then they go out and they supervise your jobs. Then the subcontracted labor is the crew itself who's doing the install. So it's kind of a situation where they work for you, but then the crew may work for them in a different facet.

Karen Edwards: Okay. So-

Trent Cotney: Yeah. I also see it where you've got a quality control person superintendent that may be W-2, but your crew is 1099. So there's a lot of different variations of that. I think that's probably the majority of what I see out there, is some kind of quasi-model where you've got some on W-2, some 1099.

Karen Edwards: All right. So let's talk about what the risks are of utilizing subcrews.

Trent Cotney: Sure. Obviously, I learned this firsthand. I'm a business owner, was a business owner. Payroll tax is anywhere from 12 to 15% more that the employer has to pay for every dollar, versus cutting a check to an independent contractor where you don't have to worry about that same burden. So there can be issues there. Justin mentioned a great thing where if your W-2, you usually want to be paid hourly if you're a crew. And that tends to drag out jobs, it tends to be more problematic. There's a lot more record keeping. There's all that kind of stuff that needs to be in place.

Commitment. You've got to constantly worry about getting poached. With clubs, it's a little easier. You don't have the same concern. Justin, you were saying something yesterday I thought was pretty interesting about that. Why don't you talk about that a little bit?

Justin Bedwell: Well, so again, you have the ability to poach anybody in the 1099 market. A guy like myself could go and sit in my truck with no logos on, no camouflage anything on and I sit there and I can watch them and watch these crews make sure that they're doing good quality installation, something that I would be able to build a base off of. And then I can walk up and I can go up there. They don't know any different whether I'm an inspector or I'm Pete in the pickup roofer from wherever. And you go out there, you see them. If you like them, you contact them, you poach them, you say, "Hey, I'll pay you X amount more dollars per square. Come over and do something for me." We see it all the time in various different ways and formats.

So the commitment level, it wanes based off of how you're going to pay them and that cash is king. So who's going to want to throw more money at that crew per square so that they can generate more jobs? Who's going to be able to throw more jobs at them? You will lose crews. They'll take the lesser pay per square to go work with somebody who can funnel them 100 jobs a month versus 12 or 15. You know what I mean?

Trent Cotney: Yeah.

Karen Edwards: Yeah.

Trent Cotney: I see that all the time. That is a great segue into some of the other points. The issue with these, there are really good subcrews and they're really bad ones, right?

Justin Bedwell: Yeah.

Trent Cotney: And it's just like with employees, it's a small world, even though it's not it is, right? And you know if you've got a seasoned subcrew, they're worth paying more than the four guys you just got from Home Depot, right?

Justin Bedwell: Yep.

Trent Cotney: So, there's definitely a difference there. Part of that difference is training, right? When you have W-2, it's really easy to sit them in a room and train them with whatever safety or how to put on a system or whatever it might be. If you got a subcrew, you just have to go based on, like what you said, you might've seen them in the field, you might have word of mouth, you might have heard from other contractors that they're good, but you're kind of gambling a little bit, right?

Justin Bedwell: Yep.

Trent Cotney: The other issue there is subs aren't going to be as concerned with some of the regulations and safety that you might be. So you might have four guys on a roof that don't have any fall protection, no PPE, no nothing. If it's a subcrew, if it's your crew, you're going to be a little bit more focused on that. And that's important not only because you want everybody to go home safe every night, but because if something does happen to that subcrew, you've got all kinds of issues. You've got customer unhappiness, you've got regulatory agencies out there, you've got insurance issues. There's just a whole host of things that you can't mitigate because it's outside of your control to a certain extent. I mean, there's certain things that you can do, but at the end of the day, you've got another entity that is engaged in that work. So those are just some of the risks.

Justin Bedwell: So, with that, Trent, is that you talk about training. You have to incentivize a crew to train because with 1099 subcrews, one of the risks is they are going to go work for other people. That is a fact. They will go out and they will seek out other jobs outside of you because they want to continue to have the cash cow milking. And if you're going out here and you're doing one roof and I take them away from that one roof where they can make more money in order to set there and train them, most of the training where what I have seen with other companies is that they miss the opportunity to do on the job training, hands on, real life getting out there. And that's also hard with the risk of utilizing subcrews and 1099 sales employees.

So whenever you have a 1099 sales, they're not going to be incentivized to go out there and stand over the top of them and want to do that and making sure that they're doing the quality control and all these measures and things and understanding that they're installing that correctly and then taking the time to show them, "Hey, this is how we place a value properly. Hey, this is what we do over here. Hey, this is how we counter flash." Their job is to go out and gain money for themselves, right? They're going to go out, they're going to try to generate money for themselves and their family, which you want that, but to what degree? So that's another risk that you see.

A lot of the subcrew problems is that you don't have the quality control. Even the crew leaders, the guys that are running these crews, their only job in their mind is to rip it apart, put the shingles back on. If left to their own devices, there's a lot of things that are getting missed, local ordinances and codes and all these other things that are, that cause problems down the line for homeowners and business owners. So regulation-

Trent Cotney: That's-

Justin Bedwell: Go ahead.

Trent Cotney: No, no. I was going to say it's everything you just mentioned. And then one thing that sneaks up on a lot of people, this question is asked in the chat, is depending on where you're working, you may have to have subs that are also licensed. So some states that require, there's subs to be licensed, California, Florida, Illinois. There are more, I'm trying to think what other ones are out there.

Oklahoma.

Karen Edwards: Oklahoma.

Trent Cotney: Yeah. Yeah. And that if you don't have a licensed subcontractor, you run into the risk of having to deal with that government agency or having a violation against your license for eating and abetting an unlicensed contractor. So those are other things that you got to be concerned about if you're subbing stuff out.

Justin Bedwell: Yeah, there's a question in here that says, "Do you have any suggestion on any training suggestion, tools?" I would just say find yourself partnerships with reputable manufacturers. Every manufacturer for any product in the roofing industry, they will give you the training. And there are videos out there, YouTube, your friend. Get out there, get the information, get on major manufacturer's websites. They have tons and tons and tons of video libraries where you can see how to do things. There are toolbox talks that you can find on the web for construction stuff. And these training tools that I can say is the you know more and the more as an owner or manager of a business, the more that you can impart on these people. And whenever you're going out here sitting behind your desk and doing all this stuff and acquiring this, if you're not going out there and you're not willing to go put forth the effort to make sure that they're doing it correctly, there's no amount of training tools that you can find under the sun if you don't care. You know what I mean? It's a culture thing.

Karen Edwards: Definitely. I want to make sure that we touch on safety here. It's the last bullet point in the slide, but it perhaps is one of the most important. But talk about that in terms of... I've talked to contractors that say, "Yeah, I can't get them to put the tie off. They just want to get up there and tear it off, put the new one on and be done," like you said, Justin? So what do you need to be aware of when it comes to safety in regards to a 1099 subcrew?

Justin Bedwell: I think that safety is the... It's the one thing that's constantly in the back of our minds as business owners and as managers, and even, I mean lawyers. That's always in Trent's mind. But the situation is that I talked about toolbox talks, right? A lot of guys aren't PMCS in equipment. So if you're not familiar with PMCS, it's preventative maintenance checks and services. That if you're not checking their equipment, if you're not making sure that everything that is needed out there is there, that's a failure on your part as an organization because you hire a crew out, but it's ultimately your responsibility whoever steps foot on that property because you contracted with that homeowner and that homeowner wants to be able to feel safe. So, if you're standing out there and they don't have ladder stabilizers, if they don't have tie off cords or cables or insert your mitigation situation here, that is ultimately your responsibility.

So if you're not checking safety, they're definitely not, because their job is expediency. They want to get in, get out and get on. Your job is to make sure that the quality and the safety is there. So if you see defective equipment, ceasefire, stop what you're doing. Don't climb up that ladder, that ladder's bent. You take it, you physically remove it. Don't ask them to do it. You do it. Lead by example. And so making sure that your guys and girls that are out in the field have that ability, like, "Hey, stop. Don't do that. If you need equipment, we go get it." And if the crew has a problem with it, the subcrew leader, whoever that is, you explain that to them. But a lot of that can go into your subcontractor agreements, which we'll talk on later down the line.

Karen Edwards: We will. We will. There's an interesting question in the chat right now because we've been talking about 1099 crews, but someone had asked if we have any advice if you're hiring a full-size company. Like if one roofing contractor in this state wants to sub the job out to you in your state, any considerations or risks to be aware of? Or we're going to cover that in the contracts.

Trent Cotney: Yeah-

Justin Bedwell: Probably, I would-

Trent Cotney: Go ahead.

Justin Bedwell: Go ahead, Trent.

Trent Cotney: I was going to say it's, do your homework, right? I mean, what I always say is, we live in a world where you can find anything you want to know about anybody with a click of a button. So, it's really easy to go to the official records and the case, the court records and the county where that contractor is located and figure out do they have judgments against them, do they have a lot of lawsuits against them, what does social media say about them. And not that that's always the best in the world. You can't rely on Google reviews and Yelp and everything else, but at the end of the day, it says something, right? It speaks to at least are they responding to stuff and are they on top of stuff? So do your homework in advance.

And then obviously, I recommend having a subcontractor checklist that goes through where you're checking boxes of things that you need, right? You need to sign subcontract agreement. You need COI. I like the policies, the CGL, the comp. Make sure you're actually getting the policies and verifying that they're legit and not just garbage policies.

Justin Bedwell: Well-

Trent Cotney: Go ahead.

Justin Bedwell: Oh, I was going to say, well, for me personally, my director of operations, she has an absolute like "No-holds-bar. This is what we do with any subcontractors that we're taking on." And everything that Trent just talked about and more, you want to verify that they have insurance. So not just get the piece of paper because anybody can go on Excel and edit a document. You can go on there and do that and then send that in and then you put yourself at risk. Pick up the phone, call, "Hey, I'm listed as a COI on here," or, "I'm listed on the COI as a policyholder. Is that true?" Then verify, "Hey, are they even a policy of yours?"

"Oh no, they used to be five years ago, but they're no longer with us." These are all things that are extremely important. And then like Trent said, you can vet them any which way. Are they reputable? So I see one in here that talks about a major contractor. If you're subbing out a major contractor, there's a lot of different ways you can verify them. Are they affiliated with major brands? What kind of certifications do they have?

So for me, if you looked me up on Google and you went, you said, "Okay, what kind of certifications does Justin and Camouflage have?" I'm a master elite with GAF and I'm a preferred with Owens Corning. We're affiliated with these major brands. And then go to the licensure. If you looked us up in Oklahoma, you would go to the construction industries board and then you would say, "Are they licensed?" Go in there and type them in.

See, because here's the thing about that too, is if you check their license and verify their license, they're going to be able to tell you there, "Do you have any complaints? Are there anything unregistered? Are they in good standing? Are they not in good standing? Are they suspended?" I see that a lot. A lot of subcontractors will go out and want to do some stuff, and then they'll hire contractors that are licensed because in Oklahoma you have to be licensed to do anything as a subcontractor. And you go on there and you look them up and their licenses are suspended or you'll go on there and you'll notice that they just ever so slightly tweaked their name and they re-registered. And now they went from suspended with this one company, but now they're in good standing with another company and it's the same registered agent who had a failed business before. You see what I'm saying?

Karen Edwards: Yeah.

Justin Bedwell: So just making sure that you're hyper aware. That's probably the best thing I could [inaudible 00:32:00].

Karen Edwards: Okay. So we've talked about the risks and maybe the things to be aware of, but there's benefits too, right? So let's not be doom and gloom. Let's talk about what are some of the benefits of using subcrews?

Trent Cotney: Yeah, obviously it's the converse of what we just talked about, right? So obviously there's less tax and HR responsibilities. Sometimes you can get experts in certain type of things. So let's say you're normally banging out shingles and you want somebody to do a metal route. Or let's say there's some kind of specialty thing that you want to do. You can go out handpick the crew that you know is going to be able to do this. And I see this not just in residential, but also commercial

Efficiencies. It's a lot more efficient. Not only is it cheaper, but it tends to be quicker timeframe that I see getting stuff done. Not always the case, but a lot of times it is. And then one of the reasons we see such a huge spike in investment in private equity and everything else is that there's relatively low barriers to entry. So you can come on the scene in an area that doesn't have a lot of regulation and basically just start, go into town. It depends on which area you're in. If I go to Texas right now, I don't need a license. I could start selling jobs right now and get to work, you know?

Justin Bedwell: Yeah.

Trent Cotney: So, all of that is some of the reasons I think we are kind of seeing the rise of sales. Plus there's just no skilled labor, right? You can't hire enough skilled labor to kind of fill roles, so you have to kind of rely on these existing subcrews to get a lot of this work done.

Justin Bedwell: No, absolutely. It doesn't matter if you're doing residential work or commercial. Let's say residential, let's stay in that lane for the moment. So in residential, you would have guys that are extremely skilled at shingles, but they're not as adept at metal or composites or any stone or tile. So you go trying to move them over there. Then you expose yourself to all kinds of risks because they've never done that before. They don't have the tools, they don't have the experience. They don't have them. Then you turn around and the next thing you know, the one thing that we're supposed to do for a homeowner is to mitigate water and elements from getting inside the house. And you get a call back as soon as we get a rain because you've got now a water monsoon inside of their home due to improper installation.

So the specialized expertise in hand-picking crews, it's absolutely correct. If I was going to hire a subcrew, I wouldn't put my roofing crew out there doing garage doors. It doesn't work like that. So we would want to make sure that we're picking people that are licensed and specialized in that area. It's harder to do. In roofing, especially you have to be a general contractor if you're going to maintain. And to be a general contractor, you have to generally do just about everything. It's a rare day in the world where you find somebody that can do everything from the ground up efficiently.

Karen Edwards: No such thing as unicorns, right?

Trent Cotney: Right.

Justin Bedwell: All right. Well, so if someone is not using 1099 crews and they know they need to start or they want to expand their business and are looking at it, what are some tips that we can share for them to find success in working with a subcrew?

Trent Cotney: So, I think Justin kind of talked about it a little bit before. You want to have SOPs in place. You want to make sure that you are onboarding correctly and that you are setting very clear expectations as far as means and methods, schedule, et cetera, so you know exactly what's going to happen.

Internally, the way to mitigate risk is have a strong subcontract agreement that has all the bells and whistles in it. I prefer, and we'll talk a little bit about it, using sort of a master subcontract agreement and then using that as a base to get everything that you want. If for some reason you see issues on a job site, make sure that your paper in the file. For those of you that have heard me speak in the past, I always say in construction, the party with the best paper wins the day. If there are problems, if there are issues with safety, if there's anything like that, make sure that you're following the contract.

There was a question asked, "How do you deal with subs and OSHA liability?" Well, one of the things I like to do is I don't want the primary roofing contractor to be the controlling contractor as a result of safety, but I still want a safe job site. So I enforce that top down through the subcontract. That is a way that you can ensure that you're conveying safety, that you're getting to where it needs to go, but that you're not there physically instructing people on what to do.

So for example, if you're on a job site and you see four guys without fall protection, let's say you've got your W-2 quality control person out there and you see these people out there, you go to that crew leader, you go to the head of that sub, whatever it might be and you say, "Look, you're in breach of the contract because you've got four guys on a roof without fall protection. It needs to be corrected. Immediately stand down until it's corrected," okay?

Justin Bedwell: Yeah.

Trent Cotney: That's different than you going up and putting on a harness and having them wear your hard hats and everything, gear and everything else, right? So there's a good way to do it and there's a bad way to do it. The good way is to understand what the laws and rules are, work within an acceptable tolerance of risk and do your best to try to stave that off by making sure that you got the right documentation.

Justin Bedwell: Yeah, absolutely. The clear expectation is, again, it starts in, it's a culture. It's a top-down. So anything and everything that happens is under the Camouflage umbrella. Well, whose Camouflage? Me. That's who it ultimately falls back on. So if I'm not setting a clear expectation from the get-go, then I have failed everyone all the way down to the lowest mid to include the homeowners. And the clear expectation's like, "Hey, this is what I expect equipment-wise. I don't want guys running around with these type of garments," anything that's going to cause problem. So you see a problem, you see something, you say something. So why wouldn't you want somebody walking around sagging on a roof that obviously their chances of falling because their pants may fall down by their ankles greatly increases. They should be common sense things, but common sense isn't all that common especially whenever you're dealing with skilled trades. We have to make sure that you break it down to the Barney level to where everybody, to the lowest man and woman can understand it and the written contracts are the way to do it.

Trent talked about notations and he talked about written contracts. Anything and everything that is an expectation shouldn't be a handshake expectation. It should be a clear, written, definitive expectation. The written contracts, the contracts between you and your home or building owners are extremely critical to protect you and the homeowner or the building owner, correct? The same thing with the subcontractors. The clear and written communication between you and them is to protect everyone in that situation, to include them sometimes from themselves.

And then the other things is that you are going out here and you're on these jobs, so we document everything. If you're a company that's just getting started, I completely and wholeheartedly endorse the fact that you should be videoing and/or photographing everything from the moment you step on a job site long before you even get to the contracting process all the way through the completion of the project. Your notations are not just actual messages themselves. They can be photographs, all of these things to help you to protect yourself and everybody else under your umbrella.

So one of the other things, you have a smartphone. Everybody's got a computer in their pocket. We have one access to one, usually within arm's reach. We all have the ability to take out and pop out a message and say, "Hey, here we are. This is what we talked about. This is what's going on." Make a generalized note. Find yourself a CRM that's going to be able to annotate and house that information per file so it's not just in your notes all unorganized. Organization is super, super critical and important, especially in the notation of jobs.

The other thing it talks about in here is the vetting process. We've already touched on that. You want to make sure that you're checking thoroughly, thoroughly, thoroughly, thoroughly and documenting that. So all of your subcontractors should have an individualized file. You want to make sure that you are going through there. And then you need to audit their files from time to time. You need to go through there and you need to, every quarter, every month, whatever it is, go through there and call and verify. Check, write emails. Email's a fantastic way to note something. Once it goes into a system, it's there. You've got different ways to check and prove that you've got that.

The licensures. Make sure you check into that. That stuff is super, super important. Workers' comp, like Trent said. If you are once somebody who is a workers' comp exempt, company or individual, you need to make sure that your crews have workers' comp because they actually are the ones out there physically doing the labor. In the event that somebody inadvertently lawn darts off of a roof, the worst thing that could happen for you, your organization and everybody in that process, to include the building owner, is for somebody to die on your property and you don't have the proper coverages or for somebody to get hurt on their property and you don't have the proper coverages. Trent.

Trent Cotney: Yeah, you're speaking the truth, brother. I mean, that's just it. The bulk of these problems that you see that happen regardless of whether it's OSHA or Department of Labor or state equivalents or anything, workers' comp, it's because a sub person got hurt, right? Somebody that's on that subgroup. Having that level of safety, making sure that there's insurance there, making sure that there's a level of professionalism is really important. That's why I don't like these crews that are just starting, right?

Roofing is... There's a lot of on the job training, and there's something to be said for wisdom and experience, right? You can't learn roofing in a book. You've got to be out. You've got to experience what it's like, right? You'll get a crew that will say that they've been doing it for 20 years, but it's pretty easy to see when stuff doesn't start matching up that that's not the case. So yeah, definitely you want to do your best to kind of protect yourself.

There's a question on... We have errors and omissions as a bullet point here. One of the things that I've been talking about here recently is the fact that I'm seeing more and more claims related to design. Even though roofers don't really have anything to do with the design, almost all the time, whether it's residential or commercial, there's a lot of in the field work that may happen with headwall flashing or whether there's roof to wall connections or penetrations or whatever it might be. And there's stuff where it's sort of a quasi-design type element. So I'm seeing plaintiff's attorneys bring claims, not only defect claims, but bring claims that are based on design related issues. Errors and omissions is relatively inexpensive for roofing contractors to get because you're not design professionals. So it's worth asking your agent and also looking at your sub policies to see if they've got that kind of coverage. Because if you get tagged from a customer with this type of thing, you want some kind of insurance pot there. Unfortunately, most contractors don't even think about it.

Justin Bedwell: Well, you're absolutely right, Trent. You go out on these jobs and it doesn't matter if it's residential or commercial. You're mixing new construction with old construction, any which way you slice it. New materials going on, old structures. I've never been out on one that's square ever, not one time in my entire life. And it would be a wonderful world if everything went exactly the way that the book or the engineer described it. But what we see is an impromptu addition of a porch here, and then now you've got to cut down a ridge cap here and do these things. And so you constantly are having to overcome the design flaws of the builder, whoever that may be.

Karen Edwards: All right. I just got my 15-minute alert saying, "Wow, this 45 minutes has gone really fast." So we've got a couple of slides to get through. And we have been answering questions as we go. So if we don't have much time at the end for Q&A, I think that's going to be just fine. So if you do have some questions, pop them in there now. But we're going to talk a little bit about best practices and then we're going to talk about building the relationships with your subcontractors and then where to find help with all this stuff. So we got a lot. We have 15 minutes left. Let's start with the best practices and work through that.

Justin Bedwell: I'm going to let Trent take this one, but I will say that subcontractor agreements, that's your absolute bread and butter. Contracts between you and the homeowners are important, but those contractor agreements are going to be your best practice hands down 100% of the time. I know a good lawyer, you're all looking at him, who could write you a fantastic master subcontractor agreement. So go ahead, Trent.

Trent Cotney: Yeah, thanks. I appreciate that. Yeah, it's really just about buttoning down internal procedures and policies, right? It's having that level of professionalism. It's great to get money in the door, and I always say the crack show when that money stops. So you want to really take a look, take a day, it can even be on a weekend, think about, "Where am I weak? Am I weak on my safety side? Do I need a better safety manual, better toolbox talks, better onboarding? Do I need better selection process for myself?" or whatever it might be. Look at your own internal employment procedures, what does your employee manual look like? What are your HR policies? I always try to reverse engineer. So I look at bad stuff that happens and then reverse it and say, "What could I have done differently? What does my contract lack that I should add in there to protect against this customer issue in the future?" Driveway cracks. Do I have a driveway crack disclaimer in my contract? Whatever it might be. That's the key thing.\

And then drilling down the importance of that from top to bottom. Having that culture of safety or that culture of professionalism is really important. It's easy for the people listening to this to say, "Yeah, yeah, we do all that." But if the people on the field, they're getting in fistfights, drinking beer on the roof, that kind of stuff, you got to have a level of professionalism.

One of the questions you asked, Karen, is where do you go for resources. Well, the associations are a great place to look. I've been involved with NRC for a long time. I serve as their general counsel, but they offer a lot of training tools. They offer pro certification, which is almost like a master's degree in your roofing discipline. Subs could potentially benefit from that. But there's also local associations, whether it's your state association or regional association that you can look at.

I think Justin mentioned it before, manufacturers are a great resource. They have tremendous amount of information on there. Everything from safety to employment to how to install a roof. I mean, I'm on these manufacturer sites all the time just learning stuff myself. Granted, I don't know half of what our audience knows, but it benefits me to get a better understanding of what it is. And that's where a lot of times I go. I think knowledge is key.

One of the things that I think is important are those vendors. It's manufacturer associations that are reaching how people look today. It's like Justin said, everybody's picking up their phone. I want to be able to scroll and see a video. And that's how it's changed a lot. By the time where I would sit back and crack a book open, it's a little bit different. I'm listening to Audible, I'm looking at my social media, that kind of stuff. So I think it's mixing it up so that you're speaking in a language that everybody can understand.

Justin Bedwell: Absolutely.

Karen Edwards: Excellent. All right, so I want to talk, we spent a little bit of time talking about this yesterday, Justin, you and I, about building the relationships with subcontractors. So why don't you get us started on this topic?

Justin Bedwell: Everything top down, it revolves around trust. And if you're not building trust at all with your crews and your subcrews and even your subcontracted salesmen or whatever... They have to trust you, you have to trust them. So how do you do that? It's through information, right? Information is the universal currency. What are you willing to spend on somebody information wise to be able to reciprocate something? So, you want an exchange of currency.

The only way that I build trust with Trent is me to give Trent all the information that he needs to do, what Trent needs to do and that's to make an informed decision for himself, right? And so I think that going out and talking, catching them out in the field, making sure that they know that you know what you're talking about. Strong communications, it goes both ways. Like, "Oh, I want to know that you know what you're doing," but they also want to know that you know what they're doing, right? And so just making sure that you're talking and having an open line of communication.

The next thing is language barriers. The language barriers, having somebody that readily speaks the language that you can interpret or at least that they can interpret for you because I know a ton of guys that I'm no Spanish aficionado at any stretch of the imagination, but I know enough to hear what's going on out there. I rarely ever talk in Spanish just because I'll butcher everything under it about it. But at the same time, being able to have somebody that can do that so that you can understand them what they need, so that they can understand you and what you need. Same thing with the guys and girls in your offices, making sure that language barriers doesn't just mean regions of the world, different languages. The language barrier is also like, "Hey, how does this person understand this? How am I talking to this person? What is my physical communication saying to these people?" Because language is so much deeper than words. They guesstimate that upwards of 95% of all communication is non-verbal. My body language is super, super critical and important in that situation then.

Karen Edwards: Excellent. And how many times can we say documentation, right? We said notation, documentation, photos.

Trent Cotney: Right. Right.

Justin Bedwell: So, I'll hit on the digital documentation. For what I see and where the places that I've been and the places that I came up and moving, documentation is everything. Making sure that you're holding everyone accountable. You have that master subcontractor agreement so they have a baseline understanding, but your digital documentation would be like your work orders going out, your technical orders going out into the field, "Hey, this is exactly what we're doing. This is how it goes. This is step-by-step what I want." And having clear-cut definitive situations where you're giving them the information.

One of the other things that I see is digital documentation. Remember what I said about taking pictures. You take photos of everything. Putting them into a file or a clickable link. And if you have a CRM that makes that more accessible, all power to you, but not everybody's at that point and different companies are at different levels. But giving them the information so they can see what it is, until they can actually get out there and touch it and feel it and smell it. Just making sure that they have the information, the who, what, when where and how. Trying to keep yourself.

There was a situation that happened in Oklahoma a few weeks ago where... And it happens more often than not, where companies like to drop materials the day of and then the guys have zero information and they show up and they start tearing apart the wrong house, then a company gets sued into oblivion. Digital documentation could have definitely saved them a huge lawsuit and the free roof that they gave out.

Karen Edwards: [inaudible 00:53:19]. Yeah.

Justin Bedwell: Go ahead.

Trent Cotney: Yeah, a couple of things. Digital is definitely the way to go. If you're listening to this and you're still all paper, you got to morph because at some point, regardless of whether you're giving it to a relative or you're selling it or you're doing something, whoever's looking to buy it or take it over is going to want to have that ease of access. And back on safety, it's very easy to maintain a lot of different photographs and issues that can help you understand what job site safety is, whether you're using something like company camera or going out there and taking photos yourself. Key thing is you got to be mindful, mindful of that information is very great and useful, but you also have to be mindful that there's not something in there that's damning.

So for example, like the photo that we've got here, I'm sure the guy's not actually doing work. I'm sure he is an actor. This is a pre-site inspection-

Justin Bedwell: Stock photo.

Trent Cotney: Yeah. Yeah, but we had a situation where a guy was taking photos, safety director wasn't reviewing it, clear safety violations. And as a result, the guy ended up getting a willful. We were able to knock it down from an OSHA standpoint, but you want to be mindful of that.

The other point that I want to make to everybody, and this is more a larger 35,000-foot view, is recognize that we are on an administration right now that is pro-union, pro-employee. We just heard about the Federal Trade Commission’s not [inaudible 00:54:45] ban today because into effect 120 days. A lot of rules there. Stay tuned for more on that one. But we're also in an administration that has open borders and relatively lax immigration policies. That can change, right That can change dramatically.

And the reason why we're harping on this is that if you have these tools in place, if you have the oversight in place, if you are doing what you need to ensure that you're running safe and professional job sites, regardless of what happens politically, one way or the other, good, bad and different, you're always protected. And I always believe, I don't care what the politics are one way or the other, professionalism is professionalism, right? You come prepared, you understand what the rules and laws are, they may change, but you always have a good game face on regardless of what it is. I think that's the case regardless of whether we have very favorable immigration, no immigration, open borders, closed borders. Whatever the issue is, you just got to be prepared for it.

Justin Bedwell: Yeah, I think some of these other bullet points that we haven't touched on yet too is training. We've hit training a plethora of times today. Training is super important. From my military background, if we're not training, we're not doing something right. So we want to make sure that you're constantly providing access to it.

Now, people are, "Oh, there are language barrier." So that language barrier is an excuse that people take to not go and spend money or spend time to train crews effectively. So it takes nothing to go, "Hey guys, I want to take a day. We're going to stop off." I'll have GAF for example. "In my particular circumstance, I'm going to have them come in here with a Spanish-speaking individual and we're going to do real life training to make sure that you guys understand what's going on." And it's okay. You can pay them, you can compensate them for coming to do the training. So you want to reward them for good performance out in the field just like you want to reward them for the training that they're doing, right?

Nobody wants to go do anything for free in this day and age most oftentimes. And to them, training is work too. So making sure that you're giving them incentives to want to train. But there's access to everything. We have different accesses for Owens Corning, for example. I can go and I can add a situation and I can build a curriculum within Owens Corning's University and send that as an email to my crew and say, "Hey, here you go. Here's some things that I would encourage you to train" and making sure that they have the ability to do these things.

The other thing is equipment and tools. Making sure that they're PMCS and their equipment. We talked about it yesterday, Karen. Guys out here, and you see them with their faulty nail guns that's been beat down, they use them every day. And then instead of checking it, they go like this. And then the next thing you know, they got a nail sticking through their arm. And then now you've got a clear safety violation and a problem all in one. So you want to make sure that they have good equipment and tools. And that is all covered in your master subcontractor agreements. You know that whenever you're forcing those subcontractors to provide adequate tools, then you're forcing the elevation up. You may have to pay them a little bit more per square, but it's going to save you money in the long run.

Karen Edwards: Right, right. And we said there's professional help, right? There's Trent's firm, Adams and Reese is there to help with contracts. There's support. There's ways to learn about the regulations. So your associations are key for bringing you resources to accomplish what you need to accomplish so you don't feel like you're on an island. I know some folks have been putting in the chat there. The Carolinas have all this help and almost all the associations same.

So I'm going to say, wow, we are at the end. One minute to go. I think we did get all your questions. So I want to say thank you all for being here. I want to thank Trent and Adams and Reese and thank you Justin and Camouflage Roofing for sharing your wisdom and giving back to the industry on this important topic. It's been really great. Thank you.

Trent Cotney: Yeah, thank you.

Justin Bedwell: Thank you.

Trent Cotney: It's been great.

Justin Bedwell: Thank you, guys, for having us. Hey, thank you Chat for continuing to drive the train of questions throughout the process. You guys are awesome. Every situation is completely different. Every situation is dependent on different variables. However, I would say button ended up, find yourself a good attorney, get yourself good representation, button up your paperwork. Check your egos, and have somebody review your processes and your situations.

Karen Edwards: Well said. Thank you, Justin. Thank you all. Be sure to share this with anyone that you feel will benefit from it. Visit RookersCoffeeshop.com under our Read, Listen, Watch section. And be sure to follow us on social media so you don't miss any future installments. Thank you, everyone.

Trent Cotney: Thank you, guys.

Justin Bedwell: Thank you.

Trent Cotney: Bye.