The Dangerous Job Site
Acme Sheet Metal has been awarded the bid for HVAC work on a downtown hotel renovation project. The developer and general contractor are both from another state and have not previously worked in the city. Over the years, the principals of Acme have become increasingly concerned about safety. A detailed safety training program has been put into place and safety issues are reviewed regularly with employees and project managers. The result has been a drop in job-related injuries and the company’s workers’ compensation insurance costs have remained stable. Acme work areas have had very few OSHA citations in recent years.
The general contractor on the project is under a standard AIA general construction contract with the owner, which utilizes AIA A201 General Conditions. Acme has signed an AIA A401 subcontract, which incorporates the AIA A201 General Conditions and contains a "flow down" clause. The "flow down" clause makes Acme responsible to the general contractor for its work in the same manner as the general contractor is responsible to the owner for the overall project.
As Acme begins its work, it becomes apparent that the general contractor is not attentive to site-safety issues. The gate switches on the construction elevator have corroded and the elevator can be run with the gate up. Openings in the floors are periodically left uncovered and unmarked, equipment and materials are stored haphazardously around the construction site and debris often sits on the floor for several days. Some of the scaffolding is flimsy and rusted, with broken or missing bolts and supports, Acme personnel also notice that demolition work is going on around old steam pipes with fraying covers. However, the job superintendent does not seem concerned about the fraying material. Acme workers fear that the material may be asbestos that could be released into the air as the demolition proceeds. While Acme personnel complain repeatedly to the job superintendent about safety conditions and even threaten to pull off the project, they ultimately decide to continue work.
Two months into the project, an electrician is injured in a fall through a floor opening. OSHA and local building inspectors arrive several days later. Acme personnel then learn that the general contractor has a record of OSHA and other safety violations in multiple states and has been repeatedly fined. Due in large part to the general contractor’s reputation for safety violations, OSHA imposes heavy fines. Acme then receives a notice from the general contractor that it will be held responsible for the fines attributable to its work area under the terms of the subcontract. Acme denies that it is responsible for the fines.
Responsibility for Control of the Job Site
Under the standard AIA and AGC construction contracts, the general contractor has primary responsibility for the job site. For example, the AIA A201 General Conditions state that the general contractor "shall be solely responsible for and have control over construction means, methods, techniques, sequences and procedures and for coordinating all portions of the Work . . ." (A201 Section 3.3.1). In addition, the general contractor is required to "enforce strict discipline and good order among the Contractors employees and other persons carrying out the Contract." (A201 Section 3.4.2). The general contractor is also "responsible for initiating, maintaining, and supervising all safety precautions and programs" (A201 Section 1 0.1. 1) and taking "reasonable precautions for the safety of and . . . provide reasonable protection to prevent damage, injury or loss" (A201 Section 10.2.1).
Therefore, the general contractor was clearly responsible for maintaining a safe work place in the Acme situation. Its failure to do so is a breach of its contract and would certainly render the general contractor responsible for any fines, penalties or damages assessed against the owner. However, the general contractor continued to insist that Acme should have taken steps within its own work area to make certain that the area was in compliance with safety laws and regulations. The general contractor relied, in significant part, upon the "flow down" clause in Section 2.1 of the A401 subcontract and language in A401 Section 4.3.1 which states: "The Subcontractor shall take reasonable safety precautions with respect to performance of this Subcontract, shall comply with safety measures initiated by the Contractor and with all applicable laws, ordinances, rules, regulations and orders of public authorities for the safety of persons or property in accordance with the requirements of the Prime Contract."
The general contractor also insists that Acme’s discovery on the site of what it believed to be asbestos, without stopping work or reporting the condition in writing, constituted a breach of the subcontract. In fact, the OSHA investigation has identified the insulation as asbestos-containing material. Therefore, Acme must deal with potential health related issues concerning its work force, without knowing whether the general contractor will be required to indemnify it against those claims. Ultimately, claims, counterclaims, and cross-claims are brought involving the general contractor, Acme and other subcontractors, the owner and the architect. The outcome of the various claims will have to be resolved in arbitration, but it is clear that Acme has found itself in the middle of a legal mess that’s even bigger than the mess it lived with on the job site.
While Acme’s position concerning responsibility for the fines should be salvageable through a skillful presentation of its case in arbitration (including testimony and documentation of its safety record, its complaints to the general contractor, and the safety measures it implemented as to its own work), the far better outcome is avoidance of such a situation. Every SMACNA member knows of the importance of employee safety training and constant updating and improvements to safety programs. The subcontractor’s insurance company can be a useful resource in advising on safety enhancements. There are also relatively minor modifications that can be made to subcontract forms to reduce the risk that the subcontractor will be held responsible for fines and penalties arising out of the general contractor’s failure to maintain a safe work site.
For the protection of its workers and its bank account, the subcontractor must also react quickly when unsafe conditions are found on the job site. If the general contractor seems unresponsive, written notice should be given to the general contractor and architect (or construction manager) specifying the unsafe conditions and the general contractor’s responsibility for safety. On such a project, the subcontractor should be particularly careful to document its own safety measures. The subcontractor should avoid the use of any equipment that is not safe or in proper working order. If the conditions are such that the subcontractor’s employees are in danger working on the job site, the subcontractor should insist upon immediate improvement to the safety conditions or be prepared to leave the job site. Obviously, before the subcontractor takes such a radical step, it should carefully review its contractual obligations and should clearly inform the general contractor of its position.
The situation as to asbestos (or PCBs) is even more clear. If the subcontractor detects any substance that it believes to be asbestos or PCBs "which has not been rendered harmless," it must give immediate notice to the general contractor and stop work in the area in which the materials were encountered." If the subcontractor does provide the notice and leave the area, it will most often be indemnified by the general contractor against personal injury claims or other damage claims that may be brought against the subcontractor due to the exposures that may have already occurred. However, if the subcontractor fails to take these steps, that indemnification obligation of the general contractor can be voided and the subcontractor may find itself solely liable for the claims.
There is no such thing as a perfectly safe job site. However, the subcontractor has an obligation to itself and its employees to avoid exposing the employees to an unreasonable risk of harm. It is essential that the subcontractor take all reasonable precautions to make certain that its work force is not exposed to unsafe conditions and that its workers are properly trained to maintain site safety. It is also important that the subcontractor carefully review and negotiate its subcontract agreements concerning responsibility for safety and maintain necessary insurance coverage’s to protect against unavoidable claims.