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Shortage of skilled laborers causing legal issues for contractors, project owners

COURTESY: BALL JANIK - Angie Otto, a partner in Ball Janik's construction and litigation practices, said it's not uncommon in this tight job market for contractors to poach workers by offering incentives to leave their current employer and join another contractor's team.

An estimated 80 percent of construction firms across the country say they are having a hard time finding qualified craft workers to hire.

Nearly half of those surveyed said they expect the shortage to continue in the coming years, according to a recent industry-wide survey by the Associated General Contractors of America and Autodesk.

The labor shortage is worsening as construction demand continues to rise, and construction employment has expanded in the majority of metro areas the association tracks. The lack of hourly craft positions, which make up the bulk of the construction workforce, poses a significant risk to the nation's future economic growth, said Ken Simonson, AGC's chief economist.

Oregon's Employment Department predicts construction jobs will increase by 17% through 2027, with building finishing contractors projected to add 2,800 jobs — a gain of 20%. These jobs include contractors for drywall and insulation, flooring, and finish carpentry.

Employment at other specialty trade contractors, such as building demolition crews, earth movers, foundation diggers and some types of paving work, are expected to increase by 2,000 jobs, or 24%. Residential and nonresidential building construction growth is anticipated to rise by 20 percent by 2027, according to the state's Employment Department.

COURTESY: VERMILYEA LAW OFFICES - Jeremy Vermilyea, owner of Vermilyea Law offices in Portland and Vancouver, said he has contractor clients who are having difficulty hiring skilled subcontractors who will commit to a schedule and are impacted by the higher prices subcontractors are charging.

In addition to economic impacts, the workforce shortage has legal ramifications as contractors struggle to retain experienced workers while ensuring projects stay on schedule and within budget. Angie Otto, a partner in Ball Janik's construction and litigation practices, said it's not uncommon in this tight job market for contractors to poach workers by offering incentives to leave their current employer and join another contractor's team.

"People are asking us to address this at the front end of their contracts so if these become issues the owner will allow them to provide the same incentives to keep good people," she said. "A lot of people are trying to be proactive about it. It's more in the rural areas, but we've got it in the Portland area as well, particularly when it comes to skilled trades."

Otto said she also is seeing more payment disputes between project owners and contractors, with missed completion deadlines as a defense for some owners. "Contractors are struggling, and the good ones are getting their teams lined up in advance," she noted.

Jeremy Vermilyea, owner of Vermilyea Law offices in Portland and Vancouver, said he has contractor clients who are having difficulty hiring skilled subcontractors who will commit to a schedule and are impacted by the higher prices subcontractors are charging. He pointed to a public project in Seattle in which the subcontractor hired to install the escalators and elevators left mid-project for a higher-paying opportunity.

"Of course, the owner is only willing to pay what the contractor bid on the job so it ended up creating a real problem from a scheduling standpoint," he said, adding the delay in the project's completion led the owner to file a claim against the prime contractor. "They got it figured out through mediation, but it really soured the relationship between the public owner and the prime."

While both public and commercial construction projects are affected by the workforce shortage and resulting price escalations and schedule delays, public projects are especially prone to disputes.

"We've just got such a hot job market right now, and it's particularly difficult with a public project that has a hard bid because they don't really have the ability to negotiate," he said. "I think those kinds of issues are going to continue."

Vermilyea said a public soil stabilization project in Vancouver was delayed when a subcontractor lost eight workers during the project and was forced to hire a crew that wasn't as experienced. The project ultimately required re-engineering and took much more time than initially scheduled.

"A big part of the problem is the experienced people have gone on to other things," he said, adding the lack of skilled workers has the potential to lead to a boom in construction defect claims if projects aren't being built correctly by experienced laborers.

AGC and its state chapters, in collaboration with scores of other construction associations, nonprofit organizations and educational institutions, are addressing the workforce shortage through initiatives to introduce young people — as young as elementary and middle-school students — to the good wages and other benefits of careers in construction. However, Vermilyea noted, some say existing apprenticeship programs are too restrictive and hamper efforts to increase the number of trained laborers to meet the demand.

In addition, young people considering a career in construction must weigh whether to participate in a union or non-union training program. For those who live in rural areas, it can be difficult to gain experience because rural contractors often don't have the time or money to act as training agents.

"There are so many multifaceted issues at play here, all trying to get at the workforce issue," Vermilyea said.

Melody Finnemore is a contract writer who regularly contributes to the Business Tribune. She can be reached at: This email address is being protected from spambots. You need JavaScript enabled to view it.


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