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Labor Only Contract

 
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Old 01-28-2014, 10:49 PM   #1
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Labor Only Contract


Hello I am a General Contractor in California. I have a remodeling project with a investor and I am working with him at a very low margin because the is customer has few more potential leads.

I want to control material prices better and not pay any mark up so I can keep my margin on the job. I have a contractor who is willing to take labor only contract at very reasonable hourly rates. I want to see if I can hire him as a contractor and not employee.

What are the legal and right way to so this. Does he need insurance or can I cover him under my insurance? Does he need to be licensed? Do I need to give him 1099 for this job?
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Old 01-28-2014, 10:53 PM   #2
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Re: Labor Only Contract


Yeah, he needs insurance and a license.

Don't fall for the "there will be more work later" bs.

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Old 01-28-2014, 11:04 PM   #3
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Re: Labor Only Contract


Quote:
Originally Posted by mitulkp
Hello I am a General Contractor in California. I have a remodeling project with a investor and I am working with him at a very low margin because the is customer has few more potential leads. I want to control material prices better and not pay any mark up so I can keep my margin on the job. I have a contractor who is willing to take labor only contract at very reasonable hourly rates. I want to see if I can hire him as a contractor and not employee. What are the legal and right way to so this. Does he need insurance or can I cover him under my insurance? Does he need to be licensed? Do I need to give him 1099 for this job?
In the state of a Cali, all trades that get 1099's must be duly licensed for the trade that they perform. There is no general liability requirement by the state to be a contractor. If he has employees, he has to carry WC. Most general liability insurance policies will require you to have him include you as an additionally insured. I don't think they will insure a sub unless you are paying for it. This is something a phone call to your broker will clear up.
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Old 01-28-2014, 11:10 PM   #4
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Re: Labor Only Contract


I'm sorry, I realize that I don't know you, or your investor, but I can see the scenario now. Someone is going to get screwed.
Make sure it isn't you.
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Old 01-28-2014, 11:10 PM   #5
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Re: Labor Only Contract


Quote:
Originally Posted by mitulkp View Post
Hello I am a General Contractor in California. I have a remodeling project with a investor

flipper

and I am working with him at a very low margin because the is customer has few more potential leads.

Wish I had a buck for everytime I heard that line. I'm sure if you work for free this time, he'd be glad to have you work for free a few more times.

I want to control material prices better and not pay any mark up

I charge mark-up, not pay it.

so I can keep my margin on the job. I have a contractor

Only a "Contractor" if he's licensed. Otherwise, he's a "construction worker"

who is willing to take labor only contract at very reasonable hourly rates. I want to see if I can hire him as a contractor and not employee.

What are the legal and right way to so this.

Wasn't any of this covered in the test?

Does he need insurance or can I cover him under my insurance?

Sub contractors should be indemnifying you, not the other way around. Starting to look alot like an employee.

Does he need to be licensed?

Is he signing a contract for more than 500 dollars, labor and materials????

Do I need to give him 1099 for this job?
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Old 01-28-2014, 11:12 PM   #6
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Re: Labor Only Contract


In California for you to hire a contractor or sub-contractor he must have a valid license in the appropriate trade and have WC insurance.

If a guy works by the hour he is not a contractor.

Jaws is right about the promise of cheap prices now for future work is pure BS....
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Old 01-29-2014, 09:28 AM   #7
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Re: Labor Only Contract


Mitul:

As the prime, you need to make sure that everyone on the job is working under a license and with insurance. Because you are a paper prime - you don't have employees and don't perform the work yourself - your subs need to be fully licensed and insured.
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Old 01-29-2014, 03:03 PM   #8
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Re: Labor Only Contract


Quote:
Originally Posted by mitulkp View Post
Hello I am a General Contractor in California. I have a remodeling project with a investor and I am working with him at a very low margin because the is customer has few more potential leads.

I want to control material prices better and not pay any mark up so I can keep my margin on the job. I have a contractor who is willing to take labor only contract at very reasonable hourly rates. I want to see if I can hire him as a contractor and not employee.

What are the legal and right way to so this. Does he need insurance or can I cover him under my insurance? Does he need to be licensed? Do I need to give him 1099 for this job?
In California if you write a check to someone for doing work for you they are either an employee or a subcontractor, a licensed subcontractor. Subs get a 1099, employees get a W2. Employees need to be covered by WC and you need to make sure you are withholding the proper taxes and SS et.al.. With a sub you best make sure that if he has employees they are covered by WC.

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