In our second installment of Meet Our Team Members, we are interviewing Ed Jesson. 
 
Q:  Most of our readers probably know that you and Kelly are both partners in the Jesson & Rains firm, but many of them might not know that you are originally from England. 
Ed: If they haven’t heard me talk!  (laughs) 
 
Q:  What do you miss most about England?  And what brought you here to the United States?
Ed: I miss a lot of things--family and the sheer amount of Indian food to name a couple--but I’m certainly very happy over here in the US, too. England and the US are very similar in a lot of ways.  I moved over to attend college as I didn’t really know what I wanted to do at university back home. In England, you have to pick your college major while you’re still in high school, and once you do, you’re kind of locked in. My best friend was from the US and moved back after high school in England and told me about how great US colleges are with the ability to take your time to pick a major.  I thought that was a good fit for me, and here I am!
 
Q: So have you always wanted to be a lawyer?  What did you eventually choose as your major in college? 
Ed: No, I was a sports and entertainment management major at the University of South Carolina and I wanted to work in that industry. It was after working with and getting to know the general counsel at Speedway Motorsports during an internship that my interest in the law was really piqued.
 
Q: What does your family think of your job as a lawyer? 
Ed: My family is very proud of what Kelly and I are building at Jesson & Rains (or at least that’s what they tell me). My dad was a lawyer (solicitor) back home in England. While our practices are completely different, it’s always interesting talking to him about the differences in US v. English practice.
 
Q:  Your focus in practicing law is construction litigation.  What qualities does an effective litigation lawyer have?
Ed: In litigation, I think being able to see both sides of the argument is a very valuable skill. It allows you to try and see where the other side is coming from and hopefully help the parties reach an understanding that everyone can live with.
 
Q: What are your future plans?  Where do you see the firm heading in the next couple of years?
Ed: Our firm is still relatively new.  We’re in our third year, but Kelly and I definitely are excited to continue to grow and foster good relationships with our clients and others in the local legal community.
 
Q:  What is your favorite type of food?
Ed: Indian food, hands down. The town I grew up in had a population of around 10,000 people and had at least 4 Indian restaurants when I was still living there. Indian take out is England's equivalent of Chinese takeout.

We are frequently asked what is the difference between an independent contractor and an employee. Hiring independent contractors is often the cheaper choice for employers as the employer saves on taxes and other administrative costs that are involved with hiring and firing traditional W2 employees. However, mistakenly (or intentionally) classifying employees as independent contractors can cost employers thousands of dollars in fines, taxes, and back wages, as well as cost the government millions of dollars in taxes.  Several years ago, the News and Observer wrote an article about contractors in the construction industry who were intentionally misclassifying those who should have been employees as independent contractors in order to save money. The article found that the misclassification of employees cost the state of North Carolina $467 million in lost tax revenue that should have been paid by employers; and that was just from a sampling of federally funded projects in North Carolina—ignoring the vast amount of private construction in the State.
 
On August 11, 2017, Governor Cooper signed into law the Employee Fair Classification Act (S.B. 407). Many in the construction industry have supported this move, feeling that the misclassification of workers by their less scrupulous competitors was making it difficult for them to compete. Companies that misclassify employees and independent contractors can save more than 20% on their labor costs.
 
The new act provides a way for the state to receive complaints that employees are being misclassified as independent contractors by creating the Employee Classification Division within the North Carolina Industrial Commission. The Employee Classifications Section’s website states that:
 
Upon receiving the complaint for employee misclassification the Director will provide this information to the North Carolina Department of Labor, North Carolina Industrial Commission – Compliance and Fraud Investigative Division, North Carolina Department of Commerce - Division of Employment Security, and North Carolina Department of Revenue where each separate agency shall conduct independent investigations to determine whether violations of their operating statutes has occurred. If determined there has been a violation of any operating agency statute, each agency will ensure the necessary enforcement actions under the respective statutes.
 
As such, should a complaint be made, independent investigations will be made into the company being complained of by several different North Carolina governmental agencies and employers could be facing multiple fines from multiple state agencies.  Also, employers are now required to post notices including the following information:

• Workers must be treated as employees unless they are independent contractors;
• Workers who believe that they have been misclassified have the right to report the alleged misclassification to the Employee Classification Section; and,
• The physical and email addresses and telephone number where alleged misclassifications can be reported.

 
To avoid any issues with the Employee Classification Section, employers must ensure that they are correctly classifying employees as either employees or independent contractors. While the classification is determined case by case and depends a great deal on the specific facts surrounding each individual’s employment, here are some basic considerations:

• Is the worker guaranteed to get paid, no matter the outcome of the project?
• Does the worker use his or her own tools or equipment?
• Does the worker work for more than one firm or business at a time?
• Does the worker offer his or her services to the general public?
• Do you have the right to give the worker instruction about when, where, and how to work?
• Did you train the worker to do the job in a particular way?
• Must the worker do the work him or herself? Or is the worker free to hire assistants? If assistants are hired, who pays them?
• Do you set the worker’s work hours?
• Must the worker spend all of his or her time on your job?
• Must the individual work on your premises?
• Do you pay the worker hourly? Weekly? Monthly? By the job?
• Can you fire the worker and/or can the worker quit without being subject to a breach of contract lawsuit?

 
That is not an exhaustive list, and no one question will determine whether a worker should be considered an employee or an independent contractor. However, if in answering those questions, you are finding that you have a lot of control over how the worker performs his or her work, then it is likely that they should be classified as an employee and not an independent contractor.
 
If you find yourself questioning whether your worker should be classified as an employee or an independent contractor, or if you find yourself being investigated by the Employee Classification Section, please give Jesson & Rains a call to assist you in the matter.

Occasionally, potential clients, be they general contractors or subcontractors, come to me with issues regarding a project that they’ve been involved with. More often than not those questions revolve around what their rights are, and what their duties are, when a problem has arisen on the project that they’re working on.

The first document that I ask for when presented with these questions is the contract that governs the work the contractor was doing, and, unfortunately, I am often told that there was no contract—which is almost as bad as when the contract that is in place is a form contract pulled from the internet that is not specific to the work that was actually being performed.
In the construction industry, contracts serve many purposes. The main purposes are to outline the rights and duties of all the parties involved in the contract, and to allocate the risk between those parties. Typically, most people are interested in the rights and duties part of a contract and somewhat ignore the allocation as a risk. However, as you will see below, this can be a costly mistake.

If a contract allocates too much of the risk involved in a project to one party (e.g. a general contractor shifting all of the risk to its subcontractor), then the party that is assuming the lion’s share of the risk likely will not want to enter into the contract. Properly and fairly allocating the risk in contracts also allows the parties to the contracts to effectively plan ahead and will likely result in fewer insurance claims, lower costs, and projects being completed on time.

​This point was well made in a recent case decided by the United States Court of Appeal for the Federal Circuit. The contract in question was between the Department of the Navy and DG21, a contractor doing business with the Navy. The contract was a fixed price contract in which DG21 would be paid a fixed sum of money to perform all the tasks that it was agreeing to. The issue that arose, was that of fuel costs. The contract was to be performed in Diego Garcia, which is located approximately 1,800 miles east of Africa and 1,20 miles south of India, not a place where you can drive to the local gas station to get gas for your fleet of vehicles!

The contract stated that DG21 was to use a certain type of fuel while operating on Diego Garcia and the fuel was to be paid for by DG21 at the prevailing Department of Defense rate at the time of purchase. DG21 examined the Department of Defense fuel rate at the time it was bidding for the contract, bid accordingly, and was awarded the contract.

The Navy, in response to DG21’s bid, advised that the fuel cost information it provided was for informational purposes only and that the bid was for a firm fixed price, meaning that DG21 would assume the full risk of fuel consumption and/or fuel rate changes. During the term of the contract, fuel prices, and the prevailing Department of Defense rate for fuel rose dramatically, reaching more than double the rate DG21 relied on when preparing its bid. As you can imagine, as a result of the fuel costs doubling, the contract no longer made financial sense to DG21.

DG21 requested that the Navy increase the price of the contract so that DG21 could be properly compensated in light of the increased fuel costs. The Navy denied this request leaving DG21 to finish out a contract that, due to the dramatic increase in fuel costs, it was likely losing money on.
The Court sided with the Navy. All the Court had to do was review the contract that was in place which allocated the risk of fuel price changes to DG21. Even more damning to DG21’s case was the fact that DG21 itself recognized that fuel prices fluctuate dramatically from year to year. Yet even though DG21 was aware of this risk, it did nothing during the contract negotiations to protect itself from fuel price fluctuations.

While not everyone will be contracting with the government, the point that this case makes is valuable to anyone involved in the construction industry, whether they are competitively bidding for work or simply negotiating the price of a project. Had DG21 fully examined the risk that was being allocated to it regarding fuel prices, DG21 may well have decided that it needed additional protections from that risk written into the contract; or that it needed to increase its bid price for the contract; or that it simply did not want to take the job due to the excessive risk that it would be taking. Unfortunately, DG21 did not undertake that analysis when negotiating its contract and was left in the unenviable position of finishing out a contract on which it would be losing money.
It is important to examine any contracts that are being entered into to see where the various risks are being allocated and to make sure that those risks are being fairly distributed between the parties.  Failing to do so could result in a job in which your profit margins are slashed completely, or in which you actually lose money.

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