Florida Legislative Update: 2000 Amendments To Statutes Affecting The Construction Industry
 
December 13, 2000
 

There were few amendments affecting the construction industry this year, but some changes were significant. The most important changes were in the areas of contractor licensing and indemnity.

Contractor Licensing

In Florida, general contractors must be properly qualified through a licensed contractor who holds a license for the work contracted. People and companies performing unlicensed contracting may be subject to possible fines and imprisonment.

Unlicensed contracting may have financial consequences, because both contracts performed by, (and liens recorded by) unlicensed companies are void and unenforceable. While some people believe the statutes previously suggested that an unlicensed contractor simply could obtain a license or affiliate itself with a licensed contractor to make the formerly void contract enforceable, the 2000 Florida Legislature removed the ambiguous statutory provision.

Unlicensed contractors’ contracts and liens are void and unenforceable.

Sometimes companies hire licensed contractors to work there and to pull permits as needed, but the license holder does not “qualify” the company as required by Florida law. Sometimes contractors form new companies, but do not “qualify” the company as required. Instead, the company may pull permits using the license holder for the original company. Some companies pay a licensed contractor to pull permits, although the contractor has nothing to do with the company performing the work. Finally, some unlicensed companies perform work without pulling the required permits. All of these scenarios may be considered “unlicensed contracting” in Florida.

It is important to determine if your company is properly licensed, to prevent the possibility that an owner may terminate your contract without paying for work performed and leave you with no recovery because any lien would be void and you cannot sue under the void contract.

Indemnity

Almost all construction contract documents contain at least one indemnification clause. Usually the contractor agrees to defend the owner and pay any claim for personal injury or property damage, whether the owner was partially or completely at fault for the accident. Subcontracts often require subcontractors to indemnify the contractor in the same way.

Until this year, Florida law permitted indemnity clauses if there was a “monetary limitation” on the extent of the indemnity, or “specific consideration” was paid for it. This year the legislature unexpectedly replaced the prior statute with the following:

1) A construction contract may require a party to that contract to indemnify and hold harmless the other party to the contract, their officers and employees, from liabilities, damages, losses and costs, including, but not limited to, reasonable attorney’s fees, to the extent caused by the negligence, recklessness, or intentional wrongful misconduct of the indemnifying party and persons employed or utilized by the indemnifying party in the performance of the construction contract.

2) Except as specifically provided in subsection (1), a construction contract may not require one party to indemnify the other party, its employees, officers, directors, or agents from any liability, damage, loss, claim, action, or proceeding, and any such contract provision is void as against public policy of this state.

Contracts should be modified to address this recent statutory amendment; otherwise the indemnification clause(s) may not be valid. There are no reported cases on whether indemnity clauses indemnifying for one’s own negligence, which were in place prior the July 1, 2000, change in the law, are enforceable. Stay tuned.

Other Amendments

Venue. The 2000 Legislature created Section 47.025 of the Florida Statutes to provide that, in almost any construction contract, a venue provision in the agreement which requires legal action to be brought outside the state is void. If such a provision exists, legal action arising out of that contract is to be brought according to Florida’s standard venue provisions, but in no case outside the State of Florida unless the parties stipulate.

Negligent Hiring. To protect employers against liability for the intentional torts of their employees, the 2000 legislature created Section 768.096. If, before hiring the employee, the employer conducts a background investigation which did not reveal any information that reasonably demonstrated the unsuitability of the employee, the employer is presumed not to have been negligent in hiring the employee. A proper background investigation includes one of the following:

• criminal background checks through FDLE

• reasonable efforts to contact references and former employers

• check of driver’s license records if relevant to employment

• requiring the prospective employee to complete a job application form that includes questions concerning whether he or she has ever been convicted of a crime (including details regarding the crime), and whether the prospective employee has ever been a defendant in a civil action for intentional tort

• an interview of the prospective employee.

The statute also provides that the failure of an employer not to conduct such an investigation does not raise any presumption that the employer failed to use reasonable care in the hiring of the employee.