Liability Coverage with former employer. 1

[strguy11]

I was recently laid off from my employer due to the bad economy. Later that same week, my previous employer called me concerning whether or not I would be willing to seal one of their projects, as I was the only engineer licensed in that particular state. Unless they hire another engineer, or one gets licensed in that state, I dont believe they can legally complete the contract. (My signature is on the contract, but it as an agent for the company, not me personally).

I have 3 questions:

1. Would any of you consider doing this?
2. Are there any legal reprecussion against me if I dont do this?
3. What types of questions should I ask to make sure I am covered. (liability umbrella, fee, etc).

 

[photoengineer]

I'd do it if they gave me my job back. Or I would do it for a nice fat consulting fee. Sounds like they laid off the wrong person to me.

The company can provide you with an indemnification against liability in the future. I wouldn't worry about insurance if I had an idemnification from a reputable company.

They can't do anything if you refuse. However, you have a lot to gain by working out a deal. Cash in your pocket now and potential future work.

Note - you're probably getting unemployment. You'll want to consider what impact, if any, consulting work has on your unemployment status.

 

[zdas04]

Are you considering starting on your own? If so, I'd get my own insurance and negotiate a fee for the work. If not, I think I would just not return their calls. The cost of developing a way to invoice them for a one-off doesn't make sense to me (not just generating the invoice which can be a word document, but the hassle to get your company to be a legal entity with the city, county, state, and IRS)

The "letter of indemnification" approach assumes that you trust them to follow what is actually an unenforceable contract. They could sign it and then sue you and you really can't do anything to do except defend the suit (which you could possibly win, but the only real winner is the lawyers).

I wouldn't tell them to stuff it, I would just be "out" when they call and have "technology problems" the would prevent me from returning their calls. If they did catch me I'd say I was considering it. You don't want to burn bridges, but they fired you so you are not obligated to jump through any hoops for them.

As for repercussions against you if you don't do it, you need to ask a lawyer (another expense). The contract you signed did not have your PE stamp on it, so you were acting as the company's agent and you should be OK, but tort law is so wonky that an upset client could sue the company, its officers, and the Attorney-in-Fact that executed the contract as co-defendants. If that happens you are simply screwed. While you were an employee your legal costs were a legitimate business expense for the company. Now they would not be. If you get your own insurance then it will not cover any action that took place before it was in place. You need to check with an attorney about whether stamping the project would put you in a better or worse position.

I don't think you can get insurance for this mess, but check with an insurance agent.

David

 

[casseopeia]

What idiots! I'd only do it with an employment contract for a stipulated minimum period of time. I'd consider asking for back pay too.

"If you are going to walk on thin ice, you might as well dance!"

 

[photoengineer]

What we don't know is the level of risk involved in sealing the document at stake. If it is a high risk job (say signing off on the engineering calculations of an amusement park ride for kids), I would want to go through the hassle of incorporation and having insurance. If it is a low risk job (I won't say an example here, but I recently sealed a no-risk engineering job), I'd do it all day long with an idemnification or even no contract at all. It all depends on what the risk that you're taking.

 

[strguy11]

It is a high risk job, so the liability is what concerns me. If i contract with them as a contract employee, rather than a separate firm, then am I covered under thier policy? I would think I could stipulate that in the terms, and be ok, rather than getting insurance, but wanted some other opinions. I guess if I need to by it, I could get a separate policy for that one job, and bill it back to them as an expense!!

 

[photoengineer]

In your case, do you think the employer would be willing to rehire you for one day as an employee, and then lay you off.

If it's a high risk job, insurance probably won't help you out. Most insurance policies work that the policy must be active at the time the claim is made, so you will have to have insurance for an ongoing length of time until your liability runs out. Your state laws and your contract will say how long that is. However, since you can be sued at anytime in the future, you probably will want insurance clear through retirement for a high risk job.

Unfortunately, that probably means the job is not worth it unless you are covered by the company.

 

[photoengineer]

The way that you limit liability is to do the following:

1) Incorporate your business as a limited liability company
2) Open a bank account in the name of your LLC and use it only to pay your annual dividend (the money you keep) and business expenses
3) Purchase an insurance policy if desired/required
4) Create letterhead, get a a work e-mail address, and setup a PO box to keep your personal business separate from your company business.
5) Obtain the necessary business licenses. Note that you will have to have a certificate of authorization from the state that says you can practice engineering on behalf of the LLC.
6) Should you get sued, your insurance policy should cover your cost. If not, dissolve your LLC. By separating your LLC from you as I described above, you should be able to show the arms-length distance between your LLC and your personal stuff.

Obviously, this is a lot of work.

 

[zdas04]

"Contract employee" is a contradiction in terms. A company "contracts" with another company to supply resources. If a company contracts with an individual for similar resources then it is called "employment". I've seen people sit in the same office for years as a "contractor", but in that case the company that needs the person writes a regular check to another company. The second company then forwards a [small] portion of that amount to the worker after taking out their profit and withholding taxes. If the company needing the resource were to pay the worker directly then in a very short period of time (weeks not years) the IRS would get involved and people would get fined for not filing employee taxes. They get cranky if a supposedly arms-length worker gets all (or more than 1/3) of their income from a single company.

You were probably explicitly named on your employers insurance since no business structure shields a PE from personal liability on negligence claims and who would put themselves and their family at that kind of risk without insurance? Oh yeah, people do it every day without any compensation for the risk because they got TERRIBLE advice from their colleagues on eng-tips.com, the water cooler, or other places where Engineers give opinions about stuff they don't know enough about.

If you know it is a project that has a high risk of ending up in a courtroom I see that you have two choices: (1) RUN away, run far away; or (2) engage an attorney and get a contract that mitigates as much risk as possible and adequately compensates you for the remaining risk. There is a third option, but it involves living under a bridge in a Maytag box.

David

 

[Ron]

Read zdas04's first post, then read his second post. Now read 'em again.

Don't ignore his advice. It's right on target.

 

[oneintheeye]

can't you ask to be taken back on as an employee?, work the project then you get notice on top?

 

[ColonelSanders83]

I would simply tell your former employer they have two choices.

1) Hire you back with a 20% raise and garunteed 2 year employment contract with lump sum cacellation penelty. This way you stay an employee and the liablity is thiers to cover, and you don't have to worry to much for the next little while.

2) leave you to your very important job search because they fired you.

In this case they contacted you and you have the power. The concern in the back of my mind would be they don't seem that clever if they laid off a neccessary asset.

Just my two cents worth.

 

[GregLamberson]

If you live in a smaller town, not many potential employers around and not willing or able to re-locate, I would present them a fair proposal and see what they said.

Even if not, I would still look at it. I assume you will be using someone there as a reference for future employment or at least a future employer will check with your last company, wouldn't burn any bridges. Seems like this can get worked out - they have a need (a stamp)you have a need (money for now, future employment), seems like a no-brainer for working out a deal.

Greg Lamberson, BS, MBA
Consultant - Upstream Energy
Website:

http://www.oil-gas-consulting.com

 

[PeterStock]

A no brainer, if the risk is moderate.

Strguy, did you work on the project? If so, your judgement should suffice as to changes of failure of the structure. As to insurance cover, I would suggest you get the former employer to provide a notarized statement stating that you were let go in error, and that they accept that you are covered under the companies policy. If you did not work on the project, take your time to review the drawing, calcs etc after geting a notarized statement as I suggested. In any case you should be paid for the time you were "on leave" and I would get a firm time commitment in writing. The raise I would definatly ask for.

I would not even consider doing this without a statement from the insurance company that you are covered.

Peter Stockhausen
Senior Design Analyst (Checker)
Infotech Aerospace Services

http://www.infotechpr.net

 

[rbulsara]

Why so much fuss? Just tell them NO because of the liability reasons. That is a professional reason, nothing that could burn the bridge.

Alternative is to have them hire you back. Too much complication in accepting any 'fee' for the work for very little gain, if any.

If you want to start on your own, spend your time and energy there or in seeking other employment.


Rafiq Bulsara

http://www.srengineersct.com