Creating a comprehensive home inspector contract that includes all the necessary information to make sure you are protected can be challenging. Home inspectors are always open to lawsuits despite having an extensive contract. Home inspector insurance can protect you in the unfortunate occurrence that you get sued. EliteMGA offers great home inspector insurance coverage at an affordable price. Contact EliteMGA today to talk about your home inspector insurance options.
This article has been updated for 2020 and all information is current.
Employment contracts are widely used in the United States. Every state has unique statutes and case law related to what can be in an employment contract and what’s enforceable. Generally speaking, employment contracts should be the document between you and your employee that sets out the scope of the work they’re going to do, the time period that the contract will be enforced, and define certain obligations, sometimes relative to insurance or other ancillary issues.
Non-Compete Agreements for Home Inspectors Employment Contracts
Home inspectors often ask about the enforceability of the terms related to the covenant not to compete or the restriction on the use of confidential information or information generated during the employment.
As home inspectors, your ultimate duty is to your client and certainly not to the real estate agent or other people that may direct business to you. The employment contract’s covenant not to compete, generally speaking, is the method the employer uses to make sure the employee cannot take everything they’ve learned and been trained on by the employer and then go right out and start a competing business in the employer’s area.
The courts generally view the covenant not to compete in very strict terms. The issues that are generally used by judges to determine whether or not they are enforceable are:
- Time period of the restriction
- Geographical area of the restriction
- Whether or not the employee can reasonably perform services and have gainful employment in this field even assuming the restrictive covenant applies
However some states, like Oklahoma, completely preclude you from having anything in the employment agreement that relates to preventing the employee from going and performing their professional services somewhere else. So, you need to be mindful what the laws are in your state related to those.
Confidentiality Agreements for Home Inspectors Employment Contracts
In many instances, the employer is sharing with the employee lists of potential clients and referral sources or particular ways employers want the inspections performed, and the employer wants to ensure they’re the only ones doing it that way. In these situations, as the employer, you want to be mindful that the contract is not so one-sided as to be unenforceable. Likewise, for the employee, you want to make sure that should something come up in your employment that causes you to have to separate from that employment, you can still feed your family and operate a business without having to abandon all the training and experience you had when you walk into the other job.
Home Inspector Employment Contracts for Independent Contractors
What we’re generally looking at in these agreements is indemnity. What is needed from the independent contractor is indemnity flowing to the inspector hiring the independent contractor so that if the independent contractor is negligent or causes some other problem, in regard to the part of the inspection they’re focusing on, the employer can make sure they’re indemnified and held harmless. The contract should include verbiage that states that the subcontractor will set up and provide you with a defense and indemnity.
Home Inspector Insurance and Independent Contractors
Nine times out of ten, the independent contractor may not have insurance because their particular business isn’t regulated like yours. We always want to make sure that any independent contractor you’re using is fully insured or, in states where it’s required, fully bonded. You also want to make sure that there’s a clear line of demarcation with regard to the things that the subcontractor or independent contractor may be to indemnify you for versus things you may have to indemnify them for.
Confidentially Agreements and Independent Contractors
Just like in the employment contract, there needs to be a strong provision related to the confidentiality of information or material that the independent contractor develops or receives as part of their work for the employer. You want to make sure that member lists or anything else that the employer needs are sent back to the employer and that independent contractor in this situation is not using those contacts or that information to develop business above and beyond the work that they’re getting from the inspector.
What is Indemnification?
Indemnification, as it applies to both of these contracts, means that somebody else is going to step in and insulate you from any judgment or attorney’s fees related to defending you when the subcontractor or independent contractor makes a mistake in performing their services. If possible, you’ll also want to make sure that you are an additional insured on the independent contractor’s or subcontractor’s E&O or general liability insurance so that there’s no question that when the time comes and there’s a problem that the insurance is going to step in and defend you just like your insurer would.