Free «Legal and Ethical Implications» Essay Sample

Legal and Ethical Implications

A contractor is a person who is hired to carry out a specific task within the specialty of a contractor for compensation or through the contractor’s own initiative. A contractor may either be licensed or unlicensed, depending on the required expertise and the field of work. However, some contractors allow their licenses to be used by other construction companies for a pay. In such a case, there are two options for a contractor to choose: the licensed contractor may either choose to supervise the project that he/she is providing the license for or not. The law requires the former and forbids the latter case. In the event that a project starts construction without supervision by a licensed contractor, there are both legal and civil implications that may result in liabilities for both the company and the license holder. This paper discusses the legal, ethical and civil consequences that may results from unsupervised license “rent” and its consequences for both the contractor and the construction company.

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A license is a manifestation of the owner’s compliance with both the legal and academic qualifications provided under various statutes (Mason, 2009). In the United States of America, various states have different laws regarding the process of contractor licensing. However, one aspect that stands is the fact that a person must pass all of the required by the licensing board examinations before this person is allowed to operate as a contractor. Moreover, such exams can only be undertaken upon an individual receiving tertiary education in a required field. In addition a person is legally required to comply with the tax authorities and adhere to the code of ethics of contractors. Granting a valid license to a contractor serves as certified proof of the contractor’s competency. A license is expected to spur confidence in any member of the public seeking the services of a contractor. Therefore, every construction company is required to provide evidence of a licensed contractor for registration and for subsequent work on any project (Mason, 2009). A licensed contractor is not only required to run the company but also to supervise and manage all of the projects that have been acquired by the company in order to ensure that the work done is up to the set quality standards. Therefore, it is against the law for any person to carry out the functions of a contractor without having a license.

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Ethical Concerns Involved in the Scenario

Selling or renting licenses has as of late become quite a common practice not only in the United States of America but throughout the entire world as well. Even though the practice has become very common, it is still an unethical one. First of all, selling or renting a license is not only deceptive towards the government, but also puts the employer at a risk of having poor performance or a substandard result of a job. Under a contractor’s terms, a person who is fully qualified as a contractor is the one responsible party for the daily operations of a project as an agent of the entity of the employer or the owner of the property. A qualifier is someone who has met all of the academic and legal requirements set by the construction board and is currently in possession of a valid license. It will only be prudent for an individual in possession of such a qualification to carry out the work of a contractor themselves.

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Secondly, it is unethical for the qualifier whose license was used to acquire the contract not to supervise the performed work. In as much as it is beneficial to the company and the contractor in terms of gaining a substantial amount of money, if such an arrangement was brought to the knowledge of the employer, this situation would breach the confidence in the construction project. It is also unethical for a company to list an individual as a Responsible Managing Officer (RMO), as required by law, when in fact such a person is only playing a ceremonial role. In the given hypothetical case, the purchase of a license by the construction company was therefore conducted in bad faith, as it may jeopardize the quality of the performed work. Thirdly, the act of selling or renting a license provides an opportunity to those people who do not meet the required academic qualifications and the necessary experience to pose as qualified contractors, which is deceptive to both the government and the employer. As a result, a person who engages in such an act without actually supervising the work will be forced to accept various legal and civil responsibilities.

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Having laid a foundation, it is worth noting that all engineers are required to subscribe to an engineer’s code of ethics through an oath or affirmation. The essence of the code of ethics is to instill an type of ethical behavior and good practice amongst the engineers for the sake of the profession’s good reputation and for protection of the client. Therefore, in the proposed hypothetical case, upon the owner’s discovery that the construction project was started by the company without the supervision of an adequate Responsible Managing Officer (RMO), the owner must file a complaint with the licensing board for an investigation of the matter. Upon completion of such investigation, if the claims are authenticated, the qualifier risks suspension or complete termination of his/her license. The foreseen sanctions for a breach of of a contractor’s ethics are suspension or revocation of a license.

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While the practice of selling or renting contractors’ licenses for qualified persons has existed for quite a long time now, it is not until recently that the licensing boards have started contemplating on what to do in order to address the issue. The law is rather silent about this practice and various states and counties, for example the county of Ventura, have already commenced investigations in order to identify the best ways to regulate the issue. The reality is that selling or renting of a qualifier’s license is not completely illegal but it is rather unethical. However, the fact that is it not strictly illegal does not mean than an individual or a company that participates in such practices cannot be held liable. Trouble arises in such kind of a business when a calamity or an accident happens at the construction site and when subsequent questions as to who is liable for the incident arise. Another instance which brings commotion is an event that  a project results in work of questionable quality and the client files for an investigation into the company about the qualifications of the company. In such cases, various legal principles, ranging from the law of contract, agency, administrative and criminal law may be instituted by the client.

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It should not go unmentioned that usually most of the people who indulge in this kind of deals are retiree contractors. These are the people who have spent their lives building up their career in construction and have already created their name. Thus, it is of no surprise that most contracting companies resort to those retirees whose licenses are still active for buying up their licenses in order to boost the reputation of their company. However, when matters go wrong, in most cases, the responsible managing officers leave the companies in trouble by denouncing them.

Responsibility of the Owner

The owner plays a key role under the code of engineers’ ethics in ensuring the quality of work and responsible practice by an engineer. First of all, an owner must always ensure that the company who has the contract is qualified (Mason, 2009). This means that the company must meet all of the statutory qualifications, as pertaining to a sole proprietorship, partnership or an incorporated business. The owner must also inquire about whether the responsible managing officer is qualified as well. Owner should also keep eye on the project in order to ensure that the RMO actually supervises the construction project in accordance with the law. In the event of dissatisfaction regarding the manner in which the project is being implemented, the owner has a duty of filing a complaint with the state licensing board for an appropriate action to be undertaken. The owner has a further duty of reporting to the police should he/she know about any fraudulent acts committed by the company.

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In the given hypothetical case, the person who sold or rented his/her license was meant to be the responsible managing officer (RMO) of the company. The law requires any person holding the position of the RMO to be engaged in the actual process of supervision and management of the project. The construction law of California further requires such a qualifier to serve only as an RMO in not more than three companies in a year. Even that notwithstanding, a person can only serve as an RMO in a company that he/she owns approximately 20% of the shares (Stephanie, 2015). In the given case, it is evident that the RMO violated the assigned responsibilities as an agent of the property’s owner by taking a dormant role in the supervision. If the licensee also resided in California, he would have been liable for breach of the state licensing law for not owning at least 20 percent of the shares in the company guaranteeing him of direct supervision of the projects. To this extent therefore, the owner has the following remedies against the Licensee.

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Criminal Remedies

Upon the discovery the project has started without the services of an RMO, who in this case had sold or rented the license to the construction company, the owner may start criminal proceedings in court or the state licensing board. The licensee may be charged, together with the company, of conspiracy to defraud the owner. Upon successful court litigation, the court may order the licensee to pay a fine sentence the licensee to imprisonment. For example, in the state of California such individual would be liable to imprisonment for a period of up to 6 months or a fine of not less than $3000 and not more than $5000, or both the fine and imprisonment.

Civil and Administrative Remedies

First, the responsible managing officer, who is a qualifier, acts as an agent of the principle (the construction company) in the event of having an independent contractor, which is the case in this scenario. Upon filing the investigation to the licensing board by the owner , the licensee may face revocation or suspension of his/her license. Secondly, upon investigating the state of the undertaken project, the licensee may also be ordered to compensate the damages for any loss that is a result of the RMO’s inactivity (Stephanie, 2015). The damages to be awarded will however differ from a case to case basis depending on the value of the project under construction.











In this case, the construction company was acting as an independent contractor subject to its own control and authority. In as much as under the law, a corporation is not responsible for the illegal acts of its employees. There are some circumstances under which any officer of the company who engages in an illegal activity may be held responsible in criminal cases (Vee & Skitmore, 2003). The company however may also be liable in a civil suit. In the hypothetical case, the sale of or renting of the license by the licensee to the company with the full knowledge of the officers of the company that in fact the licensee was not going to carry out the duties of an RMO, makes it liable in a civil suit.

Criminal Remedies against the Company

The construction company as a whole is generally not liable for any criminal case. However, those officers who have participated in fraudulent acts are liable for imprisonment or payment of a fine, as required under the respective state licensing laws. In this case, the licensee is also treated as an officer of the court since under law the licensee serves as the responsible managing officer.

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The Civil Remedies Available against the Company

Generally, the company enters into a contract on specific terms with the owner. An agreement is drawn between the owner and the company before commencement of the work. There are some provisions under law however which are implied into the contract whether sated or not. Such includes the term that the Responsible Managing Officer (RMO) be a qualified person and undertake the actual supervision of the work. In this case, the failure by the licensee to perform the functions of management and supervision of the project is a breach of contract (Vee & Skitmore, 2003). The owner is therefore entitled to the repudiation of the contract, as there is a breach of a condition as opposed to a warranty. The owner may also file a civil suit against the company for compensation of all the damages incurred as a result of the negligence of the company.

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In conclusion, we can state that there is a thin line between the services of a company and the responsible managing officer. When a company rents or seeks to buy the license of the licensee, it accepts to take the contractor as one of the key employers of the company and is therefore responsible for the acts and omissions of this employee. The act of license selling is, however, unethical but not necessarily illegal. The process is legalized when the law treats such a qualifier as the Responsible Managing officer (RMO). The failure to supervise the project by the RMO therefore makes the company and the qualifier liable in civil and criminal law for damages, breach of contract and Fraud respectively.

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