For example, all red, yellow and silver fidic books in 2017 provide for the restriction of subcontracting beyond a specified value, as well as restrictions on the subcontracting of certain parts of the work.1 The 2017 Red and Yellow Books go so far as to restrict subcontracting (with the exception of subcontracts to material suppliers, for example, a subcontract, for which the subcontractor is named in the contract), unless the engineer agrees in advance.2 The consequences of a link with a company that operates an illegal subcontract can be serious – not only does the illegal subcontractor face criminal and civil fines, but also the companies that hire him are equally likely to face investigations and penalties. The 2016 YCW Design and Construction Contract also prohibits the Contractor from subcontracting all or part of the Work or part of the Design to subcontractors without the employer`s consent3, although the form of the Contract allows for the use of additional provisions allowing the parties to insert designated subcontractors at the time of signing, and the contractor may subcontract with such subcontractors.4 Contractual Restrictions on subcontracting generally play an important role. One of their main goals is to ensure that only suitable and trustworthy subcontractors are involved in a project. While restrictions on subcontracting can be prevalent in the industry, Advanced v Daintree is a timely reminder to contractors of the legal risks associated with non-compliance with contractual restrictions on subcontracting. Finally, we note that restrictions on subcontracting are not only an area of risk for the prime contractors themselves, but perhaps also for the directors of the prime contractors. In a separate case earlier this year, Singapore`s Supreme Court found that a director is personally liable for failing to act in the best interests of a company by actively participating in subcontracting in breach of the main contract. Subcontractors are used in our industry to reduce the cost of wages, benefits and payroll taxes – a practice that is by no means illegal. However, some entrepreneurs go too far from this practice – they cut in accordance with applicable labor laws and lead to significant wage fraud. Here are some of the types of “illegal subcontracting” that hurt our industry. Federal and state officials, with the support of the Obama administration, are beginning to aggressively pursue companies that participate in illegal outsourcing in order to circumvent taxes, insurance, and Social Security and gain an unfair advantage in the market. A recent federal study concluded that employers have illegally spent 3.4 million regular workers as contractors, while the Ministry of Labor estimates that up to 30 percent of companies rank workers poorly. Strictly speaking, “subcontracting” is practised by only one contractor, i.e. a natural person or an undertaking working for another undertaking under a contractual agreement.

If the contractor then leases part of the work to another organization, it is said that it has subcontracted the work. Subcontracting is more common in the construction industry: builders often outsource piping, electricity, drywall, painting, and other tasks to subcontractors. But many other sectors are also engaged in contract work, especially government contractors of all kinds. The entire industry that supplies the U.S. Department of Defense typically operates under contract and in turn uses many subcontractors. Do you know of a concierge service that is so cheap that you suspect its hiring policy is not clean? Rest assured, the facility manager who hires them will have to pay sooner or later. Embarrassing negative publicity, damaged reputation, damaged business relationships, costly legal defense efforts, and high civil and criminal penalties are some of the problems faced by companies associated with illegal contracts, even as an “innocent” third party. Illegal subcontracting in any form harms very many people and businesses, including honest taxpayers who have to foot the bill for lost tax revenue on wages, ethical construction services companies and their employees who are unable to compete effectively with fraudulent companies. .