Trade qualifications and licensing, permits, and Workers’ Compensation Insurance (WCI): these are important requirements that help separate the legal contracting businesses from the illegal ones. You’ve probably heard these words before, but do you know what they really are, and why they are important?
It's easy for consumers to be isolated from industry standards. It’s unlikely that homeowners surf the internet in the wee hours of the night researching provincial plumbing requirements.
And, even if consumers have done their research, they may not have been told that one who is ‘qualified for the job’ may not be an ‘expert at the job’. This is a huge issue in the contracting industry, and contractors are well acquainted with it.
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Tension in the Contracting Industry with Mandatory Requirements
Businesses and contractors must have the appropriate trade qualifications, licensing, permits, and WCI to legally operate. However, these requirements can be an ongoing expense that detracts from annual revenue. That high price may encourage some contractors to avoid necessary requirements. Doing so may mean a higher revenue, but it puts safety and legitimacy on the line.
There is a tension between contractors who follow the rules and those who don’t, and the consumer plays a big role in this relationship.
A contractor who bypasses the rules can charge less for their services if they don’t pay for licensing, permits, or WCI premiums. Contractors that stick to the rules must charge more to make up for the money spent on provincial requirements.
A client who wants to keep costs down might choose the cheaper contractor without realizing the consequences. Some consequences are that:
- illegitimate contractors will cost consumers in the long run through insurance claim issues, lawsuits, incomplete projects, or bylaw complications.
- supporting illegal companies encourages illegal operations.
- supporting illegal companies creates an unfair playing field within the industry.
Despite the importance of trade qualifications, consumers don't know what contractors do: provincial requirements can put up an illusion of good workmanship. Some contractors feel that permits, licenses, and certifications can be a means to an end, and these requirements don’t translate to expertise.
Almost any qualified and licensed worker could pass off as a professional without being a real expert, all they need is a slip of paper to say so. In fact, there are plenty of unlicensed and uncertified tradespeople who are highly skilled at what they do. So, what is a homeowner to do in light of this?
- Listen to what homeowners have to say about their experience with a contractor on TrustedPros.ca.
- Gain an understanding of these requirements. You may find that they are important to you. If that's the case, you may wish to hire legitimate contractors. If that isn’t convincing enough, you should know that trade qualifications, licensing, permits, and WCI are mandatory for Journeypeople in most provinces.
Find out more about why these four renovation industry standards are essential for home renovations.
We encourage you to always hire legal Journeypeople for the sake of maintaining a fair industry playing field.
The Four Requirements
Keep in mind that fulfilling all four requirements does not make a contractor an expert. Nevertheless, be sure to ask your contractor for proof that they have met all of these requirements before you hire them. Be sure to check the following:
- license number
- qualification card
- WCI number
You can confirm this information with the appropriate governing bodies. Consider contacting:
- Government Trades Associations
- Workers Compensation Boards
Make sure that your contractor provides you with a copy of your permit if you cannot get one before your project.
Compulsory trades demand that tradespersons have their Certificate of Qualification (C of Q) before working in the field. Unless a Journeyperson has their C of Q, they can’t officially work in a compulsory trade. The C of Q distinguishes a worker who started as a learned apprentice with in-class training from everyone else. most of these mandatory trades include electrical, plumbing, gasfitting, heating, and air conditioning. Apprentices are paid while they learn in-field. Some provinces, like New Brunswick, will pay apprentices to get formal certification. It is said that certified Journeypersons are paid higher salaries, and certification may be a requirement for some employers.
Trade qualifications mean that the student has learned a standardized curriculum, and has passed all necessary examinations to prove they know their skill. Consumers can check if their contract workers are licensed by contacting government trade organizations in Ontario, Quebec, and B.C.
Workers’ Compensation Insurance
WCI protects employees and employers in the case of a workplace injury. It helps employers cover costly medical bills, and employees earn a salary during their leave. WCI is usually mandatory for employers who hire any employees (provincial standards vary). Any employer who doesn’t cover their employees that qualify for mandatory coverage is participating in illegal activity. Homeowners who hire uninsured workers could face legal charges in the event of a workplace injury.
WCI premiums can get exceedingly pricey, which means tighter revenue margins. Covering the cost of WCI is difficult for business owners who are squeezed by Provincial Workers’ Compensation Boards. The increasing cost of WCI may mean wage decreases for workers. The recent raise for Ontario WCI premiums in the construction industry is said to either raise businesses prices 70%, or cut employee wages by 25%.
There is detailed information on Workers' Compensation Insurance from province to territory here.
Permits are a localized matter that depends on municipality or province. Permits grant you permission to do certain things according to city bylaws, or provincial laws. Obtaining a permit will help you make sure that your project complies with laws, bylaws, zoning restrictions, and environmental protections acts. Some permits are accessible to homeowners, others are only accessible to licensed professionals.
Permit holders can order an inspector’s review for the work done throughout a project. Thus, permits help you make sure that the work meets an acceptable caliber. As a homeowner, it’s hard to tell when a job is up to code, which is why it’s valuable to have a city inspector on your side throughout the course of your project. The cost of a permit is worth it.
Permit costs can add up. For a contractor who does the same work over and over again in a small city, obtaining a permit can seem redundant and unnecessary. Nevertheless, permits are obligatory. Without a permit, workers can be fined, projects can be halted, and buildings can get condemned or even removed by the city.
It is best to check with your municipality about permit requirements before the start of any projects that require a contractor.
Licenses are a provincial matter. Licenses give people permission to do certain jobs. Certain provinces require particular trades licenses, and some provinces are more strict with enforcing the rules than others. Usually, one must prove that they have sufficient trade expertise and knowledge to receive a license. For example, Master Electrician Licensing in Ontario requires that the Journeyperson works 3 years before applying to the Electrical Safety Authority (ESA). Master Electricians can be sole proprietors, or operate a business without any oversight. Thus, it is essential that Master Electricians have robust experience before they become industry leaders.
Generally, licensing helps weed out inexpert tradespeople. It standardizes and tests skill. One advantage to hiring a licensed contractor are industry insurance requirements. For example, the ESA requires its applicants to have $2,000,000 in damage insurance before they can obtain a license. Ultimately, this protects the Journeyperson and the client in case something goes wrong.
Hiring an unlicensed contractor may mean that insurance claims you make in the event of an accident could be denied. Keep in mind that hiring a licensed contractor is your responsibility, even though it is a contractor’s responsibility to follow provincial laws.
Find out more about varying trade license standards across Canada.
Professional or General Liability Insurance
Professional and general liability insurance is not mandatory for contractors. However, these types of policies can be helpful due to their general scoping coverage. Some homeowners are adamant that their contractors are well insured.
It is difficult for contractors to avoid "professional" liabilities today like they did in the past. As the industry changes, responsibilities grow, and the team of "experts" on a project becomes more intricate. Today, general contractors are regarded as professionals in their field when they sign contracts as “management”, or “manager”. If they sign a contract as one providing "design services", they are also considered a professional.
"Professionals", or "experts", are expected to have a high degree of knowledge. When they have been deemed negligent in the event of damages due to omission or oversight, they may be held professionally liable. Being liable as a professional is a big responsibility that may require broader insurance coverage than traditional general liability insurance.
In the past, general liability insurance used to be sufficient for contractors. It covers “losses caused by ‘ordinary construction means and methods’” as they occur in the form of property damage or bodily injury. Coverage triggers at the event of the injury or damage. However, it does not cover issues such as project delays or reinforcing a completed faulty structure, for example. Yet, these issues would be considered the contractor’s responsibility as the building designer, or the project manager. Professional liability insurance would better cover the contractor in the event of these issues.
Professional liability insurance usually covers damage claims alleged to be the result of negligent performance, or error on behalf of a field expert. It is understood as a “failure to render professional services”. This insurance covers damage claims and the claim defense process.
It is important that contractors have their risk and liability assessed by underwriters before they decide to purchase any liability insurance. For more information, please read from our sources on the topic in either of these links.Posted by: Nicole Silver