Business failure is never a pleasant topic. If a business is forced to close its doors, is the owner a business failure, or a victim of several unfortunate and often unforeseen circumstances?

Mr. Jones was an hvacr contractor in an Appalachian state. The town was serviced by at least five heating-cooling contractors, and maybe a few others who worked out of their homes or trucks. Jones recently closed his shop, the victim of a slow economy, uncooperative weather, and a costly lawsuit.

Jones agreed to tell me his story, saying, “If I could help one other person avoid this pain of loss, it would be a pleasure.”

His story began over three years ago during a slow January, when Jones had to temporarily lay off three employees. One, a female dispatcher, felt she was unjustly laid off while others with less seniority continued to work, so she filed a lawsuit. She also said she was told by Jones that she would never move into a management position. Whether her claims were justified or not is not for discussion here, but the drain on the company’s financial base was devastating.

The employee also sued the company’s accounting company, which handled payroll. Since that company had a “hold harmless” agreement for any disputes between employees and employer, Jones had to cover their legal expenses, too. The legal fees began piling up.


“For months we would have legal fees from our defense attorney, their [accounting company] defense attorney, our occupational experts, their occupational experts, our vocational experts, their vocational experts, and so on,” lamented Jones. “Some months, legal fees would be in excess of $20,000.”

Some contracting companies might be able to absorb losses like this, but Jones was finding it hard to break even.

“A company must pay out every dime it has [for legal fees] and then finance the rest,” said Jones. “They have to do this regardless of their financial resources, or go to court and see what the jury will decide. Unfortunately, in our state we have record-breaking verdicts in favor of labor, with no monetary caps.”

Jones said he could have avoided the entire problem by renewing his Employer’s Liability Insurance that year at “about $100 per employee,” he said. “I renewed it every year but never needed it. I thought it was an added cost and I wanted to be able to pay my employees the highest wages, so I cut it out.”

On top of all this, Jones was in the midst of a downturn in his state’s economy. Add to these another problem — the weather. “We’ve had winter temperatures of 60 to 80 degress F and summers with 45 degree nights and 72 degree days,” Jones sighed. “Even the keenest of contractors are hurting with temps 17 degrees below normal in the summer and record-breaking highs in December.”

Jones’ response to all of his woes was poignant yet to the point.

“Do you close the doors or do you keep up your chin and believe in what you feel is right, and that in the end you will win? Well, we kept up our chins; served our customers 24 hours a day, and served our employees.

“Some nights, my wife would stay awake from 1 until 4 a.m., worrying about how to pay our vendors and make payroll. We filled up credit cards to pay for equipment and materials.

“Finally, we got to the point that we had no work coming in — we could not make payroll if office and service technicians were to come in. So we decided that was it.”

Jones is now looking for a career in the Human Resources field, where he is degreed, and would like to stay in the mechanical contracting trades.

By the way, this is a true story; only the name has been changed. If you’d like to talk with Jones, drop me a line and I’ll put him in touch with you.

Hall is business management editor. He can be reached at 734-542-6214; 734-542-6215 (fax); (e-mail).

Publication date: 02/25/2002