Maryland Senate Bill 853 – General Contractors Now Liable for Ensuring Payment to Subcontractor Employees

As of October 1, 2018, General Contractors operating on construction services projects in Maryland are now potentially subject to additional liability under the “General Contractor Liability for Unpaid Wage Act” introduced through Maryland Senate Bill 853 (the “Act”).  Specifically, a general contractor may be jointly and severally liable for subcontractors’ failure to properly pay employees.  To make matters more complex, this applies to subcontractors who are not even in direct contractual privity with the general contractor and can arguably extend infinitely down the sub-subcontracting chain.

Indeed, general contractors may now be liable for ensuring that every down-the-chain subcontractor on a project properly pays their employees in a manner consistent with Maryland wage and hour laws.

This controversial law also contains both a multiplier and an attorneys’ fees provision.  Specifically, if a subcontractor fails to pay an employee in accordance with Maryland’s wage and hour laws, both the employee’s direct employer and the general contractor may be liable to the employee for up to three times the wages owed, plus reasonable attorney fees and costs.  A claimant may make a claim against both the general contractor and the non-paying party as soon as two weeks after a violation occurs, and as late as three years after the occurrence.

In an attempt to balance the scales, the new law requires subcontractors who fail to properly pay their employees to indemnify the general contractor for “any wages, damages, interest, penalties, or attorney fees owed as a result of the subcontractor’s violation;” however, this indemnity protection is only as strong as the subcontractor’s ability to pay such damages and costs.  The exception to the requirement for subcontractors to indemnify general contractors occurs either when: (1) indemnification is already provided for in a contract between the general contractor and the subcontractor; or (2) the violation arose due to the general contractor’s failure to make timely payments to the subcontractor.

The full repercussions of this new law are yet to be determined, but ambiguity in the Act raises several questions.  First, the Act imposes no obligation on the subcontractors to provide the general contractor full access to all payroll and supporting records that would be needed to defend a claim, including a potentially fraudulent claim.  Second, the Act fails to specify whether an employee-claimant need even be staffed on the same project as the general contractor, or whether merely being an employee to the subcontractor who has staffed other employees on the project will suffice.  These questions will likely be clarified through litigation.

Steps you can take:

In response to the Act, both general contractors and subcontractors should review their contract provisions with counsel, general contractors may consider requiring subcontractors to obtain a bond or insurance to protect against wage claims by a subcontractor’s employees, and consider adding contract provisions to allow for review of their subcontractors’ pay practices, records, and history of wage claims and lawsuits for at minimum three years following final payment.  General contractors should further consider requiring a subcontractor’s principal or officer to sign certified payrolls, thereby attesting that employees were paid properly.

Governor Wolf Signs Amendments to CASPA into Law

On June 12, 2018, Governor Wolf signed HB 566, as amended, into law.  The new law makes some significant changes to the Contractor and Subcontractor Payment Act (“CASPA”) and it will take effect on October 10, 2018 (120 days after it was signed).

The new law has the following effect:

  • Any contract provision purporting to waive rights afforded under CASPA is unenforceable unless waiver of the right is expressly permitted by CASPA (for example, CASPA permits parties to modify by contract the CASPA right to interest at a rate of 1% per month).
  • For contracts lacking a provision permitting suspension of work for nonpayment, contractors and subcontractors now have a statutory right to suspend work for nonpayment under the following conditions:
    • Payment has not been made within the period of time required by the contract or the statutory period set by CASPA, whichever is applicable;
    • After 30 calendar days have passed since payment was due, written notice of the nonpayment is sent via email or postal service to the person who owes the payment or their authorized agent; and,
    • After 30 calendar days since the written notice of nonpayment was sent, written notice is sent via certified mail (to the person who owes payment or his/her authorized agent) of the intent to suspend performance in 10 calendar days if payment is not made.
    • Thus, under this statutory right, work may be suspended no earlier than 70 days after payment was due.
    • Parties can contract for a shorter period of time to suspend performance after nonpayment.  Conversely, any suspension of work provision that provides for a longer period of time (or does not permit suspension in the event of nonpayment) is unenforceable.
  • Good faith withholding of payment now expressly requires written explanation of the reason for the withholding within 14 days of receipt of an invoice.
  • Most notably, the Act expressly provides that failure to provide a written explanation within 14 days will constitute a waiver of the right to withhold and require payment of the invoiced amount in full.  As always, the amount of the withholding must be reasonable (i.e. a reasonable estimate of the cost to correct the deficient work or the damages sustained).
  • These written notice of deficiencies requirements must also be followed for retainage to be withheld beyond 30 days of final acceptance of the work; otherwise, the right to withhold retainage is waived.
  • Delay of payment due to an error in an invoice is now expressly prohibited.  CASPA has always required written notice of invoice errors to be sent within 10 working days of receipt of an invoice.  The Act now makes it clear that, once the notice of the error is received by person who sent the mistaken invoice, payment of the correct invoice amount must be made when due regardless of whether (or when) the invoice is corrected.
  • Finally, contractors and subcontractors now have the express right to payment of retainage upon substantial completion if they post a maintenance bond for 120% of the retainage amount.

Courts likely will construe this Act to not apply to contracts entered before October 10, 2018, but we suggest that owners, contractors and subcontractors begin complying on that date with any new duties imposed on them to avoid possibly waiving rights or arguably becoming subject to the remedies provided by CASPA.

We have drafted a red-lined copy of CASPA that shows the revisions made by this law and it is available for you to review here.

Payment Bond Fraud in Pennsylvania – Why Subcontractors Should Request Copies of Payment Bonds When Signing Subcontractors for Public Projects

The News Story

The Times-Tribune reports that a Lackawanna County insurance agent recently pleaded guilty to fraud for accepting premiums for payment bonds from contractors but never actually procuring those payment bonds from a surety.  This resulted in situations where public works projects were performed without any payment bond providing security for the subcontractors.  Pennsylvania’s Public Works Contractors’ Bond Law of 1967 (i.e. the “Little Miller Act”) requires payment bonds for public projects but imposes no penalty on the public project owner for failing to ensure the requisite bonds are posted.  Thus, Pennsylvania public project owners have no incentive to check to make sure its primes post the required bonds and things like the fraud described in the letter can easily go undetected.

 

The Practical Lesson for Subcontractors

Accordingly, this story is a good reminder to subcontractors in Pennsylvania about the need to obtain a copy of the payment bond for a public project at the time of subcontract formation rather than waiting until when a dispute arises.  Such action will help protect against the type of fraud described in the Times-Tribune report by revealing the lack of payment bond before the subcontractor finds itself in a compromised position.

Bill Seeking to Amend Pennsylvania’s Private Project Prompt Payment Act Passes House Vote

On June 20, 2017, Pennsylvania House of Representatives passed House Bill 566, which proposes amendments to Pennsylvania’s Contractor and Subcontractor Payment Act (“CASPA”), by a 168 to 26 vote.  The bill introduced by Representative Santora is very similar to HB 1387 (discussed in a blog post here) but is now farther along in the legislative process because it has passed the House and is now with the Senate Labor and Industry Committee for consideration.

The proposed legislation provides that a contractor or subcontractor may suspend performance if payment is not received in accordance with the terms of their construction contract. Specifically, if the contractor/subcontractor is not paid in accordance with the contract terms, the contractor/subcontractor must provide two separate 30 day notices before it can suspend work.  Specifically, the contractor/subcontractor must take the following steps before suspending:

  • Once 30 calendar days have passed since the end of the billing period, the contractor/subcontractor must provide written notice to the owner/contractor, via e-mail or postal service, stating payment has not been made.
  • When an additional 30 days have passed since that notice, the contractor/subcontractor must provide written notice, via certified mail, stating that the contractor/subcontractor intends to suspend work in 10 calendar days.

Thus, suspension of work under the proposed legislation will require two notices and waiting at least 70 days.

The proposed legislation also establishes that the provisions of CASPA cannot be waived in a contract and requires a written explanation of the good faith reason for withholding payment (including retainage payment) for a deficiency item.  Failure to provide such notice will constitute a waiver of the basis to withhold payment and require payment to the contractor or subcontractor in full.

In addition, the proposed bill requires an invoice recipient (owner or general contractor) who believes the received invoice is overstated still must pay the amount of the invoice it believes is correct when that amount would otherwise be due. This revision appears to be aimed at preventing a dispute over one component of an invoice from being used to delay payment of amounts not otherwise in dispute.  It would also permit a contractor or subcontractor to facilitate the release of retainage on its contract before final completion of the project by posting a maintenance bond with approved surety for 120% of the amount of the retainage.  Finally, HB 566 provides that if the withholding of retainage is longer than 30 days after the final acceptance of the work, a written explanation must be provided for the withholding, and failure to provide such an explanation constitutes a waiver of the basis to withhold payment and requires payment in full.

Babst Calland will continue to monitor HB 566 as well as other proposed legislation that may impact the construction industry and post updates on this Blog whenever they become available.

Bill Seeking to Amend Construction Payment Act Introduced in Pennsylvania’s Legislature

On May 18, 2017, Representative David S. Maloney, Sr. (R., Berks County) introduced House Bill 1387, which seeks to amend Pennsylvania’s Contractor and Subcontractor Payment Act (CASPA).  The changes include the inserting language amending CASPA to state the following:

  • A contractor or subcontractor may not contractually waive CASPA rights;
  • Failure to provide written notice of a deficiency item results in a waiver of the right to withhold for the deficiency and requires payment of the invoice in full;
  • If withholding for a deficiency item, payment for all non-deficient work must still be made;
  • If a party receiving an invoice alleges the invoice contains an error, the party must pay the correct invoice amount on the date payment would otherwise be due;
  • A party seeking release of retention may post a maintenance bond for 120% the amount retained to obtain release of retention;
  • Withholding retention for longer than 30 days after “final acceptance of the work” will qualify as an improper withholding unless the appropriate notice requirements are followed;
  • Withholding requirements also apply to subcontractors’ sub-subcontracts with lower-tier subcontractors; and
  • Compliance with the notice requirements for withholding based upon deficiencies is necessary for the withholding to “not be deemed to have been wrongfully withheld.”

Babst Calland will continue to monitor HB 1387 as well as other proposed legislation that may impact the construction industry and post updates on this Blog whenever they become available.

Commonwealth Court Addresses Engineer Licensure Requirements

On May 24, 2016, the Commonwealth Court in Se. Reprographics, Inc. v. Bureau of Prof’l & Occupational Affairs, No. 2235 C.D. 2014, 2016 WL 2979844 (Pa. Commw. Ct. May 24, 2016) addressed an issue of first impression and held that the petitioner did not perform an “engineering land survey” in violation of the Engineer, Land Surveyor and Geologist Registration Law (Law), 63 P.S. §§ 148 – 158.2, when it used maps and mobile GPS/GIS equipment to locate and identify a customer’s physical assets for a non-engineering purpose.

Southeastern Reprographics, Inc., now known as The Davey Resource Group (“DRG”), was commissioned by Central Electric Cooperative, Inc. (“CEC”), a rural electric distribution cooperative, to locate every piece of electric equipment owned by CEC, including transmission poles, distribution poles, security and street light poles, mounted equipment, regulators, and meters. The purpose of this field inventory was to provide CEC with sufficient information to create a GIS database of its existing assets. Using GIS/GPS technology, DRG assessed over 100 square miles of land, located CEC’s assets to sub meter accuracy, took an inventory of all equipment at each location, and identified and tagged the equipment. DRG then transferred this data to CEC in the form of x-y coordinates to be electronically plotted on a base map.

Based on this information, the State Registration Board for Professional Engineers, Land Surveyors, and Geologists (the “Board”) concluded that DRG performed an “engineering land survey” as defined by the Law when it determined by measurement methods the position of fixed objects on the Earth’s surface through the use of GIS/GPS equipment. According to the Board, DRG violated the Law when it conducted this “engineering land survey” without the necessary license.

On review, the Commonwealth Court reversed the Board’s determination. Agreeing with DRG, the Court held that “‘engineering land surveys’ regulated or encompassed under the Law are those that are performed in connection with or related to building construction and land development.” And because DRG’s field inventory of CEC’s assets was performed purely so that CEC could create a GIS database of its electrical equipment, it was not an “engineering land survey” as defined by the Law.

In a dissenting opinion, Judge McCullough cautioned the Court against overturning legal determinations based on the Board’s extensive “technical expertise.” Judge McCollough also noted that the Law’s licensure requirements are in place to “to safeguard life, health or property and to promote the general welfare.” And because CEC shared DRG’s maps with PA One Call and EMS services for six or seven different counties, Judge McCollough believed that the risk of not properly identifying and locating electrical infrastructure was so great that it should only be entrusted to a licensed professional. The dissent also expressed dissatisfaction with the majority’s limiting the definition of “engineering land survey” to surveying activities performed in connection with building construction or land development.

Overall, the Court’s opinion demonstrates that licensure under the Law is not required to simply determine the location of objects on the Earth’s surface. However, design professionals should be aware that they must be licensed under the Law before performing any surveying activities in conjunction with building construction or land development.

President Obama’s Fiscal Year 2017 Proposed Budget Includes Over $10 Billion for Federal Building Fund

The U.S. General Services Administration (GSA) is the federal government’s real estate manager and director of the government’s real estate investment strategies. The Agency’s FY 2017 funding requests, submitted along with the President’s proposed budget in February, include requests for over $1 billion worth of construction projects in and around the Washington, D.C. area. In addition, GSA is requesting the following funds for infrastructure in Pennsylvania and the region at large:

1. Boyers, Pennsylvania: $31,200,000 for design and related services for the construction of a new federally owned facility of approximately 462,000 gross square feet to provide a long-term housing solution for agencies currently leasing an underground mine location within the area.

2. Philadelphia, Pennsylvania: $52,300,000 for Phase II of a two phase repair and alteration project for the Federal Building (Green Building), located in downtown Philadelphia. The project involves the realignment and reconfiguration of tenant space, and multiple building system upgrades/replacements.

3. Cleveland, Ohio: $15,524,000 for a repair and alteration project to complete, repair, and expand the plaza system at the U.S. Courthouse located in downtown Cleveland. The structural steel that supports the plaza is exposed to the elements and has been since the original construction.

(Here is a complete list of GSA’s proposed infrastructure projects in its FY2017 request.) These anticipated projects, coupled with rumors GSA has started the process of implementing much-needed upgrades to fedbizopps.com (the single government point-of-entry for federal government procurement opportunities), suggests the prospect of federal government projects may become more attractive to companies in the region within the year to come.

Although the appropriations bills ultimately passed by Congress this fall may or may not mirror these infrastructure plans, GSA’s proposal provides insight into its development priorities. We will track Congress’ final appropriations bills and continue providing updates on this blog.

OSHA Fine Increases to Take Effect on August 1 but Increased Fines Could Apply to Inspections Occurring Now

As previously reported in Babst Calland’s November 2015 Employment Bulletin, a little-noticed provision in the recent federal budget permits the Occupational Safety and Health Administration (“OSHA”) to raise its monetary penalties by nearly 80%.  The increase in fines – the first since 1990 – will take effect on August 1, 2016.  However, because OSHA has six months to issue a citation after an inspection, the increased penalties could be applied to inspections occurring now.

More information about the OSHA fine increases as well as other employment related issues that impact the construction industry may be found in Babst Calland’s regularly issued newsletters as well as on this blog.

Babst Calland Attorneys Attend Prompt Pay Task Force Coalition Meeting to Discuss Amendments to Pennsylvania’s Contractor and Subcontractor Payment Act

On April 5, 2016 Babst Calland Attorneys Robert Palumbi and Marc Felezzola attended a Prompt Pay Task Force Coalition meeting in Harrisburg organized by the American Subcontractors Association’s Central Pennsylvania Chapter to discuss House Bill 726 of 2015 (“HB 726”). The meeting attendees discussed the proposed legislation, its practical impact on Pennsylvania’s construction industry.

In addition to discussing the as-drafted legislation, meeting participants worked together to prepare proposed changes to the language of HB 726 aimed at clarifying the existing language and placing a cap on the percentage of retention that can be withheld in private construction.

HB 726 is currently before the House Commerce Committee. We anticipate that the Committee will vote upon the Prompt Pay Coalition’s recommended changes to HB 726 at its regularly scheduled meeting in May.

Babst Calland will continue to track HB 726 and provide updates on this blog.

Proposed Legislation to Address Utility Delays on Pennsylvania Construction Projects

Our firm recently presented to members of the National Utility Contractors Association of Pennsylvania (“NUCA of PA”). The presentation summarized recent testimony offered by NUCA of PA to the Pennsylvania Senate Transportation Committee aimed 1) to educate the Legislature on the delays routinely experienced by contractors as a result of the relocation of a utility company’s facilities located within public rights-of-ways on state road, bridge, and utility construction projects and 2) to offer potential solutions to help minimize delays and reduce the costs of such delays.  The focus of the testimony was to address 1) delays that result from a utility company’s mismarking or failure to disclose utility lines in response to a Pennsylvania One Call request and 2) delays by utility companies in relocating facilities that must be moved to allow construction to proceed.  Given the tremendous cost impacts to contractors that experience delays to their construction projects resulting from the delays described above, NUCA of PA is seeking legislative action which would provide avenues of recourse for recovery of their costs by contractors.  Several potential solutions were addressed.  One solution calls for revisions to Pennsylvania’s Underground Utility Line Protection Act, known as the Pennsylvania One Call Law, 73 P.S. §§ 176, et seq.  A second solution seeks the creation of a statutory negligent misrepresentation claim against utility companies which would essentially expand the Supreme Court of Pennsylvania’s Bilt-Rite ruling.  A third solution would provide financial incentives to utility companies that perform their locating and relocating work in a timely manner.  Finally, a discussion centered upon making provisions such as those found in PennDOT’s Form 408 Specifications, relating to both differing site conditions and utility delays, mandatory for all construction projects in Pennsylvania.

NUCA of PA is seeking suggestions and prior experiences from contractors to share with legislators and lobbying consultants in its effort to enact legislation which would benefit contractors throughout the Commonwealth.  Please feel free to share those suggestions and stories with Richard Saxe or you can contact NUCA of PA’s Executive Director, Brenda Reigle, directly at ed@nucapa.org or (717) 234-8055.

Proposals Submitted to PennDOT for CNG Fueling Station P3 Project

On January 4, 2016 the three shortlisted proposers competing to enter into a public-private partnership (a “P3”) with the Pennsylvania Department of Transportation (“PennDOT”) submitted their proposals.  The award of the P3 contract, which calls for constructing 27 compressed natural gas (“CNG” fueling stations) along the Commonwealth’s public highways as well as making modifications to transit agencies’ vehicle maintenance and storage facilities, is expected to come sometime in February or March of 2016.

The goals and objectives of the Project include

  • Providing cost-effective CNG fuel availability to enable transit fleets to switch from diesel and gasoline to CNG;
  • Achieving operational cost savings for transit agencies;
  • Reducing greenhouse gas emissions;
  • Providing retail CNG fueling to the public (where feasible); and
  • Establishing consistency between transit agencies for the deployment of CNG fueling infrastructure.

To accomplish those goals and objectives PennDOT is seeking a private partner that will make the necessary utility upgrades, compress gas and make it available for fueling for transit agencies and third parties, and operate and maintain fueling stations.  The private entity will be compensated for its capital and operational costs but will be subject to PennDOT for liquidated damages in the event it fails to perform and will pay royalty payments to PennDOT based on third party sales of CNG.

As of October 2015, twenty three regional transit agencies opted into the CNG program and were divided into three tiers (Tier 1 includes five transportation agencies, Tier 2 includes seven transportation agencies, and Tier 3 includes eleven transportation agencies).  CNG facilities for Tier 1 agencies have completion deadlines between fall 2016 and spring 2017, CNG facilities for Tier 2 agencies have completion deadlines between spring and summer 2017, and CNG facilities for Tier 3 agencies have completion deadlines between fall 2017 and spring 2021.

More information about the CNG Fueling Station P3 Project, including a list of the shortlisted proposers and their partners, can be found by visiting PennDOT’s CNG Fueling Station website.

West Virginia Amends Public Project Change Order Process then Adopts Emergency Rule Restoring Previous Process

On July 1, 2015, amendments to West Virginia’s laws governing public construction took effect.  Among the changes ushered in by those amendments was a new requirement that all change orders for public construction be approved by the Purchasing Division of the West Virginia State Government before the contractor could begin the change order work.  Unfortunately, because of the bureaucracy and related delays necessary to obtain approval of a change order by the Purchasing Division, the amended legislation effectively required lengthy stoppages of work on active construction sites and had the potential to result in costly and unfeasible delays at the expense of taxpayers.  Accordingly, less than a month the amendments took effect, on July 31, 2015, West Virginia Secretary of State Natalie Tennant signed Decision 8-15 approving an emergency rule clarifying that change orders related to government construction contracts do not require prior approval from the Purchasing Division.

Accordingly, after the issuance of the emergency rule, the procedure for change orders on public projects has returned to the status quo – public agencies are colored with the authority to approve change orders on behalf of the State but are required to file construction change orders with the Purchasing Division “in a timely fashion.”

A copy of the emergency rule, which includes a revised version of Title 148, Series 1 (i.e. the “Legislative Rule” governing public procurement in West Virginia) may be found here.

Pennsylvania Supreme Court Grants Appeal of Decision Holding Individual Owner of an LLC May Not Be Liable for CASPA Damages

The Pennsylvania Supreme Court recently granted allowance of appeal of the Scungio Borst & Associates v. 410 Shurs Lane Developers, LLC case that we blogged about in February of this year.  As described more fully in our prior blog post, in Scungio Borst, the Superior Court of Pennsylvania (i.e. the intermediate level court) held that Robert DeBolt, the President and 50% shareholder of 410 Shurs Lane Developers, LLC did not qualify as an “owner” as defined in Pennsylvania’s Contractor and Subcontractor Payment Act (“CASPA”), and therefore, could not be held personally liable for sums that the 410 Shurs Lane Developers, LLC failed to pay to a general contractor.

On July 28, 2015, however, Pennsylvania’s highest Court agreed to hear an appeal of that decision.  The Court summarized the issue before it as follows:

Did the lower court commit an error of law or abuse its discretion in granting summary judgment to [Robert] DeBolt under [the Contractor and Subcontractor Payment Act (“CASPA”), 73 P.S. §§ 501 et seq.], where: (a) CASPA makes the owner [(410 Shurs Lane Developers, LLC)] and the “agent of the owner acting with the owner’s authority” (DeBolt) liable to contractors such as [Petitioner], (b) DeBolt is a fifty percent owner of [410 Shurs Lane Developers], (c) [Petitioner] consistently dealt with DeBolt and received his authorizations for change orders, (d) [Petitioner] never received payment for the change orders, and (e) [Petitioner’s] construction of CASPA is consistent with the courts’ construction of the Wage Payment and Collection Law[, 43 P.S. §§ 260.1et seq.]?

Scungio Borst & Associates v. 410 Shurs Lane Developers, LLC, No. 30 EAL 2015, 2015 WL 4545986, at *1 (Pa. July 28, 2015) (alterations in original).

While it is still far too early to tell how the Pennsylvania Supreme Court will answer the above question, the mere fact that the Court agreed to hear the appeal – a discretionary act that the Court exercises for only a select few cases every year – raises concerns that individuals possessing a significant ownership interest the corporation or limited liability company may become personally liable for the CASPA damages for unpaid change orders that they authorize on behalf of the corporation or limited liability company in which they hold a significant ownership interest.

Babst Calland will continue to monitor the Scungio Borst case and will post updates on its Construction Law Blog as they become available.

 

American Arbitration Association Revises Rules for Construction Arbitration

On July 1, 2015 the American Arbitration Association (“AAA”) issued revisions to its Construction Arbitration Rules and Mediation Procedures intended to address preferences of users for a more streamlined, cost-effective, and tightly managed arbitration process.  The AAA’s press release announcing the rule amendments, which became effectively immediately, states that the changes “reflect what the [AAA] learned from focus groups conducted across the country” structured to “ensure that all industry sectors had the opportunity to provide input.”

Perhaps the most significant change to the rules is the new “mediation step”, which provides subject to any party opting out, all cases with claims that exceed $100,000 must proceed to mediation at some point during the arbitration.  The new mediation step rule requires mediation in accordance with the AAA’s Construction Mediation Procedures and provides that unless specifically agreed to by all parties, the mediator may not be appointed as an arbitrator in the case.  According to the AAA, the mediation step is a “novel approach” to dispute resolution “intended to further assist the parties with the quick and economical resolution of their disputes.”

The amendments also include a new rule regarding a “Preliminary Management Hearing” that generally should take place very soon after the arbitrator is appointed.  The purpose of the hearing is to allow the parties and the arbitrator to “discuss and establish a procedure for the conduct of the arbitration that is appropriate to achieve a fair, efficient, and economical resolution of the dispute.”  The parties and the arbitrator have the option of conducting the preliminary management hearing in person or telephonically.

Other changes brought about by the amendments give the arbitrator a greater degree of control over the discovery process, the power to impose sanctions upon parties that fail to comply with the mandates of the arbitrator and the ability to allow parties to file dispositive motions.  Finally, the amendments contain a new mechanism that will allow the AAA to appoint an emergency arbitrator within one day to rule upon requests for emergency relief (but only for claims arising from contracts entered into on or after July 1, 2015) and contain time limits and filing requirements intended to streamline the consolidation and joinder processes.

More information about the AAA’s changes to its Construction Arbitration and Mediation Processes is available on the AAA’s website.

 

Proposed Amendment to Mechanics’ Lien Law Seeks to Give Architects Lien Rights in Pennsylvania

Representative Dan Truitt, a Republican serving part of Chester County, Pennsylvania, recently proposed as House Bill 430 legislation that seeks to amend the Pennsylvania’s Mechanics’ Lien Law of 1963 (i.e. the current and applicable mechanics’ lien law, hereinafter referred to as the “Lien Law”) to add “architect, engineer, or other licensed design professional” to the definitions of “contractor” and “subcontractor” that have mechanics’ lien rights.

Under the Lien Law, a mechanics’ lien may only be maintained for payment of debts due by the owner to a “contractor” or by a “contractor” to any of his “subcontractors”. 49 P.S. § 1301.  As of the date of this blog post, the definitions section of the Lien Law defines “contractor” to include “an architect or engineer who, by contract with the owner, express or implied, in addition to the preparation of drawings, specifications and contract documents also superintends or supervises any such erection, construction, alteration or repair.”  49 P.S. § 1201.  The definitions section also states that the term “subcontractor” does not include “an architect or engineer who contracts with a contractor or subcontractor….”  Id. 

Thus, under the current law,  architects only have mechanics’ lien rights if they supervise or “superintend” onsite work for the construction project.  By amending the definitions of “contractor” and “subcontractor” to expressly include architects, engineers and other design professionals, House Bill 430 stands to remove the requirement that design professionals must perform onsite work to have mechanics’ lien rights, thereby significantly expanding what were previously very limited mechanics’ lien rights for design professionals.

House Bill 430 is currently before the House’s Labor and Industry committee.  Babst Calland will continue to monitor the Bill’s status and will post updates on this blog when applicable, so check back often.

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