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June 30, 2010

Serving Notice of Contract Late Can Be Fatal to a Mechanic’s Lien Claim

Where a supplier to a general contractor (first tier supplier) served notice of its lien to the project owner after the owner terminated the general contractor, the owner was not liable on the first tier supplier’s mechanic’s lien claim. The owner did not owe anything to the general contractor on the date that the general was terminated. The Massachusetts Mechanic’s Lien statute provides that a first tier supplier’s or subcontractor’s lien shall not exceed the amount due from the owner to the general contractor as of the date the claimant gives notice of the filing of the notice of contract to the owner. Had the claimant served the owner its notice of contract earlier in the project and prior to the termination, its lien would have been valid.

General Contractor is Liable for Subcontractor’s Employee’s Injuries Because the General Failed to Demand Proof of Workers’ Comp Insurance From Subcontractor

A subcontractor’s employee was tragically killed on the job site. The subcontractor did not have workers’ compensation insurance and therefore, as required by law, the general’s workers’ compensation insurer paid for the subcontractor’s workers’ compensation claims. The estate of the deceased worker sued the general contractor for negligence. In rebuffing the general’s attempt to avoid the negligence claim by relying on the immunity that workers’ compensation statutes provide to employers, the Massachusetts Appeals Court held that a general contractor that pays the workers’ compensation claims of a subcontractor’s employee can also be sued separately for liability for the injuries. In delivering its decision the Court issued this warning, “[T] he lesson to be drawn is that general contractors must be scrupulous in demanding proof of workers’ compensation insurance from any subcontractors they engage.”

Perils of Contracting with a Public Authority

From a construction attorney’s perspective, contractors can never spend too much time investigating an owner or a project before signing a contract. That advice is particularly true when contracting with public authorities. For any contractor planning to perform public work, it is crucial to understand the limits on the authority’s power to contract and the legal requirements that must be met in order for that particular authority to enter into a valid and binding contract.  

The Importance of Clear Subcontract Language

In this difficult economy, it is more important than ever for general contractors to take all possible steps to minimize their risk through their written contracts with owners and subcontractors. In a recent case from the Massachusetts Appeals Court a general contractor was held liable to a subcontractor’s employee who had been badly injured on the job. The insurance and indemnity provisions in the subcontract were both poorly drafted and failed to protect the general contractor as intended. 

EPA Enacts Lead Paint Regulations

Contractors are now required to be certified by the Environmental Protection Agency (EPA) to perform renovation, repair and painting projects on certain schools, homes and child care facilities built before 1978 which disturb lead-based paint. EPA Regulation 40 CFR 745.80 et seq. went into on April 22, 2010 and applies to projects that disturb more than six square feet of interior painted surface or twenty square feet of exterior surface. In addition to certification, contractors must also perform the work in accordance with certain standards intended to minimize exposure to lead-based paint. The U.S. Senate recently passed an amendment prohibiting the EPA from levying any fines under the regulation until September 30, 2010, which will provide contractors with additional time to become certified.

For more information, click here to visit the EPA’s website.

Amendment to Federal Acquisition Regulation Encourages Use of Project Labor Agreements on Large-Scale Construction Projects

Effective May 13, 2010, federal agencies are authorized under the Federal Acquisition Regulations (Title 48 of the US Code of Federal Regulations) to require the use of project labor agreements (PLA) on federal construction projects costing $25 million or greater. A PLA is a pre-hire collective bargaining agreement with one or more labor organizations that establishes uniform terms and conditions for all construction contractors and employees on the project. Among other things, PLA’s require that the owner hire union workers or pay benefits at union rates to nonunion workers. In return, the unions agree not to strike. 

This change implements Executive Order 13502, signed by President Obama on February 6, 2009. PLA’s will not be required on every large-scale construction project funded by the federal government; the federal agency awarding the project will determine for each project whether a PLA is appropriate. Advocates of PLA’s claim that they increase the economy and efficiency of the procurement process and provide labor stability to the project, whereas opponents assert that they cause an increase in construction costs, inhibit free and open competition, promote cronyism and will ultimately hurt the construction industry.  

Click here to see a complete copy of the Final Rule.

Should you have any questions with regard to the above, please contact your attorney or an attorney in our Construction practice group.

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