By: J. Norman Stark, ATTORNEY, ARCHITECT EMERITUS (OH) A.I.A., N.C.A.R.B.
General Contractors (“GC’s”) face additional exposure as wage guarantors under laws being passed and considered in some states. These new provisions supplement many of the previously enacted laws providing for the GC’s payment of subcontractors and suppliers.
State laws in California and Maryland have made the GC responsible for the wages of all workers on a construction project, raising serious concerns of sureties who provide performance and payment bonds on private construction projects. Dramatic increases in insurance and bond premiums, or limitations of coverage, may follow as necessary.
The California laws require GC’s to pay all workers with valid claims in full, whereas the Maryland laws which become effective in October, 2018 provide even more stringent requirements. Under Maryland’s new laws, the GC could be held responsible for up to three times the amount(s) owed, in addition to Attorneys’ fees and costs.
Wage payment obligations of the General Contractor are not new. The Performance Bond and Payment Bond provisions of the American Institute of Architects’ document #A312-2010, obligates the surety to pay if the GC could not do so. These specific bond provisions also include the claims for relief of any individual who provided labor on the project, and qualified under the applicable mechanic’s lien laws and similar statutory provisions,
Ohio’s Prompt Payment Act, Section 4113.61 of the Revised Code of Ohio, was enacted in 1993, and revised in 2011, This Act requires payment to subcontractors and lower tier suppliers within ten (10) calendar days after receipt of payment from the Owner for improvements to the property. Penalties for failure to pay as required imposed penalties of interest on the amount due, at 18% per annum, commencing on the eleventh day after receipt of payment, and ending on the date of full payment due plus interest!
Other states may soon follow in enacting new payment laws, thereby reducing or eliminating contractors or suppliers unable to meet the financial tests required to obtain adequate performance and payment bond coverage. Consult legal counsel to assist and advise.
This office has served private and business clients for more than 40 years in a broad variety of legal matters, including construction law and expert witness testimony.
“WHERE EXPERIENCE COUNTS, COUNT ON MY EXPERIENCE”
ARCHITECT EMERITUS (OH) A.I.A., N.C.A.R.B.
1109 Carnegie Avenue Cleveland, Ohio 44115
(216) 282- 1849 Email: Jnorman@jnormanstarklaw.com
*Author: The Construction Claims Investigation Worklist