by Mark A. Cobb
A Georgia Court of Appeals recently published its opinion in Board of Regents of the University system of Georgia v. Brooks, and the holding impacts businesses providing janitorial and general maintenance on Georgia’s public buildings.
The Background Facts: The Plaintiffs’ employer entered into a maintenance and service contract with Georgia Southern University (“GSU”) which included the cleaning of rooms and the refinishing of floors. In order to secure the contract, the employer submitted a payment bond to GSU, and the employees began working on the campus. The employer, however, did not pay its employees; thus, the employees made a claim against the payment bond for payment of their past due wages. Upon further investigation, it was determined that the employer had forged the payment bond. Consequently, the employees became the plaintiffs in a lawsuit against the Board of Regents alleging that GSU owed a duty to the Plaintiffs to “obtain, confirm and [e]nsure the existence of a valid payment bond under O.C.G.A. §§ 13-10-62 and 13-20-63″ (which is often called “The Little Miller Act”).
GSU’s Argument: The Board of Regents denied all liability. Among its arguments, the Defendant argued that the suit was barred by the doctrine of sovereign immunity. More specifically, the Defendant argued that the claim was a tort claim based upon negligence, and, as such, the case was governed by the Georgia Tort Claims Act (and not by the payment bond requirements of the construction of public works projects of Title 13). Consequently, the Defendant argued that GSU was entitled to sovereign immunity from all tort suits, including this one, and that the doctrine of sovereign immunity extends to employees of the State of Georgia while acting within the scope of their official duties or employment.
The Court’s Ruling: Although the Plaintiffs insisted that O.C.G.A. §§ 13-10-62 and 13-10-63 required a payment bond for the Plaintiffs’ protection, the Georgia Court of Appeals found that the Plaintiff’s failed to demonstrate that these code sections were applicable in this specific instance. Since the requirement for a payment bond was not proven, then, the court reasoned, the doctrine of sovereign immunity applied.
When Are Payment Bonds Required on Georgia Public Works Projects? According to O.C.G.A. § 13-10-60, Payment bonds are required for “public works construction contracts with an estimated contract amount greater than $100,000.00.” Although the phrase “public works construction contracts” is not defined in Chapter 10 of Title 13, the Court of Appeals noted that the same phrase is defined in the statutory scheme governing local government public works construction (which is substantially similar to the statutory scheme governing public works owned by the State of Georgia). According to O.C.G.A. § 36-91-2(12), the term “public works construction” means “the building, altering, repairing, improving, demolishing of any public structure or building . … Such term does not include the routine operation, repair, or maintenance of existing structures, buildings, or real property.”
What is the Lesson for Subcontractors Working on Public Projects? In this case, Plaintiffs did not submit the entire GSU contract into the record, and the complaint and portions of the GSU contract which were included in the record show only that the contract was for maintenance and other services, such as cleaning services. Consequently, the Plaintiffs failed to establish that their contract was for public works construction and, accordingly, a payment bond was not required by law. Therefore, prior to bringing a suit against a payment bond, it is vital to determine whether or not a payment bond was required for a specific contract.
Are there Other Important Lessons from this Case? Yes! Since the original payment bond submitted by the Plaintiffs’ employer was forged, the Plaintiffs also argued that GSU had a duty to confirm the validity of the payment bond. The court also held that Plaintiffs failed to demonstrate the state’s duty to verify the accuracy of the payment bond and reminded us that when the Board of Regents takes a proper-form bond, it is “not required to make any further inquiry or investigation into the propriety of the information presented on the face of the payment bond.” It is incumbant upon the subcontractor or supplier to confirm the validity of the payment bond on which they work or supply materials.
By: Mark A. Cobb
Making a payment bond claim (i.e., a claim against the surety bond) in Georgia may be difficult unless you realize that there are four different types of payment bonds and that each type of payment bond has its own requirements and its own statutes of limitations.
Payment Bonds Help You Get Paid on Georgia Projects: The construction industry is very unique and offers its material suppliers and subcontractors tremendous advantages to make sure that they receive payment for their services, labor and supplies. But, in order to avail yourself of these advantages, you must strictly comply with each of the requirements and deadlines necessary to enforce your claim.
The Advantage to Being a Georgia Subcontractor or Supplier: In typical business situations, two parties contact with each other and, in the event of a breach of the contract, the offended party can only seek restitution from the breaching party. As an example, let’s assume that ABC Construction, Inc. contracts with XYZ Roofing Corp. for the delivery of roofing tiles. If the roofing tiles are delivered, but they are not paid for, Georgia contract law clearly allows XYZ Roofing Corp. to seek payment from ABC Construction, Inc. And, in most business law situations (i.e., in non-construction claims), ABC Construction, Inc. would be XYZ Roofing Corp.’s sole avenue for recovery.
However, Georgia’s materialmen lien law and Federal and state payment bond statutes allow Georgia contractors and materialmen to also seek recovery from additional parties: In the case of a lien claim, XYZ Roofing Corp can also seek recovery from the owner of the construction project, and in the case of a payment bond claim, XYZ Roofing Corp. can also seek recovery from the surety or insurance company backing the payment bond.
Four Different Types of Payment Bonds in Georgia: The advantage of seeking payment from parties other than those with whom you have a direct contractual relationship come with obligations from the potential payment bond claimant. Because there are four significant types of payment bonds covering Georgia construction projects, each type of bond has its own distinct differences with differing requirements.
1. Federal Public Works Bonds Under the Miller Act: Most Federal projects in Georgia are required to provide payment bonds to protect suppliers and subcontractors. The Federal statute governing these bonds is commonly referred to as the Miller Act. Currently, the Federal Miller Act does not require a preliminary notice (e.g., an NTO or a Notice of Furnishing).
2. Georgia Public Works Bonds Under the Little Miller Act: Most construction projects owned by the State of Georgia require the general contractor to post a payment bond for the benefit of the project’s materialmen and subcontractors. The Georgia State Statute governing these bonds and their claims is commonly referred to as Georgia’s Little Miller Act. It is called this as many of the provisions in the Georgia Little Miller Act mirror the provisions of the Federal Miller Act. However, there are significant differences which can abridge a subcontractor or supplier’s rights. Unlike the Federal Miller Act, for example, Georgia’s Little Miller Act requires that those not in privity of contract with the prime contractor or the owner send a Notice to Owner and a Notice to Contractor within 30 days of the first day that the subcontractor or supplier begins working on the job.
3. Georgia Municipality Public Works Bonds: Although there are many similarities between them, local municipalities in Georgia are governed by a different set of statutes that the State of Georgia’s Little Miller Act. Nonetheless, most local government projects (e.g., school construction or renovation) are required to maintain a payment bond to protect the project’s contractors and material suppliers.
4. Private Project Payment Bonds: The three preceding bond statutes require payment bonds on governmental projects. Although not required by law, many private projects–particularly large projects–are also covered by bonds. In these situations, potential bond claimants must meet the individual requirements of each bond in order to qualify as a claimant. In these situations, it is vital to obtain a copy of the payment bond at the project’s beginning and then read and comply with each of its terms and deadlines.
The Payment Bond Terms May Expand Subcontractors Rights: Each of the first three categories of payment bonds in Georgia (Miller Act Bonds, Little Miller Act Bonds, and Municipal Construction Bonds) have minimum requirements established by their respective statutes. However, the payment bond is also a contract between the governmental entity undertaking the work and its insurer; thus, the contract between them may be more expansive than the minimum requirements of the law. It is possible, therefore, for a particular payment bond to grant more rights to a claimant, extend the deadlines, or include a class of potential bond claimants which might otherwise be excluded. Therefore, every contractor and every supplier should review the terms of every payment bond under which they are working.
In the future, we intend to write a series of blog posts highlighting more details of each of the different types of payment bonds in Georgia. In the meantime, if you are working on or providing materials to any Federal, state or municipal project in Georgia (or a private project with a payment bond) you need to consult with an experienced payment bond attorney who can help you understand your rights, protect and preserve your rights, and, if necessary, enforce your rights.
Since the school projects throughout Georgia are finishing up, we are noticing that some of our clients who furnished labor or materials on Georgia public school projects are calling us to say that they are not being paid. Fortunately for them, there is usually a payment bond covering the school project which helps guarantee that they will get paid. These payment bond statutes are generally found in the O.C.G.A. Section 36-91-90 et seq. and are commonly referred to as Georgia’s Miller Act or Georgia’s Little Miller Act (the Miller Act is the federal government’s version of a similar statute covering federal public works projects in Georgia as well as throughout the entire country.)
Many times, it appears as though our clients are promised payments and our clients feel confident that–if they are patient enough–payment will be forthcoming. Perhaps, for example, the whole project has been “slow pay” or the municipal authority in charge of the project is withholding final payment to the general contractor for some reason unrelated to our client.
Although we hope that our clients are correct and patience will result in payment, it is vital that they make a timely payment bond claim in order to “guarantee” payment. Some clients are concerned about the legal costs associated with making a payment bond claim and enforcing a payment bond claim in Georgia. There are multiple strategies which the Cobb Law Group regularly employs when working with public works collection matters.
And, if the project has been “slow pay” project and the client reasonably believes payment will eventually be made, then we advocate (i) making a timely payment bond claim (which is a relatively simple and cost-effective procedure), and (ii) then advising the surety that, although our client’s rights pursuant to the payment bond have been preserved, we request ample time to allow our client and the obligee opportunity to amicably resolve the matter.
Thus, a specialty subcontractor or supplier has (i) met its minimum obligations under the terms of the payment bond, (ii) has not incurred excessive legal fees, and (iii) has maintained the right to pursue its remedies under the payment bond if necessary.
Regardless, a claimant cannot let any deadline slip away; thus, it is important to review some of the essential deadlines on making timely claims on payment bonds on Georgia public works projects:
Deadline Number 1: If you were a third tier supplier or subcontractor working for any one other than the project’s general contractor or the municipal authority, then you may have had to send a Notice to Owner and a Notice to Contractor within the first 30 days that you began working or supplying to the project.
Deadline Number 2: If did not receive payment in full, then you must make a claim against a Georgia Public Works project within 90 days of the last day in which you were physically on the job or furnished materials to the jobsite.
Deadline Number 3: Generally speaking a payment bond claimant must bring an action against the bond (a civil lawsuit) within one year from the completion of the contract and the acceptance of the public building or public works by the proper public authorities.
If you have provided services, labor or materials on a Georgia public school project (or any federal, state or municipal project) and have not received payment in full, please contact us to discuss your rights under Georgia’s Little Miller Act (or any other construction law or business law matter you may have!)
This is a general information article and should not be construed as legal advice or a legal opinion. The content above has been edited for conciseness and additional relevant points are omitted for space constraints. Readers are encouraged to seek counsel from a construction lawyer for advice on a particular circumstance.