GA Court Denies Payment Bond Requirement for Cleaning and Maintenance Contract

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.

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