Harmon & Davies, P.C. – Attorneys-at-Law

The actions of the NLRB are consistent with President Obama’s announced intention to use the administrative process to make union organizing easier, since he and Congressional Democrats were unable to pass the Employee Free Choice Act.  Employers need to reconsider their current strategies regarding talking to their employees about the subject of unionization since their opportunities to do so following the filing of a Petition may be substantially limited.

 This article is authored by attorney Thomas R. Davies and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

            As my family, friends, coworkers, Facebook contacts, or anyone who has ever talked to me for five minutes knows, I am a die-hard fan of the Pittsburgh Steelers.  I attribute this largely to the happy circumstance of starting my professional career with the National Labor Relations Board in Pittsburgh in August 1974, just as the Steelers were beginning their incredible run of Super Bowl success that led to four championships in six years.  As a result, it was mostly with my personal and rooting interests that I reviewed the stories regarding James Harrison’s interview in the Men’s Journal Magazine and his comments about NFL Commissioner Roger Goodell.  All of the sports radio talk shows are filled with discussions regarding his remarks and the possibility that he will be suspended or fined as a result of them.  While much of the discussion has focused on the narrow question as to whether the Commissioner or the Steelers have the authority to discipline Harrison for comments made while there is no collective bargaining agreement in place and the NFL has locked out the players, I want to focus on another issue that I have not seen discussed elsewhere.

             Many people know that the National Labor Relations Act (“NLRA”) protects the rights of employees to engage in union activity, but it also protects employees if they engage in concerted activity involving matters relating to wages, hours, or other terms and conditions of employment.  In a case decided in 1965, the 7^th Circuit Court of Appeals noted that an employee’s right to engage in protected concerted activity permits “some leeway for impulsive behavior.”  NLRB v. Thor Power Tool Co., 351 F.2d 584 (7^th Cir. 1965).  In that case, during a tense meeting with management regarding a grievance, an employee was terminated because he called an official a “horse’s ass.”  The NLRB and the Court found that, given the context of the discussion that preceded it, the employee did not lose his protection because of the use of this obscenity.  

            In a much more recent case, Stanford Hotel, 344 NLRB 558 (2005), the NLRB found the discharge of an employee unlawful, despite the fact that he had loudly called the hotel’s general manager a “f —ing son-of-a-b—-.”  During Legal Awareness Training that we regularly conduct for our clients, I use scenarios and exercises that include these types of fact patterns to illustrate the extent of NLRA protection.

             In the Stanford case, the Board explained that the following factors will be examined to determine whether the conduct is sufficiently egregious to remove it from the protection of the Act:

                         1)         The place of the discussion;

                         2)         The subject matter of the discussion;

                         3)         The nature of the employee’s outburst; and

                         4)         Whether the outburst was in any way provoked by an employer’s unfair labor practice.

             It is generally agreed that Harrison’s anger towards Commissioner Goodell is motivated by the decision of the Commissioner last year to levy substantial fines against players who hit other players in ways the Commissioner deemed inappropriate within the context of the football game.  Harrison was certainly not alone in his displeasure with the Commissioner’s actions, and numerous players spoke up about the issue at the time and have continued to do so since.  The issue of fines for alleged workplace misconduct is unquestionably a term or condition of employment.  Harrison could also argue that his anger toward Commissioner Goodell, which comes across vividly in the excerpts of the article published so far, is motivated by the actions of the NFL in locking out its players.  Clearly, however, the public nature of Harrison’s comments would weigh against a finding that they are legally protected. 

            It is not my intent here to resolve the issue regarding the protected nature of Harrison’s comments, but to simply raise an issue that has not been previously discussed.  I would welcome any comments that others may have regarding the matter. 

This article is authored by attorney Thomas R. Davies and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

 In Wal-Mart Stores v. Dukes, the U.S. Supreme Court made it much more difficult for employees suing businesses for discrimination to obtain Court approval of their claim as a “class action.”  Class actions, if approved by the court, significantly increase both the potential damages and the cost of defending the lawsuit because they involve claims by a small number of representative plaintiffs on behalf of the entire proposed “class” of employees.  In a 5-4 decision, the Court reversed the Ninth Circuit’s Court’s approval of class action status in a case initiated on behalf of 1.5 million female employees in some 3400 stores.  Plaintiffs’ theory of the case was that the discrimination to which they have been subjected is common to all Wal-Mart’s female employees.”  The Ninth Circuit had approved a class action under Federal Rule 23(b)(2) applicable generally to injunction and declaratory judgment cases.

The Supreme Court, in an opinion written by Justice Scalia, rejected the Ninth Circuit’s decision for two reasons:

First, the Court held that class action treatment is inappropriate in a company-wide discrimination case unless there is some policy or company-wide practice of discrimination, or there is a biased testing procedure in hiring or treating incumbent employees.  The Court found that neither of these was present at Wal-Mart . Therefore, Plaintiffs were unable to meet the Rule 23(a) requirement that they establish “commonality” of claims in order to justify the certification of a class.  The Court rejected Plaintiff’s argument that Wal-Mart’s policy of allowing individual store managers extensive discretion in running their stores was sufficient to meet the “commonality” requirement because Wal-Mart had a corporate wide policy banning discrimination, and it could not be simply presumed that left to their own devices, managers would discriminate against women.  Quite the contrary.  Thus, the Court found that the necessary “glue holding the alleged reasons for all those decisions” that were allegedly discriminatory was lacking in the case.

Second, the Court held that the case was improperly certified as a class action under rule 23(b)(2), applicable to injunctions, where the damages claimed made it clear that injunctive relief was not the principal remedy being requested. 

The case will have a significant impact on class action jurisprudence, particularly in regards to discrimination cases.  It ended any argument that in deciding class action certification motions, Courts are limited to the pleadings.  The Court examined the extensive expert testimony submitted in great detail.  In particular, the case will make it very difficult to proceed with class actions in discrimination cases in federal court, as it suggests Plaintiffs must show a company-wide discriminatory practice.  This will result in more of these cases being initiated in state courts.  Also, by limiting the ability of class action claimants to obtain class certification under Rule 23(b)(2), it will force them to seek certification under the higher standard under Rule 23(b)(3), thereby making it easier for defendants in general to defeat class certification.

This article is authored by attorney David A. Flores and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

Realtors are infamously known for one line:  There are 3 important factors when considering whether to buy a certain property – location, location, and location.  Similarly, if you ask an attorney the 3 most important things to do when disciplining an employee, the answer will undoubtedly be “document, document, document”.  And, actually, the documentation should begin when the problem begins, so as you begin to have issues with an employee; not just at the end when the decision has been made to terminate.  Second on the list of importance would be “consistency, consistency, consistency”.

As part of its documentation practice, your company may want to conduct performance evaluations for its employees.  Yearly performance evaluations are the most basic form of documentation, providing a yearly gauge for how each employee is performing and whether such performance meets the expectations of the company.   The employees should be advised as to what they are doing right, but also the areas in which they could improve.  Employee performance evaluations, however, will not prove useful if the employer is not both consistent in their use and honest in their evaluation.  A lot of managers and supervisors want to avoid this – they are uncomfortable addressing their employees’ weaknesses, at least face-to-face.   It is important, however, that both the good and the “needs improvement” areas are addressed.  The employee performance evaluation can be, and should be, an employer’s first sign of trouble.

Some issues, however, cannot wait until the next performance evaluation.  To address more emergent issues, the company should consider implementing a written employee discipline policy.  Why written?  The idea of a written policy often scares many employers.  The fear is that, with a policy in writing, there is no room for deviation.  This is true, and not true.  It is true in that, with a written policy, you need to follow the same steps for everyone.  You should not deviate from the written policy.  That is the purpose of a written policy, after all.  This helps keep the treatment of employees, from one to the next, consistent. 

The question I often get from management, however, is this:  But what if both John Smith and Jane Doe fall subject to discipline, yet one is a 30-year employee with an impeccable record and the other is 6-month employee who has caused 6 months of trouble?  A written policy does not necessarily limit you from taking such information into consideration.   What a written policy does is give you structure.  That structure should be followed with every single employee.  Part of that policy, however, can include the employee’s discipline record and length of service with the employer.  The caveat is that, what counts for one, needs to count for all.  If you want to consider discipline history and length of service for one employee, it must be considered for everyone else who falls under the discipline policy.  The key, here, that your counsel is attempting to help you avoid is the “disparate treatment claim”, or where one employee alleges that the employer treated him or her different than another employee. 

What should be in a discipline policy?  Most policies can be structured so that they best suit the type and size business in question.  It is best to go over your specific goals and company make-up with your counsel when developing an employee discipline policy.  Generally speaking, however, it is best to have a progressive discipline policy.  That means, for an employee’s first misconduct, there is a first stage of discipline; for their second misconduct, a second stage of discipline; and so on.  The first stage of discipline is usually a verbal warning.  That being said, the “verbal” warning should still be documented in some way – simply a note that misconduct “A” occurred, for which a verbal warning was issued.  The second level of discipline is generally a written warning.  A written warning usually involves a counseling session during which the employee is advised of their misconduct and what he or she needs to do in the future to avoid further discipline, followed by a reminder of not only their prior verbal warning but that the next step in progressive discipline could result in termination.  Again, additional steps of discipline can be tailored to the employer’s needs.  Such steps could include suspension with pay, suspension without pay, and/or termination.  Generally speaking, every progressive discipline policy includes the statement that an employee may be disciplined “up to and including termination” so that if, at any step of the disciplinary process, the conduct of the employee is so egregious as to warrant it, the employer has the ability to terminate them without being tied to certain actions.

In the end, the goal of policies and practices relevant to employee relations should be to provide the documentation to support whatever actions you as a company decide to take with regard to your employees.  Should you want to promote Jane Doe, suspend John Smith, terminate Mary May, or give Bob Williams a raise, you should have adequate documentation that, in effect, substantiates those decisions.  You may never need to pull out the documentation, no one may ever need to see it; but, should that need arise, it will be there, consistently, and as a part of your ordinary course of business.

This article is authored by attorney Susan M. Zeamer and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

The App

While many of the apps folks download are recreational in nature – games, entertainment – they aren’t all.  In fact, you’d be surprised at who is throwing their hat into the app-invention ring.  For employers, they should be aware that, this past month, the United States Department of Labor’s (DOL) Wage and Hour Division (Wage and Hour) introduced its first smartphone app.  

What does this app do?  Employees can download the app, for free I might add, and track the hours they’ve worked, breaks taken, and calculate wages owed to include overtime (OT) pay.  The app, in its present, very basic state, allows the employee to track these items for more than one employer; and also has a function that enables the employee to email the report, or “timesheet”, created by the employee to whomever they choose.   Presumably, that would be the employer. The app also supplies the employee with a “Glossary” of terms to educate the employee and a “contact us” page that conveniently directs the employee to the “right person” to talk to at the DOL should they have questions regarding their hours worked or resulting pay.  

If you are an iPhone user, and currently the DOL app is only available to iPhone, iPad and iPod Touch users, you know that phone numbers in texts, emails, webpages, apps are highlighted as a link and, with one touch, can connect the call. In the future, the DOL plans to make the app accessible to Blackberry and Android users.  The DOL also plans to upgrade the app to include more pay-tracking features, such as deductions from pay, bonuses paid, differentials in pay for shift work, holiday pay, etc.

What does this mean for employers?

Well, in the basic sense, not as much as one might initially think. There’s been no change to the law.  And employees always had the ability to track their own hours and compare their records to that of their employer.  However, with the invention of smartphones and smartphone apps, such record-keeping certainly has become simplified.  It is, as they say, now at our fingertips.  The app has also made the DOL more accessible – with the app and the “contact us” page, an employee really has to put forth very little effort to contact the DOL.  Presumably, with making contact much easier, the DOL will be prepared for a rise in claims…or at least a rise in questions.  The DOL has developed an app that allows an employee to email his or her “timesheet report” to someone; while that “someone” could be the employer, it could just as easily be the DOL.  Likewise, with linking their number for iPhone users, one would think the DOL would expect an increase in phone inquiries/claims.  It would be poor public relations management for the DOL to provide the access, but then be unable to support, or adequately and efficiently respond to, the emails and telephone calls.  So one unanswered question, to date, the app presents is whether the DOL will be faster or more responsive to inquiries and claims submitted through its newly-introduced smartphone app.

It does serve as a good reminder for employers, though, to refresh themselves on their record-keeping obligations.  The Fair Labor Standards Act (FLSA) requires employers to keep “accurate” records of the hours “non-exempt” employees work, including all OT.  What is an “exempt” employee versus a “non-exempt” employee?  Curiously, the terms are not defined under the new app’s “Glossary”. The most common misconception in this area is the belief that all hourly employees are “non-exempt”, while all salaried employees are “exempt”.  Unfortunately, such a broad rule does not prove true – after all, you can call an apple an orange all you want but, at the end of the day, no matter what you call it, it’s still an apple.  The general rule under the FLSA is that employees are non-exempt – or not exempt – from the requirements of the FLSA; which means (1) employers must keep accurate records of their hours worked and (2) they are entitled to receive OT, or 1.5 times their regular rate of pay, for all hours worked over and above 40 hours in a given work week.  There are exceptions to this general rule, and those exceptions result in the category of “exempt” employees.  While the exceptions are numerous and varied, the most common is for executive, administrative, managerial and professional employees.  In order to qualify for one of these exemptions, an employee must both perform the type of duties outlined in the applicable regulations and be paid on a salaried basis.  For these employees, employers do not need to record their hours worked at all, nor are they required to pay them OT.  How these terms are defined, however, may also be affected by state wage and hour laws that impose more requirements than the DOL.  So, for a specific answer, you should consult your state laws or with your counsel.

A good way to think about this, if you’re an employer, is to remember the general rule is that you must keep accurate records and you must pay OT for hours worked over 40 in a workweek.  In order to avoid those 2 obligations, there must be a reason, and exception, for the rule not to apply.  So, generally, your employees will be “non-exempt”, or falling under the general rule; possibly with some exceptions. 

As employers, of course, you want to be able to categorize your employees as exempt – it reduces your paperwork and also overhead, if you do not have to pay OT.  The problem, however, is that the failure to keep records of the hours non-exempt employees work is a violation of the FLSA.  Even if you ultimately paid the employee properly, the lack of records itself is a violation.  So, before you decide to forego keeping these records, and certainly before you forego paying them OT, you need to be sure that they are, indeed, “exempt” employees.

Application of the App…

Let’s apply the use of the new app, now, to employer-kept wage and hour records.  What’s the impact?  Well, if the employer has not kept records at all, categorizing the employee as “exempt”, the question before the DOL will be whether the employee really is “exempt”.  If the answer is yes,  then it won’t matter what the employee’s own records show.  If the employee is really “non-exempt”, however, and was improperly classified as “exempt” by the employer, the employer may not have kept the necessary record to document hours worked.   In this situation, the employee’s records will generally be relied upon by the DOL.  If the employer is keeping records of the employee as a “non-exempt” employee and the employee is challenging those records with his or her own records, the question becomes one of accuracy and reliability.  This brings us to the second question, unanswered to date, regarding the DOL’s new app – how will the DOL weigh the accuracy and credibility of records kept by an employee through the app it created versus accurate records maintained by the employer for all of its “non-exempt” employees.  As it stands now, we can only wait and see.

This article is authored by attorney Susan M. Zeamer and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

            As schools are wrapping up their semesters, many students are receiving their final grades.  Depending on your perspective, you may be very unhappy or delighted that a rat got a passing grade from the NLRB.

            In a decision that should surprise no one who is aware of the current composition of the National Labor Relations Board, the NLRB ruled Thursday, May 26, 2011, that the display of a 16′ high inflatable rat to protest the decision of Brandon Regional Medical Center in Brandon, Florida to protest the hospital’s decision to use a non-union HVAC contractor was not unlawful.  The inflatable rat has become a frequent visitor to construction sites and other locations where labor unions wish to protest against non-union contractors.

            As in the Brandon Regional Hospital case, contractors have claimed that the display of the rat was the equivalent of unlawful picketing designed to force the neutral employer (Brandon Hospital) to cease doing business with the contractor with whom the union had a dispute.  Labor unions, on the other hand, argued that the inflatable rat, regardless of its size, was simply a form of free speech protected by the Constitution and that it did not constitute the type of threatening or coercive conduct prohibited by the National Labor Relations Act.  This dispute has been pending since the time of the original rat demonstration at the hospital in February 2003.  In the meantime, the rat, which was apparently first created at the instigation of construction unions in the Chicago area, has enjoyed enormous popularity as an easily identifiable symbol of the existence of a labor dispute at its location.

             The 3 – 1 decision of the Board, which was along usual party lines, is simply one of many decisions that can be expected from this Board designed to make it easier for unions to harass and intimidate open shop employers and their employees in an effort to increase the ability of unions to organize successfully.  The much publicized Boeing case in which the NLRB is seeking to prevent Boeing from establishing a new plant in a Right-To-Work state (South Carolina) is a further example of what to expect from the Board during the remainder of the Obama administration.

This article is authored by attorney Thomas R. Davies and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

          A construction worker who suffered spinal injuries after being hit by a concrete filled hose settled his case against concrete company, J&R of Delaware, Inc. for $850,000 after the first day of trial. 

          The construction worker alleged that the incident occurred while he was working construction at the Philadelphia Convention Center in March 2009.  According to the construction worker’s attorney, one of the concrete company’s employees was operating a boom truck by remote control in the same area where the construction worker was present.  According to the construction worker’s attorney, when the concrete company’s employee began working that day he failed to ensure that the truck’s “zone of danger” was clear.  As a result of this failure, the concrete filled hose attached to the truck swung into the construction worker, lifting him off his feet and into the wet concrete. 

          The construction worker’s attorney argued that the concrete truck was negligently operated and that the operator of the concrete company was under the control of the concrete company, making the concrete company liable.  However, the concrete company’s attorney asserted the “borrowed servant defense” arguing that responsibility for the concrete truck operator actually should have fallen on the Carney Construction (the contractor) because an excerpt from the contract between Carney and the concrete company stated that equipment and operation personnel were under the contractor’s exclusive supervision and control, with the contractor agreeing to take responsibility for them. 

          Under Pennsylvania law “if an employee is a ‘borrowed servant,’ any liability for the employee’s negligence while performing his job duties as a ‘borrowed servant,’ shifts from his ‘legal employer’ to the ‘borrowing employer” argued the concrete company’s lawyer.  If the concrete company had prevailed based upon the borrowed servant defense, the construction worker would have gotten nothing. 

          Ultimately, however, after the opening statements at trial, the judge called the attorneys back to her chambers and advised the construction worker to seriously consider settling for a number below a million.  Even though the trial is over, the concrete company is still pursuing other entities such as Carney Construction and GC Keating (the party alleged to have been responsible for the safety of the site and personnel) for a contribution and indemnity claim. 

Lessons Learned:  Failures to take safety precautions are costly.  Enforce your safety procedures.  Also, where applicable, consider adding a “borrowed servant” clause to your contracts; it may save you from liability down the road or at least give you a basis upon which to assert a contribution/indemnity claim.

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

          Shortly before Easter, the Commonwealth Court of Pennsylvania ordered a state funded university to grant a Right-to-Know Law request that asked the university to produce certified payroll records for a roofing contractor who performed maintenance work on the university, despite the fact that the certified payroll records were in the possession of the roofing contractor and not the university. 

          When the Right-to-Know-Act request was made, the university resisted producing the certified payroll records, but the Pennsylvania Office of Open Records ordered the university to obtain the records from the roofing contractor and provide them to the requester.  The university appealed that decision to the Commonwealth Court, arguing that the Office of Open Records erred in its determination that certified payroll records not maintained by the university are “public records” subject to disclosure under the Right-to-Know-Law.  Specifically, the university argued that the Pennsylvania Prevailing Wage Act does not require the university to maintain certified payroll records and that the Right-to-Know-Law does not trump the Prevailing Wage Act.  Thus, the issue before the Commonwealth Court was whether certified payroll records, no longer in possession of the university, are considered public records.

          In finding that certified payroll records, no longer in possession of the university, are public records within the meaning of the Right-to-Know-Law, the Commonwealth Court noted that the Right-to-Know-Law contains no requirement that the record be “maintained” by the Commonwealth agency, and where the record is created or received by the Commonwealth agency, there is no requirement that it then be retained by the agency.  Thus, the Court concluded that the certified payroll forms are public records for purposes of the Right-to-Know-Law simply by virtue of the fact that they were received by the university.  The court perceived no conflict between the provisions of the Wage Act and the Right-to-Know-Law.  Moreover, the Commonwealth Court noted that the payroll records are public records under the Right-to-Know-Law because they pertain to a contract to perform a governmental function, i.e., maintaining the state university’s property. 

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

            Last December, OSHA issued a new directive on preventing residential construction falls.  The directive becomes enforceable on June 16, 2011.  Under the new directive, employers engaged in residential construction must comply with 29 CFR 1926.501(b)(13).  Below are a few things that you should know about the new directive: 

• Requires residential building contractors with personnel working six feet or more above lower levels to use:
  • Guardrail systems, safety net systems, or personal fall protection systems or other fall protection allowed elsewhere in Section 1925.501(b); or
  •  If an employer can demonstrate that fall protection is infeasible or presents a greater hazard, the employer may implement a fall protection plan meeting the requirements of 1925.502(k). 
    • Such a plan must incorporate safe work practices that eliminate or reduce the possibility of a fall.
    • The plan must be written and site-specific.  A written plan developed for repetitive use for a particular style/model home will be considered site-specific with respect to a particular site only if it fully addresses all issues related to fall protection at that site. 
    •  Note of Caution:  There is a presumption that it is feasible to implement at least one of the required fall protection systems.  If you are going to argue that it is not feasible, you have the burden of establishing that it is appropriate to implement a fall protection plan in lieu of implementing any of the systems listed above.
•  Employers can have their workers work from ladders, scaffolds, or aerial lifts in lieu of complying with 1926.501(b)(13). 
•  OSHA believes that personal fall arrest systems generally can be used safely and effectively in residential construction, including roofing work and notes that employers in residential construction will often be able to use personal fall restraint systems in situations in which it might be problematic to use personal fall arrest systems. 
•  Using a fall restraint system may be a viable way for employers to provide fall protection in situations in which they have concerns about the adequacy of available anchorage points for fall arrest equipment. 
•  In the vast majority of cases, hotels, motels and nursing homes will not be considered residential construction.

 For more information on these items, and all of the requirements, please review 29 CFR 1926.501(b)(13).

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.

Like a witch’s incantation, Pennsylvania court’s consistently say, “[t]o effectuate a valid lien claim, the contractor or subcontractor must be in strict compliance with the requirements of the Mechanics’ Lien Law” and yet time and again, contractors and subcontractors lose their lien rights because they fail to file liens in strict accordance with the law.  The case of Clearwater Concrete & Masonry, Inc. v. West Philadelphia Financial Services Institution, which was decided this past March, serves as yet another example how a subcontractor’s mechanics’ lien claim was lost due to the subcontractor’s failure to abide by the Mechanics’ Lien Law.   

Clearwater arose out of the construction of a strip mall that consisted of multiple lots.  Two of the relevant lots were owned by West Philadelphia Financial Services Institution (“WPFSI”) and one of the relevant lots was owed by Lowe’s.  WPFSI entered into a contract with a developer to develop its two lots and the general contractor subsequently subcontracted with Clearwater to provide materials and perform labor to install concrete curbing  for not only WPFSI’s two parcels, but also for another lot owed by Lowe’s.  (Included in the $467,233.00 contract was $286,275.00 for paving that was to be done on the parcel owned by Lowe’s). 

Although Clearwater performed under its subcontract with the general contractor, it was not paid in full, which lead Clearwater to file a mechanic’s lien against WPFSI.  Clearwater then commenced its action to enforce its lien against WPFSI and survived WPFSI’s preliminary objections.  Months later, Clearwater filed a second mechanics’ lien on the Lowe’s parcel in an amount substantially similar to the mechanics’ lien that it had filed against the WPFSI.  In discovery, Clearwater admitted that the amount claimed in the WPFSI lien represented the combined work that it had done on the lots owned by WPFSI and Lowe’s. 

 In response, WPSFI successfully got Clearwater’s mechanics’ lien against WPSFI dismissed because Clearwater failed to strictly comply with the Mechanics’ Lien Law.  Clearwater appealed the dismissal, asking the Superior Court to decide whether a mechanics’ lien claimant who performed work on several improvements which form part of a “single business plant” is required to apportion its lien claim. 

Section 1306 of the Mechanics’ Lien Law provides that if a claimant worked upon a single improvement, but under more than one contract, the claimant may elect to file a single claim for the entire debt.  Alternatively “[w]here a debt is incurred for labor or materials furnished by the same claimant for work upon several different improvements which do not form all or part of a single business or residential plant” the claimant must file separate claims with respect to each such improvement with the amount of each claim determined by apportionment of the total debt to the several improvements.    

Presumably, because Clearwater had failed to apportion the claims as required by the Mechanic’s Lien Law, it knew that it could not win its appeal by arguing that it was allowed to file two separate claims.  Rather, Clearwater tried to claim that its contract with the general contractor constituted work, upon “a single business plant,” and therefore it was statutorily permissible for Clearwater to elect to file a single claim for the entire debt.  However, this argument failed because in filing the second lien against Lowe’s, Clearwater admitted that it filed the second claim for the same debt.   To be clear, under the Mechanics’ Lien Law, Clearwater was not entitled to file two liens for improvements to “a single business plant;” it could only file two liens if there were several different improvements which did not form a single business plant. 

Lesson learned:  Always strictly follow the Mechanic’s Lien Law and be cautious when dealing with contracts that cover different improvements. 

This article is authored by attorney Shannon O. Young and is intended for educational purposes and to give you general information and a general understanding of the law only, not to provide specific legal advice.  Any particular questions should be directed to your legal counsel or, if you do not have one, please feel free to contact us.