St. Louis Construction Lawyer Answers FAQs about Missouri Construction Law

Workers at Dawn (web)The information contained on this website is for general educational purposes and should not in any way be construed as legal advice.

You should always consult an experienced construction law attorney for legal counsel if you need assistance with your case.

Contents

St. Louis Attorney on Missouri Construction Law

What is the Critical Path on a Construction Project?

A critical path is a general concept in management that describes a sequence of events and the interrelation of those events. The objective is to create the shortest, most efficient grouping of activities to complete a project.  

In the context of a construction project, the critical path is aimed at setting forth the schedule for the various contractors and subcontractors that are performing work on the project.  

In the construction law context, the critical path often serves as a benchmark for determining delay claims and may be a telling factor in determining whether a contractor or subcontractor caused a delay or was in compliance with its temporal obligations pursuant to the critical path.

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Does a contractor have to strictly comply with the terms of the construction contract?

The general rule is that you do not have to strictly comply with the terms of a construction project when carrying out the work.

However, one exception would be if there is specific language in the contract that requires strict compliance.  

Generally “[u]nder Missouri law, strict compliance with terms of the contract is not required, and substantial compliance must be accepted.” Gundaker v. Templer, 560 S.W.2d 306, 309 (Mo. App. 1977).

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What Happens if You Fail to Appear for a Hearing in a Construction Law Dispute?

There is no one-answer-fits-all in this situation.  It really depends on the judge and the jurisdiction.

If you fail to appear for the answer hearing, the judge may enter a default judgment against you.  In the event that this occurs, you will need to contact a St. Louis Construction Lawyer to assist you in getting the judgment set aside.

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How does a Construction Law Attorney get a Judgment Set Aside?

In order to get a judgment set aside, the lawyer will have to file a motion to set aside the default judgment.  

Depending on the jurisdiction, the motion often needs to be filed within a certain amount of time in order for the Court rendering the judgment to retain jurisdiction to rule on the motion.  

Because each jurisdiction varies, you need to consult a construction lawyer immediately to assure that you still have time to get the judgment set aside and a ruling can be made on the merits of the case.

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What is the Difference between a Deviation and a Defect?

Deviation

A deviation is a “departure from contract specifications.” Havens Steel Co. v. Randolph Engineering Co., 613 F. Supp. 514 (W.D. Mo., 1985).

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Defect

A defect in either “material” or “workmanship” is “an irregularity or departure from the norm which causes weakness, failure or a spoiled appearance.” Id.

In explaining the difference between a deviation and a defect, the Havens court noted that “a ‘deviation’ may in fact be accompanied by entirely satisfactory ‘workmanship.’”

In the Havens case, the subcontractors, Randolph and M.I.S., were supposed to apply the “cladding” or what is exterior metal sheath to the ductwork on a construction project.  The contract called for certain material to be used pursuant to the contract specifications, but the subcontractor, Randolph, determined that the specified material would not be adequate to properly perform the job as the material specified in the contract would be too weak.  The material specified in the contract was then replaced with a stronger, corrugated cladding material.

Havens, the general contractor, argued that this deviation was a breach of the warranty in the contract for deviating from the contractual specifications.  

The Court rejected this argument, making the distinction between deviation and defect as explained above.

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Payment on a Construction Project

What Happens if you Forget to Submit Pay Applications or Other Supporting Documentation?

You could lose the ability to collect interest on the amount owed and potentially lose the ability to recover attorney’s fees.  In the Environmental Protection, Inspection & Consulting, Inc. v. City of Kansas City case, the Missouri Court of Appeals reversed a damages award for interest and would not review a denial of attorney’s fees because the contractor failed to submit the documentation that was required to be sent with each pay application.  

The pay applications required supporting documentation such as:

  • certificates of completion
  • invoices
  • project records
  • lien waivers
  • and other relevant documentation

So, take that contractor’s failure as a lesson and submit all documentation required by the contract, or you may lose out on thousands and thousands of dollars in interest and attorney’s fees–simply because you didn’t submit a few pieces of paper required by the contract.

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What Situations May Entitle the Contractor to Additional Payment under the Contract?

  • unforeseen or latent conditions (depending on the factual circumstances)
  • changes made at the owner’s request
  • errors committed by the owner, the owner’s agent(s), or the architect
  • delays/disruptions that were not the fault of the contractor  
  • acceleration

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What is the Total Cost Approach?

The total cost method is a theory of recovery that is allowed only in certain limited circumstances.  It’s basically a way of determining all losses that have been incurred in connection with a contract due to a delay by some project participant.  

“The total cost method involves computation of both the actual contract costs and the contract costs as estimated in the bid.  The estimated contract costs are then subtracted from actual costs to determine costs due to delay.” Havens Steel Co. v. Randolph Engineering Co., 613 F. Supp. 514 (W.D. Mo., 1985).

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Missouri Prompt Payment Act

Why Do we have the Missouri Prompt Payment Act?

Most contractors rely on payment to satisfy the obligations that operations, labor, and materials demand. When payment is not received timely, a contractor is usually under extreme pressure to scavenge money and make payment in any manner possible.  This is not easy on a contractor and poses one of the most significant risks for those involved in the construction industry.  

Failure to pay laborers, suppliers, or materialmen could cause a contractor to lose business or could even cause a company to go out of business.  

Acknowleding this danger, the Missouri legislature has enacted certain statutes which are referred to as the Prompt Payment Act, which were aimed at compelling the participants in a construction project to make timely payment or pay a hefty price.

These statutes address both public and private construction projects.

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What is the Missouri Public Prompt Payment Act?

The Missouri Public Prompt Payment Act can be found in R.S.Mo sections 34.057 & 34.058, and it governs payment on state public works projects.  

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What is the Missouri Private Prompt Payment Act?

The Missouri Private Prompt Payment Act (“MPPPA”) can be found in R.S.Mo section 431.180, and governs payment on private construction projects–the statute specifically says “private design or construction work.”

The statute basically requires any persons who entered into a contract on a construction project to make payments according to the schedule that was agreed upon by the parties.

The MPPPA allows the court to award up to 18% interest per annum from the date the payment was supposed to be made pursuant to the contract.

The MPPPA also allows the court to award reasonable attorney’s fees to the prevailing party.

Design or construction work under the MPPPA includes:

  • design,
  • construction,
  • alteration,
  • repair or
  • maintenance of any buildings, roadways, structures and real property
  • the statute lays out other examples as well

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Under the Missouri Prompt Payment Act, does the Government have any Defense to Failure to Make Payment?

R.S.Mo section 34.057 gives the government a defense to payment if it is “contrary to any federal funding requirements or [if] funds from a state grant are not timely received by the contracting public municipality.”

That means that contractors should ensure that payment will be timely received by the government or the contractor may face delayed payment, which can cause tremendous strife amongst the participants of the construction project.

Contact a Missouri construction law attorney to find out about your rights.

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Timing & Delays on a Construction Project

What happens if the Owner gives a specific start date but prevents the contractor from starting at that time?

The contractor will not be bound to start at that date.  

Any scheduling or timing issues caused by the owner will at least absolve the general contractor from liability for delay if the GC’s work is commensurately delayed.  

Essentially this means that the delay caused by the owner will merely delay the original schedule, and each completion milestone should be proportionately extended.  Of course, this all can vary depending on the facts of the case and the language in the contract.  

If you need assistance with a construction law matter, please contact one of our construction lawyers for guidance.

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How quickly does work need to be completed on a construction project in Missouri?

Normally the contract will specify a timetable, a certain amount of days for completion, or the owner will require the general contractor provide a critical path that the construction project is supposed to follow.  

When there is no specific time for performance, though, what is the law for completion of a construction project?

Missouri construction law cases have held that the work needs to be completed in a reasonable amount of time.

Contractors need to be aware if the owner specifies a fixed completion date. This is especially important if the owner anticipates a start date that may fluctuate.  

If the start date changes due to factors outside of the contractor’s control, the contractor may have a valid defense as to any delay.

Delay claims are one of the biggest causes of litigation on a construction project, so it’s important to know your rights regarding issues that could arise from the same.

If you, as a contractor, have a question about issues with a construction schedule or a liquidated damages provision in a contract, please contact one of our St. Louis construction lawyers at our firm to assist you with negotiating the dispute or drafting a contract that will set you up for success.  

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Change Orders

What’s the difference between a change order and a change directive in the AIA Construction Contract?

Change Order

A change order is an agreement among the parties to the contract regarding the price, scope, and time of performance

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Change Directive

A change directive is sufficient if just the architect and owner agree. The contractor’s consent is not needed.

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Can I still collect for work performed if there’s no written change order?

Yes.  It’s not the end of the world if you fail to obtain a written change order. Missouri has certain safeguards in place.  There are certain equitable remedies that allow contractors to collect even if there was no written change order.

The ability to collect without a written change order rests on the validity of an oral contract in Missouri law.  Using an experienced construction law attorney, these oral contracts can be proven by course of conduct and principles of waiver.  

For example, the Missouri Court of Appeals discussed course of conduct in the Wisch & Vaughan Const. Co. v. Melrose Properties Corp. and Winn-Senter Construction Company v. Katie Franks, Inc. cases:

“Habitual acceptance of extra work done on oral change orders in connection with a contract, and payment therefore, results in waiver of any contract clause providing that no claims for extra work or material shall be allowed unless the same be pursuant to a written change order.” Wisch & Vaughan Const. Co. v. Melrose Properties Corp., 21 S.W.3d 36, 41 (Mo. Ct. App. 2000)(citing Winn–Senter Constr. Co. v. Katie Franks, Inc., 816 S.W.2d 943, 946 (Mo.App.1991)).

What if the Construction Contract Strictly Requires a Written Change order?

“Waiver of a writing requirement in a contract may be established by presenting evidence that the parties agreed to the changes and the changes were completed.”  Wisch & Vaughan Const. Co. v. Melrose Properties Corp., 21 S.W.3d 36, 41 (Mo. Ct. App. 2000)(citing Gilmartin Bros., Inc., 916 S.W.2d at 329).

How is Waiver of a Written Change Order Proven?

A waiver of a written change order may be shown by presenting evidence that the parties have orally agreed upon the “extras” and that the “extras” have been supplied pursuant to this agreement. Meadows v. Kinser, 603 S.W.2d 624, 626 (Mo. Ct. App. 1980)(citing Wirtel v. Nuelle, 27 S.W.2d 501 (Mo.App.1930).

It should be noted that Missouri construction law has various classifications for the type of work agreed upon by the contractor and owner. The work falls into the following three categories:

(1) extra work (extras),

(2) additional work,  or

(3) work that falls within the scope of the contract.

These concepts are further explained throughout this website, but are briefed below.  

Numbers (2) and (3) above may be synonymous, as “additional work” is usually considered work that falls within the scope of the contract but may require more than what was originally foreseen by the parties at the time of contracting, often due to unforeseen conditions on the project site.

Extra work performed by the contractor or construction company would be entitled to receive additional compensation.

“The determination of whether ‘extras’ are indeed ‘extras,’ and not merely basic components of the contract, is a jury question.” Meadows v. Kinser, 603 S.W.2d 624, 626 (Mo. Ct. App. 1980)(citing Kaiser v. Lyon Metal Products, Incorporated, 461 S.W.2d 893 (Mo.App.1970)).

Sometimes the trier of fact (either jury or judge) will allow for compensation for additional work without a change order, but a contractor would be ill-advised to proceed without obtaining written approval to perform the additional work.

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Can a Written Change Order be Bypassed on the basis of Quantum Meruit?

Missouri construction law has a claim called “quantum meruit,” which is latin for “whatever it’s worth.” That basically means that the contractor should be paid for the value of the work performed.

This is a principle based on fairness, and fairness demands that a contractor be paid for the work performed, assuming that the work was carried out in a good and workmanlike manner.

The Federal Miller Act 

What is the Federal Miller Act?

For many years the Federal government was facing significant issues with contractors performing work on federal projects and several contractors not getting paid.  The contractors or subcontractors that did not get paid were left with little to no remedies as the government, having sovereign immunity is not subject to liens on public buildings. Thus, the ordinary remedy of filing a mechanic’s lien and taking a security interest in the property is not available.  

Further, a subcontractor’s only method of recovering on a construction project would be through suing the entity with whom the subcontractor had a contract.  In other words, contractual privity was generally required to bring a suit to collect for unpaid work on federal construction projects.  

In an attempt to remedy this issue on construction projects, the Federal government, in 1894, enacted the Heard Act. Technica LLC v. Carolina Cas. Ins. Co., 749 F.3d 1149 (9th Cir., 2014). In 1935, the U.S. government replaced the Heard Act with the Miller Act. Id.

Today, the Miller Act is codified under 40 U.S.C.A. § 270a and is summarized nicely in the Technica case:

The Miller Act requires a general contractor on a federal construction project to furnish a payment bond “for the protection of all persons supplying labor and material in carrying out the work provided for in the contract.” 40 U.S.C. § 3133(b)(2)…Under the Miller Act, any person who has furnished labor or material in carrying out work on a federal construction project and [who] has not been paid in full within 90 days after the day on which the person did perform the last of labor … may bring a civil action on the payment bond for the amount unpaid at the time the civil action is brought and may prosecute the action to final execution and judgment for the amount due. 40 U.S.C. § 3133(b)(1). The Miller Act explicitly extends to sub-subcontractors…the right to file and prosecute an action against a prime contractor’s payment bond. See§ 3133(b)(2) (“A person having a direct contractual relationship with a subcontractor but no contractual relationship, express or implied, with the contractor furnishing the payment bond may bring a civil action on the payment bond….”).

The case goes on to state that the statute deserves a liberal construction and application to effectuate the the United States Legislature’s intent.

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Missouri Little Miller Act

What is the Little Miller Act in Missouri?

The Little Miller Act generally refers to the different U.S. states’ versions of the the Federal Miller Act.  The purpose is to create state law to protect the governmental entities existing in each of the states.  

In Missouri, R.S.Mo section 107.170 creates the Little Miller Act.  It states the following, in relevant part:

It is hereby made the duty of all public entities in this state, in making contracts for public works, the cost of which is estimated to exceed fifty thousand dollars, to be performed for the public entity, to require every contractor for such work to furnish to the public entity a bond with good and sufficient sureties, in an amount fixed by the public entity, and such bond, among other conditions, shall be conditioned for the payment of any and all materials, incorporated, consumed or used in connection with the construction of such work, and all insurance premiums, both for compensation, and for all other kinds of insurance, said work, and for all labor performed in such work whether by subcontractor or otherwise.

To provide a concise breakdown, the Little Miller Act provides that for any contract on a public project in Missouri that exceeds the value of $50,000, a general contractor is required to purchase a payment bond on the project.  

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Can I be tiered out of a Little Miller Act Claim?

The outcome in a payment bond claim on a publics work project may differ from that of a mechanic’s lien claim in Missouri, depending on the subcontractor making the claim.

In 2011, the Missouri Western District Court of Appeals ruled on case in which a supplier to a sub-subcontractor attempted to collect on the general contractor’s payment bond pursuant to the Little Miller Act.  City of Kan. City v. Ace Pipe Cleaning Inc., 349 S.W.3d 399 (Mo. App., 2011). The Court of Appeals held that a supplier to a sub-subcontractor is too far removed (or too many tiers removed) from the general contractor to have a valid bond claim. Id.

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What are the Missouri Little Miller Act Statutes?

Missouri Revised Statutes, Title VIII, Chapter 107, Section 107.170 is what is typically referred to as the Missouri Little Miller Act. However, there are other related statutes which set forth similar or supplemental language and they are described below.

Title XIV, Chapter 227, of the Missouri Revised Statutes, Sections 227.100, 227.600 and 227.633  govern construction projects performed on Missouri Public Highways.

Chapter 229 of the Missouri Revised Statutes, specifically Sections 229.050, 229.060 and 229.070 governs the treatment of projects on the public roads.

Title XXXVI, Chapter 522, Section 522.300 sets out the right to sue on the bond on any of the projects which require a bond pursuant to the Missouri Little Miller Act, R.S.Mo Section 107.170.

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Construction Law Bonds

What are some types of bonds on a construction project?

There are numerous types of bonds on a construction project, but the most common are the following: Payment Bond, Performance Bond, and Bid Bonds.

Each of the foregoing bond types are defined below.  

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Payment Bond

A payment bond is defined as “[a] bond given by a surety to cover any amounts that, because of the general contractor’s default, are not paid to a subcontractor or materials supplier.” Black’s Law Dictionary 201 (9th Ed. 2009).

On projects that are governed by the federal Miller Act or the Little Miller Act, the general contractor is required to purchase a payment bond.  However, on private projects, the owner would make the decision as to whether a bond is necessary for the project.  It is usually in the owner’s best interests to require a payment because the owner is then allocating the liability of any nonpayment on the project to the general contractor.  

From a practical standpoint, any subcontractor, that is not too many tiers removed, can make a claim on the payment bond and collect the amount that the contractor is unpaid.  The collection of any monies from the bond, however, presupposes that the subcontractor’s bond claim is valid.

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Performance Bond

A performance bond is defined as “[a] bond given by a surety to ensure the timely performance of a contract.” Black’s Law Dictionary 1253 (9th Ed. 2009).

Another definition for a performance bond and perhaps a more commonly used definition is the following: “[a] third party’s agreement to guarantee the completion of a construction contract upon the default of the general contractor” Black’s Law Dictionary 1253 (9th Ed. 2009).  

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Bid Bond

A Bid Bond is defined as “[a] bond filed in public construction projects to ensure that the bidding contractor will enter into the contract.” Black’s Law Dictionary 200 (9th Ed. 2009).  Black’s Law Dictionary goes further to describe it as a type of performance bond.  

In certain cases, the bid bond may serve as the liquidated damages “for the failure of a bidder to whom a contract is awarded to execute the contract documents and surety bond.” Bolivar Reorganized School Dist. No. 1, Polk County v. American Sur. Co. of N.Y., 307 S.W.2d 405, 70 A.L.R.2d 1361 (Mo., 1957).

In such a case, where the government requires a bid bond to be submitted with the bid, if the government awards the contractor the contract based on the bid, then the contractor will be required to enter into the contract with the government and execute a bond (payment/performance, depending on the project).

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What Happens if a Subcontractor fails to provide timely notice on the bond? Is the claim still valid?

Typically delay in notice on a bond claim is not fatal.  There usually has to be some type of prejudice against the surety, and the surety has the burden of proving the same.  

The Missouri Court of Appeals for the Eastern District touches on the issue in Thomas v. A.G. Electrical, Inc. by stating the following, in pertinent part:

The modern trend among Missouri courts has been to exercise restraint in requiring strict compliance with the terms of notice provisions. Weaver v. State Farm Mut. Auto. Ins. Co., 936 S.W.2d 818, 819-20 (Mo. banc 1997). Courts have recognized that the function of a notice requirement is simply to protect the insurer from being prejudiced. Id. Our Missouri Supreme Court has cited with approval the following persuasive analysis of the issue from the Louisiana court:

The function of the notice requirements is simply to prevent the insurer from being prejudiced, not to provide a technical escape-hatch by which to deny coverage in the absence of prejudice nor to evade the fundamental protective purpose of the insurance contract to assure the insured and the general public that liability claims will be paid up to the policy limits for which premiums were collected. Weaver, 936 S.W.2d at 810 (quoting Miller v. Marcantel, 221 So.2d 557, 559 (La. App. 1969)).

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If there’s a Bond on the Project, can a Contractor still file a Mechanic’s Lien?

This wholly depends on the type of project.

First, we must remember that mechanic’s liens cannot be placed on property owned by governmental entities (public works projects).

Therefore, the Missouri Little Miller Act, R.S.Mo. Section 107.170, requires that any project which is estimated to exceed $50,000 must have a bond for the benefit of those supplying labor and materials.  

Thus, a contractor cannot file a lien on the real property where the public works projects is being performed.

Private projects differ, however.

Below is an excerpt of Missouri law that explains the inter-relationshsip between and a contractor’s rights with respect to mechanic’s liens and surety bonds on a construction project.  

As noted above, the Missouri Little Miller Act, “Section 107.170 gives a right to surety bond protection to every person who would otherwise have a right to file and enforce a mechanic’s lien.” Collins & Hermann, Inc. v. TM2 Const. Co., Inc., 263 S.W.3d 793, 798 (Mo. Ct. App. 2008).

Important to note, however, the language of R.S.Mo. § 107.170, and related case law interpreting and applying it, only applies to public works projects. Missouri Dep’t of Transp. ex rel. On Point Contractors, LLC v. Aura Contracting, LLC, 391 S.W.3d 11, 15-16 (Mo. Ct. App. 2012), reh’g and/or transfer denied (Jan. 7, 2013), transfer denied (Feb. 26, 2013).

It does not apply to “projects paid for and for the benefit of private companies and individuals.” Id. Therefore, a subcontractor can exercise its legal remedy on a private project by “the filing of a mechanic’s lien.” Id.

The public policy of Missouri, as expressed in Section 107.170 and Section 429.010 (mechanic’s lien statute), is that subcontractors and suppliers are entitled to the protection of either mechanic’s liens or payment bonds depending on the nature of the property they improve. Collins & Hermann, Inc., 263 S.W.3d at 796. See also Ladue Contracting Co. v. Land Development Co., 337 S.W.2d 578, 584 (Mo.App. St.L.1960) (purpose of the mechanic’s lien law is to guarantee effective security to mechanics and materialmen who furnish labor and materials in the making of improvements on the property of others); Energy Masters Corp., 839 S.W.2d at 669 (purpose of the Section 107.170 bond requirement is to provide persons furnishing labor and material the bond security in lieu of mechanic’s liens which are inapplicable to public property). Id.

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Federal Prevailing Wage Laws

What is the Davis-Bacon Act?

The Davis-Bacon and its Related Acts were Acts which apply to contractors and subcontractors on construction projects that are:

  • federally funded or assisted
  • in excess of $2,000
  • for the construction, alteration, or repair (including painting and decorating) of public buildings or public works

http://www.dol.gov/whd/govcontracts/dbra.htm

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What are some Requirements of Contractors and Subcontractors under the Davis-Bacon Act?

  • Workers that are covered under the Davis-Bacon Act (prevailing wages requirement) must be paid weekly by the contractors and/or subcontractors.
  • Contractors and subcontractors must submit weekly certified payroll records to the contracting agency.
  • Contractors and subcontractors must post the applicable Davis-Bacon wage determination with the Davis-Bacon poster (WH-1321) (The poster must be displayed in prominent and accessible location that is easily seen by the workers)

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What Wage Rate must be Paid under the Davis-Bacon Act?

Contractors and subcontractors on the federally funded or assisted project must pay laborers with whom they have a contract an amount equal to or greater than the prevailing wages and fringe benefits measured at the local level for similar work on other projects in the general area.

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What are the Davis-Bacon Overtime Laws for Contracts Over $100,000?

The Davis-Bacon Act, pursuant to the Contract Work Hours and Safety Standards Act, requires contractors and subcontractors, with a prime contract in excess of $100,000, to pay laborers, including security guards, at least one and one-half their regular pay rate for any time in excess of 40 hours per workweek.

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Who Enforces the Davis-Bacon Act?

The U.S. Department of Labor Wage and Hour Division is responsible for ensuring that contractors and subcontractors comply and for enforcing the Davis-Bacon Act when necessary.

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What are the Acts Related to the Davis-Bacon Act?

The government uses the “Related Acts” terminology to refer to the other federal acts that have been passed which relate to the Davis-Bacon Act.  A few examples of these acts include: the Federal Aid Highway Acts, the Federal Water Pollution Control Act, and the Housing and Community Development Act of 1974.

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What Happens if I do not comply with the Davis-Bacon (Prevailing Wages) Act?

The government may withhold payments that are due under the contract.  The government can only withhold amounts that would be sufficient to satisfy liabilities for underpaying the qualified workers’ wages and for any damages for overtime violations (liquidated or otherwise) pursuant to the Contract Work Hours and Safety Standards Act (CWHSSA).

Under many contracts, a violation of the Davis-Bacon clauses may be a basis for termination of the construction contract and may render the contractor or subcontractor responsible for costs incurred by the government and subject the contractor to potential preclusion from future construction contracts with the federal government for a period that could last up to three years.

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Is there an Appeal Process for Violations of the Davis-Bacon Act?

Contractors and subcontractors may have an opportunity to challenge matters deemed as violations and any potential preclusion from future contracts. Any such proceedings would be held before an Administrative Law Judge (ALJ).

Any decisions made by the ALJ can be appealed.  Those cases would then be reviewed by the Department’s Administrative Review Board.

Any further Final Board determinations on violations and preclusion from participating in future government construction contracts may be appealed through the federal courts.

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What are some of the Most Common Issues that Arise under the Davis-Bacon Act?

(1) Improper classification of laborers and/or mechanics;

(2) Failure to make pay full payment of the prevailing wage (payment of incorrect amount), including fringe benefits– this includes accounting for all hours worked as well as overtime hours;

(3) Not keeping proper records, i.e., failure to count all hours worked, not properly recording hours worked by an individual in two or more classifications in a day;

(4) Failing to maintain proper documentation for apprentices performing work on the project;

(5) Failing to submit certified payrolls weekly;

(6) Failing to post the Davis-Bacon poster and applicable wage determination.

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Missouri Prevailing Wage Laws

What are the Prevailing Wage Laws in Missouri?

In Thomas v. A.G. Electrical the Missouri Court of Appeals for the Eastern District gave a general overview of what comprises the Prevaling Wage Laws in Missouri, stated as follows:

The public policy of Missouri, declared by the General Assembly, mandates that no less than the prevailing hourly rate of wages be paid to workers employed by or on behalf of any public body engaged in public works. Section 290.220 RSMo 2000. The Missouri Prevailing Wage Act, codified at Sections 290.210 through 290.340, provides the mechanism for implementing this policy. Board v. Eurostyle, 998 S.W.2d 810, 814 (Mo. App. S.D. 1999). The Act is based upon and has a similar purpose to the federal Davis-Bacon Act, 20 U.S.C. Section 276a et seq. (2003), which is intended “to ensure that workers on public projects be paid reasonable wages.” Long v. Interstate Ready Mix, L.L.C., 83 S.W.3d 571, 574 (Mo. App. W.D. 2002). The Act was enacted “in the interest of public welfare.” Id. The Act is remedial in nature, and thus we must “interpret it broadly so as to accomplish the greatest public good.” Id. Thomas v. A.G. Electrical, Inc., No. ED 92109 (Mo. App. 11/24/2009) (Mo. App., 2009).

The operative language is set out in section 290.220 of the Missouri Revised Statutes and states the following:

 It is hereby declared to be the policy of the state of Missouri that a wage of no less than the prevailing hourly rate of wages for work of a similar character in the locality in which the work is performed shall be paid to all workmen employed by or on behalf of any public body engaged in public works exclusive of maintenance work. 

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Who Enforces the Prevailing Wage Rates in Missouri?

Pursuant to R.S.MO. 290.040, the Department of Labor and Industrial Relations generally enforces the laws contained under Missouri Revised Statutes section 290.210 to 290.340.  The Missouri Department of Labor and Industrial Relations also would institute the lawsuits pertaining to prevailing wage rate violations.

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Does a Performance Bond or a Payment Bond cover a Prevailing Wage Act Claim?

If workers on a project are not paid in accordance with the prevailing wage rates, then they might have a claim on a bond.  The question, however, is which bond should the workers make the claim against? It should be noted that many construction surety bonds have a tandem role in that they may be both the payment and performance bond.  

There are certain situations where this may be difficult, so it is important for construction law attorneys and the contractors to know how to make their claims.

A performance bond typically contains language that requires the surety to finish the work in the event that the general contractor defaults on his performance obligations pursuant to the contract.  

A payment bond, on the other hand, typically covers any amounts due as a result of the general contractor’s default on the construction contract.  

The Missouri Court of Appeals does not make a distinction between the bonds, though.  

The Court of Appeals states that the:

plain language of the Prevailing Wage Act mandated that all contractors’ bonds guarantee the payment of the prevailing wage…The General Assembly has created a statutory remedy and cause of action for workers who are not paid the prevailing wage; this remedy may not be defeated by the voluntary act or by the oversight on the part of the parties in failing to insert a provision regarding the prevailing wage into the bond. Camdenton Consol. School Dist. No. 6 of Camden County ex rel. W.H. PowellLumber Co. v. New York Casualty Co., 104 S.W.2d 319, 325 (Mo. 1937). Courts have also rejected attempts to escape liability by characterizing bonds as non-statutory. Id. Parties may not “circumvent the prevailing wage law by a carefully constructed legal facade.” See Division of Labor Standards, Department of Labor and Industrial Relations, State of Mo. v. Friends of the Zoo of Springfield, Missouri, Inc., 38 S.W.3d 421, 423 (Mo. banc 2001).Thomas v. A.G. Electrical, Inc., No. ED 92109 (Mo. App. 11/24/2009) (Mo. App., 2009).

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Missouri Merchandising Practices Act

Can I be sued personally for work that my company performed on a construction project?

Yes. However, a claim under the Missouri Merchandising Practices Act will allow the corporate veil to be pierced (an individual to be sued for work performed by his/her company) only if there is an “act, use or employment by any person of any deception, fraud, false pretense, false promise, misrepresentation, unfair practice, or the concealment, suppression, or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce …” R.S.Mo. Section 407.020.

That means that typically if a contractor engages in arms length bargaining, then getting sued personally is nothing to worry about.

The caveat is that consumers will often sue contractors on defective work claims on the basis of misrepresentation because the contractor “represented that the service provided would be of a certain quality but was unable to perform the work to the standard that was promised.”  

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What elements does a homeowner have to prove under a Missouri Merchandising Practices Act Claim?

“(1) purchased merchandise[services]…from defendant[contractor];

(2) for personal, family, or household purposes; and

(3) suffered an ascertainable loss of money or property;

(4) as a result of an act declared unlawful under the Merchandising Practices Act.”
There are numerous acts declared unlawful under the Merchandising Practices Act and are listed as follows: “any deception, fraud, false pretense, false promise, misrepresentation, unfair practice, or the concealment, suppression, or omission of any material fact” R.S.Mo 407.020; In re McClelland, 06-41720, 2008 WL 5157685 (Bankr. W.D. Mo. June 20, 2008).

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203K Loans

What is a 203(k) Loan?

A 203(k) loan is an answer for homebuyers who do not have the financial means to acquire and rehabilitate a property. While some people might be able to purchase a home that needs work, they might not have the funding to make any necessary repairs (even if they’re making the repairs themselves–assuming the program will approve the same).  A section 203(k) loan opens the door for these people to obtain the financing to be able to purchase the home and to be able to afford repairs to bring the home into a livable condition, to make an addition to the home, or to simply make improvements.

Section 203(k) increases the likelihood of a borrower obtaining a loan at a favorable rate because section 203(k) permits the government to insure loans if the loans meet certain requirements.

This insurance provided by the federal government saves the borrowers both time and money because typically the borrower would have to take out two mortgages (one for the purchase and one for the rehabilitation).  Both of thees mortgages would be secured by the property, and often there will not be enough collateral in the home to obtain the rehabilitation loan.

Additionally, it is beneficial for the lender because the mortgage loan is insured by the federal government before the borrower/lender even know the value or condition of the property. This makes the extension of a loan a lot more appealing for a lender.

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How does a 203(k) Loan help the Borrower?

Many borrowers have a difficult time borrowing funds to purchase a home.  For those persons who are eligible for loans, however, the approved amount of the loan may not be to their liking.  The person might get pigeonholed into a home search that has a max price that is high enough to purchase the broken down remnants of a home.

Often these homes will need a substantial amount of repairs, and the borrower may be an at-risk borrower in the lender’s eyes (making it more difficult to qualify for the loan from the financial institution), much less qualifying for additional funds to make repairs.

A 203(k) loan allows borrowers to qualify for a loan that will enable them to purchase the home and also take out money to make repairs on the home.  The financial institutions allow this increased credit (and often times better interest rates) because the federal government is willing to insure these loans.

Thus, a buyer might be able to obtain a note with a higher maximum value, so that necessary repairs or additions can be made to the home.

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