This post has been cross-posted from Seyfarth’s Workplace Class Action Blog.

By: Anthony LaPlaca, Dawn Solowey, Andrew Scroggins & Adrienne Lee

Seyfarth Synopsis:  In June 2024, Seyfarth published a blog article warning construction industry employers of recent anti-harassment guidelines issued by the EEOC.  We predicted that the EEOC has “put the construction industry squarely in its sights.”[1] In this follow-up Alert, we discuss recent cases confirming the renewed regulatory focus on the construction sector, which demonstrate the need to put in place sound practices for non-discriminatory recruitment, hiring, and training of the work force in order to be prepared for this heightened risk of government scrutiny. 

Recent EEOC Settlements

The U.S. Equal Employment Opportunity Commission (EEOC) has indicated, in no uncertain terms, that over the next five years it intends to prioritize the mitigation of systemic workplace problems and the historical underrepresentation of women and workers of color in the construction sector.[2]  Two recent cases confirm that the EEOC is true to its word when it comes to tackling racial and gender disparities in the construction work force.

In August 2024, the EEOC secured two consent decrees with two separate construction firms in Florida, totaling nearly $3 million.

In EEOC v. J.A. Croson LLC, seventeen Black and Hispanic workers alleged they were subjected to racial slurs, derogatory language, and offensive imagery at work, and were given less desirable assignments by their foreman and other leaders in the company. Two Black employees also asserted retaliation claims alleging they had been fired for making work environment complaints. On August 26, a court in the Middle District of Florida approved a $1.6 million settlement, which also mandates three years of significant injunctive relief for the plumbing and HVAC contractor, including requirements to revise its EEO policies and procedures and provide to the EEOC for review; establish a harassment reporting hotline; create an internal complaint procedure subject to strict timelines, with the investigator reporting directly to the CEO and Director of Human Resources; hire a third-party to provide 1.5 hours annually of mandatory training to all employees (in-person for managers and supervisors, online or pre-recorded for non-supervisory employees); conduct work environment surveys and audits to gauge whether race and/or national origin play a role in assignments; take steps to prevent discrimination in the selection process for the company’s apprenticeship tuition reimbursement program; and submit reports to the EEOC twice per year for the duration of the decree.

The following day, August 27, another federal judge in Florida approved a $1.25 million settlement between a paving company and 12 Black former employees and a class of other Black employees. In the case of EEOC v. v. Asphalt Paving Systems Inc., the EEOC alleged that the defendant construction company failed to prevent white employees from regularly using racial slurs toward Black colleagues, wearing clothing bearing the Confederate flag, and flaunting white power tattoos. The complaint also alleged that Black employees experienced disparate treatment regarding taking breaks. For example, it claimed they were forced to work and eat at the same time, and forced to work in the rain during a downpour while white workers were free to take breaks at their discretion and were allowed to sit inside until the storm passed. The EEOC also alleged that white employees would often bring guns to work, in violation of company policy, which made Black workers feel intimidated. According to the complaint, in one instance, a white manager fired three Black employees while grabbing his gun from his waist. In addition to the monetary relief, the three-year consent decree also requires Asphalt Paving to: hire a third-party Compliance Monitor who is responsible for conducting any complaints of discrimination, among other duties; review and revise its employment policies to prohibit race discrimination and detail the process for handling bias complaints and submit to the EEOC for comment; hire a third-party to provide 1.5 hours of anti-discrimination training annually to its Florida employees (in-person for human resources and supervisors, online or pre-recorded for non-supervisory employees); establish an anonymous hotline for reporting bias; track and monitor all complaints; and submit reports to the EEOC twice per year for the duration of the decree.

Data on Racial and Gender Disparities in the Construction Industry

Data from the U.S. Bureau of Labor Statistics highlights ongoing race and gender disparities in the construction industry. In 2023, of the nearly 11.9 million people employed in the construction sector, approximately 88% were white and about 90% were men. In May 2023, EEOC Chair Charlotte A. Burrows issued a report entitled “Building for the Future: Advancing Equal Employment Opportunity in the Construction Industry,” finding that race and gender discrimination and harassment remain prevalent issues at construction worksites, which contributes to the underrepresentation of women and workers of color in construction.

Lessons for Construction Sector Employers

New Infrastructure Law Motivating EEOC to Intensify Monitoring of Construction Sector

Employers in the construction sector should anticipate increased scrutiny from the EEOC in the coming years, especially because of the Infrastructure Investment and Jobs Act, a $1.2 trillion initiative signed into law by President Joe Biden at the end of 2021. With substantial federal funding allocated for upgrading highways, roads, bridges, and other transit systems, the EEOC will be monitoring how this infrastructure money is spent and whether employers receiving these funds are operating in full compliance with discrimination laws.[3] According to its May 2023 report, the EEOC committed to collaborating with construction industry stakeholders including employers, unions, and workers to ensure fair hiring and employment practices and prevent discrimination and harassment. In addition, the EEOC will continue to utilize its administrative and litigation powers to resolve charges of discrimination, which includes investigating employee complaints and pursuing litigation to enforce the law.

Proactive Workforce Audits are Key to Mitigate Risk of Liability

To minimize legal risks and safeguard employees, employers in the construction industry are encouraged to proactively assess their workforce and worksites, including auditing for demographic disparities and taking documented steps to address such issues.  For example, employers can conduct anonymous employee surveys or use other means to gather comprehensive data on the demographics of their workforce and develop detailed action plans to address any identified disparities. This might entail creating and implementing targeted recruitment strategies to attract a diverse pool of candidates, as well as providing bias training for hiring managers. Documenting all steps taken and regularly reviewing progress will support ongoing compliance with anti-discrimination laws and foster a more inclusive workplace.

Training, Training, Training

One of the most impactful things that construction employers can do is to provide robust training.  Managers should be trained on avoiding workplace discrimination and harassment and when to escalate to human resources.  HR professionals should be trained on best practices for handling and investigating harassment and discrimination complaints.  And the broader workforce should be trained on the company’s anti-discrimination and anti-harassment policies.  The best trainings are live and interactive, reviewing real-life scenarios.  It is also effective to incorporate brief reminders of the employer’s non-discrimination policies into regular meetings as a way to reinforce the importance of the policy to all worksite employees.

Seyfarth at Work offers customized, interactive workplace training programs designed to ensure compliance with employment laws and mitigate legal risks. Our training services are tailored to meet specific industry needs and include practical skills development for HR professionals, managers, and employees.

Update your Policies and Ensure a Solid Reporting System

Construction employers should also ensure that they have clear, up-to date policies on discrimination and harassment. Workplace policies should define covered individuals, prohibited conduct, and reporting procedures. Policies must also commit to prompt, thorough investigations and confidentiality. Policies should be regularly updated, easy to understand, and posted in visible locations.

As for reporting, given the often complex overlap of multiple employers and entities involved in construction projects, onsite employers and leaders should collaborate to create a “no wrong door” environment for workers. That is, they should create multiple accessible channels, both formal and informal, for employees to report discrimination or harassment and policies to prevent any retaliation for such complaints. An effective harassment complaint system encourages early reporting, operates promptly and impartially, and imposes appropriate consequences for harassment or related misconduct.

To start, employers can consult the EEOC’s guide recently published in June, designed to assist construction industry leaders in reducing harassment. The guide offers recommendations on establishing clear policies, creating an accessible complaint system, and enhancing the effectiveness of anti-harassment training.

[1] Christopher Kelleher and Andrew Scroggins, EEOC Issues Anti-Harassment Guidance to Construction-Industry Employers, The Construction Seyt (June 24, 2024), available at: https://www.constructionseyt.com/2024/06/eeoc-issues-anti-harassment-guidance-to-construction-industry-employers/.

[2] Meghan A. Douris and Andrew Scroggins, The EEOC Targets Construction Industry For Heightened Enforcement, The Construction Seyt (Feb. 24, 2024), available at: https://www.seyfarth.com/news-insights/the-eeoc-targets-construction-industry-for-heightened-enforcement.html.

[3] EEOC regulations only apply to federal contractors and federally-assisted construction contractors and subcontractors who do over $10,000 in government business in one year. Exec. Order No. 11246, 30 Fed. Reg. 12319 (Sept. 24, 1965).

workers

This post has been cross-posted from Seyfarth’s Workplace Class Action Blog.

Authors: Christopher Kelleher and Andrew Scroggins

Seyfarth Synopsis: The Equal Employment Opportunity Commission (“EEOC”) has issued guidance tailored to the construction industry regarding compliance with anti-harassment laws. This lines up with our prediction in early 2024 that the EEOC had put the construction industry squarely in its sights. The guidance is important for construction-industry leaders and employers to understand to prevent and remedy workplace harassment, and to avoid potential harassment liability.

On June 18, 2024, the EEOC issued its Promising Practices for Preventing Harassment in the Construction Industry. This guidance provides key recommendations that construction-industry leaders and employers should consider implementing to prevent and address harassment in the workplace, and avoid being the target of the EEOC’s enforcement efforts. The guidance is intended to supplement the EEOC’s Strategic Enforcement Plan (“SEP”) for fiscal years 2024-2028, which provides direction on the EEOC’s current objectives, principles, and enforcement efforts – among them, increasing diversity in the construction industry and remedying harassment. (We’ve written previously about the proposed and final SEP.)

The guidance emphasizes several core principles to prevent and address harassment in the construction industry, including a committed and engaged leadership, consistent and demonstrated accountability, strong and comprehensive anti-harassment policies, trusted and accessible complaint procedures, and regular, interactive training tailored to the appropriate audience. In support of these principles, the guidance makes several overarching recommendations to help construction-industry employers remain in compliance with federal laws, and off the EEOC’s enforcement radar.

1. Leadership and Accountability

The EEOC is looking for leaders who are vocal about non-harassment. To that end, the Agency recommends that worksite leaders—project owners, general contractors, crew leaders, and union stewards—clearly, frequently, and unequivocally message and demonstrate that harassment is prohibited. Since there are often multiple entities and types of workers on a jobsite, the EEOC advises that project leaders and general contractors focus on preventing harassment against all workers on the site, regardless of whether or not those workers are covered by anti-discrimination laws. The EEOC also recommends that general contractors assist smaller subcontractors and staffing agencies with their legal obligations under federal anti-discrimination laws by referring them to the EEOC’s Small Business Resource Center.  

The EEOC also recommends that project owners provide or coordinate anti-harassment training, monitor the workforce for anti-harassment compliance, require that contract bids include a plan to prevent and address workplace harassment, and seek feedback from workers about anti-harassment efforts and whether harassment may be occurring.

2. Comprehensive and Clear Harassment Policies

The EEOC also expects construction industry employers to maintain and provide to employees a clear and comprehensive anti-harassment policy. (This expectation is true no matter the industry of the employer.) The policy should provide a description of who is covered under the policy, what conduct is prohibited, and complaint and reporting procedures. The policy should also indicate the employer’s commitment to conduct a prompt and thorough investigation of any reported harassment, and to keep any reports of workplace harassment confidential. Anti-harassment policies should be regularly updated, understandable to all employees, and posted in easy-to-find places, such as in the breakroom, or near the timeclock.

3. Effective and Accessible Harassment Complaint System

The EEOC reiterated the importance of an effective harassment complaint system, with points specific to the construction industry. in particular, in light of the often  complex overlap of multiple employers and entities engaged in construction projects, the EEOC recommends that onsite employers and leaders work together to provide a “no wrong door” environment to workers. The harassment complaint system should be easy to understand, including in languages commonly used by workers, and should include both formal and informal methods of reporting harassment, among other measures.

4. Effective Harassment Training

Finally, the EEOC emphasized the importance of regular, interactive, and comprehensive training of all workers on a construction site. According to the EEOC, harassment prevention training should be clear, easy to understand, and offered in languages commonly used by onsite workers.  It should also be tailored to the specific workforce and work environment. The EEOC recommends interactive trainings, but given the dynamic nature of construction workforces, alternative options include providing training through an interactive module accessible via mobile phone, or watching a series of short video clips, followed by a guided discussion about the clips.

Anti-harassment training should include a description of prohibited harassment, with examples specific to the construction industry, and workers should be provided with the complaint procedure, and encouraged to report any harassment they observe.

Implications for Employers

Employers in the construction industry must remain on high alert when it comes to the EEOC. The EEOC announced in the SEP that it intended to focus its enforcement efforts on the industry, and less than a year into the SEP it has backed up its words with complaints filed in federal court and guidance pointed straight at the industry.

No anti-harassment program can prevent all claims. However, adopting the EEOC’s recommendations for the construction industry may help to reduce that number while also bolstering an employer’s defense if a charge is filed. Because construction worksites often include groups of workers employed by multiple entities, the EEOC stresses the importance of a committed leadership onsite to prevent, address, and remedy harassment. Construction-industry employers should be aware of the EEOC’s guidance, and should take steps to come into compliance with the key recommendations, including by establishing clear and widely disseminated anti-harassment policies, developing channels for worker complaints, promptly investigating those complaints, and taking steps to prevent future harassment. If you have questions about your anti-harassment practices, would like guidance on how to communicate anti-harassment messages to your workers, or are in need of support to respond to any threatened or pending harassment litigation, contact your Seyfarth attorney or the authors of this post.

sergi-kabrera-2xU7rYxsTiM-unsplash

Jason Smith and Teddie Arnold, partners in Seyfarth’s Washington, DC office, have co-authored an updated “United States – Construction” chapter in the 2024 edition of The Legal 500: Country Comparative Guides. Seyfarth continues to participate as an exclusive contributor for this comprehensive overview of construction-specific laws and regulations in the United States. Topics covered include, but are not limited to, requirements and obligations, permits and licencing, procurement, financing and security, and disputes, as well as insight and opinion on current challenges and opportunities. To access and download a copy of the chapter, click here.

Seyfarth’s Construction team is pleased to announce the release of our 2023-2024 edition of the 50 State Lien Law Notice Requirements Guide. The Guide provides the general time requirements for filing lien notices in each state, plus Washington, DC.

Seyfarth’s Construction team prepared the survey for use by owners, commercial contractors, and real estate developers on non-public projects. Requirements may differ for residential and public projects. Click on this link to access a copy of the reference guide. For optimal viewing, please download the document locally to your computer or device and then open.

istrfry-marcus-T41c_r3CVOs-unsplash

Summary

On December 5, 2023, Seyfarth’s Amy Hoang will be a panelist on a Strafford Webinar detailing Build America, Buy America (BABA) requirements. This 90-minute CLE presentation (1:00 PM – 2:30 PM ET), will guide construction counsel through the BABA final guidance with notable revisions from the interim guidance. The panel will discuss how the final rule impacts construction contractors, including sourcing compliant materials, dealing with supply chain issues and increased costs, ensuring subcontractor compliance, and recordkeeping requirements. The panel will also discuss when and how to request a waiver and best practices for compliance. Those interested in attending may contact Ms. Hoang directly at ahoang@seyfarth.com or register here.

Continue Reading Seyfarth’s Amy Hoang to Speak on Build America, Buy America Webinar
ej-yao-D46mXLsQRJw-unsplash (1)

Less than a month after taking effect, the Department of Labor’s (“DOL”) broad changes to the regulations implementing Davis-Bacon and Related Acts (“DBRA”) are facing legal challenges in two federal courts. These newly-filed lawsuits could change things for those trying to navigate the new regulatory landscape. Contractors on DBRA-covered contracts should keep an eye out for developments.

On October 23, 2023, DOL’s final rule updating the regulations implementing DBRA became effective. The first major overhaul of its kind in forty years, the final rule made sweeping changes to the regulations governing payment of prevailing wages on most federally-funded construction contracts.

One of the more high-profile changes was the reintroduction of the “30-percent rule” that DOL abandoned in the early 1980’s. For the last forty years or so, DOL has deemed a wage “prevailing” for a classification only if it was paid to the majority of workers in that classification; if no majority wage existed, DOL determined prevailing wage using a weighted average of wage rates. The final rule adds a third option: if no majority wage exists, the governing prevailing wage is the wage paid to the greatest number of  workers in a classification, so long as that wage is paid to at least 30 percent. DOL used this three-step process for the first fifty years following Davis-Bacon’s enactment and, in DOL’s view, the 30-percent rule is more faithful to the concept of “prevailing wage” than the weighted-average fallback method.

Other key changes in the final rule clarified the circumstances in which prevailing wages must be updated, allowed DOL to adopt wage rates set by state and local governments in certain circumstances, strengthened DBRA enforcement by making DBRA requirements effective by operation of law, and added new anti-retaliation provisions to the Davis-Bacon contract clauses.  

Because the final rule is forward looking, contractors may not feel its effects for some time. But the prevailing view among federal contractors is that DOL’s updates to the DBRA regulations will complicate compliance, increase regulatory burdens, and drive up contractor costs.

And so, less than a month after taking effect, the final rule is facing an existential legal threat. In a pair of cases filed in Texas federal district courts this month, two sets of industry-group plaintiffs challenged most of the key changes contained in the final rule. While the cases differ somewhat on legal theory, the gist of both is that DOL’s final rule exceeded DOL’s statutory authority and violated the Administrative Procedure Act. And both cases seek orders barring implementation of the final rule.

At this early stage, it is hard to say what these cases will mean for contractors working their way through the new regulatory scheme. But these cases could lead to significant changes to the newly-enacted regulations and their effects on covered contracts. Contractors performing DBRA contracts should certainly pay close attention. 

romain-dancre-doplSDELX7E-unsplash (6)

On August 8, 2023, the U.S. Department of Labor (DOL) announced its final rule related to the Davis-Bacon Act (the “Act”), entitled “Updating the Davis-Bacon and Related Acts Regulations.”  However, the official final rule must be published in the Federal Register – likely by week’s end – before going into effect 60 days after publication.

DOL issued its notice of proposed rulemaking (“NPRM”) in March 2022 and received more than 40,000 comments from interested stakeholders. Evaluating and addressing those comments took the better part of a year, as DOL did not send the rule to the Office of Information and Regulatory Affairs (“OIRA”) for White House approval until December 16, 2022.  After languishing for months, OIRA has now concluded its review, allowing DOL to move forward with its final rule.

Continue Reading Break out the Neon: ‘80s Era Davis-Bacon “Prevailing Wage” Definition Restored in DOL Final Rule
ej-yao-D46mXLsQRJw-unsplash

On July 21, 2023, President Biden designated July 23-29, 2023, as “Made in America Week.”  This proclamation builds on the Biden Administration’s efforts to bolster domestic manufacturing through evolving policies attached to government funds that require contractors and suppliers to feature varying amounts of U.S.-made content in their products and services. To commemorate this week, here is a refresher on “Made in America” and what it means for government contractors and suppliers.

What does “Made in America” mean?

Under Executive Order 14005, the Administration defined “Made in America” laws as “all statutes, regulations, rules, and Executive Orders relating to Federal financial assistance awards or Federal procurement, including those that refer to “Buy America” or “Buy American,” that require, or provide a preference for, the purchase or acquisition of goods, products, or materials produced in the United States, including iron, steel, and manufactured goods offered in the United States.” Generally speaking, “Made in America” or “Buy American” requirements refer to:

  • The Buy American Act (BAA) of 1933, establishing domestic sourcing preferences for unmanufactured and manufactured articles, materials, and supplies procured by the federal government for public use, including those used on federal construction contracts;
  • The Trade Agreements Act (TAA) of 1979, permitting, in certain circumstances, the waiver of certain BAA domestic sourcing requirements for “designated countries”;
  • The Berry and Kissell Amendments, relating to Department of Defense (DOD) purchases of food, clothing, textiles, and tools;
  • The Specialty Metal Restriction, relating to DOD purchases of “specialty metals” and items that contain “specialty metals”;
  • The Balance of Payment Program, relating to DOD’s application of BAA policies outside of the U.S.;
  • The American Recovery and Reinvestment Act of 2009, relating to construction materials procured using funds under the Recovery Act;
  • The Department of Transportation (DOT) Buy America Act, relating to grants provided to states, localities, and other nonfederal entities for projects funded by the DOT; and
  • The Build America, Buy America (BABA) Act of the Infrastructure Investment and Jobs Act (IIJA), expanding domestic content requirements to all federal infrastructure projects. For more on BABA requirements, see coverage here.

When do “Made in America” requirements apply?

Many government contracts or federally-funded projects include “Made in America” requirements, though the requirements will differ depending on project type, product type, source of funding, and contract value.  For instance, in the case of Federal Acquisition Regulation (FAR)-based federal contracts, the BAA generally applies to contracts between the micro-purchase threshold of $10,000 and the TAA threshold of $183,000 (for supplies) or $7,023,000 (for construction materials). Above the relevant threshold, the TAA typically applies, which contains similar domestic sourcing requirements but includes exceptions to permit the use of products from many U.S. trading partners. 

What companies must comply with “Made in America” requirements?

Prime contractors as well as their supply chains are impacted by “Made in America” requirements. While the applicable “Made in America” regulations do not always mandate inclusion of “Made in America” clauses in lower-tier subcontractor and supplier contracts, oftentimes prime contractors must include those requirements in order to ensure that the products or construction materials they deliver or use in a project are compliant with the applicable “Made in America” laws.

How do companies comply with “Made in America” requirements?

Any company performing a federal contract or federally-funded project, or acting as a supplier for such projects, should be cognizant of potential “Made in America” requirements.  Companies should review their contracts to confirm applicable requirements and identify any certifications that they may be making with regard to the origin of project materials.  Communicate with customers if the requirements are unclear.  Prime contractors may want to establish procedures to obtain, archive, and update country-of-origin information from suppliers and include annual updates to ensure compliance throughout the life of a contract.

Have there been any recent updates to “Made in America” requirements?

The Biden Administration has used “Made in America” requirements as a vehicle to increase U.S. jobs and manufacturing in several key industries, including construction and electric vehicle (EV) charging infrastructure. The following updates highlight recent developments in “Made in America” requirements:

  • Office of Management and Budget (OMB) Guidance on BABA Application: On February 9, 2023, OMB issued a proposed rule and notice of proposed guidance for infrastructure projects that will be subject to BABA, building on its preliminary guidance from April 2022.  The new guidance provides additional color on how the government will interpret terms and concepts in BABA, including how the government will distinguish between a manufactured product and a steel/iron product, and how the government will define the requirement that “all manufacturing processes” for construction materials occur in the United States.
  • Federal Highway Administration (FHWA) Updates to EV Charger Waiver Guidance: On February 12, 2023, FHWA released a limited waiver that, in a series of steps, created a domestic sourcing requirement specific to EV chargers, to be implemented on a phased timeline.  On July 11, 2023, FHWA released updated Q&A’s for the new EV charger domestic sourcing requirements.
  • DOD Updates to Procurement Regulations: On June 9, 2023, DOD proposed an amendment to the Defense Federal Acquisition Regulation Supplement (DFARS) to enact domestic sourcing requirements outlined in Executive Order 14005, including updates to the definitions of “domestic end product”, “qualifying country end product”, and “domestic construction material” to reflect the increase of domestic content thresholds from 55 percent to 60 percent in calendar year 2023, then to 65 percent in calendar year 2024, and to 75 percent in calendar year 2029.

“Made in America Week” showcases all of the opportunities available to contractors and suppliers willing to comply with the federal government’s domestic sourcing requirements.  However, the complexity of the existing statutory scheme and the evolving, agency-specific nature of the requirements can make compliance seem like a daunting task. Seyfarth Shaw continues to monitor these changes and can lend its extensive expertise to contractors and suppliers currently in the federal procurement space, or those interested in taking advantage of the business opportunities that exist within that space.

1686754728-2364-3766-lxb_photodSRhwPe6v9clxb_photo-
Dakota Roos, Unsplash

Seyfarth Shaw’s Construction group have achieved a top tier ranking in the highly regarded Legal 500 United States 2023 edition, solidifying their reputation as one of the nation’s top legal teams. This recognition reaffirms Seyfarth’s unwavering commitment to excellence in Real Estate Construction and Construction Litigation.

The Legal 500 United States guide recognizes Seyfarth’s Construction practice as having a “very deep team with extensive construction knowledge as well as experts in related fields such as government contracting and business organization.” Our team is regarded by clients and peers as “collegial, intelligent, direct and adaptable.” The guide specifically recognizes the firm’s former Construction group chair, Bennett Greenberg, in their Hall of Fame. Alison Ashford, the firm’s current Construction group co-chair, is named a Leading Lawyer and Washington, DC Associate, Michael Wagner, made the Rising Stars list. Other notable mentions include, Michael McKeeman, Construction group co-chair, Jason Smith, Meghan Douris, and Ryan Gilchrist.

Renowned for its comprehensive coverage of legal services, The Legal 500 United States is an esteemed and independent guide that offers authoritative assessments of law firms. Its rigorous research conducted over the past 12 months recognizes and rewards outstanding in-house and private practice teams and individuals. The inclusion of Seyfarth Shaw’s Construction group in these rankings reflects their status as trusted authorities in Construction law. Through their unwavering dedication to providing exceptional legal counsel, clear communication, and efficient service, Seyfarth continues to serve as a valuable partner for companies seeking comprehensive Construction and Construction Litigation service offerings and strategic guidance in today’s fiercely competitive business landscape.

christopher-burns-8KfCR12oeUM-unsplash

Under the Miller Act, 40 U.S.C. §§ 3131 et seq., contractors hired to work on federal construction projects are required to furnish payment bonds in order to ensure payment to certain persons that provide labor for the project. The United States Court of Appeals for the Fourth Circuit recently issued a published decision clarifying the type of work that qualifies as “labor” under the Miller Act.  Elliot Dickson v. Fidelity and Deposit Company (issued April 26, 2023).

In that case, the U.S. Department of Defense hired Forney Enterprises (Forney) as the prime contractor on a renovation project at the Pentagon. Forney retained Fidelity and Deposit Company of Maryland (Fidelity) to provide the required Miller Act payment bond. Forney then entered into a subcontract with Elliott Dickson (Dickson), a professional engineer, to work as a project manager on the contract.  Dickson primarily supervised labor on the site, but also performed other tasks, including logistical and clerical duties, taking various field measurements, cleaning the worksite, moving tools and materials, and sometimes even watering the concrete himself.  Dickson’s work required him to be onsite on a daily basis.

In December 2018, the Government terminated its contract with Forney, and directed Forney to stop work and cleanup the site. Dickson assisted Forney in this regard, and his last day on site was February 8, 2019, when he performed a materials inventory. On January 10, 2019, Dickson submitted a claim to Fidelity for approximately $400,000 for his work on the project.  Over a year later, on January 14, 2020, Fidelity denied the claim because Dickson had not performed “labor” as required for recovery under the Miller Act. Fidelity asked Dickson to resubmit his claim and to remove all hours worked “off-site, as well as those performed on-site relating to clerical and administrative tasks.” Dickson did not submit a  revised claim, and instead sued Fidelity under the Miller Act on February 5, 2020. The District Court granted summary judgment for Fidelity holding that Dickson’s work did not qualify as “labor” under the Miller Act because supervisory work is generally not “labor.” The District Court also found that the one-year statute of limitations under the Miller Act barred the claim because the lawsuit was brought more than one year after Dickson last performed “labor” on the project, and that Fidelity’s offer to Dickson to resubmit the claim did not extend that deadline.

After reviewing the history of the Miller Act and its predecessor, the Heard Act, the U.S. Court of Appeals for the Fourth Circuit determined that the supervisory work performed by Dickson did qualify as labor under the Miller Act because the bulk of Dickson’s work involved both direction and supervision of manual labor and occasional performance of manual labor.  Dickson’s supervisory work, which continued through January 2019, was therefore characterized as Miller Act “labor.” However, the Fourth Circuit agreed with the District Court that the statute of limitation barred Dickson’s claim. The Miller Act statute of limitations runs “one year after the day on which the last of the labor was performed.” § 3133(b)(4) (emphasis added). The Fourth Circuit concluded that the only on-site work performed by Dickson within one-year of filing suit was taking a final inventory in February 2019, which did not involve any supervisory work, and thus did not constitute “labor” under the Miller Act. In reaching its decision, the court drew a distinction between “work of a professional character” and “manual labor”, and stated that it is not enough that an act is technically “physical,” but must rise to “exertion” or “toil.”  The court also rejected Dickson’s argument that Fidelity should be estopped from enforcing the one-year limitations period because of Fidelity’s invitation for Dickson to submit a revised claim, finding that there were no promises to pay by Fidelity or negotiations on the claim.[1]

[1] Judge Floyd wrote a dissenting opinion in which he concluded that the definition of “labor” should be more liberally construed to include “mental exertion,” and thus the final inventory taken by Dickson should have been considered “labor,” thus making the lawsuit timely.