Most states have enacted their own version of the Federal Miller Act (so-called Little Miller Acts) to protect the payments of subcontractors on public projects. However, in order to properly perfect such a claim, there are certain limitations and requirements that must be addressed.
A recent Alaska Supreme Court decision helped clarify two aspects of the AK Little Miller Act — what type of labor is protected, and when notice is considered served on a contractor.
Alaska’s Little Miller Act requirements
Alaska’s Little Miller Act can be found under Alaska Stat. §36.25.020, which requires contractors on certain public works projects to post a payment bond to protect payments on the project. Additionally, the Act outlines who can make a claim against the bond, along with the procedures for doing so.
Two noteworthy provisions, for the purposes of this article, are as follows:
(a) A person who furnishes labor or material in the prosecution of the work provided for in the contract for which a payment bond is furnished under AS 36.25.010 and who is not paid in full before the expiration of 90 days after the last day on which the labor is performed or material is furnished for which the claim is made, may sue on the payment bond for the amount unpaid at the time of the suit.
(b) However, a person having direct contractual relationships with a subcontractor but no contractual relationship express or implied with the contractor furnishing the payment bond has a right of action on the payment bond upon giving written notice to the contractor within 90 days from the last date on which the person performed labor or furnished material for which the claim is made… The notice shall be served by mailing it by registered mail, postage prepaid, in an envelope addressed to the contractor at any place where the contractor maintains an office or conducts business, or in any manner in which a peace officer is authorized to serve a summons. (emphasis added)
Some of the limits of these protections have yet to be fully explored by the Alaska court system. Until now, let’s take a look.
Bond claim raises unique issues under the Alaska Little Miller Act
The case in question: Dat Luong, dba LVDH Construction v. Western Surety Company
- Prime contractor: Pinnacle Construction, Inc. (Pinnacle)
- Surety: Western Surety Company (WSC)
- Subcontractor: Earth Stone, Inc. (Earth Stone)
- VP/Estimator: Dat Luong dba LVDH Construction (Luong)
- Represented by: himself, pro se
- VP/Estimator: Dat Luong dba LVDH Construction (Luong)
Luong was hired by Earth Stone, in 2014, to serve as vice president and estimator of the company. Earth Stone had been hired by Pinnacle to provide finish concrete work for the remodel of a municipal library. The amount of the contract made the project subject to Alaska’s Little Miller Act, and pursuant to the Act, Pinnacle posted a payment bond provided by WSC.
In early 2015, Luong had performed a variety of tasks on the project, but as of April of that year, payment problems began to arise. The majority of Luong’s work was supervisory, however, he also contributed physical labor, such as mixing and pouring concrete.
October 9, 2015, was when Luong helped with the last concrete pour, which both parties agree is the last date Luong provided labor on the project.
On January 6, 2016 (89 days after the last concrete pour), Luong sent a notice by registered and certified mail requesting payment of back wages. The letter was received by Pinnacle on January 11 (95 days after the last concrete pour).
Litigation ensued, as Luong made a claim for back wages against WSC under the Little Miller Act. WSC countered, arguing: 1. Supervisory tasks weren’t considered labor under the Act, and 2. The notice was sent past the 90-day deadline as required.
After several motions and transfers, the trial judge concluded that the term “labor” under the Act does include supervisory tasks, but only if they were performed on the job site, and, the operative date of the notice was January 11, 2016, the date the notice was received.
The trial court ruled in favor of WSC, and awarded them attorney fees. Luong appealed the decision.
The Alaska Supreme Court weighs in
Eventually, the Supreme Court granted the petition to decide two issues of “first impression.” The first being how to define labor under Alaska’s Little Miller Act; and the second, is “notice” effective upon mailing or the date of receipt.
Defining “labor” under AK’s Little Miller Act
The court first tackled the issue of the proper definition of “labor.” They began by noting that Alaska’s Act was modeled after the Federal Millar Act. But federal courts have disagreed on what constitutes labor under the Act.
Some courts have defined “labor” as work that requires some sort of “physical toil.” Under this interpretation, work performed by professionals only qualifies as labor if the claimant “actually superintends the work as it is done on the job site.”
This effectively excludes any clerical or administrative work, because they were insufficiently physical.
In contrast, there are other courts (such as the Fifth Circuit) who, instead of relying on physical toil, focus on the type of work being performed. These courts emphasize the link between on-site supervision or inspection and the forward progress on the construction project. These courts focus on whether the work is “necessary to and forwards the project.”
After agreeing with the approach by the Fifth Circuit, the court turned to the stated purpose of the Alaska Little Miller Act, which is to “protect persons who furnish labor or materials for a state public works project from the risks of nonpayment.” The value of the labor performed shouldn’t depend on how physically demanding the labor is. Thus, the court held:
“‘Labor’ under AS 36.25.020 to include all work that is ‘necessary to and forwards’ the project secured by the payment bond. Accordingly, inspections and supervisory work qualify as compensable ‘labor,’ in addition to physically-intensive tasks such as pouring concrete or carrying materials to the job site. Whether or not these tasks are performed at the worksite itself is not determinative.”
When is notice deemed “served?”
On to the second issue: when notice is considered served under Alaska’s Little Miller Act.
Again, after looking towards cases under the Federal Miller Act, there was also a divide.
Some courts have held that notice is only timely once it is received by the contractor. The reasoning behind this interpretation is that the purpose of “providing contractors with a date certain after which they are no longer at risk of liability to second-tier subs,” is best achieved by requiring actual receipt.
Conversely, many other courts have held that as long as the notice is mailed within the 90-day timeframe, the notice is deemed timely. Among these courts, the rationale varies.
The Louisiana Eastern District likens this rule to the mailbox rule for acceptance of contracts. While others have determined that the statutory period is tolled once the notice is deposited in the mail.
Going back to Alaska’s Little Miller Act, the notice provisions are claimant-focused. The statute requires the claimant to “give[e] written notices… within 90 days” and specifies the method by which this can be accomplished, mailing it by registered mail. The court reasoned that as long as the claimant follows these instructions, the contractor will still be provided ample time to pay their subs, free of conflicting claims under the Act. Accordingly, the court held:
Interpreting notice as effective upon mailing adequately preserves the 90-day deadline’s specific purpose – to allow the prime contractor to make timely payments to subcontractors without risking conflicting claims from the subcontractor’s employees and suppliers. It also advances the statute’s underlying purpose – to protect laborers and suppliers from the risk of nonpayment on public works projects. We, therefore, hold notice under Alaska’s Little Miller Act is complete once mailed to the contractor via registered mail.
Public contractors in Alaska should take note of these clarifications
This decision provides important guidance regarding the finer, technical points of the bond claim process in Alaska.
First and foremost, labor protected by the AK Little Miller Act covers any work that is “necessary to and forwards” the project. Whether the work performed involved physical labor or whether such work was performed on-site, is immaterial. Project participants, such as supervisors and design professionals, are now afforded a basis for making a claim against a payment bond on such projects.
Secondly, this decision clarifies when notice is considered to be served. This clarification is extremely useful and favors the protection of subcontractor payments. A notice under Alaska’s Little Miller Act is now concretely deemed to be served when deposited in the mail, eliminating the ability for bond claims to be invalidated by late delivery technicalities.
Note: The court has yet to address the issue of when a notice is returned undeliverable under such scenarios. Therefore best practice is to continue to send a notice of your claim as early as possible to avoid any complications.