About a month ago, I wrote a post about defining “labor” under the Miller Act. While certainly not a hard-line rule, that post concluded that while physical exertion qualifies as labor under the Miller Act, professional work done by architects and engineers is less likely to do so. This question exists at the state level as well. A recent Pennsylvania case tackled the issue and helped provide more clarity on what constitutes labor when dealing with a Pennsylvania surety bond. Considering new Pennsylvania lien laws recently went into affect, this has been a big couple of months for Pennsylvania construction law.
*Spoiler alert: the standards for qualifying as labor in Pennsylvania are roughly the same as the Miller Act.
You can read the case (Widmer Engineering v. Five-R Excavating and The Pennsylvania National Mutual Casualty Insurance Company) in full here.
Widmer Engineering was hired by a general contractor to provide professional engineering services on a public project. During the project, Widmer stopped receiving payments. As a result, Widmer filed a surety bond claim against the general contractor’s surety provider. The surety denied the claim, and Widmer filed suit.
The court of common pleas found in favor of the surety. While the bond did cover payment disputes for “all sums of money which may be due by contractor or corporation, for all materials furnished or labor supplied or performed in the prosecution of the work…” (emphasis added), the court found no Pennsylvania statute or case precedent under which a bond could be extended to include professional services under the definition of “labor.” It was noted, however, that the Pennsylvania surety bond did cover 100% of the price of the project, and that purchase price includes the engineering work provided by Widmer.
On appeal, Widmer asserted (1) that the court erred in holding that professional engineering services are excluded from coverage under Pennsylvania surety bond law, and (2) that the court erred in holding that the language of the actual bond does not require payment for professional engineering services. The court looked to mechanics lien law and precedent from lien claims and Miller Act claims to determine that labor should not include services of design professionals.
The court specifically noted that Pennsylvania surety bond law effectively stands in for the state’s mechanics lien laws for public projects. As such, the court found, the definition for labor could not be more broad than the definition under lien law, which does not include the work of design professionals. Because the language of the surety bond essentially mirrored that of Pennsylvania bond law, the court found that the bond, as written, should not go further than statutory requirements to cover Widmer’s work on the project.
Here is more information on Pennsylvania Public Projects.
The court’s reasoning makes sense. As we mention regularly on the blog, the requirement of surety bonds by the Miller Act (federal) and Little Miller Acts (state) provide security for subcontractors and suppliers on public projects. Because a mechanics lien may not be filed on these projects, this protection is essential. It’s no surprise, then, that because Pennsylvania lien law does not include protection for design professionals, Pennsylvania bond law follows suit. This is an interesting development, though, considering that not long ago Pennsylvania was looking to expand the rights of design professionals under mechanics lien law. Regardless, architects and engineers should take note: Pennsylvania surety bond claims are not available to design professionals unless explicitly set out in the terms of the bond.
Looking for more information on Pennsylvania lien or bond law? Look no further than our Pennsylvania Construction Payment Resources.