MA Direct Payment Claims on Public Projects

On public works projects in Massachusetts, there is a unique right for some subcontractors to seek payment directly from the public entity if the general contractor fails to remit timely payment under the public prompt pay provisions. But when properly asserted, both the general contractor and the public entity have a very limited period of time to respond. And these deadlines are strictly enforced — which was recently reinforced by a Massachusetts Superior Court judge.

Massachusetts direct payment payment claims on public projects

Under Massachusetts’ prompt payment laws, there is a built-in mechanism for certain subcontractors to request payment directly from the public entity if the GC fails to pay them. The specific procedure for this is codified under Mass. Gen. Laws c. 30 §39F, the relevant portion is reproduced below:

“(d) If, within seventy days after the subcontractor has substantially completed the subcontract work, the subcontractor has not received from the general contractor the balance due under the subcontract… the subcontractor may demand direct payment of that balance from the awarding authority. The demand shall be by a sworn statement delivered to or sent by certified mail to the awarding authority, and a copy shall be delivered to or sent by certified mail to the general contractor at the same time…

… Within ten days after the subcontractor has delivered or so mailed the demand to the awarding authority and delivered or so mailed a copy to the general contractor, the contractor may reply to the demand…

(e) Within fifteen days after receipt of the demand by the awarding authority, but in no event prior to the seventieth day after substantial completion of the subcontract work, the awarding authority shall make direct payment to the subcontractor of the balance due under the subcontract… less any amount (i) retained by the awarding authority as the estimated cost of completing the incomplete or unsatisfactory work,… or (iii) disputed by the general contractor in the sworn reply…”

As you can see, there are certain deadlines that the GC and/or public entity must meet in order to counter such claims. This was highlighted in a recent MA Superior Court case which held that these deadlines are strictly enforced.

Subcontractor’s direct payment claim goes ignored

The case in question is Harold Brothers Mechanics Contractors, Inc. v. Town of Braintree.

Project Snapshot:

The Town of Braintree had hired Shawmut as a general contractor on a renovation project for the Braintree East Middle School. Some of the HVAC work was subbed out to Harold Bros.

As Harold Bros. reached completion of the work under their subcontract, they claimed that there was still an outstanding balance of over $390,000. Subsequently, Harold Bros. sent a demand for direct payment from the Town of Braintree to the Mayor’s office and Shawmut pursuant to MGL c. 30 §39F.

Shawmut received the demand on April 19, 2021, and the Mayor’s office received the same on the April 20. After failing to get a response or payment from either party, Harold Bros. informed Braintree’s counsel that they intended to file suit. A few days later, on May 12, Shawmut sent an email that, according to Harold Bros., “fraudulently attempted to deduct a back charge for work done on the auditorium ceiling from amounts owed.”

Ultimately, Harold Bros. filed a lawsuit against Braintree on May 28, 2021. That very same day, Braintree delivered a check to Harold Bros. for $226,270.00 and deposited the remaining $166,931.00 (the disputed amount) in an interest-bearing joint account.

GC’s failure to respond doesn’t alleviate public entity’s obligation to pay

Braintree had two arguments in their defense, both of which the Court rejected.

The first argument was that they were not obligated to remit payment within 15 days because the demand did not include a “detailed breakdown” as required by statute. Specifically, they said Harold Bros. failed to include the back charge which was in dispute between the sub and Shawmut.

The Court, however, disagreed. The statute does require the sub to submit a detailed breakdown of the balance claimed to be due. Harold Bros. had complied with the requirements to make a proper claim for direct payment. The sworn statement noted which pay applications were paid and which were unpaid, identified the unpaid change order, provided the details of how the $393,201 was calculated, and stated that they completed 100% of the work required under their subcontract. From their perspective, the back charge is disputed, so why would they include it? The onus is on the GC to reply with their own detailed breakdown of the balance due.

Alternatively, Braintree’s second argument was: Even if the demand was proper, they properly complied with the request. They contended that they were required to take Shawmut’s reply into account, and they did issue payment to Harold Bros. — minus the disputed amount — after it received Shawmut’s reply. But again, the court disagreed.

The opinion states that the language of Section 39F is not “unusually complicated.” Braintree’s second argument completely ignores the timing requirements. The statute explicitly states that “within fifteen days after receipt of the demand by the awarding authority… the awarding authority shall make direct payment to the subcontractor.”

Shawmut failed to reply within 10 days, and Braintree did not make the direct payment within 15 days of receipt of the demand. There is no exception or additional time allowed when the GC fails to respond.

Thus, the Court ruled in favor of Harold Bros. and rounded out the opinion with this statement:

“Neither M.G.L. c. 30 §39F, nor my decision here prevent Braintree or Shawmut from litigating over the disputed amount with Harold Brothers, or each other, in a different lawsuit. But M.G.L. c. 30 §39F contemplates that, in the undisputed circumstances set forth in the pleadings here, Harold Brothers is entitled to be paid the entire amount named in its demand while these parties litigate elsewhere, if they choose to, the fate of the disputed amount.”

Direct payment claims are an extra layer of payment protection for MA subs

The decision in this case is a stern reminder that the timing requirements under claims for direct payment are strictly enforced.

As the court noted, the timing aspect is crucial to the overall purpose of the prompt payment statutes — which is, well, prompt payment. Shawmut’s failure to send a timely response meant that the Town of Braintree was on the hook for the entire amount claimed by Harold Bros. If Shawmut did have justification for the back charges, it was up to them to assert it within 10 days.

Subcontractors who are waiting longer than 70 days to receive final payment should keep this right in mind in order to ensure they get paid what they’ve earned — promptly.

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