By Daniel Hatch
Here’s what we know. On federal projects, the Miller Act requires prime contractors 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 for the use of each person.” The Act authorizes “every person that furnished labor or material in carrying out work provided for in a contract” who has “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.”
Further, we know that the Act is “highly remedial in nature” and “entitled to a liberal construction and application in order properly to effectuate the Congressional intent to protect those whose labor and materials go into public projects.” However, while liberally construed in favor of subcontractors, the Miller Act is not without limit.
Beyond notice, timeliness, and venue requirements, which are all necessary elements to state a prima facie claim for relief under the Miller Act, many forget to analyze the obvious: whether the subcontractor performed “labor” within the purview of the Miller Act. Despite the ostensibly inclusive language in the Miller Act requiring a bond for the protection of all persons supplying labor and materials in carrying out the work, several federal courts have imposed limits on the types of work constituting “labor” on construction projects.
To have a viable claim for unpaid work under the Miller Act, the subcontractor’s work must: (1) be performed “in the prosecution of work provided for in a contract for which a payment bond is furnished”; and (2) qualify as “labor” within the meaning of the Miller Act.
Work is performed in the prosecution of the contract when it is within the original scope of work for the project. Generally, the majority of federal courts, including the Sixth Circuit for us Michiganders, agree that neither warranty work nor corrective work satisfy this element.
Assuming the work is performed in the prosecution of the contract, the work must also qualify as “labor” which is not further defined in the Miller Act. The United States District Court for the South Division of Ohio first addressed the definition of labor under the Act in 1982 holding that, while case law interpreting the term is relatively sparse, labor must include physical toil.
Today, there is still no bright line test used to determine what constitutes labor under the Miller Act. The Eighth Circuit was the first federal appellate court to address the issue holding that labor must include some physical work and not work solely involving “technical and professional skill and judgment.” Thereafter, the Fourth Circuit expanded on the Eighth Circuit’s decision holding that labor includes professional supervisory work to the extent it “involves superintending, supervision, or inspection at the job site.”
Albeit, labor may better be defined by way of what does not qualify rather than what does. Here are some examples of work that was not considered labor under the Miller Act:
• Project Administration. “Living on the job site and performing routine office maintenance [e.g., cleaning of the office and bathrooms, negotiating new contracts, determining bid amounts and change orders, preparing bid proposals, negotiating and signing new subcontracts and purchase orders] is not enough to constitute labor that went towards completing the construction job.
• Contract Administration. “Paying invoices, reviewing proposals, and supervising hiring are clerical or administrative tasks which, even if performed at the job site, do not involve the physical toil or manual work necessary to bring them within the scope of the Miller Act.”
Lesson Learned: Federal courts are adopting an increasingly narrow definition of “labor” under the Miller Act. Don’t forget to analyze whether the subcontractor performed work provided for in the contract that qualifies as labor when assessing a Miller Act claim.