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February 24, 2017

Toil or Trouble: “Labor” Under the Federal Miller Act

Karlee Starr Blank

As construction attorneys, we are all familiar with the Miller Act, requiring 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." We know who may bring suit under the Act: "[e]very person that has furnished labor or material in carrying out work provided for in a contract for which a payment bond is furnished." We know the Miller Act "is highly remedial in nature" and "entitled to a liberal construction and application in order to properly effectuate the Congressional intent to protect those whose labor and materials go into public projects." And we know that, under the Miller Act, claimants must comply with certain notice requirements (if applicable) and timely file suit.

But what don't we readily know about the Miller Act? Or stated differently, are there any requirements or limitations under the Miller Act that we might inadvertently overlook? 

"Labor" under the Miller Act

You receive a call from your client--a prime contractor on a multi-million dollar construction project for the Department of Defense--that was just served with a first-tier subcontractor's Complaint, which includes a Miller Act payment-bond claim for its work on the project. Your client asks you whether the subcontractor's claim complies with the Miller Act, and you determine that the subcontractor has met all notice, timeliness, and venue requirements, concluding that the Miller Act count appears to state a prima facie claim for relief. But what did you miss? 

In your haste, you have taken for granted that the subcontractor actually "performed labor" for which a claim may be made under the Miller Act. To determine whether a subcontractor has stated a prima facie payment-bond claim, you should always ask about the type of work the subcontractor performed. The subcontractor's claim turns on whether it performed "labor" as that term is used in the Miller Act. Despite the ostensibly inclusive language in the Miller Act--requiring a bond "for the protection of all persons supplying labor . . . in carrying out the work"--and the Supreme Court's pronouncement that courts should liberally construe the Miller Act remedy "to protect those whose labor goes into public projects," several federal courts have found limits on the type of work constituting "labor" under the Miller Act.   

Furnishing Labor for a Contract: Evaluating the Sufficiency of a Claim for Unpaid Work

With respect to its allegations about labor, to determine whether the subcontractor has sufficiently pleaded a claim for its unpaid work under the Miller Act, confirm that such work (1) was performed "in the prosecution of work provided for in a contract for which a payment bond is furnished" and (2) qualifies as "labor" within the meaning of the Miller Act.

(1) Was the work performed "in the prosecution of [the contract]"?

Work is performed "in the prosecution [of the contract]" when it adds value to the project and is called for within the scope of work for the project. The federal appellate courts generally agree that neither warranty work nor corrective work satisfies this requirement. To bring itself within the Miller Act, the subcontractor must show that its work was "performed . . . in connection with the completion of the project and not for the purpose of correcting defects."

(2) Was such work "labor"?

Assuming the work was performed "in prosecution of the contract," next determine whether the work qualifies as "labor" under the Miller Act. To answer this question, begin with the following general rule: If the subcontractor did not "toil" at the project site, its Miller Act claim may be in trouble. 

The word "toil" was first invoked as the test for labor in 1982. That year, the United States District Court for the Southern District of Ohio noted that, despite the Act's remedial purpose, there are limits to just how liberally courts may construe the Miller Act, holding that "the Act is not to be applied so as to impose wholesale liability on payment bonds." This ruling stemmed from the court's construction of "labor" under the Miller Act. The court reached two main conclusions:

  1. While caselaw interpreting "labor" is relatively sparse, the word has been construed to include physical toil.
  2. Federal caselaw has adopted an admittedly narrow definition of the term "labor" under the Miller Act.
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    This decision is important because it expressed a limitation to the Supreme Court's mandate for courts to liberally construe and apply the Miller Act, and recognized that the few decisions defining "labor" defined it narrowly.

    In 2017, as in 1982, federal caselaw interpreting the word "labor" is relatively sparse. The Eighth Circuit was the first federal appellate court to address this question, holding in 1992 that "labor" means physical labor and not work involving "technical and professional skill and judgment." The Fourth Circuit piggybacked on that decision, concluding that professionals only perform "labor" to the extent they perform "skilled professional work which involves actual superintending, supervision, or inspection at the job site."

    Here are examples of other courts finding that work either does not qualify as "labor" or constitutes "labor" only to the extent it involves some on-site physical toil.

    • Project Management. "[T]he on-site supervisory work of a project manager falls within the purview of the Miller Act if such a superintendent did some physical labor at the job site or might have been called upon to do some on-site manual work in the regular course of his job."
    • Project Administration. "Living on the job site and performing routine office maintenance [e.g., cleaning the office and bathrooms; negotiating contracts; determining change orders; preparing bid proposals] is not enough to constitute labor that went towards completing the construction job." <\/sup>
    • 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."

    In each of these situations, if--within one year before the subcontractor files its Complaint--it was not on the project site, physically toiling, the subcontractor might not have performed "labor" under the Miller Act.

    Practice Pointers: "Labor" and the Miller Act

    When evaluating the sufficiency of a Miller Act payment-bond claim, always ask whether the subcontractor performed work "provided for in the contract" that qualifies as "labor" under federal caselaw. The subcontractor's failure to perform qualifying "labor" destroys its Miller Act claim.

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Karlee Starr Blank

McManus & Felsen LLP, Washington, D.C., Division 9 (Subcontractors & Suppliers)