• PA Supreme Court Holds that Contractor Employees are not “Subcontractors” and Cannot File Mechanics’ Lien Claims - May 6, 2014
  • May 14, 2014 | Author: Matthew M. Hennesy
  • Law Firm: Barley Snyder - Lancaster Office
  • The Pennsylvania Supreme Court’s recent decision in Bricklayers of Western Pennsylvania Combined Funds Inc. v. Scotts Development Co. reversed the Superior Court’s expansive reading of the Mechanics’ Lien Law that allowed employees of contractors to file mechanics’ liens. The decision to overturn the Superior Court should create greater certainty for both owners and contractors concerning who may properly assert a mechanics’ lien claim. While the decision will provide certainty concerning who may assert a lien, the Court’s restrictive reading and commentary indicates that contractors and owners should carefully examine potential lien claims under the Mechanics’ Lien Law.

    Pennsylvania’s Mechanics’ Lien Law provides an extraordinary remedy for contractors and subcontractors by allowing them to place liens against real estate for labor and materials furnished in the erection, construction, alteration, or repair of a building. The Pennsylvania Supreme Court’s recent decision in Bricklayers of Western Pennsylvania Combined Funds Inc. v. Scotts Development Co. clarified who may be considered a “subcontractor” under the Mechanics’ Lien Law. As noted in a more detailed previous article concerning this case, the Superior Court applied an expansive interpretation of the word “subcontractor” to find that union trustees could file a mechanics’ lien based on a contractor’s alleged failure to pay for union workers’ health, welfare, retirement, and other benefits, as required by a collective bargaining agreement.

    The Supreme Court looked at a number of factors, ultimately concluding that the Legislature did not intend the word “subcontractor” to subsume employees of the primary contractor. The Court found that the most natural meaning of the word “subcontractor” does not encompass the employees of contractor. The Supreme Court found that §1303(a) clearly envisions there will be workers that provide labor to an improvement but who do not qualify as subcontractors entitled to file a mechanics’ lien. Prior Pennsylvania case law examined by the Court held that “a contractor’s employees do not constitute subcontractors covered by mechanics’ lien legislation.” Further supporting the Court’s conclusion are comments in the Joint State Government Commission Report on the 1963 Mechanics’ Lien Law indicating that §1201(5) was not intended to change prior case law holding that laborers are not subcontractors, even though employed by a contractor. The Supreme Court rationalized that “construing the class of claimants to include all of a contractor’s employees would force private property owners to become guarantors of contractors’ general employment obligations and create an entirely new class of ‘subcontractors,’ thus exposing the subject property to significantly increased liability.”

    The Supreme Court’s decision in Bricklayers of Western Pennsylvania Combined Funds Inc. v. Scotts Development Co. reversed the Superior Court’s decision finding that the scope of persons entitled to file claims under the Mechanics’ Lien Law is not nearly as broad as the Superior Court found. The Supreme Court reiterated in its opinion that “the precision required in regard to the filing of mechanics’ liens cannot simply be ignored,” indicating that the particular requirements of the Mechanics’ Lien Law cannot be easily circumvented. Owners and contractors, therefore, should focus carefully on the requirements imposed by the Mechanics’ Lien Law when analyzing potential lien issues.