Michigan Legislature Repeals Right to Work and Reinstates Prevailing Wage

On March 24, 2023, Governor Whitmer signed into law bills repealing Michigan's "right-to-work" law and reinstating the prevailing wage statute, the latter of which had been repealed in 2018. 

The prevailing wage statute will mandate higher wages and benefits on state-funded buildings, schools, public works projects, roads and bridges. 

These new laws will taken effect in March 2024.  

Whitmer signs repeal of right-to-work, prevailing wage | Crain's Detroit Business (crainsdetroit.com)  

 

Michigan Governor Reinstates Prevailing Wage Requirement for DTMB Projects

On October 7, 2021, Governor Gretchen Whitmer announced that she's signed an executive directive instructing the Michigan Department of Technology Management and Budget (DTMB) to require contractors and subcontractors to pay prevailing wages for construction projects in Michigan. The prevailing wage policy will only apply to projects bid out by the DTMB. 

Michigan's Prevailing Wage Act was repealed by the Michigan Legislature on June 6, 2018. 

Watch this space for updates because the Governor's executive action will most certainly be challenged in the courts by non-union contractors and their associations.  

New Bill Would Require Builders to Present License When Recording Construction Lien

On April 20, 2021, Rep. Tommy Brann (R. Wyoming) introduced a new bill, which would require lien claimants to present their contractor's license and drivers license, or attach a copy of them, when recording a construction lien under the Michigan Construction Lien Act. Contractors who violate this requirement would be guilty of a misdemeanor (up to 90 days in jail) and incur a $500 fine.

H.B. 4668 would amend Section 114 of the Construction Lien Act (MCL 570.1114), by adding four new subsections. 

Section 114(2) would require contractors to display (present) their builder's license and some form of personal identification, such as a drivers license, when recording a claim of lien in person.

Section 114(3) would require prohibit a register of deeds from accepting a claim of lien for recording without seeing or attaching a copy of the contractor's license and personal identification to the claim of lien. 

Section 114(4) outlines the penalties for violation. A contractor who violates Section 114 would be guilty of a misdemeanor and face a fine of up to $500, or both. 

Section 114(5) outlines five different forms of "personal identification" that would be acceptable.

Comment: The Michigan Construction Lien Act already includes safeguards against unlicensed builders trying to enforce their construction liens. Section 114a(3) for instance requires that a person who brings an action to enforce a construction lien, who is required to have a license, allege and prove that he (or she) is properly licensed. Section 114a(1) allows an owner of residential property (Homeowner) to bring an action to discharge a construction lien recorded by an unlicensed builder, and recover actual attorney fees and costs.   

For more information about the Michigan Construction Lien Act, contact Peter Cavanaugh or Gary Quesada at (248) 543-8320.  Or visit our website - www.MichiganConstructionLaw.com

How to Discharge an Old Construction Lien in Michigan

In Michigan, a construction lien must be recorded within 90 days after the lien claimant last furnished labor or materials to a project. And a court action to enforce a construction lien must be started within one year of recording.

But what happens after a year if the lien claimant takes no action to enforce their lien? How do you remove an old lien? 

As a practical matter, a lien “expires” after more than one year if the claimant doesn’t file a lawsuit to enforce the lien. But old construction liens aren’t discharged automatically and remain part of the county property records. An old lien can disrupt the sale or refinancing of a property.   

Section 128 of the Michigan Construction Lien Act (MCL 570.1128), however, provides a remedy and a process to discharge an old construction lien.  

Discharging an old construction lien in Michigan is a 3-step process:

1.   Prepare an Affidavit. The affidavit must state your relationship to the property (ie., that you are the fee owner or the agent for the owner), describe the property (parcel number, legal description, and address), and provide information about the lien, including the date it was recorded. 

The property includes the legal description (metes and bounds), the parcel number, and the common street address. This information is included with your property tax bill, but will also be included with the (old) construction lien you’re trying to discharge. 

Attach the construction lien to the affidavit.Have the affidavit notarized. Make a copy.

2.   Submit the Affidavit to the County Clerk. Send the affidavit and a letter to the County Clerk requesting they examine their records; and if no proceedings to enforce the construction lien have been commenced, execute and deliver a certificate of that fact, bearing the seal of the circuit court. Some clerks charge a small fee for preparing the certificate.

3.   Record the Certificate. The certificate issued by the County Clerk, confirming no action was filed to enforce the construction lien within a year of recording, must then be recorded with the Register of Deeds to complete the lien discharge process. An unrecorded certificate is of little value. The recorded certificate discharges the old lien. The Register of Deeds is usually down the hall from the County Clerk. The recording fee is about $30. 

For more information or help with discharging an old construction lien, contact Peter Cavanaugh or Gary Quesada at (248) 543-8320.  Or visit our website - www.MichiganConstructionLaw.com

 

How to Bond Off a Construction Lien in Michigan

The process for bonding off a construction lien in Michigan generally involves posting a surety bond for twice the lien amount with the county clerk where the property is located. Cash bonds are permitted, but not common. Once a bond is submitted, and no objections are received, the county clerk will issue a certificate vacating he lien which is then recorded with the register of deeds. The whole process takes about 4-5 weeks.

For lawyers, the process for bonding off a construction lien is governed by Section 116 of the Michigan Construction Lien Act (MCL 570.1116). A bond discharging a lien also acts to discharge any notice of lis pendens which may have been recorded.
For a detailed, step-by-step primer on bonding off a construction lien, we recently published a "How To" on our website: http://www.michiganconstructionlaw.com/blog/2019/8/14/how-to-bond-off-a-construction-lien-in-michigan

Michigan Legislature Renews Effort to Abolish Prevailing Wage

On January 18, 2017,  Senators Peter MacGregor, Dave Hildenbrand, and Arlan Meekhof, introduced S.B. 0003, which would repeal Michigan's Prevailing Wage statute (PA 166 of 1965; MCL 408.551, et seq) in its entirety. 

The proposed legislation also includes a nominal appropriation to make it more difficult to challenge the repeal if enacted.

We'll continue to monitor this proposed legislation, which is certain to attract attention in the upcoming months.   

New Skilled Trades Regulation Act Impacts Section 114 of Michigan Construction Lien Act

During the recent lame duck session in December, the Michigan Legislature passed a series of bills aimed at consolidating the licensing and regulation of skilled trades, including residential builders, electricians, plumbing and mechanical contractors. All of these trades are now regulated under the “Skilled Trades Regulation Act.” 

S.B. 963 repealed the Electrical Administrative Act, the Forbes Mechanical Contractors Act, the State Plumbing Act, the Boiler Act, and the Building Officials and Inspectors Registration Act and created in its place the "Skilled Trades Regulation Act" to regulate all of those trades. Signed by Governor Snyder on January 3, 2017, the new statute, designated Public Act 407 of 2016 will take effect in 90 days on April 4, 2017

Passage of Skilled Trades Regulation Act also affects the Michigan Construction Lien Act for residential construction.  

Section 114 of the Construction Lien Act requires that contracts for residential construction include certain statutory language regarding licensure.  In a companion bill, S.B. 971 (PA 415 of 2016), the Michigan Legislature changed Section 114 to refer to the new “Skilled Trades Regulation Act.”  

TAKE ACTION IN JANUARY, 2017 –

1. Residential builders and other contractors that perform residential construction, you should update your contracts to incorporate the new language. It’s an easy fix. Do it today.   

2. Residential Builders and contractors who do not use a written contract or whose contract does not include any of the language required by Section 114, you should use this opportunity fix things. Amend your contract form to include the (new) statutory language. Don’t wait.

NEW LANGUAGE / ADD TO YOUR CONTRACT

“Pursuant to Section 114 of the Michigan Construction Lien Act, Homeowner is advised as follows:

“(a) That a residential builder or a residential maintenance and alteration contractor is required to be licensed under article 24 of the occupational code, 1980 PA 299, MCL 339.2401 to 339.2412. That an electrician is required to be licensed under article 7 of the skilled trades regulation act, MCL 339.5701 to 339.5739. That a plumbing contractor is required to be licensed under article 11 of the skilled trades regulation act, MCL 339.6101 to 339.6133. That a mechanical contractor is required to be licensed under article 8 of the skilled trades regulation act, MCL 339.5801 to 339.5819. 

“(b) If the contractor is required to be licensed to provide the contracted improvement, that the contractor is licensed and the contractor’s license number.

For residential builders, use the following: 

(b) {Name of Contractor} is a licensed residential builder in the State of Michigan (License No. ___________; {qualifying officer’s name}, Qualifying Officer.

For electrical contractors, use the following:

(b) {Name of Contractor” is a licensed electrician in the State of Michigan (License No. _______; {qualifying officer’s name}, Qualifying Officer.  

NOTE: Under Michigan law, for residential construction, the entity contracting for the work must be properly licensed. It is not sufficient for an individual to be licensed if the business entity, corporation or LLC, which is contracting with the homeowner, is not licensed. This is a common pitfall that builders, licensed individually, can fall into when they start a new business and fail to secure a builder’s license for the business.

For more about Michigan Construction Law Update, or to talk with one of our construction attorneys, click here.

FAR Amendments Designed to Speed Up Payment to Subcontractors

On November 25, 2013,  the DOD, GSA, and NASA issued a final rule amending the Federal Acquisition Regulations (FAR) to incorporate a new clause to provide accelerated payments to small business subcontractors.

The new clause [FAR 52.232-40] requires prime contractors, upon receipt of accelerated payment from the Government, to make accelerated payment to small business subcontractors, to the maximum extent practicable, after receipt of a proper invoice and all proper documentation from small business subcontractors. [ Note: If the Government does not accelerate payment to a prime contractor, that prime contractor is under no obligation to accelerate payments to its small business subcontractors.  78 FR 70478 ]

This clause will be inserted into all new solicitations issued after the effective date of this rule [December 26, 2013] and resultant contracts, including solicitations and contracts for the acquisition of commercial items. 

This rule does not provide any new rights under the Prompt Payment Act and does not affect the application of the Prompt Payment Act late payment interest provisions.

52.232-40  Providing Accelerated Payments to Small Business Subcontractors (Dec 2013)

(a) Upon receipt of accelerated payments from the Government, the Contractor shall make accelerated payments to its small business subcontractors under this contract, to the maximum extent practicable and prior to when such payment is otherwise required under the applicable contract or subcontract, after receipt of a proper invoice and all other required documentation from the small business subcontractor.

(b) The acceleration of payments under this clause does not provide any new rights under the Prompt Payment Act.

(c) Include the substance of this clause, including this paragraph (c), in all subcontracts with small business concerns, including subcontracts with small business concerns for the acquisition of commercial items.  78 FR 70479

For more about the Federal Acquisition Regulations (FAR), click here. For a complete copy of all the FAR regulations, or to download a complete set, click here. 

For more about Michigan Construction Law Update, click here.

Sixth Circuit Upholds Michigan Law Limiting Project Labor Agreements

On September 6, 2013, the Sixth Circuit Court of Appeals voted 2-1 to uphold the "Michigan Fair and Open Competition in Government Construction Act" (PA 98 of 2011).  

The act prohibits a city, village, township or other governmental unit from awarding a public construction project, grant, tax abatement or tax credit based on whether or not a bidder, contractor or developer employs union or non-union labor. 

The Court noted in a 13-page published opinion that "The act furthers Michigan’s proprietary goal of improving efficiency in public construction projects, and the act is no broader than is necessary to meet those goals." 

The Sixth Circuit's decision overturns a 2012 decision we reported here by U.S. District Judge Victoria Roberts, who had ruled that PA 98 violated the National Labor Relations Act.

Cite: Michigan Bldg & Const Trades Council v Snyder, 729 F.3d 572 (6th Cir. 2013).

For more about Michigan Construction Law Update, click here.

Additional reading:

• "Sixth Circuit upholds Michigan's open competition law," Legal Newsline Legal Journal, Sept 9, 2013 (click here) 
• "New Michigan Law Prohibits (Most) Project Labor Agreements," Michigan Construction Law Update, July 22, 2011 (click here) 
• "U.S. Circuit Court Upholds Michigan Ban on Project Labor Agreements", National Legal and Policy Center, Sept 16, 2013 (click here) 

New Law Expands Protection of Michigan's Anti-Indemnification Law

The final days of 2012 saw a flurry of activity by the Michigan Legislature. Among the new legislation passed during an historic lame duck session was a significant legislative victory for contractors and design professionals.  Public Act 468 of 2012, which was sponsored by Rep. Kurt Heise of Plymough (HB 5466), clarifies and expands the protections of Michigan's “anti-indemnification statute” for Michigan’s construction industry. MCL 691.991.  The new law takes effect March 1, 2013.

Under generally applicable Michigan law, every person is responsible for their own negligence, and if found liable are required to pay damages only in an amount equal to their degree of fault. This principle is known as “comparative” fault.  In the construction industry, parties with greater bargaining power have historically sought, by contract, to shift risk to other parties with lesser bargaining power.  In response, the Legislature has provided certain limited protections from unfair indemnification clauses in construction contracts.

Under existing Michigan law, MCL 691.991 prohibits agreements in connection with construction projects from requiring one party (the “indemnitor”) to indemnify another party (the “indemnitee”) for damages arising out of bodily injury to persons or damage to property, where those damages are caused by or resulting from the sole negligence of the indemnitee.  These types of clauses are declared void as against public policy.

Another important protection for industry participants is existing MCL 18.1237c, which applies only to contracts with the State of Michigan, Department of Technology, Management & Budget (“DTMB”). Sec 18.237c requires that indemnification provisions in DTMB contracts be “comparative” in nature.

Despite these protections, the existing law still allows many unfair and overreaching indemnification provisions to be included in design and construction contracts.

The new law clarifies that Sec. 691.991 applies to design contracts, and that the protection includes contracts in connection with all manner of private and public construction.  Importantly, the new law will require that design and construction contracts with “Public Entities,” (including cities, villages, townships, counties, school districts, intermediate school districts, authorities, and community and junior colleges), must not violate comparative fault principles.  In addition, such contracts can no longer require that contractors, and Michigan-licensed architects, engineers, landscape architects, surveyors defend the public entity from negligence claims.  However, state universities are exempted from the requirements of the new law.

For more information about PA 468, contact Gary Quesada. 

For more about Michigan Construction Law Update, click here.

Federal Court Strikes Down Michigan Law Barring Project Labor Agreements, Finds that National Labor Relations Act Preempts State Law (UPDATED)

On February 29, 2012, U.S. District Judge Victoria Roberts issued an Order striking down the "Michigan Fair and Open Competition in Government Construction Act" (PA 98 of 2011) finding that its limits on project labor agreements (PLA) violated the National Labor Relations Act. Judge Roberts also entered a judgment that permanently enjoins enforcement of the Act.
 

As we reported last August (here), shortly after PA 98 was signed into law by Governor Rick Snyder, the Michigan Building and Construction Trades Council (AFL-CIO) and Genesee, Lapeer, Shiawassee Building and Construction Trades Council (AFL-CIO) filed suit in U.S. District Court challenging the legality of the Act. The plaintiffs alleged that PA 98 was preempted by the National Labor Relations Act (NLRA) (29 USC 151, et seq). The Court ultimately agreed. 

In its ruling, the Court found that Section 7 of the NLRA, which allows employees to engage in concerted activity, protected employees' rights to negotiate project labor agreements.  The Court also found that Sections 8(e) and (f) of the NLRA allows for project labor agreements in the construction industry.  The court held that PA 98 effectively prohibited governmental units, construction managers, private contractors and subcontractors from entering into project labor agreements on state construction projects.

The court found that PA 98 was an impermissible obstacle to the employees' right under Section 7 of the NLRA to negotiate a project labor agreement.  The court also found that PA 98, by prohibiting activity allowed by sections 8(e) and 8(f) of the NLRA, regulated an area of labor law that Congress intended to be left "unregulated and to be controlled by the free play of economic forces" which violated the preemption principle announced by the U.S. Supreme Court in 1976 case. See, Lodge 76 International Association of Machinists and Aerospace Workers v Wisconsin Employment Relations Commission, 427 US 132 (1976).

The Court rejected the Governor's argument that Section 13 of the Act, which states that the Act should not be construed so as to interfere with agreements or other activity protected by the NLRA. The Court held that Governor's reading of the Act would render the entire Act a nullity.

The Court's decision in Michigan Building and Construction Trade Council, AFL-CIO v Synder permits local units of government and school districts to resume the practice of using project labor agreements on public projects.

For more about Michigan Construction Law Update, click here.

Update (3/7): Crain's Detroit Business reported today that Michigan Attorney General Bill Schuette plans to appeal Judge Roberts' decision to the 6th Circuit Court of Appeals. 

Update (3/9): Michigan Attorney General Bill Schuette filed a Notice of Appeal earlier today confirming earlier reports that Judge Roberts' decision would be challenged. See, Case No. 11-cv-13520, Doc #39. 

Update (9/15/13): On September 6, 2013, the 6th Circuit Court of Appeals voted 2-1 to uphold PA 98 of 2011. The Court noted in a 13-page published opinion that "The act furthers Michigan’s proprietary goal of improving efficiency in public construction projects, and the act is no broader than is necessary to meet those goals."   

Citation: Michigan Bldg. & Const. Trades Council v. Snyder, 729 F.3d 572 (6th Cir. 2013).

Test Wells Count as "Actual Physical Improvement" for Lien Priority, Michigan Court of Appeals Rules

Test wells installed by a potential buyer prior to closing constituted a physical improvement, allowing a construction lien to attach prior to buyer’s closing and giving the lien priority over a mortgage granted at closing. The Michigan Court of Appeals reached this conclusion in a recent unpublished case. See, E.T. MacKenzie Company v Sutton Place-Raisin Twp, LLC (Mich. App. No. 297864, Nov 22, 2011) (slip opinion). 

Under Section 119(4) of  the Michigan Construction Lien Act (MCL 570.1119(4)), a construction lien has priority over a mortgage recorded after the “first actual physical improvement.” MCL 570.1103(1) states that an “actual physical improvement” does not include preparation for a change or alteration, such as surveying, soil boring and testing. 

In E.T. MacKenzie, the  buyer’s contractor drilled eight test wells prior to closing and left PVC pipes extending five feet above ground. In 2006, the buyer closed and granted United Bank a mortgage. Eight months later, the buyer contracted with E.T. MacKenzie Company for demolition and grading. The Court of Appeals opinion does not discuss the relationship of the well contractor and MacKenzie. In January 2008, MacKenzie recorded a claim of lien for unpaid services and asserted priority over the mortgage.

The trial court found that the wells were not the first “actual physical improvement,” and that the first improvement occurred after the mortgage was recorded. The Court of Appeals disagreed and reversed. 

Relying on Michigan Pipe & Valve-Lansing, Inc v Hebeler Enterprises, Inc, 292 Mich App 479, lv app denied, 490 Mich 874; 803 NW2d 688 (2011), the Court of Appeals held that the wells were the “first actual physical improvements” and the construction lien attached prior to recording the mortgage:

As defined in MCL 570.1103(1), an “actual physical improvement” does not “include that labor which is provided in preparation for that change or alteration, such as surveying, soil boring and testing, architectural or engineering planning, or the preparation of other plans or drawings of any kind or nature.”We do not dispute that these acts may suggest that the definition in effect recognizes a “due diligence process” that involves the specific procedures stated in the definition of “actual physical improvement.” Nor does the plain language of the statute, which states “such as,” suggest that the list is exhaustive. However, none of the procedures stated in the definition equates to the digging of a well, or any other act, which makes a “readily visible” “physical change” to the property. To the contrary, the acts identified in the statute are all of a nature that none of them will leave a permanent presence on the property. Consequently, we find [the defendant’s] assertion that the exception encompasses all acts done in the “due diligence process” is not supported by the plain and unambiguous language of MCL 570.1103(1). [Michigan Pipe at 486.]

SB 77 Signed into Law by Governor Snyder

On October 4, 2011, Governor Rick Snyder signed SB 77 into law (now PA 162  of 2011).  As we noted here, the new law solves the problems created by the Michigan Supreme Court's 2006 Ostroth ruling. The new law restores the applicable limitation periods to their previous durations, and restores the long-established rules that govern them.

(R/L: Benedetto Tiseo, Frederick Butters, Gov. Rick Snyder, Sen. Tonya Schuitmaker, and Gary Quesada)

Statute of Limitations: Ostroth Overturned by SB 77, New Law Takes Effect January 1, 2012

By: Gary D. Quesada, Esq

Cavanaugh & Quesada, PLC

One of the most effective defenses to a lawsuit is the statute of limitations. Limitations periods created by statute are grounded in public policy considerations which include encouraging the prompt recovery of damages, penalizing plaintiffs who have not been industrious in pursuing their claims, affording defendants security against stale demands and prolonged fear of litigation, and prevention of fraudulent claims. After a claim accrues (or is alleged to have accrued), if a plaintiff delays too long before bringing suit, the statute of limitations will serve to bar the claim, despite any other considerations.

Before February 2006, Michigan’s design and construction industry was subject to the same statute of limitations system as other businesses. However, in February 2006, the Michigan Supreme Court issued its ruling in Ostroth v Warren Regency, 474 Mich 36; 709 NW2d 589 (2006). Ostroth overruled existing case law and long-established practice, segregated the industry from general limitations law and lengthened all limitations periods specific to the design and construction industry in Michigan. 

The impact of Ostroth was significant.  For instance, according to a survey published by the American Council of Engineering Companies in 2008, Michigan’s statute of limitations for design professionals became the longest in the country. Ostroth also eliminated the rule that the limitation period begins to run when a claim accrues. In practical application, that effect served to double, triple or even quadruple the limitations period for many typical claims. Ostroth also eliminated any identifiable limitations period for incomplete projects. Clearly, the Ostroth decision negatively affected individual design and construction businesses, and the industry as a whole.

As early as the Winter of 2006, Michigan’s design and construction industry organizations began working together to reverse Ostroth by legislation. 

After 5 ½ years of political activity in connection with this effort, SB 77 was finally passed by the Michigan House of Representatives on Tuesday, September 20, 2011.  The vote was 87-21, with broad bi-partisan support. The Senate concurred the next day, and SB 77 is now expected to be signed into law by Governor Rick Snyder.  The new law will take effect January 1, 2012.

SB 77 solves the problems created by Ostroth, restores the applicable limitation periods to their previous durations, and restores the long-established rules that govern them. The period of time that facility owners have to discover latent defects is not affected by SB 77. 

As with any political campaign, teamwork and perseverance were required for success. SB 77 bill sponsor Senator Tonya Schuitmaker (R-Lawton) provided her leadership throughout the process, from introduction through final passage. Industry organizations that supported this successful legislative effort represent all sections of the design and construction industry, including the following:

• American Institute of Architects of Michigan
• American Council of Engineering Companies
• Michigan Society of Professional Engineers 
• American Society of Civil Engineers - Michigan Section
• Michigan Society of Professional Surveyors, 
• AGC of Michigan 
• Michigan Infrastructure and Transportation Association (MITA)
• Construction Association of Michigan (CAM), and 
• Michigan Association of Homebuilders

Gary D. Quesada is a partner with the construction law firm of Cavanaugh & Quesada, PLC.  Mr. Quesada served as the point person for legal issues throughout the campaign to overturn Ostroth, and testified in favor of the bill on numerous occasions before Judiciary Committees in both the Michigan House and Senate. 

For more information see www.MichiganConstructionLaw.com, or e-mail gquesada@cqlawfirm.com.

Federal Lawsuit Challenges Legality of Michigan's New PLA Legislation (PA 98)

Not unexpectedly, a federal lawsuit was filed on August 11, 2011 challenging the legality of the “Fair and Open Competition in Governmental Construction Act” (PA 98 of 2011). As we reported last month (here), PA 98 prohibits most project labor agreements.

The Michigan Building and Construction Trades Council (AFL-CIO) and Genesee, Lapeer, Shiawassee Building and Construction Trades Council (AFL-CIO) filed suit in U.S. District Court against Michigan Governor Rick Snyder. 

Plaintiffs seek a declaratory judgment that PA 98 (a) is preempted under the Supremacy Clause; (b) violates the National Labor Relations Act; and (c) violates the Contracts Clause of the U.S. Constitution. 

The case is pending in U.S. District Court, Eastern District of Michigan, Case No. 11-cv-13520 before the Honorable Victoria A. Roberts. 

(Hat-tip: Courthouse News Service).