Michigan Roadwork Halted by Labor Dispute

Payments in the construction industry are already an issue for many material suppliers and others lower on a project's supply chain without any help from outside factors. Weather is a major player in the construction sector, and it will likely rear its ugly head in the coming days and weeks with Hurricane Florence; however, there's another aspect affecting construction payments and the industry as a whole: labor.

It is no secret there is a labor shortage in construction, not only in the U.S. but around the world. Currently, in Michigan, it is not that there are not enough workers—there are—but a union lockout has hampered construction in the southeast portion of the state.

More than 160 state and local road projects are beset with delays or complete stoppages due to a labor lockout between the Michigan Infrastructure & Transportation Association and Operating Engineers Local 324, according to Crain's Detroit Business. More than 1,000 workers have not reported to jobsites since the lockout started earlier this month. A five-year contract between the two sides ended June 1.

More than half of the projects are the Michigan Department of Transportation's, but the MDOT is not involved in the dispute. Others are part of local road agencies. Projects along Interstates 696, 75 and 96 are also being affected by the dispute.

When construction disputes arise, Chris Ring, of NACM's Secured Transaction Services (STS), said, "It's time for creditors to batten down the hatches."

"Creditors should let management know this [union dispute] is happening and potential delays in payments are on the horizon. It is not uncommon for this to happen." Unfortunately, factors such as a labor dispute or weather are outside a creditor's control, and there is not much they can do to make the union workers go back to work. Ring also suggested to "get paperwork done and out as soon as possible." This will help with liens, and in this case, bond claims. It is important to remember statutory deadlines do not change.

The principal contractor must still receive a written notice from the unpaid bond claimant within 30 days after first furnishing of materials or labor in Michigan. A written bond claim notice to the principal contractor and the government unit must also be given within 90 days of last furnishing. Specific for Michigan highway projects, the MDOT must give notice with 60 days of last furnishing.

One caveat of this is not all public projects are bonded, so knowing information about the project is vital. Contracts less than $50,000 are excluded from statutory bond requirements as laid out in the Michigan Compiled Laws.

—Michael Miller, managing editor

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Wednesday, 20 November 2019

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