You’ve done all your work completely and competently. The client is happy. The job is finished. And you still haven’t been paid. Confrontation can be difficult, and you may be concerned about how it will affect your future job prospects. As a hard-working and dedicated trade worker, you can’t afford to work for free, and you shouldn’t be expected to.
Approaching a difficult subject like this is easier when you have a plan in place. Understanding your rights and being assertive but not belligerent is the best way to deal with this kind of situation. Try these methods to recover lost money from a dishonest general contractor:
1. Read your contract
You should always have a contract in place before you start the work. This contract should spell out exactly what the expectations are, the pay scale, and the conditions for payment. Typically, a general contractor has ten days to pay after receiving a receipt. Make sure that you submitted the receipt correctly with accurate information. Have an open dialogue with the contractor to avoid misunderstandings about payment.
Documentation is important in case you need to pursue more aggressive means to be paid. Document all the work you have completed, the material you purchased, and any communication you have with the general contractor. Keep copies of all your receipts. You will need this documentation to prove that you have done your part in case you need to go to court.
2. Check on payment bonds
A property owner may require a general contractor to take out a payment bond. This is like having insurance on the work and payments. If the general contractor does not pay subcontractors, the surety company that issued the bond pays the debts then will be responsible for suing the contractor themselves to recover the costs. Payment bonds protect both the homeowner and the subcontractors. If there is one for the project you are working on, you can get paid through that insurance.
A payment bond is required for government funded construction such as road work or a public building. A private property owner can also require a payment bond. As a subcontractor, you are entitled to a copy of the payment bond for a property you worked on. It’s a great idea to ask about this before you begin work and include in your contract that you would like a copy of it. If you need the information, ways to contact the surety company will be in the document.
3. Report the contractor to the state licensing board
Not all states have licensing requirements for general contractors. If your state does, you can report the general contractor to this board. The board can then decide to impose penalties. Any filed reports are public record, and other property owners and subcontractors can access the information to decide who they trust to work with.
4. File a mechanics lien
This is actually filed against the property owner, even if they paid the general contractor in good faith that all subcontractors would be paid appropriately. The property owner is obligated to pay you, even if they pay for the work twice. If they do not, the property can be foreclosed on, and you would be paid from the money from the sale of the property.
5. Sue the contractor
You will need the help of a lawyer to do this. However, in the settlement you can ask for reimbursement of legal fees, as well as interest on the original amount they owe you.
Depending on how your contract is written, you may have an arbitration clause. In this case, you’d settle the disagreement outside of the courts. You and the contractor would present your cases to an arbitrator instead of a judge who will make a decision. This process is much more efficient than going through the court system, so you can get your settlement in months instead of years.
Laws determining time periods and the process for using any of these methods can vary by state. Consult with a lawyer or union representative for a complete understanding of the laws that protect you from non-payment. The laws are written in your favor and offer several ways to resolve the problem. They are there for your protection, so don’t be afraid to use them when you need them.
Trades.org is here to help your business succeed. Our tools will help you save time and money, understand the ins and outs of business management and spend your days providing exception services to your customers rather than marketing and office tasks. We’ve got your back with practical help managing and growing your business.