ConstructionPro Week, Volume: 4 - Issue: 28 - 07/24/2015

Should Labor Always Have a Priority Claim to Funds?

By Bruce Jervis

 

Individuals who use their skill and efforts to enhance the value of real property receive special protections under numerous state statutes – and appropriately so. Laborers, living paycheck to paycheck, are granted priority claims to the contract proceeds. Mechanic’s liens, while primarily utilized today by corporate constructors, were originally designed to provide payment security to individual tradesmen.

 

Fast forward to today’s world and sometimes the equities are blurred. A South Carolina court recently addressed a contest between longtime secured creditors of a contractor and a labor union fringe benefit trust fund. Each claimed a priority interest in undisbursed contract proceeds held in escrow. The creditors, whose security interest was pre-existing, lost.

 

Should statutory protections designed to protect individuals also apply to corporate entities, which furnish labor to projects, or to unions, which represent labor in collective bargaining agreements? Or, is the extension of these protections simply an appropriate recognition of the way labor is provided today? Your comments are welcomed.

 

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