Chick-fil-A Liens Highlight The Construction Payment Problem

When writing about mechanics liens, and construction payment in general, it’s always helpful when there is a story to spice things up. A recent dispute out of Western Michigan has done just that. As the result of an issue between the general contractor and a first-tier subcontractor, carpenters who worked on Chick-fil-A restaurants have gone unpaid. This sort of dispute is not uncommon in the construction industry, and the stories from these carpenters go a long way to show the toll that payment disputes can take on subs.

The Construction Payment Problem

Payment in the construction industry comes in the form of a chain: the money sits at the top of the chain with a property owner, developer, or awarding authority. These parties hire a general contractor who performs work on the project, but more importantly, the general contractor hires the subcontractors and suppliers that will do specific jobs on site. These subs and suppliers, often small and unsophisticated businesses, hire other subcontractors or suppliers as needed. This system requires a number of small businesses to work together to finish a project, but it also creates competing interests. Specifically, passing along risk of nonpayment is on the forefront of everyone’s mind.

Because each party relies on the one above it for payment, the lower-tiered parties lack leverage. Compounding the leverage issue is that the further a party is down the chain, the less likely they will be able to withstand any payment issues that come along. These payment disputes can seriously injure parties down the chain, regardless of that party’s involvement in the dispute. This point became extremely clear recently during the construction of Michigan Chick-fil-A restaurants.

For an in-depth look at the construction payment problem, here’s an article on construction payment and financial risk.

Carpenters Lien Two Chick-fil-A’s

Chick-fil-A hired Thorndale Construction Services (“Thorndale”) as general contractor to build two restaurants in Western Michigan. Thorndale in turn hired Infinity Homescapes (“Infinity”) to construct the buildings. Infinity then hired local union carpenters to complete the work.

According to Thorndale, they had authorized Infinity to pay $30,900 for non-union workers on the project. The project went far beyond this price, and Infinity claims to have been shorted $72,000. As a result, carpenters down the chain have not gotten paid. The carpenters filed liens on the properties totaling $35,000. Infinity has also filed a lien.

Chick-fil-A and the carpenters have both upheld their ends of the bargain. Chick-fil-A has made all payments to Thorndale in a timely manner, and the carpenters have done the work asked of them. Yet, Chick-fil-A is facing liens on two new restaurants and the carpenters are feeling the sting of nonpayment.

While Thorndale and Infinity duke it out in the middle of the chain, the property owner and laborers suffer. Because Thorndale and Infinity did not send payments down the chain, the carpenters have faced frozen bank accounts, missed mortgage payments, a repossessed vehicle and more. Here are some quotes from the carpenters and their Union rep:

“It doesn’t seem like anybody cares.”

“It was going to be an exciting project for me, taking my children there and showing them what I built.”

“I have four boys, and one of them needs to go see a specialist doctor, and my benefits weren’t covered.”

“Just do the right thing. Pay people what you owe them.”

For the original story, here’s Fox 17 of Western Michigan’s article: Chick-fil-A contractors’ dispute leaves dozens of carpenters unpaid.

Takeaway

The construction industry relies heavily on cooperation between different parties, so it doesn’t make a lot of sense to leave this collaborative effort behind when dealing with the construction payment problem. This is especially true now that we’ve seen how industry collaboration resulted in vast improvement to construction safety. What’s more, when payment issues do arise, the entire chain often feels the sting.

This situation puts the power of the mechanics lien on full display. Mechanics liens provide ammunition to unpaid workers when the parties up the chain have failed them. For those parties at the end of the payment chain, relying on the general contractor is not an ideal option. Unfortunately for Chick-fil-A, they are now facing liens on two properties when it appears the restaurant has been making full, timely payments. However, it’s important to note that Thorndale and Infinity are not off the hook. Chick-fil-A can file claims against those parties, and the restaurant is certainly in a better position to handle that dispute than the carpenters. By utilizing mechanics liens, the unpaid carpenters were able to shift risk to the parties best suited to manage it.

Subscribe to zlien's Construction Payment Blog