Thursday, May 18, 2017

Nevada Proposes to Amend Mechanics' and Materialmen's Lien Law

NV Attempts to Strengthen Mechanic's Lien Laws

Several changes are pending with the Nevada Materialman's and Mechanic's Lien Law. The changes appear to be headed for confirmation by the end of the legislative session. The proposed amendments to the current lien law are outlined below. The changes severely increase the liability of contractors, while removing or watering down notice provisions of those seeking to impose the liability. Contractors also are subjected to longer periods of uncertainty in that the statute of limitations in some cases is being doubled from 1 year to 2 years.

These changes, while they bring Nevada in line with the laws of many other states, follow a trend of placing enormous liability on contractors for acts of their subcontractors.  The changes, at the same time they increase contractor liability, eliminate or water down the notice requirements previously imposed to ensure the contractor knows of potential liability. As always, look for these changes increasing a contractor's liability to result in higher construction costs and higher insurance premiums.

Attempt to Resolve Conflict of Laws: 

In 2015, the Nevada State Legislature passed Senate Bill No. 223, which deal with issues relating to the imposition of vicarious liability on general contractors, foreclosure of construction liens and collecting debt on unpaid workers' wages or benefits. However, The United States District Court for the District of Nevada in Board of Trustees of the Glazing Health and Welfare Trust v. Chambers, 168 F.Supp.3d 1320 (D. Nev. 2016), found that the bill was preempted by the Employee Retirement Income Security Act of 1974 (ERISA) The new bill attempts to resolve this conflict.

Double Statute of Limitations on Suits Against Prime Contractors

Currently, employees of prime contractors have one (1) year from the date they should have received pay or benefits to sue or start a legal action for the outstanding pay. The proposed law extends this time period to 2 years, and changes the terminology from "prime contractor" to "original contractor".

Lien Claimant Terms Clarified

The law as it is currently phrased states that a "laborer" is included in the definition of "lien claimant" and this would include an express trust fund for the payment of unpaid wages and benefits, with specific exceptions limiting what are not considered fringe benefits. (NRS 108.2214) The bill under consideration deletes these provisions, and states that any potential claimant under the new bill is a lien claimant.

Revised Notification Requirements

Notification requirements are found throughout the Nevada lien law. As it relates to health and welfare funds, these notifications are being removed and replaced with a new notification requirement, and sets forth new penalties for potential claimants.

Increases Liability for Contractors

While the current law imposes liability on contractors for unpaid labor by its subcontractors, this liability has limits (i.e. contractors are not liable for unpaid health or welfare or other benefit plans). (NRS 608.150) The proposed revisions would eliminate the exceptions, and make the contractor generally liable for the indebtedness for labor that is incurred by a subcontractor or other contractor.

Taft-Hartley Notice

Administrators of a Taft-Hartley trust currently must provide notice of a delinquency when a benefit payment that is owed to the trust is not received. (NRS 338.700) Section 8 of this bill fully repeals this provision of law.

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