It should be simple; a subcontractor is hired by a general contractor and is paid after said work is done. However, it is far too routine that a subcontractor is paid far less than the value of their work, or isn’t paid at all. This creates a domino effect; a contractor doesn’t pay the subcontractor, who can’t pay their employees. In the event that this should happen, a New Orleans contractor licensing attorney can help you recover various payments. First, it is important to understand the Louisiana subcontractor licensing laws in order to get a better understanding of contractor expectations and payments
Louisiana Contracting Laws
A subcontractor may be stiffed for a number of reasons – such as the owner of the property not paying the contractor – but the main one is if the contractor doesn’t care about maintaining proper business relationships. If the contractor won’t use you again on future projects, their integrity might be less than true. There are laws that protect a Louisiana subcontractor from this type of behavior:
- Once the contractor receives payment, they are required to promptly pay the agreed amount to the subcontractors with whom they worked.
- Penalties for non-payment by a contractor in Louisiana after receiving payment from the owner following a 14-day period are as follows:
- In addition to payment, one-half of one percent of the amount due, per day.
- The total penalty shall not exceed 15 percent of the total payment due.
- If for any reason the contractor receives less than the full payment from the owner, then the contractor shall be obligated to disperse only the funds received on a prorated basis with the contractor, subcontractors, and suppliers each receiving a prorated portion based on the amount due on the payment.
There is also the difference between “pay-when-paid” and “pay-if-paid” agreements; one word presents drastic variation in how a subcontractor will receive payment from a contractor. The “pay-if-paid” clause, which is actually forbidden for use in some states, shifts credit risk of owner nonpayment down the contracting ranks. Therefore, payment to subcontractor is more likely to be contingent upon the owner paying what they agreed to in the contract.
The “pay-when-paid” clause says that a Louisiana subcontractor will get paid only when the contractor receives payment from the owner, although it is considered more of a timing provision than anything else. Even if the contractor never gets paid, they will still owe the subcontractor the agreed upon amount.
What Should I Do If I’m Not Paid?
There are many avenues you can take to recoup payment you are owed. You have the law and fair business practices on your side; so what can you do if the contractor decides that they’re not going to pay you?
- First, you could try calling them or going to their office. It’s possible that a simple mistake was made, and bringing it to their attention could easily rectify the situation. A payment plan may need to be worked out as well.
- If the amount you are owed is less than $5,000, you can take them to small claims court. An attorney is generally not required here, and court costs are low.
- Hire a New Orleans construction attorney. They can help you gather evidence and will send a letter stating that you will pursue the claim if not paid. This will let them know that you are serious and will need to be paid lest you file a lawsuit.
- You can hire a collection agency, but there is a fee for this, usually in the range of 25-40 percent. If you go this route, check that the agency is legitimate before you hire them.
If you have gone through all your options to collect and still haven’t received payment, you can actually write off not being paid on your taxes. This is what’s known as a business bad debt, and it won’t come close to reimbursing you completely, but it’s better than nothing.
In the event you are refused payment, you’ll need an experienced construction attorney on your side. The Smiley Law Firm has handled numerous cases involving non-payment, and if you reference this post, we will give you a free consultation. Call our office today for strong representation.