Doctor Fired for Taking FMLA Leave

May 17th, 2018

Case Survives Summary Judgment

This article appeared in Law 360

 

Steward Must Convince Jury Doc Fired For HIPAA Violation

By Chris Villani

 

Law360, Boston (May 16, 2018, 3:54 PM EDT) — Steward Healthcare System LLC will need to convince a jury it fired a psychiatrist for violating the Health Insurance Portability and Accountability Act and not because, as the doctor claims, he took disability leave after getting pneumonia, a Massachusetts federal judge ruled Wednesday in denying part of a summary judgment bid.

Dr. Alexander Lipin sued Steward, Steward Medical Group Inc. and Holy Family Hospital in a case removed to federal court in November 2016, nine months after he was fired. Lipin claims the hospital canned him wrongfully after he needed to extend his time off under the Family Medical Leave Act due to a bout with pneumonia, but the hospital said it decided he had to go before they knew he was sick after he passed along patient information to the police in violation of HIPAA.

SMG President Dr. George Clairmont said he was waiting for Lipin to come back from leave to officially show him the door but went ahead with the dismissal when he learned Lipin was doing work at another hospital, Anna Jaques Hospital, while supposedly out sick. In denying part of Steward’s motion for summary judgment, U.S. District Judge Leo T. Sorokin wrote Wednesday that a trial will be needed to sort out some of the issues around the prickly firing.

“A genuine issue of material fact exists as to whether Steward made its decision to terminate Lipin (1) before he took leave on January 26 and (2) before Clairmont learned of Lipin’s continued work for Anna Jaques on February 13,” Judge Sorokin wrote.

Although Judge Sorokin said nothing directly contradicts Clairmont’s description of the firing, he said finders of fact could choose to disregard his account because the hospital never actually fired Lipin or made arrangements to cover his patient workload until learning of his work for Anna Jaques.

“These circumstances could support a reasonable inference that Steward decided to fire Lipin only after Clairmont learned of Lipin’s work at Anna Jaques,” Judge Sorokin wrote. “Thus, Steward’s primary argument — that there was no causal connection between Lipin’s FMLA leave and his termination — fails for purposes of summary judgment on Lipin’s FMLA-based claims.”

The hospital said the decision to fire Lipin came after investigating a November 2015 incident during which Lipin allegedly called Methuen police and conveyed information about a patient to find out if the patient had any outstanding warrants. The police declined to speak with him about the matter, citing HIPAA, and the hospital began probing the incident over the course of the next several weeks, according to court records.

Kavita M. Goyal of the Rosen Law Offices, an attorney for Lipin, told Law360 on Thursday the HIPAA violation was “no big deal” and an excuse concocted by the hospital to drum up grounds for Lipin’s termination. Clairmont’s report characterized the offense as “minor” and Lipin would show a jury it was not the reason for the firing, Goyal said.

The judge did allow a win for Steward on separate claims by Lipin that the hospital violated the Americans With Disabilities Act by firing him on Feb. 23, 2016, after extending his FMLA leave until March 2 of that year. The judge said continuing to engage with Lipin about his illness after deciding to fire him would only have served to delay the inevitable.

“Whereas Steward had reached an employment decision without regard to any disability asserted by Lipin,” Judge Sorokin wrote, “Steward was not obligated to initiate an interactive dialogue with Lipin toward an accommodation that would have served only to forestall his termination.”

Both Goyal and Emily L. Grossman, another Lipin attorney, said they were pleased that Judge Sorokin is allowing the FMLA part of the suit to proceed, but were disappointed to see the ADA claims tossed.

“I disagree with the judge’s decision, he suggests an employer may no longer be obligated to participate in the interactive process if a decision is made to terminate, even if that decision is unlawful,” Goyal said. “In this case, he was working a second job and we believe he was protected under FMLA.

“The reason they terminated him was because they were mad he had worked at Anna Jaques and believed he was not entitled to the time off because he was working somewhere else,” Goyal added. “At the very least, the employee is entitled to a conversation.”

The parties are due back in court May 30 for an initial pretrial conference. Judge Sorokin also directed lawyers for both sides to determine whether mediation to avoid trial altogether might prove fruitful.

Counsel for Steward did not immediately respond to requests to comment Wednesday afternoon.

Lipin is represented by Kavita M. Goyal and Emily L. Grossman of Rosen Law Offices. Steward is represented by Anne S. Bider and Barry J. Miller of Seyfarth Shaw LLP.

The case is Lipin v. Steward Healthcare System LLP et al., case number 1:16-cv-12256, in the U.S. District Court for the District of Massachusetts.

–Editing by Orlando Lorenzo.

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RLO Protects ATF Employee from Gender Discrimination

February 8th, 2018

Rosen Law Office settled a case in favor of a female employee of the bureau of Alcohol, Tobacco and Firearms, who was disciplined for the sort of conduct that male agents got away with.  The Boston Globe discussed the case in an article about sexual harassment at ATF. 

RLO attorneys Kavita Goyal and Emilie Grossman handled the case.  In it, an ATF intelligence research specialist named Jennifer Norcross was suspended after complaining that female employees had to attend a training session that male agents were allowed to skip.  A female colleague told a supervisor: “I guess the penises don’t have to go to the training today; only the vaginas have to go?”

Norcross agreed that female agents were being singled out.  She told the other agent, “I would give you a prize if I had one.” The ATF found Norcross displayed “inappropriate behavior” by agreeing with the comment and suspended her for one day, even though Norcross herself said nothing inappropriate.  The woman who made the comments received a two-day suspension.

Norcross complained of unequal treatment, since just a month earlier three male agents went undisciplined for their role regarding a sexually suggestive photo shared in the Boston office.  The photo showed agent Philip Ball with his pants down at his knees and boxers exposed, standing over Eric Kotchian, who was stretched out on the floor, partially under a desk. Agent Robert White e-mailed the photo to women in the office. It wasn’t until Norcross complained about her suspension that Ball and White received reprimands.  The after-the-fact reprimands were a less severe sanction than the women received, even though the male agents’ conduct was arguably more offensive.

Goyal and Grossman argued that not only was Norcross’ reprimand evidence of gender discrimination, but also that ATF retaliated against her when she supported a female colleague’s complaint about it.  The ATF settled the case by paying Norcross $41,000, reducing her suspension to a reprimand, and transferring her to another office.

Senator Charles Grassley, chairman of the Senate Judiciary Committee, told the Globe that law enforcement should be “a guiding example of professionalism and proper conduct,” but his oversight has found that at ATF, “too often, inadequate systems to track and respond to misconduct claims only add insult to injury for harassment or discrimination at work.”

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Massachusetts Wage Act Overview

March 3rd, 2016

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Get the Wages You Have Earned

Here are a few ways employees get cheated:

  • They don’t get all their wages at the end of every pay period.
  • They don’t get time and a half when they work over 40 hours.
  • They work on public works projects but don’t get paid the prevailing wage.
  • They don’t get paid commissions when they are due.
  • They don’t get paid in full on the day they terminate, including vacation pay.

If you’re one of those employees, the Massachusetts Wage Act may provide a way for you to get back three times your unpaid wages.  

Massachusetts has some of the strongest employee rights laws in the country.   If your employer has not paid you your full wages, commissions, vacation pay, overtime, or prevailing wages—and paid you on time—you can sue to get back three times your unpaid wages, and also your attorneys’ fees and costs.    

The first step is to file a wage complaint with the Massachusetts Attorney General’s Office.  You need to do this before suing your employer.  It is best to fill out this claim as soon as you learn you are being cheated, and it must be done within three years of the wage violation.  Otherwise, you waive your right to bring a wage claim.  You do not need to submit any documents, just follow the link below to fill out the online form.

https://www.eform.ago.state.ma.us/ago_eforms/forms/npwc_ecomplaint.action

The purpose of completing a wage complaint is to give the Attorney General’s Office the opportunity to investigate your claim and get back your lost wages for you.   If the investigation results in payment, you’ll get your wages, but not treble damages and attorneys’ fees.  And the investigation can take a very long time.  That’s why you may decide to file a lawsuit. 

After you fill out the wage complaint, you can ask the Attorney General’s Office for a “Right to Sue” letter.  When the letter arrives, you can file a lawsuit against your employer in court.  At this point in the process, or earlier, you may want to find an attorney to help you with your case.  

Because the statute is so punitive to employers, our firm often takes on wage claims on a contingency fee basis.  This means that we will bring the lawsuit on your behalf, in exchange for payment from the settlement you receive from your employer if you win. 

The Rosen Law Office has a great deal of experience bringing successful Wage Act lawsuits.  In the last few years, we have helped a number of employees who were being cheated out of their proper overtime wages, prevailing wages, or both, obtain satisfactory settlements with or judgments against their employers.  If you think you’ve been cheated, you should call for a free consultation.    

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Dental Board to Start Random CEU Audits

June 10th, 2015

dentThe Board of Registration in Dentistry is going to start doing random audits to make sure dentists and hygienists have met their continuing education requirements (“CEUs).  

In the past, the only way the Board knew if someone was up to date on their CEUs was if there was a complaint.  In the course of the investigation, they would routinely request proof of attendance at the various required courses.  Starting in the fall, the Board will do random audits.  The goal is to hit 5 percent of the licensed dentists and hygienists every year.  

When dental professionals renew their licenses, they have to certify that they have satisfied their CEU requirements.  Dentists have to take 40 CEUs every two years; hygienists need 20 units.  Dentists are required to include courses in infection control and pain management.  It’s easy to miss the pain-management requirement, because it’s not in the regulations.  You can find it here.  The dentist or hygienist should also take a CPR course. 

Dentists who fall short are in double-trouble.  They’ve violated the CEU requirement, and they’ve also lied on their license renewal form.  If there are no other violations, the Board will often impose “stayed probation.”  That’s a nondisciplinary sanction.  If the dentist makes up the missing credits and stays out of trouble for a year, there won’t be any indication of public discipline when someone looks up the license, and there won’t be any report to the national data bank.  But the investigators may find some other concern, and when the issues start to add up, the sanction can be more severe.

The current license renewal cycle runs from April 1, 2014-March 31, 2016.   The Board is going to be more conscientious in checking CEUs than it was in the past, so make sure you are more conscientious about taking all your courses.

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The Dental Board’s First Look at Your Case

May 12th, 2015

Here’s an article Joel wrote for the Journal of the Massachusetts Dental Society in the summer of 2014. Since then, the Board has decided to schedule cases in advance, and you’re told where your case will fall in the order. But otherwise this is a fair summary of what you can expect at your first trip to the Board of Registration in Dentistry.

 

Screen Shot 2016-01-23 at 5.55.28 PM

Let’s say a patient has complained. You’ve received a letter from the Board of Registration in Dentistry (BORID). Your lawyer has responded with a complete explanation, and you’ve kind of forgotten about the whole thing. Then one day, you get this letter telling you that in one week the Board will meet in executive session to consider the complaint.

There’s no reason to panic. The letter is not necessarily bad news, and at worst, the Board’s new procedure will give you a better understanding of your case.

When the Board gets a complaint, it generally asks the dentist to respond and provide relevant documents. After the dentist replies, it can be months before anything happens. But eventually, the Board has to decide what to do about the complaint, and that’s when the letter will come.

In the past, the Board dealt with most complaints in open session. These would be listed on the agenda. But dentists don’t always consult the Board’s website and might not have known their case was on. The next thing the dentist would hear was either that the case was dismissed or that the Board was taking it further.

Things are different these days. Now, you are more likely to get a letter saying that the Board is going to consider the complaint against you in “executive session”—a closed hearing. You have the right to be present, to speak on your own behalf, and to make a recording or transcript. You may bring a lawyer. The lawyer is not entitled to participate actively. His or her main job is to prepare you, observe the proceedings, and advise you about your rights.

The open meeting law allows the Board to meet in executive session to discuss “the discipline or dismissal of, or complaints or charges brought against . . . [an] individual.” You would think, from this, that the Board is concerned with protecting the reputation of a dentist who may not have done anything wrong. And the closed sessions do serve that purpose. But the main goal is to preserve patient confidentiality.

It’s impossible to discuss your treatment of a patient without a risk that protected health information will be disclosed. When a specific patient isn’t involved—let’s say your dental hygienist forgot to renew her license—the Board will discuss the matter in open session.

What to Expect at the Board Meeting

The meeting opens at 8:30 a.m. at BORID’s headquarters at 239 Causeway Street in Boston. Cases are called in the order that people sign in, so get in line early and try to sign up about 15 minutes before the proceedings begin. The Board meets first in open session to discuss general business. After an hour or two, there will be a motion to enter executive session, and the public will leave the room. Depending on when you signed in, you may have an hour or more to wait.

When your case is called, you and your lawyer will sit at a desk near the Board’s conference table. You will have discussed in advance what you will say, if anything. The Board investigator will make a presentation about what regulations you may have violated and what evidence there is.

Although you’ve already received some indication of what your case is about, the investigator may have discovered facts that will come as a surprise to you. The executive sessions are recorded, so if you choose to speak, those words may come back to haunt you. If something surprises you, it’s probably better to remain silent than to blurt out an ill-considered explanation.

Although an appearance before a licensing board can be nerve-wracking—try not to worry. The large majority of cases don’t result in public discipline. Dentists frequently are in and out of the boardroom in a few minutes, smiling and shaking hands with their lawyers.

By the Number

Jeffrey Mills, the Board’s assistant executive director, was kind enough to provide the following statistics from the Board’s files regarding the period between June 1, 2013, and May 31, 2014. The Board closed 170 complaints during that time. Of these:

• 26 were dismissed

• 22 were dismissed with an advisory letter

• 69 resulted in stayed probation (non-disciplinary)

• 10 resulted in a reprimand

• 35 resulted in probation

• 5 resulted in suspension (one was summary suspension)

• 3 resulted in voluntary surrender

Only 32 percent of the complaints resulted in public discipline, which is reportable to the National Practitioner Databank. Fewer than 5 percent of the complaints resulted in the temporary or permanent loss of a license. There was only one summary suspension. That happened to be my case, and it was dismissed after a hearing, so really there were only four suspensions, or a little more than 2 percent of the cases.

Four Reasons to Show Up

With few cases resulting in serious discipline, you may wonder whether you should even bother to show up. I think you should, for four reasons.

First, the complaint you responded to may not have given you all the information about your case. The investigator may have discovered something more troubling than whatever was bothering the patient. So a complaint that seems frivolous may result in a serious charge.

Second, and perhaps most important, the investigator’s presentation is your best chance to understand what regulations you may have violated and to hear and see the supporting evidence. This information will help you inform your expert witness and prepare for a hearing. You can also see what the Board thinks of your case. The members may not agree whether there really was a violation and how serious it was. If the Board thinks it’s appropriate to impose a sanction, you will hear why they chose the particular discipline they did. You will have a sound basis to discuss with your lawyer whether to accept the discipline offered or ask for a hearing.

Third, even the Board’s investigators are capable of making a mistake. If there’s an obvious error in the investigator’s presentation, this is your chance to correct it before things progress—if your lawyer thinks that’s wise.

Fourth, and one of the best reasons to attend, is that you don’t have to wait to find out what happened. Many times, the investigator will say a couple of sentences, and the chair will ask, “Does anybody want to open a case?” If no one responds, there will be a motion to dismiss the complaint. It’s worth being in the room to hear the words, “The motion carries.”

 

 

Download a printable version here:

Journal Summer 2014_Risk Management(click to download)

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Prenuptial agreement invalid under ‘second look’ test

January 30th, 2015

joel-rosen By: Pat Murphy January 28, 2015

A prenuptial agreement that would have limited a wife’s share of marital assets in the parties’ divorce to a dilapidated home purchased during the marriage could  not be enforced, the Appeals Court has found.

The husband argued that, under the plain terms of the couple’s agreement, the wife was entitled

only to the marital home, regardless of its condition, in the division of marital property.

But the court was persuaded that, under the “second look” test adopted in 2002 by the Supreme Judicial Court in DeMatteo v. DeMatteo, a change of  circumstances during the parties’ marriage had rendered the prenuptial agreement unconscionable and unenforceable.

“If the agreement is enforced, the wife, who makes $300 per week, would be left without sufficient property and appropriate employment to support herself,” Judge Frederick L. Brown wrote on behalf of the court. “The [trial] judge’s determination that enforcement of the agreement would be unconscionable was not in error.”

The decision affirmed a judgment by Probate & Family Court Judge Amy L. Blake awarding the wife $400,000 for what the Appeals Court characterized as a “principal residence substitute.” The seven-page decision is Kelcourse v. Kelcourse, Lawyers Weekly No. 11-007-15. The full text of the ruling can be found by clicking here.

Wake-up call?

Joel Rosen of Andover represented the wife, Rebecca Kelcourse. Rosen rejected the notion that

the decision in his client’s favor is an indication that Massachusetts courts are less inclined to

enforce prenuptial agreements.

“Prenuptial agreements are pretty strictly enforced in Massachusetts,” Rosen said.  “You have to

make a very strong showing before a court is going to invalidate one.”

He added that his client’s case is instructive because it illustrates just what it takes under theDeMatteo standard before courts will substitute their judgment for the contract the parties enter.

“It’s a pretty high bar,” Rosen said. “Either you have to prove that circumstances have changed so much that they are beyond what the parties contemplated when they signed the agreement, or you have to prove that the wife is essentially going to be impoverished.”

The husband, Lawrence Kelcourse, was represented by William M. Driscoll of Chelmsford. Driscoll did not respond to a request for comment prior to deadline.

 

But Wellesley family law attorney David B. Feldman called Kelcourse a “very significant”

decision on the enforceability of prenuptial agreements.

“Every few years the courts need to give lawyers a wake-up call to the fact that, if the agreement is unconscionable at the time one of the parties seeks to enforce it, the courts won’t enforce it,” Feldman said.

The case underscores the point that the Probate & Family Court first and foremost is a court of equity, he said.

What attorneys need to take from Kelcourse is the understanding that a prenuptial agreement is not automatically enforceable just because both sides had an attorney and both sides entered into the contract freely with full disclosure of assets, Feldman said.

“Even when on the face of it the agreement was properly done, it’s not going to be enforceable if it’s totally unfair,” he said.

Cambridge lawyer Rackham Karlsson said the Appeals Court ruling illustrates that, if the second look shows that a party is not going to be able to support him or herself post-divorce, agreement is going to fail.

“One of the things that [the SJC] was considering in determining in whether a prenuptial agreement was valid in DeMatteo was the public policy of not putting people on public assistance,” Karlsson said. “That public policy overrides strict adherence to the letter of the agreement.”

Lawyers may be fooling themselves if they think they can draft a prenuptial agreement that will necessarily hold up under each and every circumstance, he said.

“The best we can do is express the intent [of the parties]. A prenuptial agreement has concrete terms, but those concrete terms are grounded in an intent. If the circumstances at the time of divorce are too far out of alignment with that intent, then the courts will try to step in and fix it,” he said.

Money pit

The husband is a businessman who owns and operates a marina. For five years preceding the

parties’ marriage in July 1991, they lived together in a three-bedroom residence in the marina. At the time of the marriage, the husband was in his 40s, while the wife was in her mid-20s and pregnant with the second of the couple’s three children.

Several months before their wedding, the parties rented a home in Amesbury. The husband allegedly promised the wife at the time that the rental would be temporary.

Four days before the wedding, the parties executed a prenuptial agreement that waived the husband’s and the wife’s interest in all premarital property separately owned by the other spouse. Each party was represented by counsel.

The agreement further provided that any principal residence purchased during the marriage would be deemed the wife’s separate property. The agreement made no provisions for either the payment or waiver of spousal support.

The landlord of the Amesbury home eventually agreed to sell the property. A home inspector hired by the parties determined that the house needed an estimated $80,000 to $100,000 in repairs. The wife claimed that she agreed to buy the home based on the husband’s promise that he would secure funding to make the necessary repairs.

With the wife’s consent, the parties purchased the home in 2006 for the discounted price of

$320,000.

Repairs were never made to the home, and the couple separated in 2010, with the husband moving back to the marina residence.

 

Including the residence, the marina was valued at $1.7 million. While the marina was unencumbered by a mortgage, the marital home in Amesbury was subject to a $256,000 mortgage.

Moreover, the house had deteriorated further since the parties had purchased it in 2006. In addition to having boarded-up windows, chipped paint and hanging utility wires, the property was rodent-infested and had a black mold problem. It was later estimated that the home needed

$300,000 in repairs. An appraisal conducted after separation determined that the home was worth

$190,000, which was $66,000 less than the amount owed on the mortgage.

The wife filed for divorce in August 2010. The trial judge awarded the wife, who had employment income of $300 a week, $1,352 a week in alimony.

However, Rosen said because the wife’s alimony terminated upon the husband reaching full

retirement age, and the husband was 65 at the time of trial, his client was receiving no alimony.

‘Second look’ at prenup

The trial judge also awarded the wife $400,000 in the division of marital assets.

The husband contested that award on appeal, relying on the language of the parties’ prenuptial

agreement.

The Appeals Court concluded that the $400,000 award was justified under the “second look” test as a “substitute” for the principal residence the wife was entitled to under the terms of the

parties’ agreement.

Under DeMatteo, a prenuptial agreement valid at the time of execution will not be enforced at the time of divorce if, due to a change of circumstances, enforcement would leave the contesting spouse without sufficient means of support.

The trial judge found that the parties’ prenuptial agreement was valid at the time of execution, but found it unenforceable upon taking a second look in their divorce case. Specifically, the judge found that that the purchase of the principal residence and its subsequent neglect constituted a change in circumstance beyond what the parties contemplated in 1991, and that enforcement of the agreement would, therefore, be unconscionable.

The Appeals Court concluded that there was sufficient evidence to support the trial judge’s determination that the prenuptial agreement was unenforceable under the second look standard. “Crucial to this finding is that enforcement of the agreement would, as the [trial] judge noted, leave the wife ‘a house with negative equity, with documented structural issues, with documented code violations, and with needed repairs and/or renovations approximated to be upwards of $300,000,’” Brown wrote.

With the prenuptial agreement deemed unconscionable and unenforceable, Brown next examined

the trial judge’s consideration of the statutory factors for dividing the marital property.

Brown concluded that the trial judge properly applied the factors enumerated in G.L.c. 208, §34 in awarding the wife $400,000.

“The [trial] judge considered, inter alia, the wife’s occupation, opportunity for future income, age, and contribution as a homemaker, as well as the needs of the couple’s dependent children,” Brown wrote. “We find no abuse of discretion, or other error of law, in the division of assets.”

 

CASE: Kelcourse v. Kelcourse,Lawyers Weekly No. 11-007-15

COURT: Appeals Court

ISSUE: Was the “second look” test properly applied to declare unconscionable and unenforceable a prenuptial agreement that limited a wife’s share of marital assets to a dilapidated home purchased during the parties’ marriage?

 

DECISION: Yes

 

 

LAWYERS WEEKLY NO. 11-007-15

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What to Do When Subcontractors and Suppliers Ask the Owner for Payment

September 15th, 2013

Stacks of One Hundred Dollar Bills with Small House.When owners discover that their contractor has not paid subcontractors and suppliers, anxiety immediately sets in. Contractors who are not adept at running their businesses end up with cash flow problems and operate on credit. The situation then catches up with them and they stop making payments. Suddenly the owner finds himself being contacted by subcontractors and suppliers who are demanding payment.

The law in Massachusetts is clear; a subcontractor or supplier can only collect against an owner if it records a properly perfected mechanic’s lien. Then he can only expect payment to the extent that money is owed to the contractor at the time the lien is filed. That said, the owner has the right to finish the job. If there are no funds left, the subcontractor or supplier can only go after the general contractor for payment.

Mechanic’s liens in Massachusetts are complicated. They consist of two documents: a Notice of Contract and Statement of Account. After filing these documents, the sub or supplier must file suit within 90 days, or the lien is no longer valid. Contractors and construction companies frequently fail to properly perfect or record their liens. If this occurs, they may be dismissed.

Generally, in MA, liens must be filed within 90 days of when the general contractor or someone working through him was last at the job. If an owner pays subs during the period that others can still record liens, he “pays them at his peril.” For that reason, the owner should record a Notice of Termination with the Registry of Deeds. That starts the clock running and all liens must be filed within 90 days of the recording.

At that point, the owner has a decision to make. Should he file a motion to dismiss the lien because no money is owed to the general contractor, or negotiate with the sub or supplier and pay them something to dissolve the lien? Unfortunately, the answer is, it depends.

In order to have a lien dissolved, your lawyer has to file an application to dissolve the lien with the court, and schedule a hearing. The whole process may take ten hours or more of your attorney’s time. As with any matter before a judge, there is no guarantee that the decision will go your way, even if the facts are on your side.

If the sub or supplier will agree to a smaller amount to pay the general contractor’s debt, it may be worth it to pay and have him sign a release. This may be a preferable and perhaps the only option if the subcontractor still has work to do, or if additional supplies are needed from the same supplier. It is generally more expensive to hire someone new to come in and complete work that has been started by someone else.

On the other hand, the amount owed may be so large that it is more economical to fight it out in court. If money is still owed to the general contractor, then that amount will be distributed pro rata to the subs who have filed properly perfected liens. Unless one can get all of the subcontractors to agree, it is better to obtain a court order decreeing the amount owed and how it should be distributed.

It is extremely stressful for an owner when subcontractors and suppliers start knocking on his door. Given the complexity of the situation, it is advisable for an owner to contact a construction attorney to determine how to best resolve the matter.

-Andrea Goldman

http://www.goldmanlg.com/

posted by: joelrosen in BUSINESS, BUSINESS ADVICE & LITIGATION, CONSTRUCTION CONTRACTS & DISPUTES | 2 Comments

What to do When Your Contractor Doesn’t Pay Subcontractors and Suppliers

August 15th, 2013

Recently I was contacted by some homeowners when their contractor told them that he had run into financial troubles and would not be completing their renovation work. They quickly discovered that he had not paid numerous subcontractors and suppliers and left them holding the ball. Over the years, I have seen this scenario many times. Contractors who are not adept at running their businesses “rob Peter to pay Paul.” At times, it is simply mismanagement of their finances, but sometimes it is intentional and criminal.

How can a homeowner avoid getting caught in this kind of situation? At its worst, I had a client who discovered that fourteen of the sixteen subs were never paid. The homeowner pays his general contractor in good faith and then faces the prospect of having to pay twice for the same work and materials. There are some ways that a homeowner can protect himself.

1. Make sure your contractor is properly registered and insured.
2. Ask references if the contractor was reliable, came to the work site regularly and followed the payment schedule.
3. Be wary of contractors whose bids are substantially lower. They may request more change orders in order to jack up the contract price to what it “should” cost.
4. Start with a good contract and link payments to the completion of milestones. Have a clause in your contract that allows you to cancel if your contractor fails to pay subs and suppliers.
5. Make the payment schedule detailed and spread evenly throughout the project (for example, 10% upon pouring the foundation, 10% upon completion of the framing, 10% upon completion of the rough inspection).
6. Avoid an overly large deposit. In Massachusetts, the deposit cannot exceed 33 1/3% or the cost of special materials; whichever is greater.
7. Require lien waivers in the contract as subcontractors complete their work and are paid.
8. Be wary of contractors who ask for payments in advance of the payment schedule.
9. Make sure that materials have actually been ordered by your contractor.
10. Make sure the payments do not get ahead of the work.
11. Periodically ask subs and suppliers if they are being paid as required.
12. If you are not able to be onsite to check the progress of the job, hire an owner’s construction manager to monitor the work for you.

If you sense a red flag, do not ignore it. Confront your contractor and find out why there is a subcontractor not being paid. If you are not satisfied that the job is being run properly, reserve the right to terminate your contractor and hire someone else to finish the job.

One of the homeowners who was abandoned by his contractor found himself in an excellent position. He had enough money left to finish the job with another contractor and did not suffer any damages. Even the best home improvement contractors have found themselves in a cash flow bind. The honorable ones will be forthright about it and address the issue. Be wary of the contractors who may abandon the job.

My next post: What to do when the subs and suppliers ask you for payment.

Andrea Goldman

http://www.goldmanlg.com

posted by: joelrosen in BUSINESS ADVICE & LITIGATION, CONSTRUCTION CONTRACTS & DISPUTES | 19 Comments

How to Handle Micro-Managing Homeowners

August 9th, 2013

Controlling business puppet conceptI assume that some of the contractors out there are already nodding their heads.  The Internet has done a lot of good in the world, but in certain ways, it has not benefited home remodelers.  The access to information allows anyone to research products and methods in construction, and unfortunately, a certain percentage of the public concludes that they have developed a level of expertise that trumps that of their contractor’s.

I have heard numerous complaints from home improvement contractors who now deal with homeowners who want to buy their own materials (they can get a better deal, they want something unique), have their contractors use different methods, or finish a task within an unreasonable amount of time. I am sure that the customers mean well, but interference from their clients can be a real problem for contractors and at its worst, derail a project or result in litigation.

How can a construction professional avoid getting stuck with micro-managing (albeit well-meaning) homeowners?

  1. Pre-screen your customers.  Most of my clients tell me that they saw red flags prior to signing a contract, but did not pay attention to them.  You are the expert; if the client starts out by telling you how to run the job or insisting that he order his own materials and supplies, take notice.
  2. Set expectations.  You are running the project.  Although a homeowner may believe that she can get a cheaper price, most contractors have ongoing relationships with suppliers that allow them to buy at a discount (which they can then mark up) and control the schedule for delivery so it does not delay a project.  If something arrives damaged, these relationships can enable the contractor to replace the item on an expedited basis.
  3. Draft a good contract.  Let the homeowner know that you will be taking a markup on your materials and supplies.  Issue a disclaimer for any owner-supplied items.  Do not guarantee performance of green materials.  Charge extra if the product requires special installation methods.  Let the homeowner know that improper installation can invalidate the warranty.
  4. Write in the contract that you control the means and methods of the work.  Make it clear that the homeowner can only enter the construction site if he/she is escorted by one of the workers.  Have the owner commit in advance to the fact that you are the expert and must make sure that work will be up to code and pass inspection.
  5.  Have a clause in your contract that allows you to terminate if the homeowner refuses to make decisions in a timely fashion, causes unreasonable delay or refuses to cooperate with you.

Renovating or building a home should be a positive experience for both parties, but as all builders know, there are aspects of it that are stressful.  Don’t let your client add to your stress level by allowing them to invade your territory.

-Andrea Goldman

Massachusetts Construction Lawyer

posted by: joelrosen in BUSINESS ADVICE & LITIGATION, CONSTRUCTION CONTRACTS & DISPUTES | 2 Comments

Legal Tools for the Contractor’s Toolbox

August 8th, 2012

I was just thinking about two recent clients who were owed money by owners. One had a contract that was not in compliance with the Massachusetts Home Improvement Contractor Statute and had waited a long time to pursue his money. The other had a contract that fully protected him and contacted me once communication had broken down with the customer. In the first case, my client ended up writing the homeowner a check because he couldn’t face the risk of the multiple damages, attorney’s fees, interest and costs that are available to the homeowner under the Consumer Protection Statute (c. 93A). In the case of the second, I had no qualms about filing a mechanic’s lien and pursuing payment aggressively because my client was in full compliance with state law.

Just as no respectable contractor would work with poor quality tools, contractors and construction companies should make sure that they are working with high-quality legal “tools” that will protect them in the event of a dispute or investigation by regulating authorities.

So, here is a list of the legal tools that should be in your toolbox:

Make sure you have all required registrations for your field. That includes staying up-to-date on developments in the construction arena. Are you familiar with the special licensing required for roofers, windows and siding, demolition, etc. Do you know about the lead law for residential renovation work? Are you aware of the new continuing education requirement for contractors?
Invest in a good contract. The Massachusetts Home Improvement Contractor Statute (142A) has numerous requirements for contracts for home renovation work. However, that contract does not necessarily have clauses that protect you. For example, if you don’t have a provision that allows you to recover your attorney’s fees if you have to pursue payment from a client, you can’t collect. Contracts for new construction are different and should not be the same as your renovation contract. All contractors should have contracts with their subcontractors. I have written on this extensively in other posts.
Use mechanic’s liens. Mechanic’s liens are a great tool for getting paid. However, the deadlines and procedures for filing them are very strict, and if you don’t do it correctly and you miss the deadline, it is usually impossible to fix.
Demand letters. When clients call, they often ask about filing suit when a dispute occurs. However, filing suit should really be the last resort when there is a dispute. A well-written demand letter can frequently resolve a dispute, and is much less expensive and stressful then a full-blown lawsuit.
Your lawyer. Clients should call me before an issue arises. I draft contracts on a flat-fee basis and tell clients to call me (for no additional charge) when they want to delete clauses or add language for a particular job. I want to become familiar with their businesses and act as a trusted advisor. Preventing problems before they occur is much less expensive and stressful and enables you to focus on your business. If a dispute does happen, we will discuss the best way to resolve it. We will consider mediation and arbitration as well as the possibility of filing a lawsuit with your goals in mind.
A true craftsman does not work at a job without the best possible tools. Make sure that you protect your business with the proper legal tools as well.

Andrea Goldman

posted by: joelrosen in BUSINESS ADVICE & LITIGATION, CONSTRUCTION CONTRACTS & DISPUTES | No Comments