April 5, 2020 • 26 mins
Michael Metz-Topodas, of Cohen Seglias details information pertaining to the CASPA (Contractor and Subcontractor Payment Act) law that impacts the Pennsylvania construction industry. Metz-Topodas shares his insight with Chris Martin and Jon O'Brien on the Building PA Podcast.
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Chris Martin (00:00):
And welcome to the latest edition of building
Pennsylvania podcast.
I'm Chris Martin with Atlasmarketing and I'm John O'Brian
from the Keystone contractorsassociation.
And today we are going to talk,be talking with Michael Mets to
POTUS of Cohen, SEG ileus, andwe are going to be also talking
(00:26):
primarily and asking Michael'sinput on caspo law and how that
affects contractors throughoutthe Commonwealth.
Um, Michael, thanks for beinghere.
Uh, yeah.
Welcome Michael.
Michael Metz-Topodas (00:40):
Yeah, it was great to be here.
Appreciate it guys.
Chris Martin (00:43):
Thank you.
I know we have a lot of, a lotof questions, so, um, let's,
let's dive in here.
And, uh, John, I know you wantedto lead lead with the first one,
so let's, let's go from there.
Yeah.
Um, Michael, how about we startreal basic.
And how about just kind ofexplain what is Casper though?
Construction and subcontractorprompt payment act.
Michael Metz-Topodas (01:05):
Exactly.
John said it best the contractorand subcontractor payment act.
Generally speaking is a statutein Pennsylvania.
It applies to private projectsand it outlines a certain
requirements regarding paymentto both contractors and
subcontractors.
(01:26):
In particular, it allows foreither contractors or
subcontractors to obtainadditional relief beyond what
they might be able to get in thecontract or under Pennsylvania
contract law, additional reliefwhere they, uh, those
contractors or subcontractorshave not been paid under the
terms and conditions of theircontracts in particular.
(01:49):
Um, it allows for, uh, anadditional 1% interest penalty
per month, um, or sorry, 1%yearly interest that's
calculated per month, uh, on anyunpaid balance and as well, one
of the most, uh, aggressivefeatures of it is it allows for
a contractor or subcontractorwho has not been paid, uh, to
(02:11):
recover its legal fees for any,uh, litigation or other legal
action that needs to take to getitself paid.
Uh, that's generally what thestatute does.
There are a lot of details thatit provides for us to how you go
about that.
Um, but in essence, it wascreated to protect contractors
and subcontractors, uh, to givea little extra ammunition for
(02:33):
them to make sure that they'repaid for work performed on a
project.
Um, and that should be work thatis undisputed with respect to
the amount of what away
Chris Martin (02:40):
You do, a lead us off here.
We're setting a nice foundationthere, cause we're talking a
little caspo today.
Michael did an awesome jobthere.
And, um, as, uh, both, you know,Chris and Michael, as you both
know, KCA does a lot with, uh,with, with politics and the
Harrisburg state Capitol.
And it seems as though withCasper every, uh, you
Speaker 3 (03:00):
Know, two to three years, every few years, this
issue pops up and there's a, amovement of foot amongst the
construction industry to kind oftweak, tweak a Casper a little
bit and improve it.
And one of those, uh, one ofthose happenings, one of those
tweakings came along lastsession and house bill five 66
(03:20):
came, which passed through thelegislature and governor Wolf
signed as act 27.
And are you, um, you're prettywell versed on that, on that
piece of legislation.
Aren't you Michael, you want totouch on that for a little bit
and see all that change caspo
Michael Metz-Topodas (03:35):
Yeah, no doubt.
As, as most of the constructionbar was, uh, certainly well
attuned to what was going onwith the changes to caspo, we
saw it coming and we all eagerlyawaited, uh, back in October of
2018, uh, when that bill, uh,became law after it was signed a
few months earlier, um, it was,uh, certainly, uh, an
(03:57):
interesting and compellingchange, um, to how Casper was
structured.
I believe it came out of, um,you know, a push from some of
the subcontractors to affordthem the opportunity to recover
and still enjoy the benefits ofCasper because there they were
being pushed in certaininstances, um, to forego some of
(04:19):
the rights that they may haveotherwise had.
Um, there are several changesthat, that the law created for
Casper, but I really will onlyfocus on, um, the three major
ones, uh, that, that became, uh,the focus of a lot of the, um,
literature and a lot of thediscussions that the bar had
regarding the changes, the firstone involved waiver, uh,
(04:43):
essentially the statute providedthat any contract that, um, asks
or purports to have an agreementby a contractor or a
subcontractor to wave, uh, thatentities rights under Casper,
that provision, no matter howmany times people agreed to it,
signed it initially at whateveris null and void and
(05:03):
unenforceable under Pennsylvanialaw.
Uh, so that was the firstrevision there and made it easy
for contractors andsubcontractors with regarding
those provisions, because theycould sign the contract and not
have to worry about waitingtheir Casper rights cause it's
unenforceable.
And it's one less thing tonegotiate.
Uh, you know, during the courseof, of ramping up to getting
started on a job, uh, the secondprovision, the second change
(05:28):
that Kathy mended Casper renderconcerned on concern suspension
of work, uh, for eithercontractors or subcontractors.
And it outlined a schedule thatwas sort of the, the floor by
which, uh, a contractor orsubcontractor could effectively
(05:49):
suspend work.
Oftentimes constructioncontracts will have provisions
that require a subcontractor ora contractor to keep on working
despite disputes about payment.
This change though, is to makesure that if it's an undisputed
amount, um, then a subcontractorwould not have to keep, you
know, essentially working forfree, uh, or, or financing a
(06:09):
job.
That's sort of the complaint youhear often, um, from those in
the industry, you know, I keepworking on financing the job.
And so this, uh, theseprovisions now allow for a, uh,
contractor or subcontractor towalk away only a certain
procedures are followed.
So first you have to wait for,uh, the billing period and the
payment due date to expire.
(06:31):
So at 30 days past the paymentdue date, a contractor or
subcontractor can send writtennotice, uh, to the owner or to
the con the general contractorform it as a, an agreement
notifying that person, uh, thatentity, that payment has not
been received at that point.
However, the contractor orsubcontractor still has to keep
(06:52):
on working and another 30 daysneeds to go by at which point a
second notice would be sent.
Now, I certainly recommend, um,that those notices identify the
amount owed identify all the 30days has passed, identify the
statutory provisions.
Um, and then also remind you thecontractor or the owner, um,
that if payment is not receivedthat, uh, in accordance with
(07:15):
Casper, uh, work would besuspended.
So after the second 30 days, yousend a second notice providing,
uh, all of the information Italked about earlier, as well as
, uh, notifying the recipientthat after another 10 days of
nonpayment, uh, the contract orsubcontract will have a right to
suspend work and we'll exercisethat road.
(07:37):
Right.
Uh, and importantly to thatsecond notice must also go to
the owner.
That's in particular forsubcontractors, obviously the
general contractor is alreadygoing to be notifying the owner,
but for subcontractors, theymake sure the owner gets a copy
of that second notice, uh, forobvious reasons, uh, an owner
doesn't want to see its project,uh, appended or, or, uh, uh,
paused for any reason,especially if it can make sure
(08:00):
that just by putting a littlepressure on the general
contractor can keep the projectmoving along.
Um, and then as well as you cansee, there's an obvious benefit
to the subcontractors too.
So these are the procedures that, uh, somebody out in the field
needs to follow in order to makesure that they can properly
suspend work on a project fornonpayment of again, undisputed
(08:20):
amounts.
Um, you can have this scheduleshort and I called it a floor
earlier.
Um, you can have it shortened byway of contractual agreement,
but you can not have itlengthened.
So any contract that, uh, thathas terms and conditions that
lengthen any of these periodsfor notice and suspension, they
too would be null and void underCasper.
(08:43):
Um, and, and therefore, um, uh,w it would default to what is
provided for the statute, thefinal, um, major change, uh,
that the admitted Casperconcerned with holding of
amounts out, um, a Oh, an owneror a contractor can withhold
(09:03):
amounts from the generalcontractor or a subcontractor,
um, for deficient work.
However, uh, now under the newCasper that owner or general
contractor must provide a noticeof the withholding, uh, and an
explanation for the reason forthe withholding and must do so
from within 14 days of thedecision to withhold, uh, I,
(09:28):
that applies irrespective ofwhat other contracts or
requirements might be.
And also in terms of whateverpayment schedule might be there.
So once the decisions made aboutwithholding, uh, there needs to
be a notice provided if however,the owner or the general
contractor fails to provide thisnotice, uh, then the right to
withhold is waived and thepayment must be made.
(09:50):
Uh, so that's a very importantprovision.
It serves two functions, one, itallows the subcontractor, um, or
the general contractor, whomeverit may apply whatever the case
may be.
It allows that entity to correctany work that might be deficient
or address the reason for thewithholding, um, and as well,
(10:13):
um, it ensures that, uh, if anowner isn't conscientious and
just withholds the money, but itdoesn't have a good reason or
cannot provide one.
Um, then there, isn't anunnecessary dispute over
arbitrary withholdings, um, andthat the parties get a, that
this isn't used as leverage overa contractor or subcontractor,
(10:35):
um, for their work on theproject.
I know a lot of that gets, youknow, down into the weeds as to
how all of these things operate.
And it's really, we've giveneven a very, um, you know, uh,
precise recitation as to howthese provisions operate.
I think though that anybody outin the field can see, um, that
with all of these measures inplace, um, it changes the
(10:56):
dynamic as to how, uh, uh, aproject would proceed.
And it gives a great deal ofadvantage to contractors and
subcontractors in the, in theevent that they are denied
payment, that they are otherwiseentitled to.
Um, and so it affords that, youknow, money is flowing properly,
um, that there isn't therearen't suspensions of payments,
um, you know, for, um, reasonsthat aren't justified, uh, and
(11:20):
ensures that a project movesefficiently, uh, in a manner
that's beneficial to everyone.
Speaker 3 (11:26):
Very, uh, very thoroughly explained there.
Thank you, Michael, for that,for the third item, though, the,
the withholding that does thatnotice have to be written, or
can that be an oral, an oralstatement from the owner and or
GC?
I know that's written noticewritten.
Okay.
Yeah.
Just thoughts.
I just wanted to make sure aboutthat.
(11:47):
Um, and then as far as the, uh,suspension of work, there's
quite a few notices that youmentioned.
So if you, if you max out on allof those notices, you're getting
close to a hundred days, Ibelieve, right.
Michael Metz-Topodas (12:02):
It could be that long, depending upon,
you know, how the paymentschedules are set up in the
original agreement.
Yes.
And that was one of thecritiques that was brought out.
And some people said, well, waita second.
Uh, yeah, that's terrific.
I can suspend work, but mygoodness, you know, it'd be so
long.
I might already be done with mywork.
If you're an excavator on asmall project, you might be done
by the time it comes time tosuspend.
(12:24):
So yeah, so the one hand there'sa certain benefit, but, uh,
that, that practicalconsideration was noted that
that said, John, there is apossibility that those who do
have a shorter timeframe for,for work on a project could
negotiate, uh, perhaps a morefavorable schedule.
It just depends upon whetherit's worth it to the
subcontractor.
(12:44):
And that really comes down to abusiness decision, but I'm glad
you asked that question becauseit really gets down into the
intersection as to what the lawprovides and then how it really
operates for guys out in thefield.
Those sometimes can be twodifferent things.
Speaker 3 (12:57):
Yeah.
You mentioned the, uh, thesidewalk.
I was thinking that as well forthe site work, but then also as
far as the small, you know, momand Paul shops that get in there
might do a little interior workand they're, they're done in a
week or so, you know, theirworks long gone.
And they're the people thatprobably need this law the most.
And they have to wait for a longamount of time like that.
So I'm just thinking out loudhere.
Michael Metz-Topodas (13:20):
Well, they might have to wait, but I think
the other point is it just mightnot apply to them.
And I think that's what you'regetting at as well.
And it's a good point is okay,fine.
Then they can suspend theirwork.
Um, they finish it and they moveon all the other protections
that cast before it's remain.
And so if there's no disputefrom the owner about that, the
workers performing the money isowed, and for whatever reason
(13:40):
that owner or general contractordoesn't want to pay, they're
going to be subject to that 1%penalty among others.
Uh, and as well, subject toattorney's fees, uh, for the
collection, if it's a smallenough amount, those attorney's
fees could be a substantialportion of the amount.
Uh, you know, that entity isthat business is seeking to get
paid.
Um, and, and that, that's agreat advantage to, to allow
(14:02):
those small mom and pop shops,John, because, because, you
know, oftentimes those entitieswould forgo their rights and
just say, well, I can't go, Iagree.
You grow up that money.
It'll cost me too much money toget what I'm seeking.
Well, now, if you know thatyou're protected by, but then
you can go after the moneyyou're entitled to.
So in that respect, um, you know, cast was original provisions
(14:23):
are the ones that are for someof the best protection.
Speaker 3 (14:26):
Yeah.
Good point.
Good point there, Michael.
Yeah.
Um, also, I mean, um, the lawjust recently went into effect
this year.
I believe.
Um, I don't have the exact date,but it's probably too early to
tell any, any sort of actualfeedback, you know, in the field
feedback, have you heardanything at all?
Michael Metz-Topodas (14:43):
You know, we really haven't, I'm kind of
surprised by that.
Um, the issue of the suspensionjust hasn't come up typically.
Um, we often advise our clientsto continue to keep working on a
project only because suspensionand again, I mean, look, John,
you got us right back to the, Ithink that the key point, which
(15:03):
is the law can have itsprovisions, but what really
happens in the field could bedifferent.
And that is that if asubcontractor or a contractor
decides to suspend fornonpayment, if for whatever
reason, um, that entity, thatbusiness guesses wrong.
And, um, and, and they did nothave justification for
(15:23):
suspending work, let's say theywere not entitled to the payment
, uh, that that business wasseeking.
Then that entity would be liablefor all the delay damages, the
damages that flow from thatsuspension.
So you gotta be careful now,granted, if it's, you know, you,
you, uh, the, if it's clear, um,on the project that looked the
work was done, there were noobjections and then people moved
(15:44):
on and, and accepted it then.
Yes.
Um, I think go ahead and suspendit and not worry about any of
the delays.
Um, but if there's any disputeabout that or any uncertainty,
then you just need to calculatethat risk.
Uh, and the liability that couldflow from that even so, you know
, um, a measured and calculatedsuspension, um, you know, could
(16:05):
be another way to make sure that, uh, uh, payment properly
flows.
Uh, but again, as you point outwith that kind of long period
there, sometimes the workrequired, uh, it might be long
gone long done and completedbefore that suspension period
ever arises.
Speaker 3 (16:19):
Yeah, that's true.
My, my favorite is, uh, wheneverI find myself in the halls
lobbying for bills like this andthe various subgroups come up to
me and they say, you know, if wecould only work for your GCs all
the time, we wouldn't, wewouldn't have to do it measures
like this, you know?
And I'm like, and I'm like,yeah, but when we do measures
like this, you know, we have tochange the way we operate just
(16:41):
to make sure we're abiding bythe new law and the new, uh, the
new contract.
So,
Michael Metz-Topodas (16:48):
Oh, that's such a great point only because,
uh, I don't know.
I know we, you and I have talkedabout this.
Others may not know, but beforebecoming a lawyer, I was a
teacher.
And one of the things I learnedas a teacher in terms of making
rules or policy for people isyou gotta make your rules for
the worst kid in class, not thebest kid in class,
unfortunately.
So good, good to see the samerule applies in legislation,
(17:09):
right?
Absolutely.
And that's a good point,Michael, Michael, I have a
question for you.
So clearly you have a solidunderstanding of this law and,
and, and really know how it, howit works, but if I'm a
contractor or a subcontractor,what's the process that I have
(17:31):
to go through to actually make aclaim or file under the, under
the legislation.
Um, if I feel like I'm not beingpaid accordingly, that's a great
question, Chris.
Um, and it's actually a verypointed and almost obscure legal
question.
We have this debate in thehallways of our firm all the
time.
(17:52):
Um, I'll give you the shortlayman's answer first, and then
maybe we can get to some of thetechnicalities legally, um, call
your lawyer.
And that started there.
Uh, quite honestly, um,thankfully there, unlike the
mechanics, lien law, Casper wasa little more forgiving and
doesn't have quite the stringentrequirements as to what you need
to do to, um, to operate underit, separate apart from some of
(18:13):
the withholding and suspensionprovisions.
We already talked about, um, anytime, uh, we file, for example,
our firm, we filed complaintsagainst either general
contractors or not paying ourowners who are not paying we'll
include a breach of contractclaim.
We'll include, include acasebook claim.
Um, and we'll just do it as amatter of course, uh, assuming
that there's an undisputedamount, uh, for which payment is
(18:36):
owed, um, and I can get intolater if you guys are curious to
why I keep saying undisputedamount, but that's, that's a
separate issue.
Um, but there is this sort of astylistic debate as to whether
you even need to have a separateCASP account, and you can just
put the Casper damages as partof the breach of contract either
way.
Um, the, the way to bring in theway they get recovery under
caspo is to, by bringing legalaction.
(18:58):
Um, you could arguably, if youhave, uh, an owner or a general
contractor who is not paying,you could just make a request or
a demand letter, a demand forthat payment and ask for the
Casper damages.
But I can't see to any owner toGCs, we're going to cough up the
interest in attorney's fees,unless there's a court order,
making them do it.
So going to courts the only way,um, and very often to, um, you
(19:22):
know, you'll, you'll follow thatlegal action and then, um, find
some sort of settlement, uh, youknow, that will account for some
of those costs, but damages, ifyou can, otherwise just their
mere existence are enough todrive people, to finding a way
of resolving a dispute.
Chris Martin (19:37):
Perfect.
Thanks.
Thanks, Michael.
Yep.
No problem.
And that's good for, for ourlisteners so that they
understand, and I kind offigured the first response was
going to be call your lawyercause that's what I would be
doing too.
Um, so another question for youin your experience, is there a
typical contracting category for, uh, that that typically has to
(20:02):
fight for this, this form ofpayment?
Uh, you know, you mentioned anexcavator, uh, earlier, you
know, like maybe there's a, isit, do you typically see this in
like tile contractors or, youknow, residential versus
commercial, like help usunderstand where the, that
typically,
Michael Metz-Topodas (20:24):
Um, I haven't made any formal study as
to any sort of percentages ofthat would be a fascinating
question to see, um, you know,it'd be a twofold analysis.
Who's not getting paid and thenwho's bringing Casper claims and
they're not always coextensivewith each other.
That's not always the same groupof people.
Um, but certainly I think as weall know, they're the, they're
the pressure flows downhill, ifyou will.
(20:46):
Um, and so, uh, very often, uh,we see a lot of subcontractors,
you know, guys who are sort oftowards the bottom of the food
chain, if you will.
Well, I should say thecontractual chain only by way of
just their positioning on aproject.
Speaker 4 (21:01):
Um, they sometimes fail
Michael Metz-Topodas (21:03):
Certain amount of pressure, uh, in terms
of, you know, not being able,not receiving the payments
promptly or, or, uh, paymentsthat are owed or an attempt to
try to leverage negotiation, uh,from the original amount agreed
upon for work perform.
Um,
Speaker 4 (21:19):
And so that, that tends to be yeah,
Michael Metz-Topodas (21:21):
How it will play out.
I think really to give a fullanswer to that, um, Chris would
be the subject of a whole notherpodcast.
We actually, as a firm, do awhole presentation on all the
things that occur on a projectwhere there are pressure points,
um, applied to subcontractors to, um, uh, to trim if you will,
the amount they otherwiseexpected to collect for the work
(21:43):
performed based on, on theagreement they have.
Um, so it's a really complicateddance that occurs throughout the
life of project.
Um, I have also seen instanceswhere owners sometimes just are
paying or a dispute them anamount of work.
Uh, I think also to Casper tendsto come into play, um, on some
of the smaller projects onlybecause it's such a great
(22:04):
mechanism to help, uh, obtainingpayment, um, uh, obtaining
payment where there's, you know,you otherwise might think twice
about going down a legal Avenueto, to obtain recovery.
Um, I think the other thing too,to your point, uh, in all of
this, I know we're going alittle bit of a tangent here,
but because a lot of theseissues arise throughout the life
(22:25):
of a project.
I do have to repeat my, mywarning earlier as to calling
your attorney early and oftenonly because, uh, this Cass was
definitely a situation or anykind of payment issue on a
project where I announced thatprevention is worth a pound of
cure, uh, and early interventioncan sometimes be very effective,
even if your lawyer's in theshadows and unknown to the other
parties, um, of the involvement.
(22:47):
I can provide some effectiveadvice on how to proceed, you
know, through the course of aproject little, little field
from what you originally asked.
But I think, um, it was such agood question that it inspired a
lot of that additionalinformation.
So thank you, Chris.
I appreciate that.
That's good.
That'll help, uh, help ourlisteners here in the building
Pennsylvania podcast.
So that's great.
Speaker 4 (23:06):
There we go.
Yeah.
Yeah.
Michael Metz-Topodas (23:08):
I, I would , uh, I know we've had a rather
technical and detaileddiscussion here about Casper and
some people might find itoverwhelming.
Um, and maybe just a lot ofdetail.
And I know certainly there is,there's a culture and an ethic
of look, let's just get the jobdone.
And I don't disagree with that.
Uh, I think at the end of theday, um, that's what makes our
(23:30):
industry great is that there'sthat focus on, uh, you know, uh,
rolling up our sleeves if you'llpermit the cliche, um, and
putting up buildings andstructures that people can use
and, and things that workerstake pride in.
But that said, um, it really,it's always a shame to me when I
see people businesses sometimes,you know, businesses that have
(23:52):
been within families for years,generations, et cetera, being
shortchanged, any amount ofmoney.
Um, and so there are ways ofdoing both of our roll up our
sleeves and getting the jobdone, but also making sure that
you don't get short changed.
And that's what I mean again,earlier about, uh, early
intervention with your council.
Uh, we take calls all the timeat our firm, uh, from people who
(24:15):
are, you know, midway through aproject, Hey, what do I do?
And we offer the guidance tosay, okay, here's the end game.
Let's see what we can do abouttoday.
So we can safeguard your rightsfor later on tomorrow.
And you can go back to doingwhat you do best.
And that is, uh, like I said, uh, getting the job done.
So, uh, that that's our role andthat's our philosophy.
And, uh, we've been doing itcoincidentally us for, for 30
(24:36):
years.
Uh, I've been honored to be apart of this firm for now since
2014.
Um, and I love every minute ofit.
Um, for a lot of those reasonsyou guys know as well as I do,
we have a great industry full ofgreat people.
Uh, it couldn't be more fun.
Speaker 3 (24:52):
Absolutely well said.
Chris Martin (24:54):
Well, well said, I agree with you.
That's a great way to end it.
Um, and, uh, thank you for yourtime and definitely the
technical information.
Um, very good information.
Speaker 3 (25:07):
I just want to remind everyone out there.
This is a new law.
There's going to be a lot morequestions.
This is just the tip of theiceberg.
Michael is a resource.
Um, but Michael, you want totoss your, your contact info out
real quick.
Michael Metz-Topodas (25:19):
Oh, John, thank you so much.
As you can tell, I kind of liketalking about this stuff and I
see each other at a lot of KCAevents and he probably has
always seen me quartering poorguys, lecturing her about
everything.
So it's all good.
It's all good.
It's over a cold beer.
So it makes it even better, butno, in all seriousness, um, uh,
(25:41):
my contact information is on theweb at our website.
[inaudible] dot com.
That's C O H E N S C G L I S.
Um, I invite anyone and everyoneto reach out at any time with
any questions, always happy totalk shop about this.
I'm always happy to help peopleout in the industry.
Um, as you can probably tell, uh, I love our industry.
(26:02):
I love being a lawyer and I lovehelping people.
Speaker 3 (26:04):
Well, thanks for the education.
And I look forward to seeing youat the next KCA event,
Michael Metz-Topodas (26:08):
John, thank you for the opportunity to
speak to the industry.
Chris Martin (26:10):
Thanks, Mike.
And, uh, thank you for listeningto the building Pennsylvania
podcast, uh, more episodes tocome and, uh, we will talk to
you next time.
Thank you very much.
And welcome to the latest edition of building
Pennsylvania podcast.
I'm Chris Martin with Atlasmarketing and I'm John O'Brian
from the Keystone contractorsassociation.
And today we are going to talk,be talking with Michael Mets to
POTUS of Cohen, SEG ileus, andwe are going to be also talking
(00:26):
primarily and asking Michael'sinput on caspo law and how that
affects contractors throughoutthe Commonwealth.
Um, Michael, thanks for beinghere.
Uh, yeah.
Welcome Michael.
Michael Metz-Topodas (00:40):
Yeah, it was great to be here.
Appreciate it guys.
Chris Martin (00:43):
Thank you.
I know we have a lot of, a lotof questions, so, um, let's,
let's dive in here.
And, uh, John, I know you wantedto lead lead with the first one,
so let's, let's go from there.
Yeah.
Um, Michael, how about we startreal basic.
And how about just kind ofexplain what is Casper though?
Construction and subcontractorprompt payment act.
Michael Metz-Topodas (01:05):
Exactly.
John said it best the contractorand subcontractor payment act.
Generally speaking is a statutein Pennsylvania.
It applies to private projectsand it outlines a certain
requirements regarding paymentto both contractors and
subcontractors.
(01:26):
In particular, it allows foreither contractors or
subcontractors to obtainadditional relief beyond what
they might be able to get in thecontract or under Pennsylvania
contract law, additional reliefwhere they, uh, those
contractors or subcontractorshave not been paid under the
terms and conditions of theircontracts in particular.
(01:49):
Um, it allows for, uh, anadditional 1% interest penalty
per month, um, or sorry, 1%yearly interest that's
calculated per month, uh, on anyunpaid balance and as well, one
of the most, uh, aggressivefeatures of it is it allows for
a contractor or subcontractorwho has not been paid, uh, to
(02:11):
recover its legal fees for any,uh, litigation or other legal
action that needs to take to getitself paid.
Uh, that's generally what thestatute does.
There are a lot of details thatit provides for us to how you go
about that.
Um, but in essence, it wascreated to protect contractors
and subcontractors, uh, to givea little extra ammunition for
(02:33):
them to make sure that they'repaid for work performed on a
project.
Um, and that should be work thatis undisputed with respect to
the amount of what away
Chris Martin (02:40):
You do, a lead us off here.
We're setting a nice foundationthere, cause we're talking a
little caspo today.
Michael did an awesome jobthere.
And, um, as, uh, both, you know,Chris and Michael, as you both
know, KCA does a lot with, uh,with, with politics and the
Harrisburg state Capitol.
And it seems as though withCasper every, uh, you
Speaker 3 (03:00):
Know, two to three years, every few years, this
issue pops up and there's a, amovement of foot amongst the
construction industry to kind oftweak, tweak a Casper a little
bit and improve it.
And one of those, uh, one ofthose happenings, one of those
tweakings came along lastsession and house bill five 66
(03:20):
came, which passed through thelegislature and governor Wolf
signed as act 27.
And are you, um, you're prettywell versed on that, on that
piece of legislation.
Aren't you Michael, you want totouch on that for a little bit
and see all that change caspo
Michael Metz-Topodas (03:35):
Yeah, no doubt.
As, as most of the constructionbar was, uh, certainly well
attuned to what was going onwith the changes to caspo, we
saw it coming and we all eagerlyawaited, uh, back in October of
2018, uh, when that bill, uh,became law after it was signed a
few months earlier, um, it was,uh, certainly, uh, an
(03:57):
interesting and compellingchange, um, to how Casper was
structured.
I believe it came out of, um,you know, a push from some of
the subcontractors to affordthem the opportunity to recover
and still enjoy the benefits ofCasper because there they were
being pushed in certaininstances, um, to forego some of
(04:19):
the rights that they may haveotherwise had.
Um, there are several changesthat, that the law created for
Casper, but I really will onlyfocus on, um, the three major
ones, uh, that, that became, uh,the focus of a lot of the, um,
literature and a lot of thediscussions that the bar had
regarding the changes, the firstone involved waiver, uh,
(04:43):
essentially the statute providedthat any contract that, um, asks
or purports to have an agreementby a contractor or a
subcontractor to wave, uh, thatentities rights under Casper,
that provision, no matter howmany times people agreed to it,
signed it initially at whateveris null and void and
(05:03):
unenforceable under Pennsylvanialaw.
Uh, so that was the firstrevision there and made it easy
for contractors andsubcontractors with regarding
those provisions, because theycould sign the contract and not
have to worry about waitingtheir Casper rights cause it's
unenforceable.
And it's one less thing tonegotiate.
Uh, you know, during the courseof, of ramping up to getting
started on a job, uh, the secondprovision, the second change
(05:28):
that Kathy mended Casper renderconcerned on concern suspension
of work, uh, for eithercontractors or subcontractors.
And it outlined a schedule thatwas sort of the, the floor by
which, uh, a contractor orsubcontractor could effectively
(05:49):
suspend work.
Oftentimes constructioncontracts will have provisions
that require a subcontractor ora contractor to keep on working
despite disputes about payment.
This change though, is to makesure that if it's an undisputed
amount, um, then a subcontractorwould not have to keep, you
know, essentially working forfree, uh, or, or financing a
(06:09):
job.
That's sort of the complaint youhear often, um, from those in
the industry, you know, I keepworking on financing the job.
And so this, uh, theseprovisions now allow for a, uh,
contractor or subcontractor towalk away only a certain
procedures are followed.
So first you have to wait for,uh, the billing period and the
payment due date to expire.
(06:31):
So at 30 days past the paymentdue date, a contractor or
subcontractor can send writtennotice, uh, to the owner or to
the con the general contractorform it as a, an agreement
notifying that person, uh, thatentity, that payment has not
been received at that point.
However, the contractor orsubcontractor still has to keep
(06:52):
on working and another 30 daysneeds to go by at which point a
second notice would be sent.
Now, I certainly recommend, um,that those notices identify the
amount owed identify all the 30days has passed, identify the
statutory provisions.
Um, and then also remind you thecontractor or the owner, um,
that if payment is not receivedthat, uh, in accordance with
(07:15):
Casper, uh, work would besuspended.
So after the second 30 days, yousend a second notice providing,
uh, all of the information Italked about earlier, as well as
, uh, notifying the recipientthat after another 10 days of
nonpayment, uh, the contract orsubcontract will have a right to
suspend work and we'll exercisethat road.
(07:37):
Right.
Uh, and importantly to thatsecond notice must also go to
the owner.
That's in particular forsubcontractors, obviously the
general contractor is alreadygoing to be notifying the owner,
but for subcontractors, theymake sure the owner gets a copy
of that second notice, uh, forobvious reasons, uh, an owner
doesn't want to see its project,uh, appended or, or, uh, uh,
paused for any reason,especially if it can make sure
(08:00):
that just by putting a littlepressure on the general
contractor can keep the projectmoving along.
Um, and then as well as you cansee, there's an obvious benefit
to the subcontractors too.
So these are the procedures that, uh, somebody out in the field
needs to follow in order to makesure that they can properly
suspend work on a project fornonpayment of again, undisputed
(08:20):
amounts.
Um, you can have this scheduleshort and I called it a floor
earlier.
Um, you can have it shortened byway of contractual agreement,
but you can not have itlengthened.
So any contract that, uh, thathas terms and conditions that
lengthen any of these periodsfor notice and suspension, they
too would be null and void underCasper.
(08:43):
Um, and, and therefore, um, uh,w it would default to what is
provided for the statute, thefinal, um, major change, uh,
that the admitted Casperconcerned with holding of
amounts out, um, a Oh, an owneror a contractor can withhold
(09:03):
amounts from the generalcontractor or a subcontractor,
um, for deficient work.
However, uh, now under the newCasper that owner or general
contractor must provide a noticeof the withholding, uh, and an
explanation for the reason forthe withholding and must do so
from within 14 days of thedecision to withhold, uh, I,
(09:28):
that applies irrespective ofwhat other contracts or
requirements might be.
And also in terms of whateverpayment schedule might be there.
So once the decisions made aboutwithholding, uh, there needs to
be a notice provided if however,the owner or the general
contractor fails to provide thisnotice, uh, then the right to
withhold is waived and thepayment must be made.
(09:50):
Uh, so that's a very importantprovision.
It serves two functions, one, itallows the subcontractor, um, or
the general contractor, whomeverit may apply whatever the case
may be.
It allows that entity to correctany work that might be deficient
or address the reason for thewithholding, um, and as well,
(10:13):
um, it ensures that, uh, if anowner isn't conscientious and
just withholds the money, but itdoesn't have a good reason or
cannot provide one.
Um, then there, isn't anunnecessary dispute over
arbitrary withholdings, um, andthat the parties get a, that
this isn't used as leverage overa contractor or subcontractor,
(10:35):
um, for their work on theproject.
I know a lot of that gets, youknow, down into the weeds as to
how all of these things operate.
And it's really, we've giveneven a very, um, you know, uh,
precise recitation as to howthese provisions operate.
I think though that anybody outin the field can see, um, that
with all of these measures inplace, um, it changes the
(10:56):
dynamic as to how, uh, uh, aproject would proceed.
And it gives a great deal ofadvantage to contractors and
subcontractors in the, in theevent that they are denied
payment, that they are otherwiseentitled to.
Um, and so it affords that, youknow, money is flowing properly,
um, that there isn't therearen't suspensions of payments,
um, you know, for, um, reasonsthat aren't justified, uh, and
(11:20):
ensures that a project movesefficiently, uh, in a manner
that's beneficial to everyone.
Speaker 3 (11:26):
Very, uh, very thoroughly explained there.
Thank you, Michael, for that,for the third item, though, the,
the withholding that does thatnotice have to be written, or
can that be an oral, an oralstatement from the owner and or
GC?
I know that's written noticewritten.
Okay.
Yeah.
Just thoughts.
I just wanted to make sure aboutthat.
(11:47):
Um, and then as far as the, uh,suspension of work, there's
quite a few notices that youmentioned.
So if you, if you max out on allof those notices, you're getting
close to a hundred days, Ibelieve, right.
Michael Metz-Topodas (12:02):
It could be that long, depending upon,
you know, how the paymentschedules are set up in the
original agreement.
Yes.
And that was one of thecritiques that was brought out.
And some people said, well, waita second.
Uh, yeah, that's terrific.
I can suspend work, but mygoodness, you know, it'd be so
long.
I might already be done with mywork.
If you're an excavator on asmall project, you might be done
by the time it comes time tosuspend.
(12:24):
So yeah, so the one hand there'sa certain benefit, but, uh,
that, that practicalconsideration was noted that
that said, John, there is apossibility that those who do
have a shorter timeframe for,for work on a project could
negotiate, uh, perhaps a morefavorable schedule.
It just depends upon whetherit's worth it to the
subcontractor.
(12:44):
And that really comes down to abusiness decision, but I'm glad
you asked that question becauseit really gets down into the
intersection as to what the lawprovides and then how it really
operates for guys out in thefield.
Those sometimes can be twodifferent things.
Speaker 3 (12:57):
Yeah.
You mentioned the, uh, thesidewalk.
I was thinking that as well forthe site work, but then also as
far as the small, you know, momand Paul shops that get in there
might do a little interior workand they're, they're done in a
week or so, you know, theirworks long gone.
And they're the people thatprobably need this law the most.
And they have to wait for a longamount of time like that.
So I'm just thinking out loudhere.
Michael Metz-Topodas (13:20):
Well, they might have to wait, but I think
the other point is it just mightnot apply to them.
And I think that's what you'regetting at as well.
And it's a good point is okay,fine.
Then they can suspend theirwork.
Um, they finish it and they moveon all the other protections
that cast before it's remain.
And so if there's no disputefrom the owner about that, the
workers performing the money isowed, and for whatever reason
(13:40):
that owner or general contractordoesn't want to pay, they're
going to be subject to that 1%penalty among others.
Uh, and as well, subject toattorney's fees, uh, for the
collection, if it's a smallenough amount, those attorney's
fees could be a substantialportion of the amount.
Uh, you know, that entity isthat business is seeking to get
paid.
Um, and, and that, that's agreat advantage to, to allow
(14:02):
those small mom and pop shops,John, because, because, you
know, oftentimes those entitieswould forgo their rights and
just say, well, I can't go, Iagree.
You grow up that money.
It'll cost me too much money toget what I'm seeking.
Well, now, if you know thatyou're protected by, but then
you can go after the moneyyou're entitled to.
So in that respect, um, you know, cast was original provisions
(14:23):
are the ones that are for someof the best protection.
Speaker 3 (14:26):
Yeah.
Good point.
Good point there, Michael.
Yeah.
Um, also, I mean, um, the lawjust recently went into effect
this year.
I believe.
Um, I don't have the exact date,but it's probably too early to
tell any, any sort of actualfeedback, you know, in the field
feedback, have you heardanything at all?
Michael Metz-Topodas (14:43):
You know, we really haven't, I'm kind of
surprised by that.
Um, the issue of the suspensionjust hasn't come up typically.
Um, we often advise our clientsto continue to keep working on a
project only because suspensionand again, I mean, look, John,
you got us right back to the, Ithink that the key point, which
(15:03):
is the law can have itsprovisions, but what really
happens in the field could bedifferent.
And that is that if asubcontractor or a contractor
decides to suspend fornonpayment, if for whatever
reason, um, that entity, thatbusiness guesses wrong.
And, um, and, and they did nothave justification for
(15:23):
suspending work, let's say theywere not entitled to the payment
, uh, that that business wasseeking.
Then that entity would be liablefor all the delay damages, the
damages that flow from thatsuspension.
So you gotta be careful now,granted, if it's, you know, you,
you, uh, the, if it's clear, um,on the project that looked the
work was done, there were noobjections and then people moved
(15:44):
on and, and accepted it then.
Yes.
Um, I think go ahead and suspendit and not worry about any of
the delays.
Um, but if there's any disputeabout that or any uncertainty,
then you just need to calculatethat risk.
Uh, and the liability that couldflow from that even so, you know
, um, a measured and calculatedsuspension, um, you know, could
(16:05):
be another way to make sure that, uh, uh, payment properly
flows.
Uh, but again, as you point outwith that kind of long period
there, sometimes the workrequired, uh, it might be long
gone long done and completedbefore that suspension period
ever arises.
Speaker 3 (16:19):
Yeah, that's true.
My, my favorite is, uh, wheneverI find myself in the halls
lobbying for bills like this andthe various subgroups come up to
me and they say, you know, if wecould only work for your GCs all
the time, we wouldn't, wewouldn't have to do it measures
like this, you know?
And I'm like, and I'm like,yeah, but when we do measures
like this, you know, we have tochange the way we operate just
(16:41):
to make sure we're abiding bythe new law and the new, uh, the
new contract.
So,
Michael Metz-Topodas (16:48):
Oh, that's such a great point only because,
uh, I don't know.
I know we, you and I have talkedabout this.
Others may not know, but beforebecoming a lawyer, I was a
teacher.
And one of the things I learnedas a teacher in terms of making
rules or policy for people isyou gotta make your rules for
the worst kid in class, not thebest kid in class,
unfortunately.
So good, good to see the samerule applies in legislation,
(17:09):
right?
Absolutely.
And that's a good point,Michael, Michael, I have a
question for you.
So clearly you have a solidunderstanding of this law and,
and, and really know how it, howit works, but if I'm a
contractor or a subcontractor,what's the process that I have
(17:31):
to go through to actually make aclaim or file under the, under
the legislation.
Um, if I feel like I'm not beingpaid accordingly, that's a great
question, Chris.
Um, and it's actually a verypointed and almost obscure legal
question.
We have this debate in thehallways of our firm all the
time.
(17:52):
Um, I'll give you the shortlayman's answer first, and then
maybe we can get to some of thetechnicalities legally, um, call
your lawyer.
And that started there.
Uh, quite honestly, um,thankfully there, unlike the
mechanics, lien law, Casper wasa little more forgiving and
doesn't have quite the stringentrequirements as to what you need
to do to, um, to operate underit, separate apart from some of
(18:13):
the withholding and suspensionprovisions.
We already talked about, um, anytime, uh, we file, for example,
our firm, we filed complaintsagainst either general
contractors or not paying ourowners who are not paying we'll
include a breach of contractclaim.
We'll include, include acasebook claim.
Um, and we'll just do it as amatter of course, uh, assuming
that there's an undisputedamount, uh, for which payment is
(18:36):
owed, um, and I can get intolater if you guys are curious to
why I keep saying undisputedamount, but that's, that's a
separate issue.
Um, but there is this sort of astylistic debate as to whether
you even need to have a separateCASP account, and you can just
put the Casper damages as partof the breach of contract either
way.
Um, the, the way to bring in theway they get recovery under
caspo is to, by bringing legalaction.
(18:58):
Um, you could arguably, if youhave, uh, an owner or a general
contractor who is not paying,you could just make a request or
a demand letter, a demand forthat payment and ask for the
Casper damages.
But I can't see to any owner toGCs, we're going to cough up the
interest in attorney's fees,unless there's a court order,
making them do it.
So going to courts the only way,um, and very often to, um, you
(19:22):
know, you'll, you'll follow thatlegal action and then, um, find
some sort of settlement, uh, youknow, that will account for some
of those costs, but damages, ifyou can, otherwise just their
mere existence are enough todrive people, to finding a way
of resolving a dispute.
Chris Martin (19:37):
Perfect.
Thanks.
Thanks, Michael.
Yep.
No problem.
And that's good for, for ourlisteners so that they
understand, and I kind offigured the first response was
going to be call your lawyercause that's what I would be
doing too.
Um, so another question for youin your experience, is there a
typical contracting category for, uh, that that typically has to
(20:02):
fight for this, this form ofpayment?
Uh, you know, you mentioned anexcavator, uh, earlier, you
know, like maybe there's a, isit, do you typically see this in
like tile contractors or, youknow, residential versus
commercial, like help usunderstand where the, that
typically,
Michael Metz-Topodas (20:24):
Um, I haven't made any formal study as
to any sort of percentages ofthat would be a fascinating
question to see, um, you know,it'd be a twofold analysis.
Who's not getting paid and thenwho's bringing Casper claims and
they're not always coextensivewith each other.
That's not always the same groupof people.
Um, but certainly I think as weall know, they're the, they're
the pressure flows downhill, ifyou will.
(20:46):
Um, and so, uh, very often, uh,we see a lot of subcontractors,
you know, guys who are sort oftowards the bottom of the food
chain, if you will.
Well, I should say thecontractual chain only by way of
just their positioning on aproject.
Speaker 4 (21:01):
Um, they sometimes fail
Michael Metz-Topodas (21:03):
Certain amount of pressure, uh, in terms
of, you know, not being able,not receiving the payments
promptly or, or, uh, paymentsthat are owed or an attempt to
try to leverage negotiation, uh,from the original amount agreed
upon for work perform.
Um,
Speaker 4 (21:19):
And so that, that tends to be yeah,
Michael Metz-Topodas (21:21):
How it will play out.
I think really to give a fullanswer to that, um, Chris would
be the subject of a whole notherpodcast.
We actually, as a firm, do awhole presentation on all the
things that occur on a projectwhere there are pressure points,
um, applied to subcontractors to, um, uh, to trim if you will,
the amount they otherwiseexpected to collect for the work
(21:43):
performed based on, on theagreement they have.
Um, so it's a really complicateddance that occurs throughout the
life of project.
Um, I have also seen instanceswhere owners sometimes just are
paying or a dispute them anamount of work.
Uh, I think also to Casper tendsto come into play, um, on some
of the smaller projects onlybecause it's such a great
(22:04):
mechanism to help, uh, obtainingpayment, um, uh, obtaining
payment where there's, you know,you otherwise might think twice
about going down a legal Avenueto, to obtain recovery.
Um, I think the other thing too,to your point, uh, in all of
this, I know we're going alittle bit of a tangent here,
but because a lot of theseissues arise throughout the life
(22:25):
of a project.
I do have to repeat my, mywarning earlier as to calling
your attorney early and oftenonly because, uh, this Cass was
definitely a situation or anykind of payment issue on a
project where I announced thatprevention is worth a pound of
cure, uh, and early interventioncan sometimes be very effective,
even if your lawyer's in theshadows and unknown to the other
parties, um, of the involvement.
(22:47):
I can provide some effectiveadvice on how to proceed, you
know, through the course of aproject little, little field
from what you originally asked.
But I think, um, it was such agood question that it inspired a
lot of that additionalinformation.
So thank you, Chris.
I appreciate that.
That's good.
That'll help, uh, help ourlisteners here in the building
Pennsylvania podcast.
So that's great.
Speaker 4 (23:06):
There we go.
Yeah.
Yeah.
Michael Metz-Topodas (23:08):
I, I would , uh, I know we've had a rather
technical and detaileddiscussion here about Casper and
some people might find itoverwhelming.
Um, and maybe just a lot ofdetail.
And I know certainly there is,there's a culture and an ethic
of look, let's just get the jobdone.
And I don't disagree with that.
Uh, I think at the end of theday, um, that's what makes our
(23:30):
industry great is that there'sthat focus on, uh, you know, uh,
rolling up our sleeves if you'llpermit the cliche, um, and
putting up buildings andstructures that people can use
and, and things that workerstake pride in.
But that said, um, it really,it's always a shame to me when I
see people businesses sometimes,you know, businesses that have
(23:52):
been within families for years,generations, et cetera, being
shortchanged, any amount ofmoney.
Um, and so there are ways ofdoing both of our roll up our
sleeves and getting the jobdone, but also making sure that
you don't get short changed.
And that's what I mean again,earlier about, uh, early
intervention with your council.
Uh, we take calls all the timeat our firm, uh, from people who
(24:15):
are, you know, midway through aproject, Hey, what do I do?
And we offer the guidance tosay, okay, here's the end game.
Let's see what we can do abouttoday.
So we can safeguard your rightsfor later on tomorrow.
And you can go back to doingwhat you do best.
And that is, uh, like I said, uh, getting the job done.
So, uh, that that's our role andthat's our philosophy.
And, uh, we've been doing itcoincidentally us for, for 30
(24:36):
years.
Uh, I've been honored to be apart of this firm for now since
2014.
Um, and I love every minute ofit.
Um, for a lot of those reasonsyou guys know as well as I do,
we have a great industry full ofgreat people.
Uh, it couldn't be more fun.
Speaker 3 (24:52):
Absolutely well said.
Chris Martin (24:54):
Well, well said, I agree with you.
That's a great way to end it.
Um, and, uh, thank you for yourtime and definitely the
technical information.
Um, very good information.
Speaker 3 (25:07):
I just want to remind everyone out there.
This is a new law.
There's going to be a lot morequestions.
This is just the tip of theiceberg.
Michael is a resource.
Um, but Michael, you want totoss your, your contact info out
real quick.
Michael Metz-Topodas (25:19):
Oh, John, thank you so much.
As you can tell, I kind of liketalking about this stuff and I
see each other at a lot of KCAevents and he probably has
always seen me quartering poorguys, lecturing her about
everything.
So it's all good.
It's all good.
It's over a cold beer.
So it makes it even better, butno, in all seriousness, um, uh,
(25:41):
my contact information is on theweb at our website.
[inaudible] dot com.
That's C O H E N S C G L I S.
Um, I invite anyone and everyoneto reach out at any time with
any questions, always happy totalk shop about this.
I'm always happy to help peopleout in the industry.
Um, as you can probably tell, uh, I love our industry.
(26:02):
I love being a lawyer and I lovehelping people.
Speaker 3 (26:04):
Well, thanks for the education.
And I look forward to seeing youat the next KCA event,
Michael Metz-Topodas (26:08):
John, thank you for the opportunity to
speak to the industry.
Chris Martin (26:10):
Thanks, Mike.
And, uh, thank you for listeningto the building Pennsylvania
podcast, uh, more episodes tocome and, uh, we will talk to
you next time.
Thank you very much.
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On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!