Invalid Labor Release Forms

Attn. General Contractors - Top 10 Reasons Why You CANNOT Blindly Trust Labor Release Forms

By Diane Dennis

1. Your Sub's employees need their jobs, especially in today's day and age, and they'll do just about anything for their employer in order to keep their jobs, including signing a document that states they've been paid. Documents signed under duress are usually invalid.

2. Employees are savvy and if they get upset with their boss they're marching right down to the labor board to complain (remember, they have grounds because it's an invalid labor release form) and there's a good chance you'll find yourself hauled into the investigation.

3. Your Sub may not have budgeted overtime into the estimate and so he writes the check up paying the employee overtime but then makes him cash the check and give the overtime cash back to the employer, your Sub.

4. Your Sub may not be legitimately paying prevailing wage rates to his guys on a prevailing wage rate project. He'll pay the prevailing wage rate and write the information from the check onto his payroll report and have his employee cash the check and give money back.

5. Your Sub may be paying overtime as straight-time cash. The employer reflects the overtime on the employee's paycheck but then again makes the employee cash it and give the difference back to the employer.

6. Your Sub may have purposely low-balled the bid to get the job and is paying his workers less than he should in order to meet that low-balled bid.

7. In some states employees may be able to file liens on private-works projects that they've worked on even without doing preliminary notices.

8. Your Sub may be under-reporting his employees' hours on his paperwork; if your Superintendent isn't paying attention to who is on the job (this is much more common than you might think) then he's going to copy your Sub's paperwork and suddenly your paperwork isn't accurate and you're in the dark. Your paperwork says the employee worked 4 hours whereas the employee has paperwork showing that he worked 8 hours but was paid for only 4 hours. You won't know until that employee files a complaint against his boss.

9. Your Sub gets nailed by the labor board but he's insolvent. Guess who's next in line to pay the Sub's employees? You. Even though you already paid the Sub.

10. Chances are you have a clause in your contract with your customer that states that you'll keep his property free of liens. The only way to do that is to make sure everyone is paid, including everyones' employees.

Invalid Labor Release Forms From Your Subs Can Cause Massive Agony For Your Company...

Some will say that it's the employee's fault for signing the form stating he'd been paid but guess what? It doesn't matter if they signed it, they're still protected.

All they have to say is that they signed it under fear of losing their jobs and the form will very possibly become invalid and unenforceable.

So, no matter whose fault it is, guess who gets left holding the bag? All fingers will be pointing at you...

Pretty much the only thing you can do to protect yourself - and while it's not fail-safe at least it's better than doing nothing - is to contact the employees and verify that they've been paid (but make sure it's legal to do that).

I hope you've found this article helpful. Please let me know your thoughts below.

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