Public Owner Not Liable for Forged Non-Statutory Bond

When a cleaning contractor failed to pay its employees for cleaning services at a university, its employees sued the Board of Regents (BOR), asserting various creative arguments.  For instance, they argued that the BOR and university were negligent in failing to confirm the validity of a forged payment bond submitted by the employer.

In support of their negligence claim, they alleged that the BOR was required to ensure that the contractor provided a valid payment bond.  Underlying this argument was their assumption that their services were provided pursuant to a “public works construction” project, on which a payment bond should have been provided under the Georgia Public Works Construction Act.

The BOR responded that sovereign immunity precluded the claim and, otherwise, the Georgia Public Works Act did not apply because the project was not a public works construction project.   Since the Act did not apply, the BOR and university were not obligated to obtain a bond from the contractor.

Court Ruled In Favor of Public Owner

Upholding the trial court’s ruling, the Court of Appeals held that BOR was entitled to sovereign immunity, and the plaintiffs failed to establish a waiver thereof.  Though the plaintiff relied on the Georgia Tort Claims Act (GTCA), the court held that it did not apply because the tortious conduct was performed by third parties.  In other words, the BOR was not liable under the GTCA because it owed no duty to the plaintiff.  Specifically, it owed no duty to inspect or otherwise confirm the validity of a bond submitted by the contractor.

The court also rejected the plaintiff’s contention that the Georgia Public Works Construction Act applied to the project.  Projects subject to the Act include

the building, altering, repairing, improving, demolishing of any public structure or building.  Such term does not include the routine operation, repair, or maintenance of existing structures, buildings, or real property.”

(Internal citations omitted.)  The cleaning services performed by the contractor and its employees were clearly routine maintenance, and therefore, the Act did not apply.

Since the Act did not apply, the BOR had no obligation to obtain a payment bond from the contractor.  When a bond was not required by statute, the contract’s requirement to obtain a bond was solely an obligation of the contractor — not an obligation of the public owner.  Accordingly, the BOR owed no duty to the plaintiffs under the Georgia Public Works Construction Act.

Conclusion

This case demonstrates the important benefits the Georgia Public Works Construction Act provides to those who provide services on a public works construction project – when the Act applies.  When it applies, unpaid subcontractors and employees may seek recovery against a payment bond.  Or if no bond is provided, in some cases, they may seek recovery against the public owner.

When the Act does not apply, however, unpaid employees and subcontractors are generally limited to claims against the delinquent contractor or subcontractor.