Contractor Liens vs. Lender Security Interests

March 2, 2015

By: GUCA Member H. Fielder Martin

The need for legislation to level the playing field between a Contractor’s lien rights and a Lender’s security interest is underscored by the recent Georgia Court of Appeals decision in First Bank of Georgia v. Robinson Grading, Inc., 328 Ga.App. 236.

In summary, Robinson subcontracted with R&B Construction to pave a subdivision which R&B was developing. Robinson had not performed work for R&B previously and was concerned over the company’s credit worthiness. Before beginning work, but after signing the Subcontract, Robinson met in person with an officer at the Bank who assured Robinson as to both R&B’s credit worthiness and the sufficiency of funds available for his work. After a delay in receiving payment for his first invoice, Robinson again met with the Bank officer, who assured Robinson he would be paid “when [he] put the last ton of asphalt down.” Several weeks after Robinson finished the work, he called the Bank to find out why his initial and final invoices were unpaid. The Bank then advised Robinson that it was not disbursing further funds, since R&B missed its prior month’s interest payment on the construction loan. Robinson filed a lien, R&B filed for Bankruptcy, the Bank obtained a release of the improved property from the Bankruptcy proceedings and the Bank instituted foreclosure. The Bank ended up the sole bidder and made an undisputed profit of $1,000,000.00 on subsequent sales of the lots which would not have been possible without the paved streets. Robinson never received a penny for his work.

Robinson then filed suit against the Bank on four counts, including (1) Fraud; (2) Promissory Estoppel; (3) Negligent Misrepresentation and (4) Unjust Enrichment. Following a trial by jury, Robinson was awarded $448,600.65 in damages and $149,500.00 in attorneys’ fees against the Bank. The Bank appealed and the Appellate Court reversed the jury verdict in favor of Robinson on each count. Especially disturbing language is found in the following excerpts from the Court’s opinion:

• “…under Georgia law, a materialman or subcontractor may not recover against [one] with whom it has no contractual relationship, based on the theory of unjust enrichment or implied contract; ‘rather, it is limited to the statutory remedies provided by Georgia’s lien statute.’ ” (citations omitted)

• “…there is no obligation arising by operation of law requiring a lender to ‘protect the subcontractors from the risks of doing business with its borrower…’ ” (citations omitted)

• “Indeed, given that the lender’s primary role is to protect its interest in the secured property, we find no basis for ‘imposing upon the lender the duty of the owner and general contractor to pay for labor and materials supplied to the Project.’ ” (citations omitted)

This case highlights the importance of GUCA’S continuing efforts to pass legislation which will protect Contractors from a total miscarriage of justice which can occur under our present lien and foreclosure laws. In the interim, the “Lesson Learned” is to ask for and obtain financial information and assurances from the Lender in writing and before signing a contract. Then continue those inquiries at intervals during construction and promptly if any payment concerns arise.


EPA Proposes Biggest Federal Land & Water Power Grab Ever

June 20, 2014

After several failed attempts in Congress to expand Federal jurisdiction under the 1972 Federal Clean Water Act, the U.S. Environmental Protection Agency has proposed a radical expansion of Federal control over the nation’s lands and waters without Congressional approval.  They want to eliminate or water down the term “navigable” which the Clean Water Act says is the limit of EPA and Corps of Engineers

Like the failed Congressional initiative, the EPA proposal is a blatant and unprecedented attempt at Federal control of all waters, as well as non-point sources, notably land use. They want to gain jurisdiction over all waters of the United States, and all activities affecting those waters.

 You could end up having to get a Corps of Engineers permit for everything you do affecting any water.  The 88-page proposed rule would expand the definition of “Waters of the U.S.” from “navigable waters” and the territorial seas (as defined in the ’72 Act) to include the following:

• Tributaries & impoundments of navigable waters, including wetlands & adjacent waters.

 • Other waters not fitting into the above categories.

 • Consideration and identification of ecoregions or hydrologic-landscape regions to determine federal jurisdiction.

 This proposal will impact all significant human activity in all states but especially in Alaska, Minnesota, and other heavily Wetlands states. Some points to consider:

 —–The proposal is an outright assault on freedom, property rights, state’s rights, and recreational uses of public lands and waters.

 —–The economic and social implications of this proposal are enormous. Rural America and small communities will be strangled.

 —–The proposal ignores recent, bi-partisan Congressional opposition and two U.S. Supreme Court decisions that imposed limits on federal jurisdiction under the 1972 Act.

 —–The proposal is presumably based on a scientific report, but it has not been peer reviewed.

 —–The proposal fails to comply with regulatory requirements, including Executive Order 12866, which provides criteria for inter-agency review of rule making procedures.

 —–State and local governments are best equipped to produce common sense solutions to water quality and other environmental problems; local and regional alternatives are faster, more lasting, less costly, and more consistent with constitutional principles.

“The principal responsibility for protecting the quality of our waters must be exercised where it naturally reposes—at the local level.”  – President Dwight Eisenhower


Defeating the Proposed EPA Corps of Engineers Federal Power Grab will require aggressive, grassroots action. To make a difference, here’s what you need to do:

 —–1. Forward this Urgent Action Alert to at least 10 people. Your whole list if possible.

 —–2. Submit written comments on the new EPA Wetlands Jurisdiction Regulations. Follow the instructions below.

 —–3. Call both your Senators at 202-224-3121. Ask for the staff person who handles Wetlands issues, EPA and Corps of Engineers.  Ask that your Senator support legislation to prevent the new EPA Wetlands Jurisdiction Regulations from going forward.

 —–4. Call your Congressman at (202) 225-3121. Follow the same instructions as for your Senators.

 —–5. Contact your state legislators. Urge them to oppose this proposal and to write your Governor urging his or her opposition.

 —–7. Contact your local elected officials, including your county commissioner, county supervisor, township supervisor, mayor, and city council members. Ask them to pass resolutions of opposition to the EPA proposal. The views of local elected bodies will be critical in the outcome of this issue.

 —–8. Get organizations in your area to oppose the EPA plan. Key groups include those involved in agriculture, energy, forestry, mining, outdoor recreation, and business in general.

—–9. Contact newspapers, radio and television stations and encourage them to do stories on the issue. The media generally tends to be soft on issues related to the environment. Let them know that this issue is about governance, not the environment. We all want clean water. It’s not good to have a bureaucrat from Washington, DC telling you what you can or cannot do with your land or water.

 —-10. Please tape this document to your refrigerator door so you will remember to follow up on the urgent action items.

 —–Comment directly to EPA on their proposal. Comments can be sent by e-mail to: Include EPA-HQ-OW-2011-0880 in the subject line of the message. To review the proposal on line, google EPA-Waters of the U.S. and follow the instructions.



March 4, 2014

Many jurisdictions have enacted legislation in various forms designed to assure, or at least encourage, prompt payment of persons providing labor materials and services to construction projects.  In Georgia, these come in several forms.  Relative to work performed and materials and services provided to federal public works projects, the Federal Prompt Payment Act affords a wide range of requirements and protections to assure timely payment flow.    On all other non-federal construction projects in Georgia, several Georgia statutory schemes provide similar forms of protection of payment flow.   This article will focus upon the Georgia statutory provisions.

Georgia Prompt Payment Act – Rights, Remedies and Recourse for Untimely Payment for Construction Labor, Materials, Work or Services

The Georgia “Prompt Payment Act” is applicable to most public and private construction projects in Georgia.  It applies to payment flow to contractors, subcontractors and materialmen.    In fact, it specifically provides that contractors and subcontractors (including materialmen) performing “in accordance with the provisions of his or her contract and satisfaction of the conditions of his or her contract precedent to payment entitles such person to payment.”

However, certain elements of the Act’s protections and assurances can be negated and superseded by more specific provisions of the payment procedures and processes required for “retainage” and final payment on PUBLIC PROJECTS as discussed below in Subpart 2…

Payment Timing (other than retainage withholding and release):

Regarding the “prime” contractor, the Act provides that an owner shall pay the prime contractor for both progress and final payment, upon proper performance, within 15 days of receipt of payment request based on “work completed or service provided”.  For all subcontractors (including “materialmen”)  performing in accordance with the provisions of their subcontract, and upon satisfaction of “the subcontract conditions precedent,”  the Act requires that the upper tier contractor (or subcontractor) shall pay its subcontractor (or materialman)  the “full amount received for such subcontractor’s work and materials based on work completed or service provided under the subcontract,” upon such proper performance, within ten (10) days of receipt by the contractor of corresponding payment (both progress and final).  However, such “contractor” is allowed “in his or her reasonable discretion” to require from the subcontractor “satisfactory reasonable assurances of continued performance and financial responsibility to complete” the work, “including but not limited to a payment and performance bond”. 

Interestingly, the satisfaction of contractual “conditions precedent” and proviso requiring “reasonable assurances of continued performance” relative to timely payment for work performed only apply at the subcontract level.  Moreover, this statutory payment flow process gives full effect to the “contingent payment” or “pay–when-and-if-paid” concept at the subcontract levels in keying payment obligation and timing to receipt of corresponding payment by the contractor.

Retainage and Withholdings:

Under theprime contract, an owner may withhold a “reasonable amount for retainage” but not exceeding the “retainage percentage set forth in the contract between the contractor and the owner.”  Additionally, an owner is not prevented by the Act from “withholding payment to its contractor because of the following”:

a.       Unsatisfactory job progress

b.      Defective construction which has not been remedied;

c.       Disputed work;

d.      Third-party claims filed or reasonable evidence that a claim will be filed;

e.       Failure of contractor (or its subcontractor) to make timely payments for labor , equipment and materials;

f.       Damage caused by contractor to the owner, other contractors, or subcontractors; or.

g.      Reasonable evidence that the work cannot be completed for the unpaid balance of the contract sum.

Under subcontracts, a prime contractor (or upper tier subcontractor) may also withhold a “reasonable amount for retainage” provided that the retainage withheld “shall not exceed the percentage retained from the contractor by the owner on account of the subcontractor’s work.”  Additionally, a contractor (or upper tier subcontractor) is not prevented by this Act from “withholding payment to its contractor because of” the same factors applicable to a prime contract (as listed above).

There are no provisions in the Act prescribing automatic reduction of the rate of retainage or release by the owner of retainage (or other withholdings) based upon the stage of completion or satisfactory progress.  (But see Public Works statutes discussed below).  However, contractor must “pass through” released retainage funds from owner – within ten  days of the contractor’s receipt of retainage or withholdings from the owner, corresponding to the subcontractors, thereby reducing each subcontractor’s retainage in” the same manner as the contractor’s retainage is reduced by the owner,” provided that:

a.  the value of the subcontractors work completed and in place equals 50 % of the subcontract value;

b.  The Work of the subcontractor is proceeding satisfactorily;

c.   subcontractor has provided or provides such “satisfactory reasonable assurances of continued performance and financial responsibilityto complete” as the contractor “in his or her reasonable discretion” including but not limited to a “payment and performance bond”.

Again the rigorous statutory conditions and limitations upon pass through of any reduction of retainage apply only at the subcontract tiers.Interest on Late Payments:If a periodic or final payment to a prime contractor is delayed by more than 15 days or if a periodic or final payment to a subcontractor (ormaterialman) is delayed more than ten days after receipt of periodic or final payment by the contractor or upper tier subcontractor, “the owner, contractor, or subcontractor, as the case may be, shall pay his or her contractor or subcontractor interest, beginning on the day following the due date, at the rate of 1 percent per month or a pro rata fraction thereof on the unpaid balance as may be due.” However, this entitlement to recover interest on late payment under this statute is dependent upon three important conditions”

First: ADVANCE NOTICE REQUIRED!  The Act specifically states that “no interest is due unless the person being charged interest has been notified of the provision of this Code section at the time the request for payment is made.”

ACTION ITEM:  include on all applications for payments, statements or invoices by imprint or stamp the following:

“This Request for payment is submitted pursuant to and in accordance with the terms of Georgia Code § 13-11-7 requiring that all payments not made within ____ days [15– for prime contract / 10– for subcontract] after same became due shall bear interest at the rate of 1 percent (1%) per month until paid. And any action to enforce this requirement shall include demand for attorneys’ fees under the Act.”

Second: The Act provides that “[a]cceptance of progress payments or final payment (without accompanying interest) shall release all claims for interest on said payments”.

ACTION ITEM:   WATCH OUT: If an interest penalty is due under the Act, one cannot accept payment of the principal amount due and still preserve entitlement to the accrued interest.

Third: And most critically. The Act provides that “[n]othing in this chapter shall prohibit owners, contractors, and subcontractors from agreeing by contract to rates of interest, payment periods, and contract and subcontract terms different from those stipulated in this Code section, and in this event, these contractual provisions shall control.”  Owners, contractors or subcontractors may agree “by contract” to rates of interest, payment periods, and contract and subcontract terms different from those specified!!   And such differing terms shall override and supersede the statutory terms.   

 BUT, even then, it is provided that “[i]n case of a willful breach of the contract provisions as to the time of payment, the interest rate specified in this Code section shall apply.”

In contract formation be wary and avoid inclusion of contract provisions that would contradict or conflict with any of the protections afforded by the Act – and negate the beneficial effects of the Act.

 Attorney’s Fees to Prevailing Party:

The Act provides that in an action to enforce a claim under the Act, the “prevailing party is entitled to recover reasonable attorney’s fees” for the services of its attorney including but not limited to trial and appeal and arbitration, in an amount to be determined by the court or the arbitrators, as the case may be.

Interestingly, it does not appear that the attorneys’ fees entitlement under this section of the Act is subject to revision or elimination by contrary contractual provisions, although the entitlement is explicitly related only to claims asserted under b of this Act

Georgia Public Works Payment Procedures and Limitations

Regarding Georgia state and local public works projects, there are additional special provisions governing payment flow, timing and retainage that overlay upon or superseded the Georgia Prompt Payment Act.  These payment procedure and limitations apply to most public construction in Georgia (they do not apply to GDOT road and highway projects, projects with value of less than $150,000 or duration of less than 45 days, or “water and sewer” projects).

 “Progress Payments”:

The statute prescribed that progress or interim payments must be made on “some periodic basis, and at least monthly, based on the value of the work” and must include the value of “stored materials and equipment suitably stored, insured and protected on the project site and off the project site if approved in advance.

  Retainage and Withholdings:

Otherwise, the focus of this statutory scheme in on retainage and withholdings.   Under prime contract, an owner may withhold retainage up to a maximum of 10 percent of each progress payment “reasonable amount for retainage” not exceeding the retainage specified in the contract retainage.  However, when 50 % of the contract value is due the “owner shall withhold no more retainage” but only if the manner of completion if the contract work and its progress are “reasonably satisfactory” to the owner.  Retainage can be restored and resumed if work is later unsatisfactory or behind schedule

At the discretion of the owner and approval of the contractor, the retainage of each subcontractor may be released separately on a line item release basis as each subcontractor completes its work.

Payments to Contractors Lender Bill

February 7, 2014

Payments to Contractors Lender Bill

This Senate Bill requires banks to let contractors find out if money is available for projects they plan to contract with private developers. It also allows contractors to find out if funding has been released for their portion of work that has been completed or if funding is still available for that particular project. Banks don’t loan money without performing a credit check. Contractors should be able to find out if money is available for land they are getting ready to enrich!


Does your company dig in Georgia. If so this blog is for you. Help us get the word out to customers, subs, and anyone diggng in Georgia!

January 21, 2014

Utility owners, locators and excavation industry stakeholders have been rewriting the Large Project Ticket process for over 2 years. There are several key factors in the rewrite of the Large Project Ticket Rule that are good for excavators. But along with that comes more excavator responsibility. You are urged to read the proposed Large Project documents thoroughly. Please send us your comments, concerns and/or suggested changes BEFORE February 14, 2014 or as soon as possible so we can review and make changes PRIOR to this going to the Public Service Commission for their Rule Making processes. If you have any questions please do not hesitate to contact us at 404-362-9995.


Definition changes now divide Large Projects into two definitions: Linear and Site Specific projects.

Linear Large Project is any excavation at a location that exceeds 1 mile on public right-of-way (NOTE this is NOT the size of the excavation but of the project).

Site Specific is any excavation or blasting that is on 100 acres or more (NOTE this is NOT the size of the excavation but of the project).

If there is over 1 mile of right-of-way being excavated on a Site Specific project the WHOLE project falls under a Linear Large Project Rule.

All communication such as uploading the marking agreement, weekly meetings through electronic form etc. are done via the UPC’s PRIS system. This includes all notices of marking changes and meetings with utility owners, locators and subcontractors.

All facility owners/operators/locators SHALL be required to attend the initial Linear Large Project meeting. There is NO opt out.

All subcontractors and their subs must be a part of the Linear Large Project and must work under the Linear Large Project ticket number. No one is exempt. Each person hiring a sub has the responsibility of telling that sub he must work under the Linear Large Project ticket and give them the Liner Large Project ticket number. It is a violation of the PSC Rule (and fines are stiff) if you do not.

There is NO marking plan on Site Specific Projects. Subs are not mandated to be on same ticket.

Locators and facility Owners have 96 hours to mark the whole site of the Site Specific Project.

All large projects have a ticket duration of 90 days. Tickets must be called in every 90 days for Site Specific Projects. Linear Ticket duration are via their marking agreement and the duration is indicated when ticket was called in otherwise the 90 day rule applies.

This alert is for informational purposes only and GUCA takes no responsibility for interpretation of documents provided. If you do not understand what your responsibility will be under this new proposed rule or flow charts we URGE you to put that in writing and send to us ASAP so we can submit it to the stakeholder group. Visit Click on Advocacy on the top topic tab, click on Industry, Click on Damage Prevention and go to the documents that state “Large Project Rule Change.”

Happy Holidays from The Georgia Utility Contractors Association, Inc.

December 18, 2013


Persons Chargeable With and Subject to Sanction for Violations of GUFPA Should Not Include an Uninvolved “Corporate Officer” of a Corporate Respondent

November 15, 2013

The Georgia Public Service Commission (“PSC”) is charged with enforcement of the Georgia Utility Facility Protection Act (“GUFPA”) also known as the Georgia “call before you dig” law.   In such capacity, the PSC continues to pursue a practice of charging violations of GUFPA and issuing Notices of Probable Violations (“NOPVs”) against corporate officers of a company suspected of the violation without regard to whether the officer had any control of or involvement in the actions of others leading to the charge.  This practice of charging uninvolved corporate officers individually as named respondents is unwarranted and should be resisted, as it otherwise may lead to such officers being adjudicated as violators personally subject to liabilities and sanctions, not to mention tarnishing their personal record as a GUFPA violator.

GUFPA imposes a number of responsibilities upon the “persons” involved in excavation or blasting processes performed in areas in which underground or concealed utility lines and facilities may be situated.  The express purpose of the Act is to require persons involved in such activities to observe “proper precautions” with respect to such utility facilities and lines.  The primary vehicle afforded under the Act for enforcement of these requirements is the imposition of civil sanctions and penalties on “persons” responsible for violations leading to damage of the existing utility lines and facilities. Additionally, such “persons” found to have violated the Act “shall be strictly liable” for costs incurred by the facility owner or operator and any injury or damage to persons or property resulting from damaging the utility facilities and lines.  Finally, such a violator shall also obligated to indemnify the affected facility owner or operator against all claims or costs incurred, if any, for personal injury, property damage, or service interruptions resulting from damaging the utility facilities and lines.

 This enforcement procedure is generally initiated by the PSC, through its investigative staff, by issuance of a “Notice of Probable Violation” (“NOPV”) naming the “person” or “persons” charged with the particular violation.  Such charges are often predicated upon solely information and allegations presented by the utility owner or operator to the PSC with little or no independent investigation by PSC staff of the alleged charges.  Such NOPVs are procedurally only allegations and not actual findings and final determinations of violation and liability.  However, they are presented in a form suggesting that the PSC has already adjudicated the claims and found the named respondents guilty.  The NOPV forms typically threaten civil penalties of up to $10,000 per violation before offering up essentially a plea bargain setting forth a “staff recommendation” usually including a specific lesser civil penalty amount often coupled with specified mitigating action.  This charging procedure employed by PSC essentially proceeds on the assumption that the named respondents are guilty unless they can prove their innocence – an interesting twist on the fundamental principle of American jurisprudence that one is “presumed innocent until proven guilty as charged” by the prosecutors.  It seems the burden of proof has been reversed under this process and this is particularly onerous where such charges are often so lacking in facts, details and “substantiation” that it is difficult to even muster an appropriate fully documented response and defense.

The NOPV then purports to afford the named respondents only two options, which must be elected and presented by “affirmative written response” submitted within 30 days, namely (1)  accept the penalties and sanctions recommended by PSC staff, essentially admitting commission of the violations charged or (2) disagree with the charges made and elect to request appearance before the GUFPA Advisory Committee or directly challenge the PSC charges by submission of “a detailed, written response along with all supporting evidence (pictures, witness statements and any other documentation).”  The path for challenging such charges ultimately follows a long road through the formal administrative hearings and ultimate appeal though the judicial process.  While such a charge can be rather easily brought by the PSC staff in almost total reliance upon an often sketchy complaint telephoned in by the utility or operator, once brought, the charge embroils the named respondent(s) – including the uninvolved corporate officer named individually – in a cumbersome, time consuming, and expensive process of defending against contested charges.

Putting aside for purposes of this discussion the several deficiencies in this process from the perspective of the contractors improperly charged with violations, the focal point here is the apparent practice of the PSC staff, upon issuance of a NOPV directed at a corporate entity, of routinely including also as a named party “respondent” to such charge the chief executive or other corporate officer of such corporation or limited liability company based solely upon such individual’s officer status.   As a matter of course, therefore, the PSC’s practice appears to be to typically name the “respondents” as “John J. Doe individually and John J. Doe Construction Co., Inc.,” with the corporate officer charged personally, together with the named corporate entity itself, for such violation.  This charge leveled against the individual is generally made in the NOPV without any evidence, or even articulated claim or basis, of direct involvement of such individual officer in the alleged violation.   Further, not only is such uninvolved corporate officer routinely so charged personally, but it has also apparently become the practice of the PSC to impose sanctions upon such individual officer in instances in which the corporation is sanctioned for a violation, again irrespective of whether the officer is demonstrated to have had any direct participation or involvement in the wrongful act.

Indeed, in response to an informal challenge of these practices by several contractor trade associations, the PSC staff has recently confirmed that its “policy remains in place that for cases involving corporate entities both an individual officer and the corporate entity will be named as respondents in NOPV charges.”  Interestingly, the reaffirmation of this “policy” was followed immediately by a puzzling statement that “[s]taff is willing to negotiate on this issue on a case by case basis with any respondent who will take the time to contact [PSC investigator] Will Culbreath, our GUFPA Program Manager . . . at 404-463-9784.”  Nowhere else in the published rules or regulations or in the documents provided relative to such an NOPV is this “policy” set forth.  Likewise, the availability of this alternative “negotiation” option for response to unfounded charges against corporate officer is not made publicly known.

This practice is simply wrong and legally unsupportable.  There is no legal or statutory basis for this practice of joining as respondents to such charges uninvolved corporate officers.  Of course, inclusion of a corporate officer as an individual respondent  to any such charge may be justified and appropriate where there is some demonstrable direct fault or culpability of that individual relative to the violation.  However, imposition of vicarious liability upon a corporate officer having nothing to do with the offending conduct is patently improper.   There should be no need to “negotiate” on this issue on a case-by-case basis as there was no basis in the first place to include a corporate officer as a named individual respondent to charges really brought against the corporate entity.

Nevertheless, in a case of joinder as a named respondent in a NOPV of an individual corporate officer who had no involvement in the circumstances underlying the charge, the door is now apparently open to immediate response and objection to such joinder presented to the PSC investigator issuing the NOPV – or to Mr. Culbreath – seeking dismissal of the charge as against the corporate officer joined without any discernible basis for contending that the officer is personally liable.  So:

ACTION ITEM: Indeed, it would seem prudent to “take the time” to advance this argument at the  earliest opportunity  in order to avoid becoming embroiled any further in the formal enforcement process and being caught in the flow through final hearing and disposition of the unrelated charge.  This can start with a telephonic communication, as noted above, followed by email or written submission setting forth the facts demonstrating that the corporate officer named had no direct personal responsibility or involvement over the activities of the company leading to the alleged violation.  BE PROACTIVE!  

Since the PSC precipitates this situation by joinder of an officer individually without any discernible basis for contending that the officer is personally responsible and now invites case-by-case negotiation on this issue as the only avenue afforded for prompt relief, then that avenue should be actively and promptly pursued where appropriate.

Corporations can only act by and through their individual employees and representatives in performing excavation or blasting work covered by GUFPA.  However, when a cooperate entity performs such work, any liability for violation of GUFPA or of its related regulations should be limited to the corporation or LLC itself and to only any employee(s) or representative(s) acting on its behalf directly involved in the wrongful action or omission.  It is not sufficient justification for naming a corporate officer as an individual respondent, simply by virtue of his/her official position, that it may be easier to pursue and enforce sanctions against such an individual than against the artificial corporate entity even where no direct involvement in the offense by such individual is demonstrated.  Moreover, there is generally no basis to “pierce the veil” of an otherwise proper and functioning corporate entity in order to subject its officers and members to individual liability for the wrongful acts of the corporation.

GUFPA empowers the PSC to investigate and sanction conduct of any “person” found to have violated the requirements of the Act.   The term “person” is very broadly defined to include “an individual, firm, joint venture, partnership, association, local governing authority, state, or other governmental unit, authority, department, agency, or a corporation” including any “employee, agent, or personal representative thereof.”  This definition does not directly, or indirectly, encompass officers or directors of a corporate entity who are not themselves actively involved in the conduct that violates the Act and does not subject individuals to personal liability for any and every act of the corporation if such individuals are not directly involved in the actions in questions.   While a “person” subject to the authority and sanction of GUFPA can include an “employee [or] agent,” including an officer, of a corporate entity it clearly applies only to those by and through whom the “corporate” entity involved was acting.   The broad definition of “person” does not automatically allow piercing the corporate veil every time the Commission alleges a GUFPA violation by a corporate entity. Otherwise, every employee and agent, let alone “officer,” could be charged and held liable for the wrongdoing of the corporation or LLC in which they were not involved.

Regarding performance of excavation or blasting work the power to sanction is limited to any “person who violates the requirements” of the Act and such liabilities are limited to only such “person” whose actions violated the Act.    Ultimately, the PSC is empowered to impose by judgment a civil penalty if it is proved that “the person” violated any of the provisions of this chapter due to failure to exercise specified additional care or reasonable care. Of course, as defined, such a “person” chargeable with and sanctionable for such violation may be the individual person actually committing the violation and/or the corporation, as an artificial “person,” on whose behalf the individual person was acting as an agent, employee or representative.  However, nowhere in this Act is it provided or even suggested that an officer of a corporate entity charged with a violation due to the actions or omissions of other employees, agents or representatives may be held personally and individually liable on a vicarious basis merely by virtue of the officer’s official title and position in the charged corporate entity.

           The PSC has previously sought to support this policy claiming that such “vicarious” liability of corporate officers was permitted and authorized by language drawn from another Title of the Georgia totally apart from that containing GUFPA.  However, that other statute has no application to such and enforcement process under GUFPA but rather clearly provides enforcement mechanisms are explicitly and expressly only applicable to “utilities,” and indeed only those acting “willfully,” and not to contractors performing utility related work.  This other Title upon which PSC relies is simply not a basis to permit naming such individuals as respondents to GUFPA contractor violations or imposing sanctions under GUFPA against them since it is directed at utilities and not contractors charged with violations under an entirely separate statute which makes no cross reference to this provision.

Article written for Georgia Utility Contractors Association by David Hendrick, Esq., General Counsel, Hendrick, Phillips, Salzman & Flatt, P.C.