In March 2023, an appellate court in New York held that an owner on a public works project was not liable to its contractor for a reduction in working hours from eight to five hours a day. Lanmark Group, Inc. v. New York City School Construction Authority, 2023 NY Slip Op 01368 (1st Dept. 2023).
In Lanmark, after the SCA awarded a contract to perform masonry restoration work at a school in Manhattan, it reduced the time allotted to perform the demolition work in response to neighborhood complaints of noise from eight to five hours. Because the contractor was obligated to pay its workers for 8 hours, even where they only worked 5, the contractor sued the SCA for its damages. However, the court dismissed the complaint finding that because the contractor agreed to the project labor agreement (PLA), it knew that under the terms of the PLA it had to pay its workers for 8 hours each day even if they worked less.
Accordingly, the court reasoned that any increased costs incurred by the contractor, as a result of the reduced working hours, were foreseeable and contemplated under the Prime Contract’s no damages for delay clause.
Over the years it has become increasingly difficult to circumvent a no damages for delay clause in New York. With few exceptions, such clauses are routinely upheld by the courts. Here, although the SCA restricted the hours of work not only did the court find that this delay should have been contemplated by the contractor but it also rejected the contractor’s argument that the SCA breached a fundamental obligation of permitting eight hours per day of work. Instead, the court referred the contractor to the PLA which only required that the contractor pay for eight hours of work, not that the workers actually work eight hours.
While the terms and conditions of a public works contract are generally not negotiable, contractors in the private sector should carefully review the terms of a no damages for delay clause and through negotiation either eliminate it altogether or revise it prior to executing a contract.
About the author: George Marco is an attorney practicing in the field of construction law. He also holds a Bachelor of Science in Mechanical Engineering and was previously employed as a Project Manager for a public improvement contractor.
Disclaimer: This article is for informational purposes only and not intended to serve as legal counsel.