Perspectives

Experienced credit professionals know that approving a customer and approving a transaction aren’t necessarily the same decision.

A contractor may have years of history with your dealership, a healthy credit line, and a solid payment record. But a new equipment transaction can introduce risks that aren’t visible on a traditional credit report.

The project may be in a different state. The customer may be working several tiers below the general contractor. The equipment may be going to a public project instead of private property. Or the transaction may carry lien or bond rights that are valuable today-but can disappear if a notice deadlines passes.

That’s why project intelligence belongs alongside customer credit analysis.

The goal isn’t simply to answer, “Will this customer pay?” it’s also to understand, “if they don’t, what leverage will we have?”.

Here are six questions to deliberate when extending credit for new jobs or equipment:

1. Where is the equipment actually going?

The project address does more than tell you where to deliver the equipment. It identifies the legal environment surrounding the transaction. Mechanic’s lien laws, public-project bond requirements, preliminary notices, filing deadlines, eligible claimants, waiver rules, and enforcement procedures can vary significantly by state. Even experienced multistate credit departments can create exposure when a familiar customer begins working in an unfamiliar jurisdiction.

The project location can also help the credit team verify information independently. With a correct and detailed project address, you may be able to confirm property ownership, identify recorded project documents, locate notices of commencement where applicable, determine the general contractor, and verify other information provided by the customer.

That makes the project address a starting point for due diligence, not simply another field in the credit file.

Why it Matters to the Credit Decision

Consider a customer with a $750,000 credit line that historically operates in three states. The customer takes on a major project in a fourth state and requests another $300,000 in availability. The customer’s financial profile may not have changed, but the dealer’s risk profile has.

Before approving the additional exposure, the credit team should understand whether the new jurisdiction provides meaningful lien or bond protection, whether notices are required, and whether those requirements can be realistically met.

What the Credit Team Should Capture

Don’t settle for a project nickname or city. Capture the following:

• Complete project name
• Physical project address
• County, where relevant
• State
• Project or contract number, if available
• Expected first furnishing/delivery date
• Expected duration of the dealer’s involvement

The last two points are especially important. Location tells you which rules may apply; furnishing dates often start or affect the clock.

2. Is This a Public or Private Project-and What Does that Mean for Our Recovery Strategy?

“Public or private?” shouldn’t simply be a checked box on a job-information form. It is an early determination of where the dealer may look for payment protection if the customer fails.

On qualifying private projects, mechanic’s lien rights may provide a potential claim connected to the improved real property. On public projects, government property generally cannot be encumbered in the same manner, making statutory payment payment bonds or other payment protections particularly important.

For federal construction projects, for example, the Miller Act establishes payment-bond protections for qualifying parties, while states have their own statutes governing state and local public projects. The requirements, and the parties protected, are not identical everywhere.

Why it Matters to the Credit Decision

Think about what this means from a recovery perspective. If you’re extending $400,000 on a private project, the credit team may be evaluating:

Customer credit + guaranty + potential lien rights + other security

On a public project, the analysis may instead be:

Customer credit + guaranty + payment bond + other security

That distinction can change the quality of the exposure.

Simply knowing that a project is “bonded” isn’t enough either. The credit team should understand which bond, issued by whom, for whose benefit, and whether the dealer’s position in the contracting chain potentially falls within the protection of the applicable statute or bond.

What the Credit Team Should Capture

For public work, obtain available information about:

• Public contracting entity
• Prime contractor
• Contract number
• Payment bond
• Surety
• Bond number
• Principal identified on the bond
• Contracting chain between the dealer and prime contractor

Ideally, this happens when the account is current.

Trying to locate a bond for the first time after a contractor has stopped communicating puts the credit department in a very different position.

3. Who Owns the Project-and Have We Verified It?

Ownership information can also reveal useful risk intelligence. Suppose the customer identifies “ABC Manufacturing” as the owner because that’s the name on the building. Further research shows that the property is actually owned by ABC Industrial Development LLC, while ABC Manufacturing is the tenant.

Now there are additional questions:

Was the work authorized by the owner? Who contracted for the improvement? What interest in the property is actually being improved? Are notices being directed to the correct parties? 

Those are much better questions to discover when the equipment is first supplied than when a lien deadline is approaching.

What the Credit Team Should Do

For meaningful exposure, verify rather than assume.

Depending on the jurisdiction and project, that may involve reviewing property records, project documents, notices of commencement, permits, contracts, or other reliable sources. The goal isn’t for the credit department to perform a legal title examination. It’s to recognize when the project information doesn’t line up-and escalate the issue while there is still time to investigate it.

4. Where Exactly Does Our Customer Sit in the Contracting Chain

This is one of the most important-and most frequently underestimated-pieces of construction credit intelligence. Knowing that your customer is “a contractor on the project” isn’t enough. You need to know who hired them.

Consider:

Owner -GC-Your Customer-Dealer

versus

Owner-GC-Subcontractor-Your Customer- Dealer

verus

Owner-GC-Subcontractor-Supplier-Your Customer-Dealer

versus

Owner-GC-Subcontractor-Supplier-Your Customer-Dealer

From a traditional customer-credit perspective, the exposure might look identical. From a lien or bond perspective, it may be very different.

Some statutes limit protection as parties become more remote from the owner or prime contractor. Supplier-to-supplier relationships can be particularly important to identify. On federal projects, for example, Miller Act protection does not extend indefinitely down the contracting chain.

Why It Matters Beyond Lien Rights

The contracting chain also tells the credit professional something about payment risk itself.

Money generally has to move through the parties above your customer before reaching your customer-and ultimately you. That means your customer’s payment performance can be affected by a dispute they aren’t even directly involved in.

A problem between the owner and GC can move downstream. So can a GC/subcontractor dispute, change-order disagreement, project delay, retainage issue, or insolvency elsewhere in the chain.

Your customer may still be financially healthy while the project’s payment chain is not.

What the Credit Team Should Capture

Identify:

Owner-Prime/GC-First Tier Subcontractor-Lower Tier Contractor-Customer-Dealer

Then ask one additional question:

Who is paying whom?

That simple question helps distinguish the contractual relationship from the physical jobsite relationship.

5. What exactly are we furnishing—and how much of the exposure may actually be protected?

This deserves more scrutiny for an equipment dealer than it might for a traditional building-material supplier.

A CAT dealer’s exposure on one project could include:

• Equipment purchases
• Rental equipment
• Replacement parts
• Repairs
• Field service
• Labor
• Attachments
• Consumables
• Transportation
• Freight
• Other charges

It can be tempting to look at a $600,000 project receivable and think:

“We have lien rights on this job.”

The more useful credit question is:

“How much of this $600,000 exposure potentially qualifies for lien or bond protection?”

Those aren’t necessarily the same number.

Whether equipment, rental charges, parts, services, or other costs qualify can depend on the applicable statute, how they were furnished, their connection to the improvement, and other project-specific facts. Construction-credit guidance likewise emphasizes that what is lienable—and how far down the contractual chain protection extends—varies by state.

Why it matters to the credit decision

This gives the credit manager a much better way to think about concentration.

Instead of:

Project exposure: $600,000

consider:

Total exposure: $600,000
Potentially protected exposure: $375,000
Potentially unsecured/uncertain exposure: $225,000

Those numbers are illustrative, but the exercise matters.

The credit team can now make a more informed decision about whether the remaining risk is acceptable—or whether it warrants a lower credit limit, additional guaranty, deposit, joint-check arrangement, UCC security interest, different payment terms, or another form of protection.

Lien rights should be viewed as one layer of the credit-risk structure, not as a substitute for underwriting.

6. What has to happen now to preserve options later?

This is where sophisticated construction credit departments distinguish themselves.

Traditional collections processes are usually delinquency driven:

Invoice-Due Date-Past Due-Collection Activity-Legal Escalation

Lien and bond rights don’t necessarily operate on that timeline. Rights-preservation requirements can be triggered by events such as first furnishing, last furnishing, project completion, recording of certain project documents, or other statutory events. That means the account could be completely current while an important legal deadline is running.

Preliminary notices are a good example. Depending on the jurisdiction and claimant’s position, a notice may be a prerequisite to later lien or bond rights, and notice requirements vary substantially among states.

Why it matters to the credit decision

The aging report answers:

“Who owes us money right now?”

A rights-management system should answer:

“Where do we have exposure today that requires action to preserve our options tomorrow?”

Those are fundamentally different reports.

A customer could have:

$0 past due

and simultaneously have:

$1.2 million in project exposure with a notice deadline approaching.

From a legal-risk perspective, the second number may deserve far more attention.

Build two clocks

For significant construction exposure, credit departments should consider tracking two parallel timelines:

The Credit Clock

Invoice-Due Date-Aging-Credit Hold-Collections-Legal

The Rights Clock

First furnishing-Preliminary Notice-Ongoing Project Monitoring-Last Furnishing-Lien/Bond Deadline-Enforcement Deadline

The two timelines eventually intersect-but they shouldn’t depend on one another.

If the rights clock doesn’t start until the credit clock shows trouble, the dealer may already have lost valuable leverage.

The Bigger Question: What Does the Project Do to the Risk?

The purpose of gathering project information isn’t to make the credit application longer. It’s to make the credit decision better.

For every meaningful construction exposure, the credit team should ultimately be able to answer four questions:

1. What is our total exposure?

2. Where does that exposure sit within the project’s payment chain?

3. What portion may be supported by lien, bond, UCC, guaranty, or other rights?

4. What must we do—and by what date—to preserve those protections?

That creates a much more complete view than customer creditworthiness alone.

Because when a construction account deteriorates, the most important question isn’t simply how much the customer owes.

It’s how much leverage you preserved before they stopped paying.

The best collection strategy starts before the first invoice is sent.

When an account becomes past due, it’s natural to focus on collections. But in the construction industry, many of the strongest collection tools-such as mechanic’s liens and payment bond claims-are either preserved or lost long before payment ever becomes an issue.

The decisions made during the credit approval process can have a significant impact on your ability to recover payment later. Asking a few key questions upfront can help protect your rights, reduce risk, and strengthen your position if a dispute arises.

Here are five questions every credit professional should ask before extending credit on a construction project.

Is this a Public or Private Project?

This is one of the most important questions you can ask because it determines which legal remedies may be available if payment problems arise.

On many private projects, qualified contractors, subcontractors, and suppliers may have mechanic’s lien rights, subject to state law and applicable notice requirements.

On public projects, mechanic’s liens generally are not available. Instead, payment may be secured through a statutory payment bond, which comes with its own notice requirements and deadlines.

Knowing the project type from the beginning allows your credit team to preserve the appropriate rights before critical deadlines pass.

Where is the Project Located?

Construction law is governed by state law, and no two states treat lien and bond rights exactly the same.

Deadlines, notice requirements, eligible claimants, and filing procedures can vary significantly depending on where the project is located.

If your company supplies projects in multiple states, relying on a “one-size-fits-all” process can create an unnecessary risk. Understanding the governing state’s requirements early allows your team to track the correct deadlines from day one.

Where Does Your Customer Fit in the Contracting Chain?

Understanding who hired your customer-and who owns the project-can be just as important as understanding who owes you money.

Questions to ask include:

• Is your customer the general contractor?
• Are they a subcontractor?
• Are they a lower-tier subcontractor?
• Are you supplying materials directly to another supplier?

Your position within the contracting chain may affect whether lien rights or bond rights are available and what notices may be required to preserve them. When extending credit, gathering this information up front is often much easier than trying to reconstruct it months later.

Are Lien or Bond Rights Available?

Not every construction project gives rise to the same legal remedies.

Depending on the project and your role, you may have access to:

• Mechanic’s lien rights
• Payment bond claims
• Other statutory remedies available under applicable law

Understanding which remedies may be available allows your organization to make informed credit decisions, and if necessary, involve legal counsel before important rights expire.

Have You Started Tracking Your Deadlines?

One of the most common reasons companies lose valuable collection rights isn’t because they had a weak claim-it’s because a deadline was missed. 

As soon as credit is approved, establish a system to track key dates, such ask:

• First furnishing of labor or materials
• Required preliminary notices
• Last furnishing date
• Lien or bond claim deadlines
• Applicable lawsuit deadlines

Waiting until an invoice reaches 60 or 90 days past due may leave little time to preserve your legal options. A well-maintained calendar can be just as valuable as a well-written contract. 

Proactive Credit Management Creates Stronger Collections

Credit professionals aren’t expected to know every nuance of construction law. However, understanding the right questions to ask before extending credit can help preserve valuable rights that may significantly improve collection outcomes if payment issues arise.

By identifying the project type, confirming the project location, understanding the contracting chain, evaluating available remedies, and tracking deadlines from the outset, your credit department is better positioned to protect both receivables and cash flow.

The strongest collection strategies begin long before an account becomes delinquent. 

How Wagner, Falconer & Judd Can Help?

Construction collections often require quick action and careful attention to statutory deadlines. Our attorneys work with credit departments, suppliers, distributors, and lenders to help preserve lien and bond rights, evaluate collection options, and develop practical strategies for recovering outstanding balances.

Whether you’re extending credit on a new project or addressing a past-due account, proactive legal guidance can help protect the remedies available to your business.

The best collection strategy starts before the first invoice is sent. 

In California, compliance risk isn’t always about what you do-it’s about how your transactions are classified.

Most equipment dealers run tight, professional operations. You extend credit thoughtfully. You follow consistent processes.

So it can be surprising to learn that under California law, risk doesn’t always come from bad behavior-it can come from technical classification.

And that’s where things get complicated.

The Shift: From Behavior to Classification

Historically, commercial collecitons were judged by how you operated:

• Were communications professional?
• Were practices fair?
• Were disputes handled privately

Now, under California’s evolving rules, the question has shifted to:

“What type of debt is this-and who is involved?”

With the expansion of the Rosenthal Fair Debt Collections Practices Act into certian commerical debts, some business transactions can be evaluated under consumer-style rules-even if your process hasn’t changed at all.

Why This Matters for Equipment Dealers

If you sell equipment and extend payment terms, you’re likely dealing with:

• open-account credit
• Invoices with payment terms (Net 30, Net 60)
• Personal guarantees from business owners

The last point is where things can shift.

When a natural person (like a business owner) guarantees a debt, it can trigger a different legal framework-one that was originally designed for consumer protection, not commercial transactions.

Even if:

• Your communication is professional
• Your process is consistent
• Your intent is fair

You could still face liability if the debt is later classified differently.

The Good News-And the Catch

Recent updates clarified that trade credit is not considered “covered commercial debt.” That’s a big win for suppliers and dealers.

It confirms what businesses have always known: Extending credit for goods and services is part of commerce-not lending.

But here’s the key: That protection depends on proper classification.

If a transaction starts to look more like financing-or falls outside of standard trade credit-those protections may not apply.

Where Risk Actually Shows Up

The biggest misconception is that compliance risk comes from aggressive collection tactics. In reality, most risk comes from misalignment between your processes and the legal framework.

Examples include:

• Sending standard demand letters that don’t include required disclosures
• Reporting debt while a dispute is still under review
• Filing in a jurisdiction that doesn’t meet statutory requirements
• Using templates that haven’t been updated for new rules

None of these are “bad behavior”. But under a strict liability framework, they can still create exposure.

It’s Not About Changing Your Business-It’s About Aligning It

This isn’t about becoming more aggressive or more cautious.

It’s about making sure your:

• Credit structure
• Documentation
• Collection workflows
• Vendor relationships

…are aligned with how the law now evaluates certain transactions. Because once a debt is challenged, the question isn’t what you intended-it’s whether your process met the requirements.

A Growing Trend to Watch

California is the first state to expand consumer-style protections into parts of the commercial space like this-but it likely won’t be the last. That means this isn’t just a California issue. It’s a signal.

What Should Equipment Dealers Do Now?

You don’t need to overhaul your business-but you do need to understand where your risk lives.

Start by asking:

• Are our credit terms clearly structured as trade credit?
• Where are we using personal guarantees-and how  are those handled?
• Are our collection processes aligned with current requirements?
• Are our templates and vendors up to date?

How WFJ Helpls Simplify This

At Wagner, Falconer & Judd, we work with businesses every day to:

• Review credit and contract structures
• Align collection processes with current regulations
• Identify risks before they turn into disputes
• Support enforcement when issues aris

Because in today’s environment, the goal isn’t just to collect-it’s do do it confidently and correctly. 

Final Thought

The biggest takeaway?

You can be doing everything right-and still face risk if your processes don’t align with how the law sees the transaction. The good news is that once you understand where that line is, it becomes much easier to operate with confidence.

A busy construction season is great for revenue-but it can also put pressure on your cash flow if your collections process isn’t ready.

When demand increases, so does risk. New customers are onboarded quickly. Terms get negotiated on the fly. Follow-ups become inconsistent as teams focus on delivering work. The result? More invoices, and more uncertainty around when you’ll be paid.

The best time to address collections risk isn’t after accounts become overdue. It’s before the work begins.

What to Review Before Things Get Busy

Your Contracts

Your contract is your first line of defense.

Are your payment terms:

• Clear and easy to understand?
• Enforceable if something goes wrong?
• Consistent across customers?

Vague or inconsistent terms can create confusion-and limit your ability to act if payment is delayed.

Your Credit Approval Process

During busy season, it’s easy to prioritize speed over process. But not every customer carries the same level of risk.

Ask yourself:

• Are you evaluating new customers before extending credit?
• Do you have defined limits or requirements?
• Are exceptions being documented-or made informally?

A strong upfront process can prevent issues later.

Your Internal Collections Workflow

Even strong contracts can fall short without consistent follow-up.

Consider:

• Who is responsible for collections?
• When do follow-ups begin?
• What happens if an account becomes overdue?

If your process depends on “who has time,” it may not hold up during your busiest months.

Lien & UCC Strategies

For many industries, timing matters.

Tools like liens and UCC filings can:

• Strengthen your position
• Improve recovery options
• Provide leverage in disputes

But these tools are often time-sensitive and must be set up early to be effective.

Why Being Busy Creates Risk

Growth can expose gaps that aren’t noticeable during slower periods:

• Inconsisten terms across accounts
• Delayed or missed follow-ups
• Informal agreements made to move faster
• Missed deadlines tied to legal protections

These small gaps can add up quickly-especially when dealing with high volumes or high-dollar accounts.

If You’re Experiencing…

• Rapid growth and onboarding new customers quickly
• Inconsistent payment terms across accounts
• Limited time to review agreements
• Increasing receivables with unclear timelines

Wagner, Falconer, and Judd Can Help With…

• Standardizing contracts and payment terms
• Strengthening your collections framework
• Identifying gaps in your current process
• Building proactive strategy before issues occur

A successful season isn’t just about how much work you bring in-it’s about how effectively you turn that work into cash flow. A strong foundation now can help you move through your busiest months with more clarity, consistency, and confidence. 

In construction equipment industry, deals move quickly-but when payments don’t, the consequences can be significant. Whether you’re financing equipment, extending payment terms, or leasing inventory, protecting your interest is critical.

One of the most effective (and often underutilized) tools available to heavy equipment dealers is the Uniform Commercial Code (UCC) filing.

Here’s what you need to know-and how to use it to your advantage.

What is a UCC Filing?

A UCC filing (commonly a UCC-1 Financing Statement) is a legal notice filed with the state that establishes our security interest in a debtor’s personal property.

In simpler terms: it tells the world, “We have a legal claim to this equipment until it’s paid for.”

For heavy equipment dealers, this often applies to:

• Excavators, loaders, cranes, and other machinery
• Inventory sold on credit
• Equipment financed through dealer-arranged terms

Why UCC Filings Matter for Equipment Dealers

Without a UCC filing, you may be treated as an unsecured creditor if a customer defaults or files for bankruptcy.

With a properly filed UCC:

• You establish priority rights over other creditors
• You improve your ability to recover or repossess equipment
• You gain leverage in collections and negotiations
• You reduce overall financial exposure

In high-value equipment transactions, that protection can make the difference between recovery and loss.

How the UCC Filing Process Works

While the process is straightforward, precision matters.

Create a Security Agreement

Before filing, you must have a signed agreement granting you a security interest in the equipment.

This agreement should clearly identify:

• The debtor (customer)
• The secured party (your business)
• The collateral (equipment)

Prepare the UCC-1 Financing Statement

This document is filed with the Secretary of State (typically where the debtor is located).

It includes:

• Legal name of the debtor (accuracy is critical)
• Secured party information
• Description of the collateral

File with the Appropriate State

Most filings are completed online and processed quickly.

One filed, your interest becomes public record, putting other creditors on notice.

Maintain & Monitor the Filing

UCC filings typically last 5 years and must be renewed if the obligation remains outstanding.

Ongoing management is key:

• Amend filings if details change
• Continue filings for long-term financing
• Terminate filings once paid in full

Common Mistakes to Avoid

Even small errors can undermine your protection.

Watch for:

• Incorrect debtor names (a leading cause of invalid filings)
• Vague or incomplete collateral descriptions
• Filing in the wrong state
• Failing to renew before expiration
• Not tying the filing a valid security agreement

How UCC Filings Strengthen Your Business Strategy

For heavy equipment dealers, UCC filings are more than a legal formality-they’re a risk management tool.

When used strategically, they can:

• Support more flexible financing options for customers
• Protect margins on high-value equipment
• Strengthen your position in the event of default
• Create consistency across your credit and collections process

How WFJ Can Help

UCC filings are powerful-but only when done correctly and consistently.

At Wagner, Falconer & Judd, we help heavy equipment dealers:

• Draft enforceable security agreements
• Ensure accurate and compliant UCC fiings
• Develop standardized credit and documentation processes
• Support collections, repossession, and enforcement if issues arise

We simplify the complex-so you can focus on running your business with confidence.

Missed deadlines are one of the most common-and costly-reasons lien and bond claims fail. Many businesses assume their enforcement window is tied to the last day they worked on a project. While that’s often true, it’s far from universal. In many situations, your deadline can start earlier (or be triggered by a different event entirely), putting otherwise valid claims at risk.

Below is a practical breakdown of how deadlines are triggered, where the pitfalls are, and how to protect your payment rights before time runs out.

The General Rule: “Last Date of Substantial Performance”

As a baseline, claim enforcement deadlines are commonly tied to your last date of substantial performance on the project. Substantial performance means the last day you provided labor or equipment that materially contributed to the improvement under your contract or an approved change order.

What doesn’t count as your “last date”:

• Punch list work
• Warranty work
• Minor or de minimis contributions

Relying on these types of activities to extend your deadline is a risky move-and one we see backfire frequently.

The Exceptions That Catch Companies Off Guard

The general rule has many exceptions, and they vary state by state and by project type. In some jurisdictions, your deadline may be triggered by events that have little to do with your final day on site. Common triggers include:

• Project substantial completion or beneficial use
• Project acceptance by the owner
• Cessation or suppression of work
• Contract termination (at any tier)
• Change orders (including gaps in performance or unapproved change orders)
• Bankruptcy (at any tier of the project)
• The date claim notice is provided
• The last date anyone furnished labor or materials (in certain states)

The takeaway: your clock may start earlier than you think-and it may start based on someone else’s actions, not yours.

Practice Tips: How to Protect Your Deadlines in the Real World

A few habits can dramatically reduce deadline risk:

• Use contract-tier changes conservatively. When the GC or ownership changes, treat that transition as a potential deadline trigger.
• Be cautious with unapproved change orders. Unapproved work may not extend your enforcement window.
• Track objective project milestones. Reliable sources include:
  • Public records
  • Written notice from the owner or GC
  • Confirmation that project funds have been paid in full to the GC

These data points often determine when courts say your clock actually started.

Case Snapshots: How Timing Errors Happen

Change Orders & Project Acceptance

In one matter, a claim was timed based on a series of change orders-two of which were not approved. The project was accepted by the public owner earlier than the company realized, shortening the window to file suit. The result: a missed enforced deadline.

General Contractor Termination

In another case, the original GC was terminated and a completing contractor took over. This created two separate claim paths with different notice and suit requirements. Because suit wasn’t timely filed under the original bond-and new notices weren’t properly served under the completing GC’s bond-the claims were denied.

Lesson: Changes in the contract chain can reset deadlines and create new procedural requirements.

State-By-State Reality Check

Not all states tie suit deadlines to your last date of work. For example:

• Lien deadlines not triggered by your last date in: CA, CO, HI, TN, VA
• Bond suit deadlines are not triggered by your last date in: AL, AK, AR, CO, DE, GA, IN, IA, KS, KY, LA, MD, MI, NE, NM, NY, NJ, NC, ND, OH, RI, SD, TN, TX, VA, WI, WY
• Canada: British Columbia, Ontario, Quebec

State specific rules can flip the script on timing. Always confirm the trigger before relying on your internal project close-out date.

Bottom Line

Lien and bond rights are deadline-driven. Substantial completion may start the clock-but it’s not often not the only trigger, and sometimes it’s not the trigger at all. Project acceptance, contract terminations, and changes in the contract chain can move deadlines up and quietly eliminate enforcement rights.

Pro tip: If payment issues appear likely, involve counsel early. A short timing review at the first sign of trouble is far cheaper than trying to fix a missed deadline after the fact.

Need help protecting your lien and bond rights?

Wagner, Falconer & Judd with contractors, suppliers, and business teams nationwide to track deadlines, preserve claims, and enforce payment rights before leverage is lost.

A new Minnesota law introduces significant changes to the state’s worker’s compensation system. Signed into law in May 2024, the bill enacts recommendations from the Worker’s Compensation Advisory Council and is set to impact employers and contractors across industries, especially construction companies and projects involving multiple subcontractors.

Key Updates You Should Know

Protected Claim Amount Increases from $1,000 to $3,000

One of the most notable changes is the increase in the protected claim amount-the portion of a claim shielded from subrogation or third-party recovery-to $3,000 (up from $1,000). This adjustment recognizes inflation and rising medical costs, ensuring injured workers retain a greater portion of their benefits.

Chanages Specific to the Construction Industry

The law also implements targeted updates affecting construction projects:

• Clarifies Liability in Multi-Contractor Projects: When multiple contractors or subcontractors are on-site, liability for worker injuries must be clearly understood. The new law aims to streamline how responsibility is determined in these shared jobsite scenarios.
• General Contractors Take Note: If you work with multiple subcontractors, this law reinforces the importance of maintaining up-to-date worker’s compensation certificates from all parties. It also reitereates the need for strong indeminity language and contractual risk transfer protections.
• Special Employer Rule Adjustments: The statute refines how “special employers” (like staffing agencies or general contractors using temp labor) are treated under worker’s compensation, potentially shifting liability in some claims.

Other Key Provisions

• Clarifies Timelines for Filing and Appeals: The law updates certain administrative timelines to improve efficiency and reduce disputes.
• Improves Transparency in Dispute Resolution: Employers and insurers may see improved predictability in how the Department of Labor and Industry (DLI) and the Office of Administrative Hearings (OAH) process claims.

What This Means for Construction Businesses

If you’re a construction company owner, general contractor, or a business managing multiple subs, now is the time to:

• Review your contracts to ensure proper worker’s compensation coverage and indeminifaction clauses are in place.
• Confirm that you are tracking active coverage for all subcontractors.
• Work with legal counsel to review whether your agreements adequately address risk transfer, especially in light of the protected claim amount increase.

Even if you’re not in construction, any Minnesota employer may see greater benefit amounts retained by workers and adjusted handling of disputed claims.

Need Help Reviewing Your Contracts or Coverage Strategy?

At WFJ, our team can help ensure you’re protected and compliant under Minnesota’s evolving worker’s compensation laws. Reach out to us to discuss how this law could impact your job sites and subcontractor relationships.