Subcontractor’s Guide to Addressing Payment Issues with General Contractors

General contractors are hired for residential and commercial construction to ensure that projects stay on track. In most cases Subcontractors are hired by the general contractor to perform all, or a large portion of, the work. What happens if a general contractor does not pay a Subcontractor?  

Payment Obligations 

Under Wisconsin law, a general contractor cannot withhold payment from a Subcontractor after the Subcontractor has satisfactorily completed work. Failure to do so may result in several potential claims available to the Subcontractor in Wisconsin.  

Breach of Contract 

A general contractor can be in breach of contract if they do not pay Subcontractors on time according to the terms of their written contracts. Verbal contracts or unclear terms in a written contract can make obtaining payment more complicated, but generally speaking, if the Subcontractor completes the job, they are entitled to be paid for their work. In Wisconsin, once a general contractor receives payment from the project owner, they must pay Subcontractors within a reasonable time frame. If they don’t, Subcontractors can file a lawsuit to obtain payment for their work.  

Fiduciary Responsibilities 

Under Wisconsin law, payments received by general contractors for labor and materials must be held in trust for Subcontractors and suppliers. Wis. Stat. § 779.02(5). If a general contractor fails to pay Subcontractors with the funds that were to be held in trust, the general contractor may be liable for theft by contractor in addition to damages related to breach of contract. 

Mechanic’s Liens 

Subcontractors can file a mechanic’s lien against the property they worked on if they have not been paid. Ther property owner must be properly notified (pursuant to Wisconsin law) by the Subcontractor to initiate the lien. Wis. Stat. § 779.01. A mechanic’s lien can eventually lead to foreclosure, allowing the Subcontractor to sell the property and recover the amount that they are owed for the work that they have completed. Wis. Stat. § 779.10. The general contractor is required by statute to indemnify and defend the property owner and pay the Subcontractor to discharge the lien. Wis. Stat. § 779.02(6). 

The experienced litigators at Halling & Cayo S.C. can help 

If you’re a subcontractor facing nonpayment Halling & Cayo can help. Our attorneys have experience with all aspects of construction law and have helped Subcontractors like you to get you paid for your work. We offer a variety of fee arrangements depending on the situation. Please give us a call for a free consultation today.