Jack of All Trades Now Must be Master of All

One of the great satisfactions as a construction attorney is assisting and witnessing a long-time client’s growth over the course of a years’ long relationship. In my career, I have had the pleasure of witnessing small subcontractors grow and take on larger projects. On occasion, those subcontractors “graduate” into general contractors, and begin taking on whole projects as their own lead.

Unfortunately, a recent decision from the Appellate Division Second Department may impact growing and established contractors alike; and may be particularly problematic for budding young general contractors. In Electrical Contracting Solutions Corp. v. Trump Village Section 4, Inc. (209 N.Y.S.3d 123 [2d Dept. 2024]), the Appellate Division overturned a favorable trial decision in favor of the contractor, where Electrical Contracting Solutions Corp. (“ECS”) was awarded a $450,000+ judgment against the Project Owner, Trump Village Section 4, Inc. (“Trump Village”).

The facts underlying ECS’s claims are simple. Trump Village needed substantial electrical work done on the housing development following extensive damage from Super Storm Sandy. ECS – an up-and-coming electrical contractor whose previous work was located outside of New York City – contracted with Brooklyn’s-own Trump Village and agreed to perform the electrical work. As ECS was just starting to take on work within New York City, it chose to use an older and more established company (“QNCC”) as its licensed Master Electrician subcontractor. Needless to say, this was not some ordinary contractor-subcontractor relationship, as ECS and QNCC shared common ownership, and the NYC Master Electrician’s License registered with QNCC was that of ECS’s own principal.

As projects tend to do, the Trump Village project began to incorporate extra and additional work, and ECS’s costs to perform grew exponentially. ECS claimed that Trump Village failed to pay all amounts due and owing for the work performed, sued Trump Village, and ultimately won at trial.

The interesting and concerning part of this story comes from the Second Department’s justification for overturning the trial court’s decision and judgment. The Appellate Division’s Second Department held that “since [ECS] was not licensed to perform electrical work in the City, it may not recover against [Trump Village] under breach of contract or [quasi-contract] theory.” The Court rejected ECS’s plea that the monetary recovery should not be denied on account of its utilizing a fully-licensed subcontractor, QNCC, to perform the work. Essentially, the Second Department is telling us that a trade-specific license, when required, must be held by the party contracting with the Project owner, irrespective of whether a license/qualified subcontractor performs the work.

This decision is devastating, as ECS did what all responsible contractors should aim to do; that is, hire and utilize personnel that possess the experience and credentials to perform the necessary work with the utmost professionalism, skills and care. That is why it was particularly surprising that the Court refused to consider the fact that ECS’s own principal, as Master Electrician for QNCC, oversaw the work on behalf of both the general contractor and subcontractor. Instead, the Court opted for as draconian a reading of the NYC Administrative Code as possible.

The operative question now is what we can make of this cautionary tale. Does this mean that a general contractor itself must possess all requisite licenses for each trade being performed on a given project, without relying on subcontractor’s licenses? It appears we may be going that way, though there is some older case law that allows a safe haven for larger projects. Instead, what we should take away from this decision is that all contractors must always be keenly aware of the licensing requirements of the jurisdiction they are working in, and make sure they are in full and unequivocal compliance.

As always, contractor’s best defense against being left holding the bag in the event of a payment dispute is what I like to call “pre-litigation”. Engaging with an experienced construction attorney at the outset of a project – or, better yet, before executing a contract – will allow your attorney to review the contract documents in the context of relevant licensing requirements, and better equip you to avoid potential non-payment traps. With an attorney’s guidance early on regarding your contract and applicable State and local laws, rules and regulations, you will be in better position to do what you do best. That is, perform your work without having to worry about whether you are/will be in compliance with pertinent licensing requirements.

If you would like more information regarding this topic please contact Andreas M. Koudellou at akoudellou@wbgllp.com or call (914) 607-6487