By Stephen P. Prentice
Recently I came across a case that peaked my interest and I thought it might be a good time to review the subject of getting paid for technicians who run their own shops and managers of larger repair facilities.
The work order
The single most important document that will help you get paid for your
work is the common work order. This form is the first one to be filled out by the shop when work comes in the door and the least understood or respected. The key element on the most common type is the signature of the customer authorizing the work. Without this signature your chances of collecting when things get tough are slim.
When the work to be accomplished is first described, ie. annual inspection plus work to correct discrepancies, tire change, or any similar labor, there should be clear notations on the form as to the extent of the work and the estimated cost for the job. Again, absent these facts your chances of collecting when a dispute arises are slim.
Calling the customer
The second most important factor is contacting the customer either in person or by phone and getting his OK to go forward with changes in accordance to the extent of the work or the cost. You must note on the order any contact with the customer regarding changes in the work order, and make an entry on the form noting the date and time of the contact with the customer. Another good practice is to send the customer a copy of the amended work order for his or her approval. Clear communication is a must to avoid problems. In all of the cases I have been concerned that the
principle problem is the lack of a well-prepared work order. Sure it's a lot of paperwork, but it's far less expensive than getting involved with an irate customer who refuses to pay you. You need to have all your documents in order when you go the legal route to collect on your bills. You can't make it up after the fact.
The scene
Most of us are familiar with the typical dispute that comes up over the
size of the aircraft or engine repair bill. What do you do when a customer refuses to pay the bill? At this point, assuming you are still on talking terms, invite the customer to your office to discuss the bill and go over it in detail. The customer may have a legitimate complaint that you may be able to adjust. Maybe the repair order is not sufficiently detailed or needs some backup with outside repair billings or parts costs. A simple explanation may solve the problem. Keep in mind when you are writing the repair order that it could wind up in a court or arbitration proceeding down the road.
The common law
Most states give a repair person a common law lien for compensation legally due for making repairs, and providing parts to such items as aircraft, boats, cars, and your house. A lien is nothing more than a claim on another's property as security for the payment of the legal debt.
This lien or claim is effective when the bill is presented for payment. Most states refer to them as mechanic's or artisan's liens.
Under common law the key to an effective lien is possession. That is, under common law you have to have possession of an aircraft in order to create and exert your lien. If the customer won't pay the bill just hang onto his aircraft until he agrees to pay or OKs an adjustment in the bill.
Possession was for years the essence of the lien. The reverse was also true, that is, if you gave up possession you gave up your lien. In many states today however possession is not a critical element of your lien.
For example: California creates what is called a statutory lien called a special lien:
s. 9798.1 California Business and Professions Code
(a) . . . each repairperson shall have a special lien . . . upon the civil aircraft, engine, or appliance upon which the repairperson has bestowed laborer furnished material. The special lien shall be in an amount equal to the agreed upon value of the labor and material furnished, or . . . the reasonable value thereof;
The statutory lien created . . . is not dependent upon possession by the repairperson of the property which is subject to the lien.
The matter of possession of the item has raised so much controversy over the years that California, for one, decided to add a statutory special lien to the law so that possession wouldn't be necessary. Life becomes much easier for the craftsman creditor if he complies with the special statutory lien requirements.
But, there are several requirements to establish this special lien, notably the requirement that it be created by written contract (repair order) signed by the customer and it must predate the commencement of the work
for which the lien is applicable. So, as mentioned above, you cannot create a repair order or contract after the work has been started. Your special lien is not enforceable and this makes collection more difficult. You then have to revert to the common law version of a lien.
The special lien is given to a certificated repair station, certificated mechanic, or a fixed base operator. Another requirement is that the repairperson must have liability insurance or a written surety bond, both of which must have predated the commencement of the work.
In California if you don't qualify for the special lien you can still exert a common law lien if you have possession of the security for the lien. Possession is still important where one doesn't qualify for the special statutory lien.
Recording
You have an additional requirement for your special lien in California
- you have to record it with the FAA. It isn't valid until it is recorded in the Oklahoma City office. Common law liens are likewise recorded at the FAA offices.
As states differ, you will have to check with your local counsel regarding the particular lien laws in your jurisdiction. Most states still adhere to the common law concept of a mechanic's lien, which depends on possession.
The effect
Well, you may ask what's the benefit of any lien? Simple, it allows you to sell the item in order to collect your money. It avoids a court proceeding or other long-term enforcement action and allows you to recover what is owed in a short period of time.
The important effect of the threat of a lien sale is that the non-paying customer usually becomes more reasonable once advised of your sale date. The threat of a lien sale is an effective collection device. Most states also have additional requirements in order to perfect your lien sale like publishing a notice of sale and serving the errant customer with a copy of the notice. These are usually small efforts when compared with other alternatives for collection, like the courthouse.
Most of the problems in the collection area under common law standards deal with what happens after possession of the aircraft is given up without the bill being paid. The primary action at this point is a lawsuit for the money due. This takes time. More importantly, what you get, if you win, is a judgment. You may or may not be able to collect your judgment.
By far, the special lien statute takes care of the possession issue if you have provision for such in your state.
Another issue that comes up related to possession is the regaining of possession after it's lost. Is your common law lien revived? Again, it
depends on where you live. The general rule is that the lien is lost when possession is given up voluntarily, and cannot be restored by repossession. However, California, like many states, allows for reinstatement of the common law lien if possession is regained, particularly if it was taken by trick or fraud.
You might also suggest to the owner that regaining possession was a variety of a crime by taking possession through trick or fraud. Be careful on this one because it can suggest extortion on your part. However you can safely tell the customer what the law says.
The logbooks
Suppose you have the logbooks and maintenance records but not the aircraft. Can you keep them pending payment? FAR 91.407 says "no person may operate an aircraft after maintenance until it is approved for return to service by an authorized person and the maintenance record entry has been made . . . "
Many shops have refused to make an entry pursuant to 91.407 until the bill was paid.
I can recall one case where the shop refused to return the records to the owner after he had taken his aircraft from the shop. In this case the owner took the aircraft before the shop had released it for return to service. The owner complained to the FAA and the FAA requested the records. The shop correctly refused on the theory that the aircraft was taken before the work was completed.
This case went to the NTSB for further hearing and the Board had no problem with the shop's refusal to return the records. They said:
"The record does not disclose whether the shop had completed all of the engine work it intended to perform or whether they had made all the inspections necessary to return the plane to service before it was taken away (by the owner). In these circumstances we cannot find that the shop violated any duty it may have had to certify the airworthiness
of the aircraft engines . . ."
In this case, the Board made it clear that the non-paying owner will get little help from the FAA on the subject of the shop retaining maintenance records until payment is received.
The shop's position in this case was simply that the job isn't complete until the paperwork is complete, and the paperwork isn't complete until the bill is paid!
Don't forget to file any lien you are entitled to with the FAA registry. This tells the whole world that the aircraft owner owes you money and usually results in your getting paid at least when the aircraft changes hands or a loan is taken out against the aircraft. When in doubt get payment in advance or a substantial deposit up front.
Stephen P. Prentice is an attorney whose practice involves FAA-NTSB issues. He has an Airframe and Powerplant certificate and is an ATP rated pilot. He worked with Western Airlines and the Allison Division of GMC in Latin America, servicing commercial and military overhaul activities and is a USAF veteran.
