What's happening
This bill requires contractors on public works projects in New York to pay subcontractors upon completion of their work, regardless of owner payment.
Why it matters
Shifts the payment obligation. Contractors must pay subcontractors and material suppliers once their portion of work or materials is complete, rather than waiting to receive payment from the public owner. This reduces subcontractors’ financial risk and improves their cash flow.
Eliminates “pay-when-paid” clauses. The bill explicitly prohibits contractors from making payment to subcontractors contingent on receiving funds from the owner, closing a common loophole that delays payment down the chain.
Provides interest penalties for late payment. If a contractor fails to pay a subcontractor or supplier upon completion, interest begins to accrue immediately, creating a financial incentive for prompt payment and adding protection for smaller businesses.
Removes complex retainage rules. Prior rules on how much contractors could withhold (retainage) from subcontractors are eliminated, simplifying the payment process and potentially accelerating the release of funds to those who have completed work.
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Who cares
Public works contractors
They would have to pay subcontractors and material suppliers upon completion of work or delivery of materials, regardless of whether the owner has paid them, with interest accruing the next day on unpaid amounts.
Public works subcontractors and material suppliers
They would gain payment rights independent of owner payments, while the bill would remove the existing limits on amounts contractors may retain.
Lower-tier subcontractors and material suppliers
The bill would delete the requirement that subcontractors and material suppliers pay their own subcontractors and suppliers within seven calendar days of receiving payment.
Public owners
The bill would delete language expressly disclaiming their obligation to ensure subcontractor payments and any contractual relationship with subcontractors or material suppliers.
Headline styles
Pay Subcontractors On Time
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to governmental operations
- Referred to governmental operations
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
2212
2019-2020 Regular Sessions
IN ASSEMBLY
January 22, 2019
Introduced by M. of A. RICHARDSON -- read once and referred to the Committee on Governmental Operations
AN ACT to amend the state finance law, in relation to requiring contractors on public works projects to pay their subcontractors upon completion of work
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Subdivision 2 of section 139-f of the state finance law, as amended by section 16 of part MM of chapter 57 of the laws of 2008, is amended to read as follows:
2. Payment by contractors to subcontractors. [Within seven calendar days of the receipt of any payment from the public owner] Payment by the contractor to a subcontractor or materialman shall not be contingent upon payment by an owner to the contractor. Upon completion of the performance of work or materials supplied, the contractor shall pay each of his subcontractors and materialmen the [proceeds from the] payment representing the value of the work performed and/or materials furnished by the subcontractor and/or materialman and reflecting the percentage of the subcontractor's work completed or the materialman's material supplied in the requisition approved by the owner and based upon the actual value of the subcontract or purchase order less an amount necessary to satisfy any claims, liens or judgments against the subcontractor or materialman which have not been suitably discharged and less any retained amount as hereafter described. Failure by the contractor to pay any subcontractor or materialman [within seven calendar days of the receipt of any payment from the public owner] upon completion of the performance of work or materials supplied shall result in the commencement and accrual of interest on amounts due to such subcontractor or materialman for the period beginning on the day immediately following the [expiration of such seven calendar day period] completion of the performance of work or materials supplied and ending on the date on
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD04446-01-9
A. 2212 2
which payment is made by the contractor to such subcontractor or materialman. Such interest payment shall be the sole responsibility of the contractor, and shall be paid at the rate of interest in effect on the date payment is made by the contractor.
Notwithstanding any other provision of law to the contrary, interest shall be computed at the rate established in paragraph (b) of subdivision one of section seven hundred fifty-six-b of the general business law. [The contractor shall retain not more than five per centum of each payment to the subcontractor and/or materialman except that the contractor may retain in excess of five per centum but not more than ten per centum of each payment to the subcontractor provided that prior to entering into a subcontract with the contractor, the subcontractor is unable or unwilling to provide a performance bond and a labor and material bond, both in the full amount of the subcontract, at the request of the contractor. However, the contractor shall retain nothing from those payments representing proceeds owed the subcontractor and/or materialman from the public owner's payments to the contractor for the remaining amounts of the contract balance as provided in subdivision one of this section. If the contractor has failed to submit a requisition for payment of the remaining amounts of the contract balance within ninety days of substantial completion as provided in subdivision one of this section, then any clause in the subcontract between the contractor and the subcontractor or materialman which states that payment by the contractor to such subcontractor or materialman is contingent upon payment by the owner to the contractor shall be deemed invalid. Within seven calendar days of the receipt of payment from the contractor, the subcontractor and/or materialman shall pay each of his subcontractors and materialmen in the same manner as the contractor has paid the subcontractor, including interest as herein provided above. Nothing provided herein shall create any obligation on the part of the public owner to pay or to see to the payment of any moneys to any subcontractor or materialman from any contractor nor shall anything provided herein serve to create any relationship in contract or otherwise, implied or expressed, between the subcontractor or materialman and the public owner.]
§ 2. This act shall take effect immediately.
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