BILL NUMBER: AB 2216 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 11, 2010
INTRODUCED BY Assembly Member Fuentes
FEBRUARY 18, 2010
An act to amend Section 7108.5 of the Business and Professions
Code, to amend Section 3252 of the Civil Code, and to amend Sections
10262 and 10262.5 of the Public Contract Code, relating to works of
improvement.
LEGISLATIVE COUNSEL'S DIGEST
AB 2216, as amended, Fuentes. Works of improvement.
(1) Existing law requires that, for private and public works of
improvement, and in a public works contract, a prime contractor or
subcontractor pay to any subcontractor, not later than 10 days after
receipt of each progress payment, unless otherwise agreed to in
writing, the respective amount allowed the contractor on account of
the work performed by the subcontractors, to the extent of each
contractor's interest therein, as prescribed.
This bill would, instead, require that those amounts be paid not
later than 7 days after receipt of each progress payment.
(2) Existing law requires, with regard to a contract entered into
on or after January 1, 1995, in order to enforce a claim upon any
payment bond given in connection with a public work, that a claimant
give the 20-day public works bond preliminary notice, as provided.
Existing law further authorizes a claimant, if the 20-day public
works preliminary bond notice was not given as prescribed by statute,
to enforce a claim by giving written notice to the surety and the
bond principal, as provided, within 15 days after recordation of a
notice of completion, or if no notice of completion has been
recorded, within 75 days after completion of the work of improvement.
This bill would, instead, with regard to a contract entered into
on or after January 1, 2010, require that the written notice to be
given to the surety and the bond principal be given prior to the
completion, as defined, of the project, or recordation of a notice of
completion. This bill would also require that every project
entity give written notice to each subcontractor, as provided.
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 7108.5 of the Business and Professions Code is
amended to read:
7108.5. (a) This section applies to all private works of
improvement and to all public works of improvement, except where
Section 10262 of the Public Contract Code applies.
(b) Except as provided in subdivision (c), a prime contractor or
subcontractor shall pay to any subcontractor, not later than seven
days of receipt of each progress payment, unless otherwise agreed to
in writing, the respective amounts allowed the contractor on account
of the work performed by the subcontractors, to the extent of each
subcontractor's interest therein. A prime contractor or subcontractor
that fails to comply with this subdivision shall be subject to a
penalty, payable to the subcontractor, of 2 percent of the amount due
per month for every month that payment is not made as required under
this subdivision.
(c) If there is a good faith dispute over all or any portion of
the amount due on a progress payment from the prime contractor or
subcontractor to a subcontractor, the prime contractor or
subcontractor may withhold no more than 150 percent of the disputed
amount.
(d) A violation of this section shall constitute a cause for
disciplinary action.
(e) In any action for the collection of funds wrongfully withheld,
the prevailing party shall be entitled to his or her attorney's fees
and costs.
(f) The sanctions authorized under this section shall be separate
from, and in addition to, all other remedies, either civil,
administrative, or criminal.
SEC. 2. Section 3252 of the Civil Code is amended to read:
3252. (a) With regard to a contract entered into on or after
January 1, 1995, in order to enforce a claim upon any payment bond
given in connection with a public work, a claimant shall give the
20-day public works preliminary bond notice as provided in Section
3098.
(b) With regard to a project completed on or before December 31,
2010, if the 20-day public work preliminary bond notice was not given
as provided in Section 3098, a claimant may enforce a claim by
giving written notice to the surety and the bond principal as
provided in Section 3227 within 15 days after recordation of a notice
of completion. If no notice of completion has been recorded, the
time for giving written notice to the surety and the bond principal
is extended to 75 days after completion of the work of improvement.
(c) Commencing January 1, 2011, and except as provided in
subdivision (b), if the 20-day public works preliminary bond notice
was not given as provided in Section 3098, a claimant may enforce a
claim by giving written notice to the surety and bond principal, as
provided in Section 3227, prior to completion, as defined in Section
3086, of the project, or recordation of a notice of completion ,
whichever is later. Prior to completion or recordation of a notice
of completion, every project entity shall provide written notice of
pending completion to each subcontractor that has provided a 20-day
preliminary bond notice as provided in Section 3098 .
SEC. 3. Section 10262 of the Public Contract Code is amended to
read:
10262. The contractor shall pay to his or her subcontractors,
within seven days of receipt of each progress payment, the respective
amounts allowed the contractor on account of the work performed by
his or her subcontractors, to the extent of each subcontractor's
interest therein. The payments to subcontractors shall be based on
estimates made pursuant to Section 10261. Any diversion by the
contractor of payments received for prosecution of a contract, or
failure to reasonably account for the application or use of the
payments constitutes ground for actions proscribed in Section 10253,
in addition to disciplinary action by the Contractors' State License
Board. The subcontractor shall notify, in writing, the Contractors'
State License Board and the department of any payment less than the
amount or percentage approved for the class or item of work as set
forth in Section 10261.
SEC. 4. Section 10262.5 of the Public Contract Code is amended to
read:
10262.5. (a) Notwithstanding any other provision of law, a prime
contractor or subcontractor shall pay to any subcontractor, not later
than seven days of receipt of each progress payment, the respective
amounts allowed the contractor on account of the work performed by
the subcontractors, to the extent of each subcontractor's interest
therein. In the event that there is a good faith dispute over all or
any portion of the amount due on a progress payment from the prime
contractor or subcontractor to a subcontractor, then the prime
contractor or subcontractor may withhold no more than 150 percent of
the disputed amount.
Any contractor who violates this section shall pay to the
subcontractor a penalty of 2 percent of the amount due per month for
every month that payment is not made. In any action for the
collection of funds wrongfully withheld, the prevailing party shall
be entitled to his or her attorney's fees and costs.
(b) This section shall not be construed to limit or impair any
contractual, administrative, or judicial remedies otherwise available
to a contractor or a subcontractor in the event of a dispute
involving late payment or nonpayment by a contractor or deficient
subcontract performance or nonperformance by a subcontractor.
(c) On or before September 1 of each year, the head of each state
agency shall submit to the Legislature a report on the number and
dollar volume of written complaints received from subcontractors and
prime contractors on contracts in excess of three hundred thousand
dollars ($300,000), relating to violations of this section.