BILL ANALYSIS �
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2011-2012 Regular Session
SB 293 (Padilla)
As Amended March 25, 2011
Hearing Date: April 5, 2011
Fiscal: No
Urgency: No
TW
SUBJECT
Payment Bonds: Laborers
DESCRIPTION
Existing law exempts laborers from having to serve a preliminary
notice prior to asserting a claim for payment against private or
public works project payment bonds. This bill would clarify
that, prior to enforcing a payment bond claim, laborers are
exempt from having to serve a preliminary notice. This bill
would contain a delayed operative date of July 1, 2012.
BACKGROUND
The California Constitution grants laborers and materials
suppliers a mechanics lien on any property improved by their
labor or material. The mechanics lien law in the Civil Code
generally specifies the obligations, rights, and remedies of
those involved in a construction project. While mechanics liens
are not available on public works of improvement, existing law
provides claimants on public works projects with other statutory
remedies, including stop notices and claims against payment
bonds.
Prior to 1994, preliminary notices were required to be served 90
days after services were commenced in order to assert and
enforce a claim against a public works payment bond. Laborers
were exempt from this notice requirement. AB 3357 (Goldsmith,
Ch. 974, Stats. 1994) reduced the preliminary notice timing
requirement from 90 to 20 days and added these same provisions
for asserting and enforcing a claim against a private works
payment bond. These provisions maintained the preliminary
(more)
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notice exemption for laborers. (See Civ. Code Secs. 3097, 3098,
3242, and 3252.)
Although the preliminary notice statutes specifically exempt
laborers from their provisions, the statutes regarding enforcing
a payment claim did not specifically exempt laborers from having
to serve a preliminary notice. Those statutes contained a
cross-reference to the preliminary notice provisions, but
project owners and contractors maintained that laborers had to
serve a preliminary notice prior to enforcing a payment bond
claim. To clarify this apparent ambiguity, AB 2390 (Torrico,
2010) was amended on August 31, 2010, to provide for the
provisions contained in AB 2216 (Fuentes, 2010), which died on
the Senate Floor. AB 2216, among other things, would have
clarified the laborer exemption to the public works payment bond
claim enforcement provisions. AB 2390 also failed passage on
the Senate Floor.
In 1999, the Assembly Judiciary Committee requested the
California Law Revision Commission (CLRC) to provide a
comprehensive review of mechanics lien law and make suggestions
for possible areas of reform. Following initial efforts to
substantively revise specific provisions of existing law, the
CLRC began studying a general revision of mechanics lien law in
2004. The CLRC believed that the mechanics lien statute had
"become increasingly difficult to use, generating litigation
over confusing provisions, and often leaving participants unsure
of their rights and obligations." Therefore, the CLRC decided
that its primary objective would be to revise the statute in a
way that would make it easier for all practitioners to use and
understand. It placed its highest priority on drafting a
"nonsubstantive reorganization of the existing mechanics lien
statute that would modernize and clarify existing law."
SB 189 (Lowenthal, Ch. 697, Stats. 2010) overhauled the
mechanics lien law and was based upon the February 2008
recommendations of the CLRC resulting from its study of
mechanics lien law. (California Law Revision Commission,
Recommendation, Mechanics Lien Law, February 2008.) In general,
the CLRC included substantive changes to existing law only if
the proposed reform fell into one of two categories: 1)
substantive reforms that were believed to bring about an
overarching improvement to the statute as a whole, thereby
benefiting all affected persons; and 2) substantive reforms
that, although primarily benefiting one group of persons
affected by the statute more than others, were perceived not to
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unduly burden any other group. (See California Law Revision
Commission Memorandum 2009-45, October 13, 2009.)
This bill, sponsored by the California State Council of
Laborers, would clarify the exemption of public or private works
project laborers from the preliminary notice requirements
regarding payment bond enforcement. The provisions of this bill
would become operative on July 1, 2012, consistent with the
provisions of SB 189.
CHANGES TO EXISTING LAW
1.Existing law , the California Constitution, provides that
mechanics, persons furnishing materials, artisans, and
laborers of every class have a lien on the property upon which
they bestowed labor or furnished material for the value of
such labor done and material furnished. (Cal. Const., art.
14, sec. 3.)
Existing law defines laborers, among other things, to mean a
person acting as an employee who performs labor upon or
bestows skill or other necessary services on a work of
improvement. (Civ. Code Sec. 8024.)
Existing law exempts laborers from having to serve preliminary
notices prior to asserting a claim for payment against private
or public works project payment bonds. (Civ. Code Secs. 8200
and 9300.)
Existing law requires preliminary notices to be served in
accordance with the preliminary notice statutes prior to
enforcing a claim against a private or public works project
payment bond. (Civ. Code Secs. 8612 and 9560.)
This bill would clarify that laborers are exempt from having
to serve preliminary notices prior to enforcing a claim
against a private or public works project payment bond.
2. Existing law , as enacted by SB 189, becomes operative on July
1, 2012. (Civil Code Section 8000 et seq.)
This bill would also become operative on July 1, 2012.
COMMENT
1. Stated need for the bill
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The author writes:
A 1959 change to the Civil Code exempted laborers from the
preliminary notice requirement. In 1994, AB 3357 was signed
into law, making changes to provisions regarding preliminary
notice. The law left it ambiguous as to whether laborers are
required to file a preliminary notice before issuing a claim
against a bond.
In a time of economic uncertainty and with foreclosure rates
and unemployment rates at an all-time high, it is important
that this ambiguity in current law be clarified. This bill
would help ensure that laborers be paid promptly by codifying
into law that they are exempt from the twenty day preliminary
notice. Laborers rendering services should be paid on a
timely basis. Moreover, this bill would prevent any future
problems that could arise from the doubt in current law
regarding preliminary notices.
SB 293 would clear up the uncertainty and codify that laborers
are indeed exempt from being required to file a preliminary
notice.
California State Council of Laborers, the sponsor of this bill,
writes: "Since laborers are exempt from the preliminary notice
requirement, the current language is ambiguous as to whether a
new notice requirement is to be added for laborers. . . . This
bill will further clarify the laborers' historic exemption from
the requirement to give a 20-day public works preliminary bond
notice in order to enforce a claim on any payment bond given in
connection with a public work. . . . "
2. Exemption for laborers from preliminary notice requirements
This bill would clarify the exemption for public and private
works project laborers from the preliminary notice requirements
regarding payment bond claims. Under existing law, laborers are
exempt from the preliminary notice requirements on private and
public works projects. (Civ. Code Secs. 8200 and 9300.)
Existing law requires a preliminary notice to be served prior to
enforcement of a payment bond claim in accordance with Civil
Code Sections 8200 (private works) or 9300 (public works).
(Civ. Code Secs. 8612 and 9560.)
California State Council of Laborers, the sponsor of this bill,
states that confusion exists between contractors, project
owners, and laborers on the issue of preliminary notice
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requirements. Because laborers are not expressly exempt from
the preliminary notice requirements under the payment bond
enforcement provisions, contractors and project owners are
denying payment bond claims submitted by laborers. Although SB
189, which this bill amends, is not operative until July 1,
2012, the statutes in effect through July 1, 2012 contain these
same ambiguities. (See Civ. Code Secs. 3097, 3098, 3242, and
3252.) The enforcement provisions require preliminary notice to
be served in accordance with the separate preliminary notice
statutes, and these preliminary notice statutes are
cross-referenced within the enforcement provisions. This bill
would clarify existing law that laborers may enforce a claim
against a payment bond and are not required to serve a
preliminary notice before hand.
Support : Associated General Contractors; Engineering & Utility
Contractors Association
Opposition : None Known
HISTORY
Source : California State Council of Laborers
Related Pending Legislation : None Known
Prior Legislation : See Background.
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