BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 293|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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CONSENT
Bill No: SB 293
Author: Padilla (D)
Amended: 3/25/11
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 04/05/11
AYES: Evans, Harman, Blakeslee, Corbett, Leno
SUBJECT : Payment bonds: laborers
SOURCE : California State Council of Laborers
DIGEST : This bill clarifies that, prior to enforcing a
payment bond claim, laborers are exempt from having to
serve a preliminary notice. This bill contains a delayed
operative date of July 1, 2012.
ANALYSIS : 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
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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 clarifies that laborers are exempt from having to
serve preliminary notices prior to enforcing a claim
against a private or public works project payment bond.
Existing law, as enacted by SB 189, becomes operative on
July 1, 2012. (Civil Code Section 8000 et seq.)
This bill also becomes operative on 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 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
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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,
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were perceived not to unduly burden any other group. (See
California Law Revision Commission Memorandum 2009-45,
October 13, 2009.)
This bill clarifies 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 4/6/11)
California State Council of Laborers (source)
Associated General Contractors
Engineering and Utility Contractors Association
ARGUMENTS IN SUPPORT : According to the author's office:
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.
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The California State Council of Laborers state:
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?
RJG:nl 4/6/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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