Senate Bill S3445

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 3445--A

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                             March 19, 2009
                               ___________

Introduced  by  Sen.  SAVINO -- read twice and ordered printed, and when
  printed to be  committed  to  the  Committee  on  Labor  --  committee
  discharged, bill amended, ordered reprinted as amended and recommitted
  to said committee

AN ACT to amend the labor law and the general business law, in  relation
  to  the prompt payment of employees and contractors engaged in private
  construction projects

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1. Section 196-a of the labor law, as added by chapter 605 of
the laws of 1997, is amended to read as follows:
  S 196-a. Complaints by employees to commissioner.   (A) Any  employee,
or  the  recognized  and certified collective bargaining agent acting on
the employee's behalf,  may  file  with  the  commissioner  a  complaint
regarding  a violation of THIS article [six], article nineteen, or arti-
cle nineteen-A of this chapter for an investigation  of  such  complaint
and  statement  setting  the  appropriate remedy, if any.  Failure of an
employer to keep adequate records, in addition to exposing such employer
to penalties authorized under subdivision one  of  section  two  hundred
eighteen  of  this  chapter,  shall  not operate as a bar to filing of a
complaint by an employee. In such a case the employer in violation shall
bear the burden of proving that the complaining employee was paid wages,
benefits and wage supplements.
  (B) ANY EMPLOYEE, OR THE RECOGNIZED AND CERTIFIED COLLECTIVE  BARGAIN-
ING AGENT ACTING ON THE EMPLOYEE'S BEHALF, CONTRACTOR, OR THE RECOGNIZED
AND  CERTIFIED LABOR ORGANIZATION WITH WHICH THE CONTRACTOR HAS EXECUTED
A COLLECTIVE BARGAINING AGREEMENT COVERING WAGES, BENEFITS  AND  SUPPLE-
MENTS,  MAY FILE WITH THE COMMISSIONER A COMPLAINT REGARDING A VIOLATION
OF OR THE POTENTIAL FOR THE IMMINENT VIOLATION OF, THIS ARTICLE, ARTICLE
NINETEEN, OR ARTICLE NINETEEN-A OF THIS CHAPTER  OCCASIONED  BY  ANOTHER
PERSON,  CORPORATION, EMPLOYER OR ENTITIES IN VIOLATION OF ARTICLE THIR-

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10170-05-9
              

S. 3445--A                          2

TY-FIVE-E OF THE GENERAL BUSINESS  LAW  FOR  AN  INVESTIGATION  OF  SUCH
COMPLAINT AND STATEMENT SETTING THE APPROPRIATE REMEDY, IF ANY.
  S  2.  Subdivision  1  of  section 756 of the general business law, as
added by chapter 127 of the laws of 2002, is amended to read as follows:
  1. "Construction contract" means a written or oral agreement  for  the
construction, reconstruction, alteration, maintenance, moving or demoli-
tion of any building, structure or improvement, or relating to the exca-
vation  of  or  other  development or improvement to land, and where the
aggregate  cost  of  the  construction  project  including  all   labor,
services,  materials  and  equipment  to be furnished, equals or exceeds
[two hundred fifty thousand dollars] ONE HUNDRED FIFTY THOUSAND DOLLARS.
For the purposes of this  article  a  construction  contract  shall  not
include  any  such  contract  made  and awarded by the state, any public
department, any public benefit corporation, any  public  corporation  or
official  thereof,  or  a  municipal corporation or official thereof for
construction, reconstruction, alteration, repair, maintenance, moving or
demolition of any public works project nor any contract with a  contrac-
tor or subcontractor which is part of such project; or any such contract
the  purpose  of  which is the construction, reconstruction, alteration,
repair, maintenance, moving or demolition of an individual one,  two  or
three  family residential dwelling or a residential tract development of
one hundred [fifty] or less one or two family dwellings, or any residen-
tial construction project where the aggregate size of  such  project  is
[nine  thousand]  FOUR THOUSAND FIVE HUNDRED square feet or less, or any
residential project of fewer than [one hundred fifty] SEVENTY-FIVE units
which receives financial assistance from  the  federal  government,  the
state  or  a municipal entity designed for households earning an average
of one hundred twenty-five percent of the housing and urban  development
agency area median income.
  S  3.  Section  756-a of the general business law, as added by chapter
127 of the laws of 2002, is amended to read as follows:
  S 756-a. Obligations. [Except as otherwise provided in  this  article,
the  terms and conditions of a construction contract shall supersede the
provisions of this article and govern the conduct of the parties  there-
to.]
  1.  Billing  cycle.  The  [parties  to a construction contract may, by
mutual agreement, establish  a  billing  cycle  for  the  submission  of
invoices   requesting   payment   for   work  performed  pursuant  to  a
construction contract. In the absence of an agreement by the parties  as
to  the  billing  cycle,  the] billing cycle shall be the calendar month
within which the work is performed.
  2. Invoices. (a) A contractor shall be entitled to invoice  the  owner
for interim payments at the end of the billing cycle. A contractor shall
be  entitled  to  submit  a  final  invoice for payment in full upon the
performance of all the contractor's obligation under the contract.
  (i) Upon  delivery  of  an  invoice  and  all  contractually  required
documentation,  an owner shall approve or disapprove all or a portion of
such invoice within twelve business days.  Owner  approval  of  invoices
shall  not  be  unreasonably  withheld  nor shall an owner, in bad faith
disapprove all or a portion of an  invoice.  If  an  owner  declines  to
approve  an  invoice  or  a portion thereof, it must prepare and issue a
written statement describing those items in the  invoice  that  are  not
approved.  An  owner  may decline to approve an invoice or portion of an
invoice for:
  (1) Unsatisfactory or disputed job progress;
  (2) Defective construction work or material not remedied;

S. 3445--A                          3

  (3) Disputed work materials;
  (4)   Failure   to  comply  with  other  material  provisions  of  the
construction contract;
  (5) Failure of the  contractor  to  make  timely  payments  for  labor
including  collectively  bargained fringe benefit contributions, payroll
taxes and insurance, equipment and materials, damage to  the  owner,  or
reasonable  evidence  that the construction contract cannot be completed
for the unpaid balance of the construction contract sum; or
  (6) Failure of the owner's architect to certify payment for any or all
of the reasons set forth in this section so  long  as  the  reasons  are
included in the owner's written statement of disapproval.
  (ii)  Upon  delivery  of  an  invoice  and  all contractually required
documentation, a contractor or subcontractor shall approve or disapprove
all or a portion of such invoice within twelve business days. Contractor
and subcontractor approval of invoices shall not be  unreasonably  with-
held  nor  shall a contractor or subcontractor, in bad faith, disapprove
all or a portion of an invoice. Nothing in this section  shall  prohibit
the contractor or subcontractor, at the time of application to the owner
or  contractor,  from  withholding  such  application  to  the  owner or
contractor for payment to the subcontractor or material supplier for:
  (1) Unsatisfactory or disputed job progress;
  (2) Defective construction work or material not remedied;
  (3) Disputed work;
  (4)  Failure  to  comply  with  other  material  provisions   of   the
construction contract; or
  (5)  Failure  of  the  subcontractor to make timely payments for labor
including collectively bargained fringe benefit  contributions;  payroll
taxes  and  insurance,  equipment and materials, damage to contractor or
another subcontractor or material supplier, or reasonable evidence  that
the  subcontract  cannot  be  completed  for  the  unpaid balance of the
subcontract sum.
  (b) Nothing in this subdivision shall authorize the withholding of  an
application  to the owner or contractor for the payment to a subcontrac-
tor or material supplier when due to a delay  in  job  progress  by  the
owner,  contractor  or  another subcontractor or material supplier other
than the applicant or applicant's subcontractor or material supplier.
  3. Payment. (a) The owner's payment  of  a  contractor's  interim  and
final  invoices shall be made on the basis of a duly approved invoice of
work performed and the material supplied during the billing cycle.
  (i) Unless the provisions of this article provide otherwise, the owner
shall pay the contractor strictly in accordance with the  terms  of  the
construction contract.
  (ii)  [Unless  otherwise agreed to by the parties, payment] PAYMENT of
an interim or final invoice shall be due from the owner not  later  than
thirty days after approval of the invoice.
  (iii)  If  payment  by  the  owner is contingent upon lender approval,
payment of a contractor's interim or final invoice or the amount of loan
proceeds disbursed by the lender for payment of the contractor's interim
or final invoice shall be due from the owner seven days after receipt by
the owner of good funds except where the  provisions  of  section  seven
hundred fifty-six-d of this article applies.
  (iv) An owner may withhold from an interim payment only an amount that
is sufficient to pay the costs and expenses the owner reasonably expects
to  incur  in order to cure the defect or correct any items set forth in
writing pursuant to subparagraph (i) of paragraph (a) of subdivision two
of this section, or in the alternative, to withhold  an  amount  not  to

S. 3445--A                          4

exceed  the  line item amount appearing in the agreed schedule of values
together with any change orders, additions  and/or  deletions,  if  such
schedule  has  been previously submitted, and/or an amount sufficient to
cover  liquidated  damages  as established in an agreed upon schedule in
the construction contract.
  (b) The contractor or  subcontractor's  payment  of  subcontractor  or
material  supplier's interim or final invoice shall be made on the basis
of a duly approved invoice of the work performed and materials  supplied
during the billing cycle.
  (i)  Unless  the  provisions  of  this  article provide otherwise, the
contractor or subcontractor shall  pay  the  subcontractor  strictly  in
accordance with the terms of the construction contract. Performance by a
subcontractor  in  accordance  with the provisions of its contract shall
entitle it to payment from the party with which it contracts.   Notwith-
standing  this  article,  where  a contractor enters into a construction
contract with a subcontractor  as  agent  for  a  disclosed  owner,  the
payment obligation shall flow directly from the disclosed owner as prin-
cipal to the subcontractor and through the agent.
  (ii)  When  a  subcontractor  has  performed  in  accordance  with the
provisions of its construction contract, the contractor shall pay to the
subcontractor, and each subcontractor shall in turn pay to  its  subcon-
tractors,  the  full  or proportionate amount of funds received from the
owner for each subcontractor's work  and  materials  based  on  work  or
services  provided  under  the  construction  contract, seven days after
receipt of good funds for each interim or final  payment,  provided  all
contractually required documentation and waivers are received.
  (iii) A contractor or subcontractor may withhold amounts received from
an owner in connection with an interim payment due to a subcontractor or
material  supplier  only such sums that are sufficient to pay the direct
expenses as are reasonable to correct deficiencies  identified  pursuant
to  subparagraph  (ii)  of  paragraph  (a)  of  subdivision  two of this
section, or in the alternative, to withhold an amount not to exceed  the
line  item  amount  appearing in the agreed schedule of values, together
with any change order, additions or deletions, if such schedule has been
previously submitted[, and/or an amount sufficient to  cover  liquidated
damages  as  established  in an agreed upon schedule in the construction
contract].
  (iv) If a contractor, after submitting an invoice to an owner under  a
construction contract, but before making a payment to a subcontractor or
material   supplier  for  the  subcontractor's  or  material  supplier's
performance covered by such invoice, discovers that all or a portion  of
the  payment  otherwise due to the subcontractor or material supplier is
subject to withholding from the subcontractor or  material  supplier  in
accordance  with  the construction contract and the conditions set forth
in subparagraph (ii)  of  paragraph  (a)  of  subdivision  two  of  this
section, then the contractor shall:
  (1)  As soon as practicable upon ascertaining the cause giving rise to
a withholding, but prior to the due date for a subcontractor or material
supplier payment, furnish to the subcontractor or material supplier  and
the  owner written notice of withholding specifying conditions for with-
holding payment and identifying the amount to be withheld;
  (2) Reduce the subcontractor's or material supplier's interim  payment
by  an  amount not to exceed the amount specified in the notice of with-
holding; and
  (3) Pay the subcontractor or material supplier amounts withheld within
seven days after correction of the identified subcontractor or  material

S. 3445--A                          5

supplier  performance  deficiency and receipt of all required documenta-
tion and waivers, unless the funds [therefore] THEREFOR must be obtained
from the owner's next interim payment due to a reduction in the contrac-
tor's  billing  directly  resulting from the subcontractor's or material
supplier's performance deficiency identified in the notice of  withhold-
ing.
  (c)  A  written notice of any withholding under this subdivision shall
be issued to a subcontractor or material supplier specifying:
  (i) The amount to be withheld;
  (ii) The specific causes  for  withholding  under  the  terms  of  the
construction contract and pursuant to this subdivision;
  (iii)  The remedial actions necessary to be taken by the subcontractor
or material supplier in order to receive payments of the  amounts  with-
held; and
  (iv) The documentation and waivers required.
  4.  Notice.  A contractor or subcontractor shall disclose to a subcon-
tractor, at the time the construction subcontract is entered  into,  the
due date for receipt of payments to the contractor or subcontractor from
the  owner  or  the  contractor  as  the case may be. If a contractor or
subcontractor fails to accurately disclose the due date to a subcontrac-
tor, the contractor or subcontractor  shall  be  obligated  to  pay  the
subcontractor  as  though  the due dates established in paragraph (a) of
subdivision three of this section were met by the  owner.  In  addition,
upon  written request of a subcontractor, the owner shall provide notice
to such subcontractor within five days of making any  interim  or  final
payment  to  the contractor. The subcontractor's request shall remain in
effect for the duration of the subcontractor's work on the project.
  S 4.  Section 756-b of the general business law, as added  by  chapter
127 of the laws of 2002, is amended to read as follows:
  S  756-b.  Remedies.  1.  (a)  If  any  interim  or final payment to a
contractor is delayed beyond the due date established in  paragraph  (a)
of  subdivision three of section seven hundred fifty-six-a of this arti-
cle, the owner shall pay the contractor interest beginning on  the  next
day  at  the rate of one percent per month or fraction of a month on the
unpaid balance, or at a higher rate  consistent  with  the  construction
contract.
  (b)  [Notwithstanding  any  contrary  agreement, if] IF any interim or
final payment to a subcontractor is delayed beyond the due  date  estab-
lished  in  paragraph  (b) of subdivision three of section seven hundred
fifty-six-a of this article the contractor or  subcontractor  shall  pay
its  subcontractor  interest,  beginning on the next day, at the rate of
one percent a month or fraction of a month on the unpaid balance, or  at
a higher rate consistent with the construction contract.
  2. (a) (i) If an owner fails to approve or disapprove an invoice with-
in  the  time limits established in subparagraph (i) of paragraph (a) of
subdivision two of section seven hundred fifty-six-a of this article, or
to pay the contractor the undisputed  invoice  amount  within  the  time
limits  provided  by paragraph (a) of subdivision three of section seven
hundred fifty-six-a of this article, the contractor may suspend contrac-
tually required performance, only  after  providing  the  owner  written
notice  and  an opportunity to cure consistent with subparagraph (ii) of
this paragraph.
  (ii) A contractor intending to suspend performance on the construction
contract for failure of the owner to make timely payments  or  approvals
within  the  time limits provided by this article must provide the owner

S. 3445--A                          6

written notice at  least  ten  calendar  days  before  the  contractor's
intended suspension. Such notice shall:
  (A)  inform the owner that payment for undisputed invoice amounts have
not been received; and
  (B) state the intent of the  contractor  to  suspend  performance  for
non-payment.
If  after  the tenth calendar day following written notice the owner has
not cured the deficiency, the contractor may suspend performance.
  (iii) A contractor shall not be deemed in breach of  the  construction
contract for suspending performance pursuant to this section.
  (b)(i)  A subcontractor may suspend contractually required performance
if any or all of the occurrences outlined in clauses (A), (B) and (C) of
this subparagraph occur and only after providing written notice  and  an
opportunity to cure consistent with subparagraph (ii) of this paragraph:
  (A)  If an owner fails to make timely payments for undisputed invoices
within the time limits established by subdivision three of section seven
hundred fifty-six-a of this article for the subcontractor's work and the
contractor also fails to pay the subcontractor for the approved work;
  (B) If an owner pays the contractor within the time limits established
by subdivision three of section seven hundred fifty-six-a of this  arti-
cle  for undisputed invoices for work performed by the subcontractor but
the contractor fails to make payment to  the  subcontractor  within  the
time frames established by this article for the subcontractor's work;
  (C)  If  an owner fails to approve or disapprove a portion of contrac-
tor's invoice for work performed by the subcontractor  within  the  time
limits  established in paragraph (a) of subdivision two of section seven
hundred fifty-six-a of this article;
  (D) If a contractor or subcontractor fails to approve or disapprove  a
subcontractor's  invoice within the time limits established in paragraph
(b) of subdivision three of section seven hundred  fifty-six-a  of  this
article; or
  (E)  If an owner fails to approve portions of the contractors' billing
for work performed by the subcontractor within the  time  limits  estab-
lished  by  this  article  and  the reasons for such failure are not the
fault of or directly related to the subcontractor's work.
  (ii) A subcontractor intending to suspend performance for  failure  to
receive  timely  payments within the time limits established pursuant to
this article must provide both the  owner  and  the  contractor  written
notice  at  least  ten calendar days before the subcontractor's intended
suspension. Such notice shall:
  (A) inform the owner and the contractor that  payment  for  undisputed
billing amounts have not been received; and
  (B)  state  the  intent  of  the contractor to suspend performance for
non-payment.
  If after the tenth calendar day following written  notice  either  the
owner  or the contractor has not cured the deficiency, the subcontractor
may suspend performance AND/OR ATTEMPT TO  RESOLVE  IN  COMPLIANCE  WITH
SUBDIVISION THREE OF THIS SECTION.
  (iii)   A   subcontractor  shall  not  be  deemed  in  breach  of  the
construction  contract  for  suspending  performance  pursuant  to  this
section.
  (iv)  (A)  A  contractor or subcontractor that suspends performance as
provided in this section shall not be required to furnish further labor,
materials or services until the contractor or subcontractor is paid  the
undisputed  invoice amount at the time period for completion as provided
in the construction contract, OR A FINAL DETERMINATION HAS BEEN MADE  IN

S. 3445--A                          7

COMPLIANCE  WITH  SUBDIVISION  THREE  OF THIS SECTION AND COMPLIED WITH.
All of the time frames established within [the construction contract  of
a  contractor  or  subcontractor] THIS SECTION shall be extended for the
length  of  time performance was suspended. Payment of documented actual
costs incurred for re-mobilization resulting from  suspension  shall  be
negotiated between the parties.
  (B) In the event of suspension of a construction contract, as provided
in this article, all materials, equipment, tools, construction equipment
and  machinery  located at the job site shall remain the sole and exclu-
sive property of the contractor or subcontractor and  shall  be  removed
from  the  job  site,  if necessary, within a reasonable period of time.
Access to the contractor's or  subcontractor's  property  shall  not  be
unreasonably withheld.
  3. IT IS THE POLICY AND PURPOSE OF THIS ARTICLE TO EXPEDITE PAYMENT OF
ALL  MONIES  OWED  TO THOSE WHO PERFORM CONTRACTING SERVICES PURSUANT TO
CONSTRUCTION  CONTRACTS.  (A)  UPON  RECEIPT  OF  WRITTEN  NOTICE  OF  A
COMPLAINT (I) THAT AN OWNER HAS VIOLATED THE PROVISIONS OF THIS ARTICLE;
(II)  THAT  A  CONTRACTOR  HAS  VIOLATED THE PROVISIONS OF THIS ARTICLE;
(III) WHERE A  CONTRACTOR  ALLEGES  A  SUBCONTRACTOR  HAS  VIOLATED  THE
PROVISIONS  OF  THIS  ARTICLE;  (IV)  WHERE  A  SUBCONTRACTOR  ALLEGES A
CONTRACTOR HAS VIOLATED THE PROVISIONS OF  THIS  ARTICLE;  (V)  WHERE  A
SUBCONTRACTOR  ALLEGES  THAT  ANOTHER  SUBCONTRACTOR  HAS  VIOLATED  THE
PROVISIONS OF THIS ARTICLE; (VI) WHERE  A  CONTRACTOR  OR  SUBCONTRACTOR
ALLEGES A MATERIAL SUPPLIER HAS VIOLATED THE PROVISIONS OF THIS ARTICLE;
OR (VII) WHERE A MATERIAL SUPPLIER ALLEGES A CONTRACTOR OR SUBCONTRACTOR
HAS  VIOLATED  THE PROVISIONS OF THIS ARTICLE; THE PARTIES SHALL ATTEMPT
TO RESOLVE THE MATTER GIVING RISE TO SUCH COMPLAINT.
  (B) THE WRITTEN NOTICE REQUIRED UNDER THIS SECTION SHALL BE  DELIVERED
AT  OR SENT BY ANY MEANS THAT PROVIDES WRITTEN, THIRD-PARTY VERIFICATION
OF DELIVERY TO THE LAST BUSINESS  ADDRESS  KNOWN  TO  THE  PARTY  GIVING
NOTICE.
  (C)  IF  EFFORTS  TO  RESOLVE  SUCH  MATTER TO THE SATISFACTION OF ALL
PARTIES ARE UNSUCCESSFUL, THE AGGRIEVED  PARTY  MAY  REFER  THE  MATTER,
WITHIN  THIRTY  DAYS  OF  THE  RECEIPT OF THE COMPLAINT, TO THE AMERICAN
ARBITRATION ASSOCIATION FOR AN EXPEDITED  ARBITRATION  PURSUANT  TO  THE
RULES OF THE AMERICAN ARBITRATION ASSOCIATION.
  (D)  UPON  CONCLUSION  OF  THE ARBITRATION PROCEEDINGS, THE ARBITRATOR
SHALL SUBMIT TO THE PARTIES HIS OR HER OPINION AND AWARD  REGARDING  THE
ALLEGED VIOLATION.
  (E) THE AWARD OF THE ARBITRATOR SHALL BE FINAL AND MAY ONLY BE VACATED
OR  MODIFIED  AS  PROVIDED IN ARTICLE SEVENTY-FIVE OF THE CIVIL PRACTICE
LAW AND RULES UPON AN APPLICATION  MADE  WITHIN  THE  TIME  PROVIDED  BY
SECTION SEVENTY-FIVE HUNDRED TWO OF THE CIVIL PRACTICE LAW AND RULES.
  S  5.  Section  757 of the general business law is amended by adding a
new subdivision 3 to read as follows:
  3. A PROVISION, COVENANT, CLAUSE OR UNDERSTANDING IN, COLLATERAL TO OR
AFFECTING A CONSTRUCTION CONTRACT STATING THAT ARBITRATION  IS  UNAVAIL-
ABLE TO ONE OR BOTH PARTIES.
  S  6.  This  act  shall  take  effect  immediately  and shall apply to
construction contracts  entered  into  after  such  date,  except  those
contracts  entered  into  as  part of a construction project for which a
permit or permits have been issued and work has begun on  such  projects
prior to the effective date of this act.

                            
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                 3445--C
    Cal. No. 143

                       2009-2010 Regular Sessions

                            I N  S E N A T E

                             March 19, 2009
                               ___________

Introduced  by  Sen.  SAVINO -- read twice and ordered printed, and when
  printed to be  committed  to  the  Committee  on  Labor  --  committee
  discharged, bill amended, ordered reprinted as amended and recommitted
  to  said  committee -- reported favorably from said committee, ordered
  to first and second report, ordered to a third  reading,  amended  and
  ordered  reprinted,  retaining its place in the order of third reading
  -- again amended and ordered reprinted, retaining  its  place  in  the
  order of third reading

AN ACT to amend the labor law and the general business law, in  relation
  to  the prompt payment of employees and contractors engaged in private
  construction projects

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1. Section 196-a of the labor law, as added by chapter 605 of
the laws of 1997, is amended to read as follows:
  S 196-a. Complaints by employees to commissioner.   (A) Any  employee,
or  the  recognized  and certified collective bargaining agent acting on
the employee's behalf,  may  file  with  the  commissioner  a  complaint
regarding  a violation of THIS article [six], article nineteen, or arti-
cle nineteen-A of this chapter for an investigation  of  such  complaint
and  statement  setting  the  appropriate remedy, if any.  Failure of an
employer to keep adequate records, in addition to exposing such employer
to penalties authorized under subdivision one  of  section  two  hundred
eighteen  of  this  chapter,  shall  not operate as a bar to filing of a
complaint by an employee. In such a case the employer in violation shall
bear the burden of proving that the complaining employee was paid wages,
benefits and wage supplements.
  (B) ANY EMPLOYEE, OR THE RECOGNIZED AND CERTIFIED COLLECTIVE  BARGAIN-
ING AGENT ACTING ON THE EMPLOYEE'S BEHALF, CONTRACTOR, OR THE RECOGNIZED
AND  CERTIFIED LABOR ORGANIZATION WITH WHICH THE CONTRACTOR HAS EXECUTED
A COLLECTIVE BARGAINING AGREEMENT COVERING WAGES, BENEFITS  AND  SUPPLE-

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
              

                                                           LBD10170-11-9

S. 3445--C                          2

MENTS,  MAY FILE WITH THE COMMISSIONER A COMPLAINT REGARDING A VIOLATION
OF OR THE POTENTIAL FOR THE IMMINENT VIOLATION OF THIS ARTICLE OR  ARTI-
CLE  NINETEEN OF THIS CHAPTER OCCASIONED BY ANOTHER PERSON, CORPORATION,
EMPLOYER OR ENTITIES IN VIOLATION OF ARTICLE THIRTY-FIVE-E OF THE GENER-
AL  BUSINESS  LAW  FOR  AN INVESTIGATION OF SUCH COMPLAINT AND STATEMENT
SETTING THE APPROPRIATE REMEDY, IF ANY.
  S 2. Subdivision 1 of section 756 of  the  general  business  law,  as
added by chapter 127 of the laws of 2002, is amended to read as follows:
  1.  "Construction  contract" means a written or oral agreement for the
construction, reconstruction, alteration, maintenance, moving or demoli-
tion of any building, structure or improvement, or relating to the exca-
vation of or other development or improvement to  land,  and  where  the
aggregate   cost  of  the  construction  project  including  all  labor,
services, materials and equipment to be  furnished,  equals  or  exceeds
[two hundred fifty thousand dollars] ONE HUNDRED FIFTY THOUSAND DOLLARS.
For  the  purposes  of  this  article  a construction contract shall not
include any such contract made and awarded  by  the  state,  any  public
department,  any  public  benefit corporation, any public corporation or
official thereof, or a municipal corporation  or  official  thereof  for
construction, reconstruction, alteration, repair, maintenance, moving or
demolition  of any public works project nor any contract with a contrac-
tor or subcontractor which is part of such project; or any such contract
the purpose of which is the  construction,  reconstruction,  alteration,
repair,  maintenance,  moving or demolition of an individual one, two or
three family residential dwelling or a residential tract development  of
one hundred [fifty] or less one or two family dwellings, or any residen-
tial  construction  project  where the aggregate size of such project is
[nine thousand] FOUR THOUSAND FIVE HUNDRED square feet or less,  or  any
residential project of fewer than [one hundred fifty] SEVENTY-FIVE units
which  receives  financial  assistance  from the federal government, the
state or a municipal entity designed for households earning  an  average
of  one hundred twenty-five percent of the housing and urban development
agency area median income.
  S 3. Section 756-a of the general business law, as  added  by  chapter
127 of the laws of 2002, is amended to read as follows:
  S  756-a. Obligations. IT IS THE POLICY AND PURPOSE OF THIS ARTICLE TO
EXPEDITE PAYMENT OF ALL MONIES OWED TO  THOSE  WHO  PERFORM  CONTRACTING
SERVICES   PURSUANT  TO  CONSTRUCTION  CONTRACTS.  Except  as  otherwise
provided in this article, the terms and  conditions  of  a  construction
contract  shall  supersede the provisions of this article and govern the
conduct of the parties thereto.
  1. Billing cycle. The parties to a construction contract may, by mutu-
al agreement, establish a billing cycle for the submission  of  invoices
requesting  payment  for  work  performed  pursuant  to  a  construction
contract. In the absence of an agreement by the parties as to the  bill-
ing  cycle,  the  billing cycle shall be the calendar month within which
the work is performed.
  2. Invoices. (a) A contractor shall be entitled to invoice  the  owner
for interim payments at the end of the billing cycle. A contractor shall
be  entitled  to  submit  a  final  invoice for payment in full upon the
performance of all the contractor's obligation under the contract.
  (i) Upon  delivery  of  an  invoice  and  all  contractually  required
documentation,  an owner shall approve or disapprove all or a portion of
such invoice within twelve business days.  Owner  approval  of  invoices
shall  not  be  unreasonably  withheld  nor shall an owner, in bad faith
disapprove all or a portion of an  invoice.  If  an  owner  declines  to

S. 3445--C                          3

approve  an  invoice  or  a portion thereof, it must prepare and issue a
written statement describing those items in the  invoice  that  are  not
approved.  An  owner  may decline to approve an invoice or portion of an
invoice for:
  (1) Unsatisfactory or disputed job progress;
  (2) Defective construction work or material not remedied;
  (3) Disputed work materials;
  (4)   Failure   to  comply  with  other  material  provisions  of  the
construction contract;
  (5) Failure of the  contractor  to  make  timely  payments  for  labor
including  collectively  bargained fringe benefit contributions, payroll
taxes and insurance, equipment and materials, damage to  the  owner,  or
reasonable  evidence  that the construction contract cannot be completed
for the unpaid balance of the construction contract sum; or
  (6) Failure of the owner's architect to certify payment for any or all
of the reasons set forth in this section so  long  as  the  reasons  are
included in the owner's written statement of disapproval.
  (ii)  Upon  delivery  of  an  invoice  and  all contractually required
documentation, a contractor or subcontractor shall approve or disapprove
all or a portion of such invoice within twelve business days. Contractor
and subcontractor approval of invoices shall not be  unreasonably  with-
held  nor  shall a contractor or subcontractor, in bad faith, disapprove
all or a portion of an invoice. Nothing in this section  shall  prohibit
the contractor or subcontractor, at the time of application to the owner
or  contractor,  from  withholding  such  application  to  the  owner or
contractor for payment to the subcontractor or material supplier for:
  (1) Unsatisfactory or disputed job progress;
  (2) Defective construction work or material not remedied;
  (3) Disputed work;
  (4)  Failure  to  comply  with  other  material  provisions   of   the
construction contract; or
  (5)  Failure  of  the  subcontractor to make timely payments for labor
including collectively bargained fringe benefit  contributions;  payroll
taxes  and  insurance,  equipment and materials, damage to contractor or
another subcontractor or material supplier, or reasonable evidence  that
the  subcontract  cannot  be  completed  for  the  unpaid balance of the
subcontract sum.
  (b) Nothing in this subdivision shall authorize the withholding of  an
application  to the owner or contractor for the payment to a subcontrac-
tor or material supplier when due to a delay  in  job  progress  by  the
owner,  contractor  or  another subcontractor or material supplier other
than the applicant or applicant's subcontractor or material supplier.
  3. Payment. (a) The owner's payment  of  a  contractor's  interim  and
final  invoices shall be made on the basis of a duly approved invoice of
work performed and the material supplied during the billing cycle.
  (i) Unless the provisions of this article provide otherwise, the owner
shall pay the contractor strictly in accordance with the  terms  of  the
construction contract.
  (ii)  [Unless  otherwise agreed to by the parties, payment] PAYMENT of
an interim or final invoice shall be due from the owner not  later  than
thirty days after approval of the invoice.
  (iii)  If  payment  by  the  owner is contingent upon lender approval,
payment of a contractor's interim or final invoice or the amount of loan
proceeds disbursed by the lender for payment of the contractor's interim
or final invoice shall be due from the owner seven days after receipt by

S. 3445--C                          4

the owner of good funds except where the  provisions  of  section  seven
hundred fifty-six-d of this article applies.
  (iv) An owner may withhold from an interim payment only an amount that
is sufficient to pay the costs and expenses the owner reasonably expects
to  incur  in order to cure the defect or correct any items set forth in
writing pursuant to subparagraph (i) of paragraph (a) of subdivision two
of this section, or in the alternative, to withhold  an  amount  not  to
exceed  the  line item amount appearing in the agreed schedule of values
together with any change orders, additions  and/or  deletions,  if  such
schedule  has  been previously submitted, and/or an amount sufficient to
cover liquidated damages as established in an agreed  upon  schedule  in
the construction contract.
  (b)  The  contractor  or  subcontractor's  payment of subcontractor or
material supplier's interim or final invoice shall be made on the  basis
of  a duly approved invoice of the work performed and materials supplied
during the billing cycle.
  (i) Unless the provisions  of  this  article  provide  otherwise,  the
contractor  or  subcontractor  shall  pay  the subcontractor strictly in
accordance with the terms of the construction contract. Performance by a
subcontractor in accordance with the provisions of  its  contract  shall
entitle  it to payment from the party with which it contracts.  Notwith-
standing this article, where a contractor  enters  into  a  construction
contract  with  a  subcontractor  as  agent  for  a disclosed owner, the
payment obligation shall flow directly from the disclosed owner as prin-
cipal to the subcontractor and through the agent.
  (ii) When  a  subcontractor  has  performed  in  accordance  with  the
provisions of its construction contract, the contractor shall pay to the
subcontractor,  and  each subcontractor shall in turn pay to its subcon-
tractors, the full or proportionate amount of funds  received  from  the
owner  for  each  subcontractor's  work  and  materials based on work or
services provided under the  construction  contract,  seven  days  after
receipt  of  good  funds for each interim or final payment, provided all
contractually required documentation and waivers are received.
  (iii) A contractor or subcontractor may withhold amounts received from
an owner in connection with an interim payment due to a subcontractor or
material supplier only such sums that are sufficient to pay  the  direct
expenses  as  are reasonable to correct deficiencies identified pursuant
to subparagraph (ii)  of  paragraph  (a)  of  subdivision  two  of  this
section,  or in the alternative, to withhold an amount not to exceed the
line item amount appearing in the agreed schedule  of  values,  together
with any change order, additions or deletions, if such schedule has been
previously  submitted[,  and/or an amount sufficient to cover liquidated
damages as established in an agreed upon schedule  in  the  construction
contract].
  (iv)  If a contractor, after submitting an invoice to an owner under a
construction contract, but before making a payment to a subcontractor or
material  supplier  for  the  subcontractor's  or  material   supplier's
performance  covered by such invoice, discovers that all or a portion of
the payment otherwise due to the subcontractor or material  supplier  is
subject  to  withholding  from the subcontractor or material supplier in
accordance with the construction contract and the conditions  set  forth
in  subparagraph  (ii)  of  paragraph  (a)  of  subdivision  two of this
section, then the contractor shall:
  (1) As soon as practicable upon ascertaining the cause giving rise  to
a withholding, but prior to the due date for a subcontractor or material
supplier  payment, furnish to the subcontractor or material supplier and

S. 3445--C                          5

the owner written notice of withholding specifying conditions for  with-
holding payment and identifying the amount to be withheld;
  (2)  Reduce the subcontractor's or material supplier's interim payment
by an amount not to exceed the amount specified in the notice  of  with-
holding; and
  (3) Pay the subcontractor or material supplier amounts withheld within
seven  days after correction of the identified subcontractor or material
supplier performance deficiency and receipt of all  required  documenta-
tion and waivers, unless the funds [therefore] THEREFOR must be obtained
from the owner's next interim payment due to a reduction in the contrac-
tor's  billing  directly  resulting from the subcontractor's or material
supplier's performance deficiency identified in the notice of  withhold-
ing.
  (c)  A  written notice of any withholding under this subdivision shall
be issued to a subcontractor or material supplier specifying:
  (i) The amount to be withheld;
  (ii) The specific causes  for  withholding  under  the  terms  of  the
construction contract and pursuant to this subdivision;
  (iii)  The remedial actions necessary to be taken by the subcontractor
or material supplier in order to receive payments of the  amounts  with-
held; and
  (iv) The documentation and waivers required.
  4.  Notice.  A contractor or subcontractor shall disclose to a subcon-
tractor, at the time the construction subcontract is entered  into,  the
due date for receipt of payments to the contractor or subcontractor from
the  owner  or  the  contractor  as  the case may be. If a contractor or
subcontractor fails to accurately disclose the due date to a subcontrac-
tor, the contractor or subcontractor  shall  be  obligated  to  pay  the
subcontractor  as  though  the due dates established in paragraph (a) of
subdivision three of this section were met by the  owner.  In  addition,
upon  written request of a subcontractor, the owner shall provide notice
to such subcontractor within five days of making any  interim  or  final
payment  to  the contractor. The subcontractor's request shall remain in
effect for the duration of the subcontractor's work on the project.
  S 4.  Section 756-b of the general business law, as added  by  chapter
127 of the laws of 2002, is amended to read as follows:
  S  756-b.  Remedies.  1.  (a)  If  any  interim  or final payment to a
contractor is delayed beyond the due date established in  paragraph  (a)
of  subdivision three of section seven hundred fifty-six-a of this arti-
cle, the owner shall pay the contractor interest beginning on  the  next
day  at  the rate of one percent per month or fraction of a month on the
unpaid balance, or at a higher rate  consistent  with  the  construction
contract.
  (b)  Notwithstanding  any  contrary agreement, if any interim or final
payment to a subcontractor is delayed beyond the due date established in
paragraph (b) of subdivision three of section seven hundred  fifty-six-a
of  this  article  the contractor or subcontractor shall pay its subcon-
tractor interest, beginning on the next day, at the rate of one  percent
a  month  or  fraction  of a month on the unpaid balance, or at a higher
rate consistent with the construction contract.
  2. (a) (i) If an owner fails to approve or disapprove an invoice with-
in the time limits established in subparagraph (i) of paragraph  (a)  of
subdivision two of section seven hundred fifty-six-a of this article, or
to  pay  the  contractor  the  undisputed invoice amount within the time
limits provided by paragraph (a) of subdivision three of  section  seven
hundred fifty-six-a of this article, the contractor may suspend contrac-

S. 3445--C                          6

tually  required  performance,  only  after  providing the owner written
notice and an opportunity to cure consistent with subparagraph  (ii)  of
this paragraph.
  (ii) A contractor intending to suspend performance on the construction
contract  for  failure of the owner to make timely payments or approvals
within the time limits provided by this article must provide  the  owner
written  notice  at  least  ten  calendar  days  before the contractor's
intended suspension. Such notice shall:
  (A) inform the owner that payment for undisputed invoice amounts  have
not been received; and
  (B)  state  the  intent  of  the contractor to suspend performance for
non-payment.
If after the tenth calendar day following written notice the  owner  has
not cured the deficiency, the contractor may suspend performance.
  (iii)  A  contractor shall not be deemed in breach of the construction
contract for suspending performance pursuant to this section.
  (b)(i) A subcontractor may suspend contractually required  performance
if any or all of the occurrences outlined in clauses (A), (B) and (C) of
this  subparagraph  occur and only after providing written notice and an
opportunity to cure consistent with subparagraph (ii) of this paragraph:
  (A) If an owner fails to make timely payments for undisputed  invoices
within the time limits established by subdivision three of section seven
hundred fifty-six-a of this article for the subcontractor's work and the
contractor also fails to pay the subcontractor for the approved work;
  (B) If an owner pays the contractor within the time limits established
by  subdivision three of section seven hundred fifty-six-a of this arti-
cle for undisputed invoices for work performed by the subcontractor  but
the  contractor  fails  to  make payment to the subcontractor within the
time frames established by this article for the subcontractor's work;
  (C) If an owner fails to approve or disapprove a portion  of  contrac-
tor's  invoice  for  work performed by the subcontractor within the time
limits established in paragraph (a) of subdivision two of section  seven
hundred fifty-six-a of this article;
  (D)  If a contractor or subcontractor fails to approve or disapprove a
subcontractor's invoice within the time limits established in  paragraph
(b)  of  subdivision  three of section seven hundred fifty-six-a of this
article; or
  (E) If an owner fails to approve portions of the contractors'  billing
for  work  performed  by the subcontractor within the time limits estab-
lished by this article and the reasons for  such  failure  are  not  the
fault of or directly related to the subcontractor's work.
  (ii)  A  subcontractor intending to suspend performance for failure to
receive timely payments within the time limits established  pursuant  to
this  article  must  provide  both  the owner and the contractor written
notice at least ten calendar days before  the  subcontractor's  intended
suspension. Such notice shall:
  (A)  inform  the  owner and the contractor that payment for undisputed
billing amounts have not been received; and
  (B) state the intent of the  contractor  to  suspend  performance  for
non-payment.
  If  after  the  tenth calendar day following written notice either the
owner or the contractor has not cured the deficiency, the  subcontractor
may  suspend  performance  AND/OR  ATTEMPT TO RESOLVE IN COMPLIANCE WITH
SUBDIVISION THREE OF THIS SECTION.

S. 3445--C                          7

  (iii)  A  subcontractor  shall  not  be  deemed  in  breach   of   the
construction  contract  for  suspending  performance  pursuant  to  this
section.
  (iv)  (A)  A  contractor or subcontractor that suspends performance as
provided in this section shall not be required to furnish further labor,
materials or services until the contractor or subcontractor is paid  the
undisputed  invoice amount at the time period for completion as provided
in the construction contract, OR A FINAL DETERMINATION HAS BEEN MADE  IN
COMPLIANCE  WITH  SUBDIVISION  THREE  OF THIS SECTION AND COMPLIED WITH.
All of the time frames established within [the construction contract  of
a  contractor  or  subcontractor] THIS SECTION shall be extended for the
length of time performance was suspended. Payment of  documented  actual
costs  incurred  for  re-mobilization resulting from suspension shall be
negotiated between the parties.
  (B) In the event of suspension of a construction contract, as provided
in this article, all materials, equipment, tools, construction equipment
and machinery located at the job site shall remain the sole  and  exclu-
sive  property  of  the contractor or subcontractor and shall be removed
from the job site, if necessary, within a  reasonable  period  of  time.
Access  to  the  contractor's  or  subcontractor's property shall not be
unreasonably withheld.
  3.  (A) UPON RECEIPT OF WRITTEN NOTICE OF  A  COMPLAINT  (I)  THAT  AN
OWNER  HAS VIOLATED THE PROVISIONS OF THIS ARTICLE; (II) THAT A CONTRAC-
TOR HAS VIOLATED THE PROVISIONS OF THIS ARTICLE; (III) WHERE A  CONTRAC-
TOR ALLEGES A SUBCONTRACTOR HAS VIOLATED THE PROVISIONS OF THIS ARTICLE;
(IV)  WHERE  A  SUBCONTRACTOR  ALLEGES  A  CONTRACTOR  HAS  VIOLATED THE
PROVISIONS OF THIS ARTICLE;  (V)  WHERE  A  SUBCONTRACTOR  ALLEGES  THAT
ANOTHER  SUBCONTRACTOR HAS VIOLATED THE PROVISIONS OF THIS ARTICLE; (VI)
WHERE A CONTRACTOR OR SUBCONTRACTOR  ALLEGES  A  MATERIAL  SUPPLIER  HAS
VIOLATED  THE  PROVISIONS  OF  THIS  ARTICLE;  OR (VII) WHERE A MATERIAL
SUPPLIER  ALLEGES  A  CONTRACTOR  OR  SUBCONTRACTOR  HAS  VIOLATED   THE
PROVISIONS  OF  THIS  ARTICLE;  THE PARTIES SHALL ATTEMPT TO RESOLVE THE
MATTER GIVING RISE TO SUCH COMPLAINT.
  (B) THE WRITTEN NOTICE REQUIRED UNDER THIS SECTION SHALL BE  DELIVERED
AT  OR SENT BY ANY MEANS THAT PROVIDES WRITTEN, THIRD-PARTY VERIFICATION
OF DELIVERY TO THE LAST BUSINESS  ADDRESS  KNOWN  TO  THE  PARTY  GIVING
NOTICE.
  (C)  IF  EFFORTS  TO  RESOLVE  SUCH  MATTER TO THE SATISFACTION OF ALL
PARTIES ARE UNSUCCESSFUL, THE AGGRIEVED PARTY MAY REFER THE MATTER,  NOT
LESS  THAN  FIFTEEN  DAYS  OF THE RECEIPT OF THIRD PARTY VERIFICATION OF
DELIVERY OF THE COMPLAINT, TO THE AMERICAN ARBITRATION  ASSOCIATION  FOR
AN  EXPEDITED  ARBITRATION  PURSUANT  TO THE RULES OF THE AMERICAN ARBI-
TRATION ASSOCIATION.
  (D) UPON CONCLUSION OF THE  ARBITRATION  PROCEEDINGS,  THE  ARBITRATOR
SHALL  SUBMIT  TO THE PARTIES HIS OR HER OPINION AND AWARD REGARDING THE
ALLEGED VIOLATION.
  (E) THE AWARD OF THE ARBITRATOR SHALL BE FINAL AND MAY ONLY BE VACATED
OR MODIFIED AS PROVIDED IN ARTICLE SEVENTY-FIVE OF  THE  CIVIL  PRACTICE
LAW  AND  RULES  UPON  AN  APPLICATION  MADE WITHIN THE TIME PROVIDED BY
SECTION SEVENTY-FIVE HUNDRED TWO OF THE CIVIL PRACTICE LAW AND RULES.
  S 5. Section 757 of the general business law is amended by adding  two
new subdivisions 3 and 4 to read as follows:
  3. A PROVISION, COVENANT, CLAUSE OR UNDERSTANDING IN, COLLATERAL TO OR
AFFECTING  A CONSTRUCTION CONTRACT STATING THAT EXPEDITED ARBITRATION AS
EXPRESSLY PROVIDED FOR AND IN THE MANNER ESTABLISHED  BY  SECTION  SEVEN

S. 3445--C                          8

HUNDRED  FIFTY-SIX-B  OF  THIS  ARTICLE  IS  UNAVAILABLE  TO ONE OR BOTH
PARTIES.
  4.  A PROVISION, COVENANT, CLAUSE OR UNDERSTANDING IN COLLATERAL TO OR
AFFECTING A CONSTRUCTION CONTRACT ESTABLISHING PAYMENT PROVISIONS  WHICH
DIFFER  FROM  THOSE  ESTABLISHED  IN  SUBDIVISION THREE OF SECTION SEVEN
HUNDRED FIFTY-SIX-A AND SECTION SEVEN HUNDRED FIFTY-SIX-B AS APPLICABLE.
  S 6. This act  shall  take  effect  immediately  and  shall  apply  to
construction  contracts  entered  into  after  such  date,  except those
contracts entered into as part of a construction  project  for  which  a
permit  or  permits have been issued and work has begun on such projects
prior to the effective date of this act.