S T A T E O F N E W Y O R K
________________________________________________________________________
5982
2009-2010 Regular Sessions
I N S E N A T E
June 19, 2009
___________
Introduced by Sens. SAVINO, ADDABBO -- read twice and ordered printed,
and when printed to be committed to the Committee on Rules
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 AN ALLEGED
VIOLATION OF THIS ARTICLE OR ARTICLE NINETEEN OF THIS CHAPTER OCCASIONED
BY ANOTHER PERSON, CORPORATION, EMPLOYER OR ENTITIES IN VIOLATION OF
ARTICLE THIRTY-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-
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD10170-14-9
S. 5982 2
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
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;
S. 5982 3
(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
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
S. 5982 4
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
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-
S. 5982 5
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-
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
S. 5982 6
(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
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
S. 5982 7
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
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.
