Senate Bill S7615

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

                                  7615

                            I N  S E N A T E

                              May 11, 2016
                               ___________

Introduced  by  Sen. MARTINS -- read twice and ordered printed, and when
  printed to be committed to the Committee on Consumer Protection

AN ACT to amend the general business law, in relation to the  obligation
  to subcontractors in construction contracts

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

  Section 1. Subdivision 1 of section 756 of the general  business  law,
as  amended  by  chapter  417 of the laws of 2009, 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 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 corpo-
ration, any public corporation  or  official  thereof,  or  a  municipal
corporation or official thereof for construction, reconstruction, alter-
ation,  repair,  maintenance,  moving  or demolition of any public works
project nor any contract with a contractor  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  dwell-
ing or a residential tract development of one hundred or less one or two
family  dwellings,  or  any  residential  construction project where the
aggregate size of such project is four thousand five hundred square feet
or less, or any residential project of  fewer  than  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, PROVIDED, HOWEVER,  THAT  THE  PROVISIONS  OF
THIS  SUBDIVISION  AS BETWEEN A CONTRACTOR AND A SUBCONTRACTOR SHALL NOT

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

                                                           LBD15004-01-6

S. 7615                             2

BE SO LIMITED AND THEY SHALL APPLY TO ALL ORAL OR WRITTEN  CONTRACTS  OR
UNDERSTANDINGS.
  S  2.  The  opening paragraph of section 756-a of the general business
law, as amended by chapter 417 of the laws of 2009, is amended  to  read
as follows:
  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 there-
to. NO CONTRACT BETWEEN A CONTRACTOR AND A SUBCONTRACTOR SHALL EXPRESSLY
OR IMPLIEDLY BE CONSTRUED IN A MANNER WHICH IS DETRIMENTAL TO THE RIGHTS
OF A SUBCONTRACTOR TO BE PAID FOR WORK PERFORMED OR SERVICES PROVIDED IN
OTHER THAN A TIMELY MANNER.
  S 3. Subdivision 2 of section 756-a of the  general  business  law  is
amended by adding two new paragraphs (c) and (d) to read as follows:
  (C) NOTHING IN THIS SUBDIVISION SHALL AUTHORIZE AN OWNER OR CONTRACTOR
TO  WITHHOLD  PAYMENT  TO A SUBCONTRACTOR UNLESS BY CLEAR AND CONVINCING
EVIDENCE, DOCUMENTED IN WRITING, THAT WORK PERFORMED BY A  SUBCONTRACTOR
WAS DEFICIENT OR DONE OTHER THAN AS SPECIFIED IN THE CONTRACT.
  (D)  WHERE  THERE  IS ANY OBJECTION TO ANY ALLEGATION MADE BY AN OWNER
WITH RESPECT TO A SUBMITTED INVOICE, A CONTRACTOR OR  SUBCONTRACTOR,  AS
THE  CASE  MAY  BE,  SHALL BE ENTITLED TO CURE ANY DEFECT OR SATISFY ANY
OBJECTION FORTHWITH. SHOULD SUCH ATTEMPT TO CURE OR  SATISFY  BE  DISAP-
PROVED BY THE OWNER, THE CONTRACTOR OR SUBCONTRACTOR MAY DEMAND AN IMME-
DIATE  EXPEDITED  ARBITRATION BY THE AMERICAN ARBITRATION ASSOCIATION OF
SUCH DISAPPROVAL. INCLUDED IN SUCH RIGHT TO ARBITRATION THERE  SHALL  BE
THE RIGHT TO ARBITRATE ANY OBJECTION ALLEGING THAT THE NOTICE TO CURE IS
NOT  SUFFICIENTLY DETAILED SO AS TO ENABLE A TIMELY REPLACEMENT, REPAIR,
OR SOLUTION TO ANY OBJECTION RAISED BY AN OWNER,  OR  THAT  THE  INVOICE
SUBMITTED BY THE CONTRACTOR OR SUBCONTRACTOR IS NOT A FINAL INVOICE.
  S  4.  Subparagraph  (i)  of paragraph (a) of subdivision 3 of section
756-a of the general business law, as amended by chapter 417 of the laws
of 2009, is amended to read as follows:
  (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  AND  THE  CONTRACTOR  SHALL  IMMEDIATELY PAY ANY
SUBCONTRACTOR AMOUNTS DUE FROM SUCH PAYMENT.
  S 5. Section 756-a of the general business law is amended by adding  a
new subdivision 5 to read as follows:
  5.  PERFORMANCE  OF  THE  SUBCONTRACTOR. IT SHALL BE PRESUMED THAT ANY
SUBCONTRACTOR PERFORMING WORK FOR A CONTRACTOR HAS ACTED IN  GOOD  FAITH
IN  ACCORDANCE  WITH  THE  CONTRACT, USED PROPER MATERIALS AND OTHERWISE
PERFORMED IN ACCORDANCE  WITH  GENERALLY  APPLICABLE  STANDARDS  IN  THE
INDUSTRY  AND A CONTRACTOR MAY REFUSE SUCH PRESUMPTION ONLY BY CLEAR AND
CONVINCING EVIDENCE TO THE CONTRARY.
  S 6. Clause (A) of subparagraph (iv) of paragraph (b) of subdivision 2
of section 756-b of the general business law, as amended by chapter  417
of the laws of 2009, is amended to read as follows:
  (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 this section shall be extended for

S. 7615                             3

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.  WHERE A SUBCONTRACTOR CAN
DEMONSTRATE  THAT  THE UNREASONABLE WITHHOLDING OF AMOUNTS DUE TO HIM OR
HER HAVE RESULTED IN LOST TIME HE OR SHE MAY HAVE  SPENT  IN  PERFORMING
ADDITIONAL  WORK FOR ANOTHER CONTRACTOR OR OWNER, THE ARBITRATOR CHARGED
WITH CONDUCTING THE ARBITRATION PROCEEDING MAY AWARD  MONIES  OCCASIONED
BY SUCH WITHHOLDING.
  S  7.  Paragraphs (c) and (d) of subdivision 3 of section 756-b of the
general business law, as added by chapter 417 of the laws of  2009,  are
amended to read as follows:
  (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. WHERE THE DISPUTE  IN  QUESTION  IS  BROUGHT  BY  A
SUBCONTRACTOR,  THE  ARBITRATOR  SHALL  FIRST  REQUIRE THE CONTRACTOR OR
OWNER TO POST A PERFORMANCE BOND IN THE AMOUNT OF  THE  DEMAND  PAYMENT.
FAILURE  TO  POST SUCH BOND WITHIN FIVE DAYS AFTER THE REQUIREMENT IS SO
IMPOSED SHALL RESULT IN AN IMMEDIATE AWARD TO THE SUBCONTRACTOR AND SUCH
DECISION SHALL NOT BE APPEALABLE.
  (d) Upon conclusion of the  arbitration  proceedings,  the  arbitrator
shall  submit  to the parties his or her opinion and award regarding the
alleged violation. WHERE THE ARBITRATOR DETERMINES THAT A  SUBCONTRACTOR
IS  ENTITLED  TO AN AWARD HE OR SHE SHALL ORDER THE CONTRACTOR OR OWNER,
AS THE CASE MAY BE, TO PAY THE REASONABLE ATTORNEY FEES INCURRED BY  THE
SUBCONTRACTOR  AND  ANY  MONIES THE SUBCONTRACTOR MAY HAVE EARNED DURING
THE TIME SPENT IN ATTENDING TO SUCH  PROCEEDING.  WHERE  THE  ARBITRATOR
CONCLUDES  THE  WITHHOLDING  PAYMENT  TO  A SUBCONTRACTOR WAS ESPECIALLY
EGREGIOUS AND A DELAY IN PAYMENT WAS UNFAIRLY WITHHELD, HE  OR  SHE  MAY
AWARD PUNITIVE DAMAGES AS HE OR SHE DEEMS WARRANTED.
  S  8.  This  act shall take effect on the ninetieth day after it shall
have become a law.