New York State has announced a major project in the state’s buildup of its infrastructure, with billions in contracts available for contractors in state-wide projects — an early return on the US government’s renewed interest in infrastructure spending.
Though we’re just at the start of this spending spree, luckily for contractors, the state of New York is already getting started. Citing a need to revitalize the state’s infrastructure, New York Governor Kathy Hochul announced a five-year, $32.8 billion capital plan for programs and projects in New York State on April 9, 2022.
Public works construction in these areas is lucrative and can provide major boosts for contractors, but that doesn’t mean there aren’t also challenges in these projects — contractors deal with payment issues on these projects just as much as they deal with them on private ones. Read on to learn about payment on New York public projects and protecting your payment rights.
Payment protection on New York public projects
Generally, companies aren’t able to file mechanics liens on public projects unlike with private projects, as the federal government — and many states — prohibit private entities from claiming an interest in public property.
Rather than filing mechanics liens, public construction projects of certain sizes are required to have a payment bond secured before work begins — in New York, this applies to public projects over $100,000. If an issue comes up due to nonpayment, companies file a claim against the payment bond instead of foreclosing on the property itself.
The Miller Act provides for that very payment protection at the federal level, and most states have their own version of it — often called “Little Miller Acts” — meaning that keeping abreast of each state’s Miller Act requirements is a major priority for any company working on a public project. However, this protection only extends to first and second-tier contractors, as general contractors and subcontractors and suppliers lower than second-tier aren’t protected.
New York also has separate rules governing a “lien on funds” with public projects, which notes that of the money owed to a prime contractor by the project owner, there must be some portion still available to satisfy the claims of any subcontractor or supplier that’s acting as a claimant — an amount referred to as the “lien fund.” This is an alternative to payment on projects that may also have a payment bond, but the burden of proving the existence of the lien fund falls on the claimant.
New York City has additional rules for payment protection as well. Contractors can additionally file a Public Improvement Lien if they are a subcontractor or supplier on an NYC public construction project. In the case of nonpayment, claimants have the right to file a lien in the amount the prime contractor owes, in which case the city will hold payment to the contractor at 1.5 times the amount owed.
New York bond claims
Making a claim against a payment bond isn’t something that is universal for everyone working on a public project, though the right to do so is far-reaching for New York. When it comes to New York bond claim law, subcontractors, “sub-subs,” laborers, and material suppliers to the general contractor or 1st tier subcontractors are protected. Generally, suppliers to suppliers are not protected under the state’s laws, and prime contractors can’t file a claim against their own payment bond.
As construction attorney Matt Viator notes, though, “New York bond claims can get complicated in a hurry,” so it’s imperative for a claimant to file within the correct range of time.
The bond claim itself is only legally required by claimants who didn’t contract directly with the general contractor. If needed, the bond claim deadline is no later than 120 days of the claimant’s last furnishing of labor and/or materials to the project.
The deadline for a lawsuit to enforce the bond claim — for all claimants, including those who contracted directly with the project’s GC — is more than 90 days after last furnishing, but no later than one year after project completion and acceptance.
Learn more: New York Bond Claim Guide and FAQs
How to file a bond claim in New York
- For a claim to be valid, it needs to be submitted with the claimant’s name and address, the amount claimed, and hiring party information.
- Submit the claim to the project’s general contractor either by personal service or registered mail to the GC’s place of business or residence. The GC is the only party that is required to receive the bond claim, but it is also good practice to send notice of the claim to the surety.
- Proving actual receipt of the claim is essential to the process! The responsibility of doing so falls on the claimant, making proper documentation especially important. Certified mail requires a signature to be delivered, with the post office storing the signature. Optionally, the sender can choose to request a return receipt in order to keep additional proof of receipt on hand.
New York’s prevailing wage laws
Following the lead of a number of states across the country expanding laws governing prevailing wage concerns, New York passed new legislation which expanded prevailing wage protection.
Prevailing wage laws require that contractors on public works jobs have to pay the majority of their workers at least the local prevailing wage rate. With the bill going into effect in 2022, all contracted construction work with a total project cost of over $5 million which is at least 30% publicly funded is now covered under the new protections.
Once they certify whether their work is subject to the new legislation, all contractors that work on these covered projects in New York will have to make sure that they’re meeting the law’s requirements.
Learn more: How Do Prevailing Wage Laws Work in Construction?
New York’s prompt payment laws
Generally, for public agencies in New York, the agency has to pay both progress and final payments for a project within 30 days of receiving an invoice. This starts the clock on general contractors’ payments to their subs — all payments to contractors down the pay chain need to be made within seven days of receiving payment.
New York prompt payment deadlines by contract type
Given the number of different community categorizations it uses, New York also has a range of different approaches to payment deadlines on public projects.
- State contracts: Once the state agency has received a proper request for payment, they generally have to pay the prime contractor within 30 calendar days. For small businesses, this is reduced to just 15 days, and for highway construction contracts, it’s increased to 75 days.
- Municipal contracts (excluding New York City): Municipal agencies must make payment to the prime contractors within 30 calendar days of receipt of a proper request for payment. All other payments to subcontractors and suppliers must be made within 7 calendar days of the higher-tiered party’s receipt of payment.
- New York City contracts: Prompt payment on NYC public works projects are measured from the “Invoice Received or Acceptance Date” (IRA Date), and the city must make payment within 30 days of this date. All other payments to subcontractors and suppliers, have to be made within 7 calendar days of the higher-tiered party’s receipt of payment.
- Public Authority contracts: The public authority has to make payment to the prime contractor within 30 calendar days of receipt of a proper invoice — however, payments to subcontractors and material suppliers aren’t covered, and are only included in contract requirements.
Protect your payment rights on every public project
Though there are a number of guidelines that absolutely need to be followed in order to secure payment rights on public projects such as these, going the extra mile can ensure that you’re getting exactly what you deserve from your work.
For example, it’s not required for contractors to send a preliminary notice for a bond claim on projects in New York, but it’s a great way for contractors to increase visibility and communication on projects — which encourages faster payment. Rather than going through the difficulty of a bond claim, sending a preliminary notice has a good chance of ensuring payment.
Additionally, keeping strict documentation of work contributed to a project and the details surrounding it is also imperative, as it’s a big part of keeping track of regulations and requirements in case a contractor does need to file a claim on a project in a timely manner.