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can I file a bond claim if I did not first file a prelim notice? I am a subcontractor

CaliforniaPrompt Payment Retainage

I started work on March 9, 2018 at a State university in California. I was hired by a general contractor who was doing a public works project for the university. I am a welder, making handrails for a baseball stadium. When the job was completed I sent final invoice request on June 25th, 2018. They responded that they are holding my payment because I backed into a light post on the university's grounds. Meanwhile my insurance is already dealing directly with the university to resolve this matter. I think the university maybe withheld the $ from the general contractor's contract, and now the general is withholding from my contract. I am uncertain if they can do this considering I have completed all work in the contract and my insurance is already in the process of reimbursing the university directly for the lightpost damage I caused.

1 reply

Jul 17, 2018

As far as welding gigs go, that sounds like a great job site! Anyway, that's a great question, and the answer will depend on who a claimant's customer is. That is, those claimants who are not wage laborers and who do not have a contract with the original contractor must provide preliminary notice before a bond claim may be made. However, for wage laborers and for subs hired by the original contractor - no notice is necessary prior to making a claim on the original contractor's bond. As to whether or not the public entity is allowed to withhold payments from the original contractor, that's far less clear. Recently, the California Supreme Court found that on private projects, the amounts withheld resulting from a dispute between contractor and their sub must be tied to the actual dispute at hand. That is, if a dispute is unrelated to the unpaid amount, the amount cannot lawfully be retained - again this is for private projects. The rule discussed in that case does not control public projects, and while the terminology is eerily similar in the public and private statutes regarding withheld amounts, under current law, amounts may likely be withheld regardless of whether that amount directly ties to the dispute between the parties. Note, though, that while a public entity may be able to withhold payments as a result of a dispute, the amount withheld may not exceed 150% of the amount of the dispute. Plus, an original contractor may be able to withhold payment when there's a bona fide dispute, but they may only withhold up to 150% of the estimated value of the disputed amount. Note also that an original contractor or a sub who believes payments are being wrongfully withheld can bring an action to collect funds wrongfully withheld - and if the withholding party has wrongfully withheld payment, they will be subject to an interest charge of 2% per month that the funds were improperly withheld. Plus, the prevailing party in such an action will be entitled to attorney fees and costs (though that would also raise the stakes for losing such an action, too).

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