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Does California have a prompt pay law especially for certified MBEs/DBEs/SBEs

CaliforniaPrompt Payment

We have an airport construction project in which some of the labor is being performed by a local, minority company. The GC has not paid us for their work since November. Doesn't California have a prompt pay law especially for certified MBEs/DBEs/SBEs? Thank you!

2 replies

May 17, 2021

On a public airport project , the prompt payment deadline for a higher tier subcontractor or direct contractor to pay a subcontractor a progress payment is governed by Business and Professions Code §7108.5 in addition to Public Contract Code §10262. Under both statues, (unless the contract says otherwise) a subcontractor must be paid within seven days after the higher tier subcontractor or direct contractor receives payment. Subcontractors that are not paid within seven days after their higher tier contractor is paid are entitled to a prompt payment penalty of 2% per month (and if legal action is necessary an award of reasonable attorney’s fees). This 2% per month of the total amount wrongfully withheld accrues instead of any interest otherwise due under the contract. But the big caveat here is that the higher tier subcontractor or direct contractor must have been paid. If they have not been paid, prompt payment will not apply. Also, if there is a good faith dispute regarding the amount owed up to 150% of the amount in dispute can be withheld without incurring prompt payment penalties. 

Different rules apply to retention. The deadline for a direct contractor to pay a subcontractor retention on a local public works project (such as most public airports) is set forth in Public Contract Code §7107. A direct contractor is obligated to pay the subcontractor within seven days after receiving all or a portion of retention. In contrast to its progress payment counterpart, the prompt payment penalty for retention cannot be waived by contract. But this penalty only applies to those with a direct contract with the direct contractor. Lower tier subs are not included. 

 

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May 18, 2021
Yes, CA does have prompt payment laws. Without knowing your particulars, there are a few remedies you can go with. Breach of contract, stop notice, or bond claim. I would talk to an experienced construction attorney who is familiar with public works projects to come up with the best business and legal solution.
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