Reviewing legislative updates for the past session, I checked on the status of an act I previously noted was making its way through the legislature — the bill was HB 1969, and as originally crafted, did not make a lot of sense.  HB 1969 was intended to apply the  prompt payment provisions currently applicable to public contracts, to private contracts.  Under the prompt payment statutes, on public projects, contractors are required to pay their subcontractors in a timely manner.

Subcontractors complained that the prompt payment provisions of the procurement code were not enough because contractors were still not making timely payments on private jobs.  They wanted the legislature to require contractors to make payments to their subs on private jobs, and crafted a bill that required payment within a set time after receipt of an invoice, stated that the contractor "may" obtain  a payment/performance bond (presumably to be paid for by the Owner?), and if the bond was not obtained, the Contractor (and Owner?) would be subject to a 1 1/2 per month interest charge on overdue subcontractor payments.  This bill made no sense — it was part of the licensing statute, but imposed all kinds of restrictions on private contracts between owners and contractors.  How such a law would be enforced, given that the licensing statute assigns such enforcement and interpretation to the Contractors License Board, was unclear.  The bill was ultimately deferred in March, but a different iteration of the private prompt payment act, appears to have passed and become law.

The law that made it through to the governor is S.B. 2412, and the operative language is as follows:

"A contractor shall pay the contractor’s subcontractor for any goods and services rendered within ten days after receipt of an invoice by the subcontractor that goods have been delivered or services have been performed and includes any supporting documents as required by the terms of the subcontract and after receipt by the contractor of payment from the owner for the subcontractor’s work, whichever occurs later. The subcontractor shall be entitled to receive interest on the unpaid amount at the rate of one and one-half per cent per month from the date payment is due; provided that this section shall not apply if the delay in payment is due to a bona fide dispute between the contractor and the subcontractor concerning the goods and services contracted for."

The statute changes the due date for payment from 60 to 10 days after receipt of the invoice, and increases the interest rate for non-payment to 18%, but importantly, adds the language that payment is only due upon payment from the owner.  This language wasn't in the original iteration of the statute, so as a compromise position it is a pretty nice addition from the general contractors' perspective – it effectively inserts a default pay when paid clause into private contractor/subcontractor agreements that did not exist prior to this change in the law, and is not a standard provision in industry form contracts.  And, the statute is only imposed if there is no bona fide dispute as to payment, and  if the subcontractor submits all required paperwork with its invoice.