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PRIOR PRINTER'S NO. 591
PRINTER'S NO. 1928
THE GENERAL ASSEMBLY OF PENNSYLVANIA
HOUSE BILL
No.
566
Session of
2017
INTRODUCED BY SANTORA, DRISCOLL, SOLOMON, THOMAS, McNEILL,
PASHINSKI, DUNBAR, GALLOWAY, W. KELLER, A. HARRIS, D. COSTA,
JOZWIAK, WHITE, ZIMMERMAN, PETRI, BRIGGS, SAINATO, PETRARCA
AND SCHWEYER, FEBRUARY 21, 2017
AS REPORTED FROM COMMITTEE ON COMMERCE, HOUSE OF
REPRESENTATIVES, AS AMENDED, JUNE 6, 2017
AN ACT
Amending the act of February 17, 1994 (P.L.73, No.7), entitled
"An act requiring timely payment to certain contractors and
subcontractors; and providing remedies to contractors and
subcontractors," further providing for owner's payment
obligations and for contractors' and subcontractors' payment
obligations.
AMENDING THE ACT OF FEBRUARY 17, 1994 (P.L.73, NO.7), ENTITLED
"AN ACT REQUIRING TIMELY PAYMENT TO CERTAIN CONTRACTORS AND
SUBCONTRACTORS; AND PROVIDING REMEDIES TO CONTRACTORS AND
SUBCONTRACTORS," FURTHER PROVIDING FOR APPLICATION OF ACT,
FOR OWNER'S PAYMENT OBLIGATIONS, FOR OWNER'S WITHHOLDING OF
PAYMENT FOR GOOD FAITH CLAIMS, FOR CONTRACTOR'S AND
SUBCONTRACTOR'S PAYMENT OBLIGATIONS, FOR ERRORS IN
DOCUMENTATION, FOR RETAINAGE, FOR CONTRACTOR'S WITHHOLDING OF
PAYMENT FOR GOOD FAITH CLAIMS AND FOR PENALTY AND ATTORNEY
FEE.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Section 5 of the act of February 17, 1994
(P.L.73, No.7), known as the Contractor and Subcontractor
Payment Act, is amended by adding a subsection to read:
Section 5. Owner's payment obligations.
* * *
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(e) Suspension of performance.--If payment is not received
by a contractor in accordance with this section, the contractor
shall have the right to suspend performance of any work, without
penalty, until payment is received in full. Any term in a
construction contract contrary to this subsection shall be
unenforceable. Suspension of performance may occur only if:
(1) payment has not been made to the contractor in
accordance with the schedule established under subsection
(c);
(2) the contractor has provided at least seven calendar
days' written notice of the contractor's intent to suspend
performance to the owner or the owner's authorized agent; and
(3) at least 60 calendar days have passed since the end
of the billing period for which payment has not been received
in full.
Section 2. Section 7(a) and (c) of the act are amended and
the section is amended by adding a subsection to read:
Section 7. Contractor's and subcontractor's payment
obligations.
(a) Entitlement to payment.--Performance by a subcontractor
in accordance with the provisions of the construction contract
shall entitle the subcontractor to payment from the party with
whom the subcontractor has contracted.
* * *
(c) Time for payment.--When a subcontractor has performed in
accordance with the provisions of the construction contract, a
contractor shall pay to the subcontractor, and each
subcontractor shall in turn pay to the subcontractor's
subcontractors, the full or proportional amount received for
each such subcontractor's work and materials, based on work
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completed or service provided under the subcontract, 14 days
after receipt of each progress or final payment or 14 days after
receipt of the subcontractor's invoice, whichever is later.
Payment shall be made under this section unless it is being
withheld under section 11.
* * *
(e) Suspension of performance.--If payment is not received
by a subcontractor in accordance with this section, the
subcontractor shall have the right to suspend performance of any
work, without penalty, until payment is received in full. Any
term in a construction contract contrary to this subsection
shall be unenforceable. Suspension of performance may occur only
if:
(1) payment has not been made to the subcontractor in
accordance with the schedule established under subsection
(c);
(2) the subcontractor has provided at least seven
calendar days' written notice of the subcontractor's intent
to suspend performance to the owner or the owner's authorized
agent; and
(3) at least 60 calendar days have passed since the end
of the billing period for which payment has not been received
in full.
Section 3. This act shall take effect in 60 days.
SECTION 1. SECTIONS 3 AND 5 OF THE ACT OF FEBRUARY 17, 1994
(P.L.73, NO.7), KNOWN AS THE CONTRACTOR AND SUBCONTRACTOR
PAYMENT ACT, ARE AMENDED BY ADDING SUBSECTIONS TO READ:
SECTION 3. APPLICATION OF ACT.
* * *
(C) PROHIBITION ON WAIVER.--UNLESS SPECIFICALLY AUTHORIZED
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UNDER THIS ACT, PARTIES TO A CONTRACT OR OTHER AGREEMENT MAY NOT
WAIVE A PROVISION OF THIS ACT BY CONTRACT OR OTHER AGREEMENT.
SECTION 5. OWNER'S PAYMENT OBLIGATIONS.
* * *
(E) SUSPENSION OF PERFORMANCE.--IF PAYMENT IS NOT RECEIVED
BY A CONTRACTOR IN ACCORDANCE WITH THIS SECTION, THE CONTRACTOR
SHALL HAVE THE RIGHT TO SUSPEND PERFORMANCE OF ANY WORK, WITHOUT
PENALTY, UNTIL PAYMENT IS RECEIVED ACCORDING TO THE TERMS OF THE
CONSTRUCTION CONTRACT. ANY TERM IN A CONSTRUCTION CONTRACT
CONTRARY TO THIS SUBSECTION SHALL BE UNENFORCEABLE. SUSPENSION
OF PERFORMANCE MAY OCCUR ONLY IF:
(1) PAYMENT HAS NOT BEEN MADE TO THE CONTRACTOR IN
ACCORDANCE WITH THE SCHEDULE ESTABLISHED UNDER SUBSECTION
(C);
(2) AT LEAST 30 CALENDAR DAYS HAVE PASSED SINCE THE END
OF THE BILLING PERIOD FOR WHICH PAYMENT HAS NOT BEEN RECEIVED
ACCORDING TO THE TERMS OF THE CONSTRUCTION CONTRACT, THE
CONTRACTOR SHALL PROVIDE WRITTEN NOTICE TO THE OWNER OR THE
OWNER'S AUTHORIZED AGENT, VIA ELECTRONIC MAIL OR POSTAL
SERVICE, STATING THAT PAYMENT HAS NOT BEEN MADE; AND
(3) AT LEAST 30 CALENDAR DAYS HAVE PASSED SINCE THE
WRITTEN NOTICE IN PARAGRAPH (2) HAS BEEN SENT, THE CONTRACTOR
SHALL PROVIDE AT LEAST 10 CALENDAR DAYS' WRITTEN NOTICE, VIA
CERTIFIED MAIL, OF THE CONTRACTOR'S INTENT TO SUSPEND
PERFORMANCE TO THE OWNER OR THE OWNER'S AUTHORIZED AGENT.
SECTION 2. SECTION 6 OF THE ACT IS AMENDED TO READ:
SECTION 6. OWNER'S WITHHOLDING OF PAYMENT FOR GOOD FAITH
CLAIMS.
(A) AUTHORITY TO WITHHOLD.--THE OWNER MAY WITHHOLD PAYMENT
FOR DEFICIENCY ITEMS ACCORDING TO THE TERMS OF THE CONSTRUCTION
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CONTRACT. THE OWNER SHALL PAY THE CONTRACTOR ACCORDING TO THE
PROVISIONS OF THIS ACT FOR ANY ITEM WHICH APPEARS ON THE INVOICE
AND HAS BEEN SATISFACTORILY COMPLETED.
(B) NOTICE.--[IF]
(1) EXCEPT AS PROVIDED UNDER SECTION 9, IF AN OWNER
WITHHOLDS PAYMENT FROM A CONTRACTOR FOR A DEFICIENCY ITEM,
[IT] THE AMOUNT WITHHELD SHALL BE REASONABLE AND THE OWNER
SHALL NOTIFY THE CONTRACTOR OF THE DEFICIENCY ITEM BY A
WRITTEN EXPLANATION OF ITS GOOD FAITH REASON WITHIN [SEVEN]
14 CALENDAR DAYS OF THE DATE THAT THE INVOICE IS RECEIVED.
(2) FAILURE TO COMPLY WITH PARAGRAPH (1) SHALL
CONSTITUTE A WAIVER OF THE BASIS TO WITHHOLD PAYMENT AND
NECESSITATE PAYMENT OF THE CONTRACTOR IN FULL FOR THE
INVOICE.
(3) IF AN OWNER WITHHOLDS PAYMENT FROM A CONTRACTOR FOR
A DEFICIENCY ITEM, THE OWNER SHALL REMIT PAYMENT TO THE
CONTRACTOR FOR EACH OTHER ITEM THAT HAS BEEN SATISFACTORILY
COMPLETED UNDER THE CONSTRUCTION CONTRACT.
SECTION 3. SECTION 7(A) AND (C) OF THE ACT ARE AMENDED AND
THE SECTION IS AMENDED BY ADDING A SUBSECTION TO READ:
SECTION 7. CONTRACTOR'S AND SUBCONTRACTOR'S PAYMENT
OBLIGATIONS.
(A) ENTITLEMENT TO PAYMENT.--PERFORMANCE BY A SUBCONTRACTOR
IN ACCORDANCE WITH THE PROVISIONS OF THE CONSTRUCTION CONTRACT
SHALL ENTITLE THE SUBCONTRACTOR TO PAYMENT FROM THE PARTY WITH
WHOM THE SUBCONTRACTOR HAS CONTRACTED.
* * *
(C) TIME FOR PAYMENT.--WHEN A SUBCONTRACTOR HAS PERFORMED IN
ACCORDANCE WITH THE PROVISIONS OF THE CONSTRUCTION CONTRACT, A
CONTRACTOR SHALL PAY TO THE SUBCONTRACTOR, AND EACH
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SUBCONTRACTOR SHALL IN TURN PAY TO THE SUBCONTRACTOR'S
SUBCONTRACTORS, THE FULL OR PROPORTIONAL AMOUNT RECEIVED FOR
EACH SUCH SUBCONTRACTOR'S WORK AND MATERIALS, BASED ON WORK
COMPLETED OR SERVICE PROVIDED UNDER THE SUBCONTRACT, 14 DAYS
AFTER RECEIPT OF EACH PROGRESS OR FINAL PAYMENT OR 14 DAYS AFTER
RECEIPT OF THE SUBCONTRACTOR'S INVOICE, WHICHEVER IS LATER.
PAYMENT SHALL BE MADE UNDER THIS SECTION UNLESS IT IS BEING
WITHHELD UNDER SECTION 11.
* * *
(E) SUSPENSION OF PERFORMANCE.--IF PAYMENT IS NOT RECEIVED
BY A SUBCONTRACTOR IN ACCORDANCE WITH THIS SECTION, THE
SUBCONTRACTOR SHALL HAVE THE RIGHT TO SUSPEND PERFORMANCE OF ANY
WORK, WITHOUT PENALTY, UNTIL PAYMENT IS RECEIVED ACCORDING TO
THE TERMS OF THE CONSTRUCTION CONTRACT. ANY TERM IN A
CONSTRUCTION CONTRACT CONTRARY TO THIS SUBSECTION SHALL BE
UNENFORCEABLE. SUSPENSION OF PERFORMANCE MAY OCCUR ONLY IF:
(1) PAYMENT HAS NOT BEEN MADE TO THE SUBCONTRACTOR IN
ACCORDANCE WITH THE SCHEDULE ESTABLISHED UNDER SUBSECTION
(C);
(2) AT LEAST 30 CALENDAR DAYS HAVE PASSED SINCE THE END
OF THE BILLING PERIOD FOR WHICH PAYMENT HAS NOT BEEN RECEIVED
ACCORDING TO THE TERMS OF THE CONSTRUCTION CONTRACT, THE
SUBCONTRACTOR SHALL PROVIDE WRITTEN NOTICE TO THE CONTRACTOR
OR CONTRACTOR'S AUTHORIZED AGENT, VIA ELECTRONIC MAIL OR
POSTAL SERVICE, STATING THAT PAYMENT HAS NOT BEEN MADE; AND
(3) AT LEAST 30 CALENDAR DAYS HAVE PASSED SINCE THE
WRITTEN NOTICE IN PARAGRAPH (2) HAS BEEN SENT, THE
SUBCONTRACTOR SHALL PROVIDE AT LEAST 10 CALENDAR DAYS'
WRITTEN NOTICE, VIA CERTIFIED MAIL, OF THE SUBCONTRACTOR'S
INTENT TO SUSPEND PERFORMANCE TO THE OWNER OR THE OWNER'S
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AUTHORIZED AGENT.
SECTION 4. SECTIONS 8, 9, 11 AND 12 OF THE ACT ARE AMENDED
TO READ:
SECTION 8. ERRORS IN DOCUMENTATION.
(A) NOTICE OF [DEFECT] ERRORS IN INVOICE.--IF AN INVOICE IS
FILLED OUT INCORRECTLY OR INCOMPLETELY OR IF THERE IS ANY OTHER
DEFECT OR IMPROPRIETY IN AN INVOICE, THE PERSON WHO RECEIVES THE
INCORRECT INVOICE SHALL GIVE WRITTEN NOTICE TO THE PERSON WHO
SENT THE INCORRECT INVOICE WITHIN TEN WORKING DAYS OF RECEIPT OF
THE INVOICE.
[(B) PAYMENT OF AMOUNT INCURRED.--THE PERSON RECEIVING THE
INCORRECT INVOICE SHALL PAY THE AMOUNT ACTUALLY INCURRED ON THE
DUE DATE IN ACCORDANCE WITH THE PROVISIONS OF THIS ACT.]
(C) PAYMENT FOR INVOICE WITH ERROR.--ONCE WRITTEN NOTICE HAS
BEEN RECEIVED BY THE PERSON WHO SENT THE INCORRECT INVOICE, THE
PERSON RECEIVING THE INVOICE SHALL PAY THE CORRECT AMOUNT OF THE
INVOICE ON THE DUE DATE IN ACCORDANCE WITH THIS ACT.
SECTION 9. RETAINAGE.
(A) TIME FOR PAYMENT.--IF PAYMENTS UNDER A CONSTRUCTION
CONTRACT ARE SUBJECT TO RETAINAGE, ANY AMOUNTS WHICH HAVE BEEN
RETAINED DURING THE PERFORMANCE OF THE CONTRACT AND WHICH ARE
DUE TO BE RELEASED TO THE CONTRACTOR UPON FINAL COMPLETION SHALL
BE PAID WITHIN 30 DAYS AFTER FINAL ACCEPTANCE OF THE WORK.
(A.1) POSTING OF SECURITY IN LIEU OF RETAINAGE.--UPON
REACHING SUBSTANTIAL COMPLETION OF ITS OWN SCOPE OF WORK, A
CONTRACTOR OR SUBCONTRACTOR MAY FACILITATE THE RELEASE OF
RETAINAGE ON ITS CONTRACT BEFORE FINAL COMPLETION OF THE PROJECT
BY POSTING A MAINTENANCE BOND WITH APPROVED SURETY FOR 120% OF
THE AMOUNT OF RETAINAGE BEING HELD.
(B) AGREEMENT BETWEEN CONTRACTOR AND SUBCONTRACTOR.--IF AN
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OWNER IS NOT WITHHOLDING RETAINAGE, A CONTRACTOR MAY WITHHOLD
RETAINAGE FROM A SUBCONTRACTOR IN ACCORDANCE WITH THEIR
AGREEMENT. THE RETAINAGE SHALL BE PAID WITHIN 30 DAYS AFTER
FINAL ACCEPTANCE OF THE WORK.
(C) PAYMENT OF RETAINAGE TO SUBCONTRACTORS.--A CONTRACTOR
SHALL PAY TO THE CONTRACTOR'S SUBCONTRACTORS, AND EACH
SUBCONTRACTOR SHALL IN TURN PAY TO THE SUBCONTRACTOR'S
SUBCONTRACTORS, WITHIN 14 DAYS AFTER RECEIPT OF THE RETAINAGE,
THE FULL AMOUNT DUE EACH SUBCONTRACTOR.
(D) WITHHOLDING ACCEPTANCE OR FAILURE TO PAY RETAINAGE.--
WITHHOLDING OF RETAINAGE FOR LONGER THAN 30 DAYS AFTER FINAL
ACCEPTANCE OF THE WORK SHALL BE SUBJECT TO THE OBLIGATIONS
IMPOSED UPON THE OWNER, CONTRACTOR OR SUBCONTRACTOR IN SECTION
6(B) OR 11(B). IF AN OWNER, CONTRACTOR OR SUBCONTRACTOR
UNREASONABLY WITHHOLDS ACCEPTANCE OF WORK OR FAILS TO PAY
RETAINAGE AS REQUIRED BY THIS SECTION, THE OWNER, CONTRACTOR OR
SUBCONTRACTOR SHALL BE SUBJECT TO THE PAYMENT OF INTEREST AT THE
RATE ESTABLISHED IN SECTION 5(D) ON THE BALANCE DUE AND OWING ON
THE DATE ACCEPTANCE WAS UNREASONABLY WITHHELD OR THE DATE THE
RETAINAGE WAS DUE AND OWING, WHICHEVER IS APPLICABLE. THE OWNER,
CONTRACTOR OR SUBCONTRACTOR SHALL ALSO BE SUBJECT TO THE
PROVISIONS OF SECTION 12.
SECTION 11. CONTRACTOR'S AND SUBCONTRACTOR'S WITHHOLDING OF
PAYMENT FOR GOOD FAITH CLAIMS.
(A) AUTHORITY TO WITHHOLD.--THE CONTRACTOR OR SUBCONTRACTOR
MAY WITHHOLD PAYMENT FROM ANY SUBCONTRACTOR RESPONSIBLE FOR A
DEFICIENCY ITEM. THE CONTRACTOR OR SUBCONTRACTOR SHALL PAY ANY
SUBCONTRACTOR ACCORDING TO THE PROVISIONS OF THIS ACT FOR ANY
ITEM WHICH APPEARS ON THE INVOICE AND HAS BEEN SATISFACTORILY
COMPLETED.
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(B) NOTICE.--[IF]
(1) EXCEPT AS PROVIDED UNDER SECTION 9, IF A CONTRACTOR
OR SUBCONTRACTOR WITHHOLDS PAYMENT FROM A SUBCONTRACTOR FOR A
DEFICIENCY ITEM, [IT] THE CONTRACTOR OR SUBCONTRACTOR
WITHHOLDING PAYMENT MUST NOTIFY THE SUBCONTRACTOR [OR
SUPPLIER AND THE OWNER OF THE REASON WITHIN] AND THE OWNER IN
WRITING OF THE GOOD FAITH REASON FOR THE WITHHOLDING WITHIN
THE TIME PERIOD SPECIFIED IN THE CONSTRUCTION CONTRACT OR
[SEVEN] 14 CALENDAR DAYS OF THE DATE AFTER RECEIPT OF THE
NOTICE OF THE DEFICIENCY ITEM.
(2) FAILURE TO COMPLY WITH PARAGRAPH (1) SHALL
CONSTITUTE A WAIVER OF THE BASIS TO WITHHOLD PAYMENT AND
NECESSITATE PAYMENT OF THE SUBCONTRACTOR IN FULL FOR THE
INVOICE.
(C) AMOUNT OF WITHHOLDING.--IF A CONTRACTOR OR SUBCONTRACTOR
WITHHOLDS PAYMENT FROM A SUBCONTRACTOR FOR A DEFICIENCY ITEM,
THE CONTRACTOR OR SUBCONTRACTOR WITHHOLDING PAYMENT SHALL REMIT
PAYMENT TO THE SUBCONTRACTOR FOR EACH OTHER ITEM THAT HAS BEEN
SATISFACTORILY COMPLETED UNDER THE CONSTRUCTION CONTRACT.
SECTION 12. PENALTY AND ATTORNEY FEE.
(A) PENALTY FOR FAILURE TO COMPLY WITH ACT.--
(1) IF ARBITRATION OR LITIGATION IS COMMENCED TO RECOVER
PAYMENT DUE UNDER THIS ACT AND IT IS DETERMINED THAT AN
OWNER, CONTRACTOR OR SUBCONTRACTOR HAS FAILED TO COMPLY WITH
THE PAYMENT TERMS OF THIS ACT, THE ARBITRATOR OR COURT SHALL
AWARD, IN ADDITION TO ALL OTHER DAMAGES DUE, A PENALTY EQUAL
TO 1% PER MONTH OF THE AMOUNT THAT WAS WRONGFULLY WITHHELD.
(2) AN AMOUNT SHALL NOT BE DEEMED TO HAVE BEEN
WRONGFULLY WITHHELD [TO THE EXTENT IT] IF ALL OF THE
FOLLOWING APPLY:
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(I) THE AMOUNT BEARS A REASONABLE RELATION TO THE
VALUE OF ANY CLAIM HELD IN GOOD FAITH BY THE OWNER,
CONTRACTOR OR SUBCONTRACTOR AGAINST WHOM THE CONTRACTOR
OR SUBCONTRACTOR IS SEEKING TO RECOVER PAYMENT.
(II) THE CLAIM HOLDER COMPLIES WITH SECTION 6 OR 11.
(B) AWARD OF ATTORNEY FEE AND EXPENSES.--NOTWITHSTANDING ANY
AGREEMENT TO THE CONTRARY, THE SUBSTANTIALLY PREVAILING PARTY IN
ANY PROCEEDING TO RECOVER ANY PAYMENT UNDER THIS ACT SHALL BE
AWARDED A REASONABLE ATTORNEY FEE IN AN AMOUNT TO BE DETERMINED
BY THE COURT OR ARBITRATOR, TOGETHER WITH EXPENSES.
SECTION 5. THIS ACT SHALL TAKE EFFECT IN 120 DAYS.
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