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A06493 Summary:

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A06493 Floor Votes:

A06493 Text:

 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         6493--D
 
                               2009-2010 Regular Sessions
 
                   IN ASSEMBLY
 
                                      March 6, 2009
                                       ___________
 
        Introduced by M. of A. JOHN, BENEDETTO -- Multi-Sponsored by -- M. of A.
          RUSSELL -- read once and referred to the Committee on Labor -- commit-
          tee  discharged, bill amended, ordered reprinted as amended and recom-
          mitted to said committee -- again reported from  said  committee  with
          amendments,  ordered  reprinted  as  amended  and  recommitted to said

          committee -- again  reported  from  said  committee  with  amendments,
          ordered  reprinted  as  amended  and  recommitted to said committee --
          reported and referred to  the  Committee  on  Codes  --  reported  and
          referred to the Committee on Rules -- Rules Committee discharged, bill
          amended, ordered reprinted as amended and recommitted to the Committee
          on Rules
 
        AN ACT to amend the labor law and the general business law, in  relation
          to  the prompt payment of employees and contractors engaged in private
          construction projects
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1. Section 196-a of the labor law, as added by chapter 605 of
     2  the laws of 1997, is amended to read as follows:

     3    § 196-a. Complaints by employees to commissioner.   (a) Any  employee,
     4  or  the  recognized  and certified collective bargaining agent acting on
     5  the employee's behalf,  may  file  with  the  commissioner  a  complaint
     6  regarding  a violation of this article [six], article nineteen, or arti-
     7  cle nineteen-A of this chapter for an investigation  of  such  complaint
     8  and  statement  setting  the  appropriate remedy, if any.  Failure of an
     9  employer to keep adequate records, in addition to exposing such employer
    10  to penalties authorized under subdivision one  of  section  two  hundred
    11  eighteen  of  this  chapter,  shall  not operate as a bar to filing of a
    12  complaint by an employee. In such a case the employer in violation shall
    13  bear the burden of proving that the complaining employee was paid wages,
    14  benefits and wage supplements.
 

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD10170-12-9
        A. 6493--D                          2
 
     1    (b) Any employee, or the recognized and certified collective  bargain-
     2  ing agent acting on the employee's behalf, contractor, or the recognized
     3  and  certified labor organization with which the contractor has executed
     4  a collective bargaining agreement covering wages, benefits  and  supple-
     5  ments,  may  file with the commissioner a complaint regarding an alleged
     6  violation of this article or article nineteen of this chapter occasioned

     7  by another person, corporation, employer or  entities  in  violation  of
     8  article  thirty-five-E  of the general business law for an investigation
     9  of such complaint and statement setting the appropriate remedy, if any.
    10    § 2. Subdivision 1 of section 756 of  the  general  business  law,  as
    11  added by chapter 127 of the laws of 2002, is amended to read as follows:
    12    1.  "Construction  contract" means a written or oral agreement for the
    13  construction, reconstruction, alteration, maintenance, moving or demoli-
    14  tion of any building, structure or improvement, or relating to the exca-
    15  vation of or other development or improvement to  land,  and  where  the
    16  aggregate   cost  of  the  construction  project  including  all  labor,
    17  services, materials and equipment to be  furnished,  equals  or  exceeds

    18  [two hundred fifty thousand dollars] one hundred fifty thousand dollars.
    19  For  the  purposes  of  this  article  a construction contract shall not
    20  include any such contract made and awarded  by  the  state,  any  public
    21  department,  any  public  benefit corporation, any public corporation or
    22  official thereof, or a municipal corporation  or  official  thereof  for
    23  construction, reconstruction, alteration, repair, maintenance, moving or
    24  demolition  of any public works project nor any contract with a contrac-
    25  tor or subcontractor which is part of such project; or any such contract
    26  the purpose of which is the  construction,  reconstruction,  alteration,
    27  repair,  maintenance,  moving or demolition of an individual one, two or
    28  three family residential dwelling or a residential tract development  of

    29  one hundred [fifty] or less one or two family dwellings, or any residen-
    30  tial  construction  project  where the aggregate size of such project is
    31  [nine thousand] four thousand five hundred square feet or less,  or  any
    32  residential project of fewer than [one hundred fifty] seventy-five units
    33  which  receives  financial  assistance  from the federal government, the
    34  state or a municipal entity designed for households earning  an  average
    35  of  one hundred twenty-five percent of the housing and urban development
    36  agency area median income.
    37    § 3. Section 756-a of the general business law, as  added  by  chapter
    38  127 of the laws of 2002, is amended to read as follows:
    39    §  756-a. Obligations. It is the policy and purpose of this article to

    40  expedite payment of all monies owed to  those  who  perform  contracting
    41  services   pursuant  to  construction  contracts.  Except  as  otherwise
    42  provided in this article, the terms and  conditions  of  a  construction
    43  contract  shall  supersede the provisions of this article and govern the
    44  conduct of the parties thereto.
    45    1. Billing cycle. The parties to a construction contract may, by mutu-
    46  al agreement, establish a billing cycle for the submission  of  invoices
    47  requesting  payment  for  work  performed  pursuant  to  a  construction
    48  contract. In the absence of an agreement by the parties as to the  bill-
    49  ing  cycle,  the  billing cycle shall be the calendar month within which
    50  the work is performed.
    51    2. Invoices. (a) A contractor shall be entitled to invoice  the  owner
    52  for interim payments at the end of the billing cycle. A contractor shall

    53  be  entitled  to  submit  a  final  invoice for payment in full upon the
    54  performance of all the contractor's obligation under the contract.
    55    (i) Upon  delivery  of  an  invoice  and  all  contractually  required
    56  documentation,  an owner shall approve or disapprove all or a portion of
        A. 6493--D                          3
 
     1  such invoice within twelve business days.  Owner  approval  of  invoices
     2  shall  not  be  unreasonably  withheld  nor shall an owner, in bad faith
     3  disapprove all or a portion of an  invoice.  If  an  owner  declines  to
     4  approve  an  invoice  or  a portion thereof, it must prepare and issue a
     5  written statement describing those items in the  invoice  that  are  not
     6  approved.  An  owner  may decline to approve an invoice or portion of an
     7  invoice for:
     8    (1) Unsatisfactory or disputed job progress;

     9    (2) Defective construction work or material not remedied;
    10    (3) Disputed work materials;
    11    (4)  Failure  to  comply  with  other  material  provisions   of   the
    12  construction contract;
    13    (5)  Failure  of  the  contractor  to  make  timely payments for labor
    14  including collectively bargained fringe benefit  contributions,  payroll
    15  taxes  and  insurance,  equipment and materials, damage to the owner, or
    16  reasonable evidence that the construction contract cannot  be  completed
    17  for the unpaid balance of the construction contract sum; or
    18    (6) Failure of the owner's architect to certify payment for any or all
    19  of  the  reasons  set  forth  in this section so long as the reasons are
    20  included in the owner's written statement of disapproval.
    21    (ii) Upon delivery  of  an  invoice  and  all  contractually  required

    22  documentation, a contractor or subcontractor shall approve or disapprove
    23  all or a portion of such invoice within twelve business days. Contractor
    24  and  subcontractor  approval of invoices shall not be unreasonably with-
    25  held nor shall a contractor or subcontractor, in bad  faith,  disapprove
    26  all  or  a portion of an invoice. Nothing in this section shall prohibit
    27  the contractor or subcontractor, at the time of application to the owner
    28  or contractor,  from  withholding  such  application  to  the  owner  or
    29  contractor for payment to the subcontractor or material supplier for:
    30    (1) Unsatisfactory or disputed job progress;
    31    (2) Defective construction work or material not remedied;
    32    (3) Disputed work;
    33    (4)   Failure   to  comply  with  other  material  provisions  of  the
    34  construction contract; or
    35    (5) Failure of the subcontractor to make  timely  payments  for  labor

    36  including  collectively  bargained fringe benefit contributions; payroll
    37  taxes and insurance, equipment and materials, damage  to  contractor  or
    38  another  subcontractor or material supplier, or reasonable evidence that
    39  the subcontract cannot be  completed  for  the  unpaid  balance  of  the
    40  subcontract sum.
    41    (b)  Nothing in this subdivision shall authorize the withholding of an
    42  application to the owner or contractor for the payment to a  subcontrac-
    43  tor  or  material  supplier  when  due to a delay in job progress by the
    44  owner, contractor or another subcontractor or  material  supplier  other
    45  than the applicant or applicant's subcontractor or material supplier.
    46    3.  Payment.  (a)  The  owner's  payment of a contractor's interim and
    47  final invoices shall be made on the basis of a duly approved invoice  of
    48  work performed and the material supplied during the billing cycle.

    49    (i) Unless the provisions of this article provide otherwise, the owner
    50  shall  pay  the  contractor strictly in accordance with the terms of the
    51  construction contract.
    52    (ii) [Unless otherwise agreed to by the parties, payment]  Payment  of
    53  an  interim  or final invoice shall be due from the owner not later than
    54  thirty days after approval of the invoice.
    55    (iii) If payment by the owner  is  contingent  upon  lender  approval,
    56  payment of a contractor's interim or final invoice or the amount of loan
        A. 6493--D                          4
 
     1  proceeds disbursed by the lender for payment of the contractor's interim
     2  or final invoice shall be due from the owner seven days after receipt by
     3  the  owner  of  good  funds except where the provisions of section seven
     4  hundred fifty-six-d of this article applies.

     5    (iv) An owner may withhold from an interim payment only an amount that
     6  is sufficient to pay the costs and expenses the owner reasonably expects
     7  to  incur  in order to cure the defect or correct any items set forth in
     8  writing pursuant to subparagraph (i) of paragraph (a) of subdivision two
     9  of this section, or in the alternative, to withhold  an  amount  not  to
    10  exceed  the  line item amount appearing in the agreed schedule of values
    11  together with any change orders, additions  and/or  deletions,  if  such
    12  schedule  has  been previously submitted, and/or an amount sufficient to
    13  cover liquidated damages as established in an agreed  upon  schedule  in
    14  the construction contract.
    15    (b)  The  contractor  or  subcontractor's  payment of subcontractor or
    16  material supplier's interim or final invoice shall be made on the  basis

    17  of  a duly approved invoice of the work performed and materials supplied
    18  during the billing cycle.
    19    (i) Unless the provisions  of  this  article  provide  otherwise,  the
    20  contractor  or  subcontractor  shall  pay  the subcontractor strictly in
    21  accordance with the terms of the construction contract. Performance by a
    22  subcontractor in accordance with the provisions of  its  contract  shall
    23  entitle  it to payment from the party with which it contracts.  Notwith-
    24  standing this article, where a contractor  enters  into  a  construction
    25  contract  with  a  subcontractor  as  agent  for  a disclosed owner, the
    26  payment obligation shall flow directly from the disclosed owner as prin-
    27  cipal to the subcontractor and through the agent.
    28    (ii) When  a  subcontractor  has  performed  in  accordance  with  the
    29  provisions of its construction contract, the contractor shall pay to the

    30  subcontractor,  and  each subcontractor shall in turn pay to its subcon-
    31  tractors, the full or proportionate amount of funds  received  from  the
    32  owner  for  each  subcontractor's  work  and  materials based on work or
    33  services provided under the  construction  contract,  seven  days  after
    34  receipt  of  good  funds for each interim or final payment, provided all
    35  contractually required documentation and waivers are received.
    36    (iii) A contractor or subcontractor may withhold amounts received from
    37  an owner in connection with an interim payment due to a subcontractor or
    38  material supplier only such sums that are sufficient to pay  the  direct
    39  expenses  as  are reasonable to correct deficiencies identified pursuant
    40  to subparagraph (ii)  of  paragraph  (a)  of  subdivision  two  of  this
    41  section,  or in the alternative, to withhold an amount not to exceed the

    42  line item amount appearing in the agreed schedule  of  values,  together
    43  with any change order, additions or deletions, if such schedule has been
    44  previously  submitted[,  and/or an amount sufficient to cover liquidated
    45  damages as established in an agreed upon schedule  in  the  construction
    46  contract].
    47    (iv)  If a contractor, after submitting an invoice to an owner under a
    48  construction contract, but before making a payment to a subcontractor or
    49  material  supplier  for  the  subcontractor's  or  material   supplier's
    50  performance  covered by such invoice, discovers that all or a portion of
    51  the payment otherwise due to the subcontractor or material  supplier  is
    52  subject  to  withholding  from the subcontractor or material supplier in
    53  accordance with the construction contract and the conditions  set  forth

    54  in  subparagraph  (ii)  of  paragraph  (a)  of  subdivision  two of this
    55  section, then the contractor shall:
        A. 6493--D                          5
 
     1    (1) As soon as practicable upon ascertaining the cause giving rise  to
     2  a withholding, but prior to the due date for a subcontractor or material
     3  supplier  payment, furnish to the subcontractor or material supplier and
     4  the owner written notice of withholding specifying conditions for  with-
     5  holding payment and identifying the amount to be withheld;
     6    (2)  Reduce the subcontractor's or material supplier's interim payment
     7  by an amount not to exceed the amount specified in the notice  of  with-
     8  holding; and
     9    (3) Pay the subcontractor or material supplier amounts withheld within
    10  seven  days after correction of the identified subcontractor or material

    11  supplier performance deficiency and receipt of all  required  documenta-
    12  tion and waivers, unless the funds [therefore] therefor must be obtained
    13  from the owner's next interim payment due to a reduction in the contrac-
    14  tor's  billing  directly  resulting from the subcontractor's or material
    15  supplier's performance deficiency identified in the notice of  withhold-
    16  ing.
    17    (c)  A  written notice of any withholding under this subdivision shall
    18  be issued to a subcontractor or material supplier specifying:
    19    (i) The amount to be withheld;
    20    (ii) The specific causes  for  withholding  under  the  terms  of  the
    21  construction contract and pursuant to this subdivision;
    22    (iii)  The remedial actions necessary to be taken by the subcontractor
    23  or material supplier in order to receive payments of the  amounts  with-
    24  held; and

    25    (iv) The documentation and waivers required.
    26    4.  Notice.  A contractor or subcontractor shall disclose to a subcon-
    27  tractor, at the time the construction subcontract is entered  into,  the
    28  due date for receipt of payments to the contractor or subcontractor from
    29  the  owner  or  the  contractor  as  the case may be. If a contractor or
    30  subcontractor fails to accurately disclose the due date to a subcontrac-
    31  tor, the contractor or subcontractor  shall  be  obligated  to  pay  the
    32  subcontractor  as  though  the due dates established in paragraph (a) of
    33  subdivision three of this section were met by the  owner.  In  addition,
    34  upon  written request of a subcontractor, the owner shall provide notice
    35  to such subcontractor within five days of making any  interim  or  final
    36  payment  to  the contractor. The subcontractor's request shall remain in

    37  effect for the duration of the subcontractor's work on the project.
    38    § 4.  Section 756-b of the general business law, as added  by  chapter
    39  127 of the laws of 2002, is amended to read as follows:
    40    §  756-b.  Remedies.  1.  (a)  If  any  interim  or final payment to a
    41  contractor is delayed beyond the due date established in  paragraph  (a)
    42  of  subdivision three of section seven hundred fifty-six-a of this arti-
    43  cle, the owner shall pay the contractor interest beginning on  the  next
    44  day  at  the rate of one percent per month or fraction of a month on the
    45  unpaid balance, or at a higher rate  consistent  with  the  construction
    46  contract.
    47    (b)  Notwithstanding  any  contrary agreement, if any interim or final
    48  payment to a subcontractor is delayed beyond the due date established in
    49  paragraph (b) of subdivision three of section seven hundred  fifty-six-a

    50  of  this  article  the contractor or subcontractor shall pay its subcon-
    51  tractor interest, beginning on the next day, at the rate of one  percent
    52  a  month  or  fraction  of a month on the unpaid balance, or at a higher
    53  rate consistent with the construction contract.
    54    2. (a) (i) If an owner fails to approve or disapprove an invoice with-
    55  in the time limits established in subparagraph (i) of paragraph  (a)  of
    56  subdivision two of section seven hundred fifty-six-a of this article, or
        A. 6493--D                          6
 
     1  to  pay  the  contractor  the  undisputed invoice amount within the time
     2  limits provided by paragraph (a) of subdivision three of  section  seven
     3  hundred fifty-six-a of this article, the contractor may suspend contrac-
     4  tually  required  performance,  only  after  providing the owner written

     5  notice and an opportunity to cure consistent with subparagraph  (ii)  of
     6  this paragraph.
     7    (ii) A contractor intending to suspend performance on the construction
     8  contract  for  failure of the owner to make timely payments or approvals
     9  within the time limits provided by this article must provide  the  owner
    10  written  notice  at  least  ten  calendar  days  before the contractor's
    11  intended suspension. Such notice shall:
    12    (A) inform the owner that payment for undisputed invoice amounts  have
    13  not been received; and
    14    (B)  state  the  intent  of  the contractor to suspend performance for
    15  non-payment.
    16  If after the tenth calendar day following written notice the  owner  has
    17  not cured the deficiency, the contractor may suspend performance.
    18    (iii)  A  contractor shall not be deemed in breach of the construction
    19  contract for suspending performance pursuant to this section.

    20    (b)(i) A subcontractor may suspend contractually required  performance
    21  if any or all of the occurrences outlined in clauses (A), (B) and (C) of
    22  this  subparagraph  occur and only after providing written notice and an
    23  opportunity to cure consistent with subparagraph (ii) of this paragraph:
    24    (A) If an owner fails to make timely payments for undisputed  invoices
    25  within the time limits established by subdivision three of section seven
    26  hundred fifty-six-a of this article for the subcontractor's work and the
    27  contractor also fails to pay the subcontractor for the approved work;
    28    (B) If an owner pays the contractor within the time limits established
    29  by  subdivision three of section seven hundred fifty-six-a of this arti-
    30  cle for undisputed invoices for work performed by the subcontractor  but
    31  the  contractor  fails  to  make payment to the subcontractor within the

    32  time frames established by this article for the subcontractor's work;
    33    (C) If an owner fails to approve or disapprove a portion  of  contrac-
    34  tor's  invoice  for  work performed by the subcontractor within the time
    35  limits established in paragraph (a) of subdivision two of section  seven
    36  hundred fifty-six-a of this article;
    37    (D)  If a contractor or subcontractor fails to approve or disapprove a
    38  subcontractor's invoice within the time limits established in  paragraph
    39  (b)  of  subdivision  three of section seven hundred fifty-six-a of this
    40  article; or
    41    (E) If an owner fails to approve portions of the contractors'  billing
    42  for  work  performed  by the subcontractor within the time limits estab-
    43  lished by this article and the reasons for  such  failure  are  not  the
    44  fault of or directly related to the subcontractor's work.

    45    (ii)  A  subcontractor intending to suspend performance for failure to
    46  receive timely payments within the time limits established  pursuant  to
    47  this  article  must  provide  both  the owner and the contractor written
    48  notice at least ten calendar days before  the  subcontractor's  intended
    49  suspension. Such notice shall:
    50    (A)  inform  the  owner and the contractor that payment for undisputed
    51  billing amounts have not been received; and
    52    (B) state the intent of the  contractor  to  suspend  performance  for
    53  non-payment.
    54    If  after  the  tenth calendar day following written notice either the
    55  owner or the contractor has not cured the deficiency, the  subcontractor
        A. 6493--D                          7
 
     1  may  suspend  performance  and/or  attempt to resolve in compliance with
     2  subdivision three of this section.

     3    (iii)   A   subcontractor  shall  not  be  deemed  in  breach  of  the
     4  construction  contract  for  suspending  performance  pursuant  to  this
     5  section.
     6    (iv)  (A)  A  contractor or subcontractor that suspends performance as
     7  provided in this section shall not be required to furnish further labor,
     8  materials or services until the contractor or subcontractor is paid  the
     9  undisputed  invoice amount at the time period for completion as provided
    10  in the construction contract, or a final determination has been made  in
    11  compliance  with  subdivision  three  of this section and complied with.
    12  All of the time frames established within [the construction contract  of
    13  a  contractor  or  subcontractor] this section shall be extended for the
    14  length of time performance was suspended. Payment of  documented  actual

    15  costs  incurred  for  re-mobilization resulting from suspension shall be
    16  negotiated between the parties.
    17    (B) In the event of suspension of a construction contract, as provided
    18  in this article, all materials, equipment, tools, construction equipment
    19  and machinery located at the job site shall remain the sole  and  exclu-
    20  sive  property  of  the contractor or subcontractor and shall be removed
    21  from the job site, if necessary, within a  reasonable  period  of  time.
    22  Access  to  the  contractor's  or  subcontractor's property shall not be
    23  unreasonably withheld.
    24    3.  (a) Upon receipt of written notice of  a  complaint  (i)  that  an
    25  owner  has violated the provisions of this article; (ii) that a contrac-
    26  tor has violated the provisions of this article; (iii) where a  contrac-

    27  tor alleges a subcontractor has violated the provisions of this article;
    28  (iv)  where  a  subcontractor  alleges  a  contractor  has  violated the
    29  provisions of this article;  (v)  where  a  subcontractor  alleges  that
    30  another  subcontractor has violated the provisions of this article; (vi)
    31  where a contractor or subcontractor  alleges  a  material  supplier  has
    32  violated  the  provisions  of  this  article;  or (vii) where a material
    33  supplier  alleges  a  contractor  or  subcontractor  has  violated   the
    34  provisions  of  this  article;  the parties shall attempt to resolve the
    35  matter giving rise to such complaint.
    36    (b) The written notice required under this section shall be  delivered

    37  at  or sent by any means that provides written, third-party verification
    38  of delivery to the last business  address  known  to  the  party  giving
    39  notice.
    40    (c)  If  efforts  to  resolve  such  matter to the satisfaction of all
    41  parties are unsuccessful, the aggrieved party may refer the matter,  not
    42  less  than  fifteen  days  of the receipt of third party verification of
    43  delivery of the complaint, to the American Arbitration  Association  for
    44  an  expedited  arbitration  pursuant  to the Rules of the American Arbi-
    45  tration Association.
    46    (d) Upon conclusion of the  arbitration  proceedings,  the  arbitrator
    47  shall  submit  to the parties his or her opinion and award regarding the
    48  alleged violation.

    49    (e) The award of the arbitrator shall be final and may only be vacated
    50  or modified as provided in article seventy-five of  the  civil  practice
    51  law  and  rules  upon  an  application  made within the time provided by
    52  section seventy-five hundred two of the civil practice law and rules.
    53    § 5. Section 757 of the general business law is amended by adding  two
    54  new subdivisions 3 and 4 to read as follows:
    55    3. A provision, covenant, clause or understanding in, collateral to or
    56  affecting  a construction contract stating that expedited arbitration as
        A. 6493--D                          8
 
     1  expressly provided for and in the manner established  by  section  seven
     2  hundred  fifty-six-b  of  this  article  is  unavailable  to one or both

     3  parties.
     4    4.  A provision, covenant, clause or understanding in collateral to or
     5  affecting a construction contract establishing payment provisions  which
     6  differ  from  those  established  in  subdivision three of section seven
     7  hundred fifty-six-a and section seven hundred fifty-six-b as applicable.
     8    § 6. This act  shall  take  effect  immediately  and  shall  apply  to
     9  construction  contracts  entered  into  after  such  date,  except those
    10  contracts entered into as part of a construction  project  for  which  a
    11  permit  or  permits have been issued and work has begun on such projects
    12  prior to the effective date of this act.