AB 396

Bill Subjects

Abstract

(1) Existing law provides that all persons and laborers of every class, except for an original contractor, performing labor upon, bestowing skill or other necessary services on, furnishing materials or leasing equipment to be used or consumed in, or furnishing appliances, teams, or power contributing to, a public work of improvement may serve a stop notice upon the public entity responsible for the public work, as specified. Existing law imposes a duty on a public entity to withhold money or bonds due or to become due to the original contractor in an amount sufficient to answer the claim stated in the stop notice and to provide for the public entity's reasonable cost of any litigation on the matter, as specified. This bill would qualify the requirement that the public entity withhold money or bonds sufficient to provide for reasonable litigation costs to make it applicable only if the original contractor fails to promptly accept a tender of defense of the public entity in the litigation. (2) Existing law requires that a 20-day public work preliminary bond notice be given under specified circumstances. If the notice is not given, a claimant may enforce a claim by giving written notice to the surety and the bond principal within 15 days after recordation of a notice of completion. If no notice of completion has been recorded, the time for giving written notice to the surety and the bond principal is extended to 75 days after completion of the work of improvement. This bill would provide, instead, if no notice is given, a claimant may enforce a claim by giving written notice to the surety and the bond principal prior to the completion of the project or recordation of a notice of completion. (3) Existing law imposes a penalty of 2% per month on funds that are improperly withheld in a contract dispute relating to public and private works of improvement, as specified. Existing law requires any person or corporation that has contracted to do business with a public utility to pay any subcontractor within 15 working days of receipt of each progress payment from the public utility, except as specified. Existing law also requires a state agency or an owner that fails to make any progress payment within 30 days after receipt of the payment request to pay interest at the rate of 10% per year. This bill would state the intent of the Legislature to reconsider prompt payment statutes regarding public and private works of improvement to aid in their clarity and application. (4) Existing law provides that in a contract between the original contractor and a subcontractor, and in a contract between a subcontractor and any subcontractor thereunder, the percentage of retention proceeds withheld cannot exceed the percentage specified in the contract between the public entity and the original contractor. This bill would instead require that retention proceeds not exceed 5% of the payment, as specified, for all contracts entered into on or after January 1, 2010, between a public entity, as defined, and an original contractor, between an original contractor and a subcontractor, and between all subcontractors thereunder. (5) Existing law requires the Department of General Services to withhold not less than 5% of the contract price for a public work of improvement until final completion and acceptance of the project. This bill would require the Department of General Services to withhold not more than 5% of the contract price until final completion and acceptance of the project.