Construction owners and contractors would face limits on withheld payments

Owners, contractors, and subcontractors would limit withheld payments and place that money in a separate account that earns interest. These rules would cover private construction and local government construction or public works. They concern money held back until work is finished or another contract condition is met. Withholding could not exceed five percent of each progress payment or five percent of the total contract price. Contractors and subcontractors could not withhold a higher percentage than the contract between the owner and contractor allows. Interest earned would go proportionately to the contractors and subcontractors whose money was withheld. These rules would apply to contracts entered into on or after the act's effective date.

Owners and contractors would return withheld money within specified deadlines. The deadlines would cover private and local government projects and public-project subcontract payments, including payments to nonemployee service providers and suppliers. Contractors would pay subcontractors within 10 days of receiving the withheld money or 30 days of the subcontractor's satisfactory completion, whichever comes sooner. Owners would pay contractors within 30 days of satisfactory completion, unless their contract sets a different period. A public-project prime contractor could pay later if the deadline for payment-claim notices ends later. These rules would apply to contracts entered into on or after the act's effective date.

Late payers would owe a penalty and interest, and courts would award specified lawyer fees in covered payment lawsuits. Late-payment charges would cover private and public construction, including state-held money kept for warranty obligations. Lawyer-fee awards would cover lawsuits under the private and local government payment rules. Late payments would carry a two percent penalty and interest at the prime rate, a benchmark interest rate. Interest would start the first calendar day after payment was due. A contractor or subcontractor owed the penalty could waive it. Public contracts could not waive the required payment protections. Courts would award lawyer fees equal to 40 percent of the first $25,000 recovered and 20 percent of the remainder, including interest owed before judgment. These rules would apply to contracts entered into on or after the act's effective date.