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New Laws Offer Subs Happier New Year

Wednesday, January 4, 2012

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Subcontractors will see faster pay in California, less risk in Texas, new worker authorization procedures in Alabama, and other shifts in the 2012 legal landscape, under new state laws that took effect Jan. 1.

The American Subcontractors Association has highlighted several major new laws that are now in effect.

California: Retainage Cap

California’s S.B. 293, signed into law Oct. 9 by Gov. Jerry Brown (D), caps retainage at 5 percent on state and local public contracts signed between Jan. 1, 2012, and Jan. 1, 2016.

Because state law already banned prime contractors from retaining more from a subcontractor than the owner retained from the prime, the law’s effect is a 5 percent cap on retainage that can be held on subcontractors.

 U.S. Citizenship & Immigration Service

 U.S. Citizenship & Immigration Service

Like 16 other states, Alabama is instituting the E-Verify program, to verify the immigration status of new hires.

The new law also improves the state’s prompt payment law by requiring upper-tier contractors on public projects to pay lower-tier contractors within seven days of receiving a progress payment.

Previously, upper-tier contractors had 10 days to pay. The new law also exempts laborers from the state’s payment bond preliminary notice requirement.

Texas: Less Risk, Paperwork

In Texas, a new law dramatically limits the ability of other parties on a private or public construction project to transfer risk to subcontractors when subcontractors are not at fault.

H.B. 2093, which Gov. Rick Perry signed into law June 17, bans broad-form indemnity clauses in private and public construction contracts and mandates that “a consolidated insurance program that provides general liability insurance coverage must provide completed operations insurance coverage for a policy period of not less than three years.”

The law also makes additional insured requirements in construction contracts “void and unenforceable,” except on consolidated insurance programs and for personal injury claims.

Also now in effect is H.B. 1456, which creates statutory conditional and unconditional lien waiver forms for progress payments and final payment on construction projects.

“As a result, subcontractors and their clients will not have to manage an unpredictable patchwork of lien waiver forms,” ASA said.

Alabama: E-Verify

Alabama, meanwhile, has jumped on the E-Verify bandwagon with H.B. 56, which requires companies with state contracts to begin using the federal E-Verify system to confirm employees’ legal status to work.

Under the measure, signed into law June 9 by Gov. Robert Bentley (R), a company’s business license will be suspended after a first violation and permanently revoked after a second one.

The federal E-Verify program was created as a voluntary Internet-based pilot program to help employers verify the work authorization of new hires.

Under the program, employers and new hires jointly complete the I-9 Employment Eligibility Verification form. The employer then enters information from the form into the E-Verify system, where it is compared against 455 million records in the Social Security Administration database and 80 million records in the Department of Homeland Security’s immigration databases. Most inquiries are resolved within 72 hours.

Federal contractors and subcontractors are already required to use E-Verify to determine employment eligibility of employees performing direct work on the contract and new hires.

Alabama is the 17th state to begin using E-Verify. The program has more than 300,000 enrolled employers at nearly one million hiring sites.

Two bills introduced in Congress in June would make E-Verify a federal law.

The measures are the Legal Workforce Act (H.R. 2164), sponsored by Rep. Lamar Smith (R-TX), and the Accountability Through Electronic Verification Act (S.B. 1196), sponsored by Sen. Chuck Grassley (R-IA).

Oregon: Billing Cycle Tweaks

Finally, Oregon has made minor modifications to the billing cycle requirement for prompt payment of amounts due under private construction contracts. That law stems from S.B. 384, which Gov. John Kitzhaber (D) signed on June 30.

   

Tagged categories: Bidding; Contracts; Laws and litigation; Subcontractors

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