Legislative Updates


URCA closely tracks any State legislation that deals with indemnity provisions in commercial construction contracts, retention payments and subcontractor bond/lien rights.

The following two bills meet that criteria and have been closely monitored by the Executive Director as well as several other subcontractor associations.
The first bill, SB 293 (Padilla) includes several provisions that would have both a positive and negative impact on our industry. From a positive standpoint, Section 7108.5 of the Business and Professions Code has been amended to read "a prime contractor shall pay to any subcontractor, not later than seven (7) days after receipt of each progress payment" as opposed to the current ten (10) days. Secondly, under Section 5 of the bill, Section 7201 is added to the Public Contract Code and mandates that "retention proceeds withheld from any payment by a public entity from the original contractor, by the original contractor from any subcontractor, and by subcontractor, from any subcontractor thereunder shall not exceed 5 percent of the payment." This section would remain in effect until January 1, 2016. On the negative side, Section 2 of this bill would amend Section 3252 of the Civil Code to read, "if the 20-day public work preliminary bond notice was not given as provided in Section 3098, a claimant may enforce a claim by giving written notice to the surety and bond principal prior to completion of the project, or recordation of Notice of Completion."

As a result of Section 2, URCA has maintained a position of OPPOSE unless this section is amended to keep intact Section 3252 of the Civil Code as amended by the State Legislature in 1995, which preserves a subcontractor's right, albeit the filing of a 20-day public work preliminary notice, to file a claim fifteen (15) days after NOC recordation, or, if no NOC recorded, within seventy-five days after completion of the project. URCA and ASAC have been working closely with the author and we are "cautiously optimistic" that the author will amend the bill to keep intact Section 3252, as amended in 1995.

The second bill is SB 474 (Evans). Currently, commercial construction contracts contain "total liability" indemnity provisions (Type 1) that are passed along to subcontractors who have the least control over the construction project or authoritative control over the acts of negligence of others on the job site. SB 474 would define liability on the basis of proportionate responsibility, not total liability. In essence, this bill would mirror the language of AB 758, which was signed into law in 2005 and mitigated the impact of unfair indemnity clauses in construction contracts of residential projects.

It should be noted that, as a result of strong public agencies' opposition, public agencies would be exempt from this bill. Hence, this bill would be applicable only to private commercial construction contracts. Nevertheless, the passage of this bill would provide significant relief to our industry and the subcontractor community as a whole. URCA's position is a strong SUPPORT.


 

 

 

 

 

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