Payment bonds: laborers.

(1) Existing law requires that, for private and public works of improvement, and in a public works contract, a prime contractor or subcontractor pay to any subcontractor, not later than 10 days after receipt of each progress payment, unless otherwise agreed to in writing, the respective amount allowed the contractor on account of the work performed by the subcontractors, to the extent of each subcontractor's interest therein, as prescribed. This bill would, instead, require that those amounts be paid not later than 7 days after receipt of each progress payment. (2) Existing law, until July 1, 2012, requires, with regard to a contract entered into on or after January 1, 1995, in order to enforce a claim upon any payment bond given in connection with a public work, that a claimant give the 20-day public work preliminary bond notice, as provided. Existing law further authorizes a claimant, if the 20-day public work preliminary bond notice was not given as prescribed by statute, to enforce a claim by giving written notice to the surety and the bond principal, as provided, within 15 days after recordation of a notice of completion, or if no notice of completion has been recorded, within 75 days after completion of the work of improvement. This bill would provide, with regard to a contract entered into on or after January 1, 2012, and until July 1, 2012, if the 20-day public work preliminary bond notice was required to be given by a person who has no direct contractual relationship with the contractor, and who has not given that notice, that person 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, or if no notice of completion has been recorded, within 75 days after completion of the work of improvement, as specified. The bill would provide that these provisions do not apply to a laborer, as specified, or if all progress payments, except for those disputed in good faith, have been made to a subcontractor who has a direct contractual relationship with the general contractor to whom the claimant has provided materials or services, or the subcontractor has been terminated from the project, as specified, and all progress payments, except those disputed in good faith, were made as of the termination date. (3) Existing law, operative July 1, 2012, requires a claimant to give a preliminary notice to enforce his or her claim against a payment bond given in connection with a private or public work of improvement, and allows the claimant, if he or she did not give a preliminary notice, to enforce his or her claim by giving written notice to the surety and bond principal within 15 days after recordation of a notice of completion, or if no notice of completion has been recorded, within 75 days after completion of the work of improvement. This bill would provide, if the preliminary notice was required to be given by a person who has no direct contractual relationship with the contractor, and who has not given that notice, that person 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, or if no notice of completion has been recorded, within 75 days after completion of the work of improvement, as specified. The bill also would provide that these provisions do not apply to a laborer, as specified, or if all progress payments, except for those disputed in good faith, have been made to a subcontractor who has a direct contractual relationship with the general contractor to whom the claimant has provided materials or services, or the subcontractor has been terminated from the project, as specified, and all progress payments, except those disputed in good faith, were made as of the termination date. (4) Existing law authorizes the Department of General Services, or any other department with authority to enter into contracts, to contract with suppliers for goods and services and for public works. Existing law provides that in a contract relating to the construction of a public work of improvement between the public entity and original contractor, 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, until January 1, 2016, prohibit retention proceeds from exceeding 5% of the payment, as specified, for those contracts entered into on or after January 1, 2012, between a public entity, as defined, and an original contractor, between an original contractor and a subcontractor, and between all subcontractors thereunder. The bill would exempt a contract from this provision if the contractor notified the subcontractor that a bond is required, and the subcontractor failed to furnish the contractor with the bond. (5) Existing law contains various provisions relating to contracts for the performance of public works of improvement, including provisions for the payment of progress payments and the disbursing and withholding of retention proceeds. Existing law prohibits progress payments upon these contracts from being made in excess of 95% of the percentage of actual work completed plus a like percentage of the value of material delivered, as specified, and requires the Department of General Services to withhold not less than 5% of the contract price until final completion and acceptance of the project. This bill would instead, until January 1, 2016, prohibit progress payments upon these contracts from being made in excess of 100% of the percentage of actual work completed, and would permit the Department of General Services to withhold not more than 5% of the contract price until final completion and acceptance of the project, except as specified.