SENATE LABOR COMMITTEE

STATEMENT TO

SENATE, No. 1726

with committee amendments

STATE OF NEW JERSEY

DATED: MAY 4, 2006

      The Senate Labor Committee reports favorably and with committee amendments, Senate Bill No. 1726.

      This bill, as amended, provides procedures and remedies for prime contractors, subcontractors and subsubcontractors who are not paid in a timely way in connection with a public or private construction contract.

      If a prime contractor performs in accordance with a construction contract and the billing for the work has been approved and certified by the owner, the bill, as amended, requires the owner to pay the amount due to the prime contractor each periodic payment, final payment or retainage monies not more than 20 calendar days after the billing date.  The billing is deemed approved and certified 10 days after the owner receives it unless the owner provides, before the end of the 10-day period, a written statement of the amount withheld and the reason for withholding payment. 

      The bill provides that if payments are late, the project owner is liable for the amount of money owed under the contract, plus interest at a rate equal to the prime rate plus 1%.  Current law establishing that liability applies it to contractors and subcontractors, but not owners.

      The bill permits any prime contractor, subcontractor or subsubcontractor who is not paid as required to suspend performance of a construction contract, after giving seven calendar day’s written notice to the party failing to make the required payments, without penalty for breach of contract, until the required payment is made.

      The bill, as amended, requires all construction contracts between owners, prime contractors, subcontractors or subsubcontractors entered into after the effective date of the bill to provide that disputes regarding whether a party has failed to make required payments be submitted to binding arbitration under the expedited rules of the American Arbitration Association.  Arbitration required by the bill would not apply to disputes concerning the bid solicitation or award process, or to the formation of contracts or subcontracts.  The bill requires that actions and arbitrations brought to collect payments or resolve disputes pursuant to the bill be conducted inside of this State and that the prevailing party be awarded reasonable costs and attorney fees.

      As amended, the bill specifies that no provision of the bill shall be construed as restricting the rights or remedies provided by any other applicable State or federal law to an owner who is a resident homeowner or purchaser with respect to the real property being improved.

      The rights, remedies or protections provided by the bill are in addition to other remedies provided under any other State law.  To the extent that the bill’s provisions provide greater rights, remedies or protections for prime contractors, subcontractors and subsubcontractors than other State laws, the provisions of the bill supersede the other laws.  At the same time, the bill specifies that it does not restrict any rights or remedies provided to owners under any other State or federal law.