Building Trade Unions Abandon Subcontractors on Prompt Pay Legislation

By: Brent Sailhamer, Director of Government Affairs, ABC Keystone

Earlier this week, the House Commerce Committee, chaired by Rep. Brian Ellis (R-Butler), moved a controversial bill that would, for the first time, establish the procedures for suspension of performance in Pennsylvania statute. The process, known as work stoppage, is present in an overwhelming majority of construction contracts, but the bill would define the procedures for walking off of a jobsite due to non-payment. The issue is a main focus for many building trade unions across the state and their support this week showed how much they were willing to sacrifice to get the bill moving.

House Bill 566, introduced by Rep. Jamie Santora (R-Delaware), establishes an inflexible process for work stoppage due to non-payment. The issue has been heavily promoted by subcontractors and building trade unions, who claim that they have little recourse when owners and prime contractors delay or stop payment. The bill allows work stoppage without penalty, superseding contract terms, but adds rigid time frames to the process. The unpaid party must wait 30 days after the end of the billing period in which he/she has not been paid to send an initial notice to the payer. Then he/she must wait another 30 days to send a second notice. Finally, after 60 days, the unpaid party must send a certified letter, notifying the payer that he/she has 10 days to pay the amount due or the unpaid party may assert his/her right to stop work. This 70-day period leaves little room for negotiation and solidifies a time frame in statute, preventing subcontractors from negotiating shorter time frames for suspension of performance. Under HB 566, an unpaid party must wait no less than 70 days before utilizing his/her rights to stop work.

The right to stop work was so valuable to the Pennsylvania Building & Construction Trades Council, who supported the bill, that they neglected one of the most glaring issues for many of their members. Included in previous versions of so-called “prompt pay legislation” was a stipulation that limited the payment terms of contracts. Currently, no such limitation exists, meaning that owners and prime contractors are routinely free to insert payment terms of 120 days or more into construction contracts. Under such a scenario, signatory companies and subcontractors could potentially be forced to wait as much as 190 days to assert their right to stop work (the 120-day billing period plus the 70-day work stoppage provision).

While House leadership has given no indication that there is planned action on the bill beyond the committee level, several groups, including ABC, expressed concern over the rigidity of the work stoppage time frame and the increased imbalance in contract terms.