Senate Panel Advances Legislation Curbing Contract Rights

Kristi Pronovost Merit Shop Spokesman Blog

By: Brent Sailhamer, Director of Government Affairs

The Senate Labor & Industry Committee, chaired by Sen. Kim Ward (R-Westmoreland), advanced a bill that could have a drastic effect on the way construction contracts are structured. By a 9-3 vote, the committee approved House Bill 566, introduced in 2017 by Rep. Jamie Santora (R-Delaware). The bill amends the Contractor and Subcontractor Payment Act (CASPA), which was signed into law in 1994 and provides for limitations on that way private construction contracts can be structured.

While current model contracts developed by the American Institute of Architects (AIA) closely follow the guidelines in CASPA, HB 566 would add strict mandatory process for payment recipients to follow in cases of non-payment. The unpaid entity must first wait until thirty days after the conclusion of the billing period and then issue written notice of non-payment. The unpaid entity must then wait another thirty days and issue a second written notice. Finally, the unpaid entity must wait an additional ten days before he/she can initiate suspension of performance, or work stoppage, without penalty. While the bill prescribes a method for work stoppage without penalty, the notification onus falls on unpaid entities to follow a meandering path to resolution.

ABC opposes House Bill 566 because it has serious implications for contract law precedent throughout Pennsylvania, but also limits the ability of contractors to negotiate terms specific to their preference. The rigidity of the notification process outlined does not allow for the negotiation of more favorable terms. In addition to ABC, numerous other groups oppose the legislation, including the Keystone Contractors Association (KCA) and the AIA.

While the full Senate has announced no plan to consider the bill, HB 566 passed the Labor & Industry Committee by a 9-3 vote, with only Sens. John DiSanto (R-Dauphin), Scott Wagner (R-York), and Mike Folmer (R-Lebanon) opposing the plan.

January 31, 2018