Legislature Looks to Change Rules for Work Stoppage

Kristi Pronovost Merit Shop Spokesman Blog

By: Brent Sailhamer, Director of Government Affairs

In 1994, the Pennsylvania legislature passed the Contractor & Subcontractor Payment Act (CASPA), opening the door to government regulation of private construction contracting.  The law was an attempt to provide parity between the rights of all parties involved in the construction process, establishing protections for smaller entities and setting limitations on the power of larger entities.  Since then, more concerns about the contracting process have arisen, and it looks like the legislature is about to offer its first substantive change to the law in more than two decades.

This week, the Pennsylvania Senate passed House Bill 566 by a 43-5 vote, altering CASPA by strengthening protections and codifying a number of practices already in place in the field.  For starters, the bill clarifies that parties cannot be compelled to waive their rights through the contracting process.  Frequent claims by specialty contractors led to the change, after they claimed that, in exchange for signing large contracts, they were routinely asked to waive rights to legal action and other remedies.  Other changes include:

  • Owners will now have 14 days instead of seven days to submit a written explanation for withholding payment for a deficiency claim. In return, contractors must be paid for all uncontested work in the invoice;
  • Once a substantial amount of work has been completed on a project, a contractor may post a maintenance bond with approved surety for 120% of the value of the retainage to release that retainage;
  • Contractors may now negotiate work stoppage without penalty in contracts. The process must be agreed to by both parties, but cannot require contractors to wait any more than 70 days following the end of an unpaid billing cycle or to submit more than three written notices to the delinquent entity.

The bill now heads back to the House of Representatives to concur on changes made in the Senate and then will head to the Governor for his signature.

May 25, 2018