Bill Text: VA HB2500 | 2023 | Regular Session | Chaptered
Bill Title: Construction contracts; payment clauses to be included in certain contracts.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2023-03-26 - Governor: Acts of Assembly Chapter text (CHAP0675) [HB2500 Detail]
Download: Virginia-2023-HB2500-Chaptered.html
Be it enacted by the General Assembly of Virginia:
1. That §§2.2-4347, 2.2-4354, and 11-4.6 of the Code of Virginia are amended and reenacted as follows:
§2.2-4347. Definitions.
As used in this article, unless the context requires a different meaning:
"Construction contract" means a contract relating to the construction, alteration, repair, or maintenance of a building, structure, or appurtenance to such building or structure, including moving, demolition, and excavation connected with such building or structure, or any provision contained in any contract relating to the construction of projects other than buildings.
"Contractor" or "general contractor"
means the entity that has a direct contract with any "state agency"
as defined herein, or any agency of local government as discussed in §
2.2-4352.
"Debtor" means any individual, business, or group having a delinquent debt or account with any state agency that obligation has not been satisfied or set aside by court order or discharged in bankruptcy.
"Payment date" means either (i) the date on which
payment is due under the terms of a contract for provision of goods or services;
or (ii) if such date has not been established by contract, (a) thirty
30 days after receipt of a proper invoice by the state agency or its agent
or forty-five 45 days after receipt by the local government or
its agent responsible under the contract for approval of such invoices for the
amount of payment due, or (b) thirty 30 days after receipt
of the goods or services by the state agency or forty-five 45
days after receipt by the local government, whichever is later.
"State agency" means any authority, board,
department, instrumentality, institution, agency, or other unit of state
government. The term shall "State agency" does not
include any county, city, or town or any local or regional
governmental authority.
"Subcontractor" means any entity that has a contract to supply labor or materials to the contractor to whom the contract was awarded or to any subcontractor in the performance of the work provided for in such contract.
§2.2-4354. Payment clauses to be included in contracts.
Any contract awarded by any state agency, or any contract awarded by any agency of local government in accordance with §2.2-4352, shall include:
1. A payment clause that obligates a the
contractor on a construction contract, in the event that the contractor has
not received payment from the state agency or local government for work
performed by a subcontractor under such contract, to be liable for the
entire amount owed to any such subcontractor with which it
contracts and to pay such subcontractor within 60 days of the receipt of
an invoice following satisfactory completion of the work for which the
subcontractor has invoiced. Such contractor shall not be liable for amounts
otherwise reducible due to the subcontractor's noncompliance with the terms of
the contract. However, in the event that the contractor withholds all or a part
of the amount promised to invoiced by the subcontractor under the
terms of the contract, the contractor shall notify the subcontractor
within 50 days of the receipt of such invoice, in writing, of his intention
to withhold all or a part of the subcontractor's payment with the reason for
nonpayment, specifically identifying the contractual noncompliance, the
dollar amount being withheld, and the lower-tier subcontractor responsible for
the contractual noncompliance. Payment by the party contracting with the
contractor shall not be a condition precedent to payment to any lower-tier
subcontractor, regardless of that contractor contractor's
receiving payment for amounts owed to that contractor. Any provision in a
construction contract contrary to this section shall be unenforceable.
Nothing in this subdivision shall be construed to (i) apply to or prohibit the
inclusion of any retainage provisions in a construction contract or (ii) apply
to contracts awarded solely for professional services as that term is defined
in §2.2-4301 where the public body is contracting directly with an
architectural and engineering firm.
2. A payment clause that obligates the contractor to take one of the two following actions within seven days after receipt of amounts paid to the contractor by the state agency or local government for work performed by the subcontractor under that contract:
a. Pay the subcontractor for the proportionate share of the total payment received from the agency attributable to the work performed by the subcontractor under that contract; or
b. Notify the agency and subcontractor, in writing, of his intention to withhold all or a part of the subcontractor's payment with the reason for nonpayment.
3. A payment clause that requires (i) individual contractors to provide their social security numbers and (ii) proprietorships, partnerships, and corporations to provide their federal employer identification numbers.
4. An interest clause that obligates the contractor to pay interest to the subcontractor on all amounts owed by the contractor that remain unpaid after seven days following receipt by the contractor of payment from the state agency or agency of local government for work performed by the subcontractor under that contract, except for amounts withheld as allowed in subdivision 2.
5. An interest rate clause stating, "Unless otherwise provided under the terms of this contract, interest shall accrue at the rate of one percent per month."
Any such contract awarded shall further require the contractor to include in each of its subcontracts a provision requiring each subcontractor to include or otherwise be subject to the same payment and interest requirements with respect to each lower-tier subcontractor.
A contractor's obligation to pay an interest charge to a subcontractor pursuant to the payment clause in this section shall not be construed to be an obligation of the state agency or agency of local government. A contract modification shall not be made for the purpose of providing reimbursement for the interest charge. A cost reimbursement claim shall not include any amount for reimbursement for the interest charge.
§11-4.6. Required contract provisions in construction contracts.
A. As used in this section, unless the context requires a different meaning:
"Construction contract" means a contract between
a general contractor and a subcontractor relating to the construction,
alteration, repair, or maintenance of a building, structure, or appurtenance
thereto, including moving, demolition, and excavation connected therewith, or
any provision contained in any contract relating to the construction of
projects other than buildings a contract for the construction,
alteration, repair, or maintenance of a building, structure, or appurtenance
thereto, including moving, demolition, and excavation connected therewith, or
any provision contained in any contract relating to the construction of
projects other than buildings, except for contracts awarded solely for
professional services as that term is defined in §2.2-4301.
"General Contractor" or "general
contractor" and "subcontractor" have the meanings ascribed thereto
in §43-1 means the same as that term is defined in §54.1-1100,
except that those terms such term shall not include persons
solely furnishing materials.
"Owner" means a person or entity, other than a public body as defined in §2.2-4301, responsible for contracting with a general contractor for the procurement of a construction contract.
"Subcontractor" means the same as that term is defined in §2.2-4347.
B. 1. In any construction contract between an owner and
a general contractor, the parties shall include a provision that requires the
owner to pay such general contractor within 60 days of the receipt of an
invoice following satisfactory completion of the portion of the work for which
the general contractor has invoiced. An owner shall not be required to pay
liable for amounts invoiced that are subject to withholding pursuant to
the contract for otherwise reducible due to the general contractor's
noncompliance with the terms of the contract. However, in the event that an
owner withholds all or a part of the amount invoiced by the general contractor
under the terms of the contract, the owner shall notify the general contractor
within 45 days of the receipt of such invoice, in writing and with
reasonable specificity, of his intention to withhold all or part of the
general contractor's payment with the reason for nonpayment, specifically
identifying the contractual noncompliance and the dollar amount being withheld.
Failure of an owner to make timely payment as provided in this subsection
subdivision shall result in interest penalties consistent with §2.2-4355.
Nothing in this subsection subdivision shall be construed to
apply to or prohibit the inclusion of any retainage provisions in a
construction contract.
C. 2. Any construction contract in which
there is at least one general contractor and one subcontractor shall be deemed
to include a provision under which any higher-tier general
contractor is liable to any lower-tier subcontractor with whom the
higher-tier general contractor contracts for satisfactory performance
of the subcontractor's duties under the contract. Such contract shall require
such higher-tier general contractor to pay such lower-tier
subcontractor within the earlier of (i) 60 days of the receipt of an invoice
following satisfactory completion of the portion of the work for which the
subcontractor has invoiced or (ii) seven days after receipt of amounts paid by
the owner to the general contractor or by the higher-tier contractor to
the lower-tier contractor subcontractor for work performed by a
subcontractor pursuant to the terms of the contract. Such contractors shall not
be liable for amounts otherwise reducible pursuant to a breach of contract
by due to the subcontractor subcontractor's noncompliance
with the terms of the contract. However, in the event that a contractor
withholds all or a part of the amount invoiced by any lower-tier
subcontractor under the contract, the contractor shall notify the subcontractor
within 50 days of the receipt of such invoice, in writing, of his intention
to withhold all or a part of the subcontractor's payment with the reason for
nonpayment, specifically identifying the contractual noncompliance, the dollar
amount being withheld, and the lower-tier subcontractor responsible for
the contractual noncompliance. Payment by the party contracting with the
contractor shall not be a condition precedent to payment to any lower-tier
subcontractor, regardless of that contractor contractor's
receiving payment for amounts owed to that contractor, unless the party
contracting with the contractor is insolvent or a debtor in bankruptcy as
defined in §50-73.79. Any provision in a contract contrary to this section
shall be unenforceable. Failure of a contractor to make timely payment as
provided in this subsection subdivision shall result in interest
penalties consistent with §2.2-4355. Nothing in this subsection
subdivision shall be construed to apply to or prohibit the inclusion of any
retainage provisions in a construction contract. Every subcontract between a
subcontractor and a lower-tier subcontractor or supplier, of any tier, shall
contain the identical payment, notice, and interest requirements as those
provided in this subdivision if (i) such construction contract is related to a
project other than a single-family residential project and (ii) the value of
the project, or an aggregate of projects under such construction contract, is
greater than $500,000.
D. C. 1. Any construction contract between a
general contractor and its subcontractor and any lower tier additional subcontract
entered into on or after July 1, 2020, shall be deemed to include a provision
under which the general contractor, its subcontractor, and the additional
subcontractor at any lower tier are jointly and severally liable to pay the
employees of any additional subcontractor at any lower tier the greater
of (i) all wages due to a subcontractor's employees or to the lower tier
subcontractor's employees at such rate and upon such terms as shall be provided
in the employment agreement between the subcontractor and its employees or (ii)
the amount of wages that the subcontractor or any lower tier subcontractor is
required to pay to its employees under the provisions of applicable law,
including the provisions of the Virginia Minimum Wage Act (§40.1-28.8 et seq.)
and the federal Fair Labor Standards Act (29 U.S.C. §201 et seq.).
E. 2. A general contractor shall be deemed to be
the employer of a any subcontractor's employees at any tier
for purposes of §40.1-29. If the wages due to the subcontractor's employees
under the terms of the employment agreement between a subcontractor and its
employees are not paid, the general contractor shall be subject to all
penalties, criminal and civil, to which an employer that fails or refuses to
pay wages is subject under §40.1-29. Any liability of a general contractor
pursuant to §40.1-29 shall be joint and several with the subcontractor that
failed or refused to pay the wages to its employees.
F. 3. Except as otherwise provided in a contract
between the general contractor and the subcontractor, the subcontractor shall
indemnify the general contractor for any wages, damages, interest, penalties,
or attorney fees owed as a result of the subcontractor's failure to pay wages
to the subcontractor's employees as provided in subsection d
subdivision 1, unless the subcontractor's failure to pay the wages was due
to the general contractor's failure to pay moneys due to the subcontractor in
accordance with the terms of their construction contract.
G. 4. The provisions of this section
subsection shall only apply if (i) it can be demonstrated that the general
contractor knew or should have known that the subcontractor was not paying his
employees all wages due, (ii) the construction contract is related to a project
other than a single family residential project, and (iii) the value of the
project, or an aggregate of projects under one construction contract, is
greater than $500,000. As evidence a general contractor or any
subcontractor, regardless of tier, may offer a written certification,
under oath, from the subcontractor in direct privity of contract with the
general contractor or subcontractor stating that (a) the subcontractor and each
of his sub-subcontractors has paid all employees all wages due for the period
during which the wages are claimed for the work performed on the project and
(b) to the subcontractor's knowledge all sub-subcontractors below the
subcontractor, regardless of tier, have similarly paid their employees
all such wages. Any person who falsely signs such certification shall be
personally liable to the general contractor or subcontractor for fraud and any
damages the general contractor or subcontractor may incur.