(a) When any public work is awarded by a contract for which a payment bond is required by section 49-41, the contract for the public work shall contain the following provisions: (1) A requirement that the general contractor, within thirty days after payment to the contractor by the state or a municipality, pay any amounts due any subcontractor, whether for labor performed or materials furnished, when the labor or materials have been included in a requisition submitted by the contractor and paid by the state or a municipality; (2) a requirement that the general contractor shall include in each of its subcontracts a provision requiring each subcontractor to pay any amounts due any of its subcontractors, whether for labor performed or materials furnished, within thirty days after such subcontractor receives a payment from the general contractor which encompasses labor or materials furnished by such subcontractor.

(b) Each payment requisition submitted in accordance with the requirements of subsection (a) of this section, except for any such payment requisition submitted pursuant to a contract administered by or in conjunction with the Department of Transportation, shall include a statement showing the status of all pending construction change orders, other pending change directives and approved changes to the original contract or subcontract. Such statement shall identify the pending construction change orders and other pending change directives, and shall include the date such change orders and directives were initiated, the costs associated with their performance and a description of any work completed. As used in this section, “pending construction change order” or “other pending change directive” means an authorized directive for extra work that has been issued to a contractor or a subcontractor.

(c) If payment is not made by the general contractor or any of its subcontractors in accordance with such requirements, the subcontractor shall set forth his claim against the general contractor and the subcontractor of a subcontractor shall set forth its claim against the subcontractor through notice by registered or certified mail. Ten days after the receipt of that notice, the general contractor shall be liable to its subcontractor, and the subcontractor shall be liable to its subcontractor, for interest on the amount due and owing at the rate of one per cent per month. In addition, the general contractor, upon written demand of its subcontractor, or the subcontractor, upon written demand of its subcontractor, shall be required to place funds in the amount of the claim, plus interest of one per cent, in an interest-bearing escrow account in a bank in this state, provided the general contractor or subcontractor may refuse to place the funds in escrow on the grounds that the subcontractor has not substantially performed the work according to the terms of his or its employment. In the event that such general contractor or subcontractor refuses to place such funds in escrow, and the party making a claim against it under this section is found to have substantially performed its work in accordance with the terms of its employment in any arbitration or litigation to determine the validity of such claim, then such general contractor or subcontractor shall pay the attorney's fees of such party.

(d) No payment may be withheld from a subcontractor for work performed because of a dispute between the general contractor and another contractor or subcontractor.

(e) This section shall not be construed to prohibit progress payments prior to final payment of the contract and is applicable to all subcontractors for material or labor whether they have contracted directly with the general contractor or with some other subcontractor on the work.

(1969, P.A. 427, S. 1, 2; P.A. 75-626; P.A. 76-164; P.A. 79-602, S. 99; P.A. 80-115; P.A. 86-12, S. 1; P.A. 05-229, S. 5; P.A. 06-59, S. 1; P.A. 09-146, S. 2.)

History: P.A. 75-626 added provisions re deposit of claim amount in escrow account and prohibiting withholding of payment from subcontractor for work performed because of dispute between general or prime contractor and another contractor or subcontractor; P.A. 76-164 substituted reference to requirements included in contract for reference to requirements issued by public works commissioner and added references to payments by municipalities; P.A. 79-602 divided section into Subsecs. and made minor changes in wording, substituting “the” or “that” for “such”, etc.; P.A. 80-115 restated provisions, eliminating references to “prime” contractors and added Subsec. (a)(2) re requirements of subcontracts; P.A. 86-12 changed time limits for payment by general contractor to subcontractor and subcontractor to subcontractor from 45 and 20 days respectively, to 30 days in each case; P.A. 05-229 amended Subsec. (b) to require the general contractor to place funds claimed in an escrow account if a surety bond is not in place; P.A. 06-59 amended Subsec. (b) to delete “if a surety bond is not in place,” re placing funds in escrow; P.A. 09-146 added new Subsec. (b) re payment requisition statement requirements and redesignated existing Subsecs. (b) to (d) as Subsecs. (c) to (e), effective July 1, 2009.

See chapter 60, part II re public building contracts.

Remedies afforded by this section and Sec. 49-42 are independent of each other. 207 C. 468. Cited. 238 C. 293; 239 C. 708.

Cited. 5 CA 61; 13 CA 253; 15 CA 504; 32 CA 118; 40 CA 89.