By: Eric Michael Papp, Esq.

 

"Prompt Payment" Statute - California Business & Professions Code § 7108.6

Your contractor client paid his subcontractor, but the subcontractor now claims he was not paid fast enough and demands an additional 2% penalty on top of the bill. Should your client pay it?

It appears that the prompt payment statute of B&P § 7108.6 requires prompt billing as well. California B&P Code § 7108.6 provides in pertinent part:

A licensed contractor is required to pay all transportation charges submitted by a duly authorized motor carrier of property in dump truck equipment by the 20th day following the last day of the calendar month in which the transportation was performed, if the charges, including all necessary documentation, are submitted by the fifth day following the last day of the calendar month in which the transportation was performed. ... A violation of this section constitutes a cause for disciplinary action under Section 7120 and shall also subject the contractor licensee to a penalty, payable to the carrier, of 2 percent of the amount due per month for every month that payment is outstanding.... (emphasis added)(B&P Code § 7108.6)

The plain reading of the statute indicates that if the subcontractor did not promptly bill the contractor (including all necessary documentation) by the "fifth day following the last day of the calendar month in which the transportation was performed" (B&P Code § 7108.6), then the 2% penalty should not apply.

As can been seen, the prompt payment statute also contains a prompt billing component. The contractor only needs to pay the subcontractor "by the 20th day following the last day of the calendar month in which the transportation was performed" if and only IF, the subcontractor billed the contractor by the "fifth day following the last day of the calendar month in which the transportation was performed." (B&P Code § 7108.6). If not, then the subcontractor should be outside of the statute and the statute’s 2% interest penalty.

Finally, do not forget that Business & Professions Code § 7108.6 also provides in pertinent part:

The payment shall be made unless otherwise agreed to in writing by the contractor and by the duly authorized motor carrier of property in dump truck equipment. (B&P Code § 7108.6)

In this regard, always check the agreements to see if the subcontractor waived the 2% penalty provided by B&P Code § 7108.6. In today’s economy, such an agreement may very well be present.

 

Eric Papp is a licensed attorney in both California and Nevada and a licensed Real Estate Broker. Mr. Papp is the principal of the Law Offices of Eric Michael Papp located at 495 East Rincon, Suite 125, Corona, CA 92879. www.ca-nvlaw.com Mr. Papp can be reached at (951) 279-6700.

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