Legislative and Executive Developments

On September 18, 2019, California Governor Gavin Newsom signed California’s Assembly Bill 5 (“AB 5”). This landmark bill takes effect on January 1, 2020, and will require gig economy workers to be reclassified as employees instead of independent contractors. As it relates to the construction industry, AB 5 provides that the “relationship between a contractor and an individual performing work pursuant to a subcontract in the construction industry” shall be governed by pre-existing law, provided that the contractor satisfies seven new criteria set forth in AB 5.[1]  AB 5 also includes an exception for certain construction trucking services performed prior to January 1, 2022,[2]  as well as active California licensed architects and engineers.[3]
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The Illinois Contractor Prompt Payment Act, 815 ILCS 603/1, et seq. (the “Act”) was first enacted in 2007 and designed to safeguard contractors and subcontractors on private projects by providing a mechanism to expedite payments for work performed. The Act applies to all private construction projects in Illinois, except those involving single family residences or multiple family residences with twelve or fewer units in a single building. With the Act, Illinois joined a growing number of states that had enacted similar legislation.

On August 20, 2019, Illinois amended the Act and again joined a growing number of states that are expanding their protections for contractors, this time by restricting the amount of retainage that may be withheld on a construction project. The amendment, codified at 815 ILCS 603/20, imposes a ten percent (10%) cap on the amount of retainage that may be withheld and reduces that cap to five percent (5%) once the project is fifty percent (50%) complete. Specifically, the Act provides:
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26 days and counting, the partial government shutdown has left many federal employees with an endless weekend and no paycheck. While those workers grapple with the financial hardship and uncertainty as Congress and the Administration try to reconcile their differences, contractors working under a government contract may be forced to deal with their own issues.
Government contractors may feel the impact of the shutdown in three primary ways: (1) availability of funds, (2) financing performance of the contract, and (3) handling financial responsibility for an idle workforce.


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