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HF552 (Legislative Session 94 (2025-2026))

Uncollectible judgements against prime contractors permitted to be paid from contract retainage, and direct payments to subcontractors under certain circumstances required.

AI Generated Summary

This bill in the Minnesota House of Representatives addresses payment issues related to state contracts. Specifically, it amends the laws to ensure that subcontractors receive timely payments from prime contractors. Here are the key points:

  1. Prompt Payment Requirement: Prime contractors must pay their subcontractors within 10 days of receiving payment from the state for the subcontractor's work.

  2. Interest for Late Payments: If the prime contractor delays payment beyond 10 days, they must pay interest at 1.5% per month on the amount due. The minimum interest payment is $10 for unpaid balances over $100, and for less than $100, the actual penalty amount is paid.

  3. Legal Recourse for Subcontractors: Subcontractors who need to take legal action to collect late payment interest and win are entitled to recover their legal costs and attorney's fees.

  4. Uncollectible Judgments: If a prime contractor cannot pay due to bankruptcy or going out of business, the state can pay the subcontractor directly from the funds held back from the prime contractor (retainage). If this retainage is insufficient to pay all owed subcontractors, the funds will be distributed proportionally based on the amounts owed.

  5. Direct Payments in Certain Cases: If a state agency doesn't require a prime contractor to have a payment security (like a bond or letter of credit), the agency must pay subcontractors directly upon satisfactory completion of their work.

This legislation aims to protect subcontractors by ensuring they are paid promptly and fairly, and it provides ways for them to recover money owed even when a prime contractor faces financial difficulties.

Bill text versions

Actions

DateChamberWhereTypeNameCommittee Name
February 12, 2025HouseFloorActionIntroduction and first reading, referred toWorkforce, Labor, and Economic Development Finance and Policy

Citations

 
[
  {
    "analysis": {
      "added": [
        "A provision that enables subcontractors to be paid from contract retainage if prime contractor's judgment is uncollectible."
      ],
      "removed": [],
      "summary": "This bill amends the existing statute 16A.1245 concerning prompt payment to subcontractors by state agencies.",
      "modified": [
        "Clarification that state agencies must directly pay subcontractors if no financial mechanism ensures prime contractor payment."
      ]
    },
    "citation": "16A.1245"
  }
]

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