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Legislature Adopts Changes to Oregon Prompt Pay Law

Legislature Adopts Changes to Oregon Prompt Pay Law

The Oregon Legislature just completed work on HB 4034, a bill that will amend Oregon’s prompt pay statute. AGC actively supported this bill for a variety of reasons. This blog post will provide in-depth background on the bill and discuss what it means to contractors.

Legislative Background

The length and depth of the current economic downturn has punished Oregon’s construction industry more than any other sector of the economy. These poor economic conditions led many contractors to the Oregon Legislature to seek economic relief during the 2011 Legislative Session.

Relief was sought in many forms, including bills that proposed overturning long-standing industry practices like the current prompt pay laws. These proposals had the potential to do three things:

  • They would have undermined the ‘pay when paid’ principle for all contractors;
  • The bills would have also redefined the rights of parties to contract with each other without government imposed restrictions; and
  • Finally, these proposed solutions would have created significant new fines and led to potential debarment from public works projects.

Policy

Following the 2011 session, AGC initiated discussions with our partners on the management and labor sides of our industry. In general, AGC works hard to support and to advocate public policies that work for the entire commercial construction chain of commerce. This means Owner to General Contractor, to Specialty Contractor, to Supplier.

In light of the 2011 Legislative Session debates, AGC’s leadership developed a core policy relating to prompt pay last fall. The position is as follows: “Prompt Pay: Support strengthening existing laws to ensure prompt payment throughout the chain of commerce – owner to General Contractor, to Specialty Contractor, to Supplier.” This policy was reviewed by AGC’s Executive Committee and approved by the full Board of Directors on October 21, 2011.

HB 4034: A Summary

As a result of this policy and the discussions that followed the 2011 session, AGC worked with a variety of key stakeholders in the construction industry and in the Legislature to develop what became House Bill 4034.

HB 4034 is aimed at strengthening Oregon’s existing prompt pay procedures and law. It does this in three ways:

  • the passage of this law will ensure that specialty or subcontractors will know exactly what is required of them to receive prompt payment;
  • if there are changes to billing procedures, or required information for prompt payment, when the law goes into effect the law will require a 45-day notification if any changes are to be made for prompt payment billing purpose; and
  • HB 4034 raises interest penalty rates to the Oregon statutory standard to 9%, replacing the current complicated, federally-based rate calculation that currently equals a 1-2% interest penalty rate.

HB 4034 passed both the House and Senate unanimously. The bill has now been sent to the Governor for his signature. AGC believes the unanimous passage of this bill demonstrates what can be accomplished in the Oregon state capitol when the industry unites and advocates in its own interests.

For additional information about this issue or HB 4034, please contact Government Affairs Director John Rakowitz at johnr@agc-oregon.org.

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