Governor Newsom Advances Fair Payment With SB 440 For Private Works
In October, Governor Newsom signed Senate Bill 440 (Ochoa Bogh), creating the Private Works Change Order Fair Payment Act.
The law ensures timely, fair payment for construction change orders arising from contract modifications, scope adjustments, unplanned work and other routine changes.
Thanks go to the CAL SMACNA Legislative Committee led by Carmen Koo, members who supported the bill, the Southern California Association of Scaffold Contractors (the bill’s primary sponsor) and industry partners for helping secure this legislative win benefiting union subcontractors across California.
SB 440 creates a system that levels the playing field for contractors, especially subcontractors, by ensuring a fair change order process and providing for timely payments. This bill establishes clear processes for disputes arising from contracts for private works:
- A subcontractor may request that a contractor submit a claim to the owner on their behalf if they lack direct standing.
- The contractor must notify the subcontractor within 30 days whether the claim was submitted; if not, they must explain why.
- The owner has 30 days to review the claim and provide a written statement identifying disputed and undisputed portions.
- The claimant must provide reasonable documentation; timelines can be extended by mutual agreement.
- The owner must pay any undisputed amounts within 60 days of their written statement.
- Remaining disputed portions go to nonbinding mediation, with costs shared equally.
- Any remaining disputes are resolved per the contract’s dispute resolution procedures identified in the underlying contract or, if none exists, by final judgment or operation of law.
The Private Works Change Order Fair Payment Act also:
- Imposes 2% monthly interest on unpaid disputed amounts.
- Allows a contractor or subcontractor to suspend work without penalty if the owner fails to pay undisputed amounts.
- To pause work and avoid penalties, the contractor or subcontractor must notify the owner after 30 days of nonpayment and give 10 days’ written notice of intent to stop work.
- Owners have 40 days to make payment before work can be paused.
- SB 440 provides CAL SMACNA contractors a fair change order process, timely payments and an alternative method to resolve private works disputes.
If you have any questions or would like additional information, please contact Chris Walker at (916) 363-7460 or chris@cal-smacna.org.