Operative July 18: Revised Nebraska Construction Prompt Pay Act

In mid-April 2014, Nebraska Governor signed into law Legislative Bill 961. Of note, it includes revisions to the Nebraska Construction Prompt Pay Act. The Act is set forth in Nebraska Revised Statutes §§ 45-1201 to 45-1210 and Section 8 of L.B. 961. The revised provisions are operative July 18, 2014.

Subdivision (3) of Section 45-1203 is amended to read:

“The owner or the owner’s representative shall release and pay all retainage for work completed in accordance with the provisions of the contract within forty-five days after the project, or a designated portion thereof, is substantially complete. When a subcontractor has performed work in accordance with the provisions of a subcontract and all conditions precedent to payment contained in the subcontract have been satisfied, the contractor shall pay all retainage due such subcontractor within ten days after receipt of the retainage.” (Underline added).

In turn, Subdivision (1) of Section 45-1204 has been amended to read:

“When work has been performed pursuant to a contract, an owner, contractor or subcontractor may only withhold payment… [f]or retainage, in an amount not to exceed the amount specified in the applicable contract, which shall not exceed a rate of ten percent. If the scope of work for the contractor or subcontractor from which retainage is withheld is fifty percent complete and if the contractor or subcontractor has performed work in accordance with the provisions in the applicable contract, no more than five percent of any additional progress payment may be withheld as retainage if the contractor or subcontractor provides or has provided satisfactory and reasonable assurances of continued performance and financial responsibility to complete the work.” (Underline added).

The definitions of contractor, subcontractor and substantially complete have also been revised:

• The term “contractor” “does not include an individual or an entity performing work on a contract for the State of Nebraska or performing work on a federal-aid or state-aid project of a political subdivision in which the state makes payments to the contractor on behalf of the political subdivision.” Neb. Rev. St. § 45-1202(1).
• The term “subcontractor” “does not include an individual or an entity performing work as a subcontractor on a contract for the State of Nebraska or performing work on a federal-aid or state-aid project of a political subdivision in which the state makes payments to the contractor on behalf of the political subdivision.” Neb. Rev. St. § 45-1202(6).
• The term “substantially complete” means “the stage of a construction project when the project, or a designated portion thereof, is sufficiently complete in accordance with the contract so that the owner can occupy or utilize the project for its intended use.” Neb. Rev. St. § 45-1202(7).

Section 8 of L.B. 961 further provides that “Any individual, partnership, firm, limited liability company, corporation, or company may bring an action to recover any damages caused to such person or entity by a violation of the Nebraska Construction Prompt Pay Act. In addition to an award of damages, the court may award a plaintiff reasonable attorney’s fees and costs as the court determines is appropriate.”