For more than twenty years the Contractor and Subcontractor Payment Act (CASPA) has been a law in Pennsylvania providing a tool for contractors and subcontractors to get paid. Conflict between Owners, Prime Contractors, Subcontractors, and subs of subs is a common sight in the construction world. CASPA provides remedies for contractors and subcontractors whose work is performed but who do not receive payment without a bona fide dispute.
CASPA has long provided unpaid Contractors with additional remedies above and beyond a suit for breach of contract. It allows the unpaid party to seek not only the unpaid amounts but also a penalty equal to 1% per month of the amount unpaid, 1% interest per month, and attorney’s fees.
Now, its provisions have been strengthened further. Governor Wolf has signed a new law that overhauls CASPA and expands the remedies available to unpaid Contractors and Subcontractors. Changes to CASPA will go into effect on October 10, 2018.
One primary update is that CASPA’s protections expressly cannot be waived by contract. That is, even if an Owner has the leverage to insist that a Contractor waive its CASPA rights in a written contract, that provision would not be not effective or enforceable.
An additional caveat in the updated CASPA is that a Contractor or subcontractor is expressly authorized to stop performance until payment is received. An Owner is entitled to withhold payment if the work is deficient, but now the Owner is required to provide notice regarding the deficiency which allegedly justifies nonpayment within fourteen (14) calendar days of receipt of the disputed invoice. Owners will need to ensure that they observe this provision and provide prompt notice of deficient work. An Owner who fails to provide written notice may waive their right to withhold payment for the deficient work.
The updated CASPA also requires retainage to be paid within thirty days of final acceptance of work, before imposing the same interest, penalty, and fees for non-payment.
For public works projects, CASPA will not apply and instead the Pennsylvania Prompt Payment Act is applicable. CASPA also does not apply to residential construction, unless the project involves simultaneous construction of seven or more units.
As with any new law, there are important details in the amendments to CASPA for Owners, Contractors, Subcontractors and subs of subs. If you are facing a legal challenge in a construction project, it is important to act promptly and document the situation to protect your legal interests. It is often better to consult legal counsel sooner rather than later in the process so that important rights are not lost. The lawyers at Fitzpatrick Lentz & Bubba, P.C. are always available and willing to help.