California Becomes First State to Enact Payment Transparency Law
California Gov. Jerry Brown signed AB1223, making the state the first to enact a payment transparency law. The new law requires state agencies to put information that will help construction subcontractors and suppliers determine when and how much their prime customers are responsible to pay them on their websites. Specifically, the new law requires that within 10 days of making a construction contract payment, a state agency must post the following on its website:
- The project for which the payment was made.
- The name of the construction contractor or company paid.
- The date the payment was made or the date the state agency transmitted instructions to the Controller or other payer to make the payment.
- The payment application number or other identifying information.
- The amount of the payment.
“One of the challenges for subcontractors working under the prompt payment laws and ubiquitous pay-when-paid clauses is finding out when their customers are paid,” said Daniel F. McLennon, a partner in the San Francisco office of Smith, Currie & Hancock, and the 2017-18 chair of the Government Relations Committee for ASA of California. “This new California law directly addresses that problem.” He added, “This payment transparency law was motivated by problem-solving discussions in meetings of ASA’s Task Force on Government Advocacy.”
ASA Chief Advocacy Officer E. Colette Nelson called on other ASA chapters to follow the lead of ASAC, saying, “California is a bellwether for legislation across the states. Other ASA chapters should follow the lead of ASA of California.”
The new California law applies to state contracts valued at $25,000 or above.