Lawmakers weigh prompt-payment bill for construction subcontractors amid disputes over enforcement and penalties

Delegate Mary Lehman told the House Economic Matters Committee that House Bill 451 would require owners to pay prime contractors and prime contractors to pay subcontractors within a set time after an invoice — and create a financial penalty for late payments.

"What this bill does is ensure that everyone involved on state and private construction contracts gets paid on time, primes and subcontractors," Delegate Mary Lehman said when she introduced the measure. Lehman told the committee she would offer sponsor amendments: shortening the payment window from 60 days to 45 days and making contrary contract provisions unenforceable.

The bill would create a remedy for unpaid invoices starting after the prompt-payment deadline; the sponsor described a 9% per‑year penalty on unpaid balances beginning on the 60th day after receipt of an invoice (she later proposed 45 days in amendment language). Lehman cited Virginia and North Carolina as nearby states with prompt‑payment laws; witnesses noted both states use roughly 1% per month as a penalty.

Supporters — mostly small subcontractors and trade groups — told the committee late payment is a persistent industry problem that can put small businesses at risk. "When subcontractors on construction projects are not paid in a timely way ... it causes financial strain that could cause a business to miss payroll or employee benefit contributions," said Tom Clark of IBEW Local 26. Kevin O'Keefe of Independent Electrical Contractors Chesapeake and Stephanie Sweet, owner of Beck Electric, described instances where subcontractors waited months for payment and said a statutory remedy would protect payroll and supplier relationships.

Opponents and industry representatives warned that imposing a penalty without a mechanism tying owner payment to contractor payment could force general contractors — including small primes — to bear owners’ late-payment risk. "There’s 2 victims here," said Sean Malone representing Associated Builders and Contractors and the Maryland Minority Contract Association. "When an owner doesn't pay the general, the general is not in a position to pay up." General contractor Robert Harrington described municipal payment timing: Baltimore City often pays within 45–60 days and some municipal contracts are explicitly "paid when paid," he said.

Committee members focused on several contested details: whether the statute should include a "paid-when-paid" or "paid-when-received" trigger; whether retainage and other contract terms would be affected; the proper penalty rate and whether interest should accrue monthly; and how a subcontractor would enforce remedies (private right of action and attorney's fees were discussed as possible additions). The sponsor said she opposed a strict "paid-when-paid" provision because proving the prime had been paid could impose an enforcement burden on subcontractors.

Key clarifications from testimony and documents introduced in the hearing: - Sponsor-proposed changes: shorten prompt-payment deadline from 60 to 45 days; make contract provisions that conflict with the statute unenforceable. - Penalty discussed: sponsor proposed 9% per year on unpaid balance beginning at the statutory deadline; witnesses cited alternate models of 1% per month used in North Carolina and Virginia. - Retainage: sponsor told a legislator the bill does not prohibit retainage provisions; language in the bill says retainage provisions in a contract are not affected. - Enforcement: witnesses and lawmakers noted enforcement would likely require private legal action; proponents seek amendments to provide a private right of action and recovery of attorneys’ fees in some versions of the bill.

Why it matters: Supporters said immediate cash-flow remedies will protect small, minority- and women-owned subcontractors that operate on thin margins. Opponents said the measure as drafted could unintentionally transfer owner nonpayment risk onto primes (and subcontractors that are also primes on other jobs), particularly where public owners pay slowly.

Next steps: Committee discussion continued for more information and possible amendments; the transcript records extensive questioning but no recorded committee vote.