When must a Washington public owner, and a contractor on public work, pay, and what happens if they don't?
For public bodies: every state agency, county, city, town, school district, board, commission or other public body must pay interest at one percent per month (at least one dollar per month) on amounts due on written contracts for public works, personal services, goods and services, equipment and travel when it fails to pay timely; payment is timely if made on the contract date but not later than thirty days after receipt of a properly completed invoice or receipt of goods or services, whichever is later, and a contract "funded by grant or federal money" runs on its own thirty-calendar-day clock from the later of a complying payment request and the public body's actual receipt of the grant or federal money (RCW 39.76.011(1)-(2)(a)). The clock's ends are defined: "A payment is considered to be made when mailed or personally delivered to the party being paid", and an invoice "is considered to be received when it is date-stamped or otherwise marked as delivered", failing which the invoice's own date governs (RCW 39.76.011(3)). On public works, a contractor or subcontractor receiving payment must pay each subcontractor within ten days after receipt the amounts allowed on account of that subcontractor's work; in a good faith dispute no more than 150 percent of the disputed amount may be withheld, and those not party to the dispute are entitled to full and prompt payment; wrongful withholding carries interest at the highest rate allowed under RCW 19.52.025 and prevailing-party attorneys' fees (RCW 39.04.250). The chapter 223 rights (which RCW 39.04.901 lists as "RCW 39.76.011, 60.28.011, 60.28.021, 60.28.051, 39.04.250, and 39.04.900" and makes "applicable to all public works contracts entered into on or after September 1, 1992") may not be waived by contract, and chapter 223 "is to be liberally construed to provide security for all parties intended to be protected by its provisions" (RCW 39.04.900, RCW 39.04.901). The withholding side has its own clock: on a public works contract a public body that withholds part or all of a payment "shall notify the prime contractor in writing within eight working days after receipt of the payment request stating specifically why part or all of the payment is being withheld and what remedial actions must be taken"; if the notice does not say that, interest runs "from the ninth working day" until a compliant notice arrives; and once the prime completes the remedial actions the withheld amount is due within thirty calendar days, with interest from the thirty-first day (RCW 39.76.011(2)(b)-(d)). The prime has a mirror-image duty running down: if, after asking the public body for payment but before paying a subcontractor, it finds part of that payment "subject to withholding from the subcontractor under the subcontract for unsatisfactory performance", it may withhold, but it must give the subcontractor notice of the remedial actions "as soon as practicable after determining the cause for the withholding but before the due date for the subcontractor payment", copy the public body's contracting officer, and pay "within eight working days after the subcontractor satisfactorily completes the remedial action identified in the notice"; if it does not, interest runs on the withheld amount "from the eighth working day" at the subsection (1) rate (RCW 39.76.011(2)(e)). In any action brought to collect interest due under chapter 39.76 RCW, the prevailing party recovers reasonable attorney fees (RCW 39.76.040).
The trap
The interest duty covers public works, personal services, goods and services, equipment and travel; the withholding-notice clocks and the ten-day flow-down are public works only. This rule states no private prompt-payment mandate: the law we hold has no Washington statute fixing the date a private owner must pay. Private work is not untimed, though: under RCW 60.04.221 a potential lien claimant "who has not received a payment within five days after the date required by their contract" may give notice to a construction lender financing without a payment bond of at least fifty percent, and after that notice the lender "shall withhold from the next and subsequent draws the amount claimed to be due as stated in the notice". RCW 39.76.020 is a closed list of seven things RCW 39.76.011 "does not apply to": interagency or intergovernmental transactions; employee or prospective-employee expense reimbursements; belated claims for delinquency after July 31 following the second year of the fiscal biennium; claims subject to a good faith dispute where notice of the dispute is given before the date of timely payment by certified mail, personal delivery or the contract's procedures; delinquencies due to natural disasters, postal or delivery disruptions, labour work stoppages, power failures "or any other cause resulting from circumstances clearly beyond the control of the unit of local government or state agency"; contracts entered before July 26, 1981; and payments from the retirement systems listed in RCW 41.50.030 and chapter 41.24 RCW.
9 authorities
- statuteRCW 39.76.011enactment date not established
The words that state the rule
(1) Except as provided in RCW 39.76.020, every state agency, county, city, town, school district, board, commission, or any other public body shall pay interest at a rate of one percent per month, but at least one dollar per month, on amounts due on written contracts for public works, personal services, goods and services, equipment, and travel, whenever the public body fails to make timely payment. (2) For purposes of this section, payment shall be timely if: (a) Except as provided otherwise in this subsection, a check or warrant is mailed or is available on the date specified for the amount specified in the applicable contract documents but not later than thirty days of receipt of a properly completed invoice or receipt of goods or services, whichever is later. If a contract is funded by grant or federal money, the public body shall pay the prime contractor for satisfactory performance within thirty calendar days of the date the public body receives a payment request that complies with the contract or within thirty calendar days of the date the public body actually receives the grant or federal money, whichever is later. (b) On written contracts for public works, when part or all of a payment is going to be withheld for unsatisfactory performance or if the payment request made does not comply with the requirements of the contract, the public body shall notify the prime contractor in writing within eight working days after receipt of the payment request stating specifically why part or all of the payment is being withheld and what remedial actions must be taken by the prime contractor to receive the withheld amount. (c) If the notification by the public body required by (b) of this subsection does not comply with the notice contents required under (b) of this subsection, the public body shall pay the interest under subsection (1) of this section from the ninth working day after receipt of the initial payment request until the contractor receives notice that does comply with the notice contents required under (b) of this subsection. (d) If part or all of a payment is withheld under (b) of this subsection, the public body shall pay the withheld amount within thirty calendar days after the prime contractor satisfactorily completes the remedial actions identified in the notice. If the withheld amount is not paid within the thirty calendar days, the public body shall pay interest under subsection (1) of this section from the thirty-first calendar day until the date paid. (e)(i) If the prime contractor on a public works contract, after making a request for payment to the public body but before paying a subcontractor for the subcontractor's performance covered by the payment request, discovers that part or all of the payment otherwise due to the subcontractor is subject to withholding from the subcontractor under the subcontract for unsatisfactory performance, the prime contractor may withhold the amount as allowed under the subcontract. If the prime contractor withholds an amount under this subsection, the prime contractor shall: (A) Give the subcontractor notice of the remedial actions that must be taken as soon as practicable after determining the cause for the withholding but before the due date for the subcontractor payment; (B) Give the contracting officer of the public body a copy of the notice furnished to the subcontractor under (e)(i)(A) of this subsection; and (C) Pay the subcontractor within eight working days after the subcontractor satisfactorily completes the remedial action identified in the notice. (ii) If the prime contractor does not comply with the notice and payment requirements of (e)(i) of this subsection, the contractor shall pay the subcontractor interest on the withheld amount from the eighth working day at an interest rate that is equal to the amount set forth in subsection (1) of this section. (3) For the purposes of this section: (a) A payment is considered to be made when mailed or personally delivered to the party being paid. (b) An invoice is considered to be received when it is date-stamped or otherwise marked as delivered. If the invoice is not date-stamped or otherwise marked as delivered, the date of the invoice is considered to be the date when the invoice is received. [ 1992 c 223 s 1.]
- statuteRCW 39.04.250enactment date not established
The words that state the rule
(1) When payment is received by a contractor or subcontractor for work performed on a public work, the contractor or subcontractor shall pay to any subcontractor not later than ten days after the receipt of the payment, amounts allowed the contractor on account of the work performed by the subcontractor, to the extent of each subcontractor's interest therein. (2) In the event of a good faith dispute over all or any portion of the amount due on a payment from the state or a municipality to the prime contractor, or from the prime contractor or subcontractor to a subcontractor, then the state or the municipality, or the prime contractor or subcontractor, may withhold no more than one hundred fifty percent of the disputed amount. Those not a party to a dispute are entitled to full and prompt payment of their portion of a draw, progress payment, final payment, or released retainage. (3) In addition to all other remedies, any person from whom funds have been withheld in violation of this section shall be entitled to receive from the person wrongfully withholding the funds, for every month and portion thereof that payment including retainage is not made, interest at the highest rate allowed under RCW 19.52.025. In any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to costs of suit and reasonable attorneys' fees.
- statuteRCW 39.04.900enactment date not established
The words that state the rule
(1) The rights provided in chapter 223, Laws of 1992 may not be waived by the parties and a contract provision that provides for waiver of the rights provided in chapter 223, Laws of 1992 is void as against public policy. (2) Chapter 223, Laws of 1992 is to be liberally construed to provide security for all parties intended to be protected by its provisions. [ 1992 c 223 s 6.]
- statuteRCW 39.76.020enactment date not established
The words that state the rule
RCW 39.76.011 does not apply to the following: (1) Interagency or intergovernmental transactions; (2) Amounts payable to employees or prospective employees of state agencies or local governmental units as reimbursement for expenses; (3) Belated claims for any time of delinquency after July 31 following the second year of the fiscal biennium; (4) Claims subject to a good faith dispute, when before the date of timely payment, notice of the dispute is: (a) Sent by certified mail; (b) Personally delivered; or (c) Sent in accordance with procedures in the contract; (5) Delinquencies due to natural disasters, disruptions in postal or delivery service, work stoppages due to labor disputes, power failures, or any other cause resulting from circumstances clearly beyond the control of the unit of local government or state agency; (6) Contracts entered before July 26, 1981; and (7) Payment from any retirement system listed in RCW 41.50.030 and chapter 41.24 RCW.
- statuteRCW 39.76.040enactment date not established
The words that state the rule
In any action brought to collect interest due under this chapter, the prevailing party is entitled to an award of reasonable attorney fees.
- statuteRCW 39.04.901enactment date not established
The words that state the rule
RCW 39.76.011, 60.28.011, 60.28.021, 60.28.051, 39.04.250, and 39.04.900 are applicable to all public works contracts entered into on or after September 1, 1992, relating to the construction of any work of improvement. [ 2009 c 219 s 1; 1992 c 223 s 7.]
- statuteRCW 60.04.221enactment date not established
The words that state the rule
(1) Any potential lien claimant who has not received a payment within five days after the date required by their contract, invoice, employee benefit plan agreement, or purchase order may within thirty-five days of the date required for payment of the contract, invoice, employee benefit plan agreement, or purchase order, give a notice as provided in subsections (2) and (3) of this section of the sums due and to become due, for which a potential lien claimant may claim a lien under this chapter.
- statuteRCW 60.04.221enactment date not established
The words that state the rule
(5) After the receipt of the notice, the lender shall withhold from the next and subsequent draws the amount claimed to be due as stated in the notice. Alternatively, the lender may obtain from the prime contractor or borrower a payment bond for the benefit of the potential lien claimant in an amount sufficient to cover the amount stated in the potential lien claimant's notice. The lender shall be obligated to withhold amounts only to the extent that sufficient interim or construction financing funds remain undisbursed as of the date the lender receives the notice.
- statuteRCW 19.52.025enactment date not established
The words that state the rule
Each month the state treasurer shall compute the highest rate of interest permissible under RCW 19.52.020(1), and the rate of interest required by RCW 4.56.110(3) and 4.56.115, for the succeeding calendar month. The treasurer shall file these rates with the state code reviser for publication in the next available issue of the Washington State Register in compliance with RCW 34.08.020(8). [ 2004 c 185 s 4; 1986 c 60 s 1.]
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.