HB274 would add a new section to Chapter 444, Hawaii Revised Statutes, governing payment practices between contractors and subcontractors on construction projects. The bill requires contractors to pay subcontractors within 30 days of receiving an invoice, unless the parties agree otherwise in writing. If payment is not made within 45 days of the invoice date, the contractor would owe compounding interest at 2% per week on the unpaid amount.
The measure also prohibits contractors from delaying or withholding subcontractor payment because the owner, municipality, or financing institution has not yet paid the contractor. It requires withheld retention amounts to be paid promptly after project completion and resolution of contractual obligations, requires contractors to carry subcontractor default insurance, and states that subcontractors must guarantee their work. The bill further allows a subcontractor to bring a civil action for violations and, if successful, recover attorney fees, direct financial penalties caused by the late payment, and interest on loans the subcontractor could not repay because of the delay, with documentation required for those costs.
Impact
HB274 would create a new statutory payment-rights framework for subcontractors in Hawaii construction law, adding enforceable deadlines and remedies to Chapter 444. It would affect contractors, subcontractors, project owners, municipalities, and financial institutions involved in funding construction projects by shifting payment risk away from subcontractors and onto contractors, while also regulating retention practices and adding insurance-related obligations. The bill would apply prospectively only, leaving prior matured rights, penalties, and proceedings unchanged.
Sentiment
Based on the bill text and the absence of recorded committee testimony or votes in the provided materials, the overall sentiment appears to be supportive of stronger subcontractor payment protections. The bill’s title and description frame it as a timely-payment and penalties measure, suggesting a policy goal of improving cash flow and accountability in the construction industry. No contrary viewpoints are documented in the supplied context.
Contention
The main points of potential contention are the bill’s strict payment deadlines, the relatively severe compounding interest penalty of 2% per week after 45 days, and the requirement that contractors pay subcontractors even when upstream project payments are delayed or withheld. Contractors and project financiers may view these provisions as shifting too much financial risk to contractors, while subcontractors are likely to support them as necessary protection against nonpayment and delayed retention. The requirement that contractors carry subcontractor default insurance and the provision stating that subcontractors must guarantee their work may also raise questions about cost, enforceability, and how risk is allocated among project participants.
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