House Bill 383 would revise North Carolina’s Chapter 22C governing payments to subcontractors on construction and improvement projects. The bill states a public policy against contract clauses that shift the risk of nonpayment down the contracting chain, including “pay if paid” and “pay when paid” provisions, and makes such clauses unenforceable. It also clarifies that a subcontractor’s right to payment is based on performance under the subcontract, not on whether the owner has paid the contractor.
The bill sets payment deadlines for contractors and lower-tier subcontractors: generally, payment must be made within seven days after receipt of periodic or final payment, or within 30 days after billing if earlier payment is not required. It also requires interest at 1% per month on late payments and allows withholding in specified circumstances, such as defective work, disputed work, third-party claims, failure to pay labor/material costs, or reasonable retainage. The bill applies prospectively to contracts entered into on or after its effective date and excludes residential contractors and certain residential projects, including those with 12 or fewer units.
The bill’s impact would be to strengthen statutory payment protections for subcontractors and sub-subcontractors on covered commercial and non-exempt construction projects. It would limit the enforceability of contract terms that delay or condition payment, create a clearer timeline for payment after work is performed, and provide a statutory interest penalty for late payment. In practical terms, it would affect contractors, subcontractors, owners, and construction contracts involving real property improvements in North Carolina.
The available context shows no recorded committee debate or votes, so there is no documented opposition or support in the provided materials. Based on the bill text, the measure appears designed to protect subcontractors from payment delays and insolvency risk, suggesting a pro-labor and pro-construction-payment sentiment. Any likely contention would center on whether the bill reduces flexibility for contractors and owners to manage cash flow and project risk, especially through the ban on pay-if-paid and pay-when-paid clauses and the short payment deadlines.
Impact
The bill would amend Chapter 22C of the North Carolina General Statutes to make subcontractor payment protections stronger and more explicit. It would invalidate contingent-payment clauses, impose mandatory payment deadlines, authorize interest on overdue payments, and preserve limited withholding rights for specified disputes or deficiencies. The changes would apply only to contracts entered into on or after the effective date and would not apply to residential contractors or certain smaller residential projects.
Sentiment
No committee transcripts or votes were provided, so there is no direct record of debate or roll-call sentiment. The bill’s stated purpose and structure indicate a generally favorable posture toward subcontractors and prompt payment protections, with the policy framed as preventing unfair risk-shifting in construction contracts. The absence of recorded opposition in the provided materials means any disagreement is inferred rather than documented.
Contention
The main likely point of contention is the bill’s prohibition on pay-if-paid and pay-when-paid clauses, which contractors and project owners may view as limiting their ability to allocate payment risk and manage cash flow. Another possible issue is the relatively short seven-day payment window after receipt of funds, along with the 1% monthly interest penalty for late payment, which could be seen as burdensome by general contractors. Supporters would likely emphasize that these provisions protect subcontractors and lower-tier subcontractors from delayed or contingent payment for work already performed.
Provides employees with civil administrative remedies against contractors, subcontractors involved in the contract with joint/severable liability imposed on contractors or subcontractors. Effective 9/1/2025.
Provides employees with civil administrative remedies against contractors, subcontractors involved in the contract with joint/severable liability imposed on contractors or subcontractors. Effective 9/1/2025.