There is a bill pending in the New Jersey legislature that is splitting the construction industry between general contractors and subcontractors, as the bill proposes penalties against contractors who fail to pay its subcontractors within a prescribed amount of time. The bill and the dispute between these groups is discussed in a NJBiz article: Subcontractors, general contractors part ways over payment bill.
Although the bill will do nothing to the state’s mechanics lien laws, these laws have been brought into the debate.
General contractors claim that the payment penalty law isn’t required because mechanics liens are available to subcontractors to secure them on the project. The subcontractors, however, claim that the mechanics lien remedy is “worthless” in New Jersey because it’s only effective if the general contractor is still owed money on the project.
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There is probably some truth to both sides of the argument here, although I’m always personally a fan of penalty statutes. After all, the statute has no effect whatsoever if companies just pay the money due to their subcontractors. It’s that easy to avoid the penalties.
Nevertheless, I think the better move might be to scratch the penalties statute and fix the state’s mechanics lien statute to make the lien remedy work like it does in most of the country. That way, subcontractors really would have security on all construction projects, and that would be a much more effective remedy than improving the claims against general contractors with a penalty provision.