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A number of states enacted legislation in 2018 that targets and influences the bonding requirements for contractors. Legislation ranged from enabling contractors to post bonds when getting licensed to increasing their liability in bond claim cases.

Contractors in South Carolina can post license bonds

South Carolina's House Bill 4612, which became effective on May 18, 2018, enables general and mechanical contractors to post bonds instead of satisfying minimum net worth requirements. Such bonds must be in an amount twice the amount of the minimum net worth required by South Carolina Code of Laws for the applicant's license group.

California and Maryland legislation makes general contractors more liable for payment disputes

Effective January 1, 2018, California Assembly Bill 1701 has made general contractors in the state liable under subcontractor payment bond claims. Under the new law, employees of subcontractors can bring a payment bond claim against the general contractor even if the latter has already paid the subcontractor. While bill provides certain protections for general contractors, it still holds them jointly liable with subcontractors.

Similarly, Maryland Senate Bill 853, which came into effect on October 1, 2018, also makes general contractors liable for subcontractors' failures to provide payment. Moreover, under the law, such a claim can even be made in cases in which a subcontractor is not in direct contractual relationship with the general contractor.

Much like the California bill, SB853 also provides protections and guarantees to general contractors. Yet, both of these bills are expected to increase contractor costs which will ultimately be passed on to the public in these states.

West Virginia increased the minimum contract price on school property projects requiring a surety bond

West Virginia Senate Bill 561 became effective on May 6, 2018. The bill's main provision was to increase the minimum contract amount for building or repairing school property which would require the posting of a contract bond. Previously, the minimum contract amount was $100. Under the bill, this amount was increased to $25,000. Now contractors on school projects will need to post a bond for contracts that exceed this amount.

California revises the securities requirement for contractor licensing

A recently passed bill in California has amended the financial security requirement for contractor licensing in the state. Under Assembly Bill 3126, the option to provide a certificate of deposit instead of a surety bond is eliminated. Instead, contractors can now only post a surety bond, lawful money or a cashier’s check with the Registrar of Contractors. This requirement will come into force for new applicants on January 1, 2019. All alternatives that are already posted with the California Contractors’ State License Board will need to be replaced with a surety bond or deposit, as specified in the bill, by January 1, 2020.

Pending New Jersey legislation to increase bid bond amount

Assembly Bill 1285, also known as the Fairness in Bidding Act, was introduced on September 1, 2018. The Act suggests an increase to bid bond amounts on municipal projects for public buildings, colleges and others. Under current law the bid bond amount on such projects is 10 percent of the total sum but not more than $20,000. If passed, this bill would increase the bid bond amount to 50 percent but not more than $100,000. Currently the bill is pending technical review by the legislative counsel and will likely not be passed, if at all, before 2019.

Pending Ohio legislation to eliminate specialty contractor license and bond at municipal level

Finally, a pending bill in Ohio includes provisions which would eliminate the right of municipalities to require that specialty contractors get registered on a local level and post a bond. Currently such contractors already have to get licensed on a state level, though they do not require a bond when doing so. The bill also seeks to prohibit political subdivisions from requiring professional licenses where they are already required on a state level.

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