Payment bonds on public jobs: the deadlines subs miss (California and federal)

On a private job, an unpaid sub can record a mechanics lien against the property. On a public job you can't lien a school, a courthouse or a federal building. Instead, the law requires the prime contractor to post a payment bond: a surety's promise to pay subs and suppliers if the contractor doesn't.

Bond claims do get paid, but only for claimants who follow the notice rules. Those rules are strict, and a strong claim that misses a deadline can fail anyway.

California public works

When there's a bond. A payment bond is required on California public works contracts over $25,000, posted by the direct contractor before work starts (Civil Code section 9550). Contracts with certain state entities follow separate rules.

Preliminary notice. If you don't contract directly with the prime, you need to serve a preliminary notice to preserve bond rights. First-tier subs are exempt, but sending one anyway is cheap insurance. If you missed it, there's a back-up: written notice to the surety and the bond principal within 15 days after a notice of completion is recorded, or within 75 days after completion if none is recorded (Civil Code section 9560). Don't count on the back-up. It's not available in some situations, for example to a lower-tier claimant when the first-tier sub above it has already been paid its progress payments.

Stop payment notice. Separately, you can give the public entity a stop payment notice, which makes it withhold money from the prime. It must be given within 30 days after a notice of completion, acceptance or cessation is recorded, or within 90 days after completion or cessation if none is recorded (Civil Code section 9356).

Suing on the bond. A lawsuit on the bond must be filed no later than six months after the period to give a stop payment notice ends (Civil Code section 9558).

Federal projects: the Miller Act

On federal construction contracts above the threshold set by federal law, the prime must post a payment bond under the Miller Act (40 U.S.C. sections 3131 to 3134).

• Who's protected. Only first-tier claimants, who contract directly with the prime, and second-tier claimants, who contract with a first-tier subcontractor. Anyone further down, including a supplier to a supplier, has no Miller Act claim.
• 90-day notice for second tier. If you don't have a contract with the prime, you must give the prime written notice within 90 days after you last furnished labor or materials, stating the amount claimed and who you worked for, by a method that proves delivery.
• Wait, then sue within a year. You can't sue until 90 days after your last work, and you must sue within one year after it. The suit is filed in federal court where the project is.

A simple routine

1. Ask for a copy of the payment bond at the start of every public job, with the surety's name and address.
2. Serve your preliminary notice within 20 days of first work, even if you might be exempt.
3. Diary your last day of work. On federal jobs, the 90-day and one-year clocks run from it.
4. Watch for a recorded notice of completion or acceptance on California jobs, which starts the short deadlines.
5. If payment is slipping, notify the surety early. Sureties often press the prime once a claim lands.

Watch your subcontract

Look for clauses that require you to waive or delay bond claims, or to pursue the GC's disputes with the owner first. A bond is a statutory right, and you shouldn't trade it away in the fine print.