Building in 2024: Recent Oregon Legislative Changes Impacting the Construction Industry

As 2023 comes to a close, it is the perfect time to look back and review recent Oregon legislative changes that will impact the construction industry in the coming year. 

The 82nd Session of the Oregon Legislature adjourned on June 25th, the designated constitutional date for sine die. The 2023 Legislative Session was unique because it was the first in-person session since the beginning of the COVID-19 pandemic. Further, the legislative body experienced various changes, including bidding farewell to one of the longest-serving members of the body, Senate President Peter Courtney, and welcoming a large contingent of new legislators who had never served inside the Capitol and had rarely attended in-person meetings with their colleagues or the public.

Despite these circumstances, the Oregon Legislature introduced 2,970 bills for consideration and passed 653 bills into law. Several of those bills that passed (or were defeated) directly impact the construction industry. The following article provides an overview of a selection of those bills and describes how they may impact public and private construction projects in the coming year.

Bills that passed into law

• SB 594: Prevailing Wage in Public Improvement Contracts
  SB 594, effective September 24, 2023, and operative January 1, 2024, expands the definition of "public works," for the purpose of the prevailing wage rate, to include the demolition or removal of hazardous waste on a public agency contract, when $750,000 or more of public funds are used, or when the work is performed on public land.
• HB 2922: Contractor Bond Requirements
  HB 2922, effective September 24, 2023, and operative January 1, 2024, increases the bond amounts that persons licensed by the CCB must maintain. On average, most surety bond requirements have increased by $5,000 under HB 2922. For example, under HB 2922, a residential general contractor must obtain a surety bond under ORS 701.068 in the amount of $25,000. The previous bond requirement for a residential general contractor under ORS 701.068 was $20,000.
• HB 2649: Increased Apprenticeship Utilization Requirements on State Projects
  HB 2649, effective September 24, 2023, and operative January 1, 2024, increases apprenticeship utilization requirements on state projects. The bill requires an increase from the previous 12% to a new requirement of 15% on projects with a contract price of $750,000 or more and mandates contractors to achieve this percentage by January 1, 2027. The bill also includes all Higher Education Coordinating Commission projects in the requirement and removes Oregon Department of Transportation's current exemption. Finally, if a contractor cannot meet this requirement by the January 1, 2027, deadline, then HB 2649 allows the relevant state agency to reduce the payment due to the contractor.
• SB 1048: ODOT Small Business Development Program
  SB 1048, effective September 24, 2023, and operative January 2, 2024, establishes a small business development program at ODOT that will limit the bidders for select projects to small businesses. The aim of this bill is to create opportunities for smaller contractors to act as general contractors on smaller ODOT projects. The bill also creates an assistance program for these contractors.
• SB 228: CCB Modernization
  SB 228, effective September 24, 2023, and operative on January 1, 2024, aims to provide tools to better support the Oregon Construction Contractors Board's (the "CCB") operations. Through this bill, the CCB requested certain changes to the regulations to modernize the CCB's systems and streamline some of CCB's procedures. SB 228 also provides additional consumer protection by increasing the CCB's ability to crack down on contractors who attempt to obtain licenses under other names after their own licenses are revoked. Finally, SB 228 requires licensed contractors to notify the CCB within 10 days of any change in status if the contractor's status changes from exempt to non-exempt or from non-exempt to exempt.
• HB 3572: Contract Preference in Public Procurements
  HB 3572, effective September 24, 2023, and operative January 1, 2024, encourages public contracting agencies to grant preference to procuring public-use goods and services from a benefit company that has a majority of its workforce operating in Oregon at the time of bidding. The measure allows the procurement preference only if the goods and services are not more than 5% higher than the goods and services available from a non-benefit company contractor.

  An Oregon benefit company is a type of corporation or limited liability company that considers its impact on society and the environment in the business decision-making process, in addition to earning a profit.

Bills that were defeated (but we will likely see again in 2024)

• HB 2870: Retainage Fix
  In 2019, the Oregon Legislature passed HB 2415, which created a requirement that retainage be held in an interest-bearing escrow account for certain public and private projects. However, due to the unclear language of HB 2415, it led to various cascading issues for the construction industry. Financial institutions, for instance, were reluctant to open escrow accounts without imposing substantial fees, often surpassing the amount of retainage interest. Disputes over retainage expanded from determining the owed amount to examining whether retainage was held in a compliant "escrow account" and which party should cover associated account fees. HB 2415 also didn't define "escrow account" or address fee responsibilities.

  HB 2870 sought to amend the retainage framework by eliminating the "escrow account" requirement and allowing contractors and subcontractors to submit a retainage bond instead of retainage on all construction projects. Later amendments excluded smaller private construction projects from the retainage bond framework. Despite broad support from contractor and subcontractor associations, as well as the Oregon State Bar Construction Law Section, the Oregon Legislature was unable to pass HB 2870 before the end of the 2023 Legislative Session. However, industry associations have committed to bringing the bill with an emergency clause in the next legislative session, indicating that if the bill passes, it would take effect in early 2024.

• HB 2057: Wage Theft Liability
  HB 2057 aimed to hold general contractors liable for their subcontractors' unpaid wages. While addressing wage theft in the construction industry, the bill did not target the bad actors directly responsible for non-payment. Instead, it shifted liability onto general contractors to pay for unpaid subcontractor wages, with a six-year statute of limitations allowing liability even years after the final payments to subcontractors. The bill failed to advance into law after it died in the Senate.
• SB 848: Duty to Defend Design Professionals
  In successive legislative sessions, design professional organizations and individuals proposed legislation to shift the burden of litigation costs from construction agreements through certain indemnity agreements. Originally intended to eliminate design professionals' obligation to cover litigation costs for projects, even when their negligence caused harm, SB 848 was later amended to apply exclusively to public works projects where the design professional was in direct contract privity with the public owner. Nevertheless, the bill ultimately stalled in the Ways and Means Committee. Given its repeated appearance in recent legislative sessions, it wouldn't be surprising if a version of this bill is reintroduced in the coming session.