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What is the legality of the you get paid when we get paid policies?

OhioPay When Paid

What is the legality of the you get paid when we get paid policies?

1 reply

Jun 9, 2020
These types of clauses are referred to as "contingent payment clauses," and they come in two forms; "pay-if-paid" and "pay-when-paid." Both of which are enforceable under Ohio law. A pay-if-paid clause means that if the person you contracted with isn't paid by their customer, then they aren't obligated to pay you. In order for this to be enforceable, the clause must clearly and unambiguously indicate that payment to you is conditioned upon payment to your customer. These types of clauses should be avoided. Fortunately in Ohio, under ORC §4113.62, although a pay-if-paid clause is enforceable, it will not prevent the subcontractor from filing a mechanics lien. A pay-when-paid clause is the less riskier of the two. These clauses state that the you will be paid within a certain period of time from when your customer receive payment. However, if the customer is never paid that doesn't relieve them of their obligation to pay. They are still obligated to pay you within a "reasonable" time period; which is determined by the courts on a case-by-case basis.
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