Ohio Prompt Payment Guide and FAQs

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Ohio Prompt Payment Overview

Ohio Prompt Payment Requirements


  • Private Jobs
  • Public Jobs
NO
DAYS
Prime Contractors

Ohio does not specify a timeframe for payments from the property owner to general contractor.


10
DAYS
Subcontractors

According to Ohio's Prompt Payment laws, subcontractor payments are due within 10 days after their hiring party receives payment on private construction projects.


10
DAYS
Suppliers

Ohio's Prompt Payment laws require payments to material suppliers within 10 days after their hiring party receives payment.


18%
/ YEAR
Interest & Fees

Ohio's Prompt Payment laws set interest on late payments at 18% year. The state also allows attorney fees to be awarded to the prevailing party in a prompt payment claim.

30
DAYS
Prime Contractors

Ohio requires prompt payment to Prime Contractors within 30 days of invoice on a public project. This timeframe may be modified by contract.


10
DAYS
Subcontractors

According to Ohio's Prompt Pay laws for public construction projects, subcontractors must receive payment within 10 days after their hiring party receives payment.


10
DAYS
Suppliers

On public construction projects in Ohio, material suppliers must receive payment within 10 days after their hiring party receives payment.


18%
/ YEAR
Interest & Fees

Prime contractors are entitled to the statutory interest rate for late payments on public construction projects. Subcontractors are entitled to a prompt payment interest rate of 18% APR.

Prompt payment laws are a set of rules that regulate the acceptable amount of time in which payments must be made to contractors and subs. This is to ensure that everyone on a construction project is paid in a timely fashion. These statutes provide a framework for the timing of payments to ensure cash flow and working capital.

Projects Covered by Ohio’s Prompt Pay Laws

The state of Ohio’s prompt payment provisions are split into two sections, covering both private and public projects. These statutes govern the timing of all payments on construction projects, and impose penalties for late payment in the form of interest.

Private Projects

Payments for Ohio private construction projects are regulated by Ohio Rev. Code §4113.61: Time limitations for payments to subcontractors and materialmen.

Payment Deadlines for Private Projects

The Ohio prompt payment provisions on private projects do not govern payments from the property owner to the prime contractor. However, as of May 2020 the Ohio Legislature is considering an amendment that would set a 35-day deadline for payments from owner to prime. Currently, these payments should be made according to the terms of the contract between the parties.

However, once the prime has received payment from the owner, they must pass payment down to their subcontractors and suppliers within 10 days of payment. The same 10-day turnaround period applies to payments from 2nd-tier parties to other lower-tiered project participants.

Penalties for Late Payment on Private Projects

If payments to subcontractors or other lower-tiered project participants is either late or wrongfully withheld, interest penalties will accrue at a rate of 18% per year (1.5% per month). Additionally, Ohio courts may award attorney fees if they deem them “equitable.”

Public Projects

All payments on public construction projects in Ohio are regulated by Ohio. Rev. Code §126.30: Interest on late payments for goods & services.

Payment Deadlines for Public Projects

Once the public entity has received a proper request for payment from the prime contractor, Ohio’s prompt pay law requires payment within 30 days of receipt, unless the contract states otherwise. As far as all other payments on public works projects the same deadlines as private projects applies. Payments must be made within 10 days of the higher-tiered party’s receipt of payment.

Penalties for Late Payment on Public Projects

Any late or wrongfully withheld payments will be subject to interest penalties on the unpaid balance. Late payments to the prime contractor will accrue interest at the “federal short-term rate,” unless the contract states otherwise. The interest rate for late payments to all other payments will be the same as private projects, 18% per year (1.5% per month).

Ohio quick guide to prompt payment in construction

Ohio Prompt Payment FAQs

Frequently asked questions about Ohio's prompt payment laws, timing, and requirements. With answers written by construction attorneys and payment experts in Ohio.

Ohio Prompt Payment: Frequently Asked Questions

When do prompt payment penalties apply in Ohio?

In order for the provisions of the Ohio prompt pay statutes to apply, a pay application, payment request, or invoice must be provided to the paying party. The specific timing of when such invoice or pay app should be submitted is determined by the party’s construction contract.

Read our contractor’s guide to Ohio’s prompt pay laws, deadlines, and penalties.

Further, a general contractor must provide the property owner with a complete, detailed, and accurate estimate of the labor and/or materials furnished since the prior estimate for approval by the owner.

Subcontractors may be awarded attorney’s fees in a successful action to recover withheld payments and interest thereon, if doing so would not be inequitable.

Can I include prompt payment fees in a mechanics lien or bond claim in Ohio?

No; Ohio’s mechanics lien law does not allow miscellaneous amounts to be included in a lien claim. Similarly, the state does not allow claimants to include extra amounts in a bond claim in Ohio, either.

The only way to recover interest penalties according to Ohio’s Prompt Pay laws is to make a prompt payment claim. Making a claim involves a lawsuit in civil court.

Learn how to make a prompt payment claim. 

What is the interest rate for late payments in Ohio's Prompt Pay laws?

For payments that are delayed beyond the state’s prompt payment requirements, the interest penalty in Ohio is set at 18% per year, or 1.5% per month.

Read more about Ohio’s prompt payment interest penalty – and how to claim it.

Is the owner or GC allowed to withhold payment under Ohio's prompt payment laws?

When it comes to payments to subcontractors or suppliers, Ohio allows payments to be withheld if necessary to resolve disputed liens, or other claims involving the work of the sub/supplier requesting payment. In addition, the prompt payment statute allows the GC to withhold retainage. Learn more about retainage requirements in Ohio.

According to Ohio’s prompt pay law, “The contractor may reduce the amount paid by any retainage provision contained in the contract […] and may withhold amounts that may be necessary to resolve disputed liens or claims involving the work or labor performed or material furnished by the subcontractor or material supplier.”

 

What can I do if my hiring party hasn't paid on time according to Ohio's Prompt Payment laws?

If you are just trying to recover a contractual payment on a construction project in Ohio, sending a notice of intent to lien is generally the best course of action. Even under the protection of the state’s prompt pay laws, securing and using your right to file an Ohio mechanics lien is the most effective method of spurring payment.

If you wish to recover the interest penalty in addition to the amount in the unpaid invoice, sending a prompt payment demand is the next step before filing a civil suit in Ohio’s courts.

Does Ohio's Prompt Payment law apply if my contract has a pay-if-paid clause?

Ohio’s prompt payment statute does not allow any contract clause, including a pay-if-paid clause, to supersede a construction party’s right to collect interest if payment is late.

Pay-if-paid clauses are only partially effective in Ohio; they cannot prevent a party from filing a mechanics lien, either.

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Ohio Prompt Payment Statutes

Prompt Payment Statute on Private Projects

§ 4113.61: Time Limitations for Payments to Subcontractors and Materialmen

(A)

(1)  If a subcontractor or material supplier submits an application or request for payment or an invoice for materials to a contractor in sufficient time to allow the contractor to include the application, request, or invoice in the contractor’s own pay request submitted to an owner, the contractor, within ten calendar days after receipt of payment from the owner for improvements to property, shall pay to the:

(a)  Subcontractor, an amount that is equal to the percentage of completion of the subcontractor’s contract allowed by the owner for the amount of labor or work performed;

(b)  Material supplier, an amount that is equal to all or that portion of the invoice for materials which represents the materials furnished by the material supplier.

The contractor may reduce the amount paid by any retainage provision contained in the contract, invoice, or purchase order between the contractor and the subcontractor or material supplier, and may withhold amounts that may be necessary to resolve disputed liens or claims involving the work or labor performed or material furnished by the subcontractor or material supplier.

If the contractor fails to comply with division (A)(1) of this section, the contractor shall pay the subcontractor or material supplier, in addition to the payment due, interest in the amount of eighteen per cent per annum of the payment due, beginning on the eleventh day following the receipt of payment from the owner and ending on the date of full payment of the payment due plus interest to the subcontractor or material supplier.

(2) If a lower tier subcontractor or lower tier material supplier submits an application or request for payment or an invoice for materials to a subcontractor, material supplier, or other lower tier subcontractor or lower tier material supplier in sufficient time to allow the subcontractor, material supplier, or other lower tier subcontractor or lower tier material supplier to include the application, request, or invoice in the subcontractor’s, material supplier’s, or other lower tier subcontractor’s or lower tier material supplier’s own pay request submitted to a contractor, other subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier, the subcontractor, material supplier, or other lower tier subcontractor or lower tier material supplier, within ten calendar days after receipt of payment from the contractor, other subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier for improvements to property, shall pay to the:

(a) Lower tier subcontractor, an amount that is equal to the percentage of completion of the lower tier subcontractor’s contract allowed by the owner for the amount of labor or work performed;

(b) Lower tier material supplier, an amount that is equal to all or that portion of the invoice for materials which represents the materials furnished by the lower tier material supplier.

The subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier may reduce the amount paid by any retainage provision contained in the contract, invoice, or purchase order between the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier and the lower tier subcontractor or lower tier material supplier, and may withhold amounts that may be necessary to resolve disputed liens or claims involving the work or labor performed or material furnished by the lower tier subcontractor or lower tier material supplier.

If the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier fails to comply with division (A)(2) of this section, the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier shall pay the lower tier subcontractor or lower tier material supplier, in addition to the payment due, interest in the amount of eighteen per cent per annum of the payment due, beginning on the eleventh day following the receipt of payment from the contractor, other subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier and ending on the date of full payment of the payment due plus interest to the lower tier subcontractor or lower tier material supplier.

(3)  If a contractor receives any final retainage from the owner for improvements to property, the contractor shall pay from that retainage each subcontractor and material supplier the subcontractor’s or material supplier’s proportion of the retainage, within ten calendar days after receipt of the retainage from the owner, or within the time period provided in a contract, invoice, or purchase order between the contractor and the subcontractor or material supplier, whichever time period is shorter, provided that the contractor has determined that the subcontractor’s or material supplier’s work, labor, and materials have been satisfactorily performed or furnished and that the owner has approved the subcontractor’s or material supplier’s work, labor, and materials.

If the contractor fails to pay a subcontractor or material supplier within the appropriate time period, the contractor shall pay the subcontractor or material supplier, in addition to the retainage due, interest in the amount of eighteen per cent per annum of the retainage due, beginning on the eleventh day following the receipt of the retainage from the owner and ending on the date of full payment of the retainage due plus interest to the subcontractor or material supplier.

(4) If a subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier receives any final retainage from the contractor or other subcontractor, lower tier subcontractor, or lower tier material supplier for improvements to property, the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier shall pay from that retainage each lower tier subcontractor or lower tier the lower tier subcontractor’s or lower tier material supplier’s proportion of the retainage, within ten calendar days after receipt of payment from the contractor or other subcontractor, lower tier subcontractor, or lower tier material supplier, or within the time period provided in a contract, invoice, or purchase order between the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier and the lower tier subcontractor or lower tier material supplier, whichever time period is shorter, provided that the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier has determined that the lower tier subcontractor’s or lower tier material supplier’s work, labor, and materials have been satisfactorily performed or furnished and that the owner has approved the lower tier subcontractor’s or lower tier material supplier’s work, labor, and materials.

If the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier fails to pay the lower tier subcontractor or lower tier material supplier within the appropriate time period, the subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier shall pay the lower tier subcontractor or lower tier material supplier, in addition to the retainage due, interest in the amount of eighteen per cent per annum of the retainage due, beginning on the eleventh day following the receipt of the retainage from the contractor or other subcontractor, lower tier subcontractor, or lower tier material supplier and ending on the date of full payment of the retainage due plus interest to the lower tier subcontractor or lower tier material supplier.

(5) A contractor, subcontractor, or lower tier subcontractor shall pay a laborer wages due within ten days of payment of any application or request for payment or the receipt of any retainage from an owner, contractor, subcontractor, or lower tier subcontractor.

If the contractor, subcontractor, or lower tier subcontractor fails to pay the laborer wages due within the appropriate time period, the contractor, subcontractor, or lower tier subcontractor shall pay the laborer, in addition to the wages due, interest in the amount of eighteen per cent per annum of the wages due, beginning on the eleventh day following the receipt of payment from the owner, contractor, subcontractor, or lower tier subcontractor and ending on the date of full payment of the wages due plus interest to the laborer.

(B)

(1)  If a contractor, subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier has not made payment in compliance with division (A)(1), (2), (3), (4), or (5) of this section within thirty days after payment is due, a subcontractor, material supplier, lower tier subcontractor, lower tier material supplier, or laborer may file a civil action to recover the amount due plus the interest provided in those divisions. If the court finds in the civil action that a contractor, subcontractor, material supplier, lower tier subcontractor, or lower tier material supplier has not made payment in compliance with those divisions, the court shall award the interest specified in those divisions, in addition to the amount due. Except as provided in division (B)(3) of this section, the court shall award the prevailing party reasonable attorney fees and court costs.

(2) In making a determination to award attorney fees under division (B)(1) of this section, the court shall consider all relevant factors, including but not limited to the following:

(a) The presence or absence of good faith allegations or defenses asserted by the parties;
(b) The proportion of the amount of recovery as it relates to the amount demanded;
(c) The nature of the services rendered and the time expended in rendering the services.

(3) The court shall not award attorney fees under division (B)(1) of this section if the court determines, following a hearing on the payment of attorney fees, that the payment of attorney fees to the prevailing party would be inequitable.

(C) This section does not apply to any construction or improvement of any single-, two-, or three-family detached dwelling houses.

(D)

(1) No provision of this section regarding entitlement to interest, attorney fees, or court costs may be waived by agreement and any such term in any contract or agreement is void and unenforceable as against public policy.

(2) This section shall not be construed as impairing or affecting, in any way, the terms and conditions of any contract, invoice, purchase order, or any other agreement between a contractor and a subcontractor or a material supplier or between a subcontractor and another subcontractor, a material supplier, a lower tier subcontractor, or a lower tier material supplier, except that if such terms and conditions contain time periods which are longer than any of the time periods specified in divisions (A)(1), (2), (3), (4), and (5) of this section or interest at a percentage less than the interest stated in those divisions, then the provisions of this section shall prevail over such terms and conditions.

(3) Notwithstanding the definition of lower tier material supplier in this section, a person is not a lower tier material supplier unless the materials supplied by the person are:

(1) Furnished with the intent, as evidenced by the contract of sale, the delivery order, delivery to the site, or by other evidence that the materials are to be used on a particular structure or improvement;
(2) Incorporated in the improvement or consumed as normal wastage in the course of the improvement; or
(3) Specifically fabricated for incorporation in the improvement and not readily resalable in the ordinary course of the fabricator’s business even if not actually incorporated in the improvement.
(F) As used in this section:

(1) “Contractor” means any person who undertakes to construct, alter, erect, improve, repair, demolish, remove, dig, or drill any part of a structure or improvement under a contract with an owner, a “construction manager” or “construction manager at risk” as those terms are defined in section 9.33 of the Revised Code, or a “design-build firm” as that term is defined in section 153.65 of the Revised Code.

(2) “Laborer,” “material supplier,” “subcontractor,” and “wages” have the same meanings as in section 1311.01 of the Revised Code.

(3) “Lower tier subcontractor” means a subcontractor who is not in privity of contract with a contractor but is in privity of contract with another subcontractor.

(4) “Lower tier material supplier” means a material supplier who is not in privity of contract with a contractor but is in privity of contract with another subcontractor or a material supplier.

(5) “Wages due” means the wages due to a laborer as of the date a contractor or subcontractor receives payment for any application or request for payment or retainage from any owner, contractor, or subcontractor.

(6) “Owner” includes the state, and a county, township, municipal corporation, school district, or other political subdivision of the state, and any public agency, authority, board, commission, instrumentality, or special district of or in the state or a county, township, municipal corporation, school district, or other political subdivision of the state, and any officer or agent thereof and relates to all the interests either legal or equitable, which a person may have in the real estate upon which improvements are made, including interests held by any person under contracts of purchase, whether in writing or otherwise.

Prompt Payment Statute on Public Projects

§ 126.30: Interest on Late Payments for Goods and Services

(A) Any state agency that purchases, leases, or otherwise acquires any equipment, materials, goods, supplies, or services from any person and fails to make payment for the equipment, materials, goods, supplies, or services by the required payment date shall pay an interest charge to the person in accordance with division (E) of this section, unless the amount of the interest charge is less than ten dollars. Except as otherwise provided in division (B), (C), or (D) of this section, the required payment date shall be the date on which payment is due under the terms of a written agreement between the state agency and the person or, if a specific payment date is not established by such a written agreement, the required payment date shall be thirty days after the state agency receives a proper invoice for the amount of the payment due.

(B)  If the invoice submitted to the state agency contains a defect or impropriety, the agency shall send written notification to the person within fifteen days after receipt of the invoice. The notice shall contain a description of the defect or impropriety and any additional information necessary to correct the defect or impropriety. If the agency sends such written notification to the person, the required payment date shall be thirty days after the state agency receives a proper invoice.

(C) In applying this section to claims submitted to the department of job and family services by providers of equipment, materials, goods, supplies, or services, the required payment date shall be the date on which payment is due under the terms of a written agreement between the department and the provider. If a specific payment date is not established by a written agreement, the required payment date shall be thirty days after the department receives a proper claim. If the department determines that the claim is improperly executed or that additional evidence of the validity of the claim is required, the department shall notify the claimant in writing or by telephone within fifteen days after receipt of the claim. The notice shall state that the claim is improperly executed and needs correction or that additional information is necessary to establish the validity of the claim. If the department makes such notification to the provider, the required payment date shall be thirty days after the department receives the corrected claim or such additional information as may be necessary to establish the validity of the claim.

(D)  In applying this section to invoices submitted to the bureau of workers’ compensation for equipment, materials, goods, supplies, or services provided to employees in connection with an employee’s claim against the state insurance fund, the public work-relief employees’ compensation fund, the coal-workers pneumoconiosis fund, or the marine industry fund as compensation for injuries or occupational disease pursuant to Chapter 4123., 4127., or 4131. of the Revised Code, the required payment date shall be the date on which payment is due under the terms of a written agreement between the bureau and the provider. If a specific payment date is not established by a written agreement, the required payment date shall be thirty days after the bureau receives a proper invoice for the amount of the payment due or thirty days after the final adjudication allowing payment of an award to the employee, whichever is later. Nothing in this section shall supersede any faster timetable for payments to health care providers contained in sections 4121.44 and 4123.512 of the Revised Code.

For purposes of this division, a “proper invoice” includes the claimant’s name, claim number and date of injury, employer’s name, the provider’s name and address, the provider’s assigned payee number, a description of the equipment, materials, goods, supplies, or services provided by the provider to the claimant, the date provided, and the amount of the charge. If more than one item of equipment, materials, goods, supplies, or services is listed by a provider on a single application for payment, each item shall be considered separately in determining if it is a proper invoice.

If prior to a final adjudication the bureau determines that the invoice contains a defect, the bureau shall notify the provider in writing at least fifteen days prior to what would be the required payment date if the invoice did not contain a defect. The notice shall contain a description of the defect and any additional information necessary to correct the defect. If the bureau sends a notification to the provider, the required payment date shall be redetermined in accordance with this division after the bureau receives a proper invoice.

For purposes of this division, “final adjudication” means the later of the date of the decision or other action by the bureau, the industrial commission, or a court allowing payment of the award to the employee from which there is no further right to reconsideration or appeal that would require the bureau to withhold compensation and benefits, or the date on which the rights to reconsideration or appeal have expired without an application therefor having been filed or, if later, the date on which an application for reconsideration or appeal is withdrawn. If after final adjudication, the administrator of the bureau of workers’ compensation or the industrial commission makes a modification with respect to former findings or orders, pursuant to Chapter 4123., 4127., or 4131. of the Revised Code or pursuant to court order, the adjudication process shall no longer be considered final for purposes of determining the required payment date for invoices for equipment, materials, goods, supplies, or services provided after the date of the modification when the propriety of the invoices is affected by the modification.

(E) The interest charge on amounts due shall be paid to the person for the period beginning on the day after the required payment date and ending on the day that payment of the amount due is made. The amount of the interest charge that remains unpaid at the end of any thirty-day period after the required payment date, including amounts under ten dollars, shall be added to the principal amount of the debt and thereafter the interest charge shall accrue on the principal amount of the debt plus the added interest charge. The interest charge shall be at the rate per calendar month that equals one-twelfth of the rate per annum prescribed by section 5703.47 of the Revised Code for the calendar year that includes the month for which the interest charge accrues.

(F)  No appropriations shall be made for the payment of any interest charges required by this section. Any state agency required to pay interest charges under this section shall make the payments from moneys available for the administration of agency programs.

If a state agency pays interest charges under this section, but determines that all or part of the interest charges should have been paid by another state agency, the state agency that paid the interest charges may request the attorney general to determine the amount of the interest charges that each state agency should have paid under this section. If the attorney general determines that the state agency that paid the interest charges should have paid none or only a part of the interest charges, the attorney general shall notify the state agency that paid the interest charges, any other state agency that should have paid all or part of the interest charges, and the director of budget and management of the attorney general’s decision, stating the amount of interest charges that each state agency should have paid. The director shall transfer from the appropriate funds of any other state agency that should have paid all or part of the interest charges to the appropriate funds of the state agency that paid the interest charges an amount necessary to implement the attorney general’s decision.

(G) Not later than forty-five days after the end of each fiscal year, each state agency shall file with the director of budget and management a detailed report concerning the interest charges the agency paid under this section during the previous fiscal year. The report shall include the number, amounts, and frequency of interest charges the agency incurred during the previous fiscal year and the reasons why the interest charges were not avoided by payment prior to the required payment date. The director shall compile a summary of all the reports submitted under this division and shall submit a copy of the summary to the president and minority leader of the senate and to the speaker and minority leader of the house of representatives no later than the thirtieth day of September of each year.

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