Hawaii Prompt Payment Overview

Hawaii’s prompt payment statutes set forth specific timeframes when general contractors, subcontractors, suppliers, and others involved with a construction project must be paid. This page provides an overview of these regulations, and addresses some frequently asked questions related to the Hawaii prompt payment laws.

Hawaii Prompt Payment for Private Projects FAQs

Prompt Payment Frequently Asked Questions

Do I Have To Send A Letter or File Anything To Qualify For Prompt Payment Penalties or Remedies in Hawaii?

For parties covered by the prompt pay statutes in Hawaii (parties with a direct contract with the property owner do not seem to be covered), a proper statement that materials and/or services were furnished (an invoice counts) is required.

Can I Include Prompt Payment Fees In My Hawaii Mechanics Liens Claim or Bond Claim?

Likely not. However, since filing a mechanics lien in Hawaii requires a court action, claims to enforce a mechanics lien and for relief pursuant to the prompt pay statute may be asserted contemporaneously.

What Happens To My Prompt Payment Penalties and Fees if I Get Paid Late? Can I Still Recover The Prompt Payment Penalty in Hawaii?

If payment is received late, and none of the valid reasons for late payment apply, the party to be paid is entitled to recover interest. However, if payment is to be from funds received from an escrow account or trust, interest will not begin to accrue on the unpaid amount until after the tenth day following receipt by the contractor of an invoice by the subcontractor that includes any supporting documents as required by the terms of the subcontract and receipt of the escrow or trust funds, whichever occurs later.

Are there reasons for which payment may be withheld past the general deadline?

Hawaii allows payments to be withheld pursuant to a bona fide dispute over the materials and/or labor furnished.

What is the best practice for making a demand to a non-paying party to get prompt payment fees?

Sending a notice of intent to lien and prompt payment demand is generally the best method for encouraging parties to make payment.

Hawaii Prompt Payment for Public Projects FAQs

Prompt Payment Frequently Asked Questions

Do I Have To Send A Letter or File Anything To Qualify For Prompt Payment Penalties or Remedies in Hawaii?

Hawaii’s prompt payment statute applies pursuant to the timing deadlines set forth in the statute provided an invoice has been delivered to the paying party.

Can I Include Prompt Payment Fees In My Hawaii Mechanics Liens Claim or Bond Claim?

No. Hawaii law does not allow for the recovery of miscellaneous amounts in a bond claim.

If I am paid late according to prompt payment statutes, can I obtain interest or other penalty payments?

If payment is received late, and none of the valid reasons for late payment apply, the party to be paid is entitled to recover interest.

Are there reasons for which payment may be withheld past the general deadline?

Hawaii allows payments to be withheld pursuant the following:

 

A bona fide dispute between State or any County and the contractor concerning the labor and/or materials furnished; Labor dispute; Power or mechanical failure; Fire; Acts of God; Any similar circumstances beyond the control of the State or any County

Hawaii Prompt Payment Statutes

Getting informed about prompt payment laws is important. An examination of Hawaii’s prompt payment laws, the rules and regulations related to payment timing, is important to know your rights and responsibilities as a party on a construction project. Hawaii’s specific laws can be found in: : HRS §§ 444-1, 444-25, 103-10 – 103-10.5; and are reproduced below.

Prompt Payment Statute on Private Projects

444-1: Definitions

As used in this chapter:

“Board” means the contractors license board.

“Chlorofluorocarbon” or “CFC” means any member of the family of substances containing carbon, fluorine, and chlorine, including, without limitation, those compounds known as CFC-11, CFC-12, CFC-13, CFC-14, CFC-113, CFC-114, CFC-115, CFC-116, CFC-500, CFC-502, and CFC-503, and any combination or mixture containing any of these chlorofluorocarbon compounds.

“Contractor” means any person who by oneself or through others offers to undertake, or holds oneself out as being able to undertake, or does undertake to alter, add to, subtract from, improve, enhance, or beautify any realty or construct, alter, repair, add to, subtract from, improve, move, wreck, or demolish any building, highway, road, railroad, excavation, or other structure, project, development, or improvement, or do any part thereof, including the erection of scaffolding or other structures or works in connection therewith.

“Contractor”, to the extent allowed under federal law includes a subcontractor, a specialty contractor, and any person, general engineering, general building, or specialty contractor who performs any of the activities listed in the previous paragraph directly or indirectly for the federal government.

“Department” means the department of commerce and consumer affairs.

“Director” means the director of commerce and consumer affairs.

“Hydrochlorofluorocarbon” or “HCFC” means any member of the family of substances containing hydrogen, carbon, fluorine, and chlorine, including, without limitation, those compounds known as HCFC-22 and HCFC-123 and any combination or mixture containing any of three hydrochlorofluorocarbon compounds.

“Investigator” means any person employed by the department of commerce and consumer affairs to investigate matters relating to any person who furnishes commodities or services for which a license is required from the department or any board or commission thereunder.

“Refrigerant recovery and recycling equipment” means a device used to recover and to purify CFCs from a device for later reuse.

“RME” means responsible managing employee.

“Sale” means any arrangement between two or more persons as a result of which there is, or is to be, a transfer of property for a consideration.

If any provision of this section, or the application thereof to any person, or circumstances, is held to be invalid, the invalidity shall not affect other provisions or applications of this section which can be given effect without the invalid provision or application, and to this end the provisions of this section are severable.

444-25: Payments for Goods and Services

A contractor shall pay the contractor’s subcontractor for any goods and services rendered within ten days after receipt of an invoice by the subcontractor that includes any supporting documents as required by the terms of the subcontract and after receipt by the contractor of payment from the owner for the subcontractor’s work, whichever occurs later. The subcontractor shall be entitled to receive interest on the unpaid amount at the rate of one and one-half per cent per month from the date payment is due; provided that this section shall not apply if the delay in payment is due to a bona fide dispute between the contractor and the subcontractor concerning the goods and services contracted for.

If payment is contingent upon receipt of funds held in escrow or trust, the contractor shall clearly state this fact in the contractor’s solicitation of bids. If the solicitation for bids contains the statement that the time of payment is contingent upon the receipt of funds held in escrow or trust and a contract is awarded in response to the solicitation, interest shall not begin to accrue upon any unpaid balance until after the tenth day following receipt by the contractor of an invoice by the subcontractor that includes any supporting documents as required by the terms of the subcontract and receipt of the escrow or trust funds, whichever occurs later; provided that this section shall not apply if the delay in payment is due to a bona fide dispute between the subcontractor and the contractor concerning the goods and services contracted for.

This section shall not apply to chapter 103 or any section affecting public contracts.

Prompt Payment Statute on Public Projects

103-10: Payments for Goods and Services

(a) Any person who renders a proper statement for goods delivered or services performed, pursuant to contract, to any agency of the state or county, shall be paid no later than thirty calendar days following receipt of the statement or satisfactory delivery of goods or performance of the services. In the event that circumstances prevent the paying agency from complying with this section, the person shall be entitled to interest from the paying agency on the principal amount remaining paid at a rate equal to the prime rate for each calendar quarter plus two percent, commencing on the thirtieth day day following receipt of the statement or satisfactory delivery of the goods or performance of the services, whichever is later, and ending on the date of the check. As used in this subsection, “prime rate” means the prime rate posted in the Wall Street Journal on the first business day of the month preceding the calendar quarter.

(b) This section shall not apply in those cases where delay in payment is due to:

(1) A bona fide dispute between the State or any county and the contractor concerning the services or goods contracted for;
(2) A labor dispute;
(3) A power or mechanical failure;
(4) Fire;
(5) Acts of God; or
(6) Any similar circumstances beyond the control of the State or any county.

Where the time of payment is contingent upon the receipt of federal funds, or federal approval, the solicitation of bids for contracts shall clearly state that payment is contingent upon those conditions. If the solicitation for bids contains the warning and a contract is awarded in response to the solicitation then interest shall not begin to accrue upon any unpaid voucher until the thirtieth day following receipt by the State or county of the contractor’s statement or the thirtieth day following receipt of the federal funds or approval, whichever occurs later, and shall end as of the date of the check.

(c) All goods or services purchased by a state agency which are less than $25, except those purchased through the use of a state procurement card, shall be paid from the petty cash funds of the agency; provided that the comptroller may establish a higher threshold for petty cash payments and may grant exceptions to this requirement.

(d) Any other law to the contrary notwithstanding, the payments for goods and services obtained through use of any state or county procurement card shall be made under the terms and conditions specified in the contract under which the procurement card was established.

103-10.5: Prompt Payment

(a) Any money paid to a contractor shall be disbursed to subcontractors within ten days after receipt of the money in accordance with the terms of the subcontract; provided that the subcontractor has met all the terms and conditions of the subcontract and there are no bona fide disputes on which the procurement officer has withheld payment.

(b) Upon final payment to the contractor, full payment to the subcontractor, including retainage, shall be made within ten days after receipt of the money; provided there are no bona fide disputes over the subcontractor’s performance under the subcontract.

(c) Where a subcontractor has provided evidence to the contractor of satisfactorily completing all work under their subcontract and has provided a properly documented final payment request as described in subsection (d) of this section, and:

(1) Has provided to the contractor an acceptable performance and payment bond for the project executed by a surety company authorized to do business in the State, as provided in section 103-32.1; or
(2) The following has occurred:

(A) A period of ninety days after the day on which the last of the labor was done or performed and the last of the material was furnished or supplied has elapsed without written notice of a claim given to contractor and the surety, as provided for in section 103D-324; and

(B) The subcontractor has provided to the contractor:

(i) An acceptable release of retainage bond, executed by a surety company authorized to do business in the State, in an amount of not more than two times the amount being retained or withheld by the contractor;
(ii) Any other bond acceptable to the contractor; or
(iii) Any other form of mutually acceptable collateral,

all sums retained or withheld from a subcontractor and otherwise due to the subcontractor for satisfactory performance under the subcontract shall be paid by the procurement officer to the contractor and subsequently, upon receipt from the procurement officer, by the contractor to the subcontractor within the applicable time periods specified in subsection (b) and section 103-10. If the procurement officer or the contractor fails to pay in accordance with this section, a penalty of one and one-half per cent per month shall be imposed upon the outstanding amounts due that were not timely paid by the responsible party. The penalty may be withheld from future payment due to the contractor, if the contractor was the responsible party. If a contractor has violated subsection (b) three or more times within two years of the first violation, the contractor shall be referred by the procurement officer to the contractor license board for action under section 444-17(14).

(d) A properly documented final payment request from a subcontractor, as required by subsection (c), shall include:

(1) Substantiation of the amounts requested;
(2) A certification by the subcontractor, to the best of the subcontractor’s knowledge and belief, that:

(A) The amounts requested are only for performance in accordance with the specifications, terms, and conditions of the subcontract;

(B) The subcontractor has made payments due to its subcontractors and suppliers from previous payments received under the subcontract and will make timely payments from the proceeds of the payment covered by the certification, in accordance with their subcontract agreements and the requirements of this section; and

(C) The payment request does not include any amounts that the subcontractor intends to withhold or retain from a subcontractor or supplier in accordance with the terms and conditions of their subcontract; and

(3) The submission of documentation confirming that all other terms and conditions required under the subcontract agreement have been fully satisfied.

The procurement officer shall return any final payment request that is defective to the contractor within seven days after receipt, with a statement identifying the defect.

(e) In the case of a construction contract, a payment request made by a contractor to the procurement officer that includes a request for sums that were withheld or retained from a subcontractor and are due to a subcontractor may not be approved under subsection (c) unless the payment request includes:

(1) Substantiation of the amounts requested; and
(2) A certification by the contractor, to the best of the contractor’s knowledge and belief, that:

(A) The amounts requested are only for performance in accordance with the specifications, terms, and conditions of the contract;

(B) The subcontractor has made payments due to its subcontractors and suppliers from previous payments received under the contract and will make timely payments from the proceeds of the payment covered by the certification, in accordance with their subcontract agreements and the requirements of this section; and

(C) The payment request does not include any amounts that the contractor intends to withhold or retain from a subcontractor or supplier in accordance with the terms and conditions of their subcontract.

The procurement officer shall return any final payment request that is defective to the contractor within seven days after receipt, with a statement identifying the defect.

(f) This section shall not be construed to impair the right of a contractor or a subcontractor at any tier to negotiate and to include in their respective subcontracts provisions that provide for additional terms and conditions that are requested to be met before the subcontractor shall be entitled to receive final payment under subsection (c) of this section; provided that any such payments withheld shall be withheld by the procurement officer.