Nearly every US state has prompt payment laws that set deadlines within which payments must be made on construction projects. The timing of payments and penalties for non-compliance vary widely. This guide provides an overview of the requirements and penalties in each state as they apply to both private and public projects.
Private vs. public projects
While most states have prompt payment laws that apply to both private projects and public projects, some states only set prompt payment requirements for public projects. In some states, the same statute applies to payments on both types of projects. In others, different laws apply to each type of project.
Prompt payment deadlines
From Owner to Prime: When applicable, statutes set a deadline by which the project owner must submit payment to the Prime Contractor. Some states create a distinction between progress payments and final payments, including retainage.
From Prime to Subs: When applicable, prompt payment laws set a deadline by which the Prime Contractor must submit payment to the subcontractor. Generally, these requirements also apply for payments from the subcontractor to subs and suppliers under them as well.
Interest fees: Statutes assign an interest fee to late payments. The claimant typically has the right to include interest fees on invoices for payments that are made past the deadline.
Other penalties: Many states allow the prevailing party to recover attorney and/or court fees, should the case proceed to court or arbitration.
Exceptions to prompt payment requirements
Most prompt payment laws provide for exceptions under which the deadline doesn’t apply. Typically, these exceptions apply to good faith disputes, such as when the quality of work is in question.