Ohio’s Prompt Payment Act – remedies for late payments to subcontractors.

As a construction law firm in Cincinnati, an important legal tool that comes up often is Ohio’s prompt pay law, more formally called the Prompt Payment Act (O.R.C. 4113.61).  The Prompt Payment Act sets certain time requirements for when payments must be made on Ohio construction projects.

The Prompt Payment Act requires general contractors to pay subcontractors within 10 calendar days after receipt of payment from the owner.  The general contractor may reduce the payment under a retainage provision in the contract.  The general contractor also may withhold amounts necessary to resolve disputed liens or claims involving the work or labor performed or material furnished.

The act does not just apply to progress and final payments.  Retainage is also covered by the Prompt Payment Act.  General contractors must pay retainage within 10 calendar days after receipt of the retainage from the owner, or within the time period provided in the contract (whichever is shorter) provided that the general contractor and owner approve of the work.

If the general contractor fails to meet its payment deadlines, it must pay an interest penalty at a rate of 18% per annum.  The general contractor is also liable for the subcontractor’s attorney’s fees and court costs unless payment of the fees would be inequitable.

The Prompt Payment Act imposes similar payment timing requirements on subcontractors and material suppliers.  The act applies to most public and private commercial construction projects but does not apply to certain residential projects.

Schwandner Law Firm frequently litigates on behalf of contractors for progress/final payments, retainage, and Prompt Payment Act interest and fees.