XI. Prompt Payment Acts

Prompt payment acts relate to the timing of and requirement for payment after a request for payment is made. They also set out various damages if prompt payment is not made. The prompt payment statutes can be used when filing construction claims for non-payment by an owner to a contractor or by a contractor to a subcontractor. The following is an overview of Alabama construction law related to prompt payment. Other states have prompt payment acts that apply to projects in those states. The sections below only address when Alabama construction law applies to the project.

1. PRIVATE PROMPT PAY ACT ALA. CODE § 8-29-1 (1975)

   1. Owner to Contractor

      Payment to contractor must be made in 30 days from pay request unless contract states otherwise. (Ala. Code § 8-29-3)

      Final payment from owner is due no later than 60 days after completion of contractor’s work or substantial completion, whichever occurs first.

      (Ala. Code § 8-29-3(l))

   2. Contractor to Subcontractor

      Payment to subcontractor must be made in 7 days from payment by the owner unless contract states otherwise. (Ala. Code § 8-29-3)

   3. Retainage

      1. Retainage withheld by owner shall not exceed 10%, and after 50% project completion, no further retainage shall be withheld.
      2. Contractors and subcontractors are subject to same limitations.

      (Ala. Code § 8-29-3(f)(g)(i))

   4. Disputing Pay Request

      If pay request is disputed the party disputing that request must notify that they dispute the request in writing in:

      • 15 days from pay request if you are the owner.
      • 5 days from pay request if you are the contractor or subcontractor.

      (Ala. Code § 8-29-4)

   5. Interest and Attorneys’ Fees

      If there is no payment or late payment

      1. Can recover interest at 12% per year. (Ala. Code § 8-29-3(d))
      2. Can recover attorneys’ fees. (Ala. Code § 8-29-6)

2. PUBLIC PROMPT PAY ACT ALA. CODE § 41-16-3 (1975)

   The public prompt pay act is the applicable Alabama construction law when the State of Alabama is a party to the contract.

   1. Owner to Contractor

      Payment to contractor must be made in 30 days from completion of work and presentation of proper invoice.

   2. Contractor to Subcontractor

      Payment to subcontractor must be made in 7 days from payment by the state unless contract states otherwise.

   3. Retainage

      1. Retainage cannot exceed the amount that is being withheld from you.
      2. There is not a provision in the statute about the contract stating otherwise.

   4. Disputing Pay Request

      If pay request is disputed the party disputing the pay request must give notification in writing in:

      • 15 days from pay request if you are the owner.
      • 5 days from pay request if you are the contractor or subcontractor.

   5. Interest and Attorneys’ Fees

      If there is no payment or late payment

      1. Can recover interest at the legal amount currently charged by the state.
      2. There is no attorneys’ fees provision in the public prompt payment act.