The Ohio Prompt Payment Act, codified at Ohio Revised Code Section 4113.61, gives subcontractors and material suppliers on private construction projects a right to be paid within 10 calendar days after the party above them in the contracting chain receives payment from the owner. Miss that deadline and the unpaid balance accrues 18% annual interest, and a court that finds a violation must also award reasonable attorney fees and costs to the prevailing party in most cases.1Ohio Revised Code Section 4113.61
The Act reaches every tier. Prime contractors, subcontractors, suppliers, and their lower-tier counterparts are all covered, so long as the work is a private improvement to Ohio property. Public projects run on a different set of statutes and are not covered here except as a boundary.
The 10-Day Payment Rule
The clock is tied to money actually changing hands upstream, not to a calendar date in the contract. Once a contractor receives payment from the owner, the contractor has 10 calendar days to pay each subcontractor and supplier its proportional share of what the owner approved. A subcontractor who receives that payment then has 10 calendar days to pay its own lower-tier subs and suppliers. The duty cascades down the chain at every level.
For the clock to work, the sub or supplier has to get its invoice or payment application in early enough for the contractor to include it in the pay request going to the owner. If a sub misses that window, the obligation to pay still exists, but the timing shifts, because the contractor cannot request money from the owner for work the owner has not yet been billed for.
One gap in the statute is worth knowing about. Section 4113.61 sets no deadline for the owner to pay the prime contractor in the first place. The 10-day rule only governs what happens after money arrives. When an owner stalls on approving a pay application, everyone downstream waits, and the prompt payment clock has not started.
When a Contractor Can Hold Payment Back
Withholding is permitted on narrow grounds. The statute allows a contractor to hold back retainage under the terms of the contract, invoice, or purchase order, and to withhold amounts necessary to resolve disputed liens or claims tied to the subcontractor’s or supplier’s work. That is the list.
A contractor cannot withhold payment because of a general disagreement about pace or scope. The dispute has to involve an actual lien or claim related to the labor or materials the sub furnished. And withholding is limited to the disputed amount. If a subcontractor is owed $50,000 and a $5,000 lien claim exists against part of the work, the other $45,000 still has to be paid on time. Holding back more than the disputed portion exposes the contractor to 18% interest on the excess.
Retainage Release
Section 4113.61 does not cap retainage percentages on private projects. The amount withheld from each progress payment is whatever the parties agreed to, often in the 5% to 10% range in practice.
What the Act does control is release timing. Once the contractor receives final retainage from the owner, the contractor has 10 calendar days to pass each subcontractor’s and supplier’s proportional share down the line, as long as the work has been satisfactorily completed and the owner has approved it. The same 10-day rule applies to subcontractors releasing retainage to their lower-tier subs. Late retainage carries the same 18% annual interest as a late progress payment, running from the 11th day after the contractor received the retainage.
Interest and Attorney Fees
Interest on a late private-project payment runs at 18% per year on the unpaid balance, starting on the 11th day after the paying party received its own payment and continuing until the debt is paid in full. The rate is fixed by statute and applies automatically. It is not something the parties can negotiate down.
The attorney-fee provision is often where real pressure comes from. A court that finds a violation must award the statutory interest and must award reasonable attorney fees and court costs to the prevailing party, unless the court finds that such an award would be inequitable. In deciding fees, the court looks at whether the parties raised their claims and defenses in good faith, the proportion of the amount recovered to the amount demanded, and the nature and extent of the legal work involved. A party that inflates its demand and wins only a small fraction can see its fee award cut back accordingly.1Ohio Revised Code Section 4113.61
Filing Suit to Recover Payment
You cannot sue the moment a payment is late. The statute requires the unpaid party to wait until 30 days have passed since payment was due. After that waiting period, any contractor, subcontractor, supplier, or lower-tier participant can file a civil action for the principal plus accrued interest. The case goes to the Ohio court of common pleas, or to a municipal court when the amount is within that court’s jurisdictional limit.
Documentation drives the case. Expect to produce the contract, the invoices or payment applications submitted, proof of when the party above you received its payment from the owner, and the timeline showing the 10-day window closed without payment or a valid basis for withholding. The court is looking at two things: whether the paying party actually received funds, and whether 10 days passed without payment or a lawful reason to hold back.
Contract Terms the Act Overrides
Contracts cannot shrink the statute’s protections. If a contract sets a payment period longer than 10 calendar days or an interest rate lower than 18%, the statute’s terms control. The minimums cannot be negotiated away by burying different numbers in the paperwork.
Section 4113.62, sometimes called the Fairness in Construction Contracting Act, adds further limits. Contract clauses that waive a subcontractor’s rights under a surety bond are void and unenforceable. The same is true of clauses waiving a subcontractor’s right to delay damages caused by the owner or general contractor.2Ohio Revised Code Section 4113.62
Pay-if-paid clauses sit in a less settled area. Ohio courts have not declared them unenforceable across the board. But a pay-if-paid clause cannot prevent a subcontractor from filing a mechanic’s lien, and subcontractors have strong arguments that broad pay-if-paid provisions run into Section 4113.62 when they operate to waive bond claims or delay damages.
Using the Act With a Mechanic’s Lien
The prompt payment statute and Ohio’s mechanic’s lien statute work independently, and an unpaid sub or supplier often needs both. A lien secures the underlying debt against the property but is limited to the value of the labor or materials actually furnished, minus offsets. The 18% statutory interest and attorney fees available under the Prompt Payment Act cannot be rolled into the lien amount.
To capture both the secured claim and the statutory penalties, the usual path is to file the mechanic’s lien and bring a prompt payment claim. A pay-if-paid clause in the contract does not block the lien filing, regardless of whether the general contractor has yet been paid by the owner.
A Note on Public Projects
Section 4113.61 does not govern public improvement work. Payment on state, county, township, municipal, and school district projects is handled under Section 153.12 and related statutes, and state agency purchases of equipment, materials, and services fall under Section 126.30. The deadlines, interest rates, and procedures on those projects are different from the private-project rules described above.