Massachusetts Ruling Sets Bar for Prompt Payment Compliance
A Massachusetts Supreme Judicial Court ruling issued June 26 shows contractors must strictly follow prompt payment statutes when rejecting disputed invoices, Construction Dive reports, or risk losing withholding protections entirely.
What Happened in the Case
Subcontractor J.C. Cannistraro submitted invoices totaling $925,000 in disputed change order work to contractor Columbia Construction. Columbia rejected the invoices but failed to meet the good-faith certification requirement for nonpayment under Massachusetts’ Prompt Pay Act, according to a blog post from Matthew Madden, partner at law firm Bowditch & Dewey. That failure meant the invoices were deemed automatically approved, and Columbia had to pay them.
Columbia later pursued recoupment through arbitration. The arbitrator found that $577,000 of those costs were not fair and reasonable and awarded Columbia partial recoupment. The Supreme Judicial Court upheld that decision. Madden told Construction Dive the case “did affirm that its initial rejections didn’t comply with the statute, so it doesn’t excuse prompt pay compliance,” despite Columbia’s eventual win.
Timothy Hegarty, partner at Zetlin & De Chiara, called the outcome “common sense” since the arbitrator prevented the subcontractor from securing “a windfall” on costs it couldn’t justify. Trent Cotney, construction team leader at Adams & Reese in Tampa, said general contractors often reject payment applications over technical issues, pushing subcontractors into 90- to 120-day payment delays over failures “to cross a T or dot an I.”
Late payments cost the U.S. construction industry $208 billion in 2022, according to figures cited in the report. Prompt payment laws exist in nearly every state for public projects, per payment platform Levelset, though private-project coverage varies. Provisions differ by state: New Jersey mandates attorney’s fee payment for a winning contractor, a rule that doesn’t exist in New York, Hegarty noted.
What It Means for Subcontractors
- Document every payment rejection with the specific good-faith certification language required under your state’s prompt pay statute, not just a general dispute notice, since a technical miss can void the withholding and force full payment upfront.
- If a general contractor rejects a pay application on a minor technicality, consult counsel before accepting the delay. Cotney’s comments suggest these rejections can stretch payment timelines to 90 or 120 days even when the underlying work isn’t in dispute.
- Before submitting change order invoices, confirm the billed amount is fully backed by documentation. Hegarty warned that padding a requisition and hoping for late approval “is borderline fraud” and can backfire in arbitration, as it did for Cannistraro on $577,000 of its claim.
- Track your state’s specific prompt payment provisions, including fee-shifting rules like New Jersey’s mandatory attorney’s fee award, since compliance requirements and remedies differ significantly state to state.
- Expect this Massachusetts precedent to inform disputes in other states with similar prompt pay statutes, so subcontractors working multi-state contracts should have counsel review certification requirements jurisdiction by jurisdiction.
