Prompt payment statutes are laws that require the payment of contractors and subcontractors within a certain period of time, and prescribe interest and penalties for late payments. In some states these laws only apply to public works construction projects that are funded by the government—and sometimes only to public works projects over a certain dollar amount. There is also a federal Prompt Payment Act for federal construction projects.
In Tennessee, prompt payment statutes are designed to ensure that contractors and subcontractors are paid in a timely manner for their work on construction projects. These laws apply to both public and private construction projects. Under Tennessee Code Annotated § 66-34-101, for public projects, state entities are required to pay contractors within 30 days after receipt of an invoice, and contractors must pay their subcontractors within 7 days of receiving payment. For private projects, according to Tennessee Code Annotated § 66-34-201, the property owner must pay the contractor within 90 days of the completion of the work, and the contractor must pay the subcontractor within 10 days of receiving payment. If payments are delayed, the statutes provide for interest penalties to compensate the unpaid party. The interest rates for late payments are specified in the statutes. These state laws operate alongside the federal Prompt Payment Act, which governs the timely payment for federal construction projects.