Large public works construction projects can give rise to complex disputes. Often these disputes center around compensation owed, and sometimes withheld, by one party to a downstream party (e.g., prime contractor to a sub-sub contractor). The upstream, non-paying party might forgo immediate payment as a means of leveraging increased productivity from the downstream party, achieving a resolution to another dispute with said party, or encouraging the downstream entity to meet a project deadline. Many times, this is money the project owner has remitted to the prime contractor to compensate the sub-contractors.

Jonathan M. Blocker
Jonathan M. Blocker

While such tactics may ultimately benefit the project and the upstream entity, it creates significant financial hardship and grounds for legal retaliation from the downstream entity. In Florida, these compensation tactics are prohibited on public works projects under the state’s Prompt Payment Law, and state law creates additional remedies for the downstream party that may engender significant financial consequences for the upstream party.

Section 255.071(2) of the Florida Statute prohibits an owner or contractor from withholding payment to a subcontractor(s) for more than 30 days after labor was furnished and payment was due or due pursuant to deadlines in section 255.073(3), whichever is later. Failure of a party to pay due compensation under this statute creates a cause of action that is covered by statutory remedies in section 255.071(4). These remedies are:

  1. An accounting of the use of any such payment from the person who receives such payment.
  2. Temporary injunction against the person who received the payment, subject to the bond requirements specified in the Florida Rules of Civil Procedure.
  3. Prejudgment attachment against the person who received the payment.
  4. Such other legal or equitable remedies as may be appropriate in accordance with the requirements of law.

These statutory remedies operate independently of any other legal remedies available to the party seeking timely payment. Sec. 255.071(5), Fla. Stat. Furthermore, an action for timely payment entitles the prevailing party to costs and reasonable attorney’s fees under Section 255.07(7).

Even if the upstream party disputes the quality or completion of work by the downstream party, Florida law seeks to have the downstream party compensated. State law only permits the owner, contractor, or paying party to withhold compensation for the disputed portions of the work. This means the downstream party must receive payment for the undisputed portions of the work. Sec. 255.073(2), Fla. Stat.  The owner/contractor/paying party must pay for all undisputed amounts due within the time limits set forth in the contract.

If any amount is disputed by the paying party, then the paying party must notify in writing the aggrieved party regarding (1) the amount of payment in dispute; and (2) actions required by the aggrieved party to cure the dispute. Otherwise, the paying party owes the aggrieved party full payment within 10 days of the paying party receiving funds from the public entity/owner. Sec. 255.073(3), Fla. Stat.

If the payment dispute under this section is litigated, a court can only award to the aggrieved party the undisputed payment amounts during a summary hearing. Disputed amounts must go through full litigation (i.e., discovery, depositions, pre-trial proceedings, and trial) before the court can render judgment on the disputed payments. See Astaldi Constr. Corp. v. American Asphalt, 672 So. 2d 609 (Fla. 5th DCA 1996).

Accordingly, an upstream party’s decision not to promptly compensate the downstream party can multiply litigation costs. The upstream party faces not only a bifurcated litigation process, it also is potentially on the hook for all litigation costs in the dispute as Florida’s Prompt Payment Law awards costs and reasonable attorney’s fees to the prevailing party.

Knowing whether Florida’s Prompt Payment Law impacts your construction conflict is important.  If you are a construction entity or financier contemplating a construction project for a Florida state agency, then it is crucial to consider how Florida’s Prompt Payment Law could impact foreseeable disputes. Ensure you are protected in the event of a dispute and consult with an attorney.

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