Philadelphia Construction Law Blog

n an opinion issued in July, the Pennsylvania Supreme Court categorically declared the award of attorneys’ fees and penalties under the Pennsylvania Prompt Pay Act to be discretionary. While the statute itself contains language which suggests such an outcome, the Court’s decision in Scott Enterprises, Inc. v. City of Allentown formally settles an issue which many construction practitioners understood differently and argued differently in litigation.

There is at least one universal truth in businesses of all kinds: no one likes to work for free. The risk of non-payment in the construction industry can be greater than in others because of the significant financial outlay that is required just to perform the work. Reimbursement for labor and material costs are required just to avoid losing money (not profit) on a job. And we all know what happens to companies that don’t at least break even most of the time.

Owners and contractors on Pennsylvania construction projects are familiar with the Contractor and Subcontractor Payment Act (“CASPA”). CASPA requires owners to pay contractors in accordance with the terms of their contract, and for contractors to pay subcontractors in accordance with the terms of the subcontract. If payments are not timely made without a good faith reason, CASPA allows an unpaid contractor or subcontractor to recover (in addition to the amount owed) interest at the rate of 1% per month, penalties at the rate of 1% per month, and attorney’s fees incurred to collect payment.