Louisiana Enacts Sweeping Changes to its Prompt Payment Law for Construction Projects

On June 8, Governor Jeff Landry signed HB 638 into law as Act 822 of the 2026 Regular Session, amending and reenacting La. R.S. § 9:2784. The new law took effect on August 1. Act 822 significantly expands Louisiana’s prompt payment framework for construction projects involving improvements to immovable property by imposing statutory payment deadlines and penalties on owners — for the first time.

It also:

• establishes new time delays for downstream payments
• restructures the penalty regime
• renders waivers of the statute’s protections absolutely null, and
• grants a cause of action with prevailing-party attorney fees to contractors, subcontractors and suppliers.

This alert summarizes the key changes, discusses the practical impact on existing and future contracts, and recommends steps for compliance.

What are the New Payment Rules?

Under this amended statute, an owner is obligated to pay a contractor within 35 days of receiving a written payment request for “properly performed work or suitably stored or specially fabricated materials,” subject to limited exceptions.

The contractor, in turn, must pay each subcontractor and supplier its attributable share of that payment, including any accrued interest, within seven days of receiving payment from the owner.

The subcontractor must then pay each sub-subcontractor and supplier within seven days of receiving payment from the contractor. Owners, contractors, and subcontractors should ensure full compliance with the statutory requirements to avoid penalties and late-payment disputes.

What Was the Law?

Prior to Act 822, La. R.S. § 9:2784 governed only late payments by contractors and subcontractors. Following receipt of payment from an owner, contractors were required to promptly pay subcontractors and suppliers in proportion to the percentage of work completed. Subcontractors were likewise required to promptly pay sub-subcontractors and suppliers. If a contractor received less than full payment from an owner, the contractor was required to distribute the funds received on a prorated basis. The statute required that payment be made “promptly” but imposed penalties if payment was not made within 14 consecutive days of receipt of payment from the owner.

If a contractor or subcontractor “without reasonable cause” failed to make the payments due within the prior statutory deadline, this could subject the contractor or subcontractor to a penalty of one-half of one percent (0.5%) per day, capped at fifteen percent (15%) of the outstanding balance. The prior statute also addressed attorney fees, subjecting the delinquent contractor or subcontractor to reasonable attorney fees for collection, while a claimant whose claim was found to be without merit could be liable for reasonable defense costs and attorney fees.

What’s New About the 2026 Change?

Act 822 fundamentally restructures the prompt payment framework in several important respects.

Owners now face a statutory payment deadline. If an owner (or person authorized to act on behalf of the owner) receives a written payment request from a contractor for (a) properly performed work (b) suitably stored materials or (c) specially fabricated materials, the owner must pay the amount owed within 35 days, unless withholding is authorized by law, the contract, or the statute. If the owner obtained a construction loan before the payment request and timely and properly requested disbursement of proceeds from that loan, the deadline extends to the later of (a) 35 days after receiving the payment request or (b) the fifth day after receiving the loan proceeds. Previously, owners faced no statutory deadline and no statutory penalty for delayed payments to contractors.

Contractors and subcontractors face a tighter deadline to disburse downstream payments. A contractor who receives payment from the owner or the owner’s authorized representative must pay subcontractors and suppliers their attributable share of owner payments, including any interest accrued, no later than the seventh day after receiving payment. Subcontractors likewise must pay each sub-subcontractor and supplier their attributable share of the payments, including any interest accrued, no later than the seventh day after receiving payment from the contractor.

Waivers of the statute’s protections are absolutely null, with a narrow exception. Under new Subsection E, any waiver of a provision of La. R.S. § 9:2784 is absolutely null. The sole exception permits a written contract between an owner and a contractor for improvements on or construction of a single-family residence to extend the owner’s payment deadline to no later than 61 days after the owner receives the payment request; however, unpaid amounts under such an extended deadline still incur the statutory penalty. Notably, the prior law’s blanket exemption for improvements to immovable property used for residential purposes has been eliminated. Residential construction projects (other than the narrow single-family residence payment-timing exception) are now subject to the statute’s full protections.

The statute’s scope remains limited in certain respects. The revised statute expressly provides that it does not supersede the separate prompt payment obligations and penalties for public contracts under La. R.S. § 38:2191. It also contains broad exemptions for agreements related to the exploration, production, manufacturing, or development of oil, gas, minerals, or other substances, as well as well or mine services and pipeline-related contracts. In addition, the statute does not create a right of action against a lender or insurer.

How Does Act 822 Affect Contracts Executed Before August 1, 2026?

Act 822 does not contain any express provision specifying whether its requirements apply to contracts executed before August 1, 2026. Under Louisiana Civil Code article 6, substantive laws apply prospectively only in the absence of a contrary legislative expression, while procedural and interpretive laws apply both prospectively and retroactively.

Because the revisions to La. R.S. § 9:2784 create new obligations (such as the owner payment deadline), alter existing duties (such as the shortened payment window), restructure the penalty regime, and render waivers null, these changes are largely substantive in nature and should therefore apply prospectively.

As a practical matter, this means that payment obligations that arose and became due before August 1, 2026 should be governed by the prior version of the statute. However, for payment obligations that arise on or after August 1, 2026 — even under a contract executed before that date — the new statute’s requirements likely apply because the statute regulates the timing and consequences of payment rather than the formation of the contract itself.

The applicability of the revised statute to pre-existing contracts will need to be analyzed on a provision-by-provision basis. Parties with contracts executed before August 1, 2026 that involve ongoing payment obligations should carefully review their existing contractual terms to determine their rights and obligations in light of the new law.

What Should Owners, Contractors, Subcontractors and Suppliers Do Now?

To comply with the amended statute, affected parties should consider the following steps:

Owners should calendar the 35-day payment deadline from receipt of a written payment request and identify any amounts withheld under the contract, the statute, or other applicable law.

Contractors should promptly identify the portion of each owner payment attributable to each subcontractor and supplier and pay those amounts within seven days from receipt of payment from the owner.

Subcontractors should promptly identify amounts owed to sub-subcontractors and suppliers and pay those amounts within seven days after receiving payment from the contractor.

In addition to paying undisputed amounts timely, all parties should document any good faith disputes in writing and before the deadline for payment arrives under the revised statute. Under the revised statute, a “good faith dispute” may include a dispute regarding whether the work was performed in a proper manner under the contract. A party disputing the obligation to pay must still pay the amount that is not in dispute by the applicable statutory deadline.

All parties with contracts executed before August 1, 2026 that involve ongoing construction work should review their existing contractual terms — particularly payment timelines, penalty provisions, and any waiver clauses — to determine whether amendments are advisable in light of the new law.

What if a Party Fails to Comply with the New Statute?

Failure to comply with the amended statute can expose owners, contractors and subcontractors to penalties, attorney fees, and court costs, in addition to other remedies authorized by law or the contract. Act 822 replaces the old daily penalty (0.5% per day, capped at 15%) with a monthly penalty of 1.5% of the unpaid amount per month, with no stated aggregate cap.

The penalty starts accruing the day after the payment was due and stops accruing on the earlier of:

1. the date payment is delivered
2. the date payment is mailed if delivered within three days, or
3. the date a judgment is rendered in an action brought under the statute.

Please contact Kelsey Kornick Funes or Virginia Stewart or any member of the Construction/Design team if you have questions or need advice or guidance.