This article was featured in the August 2026 edition of the Utility Contractors Association of New England, Inc.’s Construction Outlook.
For the first 12 years since it was enacted in 2010, no Massachusetts appellate-level court had issued a decision concerning the Massachusetts Prompt Payment Act. After a dozen years, we have now had three appellate-level decisions addressing this statute in the past four years, including most recently, a June 2026 decision of the Massachusetts Supreme Judicial Court (“SJC”).
For those who may be unfamiliar, the Massachusetts Prompt Payment Act generally applies to certain private construction projects in excess of $3 Million (but not projects containing 1-4 dwelling units). The statute sets forth specific timeframes and requirements applicable to the review, approval, and rejection of applications for payment and change order requests. To comply with the statute, a rejection must not only be timely, it must be made in writing, set forth the factual and contractual bases for the rejection, and include a certification that the rejection has been made in good faith. Otherwise, the application for payment or the change order request is deemed to be approved under the terms of the statute.
In 2022, the Massachusetts Appeals Court issued a written decision confirming that the statute means what it says: when there has been a failure to comply with the statutory requirements, an application for payment (or change order request for that matter) is deemed to be approved and is therefore due and payable (the “Tocci” case).
The SJC weighed in two years later, in 2024 (the “Graycor” case). The SJC’s decision in Graycor addressed an important question under the statute, namely: whether a general contractor waives its right to assert common-law defenses to payment if the general contractor fails to comply with the statutory requirements for rejecting a subcontractor’s applications for payment. The SJC in Graycor concluded that, under the Prompt Pay Act, a party does not automatically waive all common-law defenses by failing to approve or reject an application for payment as required by the statute. However, the SJC determined that in order to preserve its common-law defenses, a contractor that fails to approve or reject a subcontractor’s application for payment in accordance with the statute must: (1) make payment of the “deemed approved” invoice to the subcontractor; and (2) raise its defenses prior to or contemporaneously with the payment of the invoice. The contractor in Graycor did not follow this approach; even after invoices were “deemed approved” under the statute, the contractor had “sought to raise and pursue defenses without ever paying the invoices.” According to the SJC in Graycor: “This it cannot do.”
The SJC in Graycor stated that – in order for the statute to have “meaningful consequences” – “payment of overdue approved invoices must be made prior to, or contemporaneous with, raising common-law defenses, or the defenses cannot be raised.” Otherwise, “[a]llowing common-law defenses to be raised and pursued without paying the now ‘deemed to be approved’ invoices would render this approval to be of no import.”
In a June 2026 decision, the SJC had another opportunity to weigh in on the mechanics of the Prompt Payment Act (the “Columbia” case). The Columbia case involved a payment dispute between a subcontractor and a contractor that had arisen prior to the Tocci and Graycor decisions.
The subcontractor in the Columbia case had billed for change order work. Although the contractor timely rejected those invoices, the contractor “failed to include the certification required by the prompt pay act that its rejections were made in good faith.” The contractor did not pay the invoices, and the case proceeded to arbitration.
During the arbitration in the Columbia case, the Appeals Court issued its decision in Tocci. With the benefit of the Tocci decision, the arbitrator in the Columbia case ruled that the contractor had violated the Prompt Payment Act by failing to certify that its rejection of the subcontractor’s invoices was made in good faith. Thus, the subcontractor’s invoices were deemed to be approved and the arbitrator ruled that the contractor was required to pay them. In compliance with the arbitrator’s ruling, the contractor paid the subcontractor’s invoices. However, the contractor then asserted a “recoupment” counterclaim against the subcontractor to recoup the amounts that it was ordered to pay in light of the statute. After an evidentiary hearing, the arbitrator determined that the contractor met its burden of proving that the subcontractor’s invoices (which the contractor had by then paid) were not fair and reasonable and ordered the subcontractor to pay a damages award to the contractor.
The subcontractor in Columbia appealed to the Massachusetts Superior Court. “Shortly thereafter,” the SJC issued its decision in Graycor. In light of the SJC’s decision in Graycor, the Superior Court concluded that the arbitrator had exceeded its authority when it ultimately ruled that the subcontractor was required to make payment to the contractor. The contractor appealed, leading to the SJC’s decision in Columbia.
The SJC in Columbia restored the arbitrator’s award requiring the subcontractor to make payment to the contractor. In so doing, the SJC in Columbia confirmed that the Prompt Payment Act “does not by its express terms state if or when a recoupment counterclaim may be raised after an invoice is deemed to be approved due to a failure to provide a timely certification in good faith.” The SJC pointed out that its prior decision in Graycor made clear that the statute does not preclude all common law defenses. According to the SJC, the arbitrator’s conclusion that the subcontractor was required to make payment to the contractor did not violate the express terms of the statute.
The SJC in Columbia also concluded that the subcontractor failed to meet its burden of proving that the arbitrator’s award violated public policy. In support of this conclusion, the SJC in Columbia reiterated that “the statute does not address the consequences of the failure to comply fully” with its requirements “except to state that the invoices are deemed approved.” According to the SJC, the Prompt Payment Act “also does not address whether recoupment claims can nonetheless be pursued.” The SJC concluded that the arbitrator “presciently anticipated Graycor’s central requirement that, when a contractor fails to satisfy all statutory requirements for rejecting a claim, it must pay the disputed amount before asserting defenses.” The SJC added that the arbitrator “appears to have concluded” that the contractor had acted in good faith and that the subcontractor was “not harmed” by the contractor’s failure to provide good faith certifications “because the certifications would have provided no more information about why the invoices were being rejected than [the subcontractor] had already received.” In these circumstances, the SJC directed the Superior Court to confirm the arbitration award requiring the subcontractor to make payment to the contractor.
With the benefit of these three appellate-level decisions, contractors that perform private construction work subject to the Prompt Payment Act should be mindful of the following takeaway: comply with the applicable statutory requirements. Contractors that receive applications for payment and/or change order requests from their subcontractors should timely and carefully review those applications/requests. In the event there are good faith reasons to reject those applications/requests in whole or in part, contractors should make sure to jump through the required statutory hoops to protect their interests. Any rejections must be timely and in writing. They must explain the factual and contractual bases for the rejection, and they must be certified as made in good faith. A misstep along this process can result in a determination that the subcontractor’s applications/requests are deemed approved and must be paid (even if they may otherwise lack merit).
In these circumstances, contractors performing private work subject to the Prompt Payment Act should undergo training with respect to the applicable statutory requirements so that they can equip themselves to comply with those requirements and protect their interests. Keep in mind also that there is a statutory companion to the Prompt Payment Act addressing substantial completion, applications for retainage and punch list work (the “Retainage Law”). Prompt Payment Act (and Retainage Law) training is particularly important because contractors also stand to benefit from the statutory protections when it comes to contractor applications for payment and change order requests submitted to project owners.
