Louisiana Public Entities Can No Longer Withhold Contested Liquidated Damages

Act 255 changed Louisiana’s public prompt-payment rules, and on public projects it changes the balance of leverage in a real way. It took effect May 15, 2026.

The core change: A public owner can no longer hold back liquidated damages the contractor disputes. If the owner believes it is owed delay damages, it has to pay the contractor first and pursue the claim in a separate lawsuit. The one exception is narrow — flood protection and integrated coastal projects — and it opens only after the standard 45-day payment window closes.

This is less a reversal than a codification. Louisiana courts had previously ruled that a public entity could not sit on a contractor’s retainage over an unproven delay claim, and that a contract clause purporting to allow it did not override the duty to pay. Act 255 now writes that into the statute and names contested liquidated damages directly, so the outcome no longer turns on how a court may read the older law.

Three features give teeth to Louisiana Act 255:

1. Loser pays on the damages fight. Whoever prevails on the liquidated-damages claim recovers attorney fees.
2. Interest cuts back toward the owner. An owner who pays a contested amount and later wins it back collects interest — half a percent a day, capped at 15 percent — from the date it paid. That mirrors the penalty that owners have long faced for paying late.
3. The payment-enforcement remedy runs both ways. A contractor forcing payment recovers fees and interest; if the owner wins that fight instead, the contractor owes the owner’s fees. And the delay-damages claim cannot be pulled into that expedited proceeding at all.

Bottom line: Contractors holding receivables against an open delay assessment should revisit them now, and public owners should treat liquidated damages as a claim to prove in court, not a reason to withhold.