Labor Code 2810: Liability for Underfunded Labor Contracts
A single signed document with the terms Labor Code section 2810 lists is the main protection California gives a business that hires certain labor contractors. The statute bars contracts with construction, farm labor, garment, janitorial, security guard, port drayage, and warehouse contractors that the business knows or should know are too thin to let the contractor obey wage laws. The contractor’s workers can sue the business that signed. A contract that meets the statute’s checklist creates a presumption that the business didn’t violate it.
What does section 2810 prohibit?
Signing a contract the business should know is underfunded. Labor Code section 2810(a) says a person or entity “shall not enter into a contract or agreement for labor or services” with one of the listed contractors “if the person or entity knows or should know that the contract or agreement does not include funds sufficient to allow the contractor to comply with all applicable local, state, and federal laws or regulations governing the labor or services to be provided.”
The listed industries are specific: construction, farm labor, garment, janitorial, security guard, port drayage motor carrier, and warehouse contractors. The section was last amended by Assembly Bill 2754 (Stats. 2024, ch. 739), effective January 1, 2025. Under subdivision (h), a contractor counts whether or not it’s licensed, if it’s “acting in the capacity” of one of those contractors.
The business that’s liable is usually the customer: the building owner that hires a janitorial company, the retailer that hires a security firm, the developer that hires a framing subcontractor, or the brand that uses a warehouse operator. The statute doesn’t require that the customer control the workers or count as their employer.
What do “knows” and “should know” mean?
More than actual knowledge. Under section 2810(i)(1), “knows” includes knowledge “arising from familiarity with the normal facts and circumstances of the business activity engaged in.” “Should know” includes facts “that would make a reasonably prudent person undertake to inquire” whether the contract has enough money in it.
The third definition is the one that catches businesses. Section 2810(i)(3) says a failure “to request or obtain any information from the contractor that is required by any applicable statute or by the contract or agreement between them, constitutes knowledge of that information.” A company that never asked for the worker count or the wage total is treated as knowing them anyway.
In practice, the price is the evidence. A janitorial bid that, divided by the hours the contract requires, comes out below minimum wage plus payroll costs is the kind of fact a plaintiff will use. Procurement teams that pick the lowest bid without asking how it pencils out create that record.
How does the written-contract presumption work?
It favors the business if the contract is complete. Under section 2810(b), “There is a rebuttable presumption affecting the burden of proof that there has been no violation of subdivision (a)” if the contract meets every requirement of subdivision (d). That’s the stronger kind of presumption: the fact-finder assumes there was no violation unless the workers prove otherwise.
Subdivision (d) requires the contract to be “in writing, in a single document,” and to include the parties’ contact information, a description and schedule of the work, the contractor’s state employer identification number, its workers’ compensation policy and carrier, vehicle and vehicle-insurance information for vehicles used in the work, any worker housing address, the total number of workers and total wages with pay dates, the contractor’s commission or payment, information about any independent contractors it will use, and the signatures with the date.
Two details matter in litigation. A material change has to meet the same single-document rule under subdivision (e)(1), so a change order by email can cost the presumption. And where the worker count or wage total isn’t known at signing, subdivision (e)(2) allows “the best estimate available at that time,” but the parties then have “a continuing duty” to put the real figures in writing.
The business also has to keep the paper. Subdivision (f) requires it to keep a copy of the contract “for a period of not less than four years following the termination of the contract or agreement,” and to provide it to the Labor Commissioner on request.
What can workers recover?
Damages or a per-employee amount, with conditions. Under section 2810(g)(1), an employee aggrieved by a violation may recover “the greater of all of the employee’s actual damages or two hundred fifty dollars ($250) per employee per violation for an initial violation and one thousand dollars ($1,000) per employee for each subsequent violation,” plus costs and reasonable attorney’s fees if the employee prevails. Injunctive relief is available under subdivision (g)(2).
The same subdivision sets a threshold that’s a real defense. The action “shall not be maintained unless it is pleaded and proved that an employee was injured as a result of a violation of a labor law or regulation in connection with the performance of the contract or agreement.” No underlying wage or labor violation means no section 2810 claim, even if the contract was thin.
Section 2810 isn’t the only route to the customer. For workers supplied to work in a business’s usual course of business, Labor Code section 2810.3(b) separately says a client employer “shall share with a labor contractor all civil legal responsibility and civil liability” for the payment of wages and for failure to secure workers’ compensation coverage, subject to that section’s own definitions and exclusions. A complaint may plead both.
| Issue | Section 2810 | What it means for the business |
|---|---|---|
| Covered contracts | Construction, farm labor, garment, janitorial, security guard, port drayage, warehouse (subd. (a)) | Check whether the vendor fits a listed category |
| Knowledge | Includes industry familiarity and information the business failed to request (subd. (i)) | Ask for the worker count and wage figures |
| Presumption | No violation is presumed if the contract meets subd. (d) (subd. (b)) | Use a single document with every listed term |
| Exposure | Greater of actual damages or $250 per employee per initial violation and $1,000 per employee per subsequent violation, plus fees (subd. (g)(1)) | Requires an underlying labor law violation that injured the employee |
| Exclusions | Collective bargaining agreements, family home residences, short port drayage contracts (subd. (c)) | Confirm whether an exclusion applies |
What should a business do when a contractor’s workers sue it?
- Preserve the contract, every amendment and change order, the bid and pricing records, invoices and payments, and any communications with the contractor about staffing or wages, and keep the contract copy the statute requires.
- Calendar the response deadline, and check the contract’s indemnity and insurance clauses, the contractor’s certificates of insurance, and the business’s own EPLI or general liability policy for notice requirements.
- Identify who at the business negotiated the contract and approved the price, and avoid any action toward the contractor’s workers that could look like retaliation.
- Pull the documents the claim depends on, including the contractor’s payroll records if they can be obtained and the information the business requested or failed to request from the contractor.
- Talk to a lawyer before tendering to the contractor, terminating the contract, or responding to the workers or the Labor Commissioner.
The firm’s page on contractor wage liability defense for California businesses describes its approach to these claims.
Labor contractor liability questions from California businesses
Does section 2810 apply to every vendor we use?
No. It covers only the listed contractor types: construction, farm labor, garment, janitorial, security guard, port drayage motor carrier, and warehouse contractors. A software vendor or a marketing agency isn’t covered. Warehouse has its own definition in subdivision (j): a facility whose primary operation is storage or distribution of merchandise, refrigerated goods, or other products.
Can the contractor’s indemnity clause protect us?
It can shift the cost, but it won’t stop the workers from suing the business. Section 2810 liability runs directly to the business that signed. An indemnity clause is only as good as the contractor’s finances, and a contractor that underpaid its workers may not be able to pay a judgment. Insurance requirements backed by certificates, along with a right to audit the contractor’s payroll, give the clause more value.
Is a union contractor covered?
Subdivision (c)(1) says the prohibition doesn’t apply to “A person or entity who executes a collective bargaining agreement covering the workers employed under the contract or agreement.” The exemption depends on who signed the agreement, so a business should check whether it, and not only the contractor, is a party to the collective bargaining agreement before relying on it.
What if the price was low but the contractor paid everyone correctly?
Then the workers have a problem. Section 2810(g)(1) requires them to plead and prove an injury from a labor law violation connected to the contract. A thin contract with no underlying violation doesn’t support a damages claim. The business should still tighten its contracts, because the next contractor may not be as careful.
If a contractor’s workers have sued your business
If your business has been named in a wage lawsuit by a janitorial, security, construction, or warehouse contractor’s workers, the contract file and the pricing records usually decide whether section 2810 reaches the business. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving liability for labor contractors’ wage violations. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statutes are Labor Code section 2810, as last amended by Assembly Bill 2754 (Stats. 2024, ch. 739), and Labor Code section 2810.3.
This post is general information about California and federal employment law as of November 7, 2026. It is not legal advice, and reading it does not create an attorney-client relationship. Employment statutes, regulations, and court decisions change often, and the outcome of any claim depends on its facts. Past results do not guarantee future outcomes.