On a private construction project in California, the general contractor can owe the unpaid wages of a subcontractor’s workers, even several tiers down. Three Labor Code sections impose that liability, and which one applies depends on when the direct contract was signed. For contracts since 2022, liability can reach penalties and liquidated damages too, unless the contractor monitored the subcontractor’s payroll and acted on any nonpayment. The paperwork the contractor collects during the job is usually its best defense.
Which statute applies to the project?
It depends on the date of the direct contract.
| Contract date | Statute | Penalties and liquidated damages |
|---|---|---|
| 2018 through 2021 | Lab. Code § 218.7 | Not covered |
| 2022 through 2025 | Lab. Code § 218.8 | Covered unless the contractor met the monitoring steps |
| 2026 and later | Lab. Code § 218.9 | Covered unless the contractor met the monitoring steps |
For the oldest contracts, section 218.7(a)(2) says the direct contractor’s liability “shall extend only to any unpaid wage, fringe or other benefit payment or contribution, including interest owed but shall not extend to penalties or liquidated damages.” Long projects can span more than one regime, so the contract date matters more than the date the work was done.
How broad is the liability?
Broad. Under section 218.9(a)(1), a direct contractor on private work “shall assume, and is liable for, any indebtedness for the performance of labor” incurred “by a subcontractor at any tier acting under, by, or for the direct contractor.” That reaches a sub-subcontractor the general contractor may never have met.
The 2026 statute also widened the definition of direct contractor. Section 218.9(g)(1) covers a contractor with a direct relationship “with an owner or any other person or entity engaging contractors or subcontractors” on the owner’s behalf, which can pull in contractors hired through a construction manager or developer.
How can a contractor avoid penalties?
By following the monitoring steps in the statute. Under section 218.9(a)(3), the direct contractor isn’t liable for penalties or liquidated damages unless it “had knowledge of the subcontractor’s failure to pay” or failed to do three things. It must monitor the subcontractor’s payments “by periodic review of the subcontractor’s payroll records.” Under subparagraph (B), on learning of nonpayment, it must “diligently take corrective action to halt or rectify the failure, including, but not limited to, retaining sufficient funds due the subcontractor.” And under subparagraph (C), before final payment, it must obtain “an affidavit signed under penalty of perjury from the subcontractor” that wages and benefit contributions were paid.
Section 218.8 has the same three steps for 2022 through 2025 contracts. The unpaid wages themselves remain the contractor’s responsibility either way; the steps protect against the add-ons.
Who can bring these claims?
A limited group. The Labor Commissioner can enforce the liability administratively or in court. Benefit trust funds and certain joint labor-management cooperation committees can sue, and a prevailing plaintiff in those actions recovers “reasonable attorney’s fees and costs, including expert witness fees,” under section 218.9(b). The statute adds that “No other party may bring an action against a direct contractor to enforce the liability created by subdivision (a).”
That last limit is useful in defense. A claim by an individual worker against the general contractor under these sections should be examined for standing at the outset. Workers may still pursue the subcontractor directly, or argue the general contractor was a joint employer under other theories.
What can contractors require from subcontractors?
Payroll records and project information, on request. Section 218.9(f) requires subcontractors at every tier to provide payroll records and award information when the direct contractor asks. If the subcontract specifies the documents required, the direct contractor can withhold payment as disputed until they arrive.
The 2026 statute also adds a joint-check option for benefit contributions. Under section 218.9(b)(8), a direct contractor that pays delinquent contributions by joint check, after following the listed steps, “shall not be held liable” for those fringe or benefit contributions.
What should a direct contractor do when a wage claim surfaces?
Assemble the monitoring record before responding.
- Preserve the subcontracts, payroll records received, payment applications, lien releases, and final-payment affidavits for the project.
- Calendar the response date on any Labor Commissioner notice or trust fund demand, and check the subcontract’s indemnity clause and the subcontractor’s insurance.
- Identify every tier of subcontractor on the project and which one employed the workers at issue.
- Pull the direct contract to confirm its date, since that decides whether section 218.7, 218.8, or 218.9 governs.
- Talk to counsel about withholding remaining payments to the subcontractor and pursuing indemnity.
Wage claims on construction projects are part of the firm’s California wage and hour defense for employers.
Contractor wage liability questions employers ask
Does this apply to public works?
No. These sections cover private works. Public works projects have their own prevailing wage rules and enforcement process, with separate obligations for contractors and awarding bodies. A company that does both kinds of work should keep the compliance programs distinct.
Can the subcontract shift the liability back?
Partly. The statutes bar a direct contractor from evading the requirements, but section 218.9(a)(5) expressly allows it to establish remedies “by contract or enforcing any otherwise lawful remedies against a subcontractor it hires” for nonpayment. Indemnity clauses, payment bonds, and withholding rights let the general contractor recover from the subcontractor, though they don’t eliminate the contractor’s liability to the workers or funds.
What if the worker’s craft classification is disputed?
Under section 218.9(b)(6), an action under that section “shall not be based on the employer’s misclassification of the craft of a worker.” Disputes over whether a worker should have been paid as one trade or another fall outside the 2026 statute’s direct contractor liability, though they may still be raised against the subcontractor.
If a wage claim names your company on a subcontractor’s workers
If the Labor Commissioner, a trust fund, or a labor-management committee has demanded unpaid wages from your company for a subcontractor’s crew, the contract date and your monitoring records usually set the exposure. Rosenberger + Kawabata represents employers defending employment lawsuits and claims through its business litigation practice, including claims involving subcontractor wage liability. Contact Rosenberger + Kawabata online for a confidential consultation, or call (310) 894-6921.
Sources
The statutes are Labor Code sections 218.7, 218.8, and 218.9.
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.