If a general contractor is not paying you as a subcontractor in California, you have a powerful arsenal of legal remedies. California law requires contractors to pay subcontractors within 7 days of receiving payment from the owner (B&P §7108.5), with a 2% monthly penalty for late payment. Your remedies include mechanic’s liens, stop payment notices, payment bond claims, CSLB complaints, prompt payment penalties, and breach of contract lawsuits. Starting in 2026, SB 440 and SB 61 add new protections for subcontractor payment rights.

What Are a Subcontractor’s Payment Rights Under California Law?

As a subcontractor in California, you are not merely relying on the general contractor’s goodwill to get paid. California law provides a layered system of protections specifically designed to help subcontractors secure payment, even when the general contractor fails to cooperate.

The foundation of your payment rights is Business and Professions Code §7108.5, which requires the prime contractor (or any higher-tier subcontractor) to pay each subcontractor within 7 days of receiving a progress payment from the owner, unless a different timeline is agreed to in writing. The payment must equal the amounts allowed on account of the subcontractor’s work, to the extent of the subcontractor’s interest. Violation of this provision triggers a 2% monthly penalty on the amount wrongfully withheld, plus the right to recover attorney’s fees.

But the 7-day payment rule is only one piece of your protection. California’s construction payment statutes provide multiple, overlapping remedies that work together to maximize your chances of getting paid.

What Remedies Are Available When a Contractor Won’t Pay?

Mechanic’s Lien

A mechanic’s lien is one of the most powerful tools available to unpaid subcontractors. Under Civil Code §8400 et seq., you can place a lien against the property where you performed work—even though your contract is with the general contractor, not the property owner. This creates a security interest in the real property itself, which can ultimately force a sale to satisfy the debt.

To preserve your mechanic’s lien rights, you must have served a valid preliminary notice (generally within 20 days of first furnishing labor or materials) and must file the lien within the applicable deadline. For subcontractors, this is generally 90 days after completion of work or cessation of labor. A mechanic’s lien must then be enforced through a lawsuit filed within 90 days of recording the lien.

Stop Payment Notice

A stop payment notice is a written notice served on the property owner or construction lender directing them to withhold sufficient funds to cover your claim. An unbonded stop payment notice, served on the owner, requires the owner to withhold funds from the contractor. A bonded stop payment notice, served on a construction lender, requires the lender to set aside funds from the construction loan.

A stop payment notice is particularly effective because it freezes money in the payment chain before the contractor can divert it elsewhere. It puts the owner and lender on notice that there is a payment dispute, which often motivates them to intervene and ensure subcontractors are paid.

Payment Bond Claim

On projects where the contractor has a payment bond (required on most public works projects and many large private projects), you can make a claim directly against the bond. The surety company that issued the bond is obligated to pay valid claims up to the bond amount. For licensed contractors, you can also file a claim against the contractor’s license bond (currently $25,000 minimum) through the surety company listed in the CSLB records.

Prompt Payment Penalties

Under B&P §7108.5, the 2% monthly penalty on wrongfully withheld amounts is recoverable in a civil action or through a disciplinary proceeding before the CSLB. This penalty, equivalent to a 24% annual rate, compounds quickly. On a $50,000 disputed payment, the penalty alone reaches $1,000 per month, creating strong financial incentive for the contractor to pay promptly.

CSLB Complaint

Filing a complaint with the Contractors State License Board can trigger an investigation that may result in disciplinary action against the contractor’s license—including suspension, revocation, or fines. While the CSLB cannot directly order the contractor to pay you, the threat of license action is often a powerful motivator. Many contractors will settle payment disputes when they learn a CSLB complaint has been filed.

Breach of Contract Lawsuit

A direct lawsuit for breach of contract allows you to recover the full amount owed, plus consequential damages (such as lost profits on other work you could not perform due to cash flow disruption), prompt payment penalties, and attorney’s fees. For claims under $12,500, California Small Claims Court offers a faster, less expensive option.

What Should You Do Step-by-Step When a Contractor Won’t Pay?

1. Send a formal written demand: Cite B&P §7108.5, specify the amount owed, the date payment was due, and state that 2% monthly penalties are accruing. Send by certified mail with return receipt requested.
2. Verify your preliminary notice: Confirm that you served a valid 20-day preliminary notice on the project. Without it, your mechanic’s lien rights and stop payment notice rights may be compromised.
3. Serve a stop payment notice: If payment is not received within a reasonable time after your demand (7-14 days), serve a stop payment notice on the owner and/or construction lender to freeze funds in the payment chain.
4. File a mechanic’s lien: If payment is still not received, file a mechanic’s lien against the property before your deadline expires (generally 90 days after completion for subcontractors). This puts the property owner on direct notice of your claim.
5. File a CSLB complaint: Submit a complaint to the CSLB documenting the contractor’s failure to pay. Include your contract, payment records, demand letters, and evidence of non-payment.
6. Make a bond claim: If applicable, file a claim against the contractor’s license bond or the project payment bond.
7. Consult a construction attorney: If the amount at stake is significant, retain an attorney to evaluate your total recovery potential and pursue all available remedies in a coordinated strategy.
8. File a lawsuit: If informal remedies do not produce results, file a breach of contract lawsuit seeking the amount owed, prompt payment penalties, and attorney’s fees.

How Do SB 440 and SB 61 Help Subcontractors in 2026?

Two major pieces of legislation effective January 1, 2026, strengthen subcontractor payment protections:

SB 440: The Private Works Change Order Fair Payment Act

SB 440 (Civil Code §§8850-8859) creates a mandatory claims process for change order disputes on private projects. It requires owners to respond to claims within specified deadlines, imposes 2% monthly interest on late payments of undisputed amounts related to change order work, and—most significantly—gives contractors and subcontractors a statutory right to suspend work if the owner fails to pay undisputed amounts or violates the claims process. The suspension right can be exercised on 10 days’ written notice, without penalty or liability for resulting delays. Contract clauses that attempt to waive these protections are void.

SB 61: Retention Limits

SB 61 (Civil Code §8811) extends the 5% retention cap—which previously applied only to public works—to private construction projects. This means owners can no longer withhold excessive retention as leverage against contractors and subcontractors. Additionally, SB 61’s retention flow-down requirements help subcontractors by capping the retention that a general contractor can withhold from subcontractors at the same percentage the owner withholds from the general contractor.

How Can You Protect Yourself from Non-Payment Before It Happens?

The best time to protect your payment rights is before the first shovel hits dirt. Here are practical steps every subcontractor should take:

• Serve your preliminary notice immediately: Serve a 20-day preliminary notice within the first 20 days of furnishing labor or materials on every project—no exceptions. This preserves your mechanic’s lien and stop payment notice rights.
• Use a strong written contract: Your subcontract should include clear payment terms, a schedule of values, change order procedures, and provisions for prompt payment penalties. Do not rely on handshake agreements.
• Include pay-if-paid vs. pay-when-paid protections: Understand the difference. A pay-when-paid clause means the GC must pay you within a reasonable time regardless of whether the owner pays. A pay-if-paid clause (which California courts disfavor) may condition your payment on the GC receiving payment from the owner. Push for pay-when-paid language.
• Track payments meticulously: Maintain a payment log showing every invoice submitted, when it was submitted, when payment was received, and any discrepancies. This documentation is critical for enforcing your rights.
• Check the GC’s license and bond: Before starting work, verify the general contractor’s license status and bond information through the CSLB website. A contractor with a history of disciplinary actions or complaints is a higher risk.
• Document your work: Keep daily logs, photographs, and detailed records of all work performed. This evidence supports both payment claims and defense against back-charges.

Talk to a California Construction Law Attorney

Bay Legal’s construction law team helps owners, contractors, and subcontractors resolve disputes and protect their rights under California law. Whether you need help pursuing a claim, filing a complaint, or understanding your legal options, we can help.

Schedule a consultation: call (650) 668-8000 or visit baylegal.com/practice-areas/construction-law/.

Frequently Asked Questions

Q: What should I do if a general contractor won’t pay me as a subcontractor?

A: Start by sending a formal written demand citing B&P §7108.5 (7-day payment deadline) and the 2% monthly penalty. Simultaneously, verify your preliminary notice is on file and preserve your mechanic’s lien deadline. If payment is not received, file a mechanic’s lien, serve a stop payment notice, make a claim against the contractor’s bond, and file a CSLB complaint. Consult a construction attorney for claims involving significant amounts.

Q: Can a subcontractor file a mechanic’s lien if the contractor doesn’t pay?

A: Yes. California subcontractors have independent mechanic’s lien rights under Civil Code §8400 et seq. You can file a lien against the property where you performed work, even though your contract is with the general contractor, not the owner. You must have served a valid preliminary notice and must file the lien within the applicable deadline (generally 90 days after completion for subcontractors).

Q: What is a stop payment notice and when should I use one?

A: A stop payment notice is a legal document served on the property owner (unbonded) or the construction lender (bonded) directing them to withhold funds due to the contractor. It is a powerful tool when a contractor is not paying you because it freezes money in the payment chain. Serve the notice as soon as you suspect non-payment is becoming a pattern.

Q: How does SB 440 help subcontractors who aren’t getting paid?

A: SB 440, effective January 1, 2026, creates a mandatory claims process for change order disputes on private projects. It imposes strict response deadlines on owners, provides 2% monthly interest penalties on late payments, and gives contractors and subcontractors the right to suspend work if undisputed amounts are not paid. These protections cannot be waived by contract.

Q: Can I file a claim against the contractor’s surety bond?

A: Yes. Licensed California contractors are required to maintain a surety bond (currently $25,000 minimum). If the contractor fails to pay you, you can file a claim directly with the surety company that issued the bond. Find the surety company information through the CSLB’s license lookup tool at cslb.ca.gov.

Disclaimer: This content is for informational purposes only and does not constitute legal advice. Results depend on the specific facts of each situation. No attorney-client relationship is created by reading this article. Contact Bay Legal, PC for advice on your specific situation.