California's prompt payment laws: what to do when the GC sits on your progress payment

Most subs know the feeling. The pay app went in on time, the owner paid the GC, and your check still isn't here. Then come the reasons: a missing form, a lien release in the wrong format, a question about one line item.

California has laws for exactly this. They set deadlines for passing money down the chain, cap what can be held back in a dispute, and add a penalty when money is wrongly withheld. Knowing them changes the conversation.

Seven days after the GC is paid

Under Business and Professions Code section 7108.5, a prime contractor or subcontractor must pay its subs within seven days of receiving each progress payment, unless the contract sets a different time in writing. It applies to private jobs and to most public jobs. Contracts with state agencies follow their own seven-day rule, covered below.

Three parts of that section matter in practice:

• Disputes have a cap. If there's a good-faith dispute, the GC can hold back no more than 150% of the disputed amount. The rest has to be paid.
• Late money costs 2% a month. A contractor who wrongly withholds payment owes the sub a penalty of 2% of the amount due for each month it's late.
• Fees go to the winner. In a suit to collect wrongly withheld money, the prevailing party recovers attorney's fees and costs.

Read your subcontract's payment clause alongside the statute. If it gives the GC 30 days instead of seven, that's the "different time in writing" the statute allows. If it says nothing, seven days is the rule.

Retention: when it has to come back

On private jobs, the owner must pay retention to the GC within 45 days after the project is completed (Civil Code section 8812). Once the GC receives it, it has 10 days to pay each sub its share (Civil Code section 8814). The same 150% cap applies to disputed amounts.

Public jobs: different clocks

Public projects add their own rules on top:

• Retention on public works. The public entity must release retention within 60 days after completion (some state agencies get longer), and the GC must pay subs their share within seven days of receiving it. Wrongly withheld retention carries the same 2% a month charge, the winner recovers attorney's fees, and any waiver of these rules in the contract is void (Public Contract Code section 7107).
• State projects. On contracts with state agencies, the prime must pay subs within seven days of receiving each progress payment (Public Contract Code section 10262).
• Local agencies. A city, county or district that doesn't pay an undisputed, proper pay request within 30 days owes the contractor interest, and it has seven days to send back a request it thinks is improper, with reasons (Public Contract Code section 20104.50).

When the delay is "paperwork"

A common pattern: the money has arrived upstream, but the GC holds yours until a form comes in. Some of that is legitimate. Certified payroll on prevailing wage jobs and conditional lien releases are reasonable to ask for. But paperwork can also become a way to stretch payment.

• Lien releases. Offer the statutory conditional release with your pay app. It only takes effect when you're paid, so it costs you nothing to give it early. Our article on conditional and unconditional waivers explains the forms.
• Conditions in the subcontract. Look for clauses that make every form a "condition precedent" to payment. Ask for a short, fixed list of documents, and a duty for the GC to tell you within a few days if anything is missing.
• A paper trail. Log the date each pay app went in, when you learn the GC was paid, and every request for documents. Dates are what turn a frustrating call into a strong letter.

Using the statute without burning the relationship

You don't have to lead with a lawsuit. A short, polite letter that cites section 7108.5, states the amount, the date the GC was paid, and the 2% a month penalty usually gets a faster answer than a fourth phone call. If the GC disputes part of the amount, ask for the undisputed balance now, as the statute expects.

And if the delay is a pattern, raise it at your next negotiation. A payment clause with a short deadline, a fixed document list and interest on late payments is a reasonable ask from a sub who has been paid late before.