Labor-related liabilities: direct contractor and subcontractor.

Senator Cortese's construction labor liability measure revises California's wage protection framework by expanding direct contractor obligations and establishing new oversight requirements for private construction projects. The legislation modifies existing provisions covering contracts from 2022 through 2025 while creating enhanced standards for agreements initiated in 2026 and beyond.

For pre-2026 contracts, direct contractors must continue assuming liability for subcontractor wage debts, including unpaid wages, benefits, and associated penalties. The bill broadens the definition of direct contractors to include entities contracting on owners' behalf, not just those with direct owner relationships. Contractors must monitor subcontractor payroll compliance through regular record reviews and obtain signed payment verification affidavits before issuing final payments.

Starting in 2026, the measure institutes more comprehensive contractor responsibilities regarding labor-related debts. Direct contractors face liability for all labor performance indebtedness incurred by subcontractors at any tier. The legislation maintains contractors' ability to withhold disputed payments when subcontractors fail to provide required payroll documentation but mandates that contracts explicitly specify information requirements.

The Labor Commissioner retains authority to enforce these provisions through administrative actions or civil litigation. Joint labor-management committees and specified third parties may also pursue civil remedies, with prevailing plaintiffs eligible for attorney fees and costs. The measure preserves existing payment timing requirements between owners, contractors and subcontractors while establishing a one-year window for filing claims after project completion.