What Are the Rules for Hiring Subcontractors as a Licensed General Contractor in California?
Hiring subcontractors is a critical part of successful construction work. As a licensed general contractor, you’re subject to rules set forth by the California Contractors State License Board (CSLB) and much more. Knowing the rules for hiring subcontractors is essential to protecting your rights and complying with all of the rules. Failure to do so could lose your contractor’s license and expose your company to liability.
At Plumtree & Brunner, LLP, our California construction lawyers help you compliantly hire subcontractors and safeguard your contractor’s license.
Subcontractors Must Be Properly Licensed
The state requires subcontractors to have the right CSLB license classification for the type of work they do. A general contractor is not allowed to hire an unlicensed subcontractor for any work that requires a license.
Subcontractors are required to have an active and valid CSLB license. The general contract must verify that any required licenses are valid and in good standing before work by the subcontractor begins. If you hire an unlicensed subcontractor, you may be exposed to:
- Civil penalties
- Disciplinary action
- Loss of your CSLB license
- Liability for the subcontractor’s work
Written Contracts Are Required
California law requires written contracts for most construction work, including subcontractor agreements. A compliant subcontractor contract should include:
- Scope of work
- Project location
- Payment terms
- Timeline and milestones
- Change‑order procedures
- Insurance requirements
- Licensing information
- Dispute‑resolution terms
Insurance and Workers’ Compensation Requirements
General contractors must ensure subcontractors carry appropriate insurance. At minimum, subcontractors should have:
- General liability insurance
- Workers’ compensation insurance (if they have employees)
If the subcontractor doesn’t have appropriate workers’ compensation coverage for its employees, the general contractor may be liable for legal and financial purposes, as if they were the employer for each of them. This could be a massive liability.
Subcontractors Cannot Be Treated as Employees
California’s worker‑classification rules require contractors to clearly distinguish subcontractors from employees. To qualify as an independent contractor:
- The subcontractor must control how the work is performed.
- The subcontractor must perform work outside the hiring contractor’s usual business (this requirement is relaxed for licensed contractors).
- The subcontractor must operate an independent business.
Licensed subcontractors generally meet these criteria, but general contractors must avoid exerting employee‑level control over them.
Compliance With Safety Regulations
General contractors are responsible for overall site safety, even when subcontractors are performing specialized work. California’s Division of Occupational Safety and Health (Cal/OSHA) requires:
- A site‑specific safety plan
- Proper training and equipment
- Hazard communication
- Coordination among all subcontractors on site
If a subcontractor violates safety rules, the general contractor may still face citations or penalties.
Payment Rules and Prompt‑Pay Requirements
California’s prompt‑pay laws require general contractors to pay subcontractors within specific timelines once funds are received from the project owner. Key rules include:
- Payment must be made within seven days of receiving funds designated for the subcontractor’s work.
- Improper withholding of payment can result in penalties and interest.
- General contractors must provide written notice if payment is withheld for a legitimate reason.
Responsibilities for Quality and Code Compliance
Even when subcontractors perform specialized work, the general contractor remains responsible for ensuring:
- Work meets building‑code requirements
- Inspections are completed
- Materials meet project specifications
- Subcontractor work aligns with the overall project plan
If a subcontractor’s work fails inspection, the general contractor must coordinate corrections and may be liable for associated costs.
When General Contractors Can Self‑Perform Work Instead of Hiring Subcontractors
General contractors may self‑perform work only if they hold the appropriate CSLB classification. For example:
- A general contractor with a B license may self‑perform framing or carpentry.
- They may not self‑perform electrical, plumbing, or HVAC unless they also hold those specialty licenses.
If the general contractor lacks the specialty license, they must hire a properly licensed subcontractor.
Why Compliance Matters
Failure to follow California’s subcontractor rules can lead to:
- CSLB disciplinary action
- Civil penalties
- Project delays
- Liability for injuries or defective work
- Contract disputes
- Loss of license
Get Help With Complex Legal Matters in California Construction Cases
Hiring subcontractors is not as simple as it looks, and there are specific rules you have to follow. With the right legal team at your side, you can ensure your hiring practices comply with California laws and CSLB requirements.
Our team at Plumtree & Bruner, LLP helps you with your California construction law needs. Contact us today for a consultation.
