Labor Relations
New Direct-Contractor Wage Liability Rules for Construction Contracts
Updated
Senate Bill 597, authored by Senator Cortese, revises how a direct contractor on a private construction project can be held liable for labor debts owed by its subcontractors. The measure amends existing law for older contracts and adds a new liability framework for contracts entered into on or after January 1, 2026. As an ordinary statute chaptered in 2025, it takes effect January 1, 2026.
Background
Since 2022, Labor Code section 218.8 has required a direct contractor on a private construction project to assume, and be liable for, debts owed to a wage claimant, or to a third party on the claimant’s behalf, incurred by a subcontractor at any tier for labor performed under the contract. A “direct contractor” was defined as a contractor with a direct contractual relationship with an owner.
SB 597 amends Sections 65912.131, 65913.4, and 65913.16 of the Government Code and Labor Code section 218.8, and adds Labor Code section 218.9. It closes existing section 218.8 to contracts entered before January 1, 2026, and directs newer contracts to the added section.
What the Law Changes
For contracts entered into on or after January 1, 2026, new Labor Code section 218.9 requires a direct contractor on a private erection, construction, alteration, or repair project to assume, and be liable for, any indebtedness for the performance of labor incurred by a subcontractor at any tier. That liability is limited to payments for labor required by the subcontractor’s agreement with the worker or its collective bargaining agreement.
SB 597 also broadens the definition of “direct contractor.” Under section 218.9, the term reaches a contractor with a direct contractual relationship with an owner or with any other person or entity engaging contractors or subcontractors on the owner’s behalf. As before, liability can be enforced by the Labor Commissioner, by specified persons owed benefit contributions, and by a joint labor–management cooperation committee.
For private construction contracts entered into on or after January 1, 2026, a direct contractor is liable under new Labor Code section 218.9 for a subcontractor’s labor debts at any tier, and the definition of “direct contractor” extends to those engaging contractors on an owner’s behalf.
Joint-Check Safe Harbor and Phase-In
Section 218.9 adds a joint-check option for benefit contributions. A direct contractor that has been shown documentation that a subcontractor was notified of missed contributions will not be liable for fringe or other benefit contributions if it pays by joint check to the subcontractor and the trust, plan, fund, or program, obtains the required information, and notifies that entity.
The prior rule in section 218.8 continues to govern contracts entered into on or after January 1, 2022, and before January 1, 2026. Because the statute keys its provisions to the date a contract is entered, the two frameworks run in parallel depending on contract timing.
What This Means for You
SB 597 sets direct-contractor liability for subcontractor labor debts on private construction contracts entered on or after January 1, 2026, through new Labor Code section 218.9, with the earlier section 218.8 governing contracts entered before that date. It touches wage and benefit disputes on private construction projects and allows a direct contractor to use a joint check for benefit contributions under stated conditions.
I write these summaries as general information about developments in California employment law. They are not legal advice and don’t create a mediator–client relationship. For guidance on a specific matter, consult a qualified attorney.