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Legislation designed to level the playing field for subcontractors when seeking payments related to change orders on private works construction projects was signed into law by Governor Newsom on Friday, October 10.
The bill, SB 440 by Senator Rosilicie Ochoa Bogh (R-Yucaipa), establishes a process for subcontractors to recover payments arising from change orders. The new process outlines meet and confer and non-binding mediation strategies to resolve disputes before aggrieved contractors go to court. If the SB 440 process fails to resolve the dispute, the subcontractor can exercise their right to a civil judgment.
There are a variety of statutory mechanisms contained within SB 440 designed to incentivize the successful utilization of the SB 440 process. Those include:
- Eliminating any discretion for a general contractor to hold a change order claim by mandating general contractors to submit subcontractor change order claims to the owner;
- Authorizing contractors to suspend work, without penalty, until payment is received;
- Entitling contractors to a 2 percent per month penalty for undisputed amounts not paid in a timely manner; and
- Authorizes attorney fees for prevailing parties through statutory offers of settlement under Section 998 of the Civil Code.
All of the SB 440 provisions are specifically designed to assist subcontractors recover payment and prevent them from being leveraged to reduce the value of their change order work.
Senator Ochoa Bogh released the following statement when the bill passed out of the legislature:
“In construction, changes to the original plan happen all the time. This bill makes sure contractors and subcontractors get paid fairly and on time for work arising from change orders instead of waiting months or years. These delays can become existential threats to their businesses.”
The bill was sponsored by the Southern California Association of Scaffold Contractors and was supported by a variety of contractor organizations, including SCCA. SB 440 will take effect on January 1, 2026. You can read the bill online by clicking this link.
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