California has a new law that changes how subcontractors get paid when projects go wrong. The Private Works Change Order Fair Payment Act, codified at California Civil Code section 8850, takes effect for most private construction contracts signed on or after January 1, 2026.
It sets up a mandatory dispute-resolution process with strict deadlines for claims involving time extensions, relief from delay damages, or disputed payments.
For plumbing subcontractors, the timing matters a lot. Plumbing work depends on other trades finishing their jobs first, so delays and out-of-sequence work hit them hard. The new law requires contractors to take a subcontractor’s claim and send it to the owner within 30 days, then pursue it in good faith.
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They cannot settle the claim without the sub’s written consent.
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The statute bridges that gap. When a sub submits a claim, the GC must send it via registered or certified mail to the project owner. The owner then has a month to respond in writing, identifying which parts of the claim are disputed and which are undisputed. They can agree in writing to extend that window for complex claims.
If the project owner fails to respond within the allotted time, the claim is “deemed denied” under the code’s subsection (g)(1). The owner must pay any undisputed amount and issue a change order for any undisputed time extension within 60 days of its written response.
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If some portion is denied, or if the sub disagrees with the owner’s statement, the GC can request a meet-and-confer meeting, which must happen within a month. If that doesn’t resolve it, the owner must issue a final written statement within a set period, and then the remaining claims go to nonbinding mediation.
If the parties cannot agree on a mediator within that same period, the GC picks one unilaterally. Mediator costs are split equally. Unresolved claims after mediation go to litigation or arbitration per the contract. The meet-and-confer and mediation steps can be waived in writing.
The Ultimate Leverage: Interest Penalties
Any undisputed amount not paid on time accrues a 2% per month interest penalty.
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General contractors and project owners are now facing a system where a missed deadline can cost them the interest penalty.
The statute says these protections cannot be waived — any attempt to insert a waiver or inconsistent terms in a sub’s contract is automatically void.
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