SB 440 — Change-Order & Claim Procedures for Private Works

What It Does:
SB 440 (Private Works Change Order Fair Payment Act) was passed in October 2025 and becomes effective January 1, 2026. It creates a statutory framework for how change order claims, time extensions, and related adjustments must be handled in private construction contracts in California.

Key Provisions:
• Contractors and subcontractors must submit written, documented claims for work or schedule changes.
• Owners must meet and confer within 30 days and identify disputed/undisputed portions.
• Undisputed portions of the claim must be paid within 60 days, or interest accrues (2% per month).
• Disputed parts of the claim go to nonbinding mediation before any litigation or arbitration.
• If the owner fails to timely respond, the contractor may issue a stop-work notice after certain periods.

Why It Matters:
• Parties will need to build strict procedures and timing compliance into their contract practices.
• Documentation, claim submission, and prompt communication become critical to preserve rights.
• It may reduce the need for protracted dispute resolution in many change order contexts, but only if parties follow the statute.

SB 61 — Retention Cap for Private Construction

What It Does:
Senate Bill 61, signed in 2025, introduces a law (Civil Code § 8811) that limits how much retention (money withheld as security for project completion) can be withheld in private construction contracts in California.

Key Points:
• Applies to contracts executed on or after January 1, 2026 (not retroactive).
• The maximum retention is capped at 5% of each progress payment and 5% of the total contract value.
• The cap must flow down from the prime contract to subcontracts (if the prime contract reduces retention below 5%, subcontractors must use the same lower retention rate).
• There are limited exceptions (e.g. certain residential works, smaller projects) that the law itself sets out.

Why It Matters:
• Contractors, subcontractors, and developers will need to revise contract templates and payment terms to comply.
• This reduces cash flow flexibility (less retention means more money up front) but also reduces the burden of over-withholding.
• Risk of noncompliance or payment disputes could increase if parties aren’t aware or prepared.

PAGA Reform & Cure Provisions (Effective October 1, 2024)

What it Does:
California recently amended the Private Attorneys General Act (“PAGA”) via AB 2288 and SB 92, which introduced new cure opportunities and reduced penalties for employers who proactively correct labor law violations.

Key Changes:
• Employers may now cure certain violations before a PAGA claim is filed, which can significantly reduce penalties.
• The amendments allow for confidential proposals and early evaluation conferences (EECs) in some cases.
• The burden is now higher on employers to maintain internal compliance programs (e.g., audits, policy updates, training) to reduce exposure.

Why It Matters:
• Businesses with hourly/nonexempt staff are at risk of PAGA claims.
• The new laws reward those who respond quickly to alleged violations — so internal audits and remediation matter more than ever.
• Having a legal partner who monitors these changes and helps implement compliance plans can prevent costly litigation or exposure down the line.